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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE TITAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7373 95-2588754
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION NUMBER)
3033 SCIENCE PARK RD.
SAN DIEGO, CALIFORNIA 92121
(858) 552-9500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GENE W. RAY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
3033 SCIENCE PARK RD.
SAN DIEGO, CALIFORNIA 92121
(858) 552-9500
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
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RICHARD J. PARRINO, ESQ. ANITA FINKELSTEIN, ESQ. NICHOLAS J. COSTANZA, ESQ.
STUART A. BARR, ESQ. VENABLE, BAETJER, HOWARD & CIVILETTI, LLP THE TITAN CORPORATION
HOGAN & HARTSON L.L.P. 1201 NEW YORK AVENUE, NW 3033 SCIENCE PARK ROAD
8300 GREENSBORO DRIVE SUITE 1000 SAN DIEGO, CALIFORNIA 92121
MCLEAN, VIRGINIA 22102 WASHINGTON, DC 20005 TELEPHONE: (858) 552-9500
TELEPHONE: (703) 610-6100 TELEPHONE: (202) 962-4800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the proposed merger described herein have been satisfied or
waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________________________
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(3) REGISTRATION FEE(4)
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Common Stock, $.01 par value......... (1) (2) $193,091,525 $50,977
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(1) This registration statement covers the maximum number of shares of common
stock of The Titan Corporation ("Titan") issuable in connection with the
merger in exchange for shares of common stock of Advanced Communication
Systems, Inc. ("ACS"), based on (i) the maximum number of shares of ACS
common stock exchangeable in the merger (9,917,387 shares) and (ii) the
exchange ratio applicable in the merger as described herein. This
registration statement also covers additional shares of Titan common stock
that may be issued to prevent dilution resulting from a stock split, stock
dividend or similar transaction involving the Titan or ACS common stock,
under Rule 416 of the Securities Act.
(2) Pursuant to Rule 457(o) of the Securities Act, the Proposed Maximum Offering
Price Per Share has been omitted.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act, based on
the market value of the ACS common stock to be received by Titan in the
merger, as established by the average of the high and low sales prices of
ACS common stock on January 20, 2000 on The Nasdaq National Market, which
was $19.47.
(4) This fee has been calculated pursuant to Section 6(b) of the Securities Act
as .000264 of $193,091,525. In accordance with Rule 457 under the Securities
Act, the fee of $55,305.95 paid by ACS pursuant to Rule 14a-6(i)(1) under
the Securities Exchange Act upon the filing of its preliminary proxy
material relating to the merger has been credited against the registration
fee payable in connection with this filing. Accordingly, no fee is payable
in connection with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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ADVANCED COMMUNICATION SYSTEMS, INC.
10089 LEE HIGHWAY
FAIRFAX, VIRGINIA 22030
JANUARY 24, 2000
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PROPOSED MERGER
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To Our Stockholders:
On December 9, 1999, Advanced Communication Systems, Inc. entered into a
merger agreement with The Titan Corporation. The agreement calls for the merger
of a Titan subsidiary into ACS. As a result of the merger, ACS will become a
wholly owned subsidiary of Titan and ACS stockholders will become stockholders
of Titan. Your board of directors believes that the combined strengths of ACS
and Titan will enable the companies to compete more effectively than either can
compete alone.
If we complete the merger, you will receive Titan common stock in exchange
for your ACS common stock. Titan common stock is listed on the New York Stock
Exchange under the trading symbol "TTN." The number of shares of Titan common
stock you will receive in exchange for each share of ACS common stock will be
determined at the time of the merger according to a formula contained in the
merger agreement and described in the accompanying proxy statement. Based on the
number of shares of Titan and ACS common stock outstanding on January 20, 2000,
if the merger were completed on that date, ACS stockholders would own
approximately 9.95% of Titan's outstanding common stock immediately after the
merger.
ACS and Titan cannot complete the merger unless the holders of a majority
of the outstanding shares of ACS common stock vote to adopt the merger agreement
and approve the merger and related transactions. This letter is accompanied by
ACS's proxy statement, which your board of directors is providing to you to
solicit your proxy to vote for adoption of the merger agreement and approval of
the merger and related transactions at a special meeting of ACS stockholders to
be held on February 23, 2000. Only holders of ACS common stock as of the close
of business on January 11, 2000 will be entitled to vote on the merger agreement
at the special meeting.
The accompanying document is also Titan's prospectus for its offering of
Titan common stock to ACS stockholders in the proposed merger. This proxy
statement/prospectus of ACS and Titan provides you with detailed information
about the proposed merger. It also contains information about ACS and Titan from
documents the two companies have filed with the Securities and Exchange
Commission. We encourage you to read this document carefully. IN PARTICULAR, YOU
SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 17 FOR A DESCRIPTION OF
THE VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING THE PROPOSED MERGER.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT,
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF, AND THAT THE TERMS OF
THE MERGER ARE FAIR TO, ACS AND ITS STOCKHOLDERS. YOUR BOARD ALSO HAS DECLARED
UNANIMOUSLY THE ADVISABILITY OF THE MERGER AGREEMENT AND RECOMMENDED ITS
APPROVAL BY THE ACS STOCKHOLDERS.
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Please take this opportunity to participate in the affairs of ACS by voting
in favor of the merger agreement and the merger and related transactions. Your
vote is important no matter how many shares you own. Whether or not you intend
to attend the stockholders meeting, please carefully read the enclosed materials
and then complete, sign, date and return the accompanying proxy in the
pre-addressed, stamped envelope provided for that purpose. Even if you return
your proxy, you may attend the meeting and vote in person.
We appreciate your consideration in this matter.
Sincerely,
/s/ GEORGE A. ROBINSON
George A. Robinson
Chief Executive Officer
EACH VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THIS DOCUMENT OR THE SECURITIES TO BE
ISSUED IN THE MERGER OR DETERMINED IF THIS DOCUMENT IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated January 24, 2000
and is first being mailed on or about January 24, 2000.
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ADVANCED COMMUNICATION SYSTEMS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 23, 2000
TO THE STOCKHOLDERS OF
ADVANCED COMMUNICATION SYSTEMS, INC.
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Advanced
Communication Systems, Inc. will be held on Wednesday, February 23, 2000, at
10:30 a.m., local time, at the offices of ACS at 10089 Lee Highway, Fairfax,
Virginia 22030, for the following purposes:
1. To consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of December 9, 1999 and amended as of January 20, 2000
(the "Merger Agreement"), by and among ACS, The Titan Corporation, a
Delaware corporation, and A T Acquisition Corp., a Delaware corporation
that is a wholly owned subsidiary of Titan, and to approve the merger of
A T Acquisition Corp. with ACS (the "Merger") and the other transactions
contemplated by the Merger Agreement. As a result of the Merger, ACS
will become a wholly owned subsidiary of Titan and ACS stockholders will
become stockholders of Titan.
2. To consider and vote upon the postponement or adjournment of the special
meeting in order to solicit additional votes to adopt the Merger
Agreement and approve the Merger and related transactions if, at the
time of the meeting, ACS determines that it does not have in hand
proxies representing enough votes to adopt the Merger Agreement and
approve the Merger and related transactions.
The enclosed proxy statement/prospectus contains a more complete
description of these items of business. We encourage you to read it completely
and carefully.
The close of business on January 11, 2000 has been fixed as the record date
for determining those stockholders entitled to vote at the special meeting of
stockholders and any adjournments, postponements or reschedulings of the special
meeting. Therefore, only holders of ACS common stock as of the close of business
on January 11, 2000 will be entitled to vote at the special meeting on adoption
of the Merger Agreement and approval of the Merger and related transactions.
By Order of the Board of Directors,
/s/ GEORGE A. ROBINSON
George A. Robinson
Chief Executive Officer
Fairfax, Virginia
January 24, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY CARD IN THE PRE-ADDRESSED, POSTAGE PAID ENVELOPE
PROVIDED FOR THAT PURPOSE. YOU MAY VOTE IN PERSON AT THE MEETING, EVEN IF YOU
PREVIOUSLY HAVE RETURNED YOUR PROXY CARD.
PLEASE DO NOT SEND STOCK CERTIFICATES WITH YOUR PROXY CARD.
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ADVANCED COMMUNICATION SYSTEMS, INC.
PROXY STATEMENT
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THE TITAN CORPORATION
PROSPECTUS
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TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
RISK FACTORS................................................ 17
INFORMATION IN THIS DOCUMENT................................ 26
THE ACS SPECIAL MEETING..................................... 27
General................................................... 27
Matters to be Considered.................................. 27
Recommendation of the ACS Board of Directors.............. 27
Record Date and Vote Required............................. 27
Proxies................................................... 28
Availability of Accountants............................... 29
THE MERGER.................................................. 30
General................................................... 30
Background of the Merger.................................. 30
Recommendation of ACS Board of Directors; ACS Reasons for
the Merger............................................. 34
Titan Reasons for the Merger.............................. 35
Opinion of Financial Advisor to ACS....................... 36
Interests of ACS Directors and Executive Officers in the
Merger................................................. 43
Stockholder Approval Requirements......................... 44
Accounting Treatment...................................... 44
Listing of Titan Common Stock on the NYSE................. 44
Absence of Dissenters' Rights............................. 45
Clearance Under Federal Antitrust Laws.................... 45
Federal Income Tax Consequences........................... 45
Restrictions on Resale of Titan Common Stock by
Affiliates............................................. 46
Anti-Dilution Adjustments................................. 47
Exchange of Certificates.................................. 47
TERMS OF THE MERGER AGREEMENT AND RELATED TRANSACTIONS...... 49
General................................................... 49
Effective Time............................................ 51
Representations and Warranties............................ 52
Business and Agreements of ACS and Titan Pending the
Merger................................................. 55
Non-Solicitation Agreement by ACS......................... 59
Conditions to Completion of the Merger.................... 60
Termination of the Merger Agreement; Termination Fee...... 61
Waiver and Amendment of the Merger Agreement.............. 63
Expenses.................................................. 64
ACS Stockholder Agreements................................ 64
UNAUDITED PRO FORMA FINANCIAL INFORMATION................... 66
INFORMATION ABOUT TITAN..................................... 76
INFORMATION ABOUT ACS....................................... 79
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OWNERSHIP OF TITAN COMMON STOCK............................. 81
DESCRIPTION OF TITAN CAPITAL STOCK.......................... 84
Common Stock.............................................. 84
Preferred Share Purchase Rights........................... 84
Preferred Stock........................................... 87
Anti-Takeover Effect of Titan's Bylaw Provisions.......... 88
Section 203 of the Delaware General Corporation Law....... 89
Director Liability and Indemnification of Directors and
Officers............................................... 89
Listing of Common Stock................................... 90
Transfer Agent and Registrar.............................. 90
DESCRIPTION OF ACS CAPITAL STOCK............................ 91
Common Stock.............................................. 91
Preferred Stock........................................... 91
Anti-Takeover Effect of ACS's Bylaw Provisions............ 91
Section 203 of the Delaware General Corporation Law....... 92
Director Liability and Indemnification of ACS Directors
and Officers........................................... 93
Listing of ACS Common Stock............................... 93
ACS Transfer Agent and Registrar.......................... 93
COMPARATIVE RIGHTS OF TITAN STOCKHOLDERS AND ACS
STOCKHOLDERS.............................................. 94
Authorized Shares of Capital Stock; Dividend Rights....... 94
Voting Rights............................................. 95
Supermajority Voting Requirements; Business
Combinations........................................... 95
Appraisal Rights.......................................... 96
Special Meetings of Stockholders.......................... 96
Stockholder Action Without a Meeting...................... 96
Stockholder Proposal Procedures........................... 97
Shareholder Rights Plan................................... 98
Classified Board of Directors............................. 98
Nominations of Directors.................................. 98
Removal of Directors...................................... 99
Vacancies in the Board of Directors....................... 100
Indemnification........................................... 100
Limitation of Personal Liability of Directors............. 100
Amendment of Certificate of Incorporation................. 100
Amendment of Bylaws....................................... 101
OTHER MATTERS............................................... 102
Validity of Titan Common Stock............................ 102
Experts................................................... 102
WHERE YOU CAN FIND MORE INFORMATION......................... 103
APPENDICES
APPENDIX A -- Agreement and Plan of Merger
APPENDIX B -- Opinion of Banc of America Securities LLC
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY ARE ACS AND TITAN PROPOSING THE MERGER?
A. The boards of directors of ACS and Titan believe the combined strengths of
the two companies will enable them to compete more effectively than either
can compete alone.
Q. WHAT WILL HAPPEN TO ACS AS A RESULT OF THE MERGER?
A. If the merger is completed, ACS will become a wholly owned subsidiary of
Titan, and the ACS common stock will cease to be traded on The Nasdaq
National Market.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. Each share of ACS common stock you own will be converted into the right to
receive Titan common stock in an amount which will be determined at the time
of the merger based on the average of the closing sale prices of the Titan
common stock on the New York Stock Exchange for the ten consecutive trading
days ending two trading days immediately before the merger closing date.
Q. HOW WILL THE MERGER AFFECT MY FUTURE DIVIDENDS?
A. Neither Titan nor ACS has historically paid dividends to its common
stockholders. Titan does not anticipate that it will pay dividends to its
common stockholders in the foreseeable future.
Q. WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ACS STOCKHOLDERS?
A. ACS stockholders who exchange their shares of ACS common stock for shares of
Titan common stock as a result of the merger will not recognize any gain or
loss on the exchange for U.S. federal income tax purposes. To review the tax
consequences to ACS stockholders in greater detail, see page 45.
Q. WHEN DO ACS AND TITAN EXPECT THE MERGER TO BE COMPLETED?
A. ACS and Titan are working to complete the merger as quickly as possible. We
hope to complete the merger during the first quarter of 2000.
Q. ARE ACS STOCKHOLDERS ENTITLED TO DISSENTERS' RIGHTS?
A. No. Under Delaware law, which governs ACS and the rights of its
stockholders, ACS stockholders are not entitled to dissenters' rights of
appraisal or other rights to demand fair value for their shares in cash
instead of Titan shares by reason of the merger.
Q. WHO MUST APPROVE THE MERGER?
A. In addition to the boards of directors of ACS and Titan, which have already
approved the merger, the stockholders of ACS must adopt the merger
agreement. The ACS special meeting of stockholders will take place on
February 23, 2000. ACS and Titan must also obtain some regulatory approvals
for the merger.
Q. WHAT DO I NEED TO DO NOW?
A. You should carefully read and consider the information contained in this
proxy statement/prospectus. You should then complete and sign your proxy and
return it in the enclosed return envelope as soon as possible so that your
shares will be represented at the ACS special meeting. If you sign, date and
mail your proxy card without identifying how you want to vote, your proxy
will be voted "FOR" adoption of the merger agreement and approval of the
merger and related transactions. If you do not vote in person or by
returning your completed proxy card, your failure to vote will have the same
effect as a vote "AGAINST" the merger agreement.
Q. CAN I CHANGE MY VOTE AFTER I MAIL MY SIGNED PROXY?
A. Yes. You can change your vote at any time before your proxy is voted at the
special meeting of ACS stockholders. You can do this in one of three ways.
First, you can send a written notice stating that you would like to revoke
your proxy. Second, you can complete and submit a new proxy reflecting a
later date. If you choose either of these two
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methods, you must submit your notice of revocation or your new proxy to the
address on page 28. Third, you can attend the special meeting and vote in
person.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. No. Your broker will vote your shares on the merger agreement only if you
provide instructions on how to vote. You should follow the directions
provided by your broker regarding how to instruct brokers to vote the
shares.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No, you should not send in your stock certificates with your proxy. If the
merger is completed, Titan will send you written instructions on how to
exchange your stock certificates.
Q. WHO CAN HELP ANSWER MY QUESTIONS?
A. If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy, you should contact
Corporate Investor Communications, Inc. at the following address:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072-2586
Telephone: (800) 557-7141
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SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that may be
important to you. To understand the proposed merger, you should read carefully
this entire document and the other documents to which Titan and ACS refer. For
more information about Titan and ACS, see "Where You Can Find More Information"
on page 103. Each subject in this summary refers to the pages in this proxy
statement/prospectus where you can find a more complete discussion of that
subject.
THE COMPANIES (PAGE 76)
The parties to the merger agreement are The Titan Corporation, Advanced
Communication Systems, Inc. and A T Acquisition Corp.
The Titan Corporation
3033 Science Park Road
San Diego, California 92121
Telephone: (619) 552-9500
The Titan Corporation is a leading provider of communications and information
solutions to U.S. military and allied government agencies, as well as commercial
customers. Titan's systems, products and services enable government and
commercial customers to generate, process, transmit, store and distribute
information in a secure, cost-effective and timely manner. Titan has organized
its business into five segments: information technologies, software systems,
medical sterilization and food pasteurization, communications systems, and
emerging businesses.
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, Virginia 22030
Telephone: (703) 934-8130
Advanced Communication Systems, Inc. provides communication services,
information systems and aerospace services, predominantly to U.S. government
agencies and to commercial customers, and is a leader in U.S. Navy satellite
communications. Recently, ACS began expanding its network and database design
and support services to the U.S. military and developing business with other
federal agencies, state and local governments and commercial customers.
A T Acquisition Corp.
3033 Science Park Road
San Diego, California 92121
Telephone: (619) 552-9500
A T Acquisition Corp. is a wholly owned subsidiary of Titan which Titan formed
solely for the purpose of completing the merger. A T Acquisition Corp. is a
newly formed corporation that to date has not conducted any activities other
than activities related to its formation, the execution of the merger agreement
and the preparation of this proxy statement/prospectus.
THE MERGER (PAGE 49)
The merger agreement is attached as Appendix A to this proxy
statement/prospectus and is incorporated by reference into this document. We
encourage you to read the entire merger agreement because it is the legal
document that governs the merger.
In the merger, Titan will acquire ACS by merging A T Acquisition Corp. with and
into ACS. ACS will become a wholly owned subsidiary of Titan and ACS
stockholders will become stockholders of Titan. Based on the number of shares of
Titan and ACS common stock outstanding on January 20, 2000, if the merger were
completed on that date, ACS stockholders would own approximately 9.95% of
Titan's outstanding common stock immediately after the merger.
Some ACS stockholders, who are members of ACS's management and board of
directors and who collectively own approximately 24% of ACS's outstanding common
stock, have signed an agreement to vote their shares in favor of adoption of the
merger agreement and approval of the merger and related transactions. Each of
these stockholders also has given Titan an irrevocable proxy authorizing Titan
to vote the stockholder's shares in favor of adoption of the merger agreement
and approval of the merger and related transactions. These stockholders are
referred to as the ACS Principal Stockholders in this proxy
statement/prospectus. See "Terms of the Merger Agreement and Related
Transactions -- ACS Stockholder Agreements" beginning on page 64 for more
information about these voting agreements.
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<PAGE> 10
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 49)
In the merger, each outstanding share of ACS common stock will be converted into
the right to receive shares of Titan common stock. The number of Titan common
shares you will be entitled to receive for each share of ACS common stock that
you own will depend on the exchange ratio of Titan common stock to ACS common
stock. The exchange ratio has not been fixed in the merger agreement, but will
be calculated at the time of the merger according to a formula contained in the
merger agreement. Under this formula, the exchange ratio will be based on the
average of the closing sale prices of Titan common stock on the New York Stock
Exchange for the ten consecutive trading days ending two trading days
immediately before the merger closing date.
- If the average Titan stock price is greater than $35.75, the exchange
ratio, at ACS's election, will be 22 divided by that stock price.
- If the average Titan stock price is greater than $32.50 and less than or
equal to $35.75, the exchange ratio will be .6154.
- If the average Titan stock price is between $25.50 and $32.50, the
exchange ratio will be 20 divided by that stock price.
- If the average Titan stock price is at least $22.95 but less than $25.50,
the exchange ratio will be .7843.
- If the average Titan stock price is less than $22.95 and greater than
$14.00, the exchange ratio, at Titan's election, will be 18 divided by
that stock price.
For information on some of the possible market values of Titan shares you could
receive, see "Terms of the Merger Agreement and Related
Transactions -- General -- Conversion of ACS Common Stock" beginning on page 49.
Titan will not issue fractional shares of its common stock in the merger.
Instead, fractional shares will be rounded up or down to the nearest whole share
of Titan common stock.
TREATMENT OF OPTIONS IN THE MERGER (PAGE 51)
Titan will assume each option to purchase shares of ACS common stock held by an
ACS employee or director at the effective time of the merger. Each assumed
option will be converted into an option to purchase shares of Titan common
stock. The number of shares subject to the assumed options and the option
exercise prices will be adjusted based on the exchange ratio. All other terms of
the options will remain unchanged.
EXCHANGE OF STOCK CERTIFICATES (PAGE 47)
After the merger, you will receive a letter of transmittal that will provide you
with instructions on how to exchange your ACS stock certificates for stock
certificates representing the Titan common stock you receive in the merger.
PLEASE DO NOT SEND YOUR STOCK
CERTIFICATES AT THIS TIME.
SPECIAL MEETING OF ACS STOCKHOLDERS (PAGE 27)
Under Delaware law, ACS stockholders must vote to adopt the merger agreement in
order for ACS to complete the merger.
The special meeting of ACS stockholders will be held at the offices of ACS at
10089 Lee Highway, Fairfax, Virginia 22030 on February 23, 2000, at 10:30 a.m.,
local time. At the special meeting, you will be asked to vote to adopt the
merger agreement and to approve the merger and the other transactions
contemplated by the merger agreement.
You may vote, or submit a proxy to vote, at the special meeting if you were a
record holder of ACS common stock at the close of business on January 11, 2000,
which is the record date for the special meeting. If you return your proxy, you
may revoke it at any time before the vote at the special meeting by sending a
later-dated proxy or a written notice revoking the proxy to the secretary of ACS
or by attending the meeting and voting in person.
VOTE REQUIRED (PAGE 27)
For the merger to occur, a majority of the shares of ACS common stock issued and
outstanding on January 11, 2000 must vote to adopt the merger agreement. If you
do not vote your shares of ACS common stock, the effect will be the same as a
vote against the merger.
As of January 11, 2000, directors and officers of ACS, other than the ACS
Principal Stockholders,
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<PAGE> 11
beneficially owned less than 1% of the outstanding shares of ACS common stock.
ACS'S REASONS FOR THE MERGER (PAGE 34)
In reaching its decision to approve the merger and recommend the approval of the
merger agreement to the ACS stockholders, the ACS board of directors considered
and analyzed a number of factors, including the following:
- the long-term as well as the short-term interests of ACS which the board
of directors believes will be served by combining with Titan into a
larger company that should be better able to compete in the federal
professional and technical services marketplace and which is expected to
have greater resources, thereby reducing stockholder risk;
- the long-term and short-term interests of the ACS stockholders which the
board of directors believes will be served by the merger, which will give
ACS stockholders an interest in a larger entity likely to have a more
liquid trading market and to generate more interest from financial
analysts;
- current market conditions favoring a sale of ACS to realize full value
for stockholders and increasing consolidation in the federal professional
and technical services industry;
- the December 8, 1999 presentation and written opinion to the ACS board of
directors of ACS's financial advisor, Banc of America Securities LLC, a
copy of which opinion is attached as Appendix B to this proxy
statement/prospectus, that the exchange ratio to be received by ACS
stockholders in the merger was fair from a financial point of view to ACS
as of the date of the opinion; and
- the terms of the Titan proposal, which were more favorable to the ACS
stockholders than the terms of the proposal of any other bidder.
RECOMMENDATION OF ACS'S BOARD OF DIRECTORS (PAGE 34)
The ACS board of directors has concluded unanimously that the merger is in the
best interests of, and that the terms of the merger are fair to, ACS and to you
as an ACS stockholder. The ACS board of directors has recommended unanimously
that you vote "FOR" adoption of the merger agreement and approval of the merger
and the other transactions contemplated by the merger agreement.
OPINION OF FINANCIAL ADVISOR TO ACS (PAGE 36)
In making its determination to approve, and to recommend that the ACS
stockholders approve, the merger agreement, the ACS board of directors took into
consideration, among many factors, the December 8, 1999 presentation and written
opinion of its financial advisor, Banc of America Securities, that the exchange
ratio to be received by the ACS stockholders in the proposed merger was fair
from a financial point of view to ACS as of the date of the opinion.
The full text of the written opinion of Banc of America Securities is attached
as Appendix B to this proxy statement/prospectus. The opinion sets forth
assumptions made and matters considered in the review undertaken in connection
with the opinion. The opinion does not constitute a recommendation by Banc of
America Securities to you on how to vote with respect to the merger or as to any
other matter relating to the merger. YOU SHOULD READ THE OPINION CAREFULLY AND
IN ITS ENTIRETY.
INTERESTS OF ACS'S DIRECTORS AND OFFICERS IN THE MERGER (PAGE 43)
In considering the recommendation of the ACS board of directors that you vote to
adopt the merger agreement, you should be aware that some of the ACS directors
and executive officers identified in this proxy statement/prospectus have
interests in the merger that are different from, or in addition to, their rights
as ACS stockholders. These interests arise primarily because some of the ACS
directors and executive officers have entered or will enter into retention
agreements or retirement contracts with ACS or Titan.
CLEARANCE UNDER FEDERAL ANTITRUST LAWS (PAGE 45)
In order to complete the merger, ACS and Titan had to make filings with the
Department of Justice and the Federal Trade Commission in compliance with
federal antitrust law. Before the merger can occur, the applicable pre-merger
wait-
5
<PAGE> 12
ing period under this law must expire or be terminated.
CONDITIONS TO THE MERGER (PAGE 60)
The merger will not be completed unless customary conditions are satisfied or
waived by Titan or ACS. Some conditions may not be waived, however, such as
approval of the merger by the ACS stockholders, clearance under federal
antitrust laws and the absence of governmental action to block the merger.
TERMINATION OF THE MERGER AGREEMENT (PAGE 61)
The merger agreement may be terminated by either Titan or ACS in a number of
circumstances, in which case the merger will not be completed. Breaches of the
merger agreement, withdrawal by the ACS board of directors of its recommendation
that ACS stockholders adopt the merger agreement, and the failure of the ACS
stockholders to adopt the merger agreement are some of the factors that could
permit Titan or ACS to terminate the merger agreement. See "Terms of the Merger
Agreement and Related Transactions -- Termination of the Merger Agreement;
Termination Fee" beginning on page 61 for a more detailed description of the
termination provisions of the merger agreement.
TERMINATION FEE (PAGE 61)
If the merger agreement is terminated, under some circumstances ACS may have to
pay Titan a termination fee of up to $4 million. See "Terms of the Merger
Agreement and Related Transactions -- Termination of the Merger Agreement;
Termination Fee" beginning on page 61 for more information about when this
termination fee or other termination payments may be payable.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 45)
It is a condition to the merger that Titan and ACS receive opinions from their
counsel to the effect that ACS stockholders will not recognize gain or loss for
U.S. federal income tax purposes upon the exchange of their ACS common stock for
Titan common stock in the merger. To review the expected federal income tax
consequences of the merger, see the tax discussion beginning on page 45.
The tax consequences of the merger to ACS stockholders will depend on the
particular facts of each ACS stockholder's own situation. Therefore, ACS
stockholders should consult their own tax advisors regarding the merger's
specific tax consequences.
ACCOUNTING TREATMENT (PAGE 44)
Titan and ACS have structured the merger to be accounted for as a pooling of
interests in accordance with generally accepted accounting principles. This
means that the two companies will be treated as if they had always been combined
for accounting and financial reporting purposes.
ABSENCE OF DISSENTERS' RIGHTS (PAGE 45)
Under Delaware law, which governs your rights as an ACS stockholder, you will
not be entitled to dissent from the merger or to exercise appraisal rights in
connection with the merger.
DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS (PAGE 94)
If you own ACS common stock, you will receive Titan common stock and become a
stockholder of Titan after the merger. Your rights will continue to be governed
by Delaware law, but also will be governed by Titan's certificate of
incorporation, bylaws and shareholder rights plan, rather than by ACS's
certificate of incorporation and bylaws. For a description of how your rights as
a Titan stockholder would differ from your rights as an ACS stockholder, see
"Comparative Rights of Titan Stockholders and ACS Stockholders" beginning on
page 94.
WHERE YOU CAN FIND MORE INFORMATION (PAGE 103)
If you would like more information about Titan or ACS, you can find this
information in documents filed by each company with the Securities and Exchange
Commission. These documents are identified on pages 103 and 104. Instructions on
how you can obtain copies of these documents are on page 104.
6
<PAGE> 13
DIVIDENDS AND MARKET PRICES OF TITAN COMMON STOCK AND ACS COMMON STOCK
Titan. The Titan common stock is listed on the NYSE under the symbol
"TTN." The table below shows, for the periods indicated, the high and low sale
prices of the Titan common stock on the NYSE composite tape:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1997
First Quarter............................................... $ 3.75 $ 2.88
Second Quarter............................................ 4.38 2.75
Third Quarter............................................. 7.44 4.19
Fourth Quarter............................................ 8.38 5.25
FISCAL YEAR ENDED DECEMBER 31, 1998
First Quarter............................................. $ 6.88 $ 5.50
Second Quarter............................................ 8.25 5.75
Third Quarter............................................. 6.56 3.81
Fourth Quarter............................................ 6.19 4.25
FISCAL YEAR ENDED DECEMBER 31, 1999
First Quarter............................................. $ 6.25 $ 4.75
Second Quarter............................................ 11.00 4.94
Third Quarter............................................. 14.63 9.38
Fourth Quarter............................................ 48.38 13.13
FISCAL YEAR ENDING DECEMBER 31, 2000
First Quarter (through January 20, 2000).................. $49.00 $33.38
</TABLE>
Titan did not declare or pay a cash dividend on its common stock in any of
the periods shown in the table above. Titan may pay cash dividends only if it
complies with financial tests and other restrictions contained in agreements
relating to Titan's indebtedness. Other than earnings distributed as quarterly
dividends to holders of Titan public preferred stock, Titan anticipates that,
for the foreseeable future, it will continue to retain any earnings for use in
its business.
ACS. The ACS common stock is traded on The Nasdaq National Market under
the symbol "ACSC." The table below shows, for the periods indicated, the
reported high and low sale prices for the ACS common stock on The Nasdaq
National Market:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1998
First Quarter............................................... $12.75 $ 8.00
Second Quarter............................................ 12.00 8.00
Third Quarter............................................. 14.94 10.50
Fourth Quarter............................................ 12.88 7.75
FISCAL YEAR ENDED SEPTEMBER 30, 1999
First Quarter............................................. $12.56 $ 7.13
Second Quarter............................................ 16.13 9.81
Third Quarter............................................. 13.94 11.13
Fourth Quarter............................................ 15.00 10.00
FISCAL YEAR ENDING SEPTEMBER 30, 2000
First Quarter............................................. $19.13 $10.88
Second Quarter (through January 20, 2000)................. 19.88 18.13
</TABLE>
ACS did not declare or pay a cash dividend on its common stock in any of
the periods shown in the table above. ACS may pay cash dividends only if it
complies with financial tests and other restrictions contained in its credit
facility agreement.
Following the merger, the ACS common stock will cease to be traded on The
Nasdaq National Market, and there will be no further market for the ACS common
stock.
Comparative Share Prices. The following table sets forth the closing sale
price of the Titan common stock reported on the NYSE composite tape and the
closing sale price of the ACS common stock reported
7
<PAGE> 14
on The Nasdaq National Market on December 8, 1999, the last full trading day
before public announcement of the execution of the merger agreement, and on
January 20, 2000, the last practicable date before the printing of this proxy
statement/prospectus for which sales price information was available, and the
equivalent per share prices for the ACS common stock on those two dates.
<TABLE>
<CAPTION>
ACS EQUIVALENT
TITAN COMMON STOCK ACS COMMON STOCK COMMON STOCK
------------------ ---------------- --------------
<S> <C> <C> <C>
December 8, 1999 $28.69 $14.56 $20.00
January 20, 2000 $39.63 $19.50 $22.34
</TABLE>
The equivalent per share price shown in the table above for each date
represents the per share closing price for the Titan common stock reported on
the NYSE on that date, multiplied by an assumed exchange ratio of .6971 for
December 8, 1999 and an assumed exchange ratio of .5637 for January 20, 2000.
Based on the exchange ratio formula set forth in the merger agreement, we have
calculated these assumed exchange ratios based on the average of the closing
sale prices of the Titan common stock on the NYSE for the ten consecutive
trading days ending two trading days before each date shown in the table. For a
description of how the exchange ratio will be calculated, see "Terms of the
Merger Agreement and Related Transactions -- General -- Conversion of ACS Common
Stock."
You are urged to obtain current quotations for the market prices of the
Titan common stock and the ACS common stock. No assurance can be given as to the
market price of the Titan common stock or the ACS common stock on the merger
closing date or in the period before the closing date. The market prices of the
Titan common stock that you will receive in the merger may vary significantly
from the prices shown in the preceding tables.
8
<PAGE> 15
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
We expect that the merger of Titan and ACS will be accounted for under the
pooling of interests method of accounting, which means that, for accounting and
financial reporting purposes, Titan and ACS will be treated as if they had
always been combined. We have presented below unaudited pro forma combined
financial data that reflect the pooling of interests method of accounting and
are intended to give you a better picture of what the businesses of Titan and
ACS might have looked like if the merger between the two companies had occurred
on January 1, 1996, the first day of the first period for which financial
information is presented here. Titan and ACS might have performed differently if
they had been combined.
In addition, the pro forma statement of operations data for the year ended
December 31, 1998 and for the nine months ended September 30, 1998 and 1999
assume that Titan completed the acquisitions of Transnational Partners II, LLC
("TNP"), JB Systems, Inc., doing business as Mainsaver, Assist Cornerstone
Technologies, Inc. ("Assist") and SFG Technologies, Inc. ("SFG") as of the
beginning of each such period. The pro forma balance sheet data as of September
30, 1999 assume that Titan completed these acquisitions as of such date. The
summary unaudited pro forma financial data presented below have been derived
from, and should be read in conjunction with, the "Unaudited Pro Forma Financial
Information" and related notes in this proxy statement/prospectus and the
financial statements of TNP, Mainsaver, Assist and SFG incorporated by reference
herein. You should not rely on the unaudited pro forma combined financial data
as being indicative of the results that would have occurred or of the future
results that will occur after the merger.
9
<PAGE> 16
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------------- ------------------------------
1999 1998 1998 1997 1996
------------- ------------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Revenue.................................. $451,274 $298,724 $440,433 $328,117 $277,641
Costs and expenses:
Cost of revenues......................... 324,771 216,375 315,465 254,240 211,964
Selling, general and administrative
expense.............................. 86,438 54,144 82,426 47,859 46,479
Research and development expense....... 8,128 6,133 8,786 7,466 5,023
Special acquisition related charges and
other................................ -- 4,553 9,891 8,510 --
-------- -------- -------- -------- --------
Total costs and expenses........ 419,337 281,205 416,568 318,075 263,466
Operating profit......................... 31,937 17,520 23,865 10,042 14,175
Interest expense......................... (12,392) (8,964) (12,783) (6,779) (5,021)
Interest income.......................... 585 302 512 1,025 696
-------- -------- -------- -------- --------
Income from continuing operations before
income taxes........................... 20,130 8,857 11,594 4,288 9,850
Income tax provision..................... 7,901 3,730 5,784 3,934 2,603
-------- -------- -------- -------- --------
Income from continuing operations before
cumulative effect of change in
accounting............................. $ 12,229 $ 5,128 $ 5,810 $ 354 $ 7,247
======== ======== ======== ======== ========
Basic earnings per share
Income from continuing operations...... $ 0.25 $ 0.11 $ 0.12 $ (0.01) $ 0.16
======== ======== ======== ======== ========
Weighted average shares................ 45,983 42,521 42,802 40,485 39,459
======== ======== ======== ======== ========
Diluted earnings per share
Income from continuing operations...... $ 0.22 $ 0.10 $ 0.11 $ (0.01) $ 0.16
-------- -------- -------- -------- --------
Weighted average shares................ 53,396 43,627 43,936 40,485 39,836
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1999
-------------
(UNAUDITED)
<S> <C>
PRO FORMA BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 6,235
Working capital............................................. 114,632
Property and equipment, net................................. 38,175
Total assets................................................ 505,669
Total debt.................................................. 232,165
Stockholders' equity........................................ 131,450
</TABLE>
10
<PAGE> 17
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF TITAN
Titan derived the following information from its audited financial
statements as of and for the years ended December 31, 1994 through 1998 and
unaudited financial statements as of and for the nine months ended September 30,
1999 and 1998. The following information is only a summary and should be read in
conjunction with the historical financial statements of Titan and related notes
contained in Titan's annual reports and other information it has filed with the
SEC. To obtain copies of this information, see "Where You Can Find More
Information."
The summary consolidated statements of operations data for the nine months
ended September 30, 1998 and September 30, 1999 and the consolidated balance
sheet data as of September 30, 1999 are unaudited but include, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such data. Results for the nine months
ended September 30, 1999 are not necessarily indicative of the results which may
be expected for any other interim periods or for the year as a whole.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues........................... $274,059 $218,678 $303,428 $275,923 $245,976 $244,882 $230,611
Costs and expenses:
Cost of revenues................. 211,147 168,816 232,041 216,553 192,657 189,237 172,947
Selling, general and
administrative expense......... 32,957 26,936 37,553 36,731 36,226 37,513 35,871
Research and development
expense........................ 5,317 4,025 5,590 7,466 5,023 6,907 5,749
Special acquisition related
charges and other.............. -- 4,553 9,891 6,600 -- 6,249 (1,200)
-------- -------- -------- -------- -------- -------- --------
Total costs and
expenses................ 249,421 204,330 285,075 267,350 233,906 239,906 213,367
Operating profit................... 24,638 14,348 18,353 8,573 12,070 4,976 17,244
Interest expense................... (6,712) (5,399) (7,377) (6,643) (4,764) (2,817) (2,327)
Interest income.................... 585 262 392 872 639 392 389
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations
before income taxes.............. 18,511 9,211 11,368 2,802 7,945 2,551 15,306
Income tax provision............... 5,553 3,336 4,155 4,184 2,603 498 5,103
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations before cumulative
effect of change in accounting... 12,958 5,875 7,213 (1,382) 5,342 2,053 10,203
Cumulative effect of change in
accounting principle, net........ -- (19,474) (19,474) -- -- -- --
Loss from discontinued operation,
net of taxes..................... -- (5,617) (7,444) (17,930) (6,326) (12,942) (4,024)
-------- -------- -------- -------- -------- -------- --------
Net income (loss).................. 12,958 (19,216) (19,705) (19,312) (984) (10,889) 6,179
Dividend requirements on preferred
stock............................ (521) (605) (778) (875) (803) (695) (695)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) applicable to
common stock..................... $ 12,437 $(19,821) $(20,483) $(20,187) $ (1,787) $(11,584) $ 5,484
======== ======== ======== ======== ======== ======== ========
Basic earnings per share:
Income from continuing
operations..................... $ 0.33 $ 0.15 $ 0.18 $ (0.07) $ 0.14 $ 0.04 $ 0.31
Cumulative effect of change in
accounting..................... -- (0.56) (0.56) -- -- -- --
Loss from discontinued
operation...................... -- (0.16) (0.21) (0.54) (0.20) (0.42) (0.13)
-------- -------- -------- -------- -------- -------- --------
Net income (loss).................. $ 0.33 $ (0.57) $ (0.59) $ (0.61) $ (0.06) $ (0.38) $ 0.18
Weighted average shares.......... 38,076 34,614 34,895 33,094 32,068 30,545 30,388
======== ======== ======== ======== ======== ======== ========
</TABLE>
11
<PAGE> 18
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Diluted earnings per share:
Income from continuing
operations..................... $ 0.29 $ 0.15 $ 0.18 $ (0.07) $ 0.14 $ 0.04 $ 0.31
Cumulative effect of change in
accounting..................... -- (0.54) (0.54) -- -- -- --
Loss from discontinued
operation...................... -- (0.16) (0.21) (0.54) (0.20) (0.42) (0.13)
-------- -------- -------- -------- -------- -------- --------
Net income (loss).................. $ 0.29 $ (0.55) $ (0.57) $ (0.61) $ (0.06) $ (0.37) $ 0.18
======== ======== ======== ======== ======== ======== ========
Weighted average shares.......... 45,732 36,013 36,177 33,094 32,445 31,167 30,388
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 4,207 $ 11,079 $ 11,079 $ 11,383 $ 5,719 $ 9,477 $ 9,447
Investments........................ -- -- -- -- 9,888 5,000 --
Working capital.................... 91,391 64,450 64,450 115,779 62,634 36,730 46,184
Property and equipment, net........ 28,476 25,702 25,702 27,666 29,391 32,730 27,333
Total assets....................... 293,108 192,567 192,567 183,703 193,288 163,060 150,424
Total debt......................... 130,854 75,240 75,240 62,200 54,242 33,634 13,915
Stockholders' equity............... 86,837 50,711 50,711 65,447 82,279 71,691 78,296
</TABLE>
12
<PAGE> 19
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF ACS
ACS derived the following information from its audited financial statements
as of and for the years ended September 30, 1995 through 1999. The following
information is only a summary and should be read in conjunction with the
historical financial statements of ACS and related notes contained in ACS's
annual reports and other information it has filed with the SEC. To obtain copies
of this information, see "Where You Can Find More Information."
Before June 25, 1997, ACS elected to be treated as a corporation taxed
under subchapter S of the Internal Revenue Code and was not subject to federal
and certain state income taxes. The pro forma statement of operations data
presented below reflect, for the periods prior to June 25, 1997, federal and
state income taxes based on applicable rates as if ACS had not elected S
corporation status for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------
1999(1) 1998 1997(2) 1996 1995
-------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $218,252 $107,752 $52,194 $31,665 $23,724
Direct costs................................... 147,667 69,847 37,687 19,307 14,815
Indirect, general and administrative
expenses..................................... 54,577 28,834 11,128 10,253 8,202
Write-off of receivable and capitalized
software..................................... 5,693 -- -- -- --
-------- -------- ------- ------- -------
Income from operations......................... 10,315 9,071 3,379 2,105 707
Interest expense............................... (4,492) (1,918) (136) (257) (185)
Other income, net.............................. 160 82 153 57 52
-------- -------- ------- ------- -------
Income before taxes............................ 5,983 7,235 3,396 1,905 574
Provision (benefit) for income taxes........... 2,402 2,861 (250) -- --
-------- -------- ------- ------- -------
Net income..................................... $ 3,581 $ 4,374 $ 3,646 $ 1,905 $ 574
======== ======== ======= ======= =======
Net income per share -- basic.................. $ 0.41 $ 0.61 $ 0.85 $ 0.51
======== ======== ======= =======
Net income per share -- diluted................ $ 0.41 $ 0.60 $ 0.84 $ 0.50
======== ======== ======= =======
Weighted average shares outstanding -- basic... 8,680 7,221 4,306 3,733
======== ======== ======= =======
Weighted average shares
outstanding -- diluted....................... 8,803 7,326 4,352 3,806
======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1997 1996 1995
------ ------ ----
<S> <C> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Income before taxes......................................... $3,396 $1,905 $574
Pro forma income taxes...................................... 1,305 743 229
------ ------ ----
Pro forma net income........................................ $2,091 $1,162 $345
====== ====== ====
Pro forma net income per share -- basic..................... $ 0.45 $ 0.28
====== ======
Pro forma net income per share -- diluted................... $ 0.44 $ 0.27
====== ======
Pro forma weighted average shares
outstanding -- basic(3)(4)................................ 4,682 4,212
====== ======
Pro forma weighted average shares
outstanding -- diluted(3)(4).............................. 4,729 4,286
====== ======
</TABLE>
13
<PAGE> 20
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................. $ 29,195 $ 21,436 $ 9,526 $5,387 $2,716
Total assets..................................... 143,202 119,735 26,212 3,117 6,987
Total debt....................................... 48,964 38,274 -- 2,688 1,821
Stockholders' equity............................. 49,894 44,883 13,828 4,375 2,497
</TABLE>
- ---------------
(1) Includes a one-time charge of $3.9 million related to software development
for the Streamlined Automated Logistics Transmission System, or SALTS, and
$1.8 million for an uncollected receivable from the Australian Navy related
to the development and installation of RANSALTS, a SALTS-type product.
Related costs that are included in the indirect, general and administrative
expenses totaled $548,000. Indirect, general and administrative expenses
also include unusual bid and proposal costs of $444,000. Adjusted per share
earnings on a fully diluted basis, excluding the charges referred to above,
would have been $0.86 for the year ended September 30, 1999.
(2) Excludes a one-time, non-cash charge of acquired in-process research and
development costs incurred in connection with the acquisition of RF
Microsystems, Inc., now a wholly owned subsidiary of ACS, totaling $1.9
million, or $0.25 per share on an after-tax basis.
(3) The pro forma weighted average shares outstanding is based on (a) the
weighted average shares outstanding during the period, assuming the dilutive
effect of all options outstanding for diluted pro forma net income per
share, and (b) the assumed sale of a sufficient number of shares of ACS
common stock necessary to fund the distribution of all undistributed S
corporation earnings in excess of the preceding 12 months earnings, through
the date of ACS's initial public offering in June 1997.
(4) Excludes the effect of an earnout payment of up to $10 million which is
payable on or before February 14, 2000. This amount is payable in cash or
ACS common stock at the option of the former owners of an acquired business.
14
<PAGE> 21
COMPARATIVE UNAUDITED PER SHARE DATA
The following table shows selected historical per share data of Titan and
ACS and combined per share data on an unaudited pro forma combined basis for the
years ended December 31, 1997 and 1998 after giving effect to the merger as if
it had occurred on January 1, 1996 under the pooling of interests method of
accounting. The pro forma combined per share data for the year ended December
31, 1999 and for the nine months ended September 30, 1999 combine the historical
per share data of Titan with the historical per share data of ACS, TNP (only for
the year ended December 31, 1998), Mainsaver, Assist and SFG as if each company
had been combined with Titan on January 1, 1998. The pro forma combined per
share data assume that 0.7843 of a share of Titan common stock had been issued
in exchange for each outstanding share of ACS common stock. You should read this
information in conjunction with the selected historical audited and unaudited
financial information included elsewhere in this proxy statement/ prospectus and
the historical audited and unaudited financial statements of Titan and ACS and
related notes that are incorporated in this proxy statement/prospectus by
reference.
The per share data presented below are derived from the historical
consolidated financial statements of Titan and ACS, both of which are
incorporated in this proxy statement/prospectus by reference. The unaudited pro
forma combined results of Titan and of ACS are not necessarily indicative of
results of operations that would have resulted if the merger had been completed
at the beginning of the periods indicated or of the results that will be
achieved in the future. Interim data for the nine months ended September 30,
1999 and as of September 30, 1999 are unaudited but include, in the opinion of
management of Titan, with respect to the Titan data, and ACS, with respect to
the ACS data, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such data. Results for the nine months
ended September 30, 1999 are not necessarily indicative of the results which may
be expected for any other interim periods or for the year as a whole.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
NINE MONTHS ENDED --------------------------
SEPTEMBER 30, 1999 1998 1997 1996
------------------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Historical -- Titan:
Net income (loss) per share.................. $0.29 $(0.57) $(0.61) $(0.06)
Book value per share(1,2).................... 1.90
Historical -- ACS:
Net income (loss) per share.................. $0.56 $ 0.60 $ 0.40 $ 0.50
Book value per share(1,2).................... 5.70
Pro forma combined per Titan share(2):
Net income (loss) per share.................. $0.22 $(0.50) $(0.46) $ 0.00
Book value per share(1,2).................... 2.46
Equivalent pro forma combined per ACS share(3):
Net income (loss) per share.................. $0.21 $(0.48) $(0.43) $(0.00)
Book value per share(1,2).................... 2.37
</TABLE>
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(1) The historical book value per share is computed by dividing stockholders'
equity by the number of shares of common stock and equivalents outstanding
at the end of each period. The pro forma book value per share is computed by
dividing pro forma stockholders' equity by the pro forma number of shares of
common stock and equivalents at the end of each period.
(2) Titan estimates that Titan and ACS will incur approximately $11.2 million of
primarily direct transaction costs associated with the merger, which will be
charged to operations as the costs are incurred. The book value per share
data under pro forma combined per Titan share give effect to estimated costs
of $7.8 million, net of tax, as if such costs had been incurred and charged
to operations as of September 30, 1999. These costs and this charge
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are not included in the pro forma income per share data. See "Unaudited Pro
Forma Financial Information" and the related notes in this proxy
statement/prospectus.
(3) The amounts for equivalent pro forma combined per ACS share are calculated
by dividing the amounts for pro forma combined per Titan share by an assumed
exchange ratio of .7843. The exchange ratio assumes an average Titan stock
price of at least $22.95 but less than $25.50, which is the range below
which ACS has the right, subject to conditions, to terminate the merger
agreement.
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RISK FACTORS
You should carefully consider the following risk factors relating to the
merger and ownership of
Titan common stock before you decide whether to vote to adopt the merger
agreement and approve
the merger and related transactions. You also should consider the other
information in this proxy
statement/prospectus and the other documents considered a part of this proxy
statement/prospectus.
For information about these other documents, see "Where You Can Find More
Information."
RISKS RELATING TO THE MERGER
TITAN CANNOT ASSURE YOU THAT TITAN AND ACS BUSINESS OPERATIONS WILL BE
SUCCESSFULLY INTEGRATED.
If Titan and the stockholders of the combined company are to realize the
anticipated benefits of the merger, the operations of Titan and ACS must be
integrated and combined efficiently. Titan cannot assure you that the
integration will be successful or that the anticipated benefits of the merger
will be fully realized. Similarly, Titan cannot guarantee that the ACS
stockholders will achieve greater value through their ownership of Titan common
stock than they would have achieved as stockholders of ACS as a separate entity.
The dedication of Titan's management resources to integration activities may
detract attention from the day-to-day business of the combined company. The
difficulties of integration may be increased by the need to coordinate
geographically separate organizations, integrate personnel with disparate
business backgrounds and combine different corporate cultures. This integration
may also be more difficult due to Titan's integration challenges as a result of
its recently completed acquisitions or any future acquisitions. Titan cannot
assure you that there will not be substantial costs associated with the
integration process, that integration activities will not result in a decrease
in revenues or a decrease in the value of Titan common stock, or that there will
not be other material adverse effects from Titan's integration efforts.
THE EXPECTED COSTS OF THE MERGER WILL BE SUBSTANTIAL.
Titan estimates that it will incur approximately $11.2 million of primarily
direct transaction costs associated with the merger. These costs will be charged
to operations as incurred. This amount is a preliminary estimate only; there can
be no assurance that Titan will not actually incur charges in excess of this
estimate.
SALES OF SUBSTANTIAL AMOUNTS OF TITAN'S COMMON STOCK IN THE OPEN MARKET BY
ACS STOCKHOLDERS COULD DEPRESS TITAN'S STOCK PRICE.
If ACS stockholders sell substantial amounts of Titan common stock in the
public market following the merger, including shares issued upon the exercise of
outstanding options, the market price of Titan common stock could fall. These
sales might also make it more difficult for Titan to sell equity or equity-
related securities at a time and price that it otherwise would deem appropriate.
Based on the number of outstanding shares of ACS common stock as of January 20,
2000, Titan would issue 5,478,600 shares in the merger if the average Titan
stock price used to calculate the exchange ratio is greater than $32.50 but less
than or equal to $35.75 and 6,982,232 shares in the merger if the average Titan
stock price used to calculate the exchange ratio is at least $22.95 but less
than $25.50. In addition, Titan will assume all outstanding options to purchase
ACS common stock, which will be converted into options to acquire shares of
Titan common stock using the same exchange ratio which is applicable to ACS
common stock in the merger. All of the shares of Titan common stock issued to
stockholders of ACS, including those issued upon the exercise of options, will
be freely tradable without restrictions or further registration under the
Securities Act of 1933, unless you are an ACS "affiliate," as that term is
defined under the Securities Act, at the time the merger is submitted for
approval by ACS stockholders. The term "affiliate" would include directors,
executive officers and some significant stockholders of ACS.
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RISKS RELATING TO TITAN'S BUSINESS AND COMMON STOCK
THE CAYENTA, TITAN SCAN AND TITAN WIRELESS BUSINESSES OPERATE IN EMERGING
MARKETS, AND TITAN WILL BE UNABLE TO EXPAND THESE BUSINESSES AS IT EXPECTS IF
THE PRINCIPAL PRODUCTS AND SERVICES OF THOSE BUSINESSES DO NOT MEET WITH MARKET
ACCEPTANCE.
To grow as currently contemplated, Titan will need to derive an increasing
portion of its revenues from the Cayenta, Titan Scan and Titan Wireless
businesses. If any of the primary markets targeted by Cayenta, Titan Scan or
Titan Wireless fails to develop as Titan anticipates, Titan's revenues will be
less than expected, its business will suffer and it may be unable to recoup the
investments it has made to develop and market the principal products and
services of those businesses.
To date, none of Cayenta's revenues have been derived from direct sales by
it of its total services provider, or TSP, offering. Cayenta's only TSP-related
revenues have resulted from providing TSP services to the customers of a joint
venture in which it holds a 10% equity interest. The market for TSP offerings
has only recently begun to develop, and Cayenta cannot be certain that the
market for TSP offerings will develop.
The use of the Titan Scan electron beam technology for food irradiation has
only recently been approved by the applicable regulatory authorities in the
United States. Accordingly, a market for pasteurized foods has only recently
begun to develop, and its continued development will depend on broad acceptance
of irradiated foods by customers, food producers and providers, restaurant
chains and food retailers. This acceptance may not occur.
Titan Wireless's principal strategy is to provide products used in
telephony systems in developing countries. Titan cannot guarantee that a
substantial market for telephony services in developing countries will ever
develop, or if such a market does develop, that fixed-site satellite equipment
will capture a significant portion of that market. The development of a market
for telephony services in developing countries will depend upon a variety of
factors including whether a particular country has sufficient resources to
support such a market and whether the telephony services are offered at a
reasonable cost to the end users of such services. Titan Wireless's ability to
penetrate the telephony market in developing countries will be adversely
affected to the extent that other competing elements of the communications
infrastructure, such as telephone lines, other satellite-delivered solutions and
fiber optic cable and television cable, are installed in the developing
countries. In addition, the development and implementation of telephony systems
will be dependent upon, among other items, the continued development of
necessary technologies, continued financial and other support from governmental
agencies, the implementation of cost-effective systems, market acceptance for
such systems and approval by appropriate regulatory agencies.
TITAN HAS A LIMITED HISTORY OF COMMERCIALIZING NEW TECHNOLOGIES AND ITS
COMMERCIAL BUSINESSES MAY NOT REMAIN OR EVER BECOME SUCCESSFUL.
In 1991, Titan adopted a strategy of seeking to develop commercial
businesses using technology developed in its defense businesses. The Titan Scan
and Titan Wireless businesses are a product of this strategy. Many of Titan's
commercial businesses are in an early stage of development or have only recently
begun to offer their products, services, systems or solutions in the emerging
markets in which they operate. These technology-based businesses are subject to
risks inherent in companies at these early stages of development, including:
- the risks that their base technology will become obsolete and that they
will fail to respond in a timely and cost-effective manner to rapid
technological changes;
- the risks associated with operating in markets that are subject to a high
degree of competition;
- the risk that they will have inadequate management resources to
capitalize on market opportunities and execute their strategy;
- the risk that they will be unable to manage rapid growth effectively;
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- the risk that they will be unable to execute successfully each portion of
their business strategy on schedule;
- the risk that Titan may not identify markets with sufficient
opportunities to justify its investments in products and solutions for
these markets;
- the market and operating risks that are unique to each particular
business; and
- the risk that adequate capital may not be available to fund their
continued development.
TITAN CANNOT GUARANTEE THAT CAYENTA'S PENDING INITIAL PUBLIC OFFERING WILL
CLOSE OR THAT TITAN WILL BE ABLE TO EXECUTE ON ITS STRATEGY OF OBTAINING PUBLIC
OR PRIVATE FINANCING TO FUND THE GROWTH OF ITS COMMERCIAL BUSINESSES.
As part of Titan's strategy of seeking external financing to grow its
commercial businesses, Titan's Cayenta subsidiary has filed a registration
statement for an initial public offering of its common stock. Titan cannot
guarantee that Cayenta will succeed in completing the offering, which may be
adversely affected by market conditions or other factors. Titan has extended a
credit facility of up to a maximum of $70.0 million under which Cayenta owed
Titan approximately $54 million as of January 21, 2000. Cayenta may not use the
proceeds of its initial public offering to pay amounts outstanding under its
credit facility with Titan.
Titan may seek public or private financing for one or more of its
commercial businesses to fund their growth, including through initial public
offerings for any of its segments. Titan cannot guarantee that adequate capital
to fund its growth will be available to Titan or be available on acceptable
terms.
TITAN DEPENDS ON GOVERNMENT CONTRACTS FOR A MAJORITY OF ITS REVENUES.
Titan earns a majority of its total revenues from U.S. government
contracts. Any cancellations or modifications of Titan's significant U.S.
government contracts or subcontracts, or failure by the U.S. government to
exercise an option period relating to those contracts or subcontracts, could
hurt Titan's business, financial condition and results of operations in the
short or long term. Continuing declines in U.S. defense and other federal agency
budgets also may hurt Titan's prospects.
Titan's revenues from U.S. government business represented approximately
81% of its total revenues in 1996, 82% of its total revenues in 1997, and 80% of
its total revenues in 1998. On a pro forma basis giving effect to its
acquisition of ACS, Titan's revenues from U.S. government businesses represented
approximately 88% of its total revenues for the twelve months ended September
30, 1999. This percentage may rise in the future. Although Titan bids for and is
awarded long-term U.S. government contracts and subcontracts, the U.S.
government only funds these contracts on an annual basis, and many of Titan's
contracts and subcontracts include option years. The U.S. government may cancel
these contracts at any time without penalty or may change its requirements,
programs or contract budget, and generally has the right not to exercise option
periods. The U.S. Congress may decline to appropriate funds needed to complete
the contracts awarded to Titan or the prime contractor. On its subcontracts,
Titan generally does not control the prime contractor's allocation of resources.
Titan also depends upon the prime contractor to perform its obligations on the
primary government contract. In addition to contract cancellations and declines
in agency budgets, Titan's prospects may be adversely affected by:
- budgetary constraints affecting U.S. government spending generally, and
changes in fiscal policy or available funding;
- curtailment of the U.S. government's use of technology services
providers;
- the adoption of new laws or regulations;
- technological developments;
- U.S. government shutdowns, such as that which occurred during the U.S.
government's 1996 fiscal year;
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- competition and consolidation in Titan's business areas; and
- general economic conditions.
These or other factors could cause government agencies to reduce their purchases
under contracts, to exercise their right to terminate contracts or not to
exercise options to renew contracts. Any of these actions could have a material
adverse effect on Titan's business, financial condition and results of
operations.
GOVERNMENT AUDITS OF TITAN'S GOVERNMENT CONTRACTS COULD CAUSE A MATERIAL
NEGATIVE ADJUSTMENT TO ITS REVENUES.
Titan's government contracts are subject to cost audits by the government.
These audits may occur several years after completion of the audited work.
Audits may result in a recalculation of contract revenues or result in the
government refusing to reimburse some of Titan's contract costs and fees.
Generally, Titan resolves audit issues by negotiation without material
adjustments. However, in the future, Titan could have a material adjustment to
revenue as a result of an audit, including an audit of one of the companies
Titan has recently acquired. Before Titan acquired them, some of its recently
acquired companies did not impose internal controls as rigorous as those Titan
imposes on the government contracts it performs. As part of the integration
process, Titan seeks to apply its policies throughout the acquired companies.
TITAN'S OPERATING MARGINS MAY DECLINE UNDER ITS FIXED-PRICE CONTRACTS IF IT
FAILS TO ESTIMATE ACCURATELY THE RESOURCES NECESSARY TO SATISFY ITS OBLIGATIONS.
Some of Titan's contracts are fixed-price contracts under which Titan bears
the risk of any cost overruns. Its profits are adversely affected if its costs
under a contract exceed the assumptions it used in bidding for these contracts.
TITAN IS NOT ABLE TO GUARANTEE THAT IT WILL RETAIN ITS CONTRACTS WITH THE
U.S. GOVERNMENT AND SUBCONTRACTS UNDER U.S. GOVERNMENT PRIME CONTRACTS IN ANY
COMPETITIVE REBIDDING PROCESS.
Upon expiration of a U.S. government contract or subcontract under U.S.
government prime contracts, if the government customer requires further services
of the type provided in the contract, there is frequently a competitive
rebidding process. Titan cannot guarantee that it, or the prime contractor, will
win any particular bid, or that it will be able to replace business lost upon
expiration or completion of a contract. Further, all U.S. government contracts
are subject to protest by competitors. The unexpected termination of one or more
of Titan's significant contracts could result in significant revenue shortfalls.
The termination or non-renewal of any of its significant contracts, short-term
revenue shortfalls, the imposition of fines or damages, or Titan's suspension or
debarment from bidding on additional contracts could have a material adverse
effect on its business, financial condition and results of operations.
MANY OF TITAN'S U.S. GOVERNMENT CUSTOMERS SPEND THEIR PROCUREMENT BUDGETS
THROUGH GSA SCHEDULE CONTRACTS, AND TITAN IS REQUIRED TO COMPETE FOR POST-AWARD
ORDERS.
Budgetary pressures and reforms in the procurement process have caused many
U.S. government customers increasingly to purchase goods and services through
"indefinite delivery, indefinite quantity" contracts, General Services
Administration, or GSA, Schedule contracts and other multiple award or
government-wide acquisitions contract vehicles. Titan's failure to compete
effectively in this procurement environment could have a material adverse effect
on its business, financial condition and results of operations. These contract
vehicles have resulted in increased competition and pricing pressure and
required Titan to make sustained post-award efforts to realize revenues under
the relevant contract. Titan cannot guarantee that it will continue to increase
revenues or otherwise sell successfully under these contract vehicles.
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TITAN MAY BE LIABLE FOR PENALTIES UNDER A VARIETY OF PROCUREMENT RULES AND
REGULATIONS, AND CHANGES IN GOVERNMENT REGULATIONS COULD ADVERSELY AFFECT ITS
BUSINESS.
Titan's defense and commercial businesses must comply with and are affected
by various government regulations. Among the most significant regulations are
the following:
- the Federal Acquisition Regulations, which comprehensively regulate the
formation, administration and performance of government contracts;
- the Truth in Negotiations Act, which requires certification and
disclosure of all cost and pricing data in connection with contract
negotiations;
- the Cost Accounting Standards, which impose accounting requirements that
govern Titan's right to reimbursement under certain cost-based government
contracts; and
- laws, regulations and Executive Orders restricting the use and
dissemination of information classified for national security purposes
and the exportation of certain products and technical data.
These regulations affect how Titan and its customers do business and, in some
instances, impose added costs on its businesses. Any changes in applicable laws
could adversely affect the financial performance of the business affected by the
changed regulations. Any failure to comply with applicable laws could result in
contract termination, price or fee reductions or suspension or debarment from
contracting with the U.S. government.
TITAN'S FAILURE TO RETAIN QUALIFIED TECHNICAL AND MANAGEMENT PERSONNEL
COULD ADVERSELY AFFECT ITS FINANCIAL PERFORMANCE.
Titan needs to maintain its workforce of highly qualified technical and
management personnel for each of its business segments, including its engineers,
computer programmers and personnel with security clearances required for
classified work. In addition, Titan's future success will depend in part on its
ability to identify, recruit and retain additional qualified personnel,
including individuals with security clearances required for classified work. The
loss of any key personnel could negatively affect its business, financial
condition and results of operations. Titan's employees generally have many other
job opportunities, and there is intense competition for their services.
Consequently, Titan strives to maintain an entrepreneurial work environment and
provide financial incentives to attract and retain its key personnel. Titan
cannot guarantee that it will be able to continue to attract and retain
personnel with the advanced technical and security clearance qualifications
necessary for the development of its business.
TITAN COMPETES IN HIGHLY COMPETITIVE MARKETS AGAINST MANY COMPANIES THAT
ARE LARGER, BETTER FINANCED AND BETTER KNOWN THAN TITAN.
Titan's businesses operate in highly competitive markets. Many of Titan's
competitors are larger, better financed and better known companies who may
compete more effectively. Titan believes it must continue to expand its defense
information technology business so that it can remain price competitive and
compete for larger contracts. For that reason, Titan is continuing to look for
acquisition candidates. Titan's commercial businesses compete against other
technologies as well as against companies with similar products. In order to
remain competitive, Titan must invest to keep its products technically advanced
and compete on price and on value added to its customers. Titan's ability to
compete may be adversely affected by limits on its capital resources and its
ability to invest in maintaining and expanding its market share. Any adverse
financial developments could make Titan a less effective competitor.
TITAN IS SUBJECT TO RISKS ASSOCIATED WITH ITS ACQUISITIONS OF OTHER
COMPANIES.
Since January 1, 1998, Titan has acquired seven defense information
technology companies as part of the consolidation strategy for its defense
business. Four of these seven transactions were structured as stock-for-stock
pooling of interests transactions. In addition, since January 1, 1999, Titan has
acquired four information technology services and solutions companies as part of
Cayenta's development of its total services provider offering. The acquisition
and integration of new companies involves risk. The integration
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of acquired businesses may be costly and may result in a decrease in its
revenues or a decrease in the value of its common stock for the following
reasons, among others:
- Titan may need to divert more management resources to integration than it
planned, which may adversely affect its ability to pursue other more
profitable activities;
- the difficulties of integration may be increased by the necessity of
coordinating geographically separated organizations, integrating
personnel with disparate business backgrounds and combining different
corporate cultures;
- Titan may not eliminate as many redundant costs as it anticipated in
selecting its acquisition candidates; and
- one or more of Titan's acquisition candidates also may have liabilities
or adverse operating issues that Titan failed to discover through its
diligence prior to the acquisition.
Consequently, Titan's recent acquisitions may not improve its business,
financial condition and results of operations in the short-term or long-term as
it expects them to do.
Titan intends to continue to look for complementary businesses or
technologies to acquire so that it can expand its core businesses. However,
Titan may not find any more attractive candidates or may find that the
acquisition terms are not favorable to it. In addition, Titan may compete with
other companies for these acquisition candidates. Instability in the U.S.
securities markets and volatility in its stock price may make acquisitions with
Titan stock more expensive. Titan also may not adequately assess the risks
inherent in a particular acquisition candidate or correctly assess the
candidate's potential contribution to its financial performance. Accordingly,
Titan's acquisition strategy may not improve its overall business, financial
condition and results of operations, and could weaken them.
TITAN MAY INCUR SIGNIFICANT COSTS IN PROTECTING ITS INTELLECTUAL PROPERTY.
As a policy, Titan seeks to protect its proprietary technology and
inventions through patents, copyrights, trade secret law and other legal
protections. While Titan's patent portfolio is valuable, its financial success
ultimately depends upon its ability to deliver products and services that meet
customer needs, not on intellectual property laws. Titan may, however, incur
significant expense both in protecting its intellectual property and in
depending or assessing claims with respect to intellectual property owned by
others. Any patent or other infringement litigation by or against Titan could
have an adverse effect on its business, financial condition and results of
operations. Titan also could be forced to modify or abandon one or more planned
or current products based upon its assessment of intellectual property risks or
actual or threatened claims by other companies.
On January 6, 2000, Ion Beam Applications s.a., a Belgian corporation, and
some of its U.S. subsidiaries filed an action for declaratory judgment in a
federal court in Virginia against Titan relating to its patent for its SureBeam
technology. The action attacks the validity of Titan's patent, seeks a
declaration that Ion Beam Applications and its customers have not infringed any
of the 62 claims in Titan's patent, and alleges that Titan has engaged in unfair
competition and that Titan's conduct constitutes patent misuse. Titan intends to
vigorously defend its patent position. A finding in favor of Ion Beam
Applications in this action could adversely affect Titan's business, financial
condition and results of operations by reducing the growth of its Titan Scan
business segment and preventing Titan from generating the revenues that it
expects from food pasteurization.
TITAN'S QUARTERLY AND ANNUAL FINANCIAL PERFORMANCE AND STOCK PRICE HAVE
HISTORICALLY FLUCTUATED AND MAY CONTINUE TO FLUCTUATE SIGNIFICANTLY IN THE
FUTURE.
Titan's revenues are affected by factors such as the unpredictability of
sales and contracts awards due to the long procurement process for most of its
products and services, defense and intelligence budgets, competition and general
economic conditions. Titan's product mix and unit volume, its ability to keep
expenses within budgets, its distribution channels and its pricing affect its
gross margins. These factors and other risk factors described in this proxy
statement/prospectus may adversely affect Titan's financial
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performance within a period and cause its financial results to fluctuate
significantly on a quarterly or annual basis. Consequently, Titan does not
believe that comparison of its financial performance from period to period is
necessarily meaningful or predictive of its likely future performance. It is
possible that in some future quarter or quarters Titan's operating results will
be below the expectations of public market analysts or investors. If so, the
market price of Titan's common stock may decline significantly.
From time to time, there may be significant volatility in the market price
for Titan's common stock. Over the past three years, the market price of Titan's
common stock has fluctuated over a wide range. During its last four complete
fiscal quarters, the highest sale price of its common stock on the New York
Stock Exchange was $48.38 and the lowest sale price of its common stock was
$4.75. A number of factors involving Titan and its industry could contribute to
future fluctuations in its stock price, including the risk factors described in
this proxy statement/prospectus.
RISKS OF TITAN'S INTERNATIONAL OPERATIONS, INCLUDING ECONOMIC CONDITIONS IN
EMERGING MARKETS, COULD ADVERSELY AFFECT THE PROSPECTS OF ITS COMMERCIAL
COMMUNICATIONS BUSINESS.
Titan sells commercial communications products and services primarily in
developing countries. Its revenues from sales of these products and services in
foreign countries represented 3% of its total revenues for the nine months ended
September 30, 1999. Titan expects its revenues from these activities in foreign
countries to increase. Although Titan generally sells commercial communications
products and services in U.S. dollars, currency devaluations and adverse market
conditions in emerging markets have negatively affected demand for its
commercial communications products and services and, consequently, its revenues
for this segment. Titan's commercial communications products generally require
substantial capital investments, and its potential customers have not had the
capital resources to make these investments. Titan has assisted its established
marketing partner in Indonesia by providing trade credit that has subsequently
been extended with a final installment due in September 2000. Because of market
conditions in Indonesia and other factors, there is a risk that its customer in
Indonesia may not be able to pay this debt in accordance with the extended
terms. Further, Titan does not have the capital resources or tolerance of risk
to finance the purchase of its commercial communications products and therefore
relies upon its customers' abilities to obtain such financing. As a result,
revenues in this group may be adversely affected by economic conditions in
emerging markets and the unavailability of financing on reasonable terms. These
services generally are billed in U.S. dollars but in the future may be billed in
local currency. Titan does not believe that its international operations
currently subject it to material risks from fluctuations in currency exchange
rates. However, as Titan increases its commercial communications activities in
foreign countries, its risks from fluctuations in currency exchange rates could
increase.
Selling products or services in international markets also entails other
market, economic, cultural, legal and political risks, conditions and expenses.
These risks include:
- trade barriers;
- export and import restrictions and other applicable laws;
- political and economic instability;
- difficulties in collecting amounts owed to Titan; and
- difficulties in managing overseas employees and contractors.
Any one of these factors or other international business risks could adversely
affect Titan's financial performance.
TITAN'S OPERATING RESULTS MAY SUFFER IF A SIGNIFICANT NUMBER OF ITS U.S.
NAVY CONTRACTS ARE DELAYED OR CANCELED.
A significant percentage of Titan's products and services are predominately
sold and performed under contracts with various parts of the U.S. Navy or with
prime contractors to the U.S. Navy. Although these various parts of the U.S.
Navy are subject to common budgetary pressures and other factors, Titan's
various U.S. Navy customers exercise independent purchasing decisions. However,
because of such
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concentration of its contracts, Titan is vulnerable to adverse changes in its
business, financial condition and results of operations if a significant number
of its U.S. Navy contracts and subcontracts are simultaneously delayed or
canceled for budgetary or other reasons.
THE COVENANTS IN TITAN'S EXISTING CREDIT FACILITY RESTRICT ITS FINANCIAL
AND OPERATIONAL FLEXIBILITY, AND IT IS LIKELY THAT ITS ANTICIPATED REPLACEMENT
CREDIT FACILITY WILL CONTAIN SIMILAR OR MORE RESTRICTIVE COVENANTS.
Titan's existing credit facility contains covenants that restrict, among
other things, its ability to borrow money, make particular types of investments
or other restricted payments, swap or sell assets, merge or consolidate or make
acquisitions. An event of default under its credit facility could allow the
lenders to declare all amounts outstanding to be immediately due and payable.
Titan has pledged substantially all of its consolidated assets and the stock of
its subsidiaries to secure the debt under its credit facility. If the amounts
outstanding under the credit facility were accelerated, the lenders could
proceed against Titan's consolidated assets and the stock of its subsidiaries.
Any event of default, therefore, could have a material adverse effect on its
business. Titan's credit facility also requires it to maintain specified
financial ratios. Titan's ability to meet these financial ratios can be affected
by events beyond its control, and Titan cannot assure you that it will meet
those ratios. Titan expects to replace its credit facility with a new credit
facility. It is likely that any replacement credit facility will contain similar
or more restrictive covenants. Titan also may incur future debt obligations that
might subject it to restrictive covenants that could affect its financial and
operational flexibility or subject it to other events of default.
TITAN'S OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY DISRUPTIONS IN ITS
SUPPLY OF PRODUCTS AND COMPONENTS OR SERVICES.
Because its internal manufacturing capacity is limited, Titan uses contract
manufacturers. While it uses care in selecting its manufacturers, this
arrangement gives Titan less control over the quality and price of products or
components than if it manufactured them. In some cases, Titan obtains products
from a sole supplier or a limited group of suppliers. Consequently, Titan risks
disruptions in its supply of key products and components if its suppliers fail
or are unable to perform because of strikes, natural disasters, financial
condition or other factors. Any material supply disruptions could adversely
affect its business, financial condition and results of operations as well as
its ongoing product cost structure.
TITAN'S BUSINESS IS SUBJECT TO SIGNIFICANT ENVIRONMENTAL REGULATION.
Titan is subject to environmental and safety laws and regulations governing
the uses, storage and disposal of hazardous substances or waste and imposing
liability for the cleanup of contamination from these substances. Titan cannot
completely eliminate the risk of contamination or injury from these substances
or waste, and, in the event of such an incident, Titan could be held liable for
any damages that result. From time to time, Titan has been notified of
violations of government and environmental regulations. Titan attempts to
correct these violations promptly without any material impact on Titan's
operations. In addition, Titan may be required to incur significant additional
costs to comply with environmental laws and regulations in the future. These
costs, and any future violations or liability under environmental laws or
regulations, could have a material adverse effect on Titan's business, financial
condition and results of operations.
FAILURE TO ACHIEVE YEAR 2000 COMPLIANCE COULD HAVE A NEGATIVE EFFECT ON
TITAN'S FINANCIAL CONDITION.
Titan implemented a Year 2000 compliance program to address various areas
of the business that may encounter difficulties as a result of the Year 2000
issue. Because of its history of acquisitions, Titan has a number of business
units that use different systems, some of which Titan knows have Year 2000
issues. Titan estimates that the cost of moving business units to new systems
will ultimately range from $1.0 million to $2.0 million. If any of the business
units experience system failures as a result of the Year 2000 issue, disruptions
could occur in some key business processes, such as labor and other cost
accumulation, project management and billing. If the business units cannot
timely correct all Year 2000 problems, these problems may have material adverse
effects on Titan's financial position, results of operations or cash flows. To
date, none of Titan's business units has experienced system failures as a result
of the Year 2000 issue.
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Most of Titan's customers, in particular the U.S. government, utilize
complex billing and accounting systems to determine the timing and the amounts
that will be paid to Titan under its contracts. In addition, several of Titan's
major strategic partners rely on complex software systems to coordinate and
control their day-to-day operations. These complex systems may not be Year 2000
compliant. Although these customers and strategic partners advised Titan that
they expected to resolve any Year 2000 issues before December 31, 1999, Titan
cannot guarantee that its billing procedures and cycles, or its joint sales and
marketing efforts, will not be interrupted in the future. If these Year 2000
issues involving its customers and business partners are not resolved on time,
or at all, Titan's business, financial position, results of operations or cash
flows could be materially and adversely affected. To date, none of Titan's
billing procedures or cycles, or its joint sales and marketing efforts, has been
interrupted.
TITAN DOES NOT ANTICIPATE THAT IT WILL PAY DIVIDENDS ON ITS COMMON STOCK.
Titan has not paid cash dividends on its common stock within the past three
years and does not anticipate that it will pay cash dividends in the foreseeable
future. Titan may pay cash dividends only if it complies with financial tests
and other restrictions contained in agreements relating to its indebtedness.
PROVISIONS IN TITAN'S CERTIFICATE OF INCORPORATION AND BYLAWS AND IN
DELAWARE LAW COULD DISCOURAGE TAKEOVER ATTEMPTS TITAN OPPOSES EVEN IF TITAN'S
STOCKHOLDERS MIGHT BENEFIT FROM A CHANGE IN CONTROL OF TITAN.
Provisions in Titan's certificate of incorporation and bylaws and in the
Delaware General Corporation Law may make it difficult and expensive for a third
party to pursue a takeover attempt Titan opposes even if a change in control of
Titan would be beneficial to the interests of its stockholders. Titan's bylaws
permit its stockholders to take action by written consent instead of at a
meeting and to nominate directors or bring other business before stockholder
meetings only if they comply with advance notice and other procedural
requirements in its bylaws. Titan's board of directors currently has the
authority under its certificate of incorporation to issue up to 2,500,000
authorized shares of Titan preferred stock in one or more series and to fix the
powers, preferences and rights of each series without stockholder approval. The
ability to issue preferred stock could discourage unsolicited acquisition
proposals or make it more difficult for a third party to gain control of Titan,
or otherwise could adversely affect the market price of Titan's common stock.
Further, as a Delaware corporation, Titan is subject to section 203 of the
Delaware General Corporation Law. This section generally prohibits Titan from
engaging in mergers and other business combinations with stockholders that
beneficially own 15% or more of its voting stock, or with their affiliates,
unless Titan's directors or stockholders approve the business combination in the
prescribed manner.
TITAN HAS ADOPTED A SHAREHOLDER RIGHTS PLAN WHICH COULD DISCOURAGE HOSTILE
ACQUISITIONS OF CONTROL IN WHICH ITS STOCKHOLDERS MAY WISH TO PARTICIPATE.
In 1995, Titan's board of directors adopted a "poison pill" shareholder
rights plan, which may discourage a third party from making a proposal to
acquire Titan which Titan has not solicited or does not approve, even if the
acquisition would be beneficial to its stockholders. As a result, Titan's
stockholders who wish to participate in such a transaction may not have an
opportunity to do so. Under Titan's rights plan, preferred share purchase
rights, which are attached to its common stock, generally will be triggered upon
the acquisition, or actions that would result in the acquisition, of 15% or more
of its common stock by any person or group. If triggered, these rights would
entitle its stockholders other than the acquiror to purchase, for the exercise
price, shares of its common stock having a market value of two times the
exercise price. In addition, if a company acquires Titan in a merger or other
business combination not approved by the board of directors, these rights will
entitle Titan's stockholders other than the acquiror to purchase, for the
exercise price, shares of the common stock of the acquiring company having a
market value of two times the exercise price.
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INFORMATION IN THIS DOCUMENT
Important information in the documents referred to under the heading "Where
You Can Find More Information" is considered a part of, but is not included
directly in, this proxy statement/prospectus. You may obtain this information
without charge upon written or oral request to:
The Titan Corporation
3033 Science Park Road
San Diego, California 92121-1199
Attn: Investor Relations
Telephone (858) 552-9500
or
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072-2586
Telephone: (800) 557-7141
If you would like to request documents, please do so by February 15, 2000
to receive them before the special meeting of ACS's stockholders.
This proxy statement/prospectus and the information incorporated by
reference in it include "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Titan and
ACS intend the forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements in these sections. All statements by
either Titan or ACS regarding its expected financial position and operating
results, its business strategy, its financing plans, forecasted trends relating
to the markets in which it operates, its ability to complete acquisitions, and
similar matters are forward-looking statements. These statements can sometimes
be identified by the use of forward-looking words such as "may," "will,"
"anticipate," "estimate," "expect" or "intend." Neither Titan nor ACS can
promise you that its expectations in such forward-looking statements will turn
out to be correct. The actual results of Titan or ACS could be materially
different from such expectations. Important factors that could cause the actual
results to be materially different from expectations include those discussed in
this proxy statement/prospectus under the caption "Risk Factors."
Some of the information contained in or considered a part of this proxy
statement/prospectus concerning the markets and industries in which Titan and
ACS operate is derived from publicly available information and from industry
sources. Although Titan and ACS believe that this publicly available information
and the information provided by these industry sources are reliable, Titan and
ACS have not independently verified the accuracy of any of this information.
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THE ACS SPECIAL MEETING
GENERAL
This proxy statement/prospectus, together with a notice of special meeting
and a form of proxy, is being provided to holders of ACS common stock in
connection with the solicitation of proxies by the ACS board of directors for
use at a special meeting of ACS stockholders to be held on February 23, 2000, at
10:30 a.m., local time, at the offices of ACS at 10089 Lee Highway, Fairfax,
Virginia 22030, or at any adjournment, postponement or rescheduling of that
meeting.
This proxy statement/prospectus and the accompanying notice of special
meeting and form of proxy are first being mailed to stockholders of ACS around
January 24, 2000.
MATTERS TO BE CONSIDERED
The special meeting of stockholders is being held so that ACS stockholders
may consider and vote on adoption of the merger agreement and approval of the
merger and the other transactions contemplated by the merger agreement.
ACS stockholders also will be asked to vote on a proposal to adjourn or
postpone the special meeting to allow additional time for the solicitation of
proxies if, at the time of the meeting, ACS determines that it does not have in
hand proxies representing enough votes to adopt the merger agreement and approve
the merger and related transactions. ACS stockholders also will be asked to act
on any other matters that may properly come before the meeting.
RECOMMENDATION OF THE ACS BOARD OF DIRECTORS
THE ACS BOARD OF DIRECTORS HAS APPROVED UNANIMOUSLY THE MERGER AGREEMENT,
THE PROPOSED MERGER AND OTHER TRANSACTIONS RELATED TO THE MERGER AND
CONTEMPLATED BY THE MERGER AGREEMENT. THE ACS BOARD OF DIRECTORS BELIEVES THAT
THE MERGER IS IN THE BEST INTERESTS OF, AND THAT THE TERMS OF THE MERGER ARE
FAIR TO, ACS AND ITS STOCKHOLDERS. THE ACS BOARD RECOMMENDS UNANIMOUSLY THAT ACS
STOCKHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
RECORD DATE AND VOTE REQUIRED
The ACS board of directors has fixed January 11, 2000 as the record date
for determining the ACS stockholders who are entitled to notice of and to vote
at the special meeting. Therefore, only stockholders of record at the close of
business on the record date will receive notice of, and be able to vote at, the
special meeting of ACS stockholders.
At the close of business on the record date, there were 8,836,252 shares of
ACS common stock outstanding and entitled to a vote, held by 86 record holders.
A majority of these shares must be represented, in person or by proxy, at the
special meeting in order to constitute a quorum. A quorum must be present before
a vote can be taken on the adoption of the merger agreement, or any other matter
except adjournment or postponement of the meeting due to the absence of a
quorum. Abstentions and broker non-votes will be counted for purposes of
determining the presence of a quorum at the special meeting.
Each share of common stock entitles its holder to cast one vote on each
matter submitted to a vote at the special meeting. For the merger to be approved
under Delaware law and ACS's certificate of incorporation, at least a majority
of the outstanding shares of ACS common stock must be voted for the adoption of
the merger agreement. In the event that the stockholders are asked to vote on a
proposal to adjourn or postpone the special meeting to permit solicitation of
additional proxies, approval of that proposal would require the affirmative vote
of at least a majority of the shares of ACS common stock present in person or
represented by proxy at the meeting.
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As of the record date, 2,184,404 of the outstanding shares of ACS common
stock, which represented approximately 25% of the ACS common stock outstanding,
were beneficially owned by directors and executive officers of ACS and their
affiliates, including the ACS Principal Stockholders. The ACS Principal
Stockholders, who collectively owned approximately 24% of ACS's outstanding
common stock as of the record date, have signed an agreement to vote their
shares in favor of adoption of the merger agreement and approval of the merger
and the other transactions contemplated by the merger agreement. Each of these
stockholders also has given Titan an irrevocable proxy authorizing Titan to vote
the stockholder's shares in favor of adoption of the merger agreement and
approval of the merger and the other transactions contemplated by the merger
agreement. See "Terms of the Merger Agreement and Related Transactions -- ACS
Stockholder Agreements" for more information about these voting agreements.
PROXIES
This proxy statement/prospectus is being furnished to ACS stockholders in
connection with the solicitation of proxies by the ACS board of directors for
use at the special meeting of ACS stockholders. It is accompanied by a form of
proxy.
ACS stockholders should complete, sign and return the form of proxy if they
will not be able to attend the special meeting in person. A stockholder who
submits a proxy and later changes his or her mind as to the vote, or decides to
attend the meeting in person, may revoke the proxy at any time by notifying the
corporate secretary of ACS in writing of the revocation before the proxy is
exercised or by completing, signing and returning a proxy with a later date. In
addition, a stockholder may revoke a prior proxy by attending the special
meeting and voting in person. However, attendance at the special meeting by a
stockholder who has signed a proxy but does not provide a notice of revocation
or request to vote in person is not sufficient to revoke that proxy.
Written notices of revocation of proxies and other communications relating
to proxies should be addressed to:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072-2586
All shares of ACS stock entitled to vote represented at the special meeting
of ACS stockholders by properly executed proxies that are received prior to or
at the meeting and not revoked before they are exercised will be voted at the
meeting as directed by the stockholders in the proxies for such shares. If a
properly executed proxy is returned but contains no voting instructions, the
shares of ACS common stock represented by the proxy will be voted "FOR" adoption
of the merger agreement and approval of the merger and the other transactions
contemplated by the merger agreement. In the event that the stockholders are
asked to vote on a proposal to adjourn or postpone the meeting to permit the
solicitation of additional proxies and no directions on this proposal are
indicated, proxies that indicate a vote in favor of adoption of the merger
agreement will be voted "FOR" the proposal to postpone or adjourn, proxies that
indicate a vote against adoption of the merger agreement will be voted "AGAINST"
the proposal to postpone or adjourn, and proxies that abstain from a vote on
adoption of the merger agreement will be voted "FOR" the adjournment or
postponement.
ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE
OF A MAJORITY OF THE SHARES OF ACS STOCK ISSUED AND OUTSTANDING ON THE RECORD
DATE. ACCORDINGLY, ABSTENTIONS, FAILURES TO VOTE AND BROKER NON-VOTES WILL HAVE
THE SAME EFFECT AS VOTES AGAINST ADOPTION OF THE MERGER AGREEMENT AND APPROVAL
OF THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
THEREFORE, THE ACS BOARD OF DIRECTORS URGES ALL ACS STOCKHOLDERS TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
PRE-ADDRESSED, POSTAGE-PAID ENVELOPE PROVIDED FOR THAT PURPOSE.
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If any other matters are properly presented for consideration at the
special meeting, the persons named in the enclosed form of proxy will have the
discretion to vote on those matters using their best judgment.
In addition to soliciting proxies by mail, ACS will request that banks,
brokers and other record holders of ACS common stock forward proxies and proxy
materials to the beneficial owners of such shares and, if necessary, obtain
their voting instructions. ACS will reimburse these record holders for their
reasonable expenses in performing these tasks and will pay all other costs of
soliciting proxies. ACS has retained Corporate Investor Communications, Inc., a
proxy solicitation firm, to assist it in the solicitation of proxies for the ACS
special meeting at a cost of approximately $5,000 plus reimbursement of
reasonable out-of-pocket expenses. If the merger is not completed, ACS and Titan
have agreed to share equally certain costs, including costs of printing, filing
and mailing this proxy statement/prospectus and the registration statement of
which it is a part. Directors, officers and employees of ACS may solicit proxies
in person or by telephone, mail, facsimile or other means. These directors,
officers and employees will not be separately compensated for soliciting
proxies.
AVAILABILITY OF ACCOUNTANTS
Arthur Andersen LLP has acted as ACS's independent accountants since 1997.
Representatives of Arthur Andersen LLP familiar with ACS are expected to attend
the special meeting and to be available to answer appropriate questions and will
have an opportunity to make a statement if they should desire to do so.
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THE MERGER
The discussion in this proxy statement/prospectus of the merger and the
principal terms of the merger agreement is qualified in its entirety by
reference to the merger agreement, which is attached to this proxy
statement/prospectus as Appendix A and is incorporated in this document by
reference.
GENERAL
Under the terms of the merger agreement, A T Acquisition Corp., a wholly
owned subsidiary of Titan, will be merged with and into ACS at the effective
time of the merger. ACS will be the surviving corporation in the merger and will
become a wholly owned subsidiary of Titan.
At the effective time of the merger, each issued and outstanding share of
ACS common stock will be converted into the right to receive the number of
shares of Titan common stock calculated as described below. Titan will not issue
fractional shares of its common stock in the merger. Instead, fractional shares
will be rounded up or down to the nearest whole share of Titan common stock. The
number of shares of Titan common stock ACS stockholders will be entitled to
receive will depend on the exchange ratio of Titan common stock to ACS common
stock. The exchange ratio has not been fixed in the merger agreement, but will
be calculated at the time of the merger in accordance with a formula contained
in the merger agreement. Under this formula, the exchange ratio will be based on
the average of the closing sale prices of the Titan common stock on the NYSE for
the ten consecutive trading days ending two trading days immediately before the
merger closing date.
At the effective time of the merger, Titan will assume all outstanding ACS
employee and director stock options. Each assumed option will be converted in
the merger into an option to purchase shares of Titan common stock using the
same exchange ratio which is applicable to ACS common stock in the merger.
Except for the number of shares issuable upon exercise of such options and the
option exercise prices, which will be adjusted based on the exchange ratio, the
assumed options will remain subject to the same terms and conditions that were
in effect before the merger. The exercise price per share of Titan common stock
issuable under the assumed options will equal the exercise price per share of
ACS common stock issuable under the applicable option at the effective time of
the merger divided by the exchange ratio, rounded to the nearest whole cent. The
option conversion will not result in accelerated vesting of any assumed options
or otherwise affect the vesting schedules in effect before the merger for the
assumed options.
BACKGROUND OF THE MERGER
ACS Consideration of Strategic Alternatives. Since its initial public
offering in 1997, ACS has followed a multi-track approach of internal growth,
new business development and selected acquisitions to capitalize on industry
growth and expansion. ACS management and its board of directors have, on an
ongoing basis, reviewed ACS's performance, strategic position and direction, and
prospects in light of changes in the capital markets and in the federal
professional and technical services industry in which ACS operates.
During 1998, ACS experienced increasing difficulty in carrying out its
acquisition strategy. Senior management attributed this difficulty to two
factors. First, consolidation in the federal professional and technical services
industry had increased competition and the acquisition prices for companies of
the size that ACS was seeking to acquire. Second, because of ACS's own
relatively small size, the ACS common stock was not being widely followed in the
investment community and, management believed, did not fully reflect the
company's value. As a consequence, stock acquisitions by ACS were relatively
expensive.
In light of these industry and market conditions, during the second half of
1999, members of ACS senior management met with representatives of four
investment banking firms with national reputations to discuss the strategic
alternatives available to ACS and the assistance which each of these firms could
provide to ACS.
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On August 24, 1999, representatives of Banc of America Securities LLC met
with ACS directors and senior management, reviewed ACS's existing strategic plan
and identified and analyzed a range of alternatives available to ACS. Based on
its review, Banc of America Securities identified and discussed in detail
several alternatives available to ACS, including remaining an independent public
company and continuing to pursue its acquisition strategy, entering into a
strategic alliance or business combination, or pursuing a sale or merger of ACS.
In light of the ongoing consolidation in the federal professional and technical
services marketplace and the relatively disadvantageous position of small public
companies in the capital markets, Banc of America Securities recommended that
the board of directors of ACS consider exploring a sale of ACS as a means to
maximize value for ACS stockholders.
At a regular meeting of the ACS board of directors on September 9, 1999,
George A. Robinson, Chairman, President and Chief Executive Officer of ACS, led
the board of directors in a discussion of the industry and market factors
affecting ACS, the information provided by the investment banking firms and the
strategic alternatives available to ACS. Mr. Robinson recommended that ACS
engage Banc of America Securities to explore the strategic alternatives which
might be available to ACS in order to maximize stockholder value. This
recommendation was based upon Banc of America Securities' knowledge of ACS and
of the federal professional services industry, its relationships with a
substantial number of potential acquirers and its willingness to provide
necessary resources to assist ACS on a timely basis. Following discussion at the
meeting, the board of directors authorized Mr. Robinson to retain Banc of
America Securities on the basis indicated.
ACS and Banc of America Securities entered into an engagement letter on
September 13, 1999. With the assistance of Banc of America Securities, the ACS
board of directors subsequently conducted an auction process designed to obtain
the highest possible bids for ACS. This process began with the development of a
confidential descriptive memorandum, which was written to provide potential
buyers with general information regarding ACS, its historical and projected
financial performance and the federal professional and technical services and
commercial training marketplaces. The memorandum also provided information about
ACS's customer base, corporate structure and strategy, and described in detail
the business plans and operations of ACS's federal and commercial businesses.
Upon completion of the descriptive memorandum, Banc of America Securities
started the marketing process by contacting potential acquirers in October 1999.
During the marketing process, Banc of America Securities contacted numerous
potential acquirers. A number of these companies expressed an interest in a
potential acquisition of or partnership with ACS, entered into confidentiality
agreements with ACS and received copies of the descriptive memorandum. A group
of these companies, including Titan, submitted initial indications of interest.
These indications of interest were submitted by both strategic and financial
bidders.
The indications of interest from companies other than Titan were either
withdrawn or were determined by ACS, in consultation with Banc of America
Securities, not to be in ACS's interest to pursue further. Subsequently, as
described below, ACS entered into an exclusivity arrangement with Titan.
Titan Acquisition Strategy. In recent years, developments in government
procurement policies and other factors have contributed to substantial
consolidation in the defense information technology industry, as larger
companies have acquired smaller companies without the broad capabilities needed
to compete effectively for government contracts. Titan has pursued a policy of
supplementing the internal growth in its defense business with an active program
of strategic acquisitions to take advantage of growth opportunities from this
ongoing consolidation. Since January 1, 1998, Titan has acquired seven defense
information technology companies as part of its consolidation strategy. In
implementing its strategy, Titan seeks acquisition candidates it believes are
capable of bringing strategic advantages, earnings and strong management
resources to the combined company.
Chronology of Events Leading Up to Execution of the Merger Agreement. On
October 21, 1999, ACS's financial advisor, Banc of America Securities, contacted
Eric DeMarco, Titan's Chief Financial Officer, to express ACS's interest in
initiating discussions regarding a possible business combination with Titan. Mr.
DeMarco responded on October 25, 1999 that Titan would be willing to pursue such
discussions on an exploratory basis.
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On October 25, 1999, ACS agreed to provide Titan with confidential
information about ACS for Titan's use in evaluating a potential business
combination. On the same date, Titan executed a confidentiality agreement in
which it agreed to maintain, and to cause its affiliates and representatives to
maintain, the confidentiality of information it received from ACS in connection
with its evaluation. As a part of this agreement, Titan also agreed that,
without the permission of the ACS board of directors, neither it nor any of its
representatives would seek to acquire ACS's voting securities, engage in the
solicitation of proxies with respect to ACS stockholders or form any "group"
within the meaning of the Exchange Act relating to ACS's voting securities for a
period of two years. Titan also agreed that for a period of two years it would
not solicit for employment any employee of ACS who became known to Titan in
connection with Titan's consideration of a potential business combination with
ACS. ACS subsequently executed a substantially identical confidentiality
agreement for the benefit of Titan.
In the first week of November 1999, Dr. Gene W. Ray, Titan's Chief
Executive Officer, and Mr. George Robinson, ACS's Chief Executive Officer,
engaged by telephone in an exploratory discussion regarding the concept of a
business combination between Titan and ACS. Mr. Ray and Mr. Robinson agreed to
meet to begin formal discussions regarding a possible business combination
between the two companies.
On November 5, 1999, Titan engaged an investment banking firm to provide it
with financial advisory services and to act as Titan's financial advisor in
connection with a possible business combination with ACS.
On November 11, 1999, the Titan board of directors met in a regularly
scheduled meeting at which Titan's senior management advised the directors of
the status of discussions with ACS and provided the directors with information
regarding ACS and its business. Management's presentation addressed the
strategic advantages of a combination with ACS, the structure and accounting
treatment of such a transaction, and valuation and pricing issues. At this
meeting, the board of directors authorized Titan's management to enter into
negotiations with ACS with respect to a stock-for-stock business combination.
On November 12, 1999, Dr. Ray and Mr. DeMarco, on behalf of Titan, and Mr.
Robinson, on behalf of ACS, met to discuss strategic issues in the context of a
possible business combination between the two companies and procedures for the
commencement of due diligence investigations. Discussions regarding a
combination transaction focused on the strategic advantages for both companies,
the use of a stock-for-stock structure and the desired accounting treatment for
a combination. The representatives identified pricing of a combination and
issues relating to integration of the companies' businesses, including employee
retention, as important issues that would have to be resolved. Following this
meeting, Titan began its financial, business and legal due diligence review.
On November 17, 1999, members of the senior management of Titan and ACS,
together with the financial and legal advisors of the two companies and their
independent accountants, met to discuss a possible business combination and to
review financial information and other due diligence materials, which were not
and are not publicly available, concerning ACS and Titan. The members of Titan
management attending the meeting were Dr. Ray, Mr. DeMarco, Mr. M.C. Baird,
Senior Vice President, Mr. Ronald B. Gorda, Senior Vice President, Mr. Nicholas
J. Costanza, Senior Vice President and General Counsel, Mr. L.L. Fowler, Vice
President, and Mr. Allan D. Branch, Executive Vice President of a Titan
subsidiary. Among the members of ACS management attending the meeting were Mr.
George Robinson, Chairman, President and Chief Executive Officer, Mr. Thomas A
Costello, Executive Vice President, Chief Operating Officer, Secretary and a
director, Mr. Charles Martinache, a director, Mr. Vince Vidas, a director, Mr.
Wayne Shelton, a director, Mr. Charles (Ron) Collins, a director, Mr. Thomas
Brennan, President of ACS's SEMCOR division, Mr. John Finegan, Vice President of
ACS's Information Technology division, Dwayne Junker, President of ACS's
Services and RF Microsystems divisions, and Mr. Kevin Adams, President of ACS's
Technologies division. Management representatives of each company made a
presentation that included information about the company's business,
organizational structure and management philosophy, financial condition, and
strategic plan. Representatives of the
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companies discussed various matters relating to financial reporting and the
structure and exchange ratio for a combination.
At a special meeting of the ACS board of directors immediately following
the meeting with Titan on November 17, the ACS board of directors authorized Mr.
Robinson to enter into an exclusivity agreement with Titan and to negotiate a
definitive agreement for a business combination between ACS and Titan.
Following the meeting on November 17, 1999, Titan and ACS exchanged
additional financial and accounting information and, together with their
respective financial advisors, discussed due diligence matters.
On November 23, 1999, Titan and ACS executed an exclusivity agreement. This
agreement obligated ACS, subject to specified exceptions, to refrain from
conducting any negotiations with other parties regarding a possible business
combination for a period of 21 days, during which time Titan and ACS agreed to
continue to exchange information and seek to negotiate a definitive agreement
for a business combination. ACS agreed that, if it entered into a definitive
agreement for a business combination with another party within this 21-day
period, it would pay Titan a termination fee of $4 million if the consideration
payable by the other party for each ACS common share at the time of public
announcement of the transaction had a fair market value greater than $20.
During the period from November 22 to November 26, 1999, members of the
senior managements of Titan and ACS, and their financial and legal advisors,
held discussions and meetings pertaining to the terms of the proposed business
combination and general business issues, and conducted due diligence
investigations. The discussions regarding terms of a combination related
principally to agreeing upon an exchange ratio and addressing human resources
issues relating to ACS after the combination. Working groups composed of
employees of both companies and the companies' independent accountants and
financial and legal advisors examined various issues, including the structure
and accounting treatment of a business combination, the compatibility and
integration of their information systems, the debt levels and debt coverage of
the two companies and operational issues that would affect the combined
companies. Accounting due diligence encompassed a number of financial reporting
matters.
During the period from December 3 to December 9, 1999, members of senior
management of Titan and ACS, together with their financial and legal advisors,
negotiated the terms of the merger agreement and the Company Stockholders
Agreement. The parties continued, during this time, to exchange financial,
business and legal due diligence materials and conducted additional due
diligence.
On December 8, 1999, Titan's board of directors met in a special meeting.
At this meeting, members of Titan's senior management, together with Titan's
legal and financial advisors, reviewed with the Titan board of directors, among
other things, the financial and legal aspects of the transaction, the terms of
the merger agreement, the Company Stockholders Agreement, and the other matters
described below under "Titan Reasons for the Merger." After discussion and
consideration, the Titan board of directors unanimously approved the merger
agreement and the merger and the issuance of Titan common stock in connection
with the merger. In addition, on December 8, by unanimous written consent, the
board of directors of A T Acquisition Corp. approved and adopted the merger
agreement, and Titan, as the sole stockholder of A T Acquisition Corp., approved
and adopted the merger agreement.
At its regular meeting on December 8, 1999, the ACS board of directors
evaluated the offer from Titan and considered and analyzed a number of factors,
including a presentation from Banc of America Securities, its financial advisor,
regarding Titan and its offer. Banc of America Securities presented its written
opinion, a copy of which is attached as Appendix B to this proxy
statement/prospectus, that subject to certain factors, analyses and limitations
and based upon the terms presented in Titan's offer, as of the date of the
opinion, the exchange ratio to be received by ACS stockholders in the proposed
merger was fair, from a financial point of view, to ACS. At the December 8
meeting, the ACS board of directors unanimously approved, adopted and declared
advisable to the stockholders of ACS and recommended for stockholder approval
the merger agreement and the merger and the other transactions contemplated by
the merger agreement.
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On December 9, 1999, the merger agreement was executed and delivered by
Titan, ACS and A T Acquisition Corp., and the Company Stockholders Agreement was
executed and delivered by Titan and the ACS Principal Stockholders. On the same
day, Titan and ACS issued a joint press release announcing the execution of the
merger agreement and the proposed merger.
RECOMMENDATION OF ACS BOARD OF DIRECTORS; ACS REASONS FOR THE MERGER
ACS'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS ADVISABLE, FAIR TO,
AND IN THE BEST INTERESTS OF ACS AND THE ACS STOCKHOLDERS. ACCORDINGLY, ACS'S
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, UNANIMOUSLY
ADOPTED A RESOLUTION DECLARING THE MERGER ADVISABLE AND UNANIMOUSLY RECOMMENDS
THAT ACS STOCKHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND THE
APPROVAL OF THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT.
In reaching its decision to approve the merger and recommend adoption of
the merger agreement to the ACS stockholders, the ACS board of directors, with
the assistance of its financial and legal advisors, considered and analyzed a
number of factors, including those reviewed at the December 8, 1999 board of
directors meeting, as described above. The material factors considered by the
ACS board of directors in determining to approve the merger agreement were:
- the long-term as well as the short-term interests of ACS which the board
of directors believes will be served by combining with Titan into a
larger company that should be better able to compete in the federal
professional and technical services marketplace and which is expected to
have greater resources, thereby reducing stockholder risk;
- the long-term and short term interests of the ACS stockholders which the
board of directors believes will be served by the merger, which will give
ACS stockholders an interest in a larger entity likely to have a more
liquid trading market and to generate more interest from financial
analysts;
- current market conditions favoring a sale of ACS to realize full value
for stockholders and increasing consolidation in the federal professional
and technical services industry;
- the presentation and written opinion to the ACS board of directors of
ACS's financial advisor, Banc of America Securities, a copy of which
opinion is attached as Appendix B to this proxy statement/ prospectus,
that the exchange ratio to be received by ACS stockholders in the merger
was fair from a financial point of view to ACS as of the date of the
opinion;
- the terms of the Titan proposal, which were more favorable to the ACS
stockholders than the terms of the proposal of any other bidder;
- the fact that the merger is expected to qualify as a tax-free
reorganization and be accounted for as a pooling of interests;
- the likelihood that the transactions contemplated by the merger agreement
would be successfully completed; and
- the impact of the merger on various constituencies served by ACS,
including its employees, customers, creditors, and suppliers, as well as
the communities in which an office or other facility of ACS is located or
which ACS otherwise serves.
In arriving at its decision to approve the merger agreement and recommend
its approval by the stockholders, the ACS board of directors considered
information from a number of sources, including:
- historical information concerning the respective businesses, financial
performance, condition, operations, technology, products, properties,
assets, management style, competitive position and trends and prospects
of ACS and Titan;
- SEC filings by Titan;
- current and historical market prices, volatility and trading data for the
two companies;
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<PAGE> 41
- the full-day management presentation by Titan;
- information and advice based on the results of due diligence
investigations by members of ACS's management and ACS's legal, financial
and accounting advisors concerning the business, financial performance,
condition, operations, technology, products, properties, assets,
competitive position and trends and prospects of Titan;
- trends in Titan's business and financial results and the capabilities of
its management team;
- reports from management relating to the prospects for successful
integration of the two companies; and
- reports by ACS's legal counsel on the terms of the merger agreement and
related agreements, and an evaluation of those terms in comparison to the
terms of other recent mergers and acquisitions.
The ACS board of directors also identified and considered a number of
uncertainties and risks in its deliberations concerning the merger, including:
- the risk that the potential benefits sought in the merger might not be
realized fully, if at all;
- the potential effects of the public announcement of the merger on ACS's
stock price, sales, customer relations and operating results;
- the risk that Titan would be unable to achieve growth or sustain
profitability after the merger;
- the potential difficulties in the integration of the companies' business
operations;
- the effect of the non-solicitation agreement on ACS's ability to consider
competing offers before completion of the merger;
- the provisions in the merger agreement that require payments to be made
if the merger agreement is terminated under certain circumstances; and
- the other risks associated with the businesses of ACS and Titan and with
the merger described under "Risk Factors" in this proxy
statement/prospectus.
The foregoing summary of the information and factors considered by the ACS
board of directors is not intended to be exhaustive, but is believed to include
all significant factors considered by it. In view of the variety of factors
considered in connection with its evaluation of the merger, the ACS board of
directors did not find it practicable to, and did not, quantify or otherwise
assign relative or specific weight to the factors considered in reaching its
determination. In addition, individual members of the ACS board of directors may
have given different weight to different factors.
For a discussion of the interests of some directors and executive officers
of ACS in the merger, see "Interests of ACS Directors and Executive Officers in
the Merger" below.
TITAN REASONS FOR THE MERGER
Titan believes a business combination with ACS will advance its strategic
objective of taking advantage through acquisitions of growth opportunities from
ongoing consolidation in the defense information technology industry. Titan
expects the combination with ACS to offer the following strategic benefits to
Titan after the merger:
- enhancement of Titan's defense business revenues;
- augmentation of Titan's employee base in the Washington, D.C. area, where
a significant portion of its defense business is conducted;
- expansion of Titan's defense customer base; and
- broadening of Titan's capability to serve the defense industry and to
compete for new projects.
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<PAGE> 42
OPINION OF FINANCIAL ADVISOR TO ACS
On September 13, 1999, the board of directors of ACS retained Banc of
America Securities to act as its sole financial advisor in connection with a
proposed transaction involving business opportunities acceptable to ACS pursuant
to which ACS may be combined with a business partner. Banc of America Securities
is a nationally recognized investment banking firm. Banc of America Securities
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. ACS selected Banc of America
Securities to act as its financial advisor on the basis of Banc of America
Securities' experience and expertise in transactions similar to the merger, its
reputation in the general information technology services industry and
investment community and its historical investment banking relationship with
ACS.
Banc of America Securities delivered its written opinion dated as of
December 8, 1999 to the ACS board of directors that the exchange ratio to be
received by the ACS stockholders in the proposed merger was fair from a
financial point of view as of that date to ACS. The ACS board of directors did
not limit the investigations made or procedures followed by Banc of America
Securities in rendering its opinion.
The full text of Banc of America Securities' written opinion to the ACS
board of directors is attached as Appendix B to this proxy statement/prospectus
and is incorporated in its entirety in this document. You should read this
opinion carefully and in its entirety in connection with this proxy
statement/prospectus. The following summary of Banc of America Securities'
opinion is qualified in its entirety by reference to the full text of the
opinion.
Banc of America Securities' opinion is directed to the ACS board of
directors. It does not constitute a recommendation to you on how to vote with
respect to the merger. The opinion addresses only the financial fairness of the
consideration to be received by stockholders of ACS in the merger. The opinion
does not address the relative merits of the merger or any alternatives to the
merger, the underlying decision of the ACS board of directors to proceed with or
effect the merger or any other aspect of the merger. In furnishing its opinion,
Banc of America Securities did not admit that it is an expert within the meaning
of the term "expert" as used in the Securities Act, nor did it admit that its
opinion constitutes a report or valuation within the meaning of the Securities
Act. Statements to that effect are included in the Banc of America Securities
opinion.
In preparing its opinion, Banc of America Securities:
- reviewed publicly available financial statements and other business and
financial information of ACS and Titan;
- reviewed internal financial statements and other financial and operating
data concerning ACS and Titan;
- analyzed financial forecasts prepared by the managements of ACS and
Titan;
- reviewed and discussed with senior executives of ACS and Titan
information relating to strategic, financial and operational benefits
anticipated from the merger prepared by the management of ACS;
- discussed the past and current operations, financial condition and
prospects of ACS with senior executives of ACS and discussed the past and
current operations, financial condition and prospects of Titan with
senior executives of Titan;
- reviewed the pro forma impact of the merger on Titan's earnings per
share, cash flow, consolidated capitalization and financial ratios;
- reviewed and considered, in the analysis, information prepared by members
of senior management of ACS and Titan relating to the relative
contributions of ACS and Titan to the combined company;
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<PAGE> 43
- reviewed the reported prices and trading activity for ACS common stock
and the Titan common stock;
- compared the financial performance of ACS and Titan and the prices and
trading activity of ACS common stock and Titan common stock with other
publicly traded companies Banc of America Securities deemed relevant;
- compared the financial terms of the merger to the financial terms, to the
extent publicly available, of other business combination transactions
Banc of America Securities deemed relevant;
- participated in discussions and negotiations among representatives of ACS
and Titan and their financial and legal advisors;
- reviewed the December 7, 1999 draft of the merger agreement and related
documents;
- at the request of the management of ACS, spoke with a number of potential
purchasers concerning their interest in ACS and their preliminary range
of possible purchase prices;
- analyzed various segments of Titan's business and compared them to
publicly available information on other market participants; and
- performed other analyses and considered other factors as Banc of America
Securities deemed appropriate.
Banc of America Securities reviewed the December 7, 1999 draft merger
agreement in preparing its opinion. While ACS and Titan had the opportunity to
agree to materially add, delete or alter material terms of the merger agreement
before its execution, the final merger agreement was substantially similar to
the December 7, 1999 draft merger agreement.
Banc of America Securities did not assume any responsibility to verify
independently the information listed above. Instead, with the consent of the ACS
board of directors, Banc of America Securities relied on the information as
being accurate and complete in all material respects. Banc of America Securities
also made the following assumptions with the consent of the ACS board of
directors:
- with respect to the financial forecasts, including information relating
to certain strategic, financial and operational benefits anticipated from
the merger, that the financial forecasts had been reasonably prepared on
bases reflecting the best currently available estimates and good faith
judgments of the future financial performance of ACS and Titan;
- in connection with the receipt of all the necessary regulatory approvals
for the proposed merger, that no restrictions would be imposed that would
have a material adverse effect on the contemplated benefits expected to
be derived in the merger;
- that the merger would be accounted for as a pooling of interests in
accordance with generally accepted accounting principles;
- that the merger would be treated as a tax-free reorganization and/or
exchange, each pursuant to the Internal Revenue Code; and
- that Titan would be able to retain ACS's key managers upon consummation
of the merger.
ACS and Titan do not publicly disclose internal management forecasts of the
type provided to Banc of America Securities by the management of each of ACS and
Titan in connection with Banc of America Securities' review of the merger. The
forecasts were not prepared with a view toward public disclosure. In addition,
the forecasts were based on numerous variables and assumptions that are
inherently uncertain, including factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from the results set forth in the forecasts. Banc of America Securities has
assumed no liability for the forecasts.
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<PAGE> 44
In addition, for purposes of its opinion, Banc of America Securities:
- with respect to the forecasts for ACS provided to Banc of America
Securities by ACS's management, adjusted those forecasts to reflect more
conservative assumptions than those made by management of ACS and
discussed the adjusted forecasts with management of ACS, who acknowledged
Banc of America Securities' use of the adjusted forecasts in arriving at
Banc of America Securities' opinion;
- relied on advice of counsel and independent accountants to ACS as to all
legal and financial reporting matters with respect to ACS, the merger and
the December 7, 1999 draft merger agreement;
- did not assume responsibility for making an independent evaluation,
appraisal or physical inspection of any of the assets or liabilities,
contingent or otherwise, of ACS or Titan, and did not receive any
appraisals; and
- relied, without independent verification, upon the assessment by the
managements of ACS and Titan of their respective technology, products and
services and the integration of ACS's technology with Titan's technology
and the timing of introduction of future products and services
incorporating that technology.
No opinion was expressed by Banc of America Securities as to whether any
alternative transaction might produce consideration for the ACS stockholders in
an amount in excess of that contemplated in the merger. Banc of America
Securities' opinion was based on economic, market and other conditions in effect
on, and the information made available to it as of, the date of the opinion.
Accordingly, although subsequent developments may affect its opinion, Banc of
America Securities does not have any obligation to update, revise or reaffirm
its opinion. No opinion was rendered by Banc of America Securities with respect
to any shares of ACS common stock held by Titan or any affiliate of Titan.
The following represents a brief summary of the material financial analyses
performed by Banc of America Securities in connection with providing its opinion
to the ACS board of directors. Some of the summaries of financial analyses
performed by Banc of America Securities include information presented in tabular
format. In order to understand fully the financial analyses performed by Banc of
America Securities, you should read the tables together with the rest of each
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data set forth in the tables without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses performed by Banc of
America Securities.
Comparable Company Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of aggregate
value to each of (a) revenues, (b) earnings before interest and taxes, referred
to as EBIT, and (c) earnings before interest, taxes, depreciation and
amortization, referred to as EBITDA, each for the latest twelve months, for
eight companies in the technical services government contractor industry that
Banc of America Securities deemed to be comparable to ACS.
Banc of America Securities defined aggregate value to mean:
- equity value, defined as the product of the number of shares of common
stock outstanding for a company multiplied by its stock price, plus
- outstanding funded debt, less
- cash and cash equivalents.
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<PAGE> 45
The following table sets forth multiples indicated by this analysis for
these eight companies:
<TABLE>
<CAPTION>
AGGREGATE VALUE TO: RANGE OF MULTIPLES* MEDIAN ADJUSTED MEAN**
- ------------------- ------------------- ------ ---------------
<S> <C> <C> <C>
Latest twelve months revenues............. 0.7x to 0.9x 0.8x 0.8x
Latest twelve months EBIT................. 11.7x to 12.7x 12.2x 12.5x
Latest twelve months EBITDA............... 9.1x to 10.1x 9.6x 8.8x
</TABLE>
- ---------------
* The Range of Multiples is derived from relevant data that take into
account the Median, the Adjusted Mean and other information.
** Adjusted to omit high and low values of relevant data sets.
The comparable company analysis compared ACS to the eight companies in the
technical services government contractor industry on the basis that the
companies selected were the most relevant given the factors considered above.
Consequently, Banc of America Securities did not include every company that
could be deemed to be a participant in the same industries.
Banc of America Securities noted that the aggregate value of the
consideration to be received by the stockholders of ACS in connection with the
merger implied multiples of (a) 1.1x latest twelve months revenues, (b) 13.8x
latest twelve months EBIT and (c) 11.4x latest twelve months EBITDA for ACS.
Comparable Transactions Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of aggregate
value to each of latest twelve months revenues, EBIT and EBITDA for the acquired
company implied in ten acquisitions of technical services government contractor
companies that have been announced since 1996.
The following table sets forth the multiples indicated by this analysis for
these ten acquisitions:
<TABLE>
<CAPTION>
AGGREGATE VALUE TO: RANGE OF MULTIPLES* MEDIAN ADJUSTED MEAN**
- ------------------- ------------------- ------ ---------------
<S> <C> <C> <C>
Latest twelve months revenues............. 0.9x to 1.1x 1.0x 1.0x
Latest twelve months EBIT................. 12.9x to 13.9x 13.3x 13.4x
Latest twelve months EBITDA............... 9.7x to 10.7x 10.2x 10.5x
</TABLE>
- ---------------
* The Range of Multiples is derived from relevant data that take into
account the Median, the Adjusted Mean and other information.
** Adjusted to omit high and low values of relevant data sets.
The comparable transactions analysis compared the merger to the ten
acquisitions of technical services government contractor companies on the basis
that the transactions selected were the most relevant given the factors
considered above. Consequently, Banc of America Securities did not include every
transaction that could be deemed to have occurred in the relevant industries.
Banc of America Securities noted that aggregate value of ACS implied by the
merger yielded multiples of (a) 1.1x latest twelve months revenues, (b) 13.8x
latest twelve months EBIT and (c) 11.4x latest twelve months EBITDA.
No company or transaction used in the comparable company or comparable
transactions analyses is identical to ACS or the merger. Accordingly, an
analysis of the foregoing results is not mathematical. Rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading value of the companies to which ACS and the merger were
compared.
Discounted Cash Flow Analysis. Banc of America Securities used financial
cash flow forecasts for ACS for the fiscal years ending September 30, 2000
through 2004, as estimated by the management of ACS, to perform discounted cash
flow analysis. In conducting this analysis, Banc of America Securities first
calculated the present values of the forecasted cash flows. Second, Banc of
America Securities estimated the terminal value of ACS at the end of 2004 by
applying multiples to ACS's estimated 2004
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<PAGE> 46
EBITDA, which multiples ranged from 9.0x to 11.0x. Banc of America Securities
then discounted the cash flows and terminal values to present values using
discount rates ranging from 11.5% to 13.5%. Banc of America Securities selected
the range of discount rates to reflect the estimated weighted average cost of
capital for ACS. The weighted average cost of capital weights the cost of debt
and equity by the proportion of each type of capital employed by ACS. Banc of
America Securities used the December 3, 1999 10-year treasury note for a risk
free rate, a selected equity risk premium, the average of the comparable
companies' predicted betas derived from a selected equity model and ACS's
targeted capital structure to calculate ACS's cost of capital.
This analysis indicated a range of aggregate value for ACS, expressed as
multiples of estimated EBITDA, as follows:
MULTIPLE OF AGGREGATE VALUE TO 1999 EBITDA
<TABLE>
<CAPTION>
TERMINAL MULTIPLE TERMINAL MULTIPLE TERMINAL MULTIPLE
OF 9.0X PROJECTED OF 10.0X PROJECTED OF 11.0X PROJECTED
FISCAL YEAR 2004 FISCAL YEAR 2004 FISCAL YEAR 2004
DISCOUNT RATE EBITDA EBITDA EBITDA
- ------------- ----------------- ------------------ ------------------
<S> <C> <C> <C>
11.5% 10.5x 11.5x 12.5x
12.5% 10.0x 11.0x 11.9x
13.5% 9.6x 10.5x 11.5x
</TABLE>
Premiums Paid Analysis. Banc of America Securities reviewed the
consideration paid or offered in merger and acquisition transactions announced
between 1996 and 1999 involving U.S. companies in the technical services
government contractor industry. Banc of America Securities calculated the
premiums paid or offered relative to the stock prices of the acquired companies
one day and four weeks before the announcement of the acquisition offer.
This analysis indicated the following median and mean premiums:
<TABLE>
<CAPTION>
PREMIUM ONE DAY PREMIUM FOUR WEEKS
BEFORE ANNOUNCEMENT BEFORE ANNOUNCEMENT
------------------- -------------------
<S> <C> <C>
Median 10% 32%
Mean 16% 34%
</TABLE>
Banc of America Securities noted that the per share value of the stock
consideration to be received by ACS stockholders in connection with the merger
implied a premium of 33% over ACS's closing stock price on December 3, 1999. The
premium implied by the merger over ACS's closing stock price four weeks before
that date was 41%.
Contribution Analysis. Banc of America Securities used the estimates and
forecasts for ACS prepared by the management of ACS and for Titan prepared by
the management of Titan to review the estimated contribution of each company to
the (a) revenue, (b) EBIT, (c) EBITDA and (d) net income for each of (1) the
estimated calendar year 1999 and (2) projected calendar year 2000, for the
combined company. This analysis did not take into account any potential
synergies following consummation of the merger. Banc of America Securities also
reviewed the estimated contribution of each of ACS and Titan to stockholders'
equity as stated in each company's most recent balance sheet and market
capitalization at December 3, 1999.
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<PAGE> 47
This analysis indicated that ACS would contribute:
<TABLE>
<CAPTION>
ON AN ON A
ESTIMATED PROJECTED
CALENDAR CALENDAR
CONTRIBUTION TO: YEAR 1999 BASIS YEAR 2000 BASIS
- ---------------- --------------- ---------------
<S> <C> <C>
Revenues....................................... 36% 31%
EBIT........................................... 34% 26%
EBITDA......................................... 31% 27%
Net income..................................... 36% 29%
</TABLE>
The analysis also indicated that ACS would contribute to the combined
company (a) 58% of stockholders' book equity as of September 30, 1999 and (b)
9.1% of estimated market capitalization as of December 3, 1999.
Banc of America Securities then compared the contributions to the pro forma
share ownership of the combined company to be owned by each company's
stockholders, assuming the merger was consummated under the terms of the
December 7, 1999 draft merger agreement. On a pro forma basis, ACS stockholders
would own approximately 12.1% of the combined company on a diluted basis.
Exchange Ratio Analysis. Banc of America Securities reviewed the
historical ratio of closing price per share of ACS common stock to that of Titan
common stock for several time periods during the one-year period from December
3, 1998 to December 3, 1999. Banc of America Securities noted that at no time
during this period did the historical exchange ratio exceed 2.96. During this
period, the historical exchange ratio calculated on a daily basis has ranged
from a low of 0.50 on December 2, 1999 to a high of 2.96 on January 26, 1999.
The weighted average exchange ratios for selected time periods during the
last year were:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
TIME PERIOD BEFORE DECEMBER 3, 1999 EXCHANGE RATIO
- ----------------------------------- ----------------
<S> <C>
10 trading days............................................. 0.54
20 trading days............................................. 0.58
30 trading days............................................. 0.63
45 trading days............................................. 0.66
3 months.................................................... 0.65
6 months.................................................... 0.79
9 months.................................................... 0.92
12 months................................................... 1.02
</TABLE>
Banc of America Securities noted that the weighted average exchange ratios
for all but three of these periods were less than the exchange ratio of 0.6897
proposed in the December 7, 1999 draft merger agreement.
Accretion/Dilution Analysis. Using financial forecasts of ACS and Titan
provided by their respective managements, Banc of America Securities reviewed
the pro forma effects of the merger, including a comparison of estimated
earnings per share on a stand-alone basis for Titan, to the estimated earnings
per share of the combined company for calendar years 1999 through 2003.
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<PAGE> 48
Banc of America Securities noted that, based on (a) the forecasts provided
by each company and (b) assuming completion of the merger under the terms of the
December 7, 1999 draft merger agreement, the accretion or dilution to Titan's
earnings per share would be:
<TABLE>
<CAPTION>
ACCRETION
(DILUTION) TO
CALENDAR YEAR EARNINGS PER SHARE
- ------------- ------------------
<S> <C>
1999........................................................ 37.5%
2000........................................................ 5.3%
2001........................................................ 7.0%
2002........................................................ 5.1%
2003........................................................ 5.9%
</TABLE>
Historical Stock Price Analysis. Banc of America Securities reviewed the
performance of the per share market price and trading volume of ACS common stock
for the period between March 3, 1999 through December 3, 1999. The analysis
indicated that the closing market price per share for ACS common stock during
this period ranged from $12.37 to $15.00.
Banc of America Securities also reviewed the weighted average closing price
for ACS common stock over a number of periods:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
CLOSING PRICE
PER SHARE FOR
PERIOD PRIOR TO DECEMBER 3, 1999 ACS COMMON STOCK
- -------------------------------- ----------------
<S> <C>
Last 30 trading days....................................... $13.89
Last 90 trading days....................................... $12.40
Last 180 trading days...................................... $12.51
</TABLE>
Banc of America Securities noted that the equity value per share to ACS
stockholders based on the terms of the merger and the closing price of Titan
common stock on December 3, 1999 was $20.00, which compared favorably to the
weighted average closing price of ACS common stock for each period reviewed.
As noted above, the discussion above is merely a summary of the analyses
and examinations that Banc of America Securities considered to be material to
its opinion. It is not a comprehensive description of all analyses and
examinations actually conducted by Banc of America Securities. The preparation
of a fairness opinion is not susceptible to partial analysis or summary
description. Banc of America Securities believes that its analyses and the
summary above must be considered as a whole. Banc of America Securities further
believes that selecting portions of its analyses and the factors considered,
without considering all analyses and factors, would create an incomplete view of
the process underlying the analyses set forth in its presentation to the ACS
board of directors. Banc of America Securities did not assign any specific
weight to any of the analyses described above. The fact that any specific
analysis has been referred to in the summary above is not meant to indicate that
analysis was given greater weight than any other analysis. Accordingly, the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Banc of America Securities' view of the actual value
of ACS.
In performing its analyses, Banc of America Securities made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of ACS and
Titan. The analyses performed by Banc of America Securities are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than those suggested by these analyses. These analyses
were prepared solely as part of Banc of America Securities' analysis of the
financial fairness of the consideration to be received by the stockholders of
ACS in the merger and were provided to the ACS board of directors in connection
with the delivery of Banc of America Securities' opinion. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities have traded or may trade
at any time in the future.
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As described above, Banc of America Securities' opinion and presentation to
the ACS board of directors were among the many factors taken into consideration
by the ACS board of directors in making its determination to approve, and to
recommend that ACS's stockholders approve, the merger agreement.
ACS agreed to pay Banc of America Securities a fee of $50,000 at the time
the engagement letter was executed. In addition, ACS agreed to pay Banc of
America Securities a fee of $500,000 at the time Banc of America Securities
delivered its opinion. At any subsequent delivery of the opinion, or if the
opinion were subject to revisions after its date, ACS will pay Banc of America
Securities an additional fee of $250,000. ACS agreed to pay Banc of America
Securities an additional transaction fee contingent on the completion of the
merger. The transaction fee will be determined at the time the merger is
completed and will be based on the aggregate transaction value. As of December
9, 1999, based on Titan's closing stock price, the transaction fee was estimated
to be approximately $3.1 million. The transaction fee will be reduced by any
fees previously paid to Banc of America Securities at the time the engagement
letter was executed, the opinion was originally delivered or the opinion was
subsequently delivered or revised, as described above. The ACS board of
directors was aware of this fee structure and took it into account in
considering Banc of America Securities' fairness opinion and in approving the
merger. The engagement letter calls for ACS to reimburse Banc of America
Securities for all reasonable out-of-pocket expenses, including reasonable fees
and disbursements of Banc of America Securities' counsel, and ACS has agreed to
indemnify Banc of America Securities, any controlling person of Banc of America
Securities, and their respective directors, officers, employees, agents,
affiliates and representatives against particular liabilities, including
liabilities under the federal securities laws.
In the past, Banc of America Securities or its affiliates have provided
financial advisory and financing services for ACS and have received fees for the
rendering of these services. Banc of America Securities serves as agent bank
under ACS's senior credit facility and has received fees for rendering those
services. In the ordinary course of its businesses, Banc of America Securities
and its affiliates may actively trade the debt and equity securities of ACS and
Titan for their own account or for the accounts of customers and, accordingly,
Banc of America Securities or its affiliates may at any time hold long or short
positions in those securities.
INTERESTS OF ACS DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
The following ACS directors and executive officers have interests in the
merger that are different from, or in addition to, the interests generally of
ACS stockholders:
- The merger agreement provides that George A. Robinson, the Chairman,
President and Chief Executive Officer of ACS, will become a member of the
Titan board of directors.
- George A. Robinson, as the Chief Executive Officer of ACS, is entitled to
retirement benefits under the Advanced Communication Systems, Inc.
Executive Retirement Plan that will be immediately available if Mr.
Robinson should retire after the merger, which would constitute a "change
in control" under the retirement plan. These benefits consist of:
-- a cash payment equal to one month of Mr. Robinson's salary for each
year of his employment, which, as of the date of this joint proxy
statement/prospectus, would represent an aggregate payment of
$350,000; and
-- the immediate vesting of options to purchase 30,000 shares of ACS
common stock at an exercise price of $11.75 per share, with such
number of shares and exercise price subject to adjustment in the
merger based on the exchange ratio. These options otherwise would
vest in increments of 10,000 shares on each of February 25, 2000,
February 25, 2001 and February 25, 2002.
- Terrence E. Hileman, Vice President, Chief Financial Officer and
Treasurer of ACS, and Thomas A. Costello, Executive Vice President, Chief
Operating Officer and Secretary of ACS, are parties to an ACS retention
incentive program agreement under which each of them is entitled to
receive a bonus payment within seven days following the closing of a
transaction or series of
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<PAGE> 50
transactions that may involve the sale or transfer of substantially all
of the assets or equity securities of ACS to another entity or the merger
of ACS with and into another entity, provided all of the conditions set
forth in the agreement are satisfied. These conditions include a
requirement that any such transaction be completed on or before June 30,
2000. Assuming that all of the conditions are met, Mr. Hileman and Mr.
Costello will each be entitled to payments of $75,000 after the
completion of the merger.
- Following the merger, Mr. Hileman and Mr. Costello will become parties to
a Titan retention incentive program agreement under which each of them
will be entitled to receive a bonus payment within seven days following
the first anniversary of the effective date of the merger, provided all
of the conditions set forth in the agreement are satisfied. Assuming that
all of the conditions are met, Mr. Hileman and Mr. Costello will each be
entitled to a payment of $25,000 after the first anniversary of the
merger.
As of January 20, 2000, directors and executive officers of ACS held a
total of 2,184,404 shares of ACS common stock and options to purchase 95,000
shares of ACS common stock. These shares and options will be converted in the
merger into the right to receive shares of Titan common stock or options to
purchase shares of Titan common stock on the same basis as all other outstanding
ACS shares and options.
As a result of their interests in the merger, the individuals listed above
may be more likely to vote to approve the merger agreement and the merger than
if they did not hold such interests. The ACS board of directors was aware of
these interests and considered them, among other matters, in approving the
merger agreement and the transactions contemplated thereby.
STOCKHOLDER APPROVAL REQUIREMENTS
Under Delaware law, ACS stockholders must vote to adopt the merger
agreement in order for ACS to complete the merger. Titan stockholders are not
required to adopt the merger agreement under Delaware law because Titan is not a
constituent corporation in the merger, or under NYSE rules because the maximum
number of shares of Titan common stock which Titan is obligated to issue in the
merger will be less than 20% of the Titan common stock outstanding before the
merger.
ACCOUNTING TREATMENT
It is intended that the merger be accounted for by Titan as a pooling of
interests under generally accepted accounting principles. This means that Titan
and ACS will be treated as if they had always been combined for accounting and
financial reporting purposes. It is a condition to the completion of the merger
that the following will occur:
- ACS and Titan will receive a letter, dated the merger closing date, from
ACS's independent accountants stating that the accountants are not aware
of any fact concerning ACS, its stockholders or affiliates which could
preclude Titan from accounting for the merger as a pooling of interests;
and
- Titan and ACS will receive a letter, dated the merger closing date, from
Titan's independent accountants stating that the accountants are not
aware of any fact concerning Titan or any of its affiliates which could
preclude Titan from accounting for the merger as a pooling of interests,
and that the merger is eligible to be accounted for as a pooling of
interests.
LISTING OF TITAN COMMON STOCK ON THE NYSE
It is a condition to the obligation of Titan and ACS to complete the merger
that the Titan common stock to be issued under the merger agreement, including
the Titan shares issuable upon exercise of the assumed stock options, be
approved for listing on the NYSE, subject to official notice of issuance.
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ABSENCE OF DISSENTERS' RIGHTS
Both Titan and ACS are incorporated under the laws of Delaware, and are
therefore governed by the Delaware General Corporation Law. Under section
262(b)(1) of the Delaware General Corporation Law, the stockholders of ACS are
not entitled to dissent from the merger or to exercise appraisal rights in
connection with the merger because the ACS common stock is quoted on The Nasdaq
National Market and ACS stockholders will receive only shares of Titan common
stock as consideration in the merger. These shares of Titan common stock will be
listed on the NYSE upon the completion of the merger. Titan stockholders are not
entitled to dissent from the merger or to exercise appraisal rights under
section 262 of the Delaware General Corporation Law because Titan is not a
constituent corporation in the merger.
CLEARANCE UNDER FEDERAL ANTITRUST LAWS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the merger
may not be completed until notifications have been given and certain information
has been furnished to the Federal Trade Commission and the Antitrust Division of
the Department of Justice and specified waiting period requirements have been
satisfied. The obligations of Titan and ACS to complete the merger are subject
to the condition that the applicable waiting period will have expired or been
terminated. Titan and ACS filed pre-merger notification and report forms with
respect to the merger with the Federal Trade Commission and the Antitrust
Division on January 7, 2000. Satisfaction or termination of the waiting period
requirement with respect to any such filing does not preclude the Federal Trade
Commission, the Antitrust Division or any other party from challenging or
seeking to delay or enjoin the merger on antitrust or other grounds either
before or after the effective time of the merger. There can be no assurance that
such a challenge will not be made or, if made, would not succeed.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material U.S. federal income
tax consequences of the merger to a stockholder of ACS holding shares of ACS
common stock as a capital asset within the meaning of section 1221 of the
Internal Revenue Code of 1986 at the effective time of the merger.
This discussion does not address all aspects of federal taxation that may
be relevant to particular stockholders of ACS in light of their personal
circumstances or to stockholders of ACS subject to special treatment under the
Internal Revenue Code. Stockholders subject to special treatment include banks,
tax-exempt organizations, insurance companies, dealers in securities or foreign
currencies, stockholders who received their ACS common stock through the
exercise of employee stock options or otherwise as compensation, stockholders
who are not U.S. persons and stockholders who hold ACS common stock as part of a
hedge, straddle or conversion transaction. In addition, the discussion does not
address any state, local or foreign tax consequences of the merger, or the tax
consequences of the merger to holders of stock options or restricted stock.
This discussion is based on the Internal Revenue Code, the U.S. Department
of Treasury regulations and administrative rulings and court decisions as of the
date of this proxy statement/prospectus. These sources of legal authority are
all subject to change, possibly with retroactive effects, and are subject to
differing interpretations. Neither Titan nor ACS has sought or will seek a
ruling from the Internal Revenue Service concerning the tax consequences of the
merger. ACS stockholders are urged to consult their tax advisors regarding the
tax consequences of the merger to them, including the effects of U.S. federal,
state, local, foreign and other tax laws.
Tax Consequences of the Merger. Titan has received the opinion of Hogan &
Hartson L.L.P., counsel to Titan, and ACS and the ACS stockholders have received
the opinion of Venable, Baetjer, Howard & Civiletti, LLP, counsel to ACS, that
the merger of A T Acquisition Corp. into ACS will qualify as a reorganization
under section 368(a) of the Internal Revenue Code, subject to the assumptions,
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limitations, qualifications and other considerations described below under
"Considerations with Respect to Opinions." Under such treatment,
(1) no gain or loss will be recognized by an ACS stockholder as a
result of the receipt solely of shares of Titan common stock in exchange
for the stockholder's ACS common stock;
(2) an ACS stockholder's tax basis in the Titan common stock received
in the merger will be equal to the stockholder's aggregate tax basis in the
ACS common stock immediately before the merger;
(3) an ACS stockholder's holding period for Titan common stock
received in the merger will include the holding period of the ACS common
stock for which it was exchanged, assuming such ACS common stock was held
as a capital asset on the effective date of the merger; and
(4) neither Titan nor ACS will recognize any gain or loss as a result
of the merger.
Considerations with Respect to Opinions. The tax opinions of Hogan &
Hartson L.L.P. and Venable, Baetjer, Howard & Civiletti, LLP and the foregoing
summary of the U.S. federal income tax consequences of the merger will be and
are subject to assumptions, limitations and qualifications and are based on
current law and, among other things, representations of ACS and Titan, including
representations made by the respective managements of ACS and Titan. For a
complete description of the assumptions made and matters considered in
connection with such tax opinions, ACS stockholders should refer to the full
text of the tax opinions, copies of which have been filed as exhibits to the
registration statement of which this proxy statement/prospectus forms a part.
Opinions of counsel are not binding on the Internal Revenue Service and do not
preclude the Internal Revenue Service from adopting a contrary position. In
addition, if any of the representations or assumptions underlying the opinions
are inconsistent with the facts relating to the merger and the parties to the
merger, the U.S. federal income tax consequences of the merger could differ from
those described above.
THIS DISCUSSION IS ONLY A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER. THE TAX CONSEQUENCES OF THE MERGER TO AN ACS
STOCKHOLDER MAY BE DIFFERENT FROM THOSE SUMMARIZED ABOVE, BASED ON THE ACS
STOCKHOLDER'S INDIVIDUAL SITUATION. THE STOCKHOLDERS OF ACS ARE STRONGLY
ENCOURAGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER APPLICABLE TAX LAWS,
AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
RESTRICTIONS ON RESALE OF TITAN COMMON STOCK BY AFFILIATES
The issuance of Titan shares to ACS stockholders in connection with the
merger has been registered under the Securities Act. Such shares may be traded
freely and without restriction by those ACS stockholders who are not deemed to
be ACS "affiliates," as that term is defined under the Securities Act, at the
time the merger agreement is submitted for approval by the ACS stockholders at
the special meeting. An affiliate of ACS is a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with ACS. Any subsequent transfer of Titan common stock issued in
the merger by any ACS affiliate will, under existing law, require one of the
following:
- registration of the transfer under the Securities Act;
- compliance with Rule 145 under the Securities Act, which allows limited
sales under specified circumstances; or
- availability of another exemption from registration.
The foregoing restrictions are expected to apply to, among other persons,
directors and executive officers of ACS and any holders of 10% or more of the
ACS common stock converted in the merger.
SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales of shares of the acquiring and acquired companies by
affiliates of either company. SEC guidelines indicate
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further that the pooling of interests method of accounting generally will not be
challenged on the basis of sales by affiliates of the acquiring or acquired
company if the affiliates do not dispose of any of the shares of the corporation
they own or shares of a corporation they receive in connection with a business
combination during the period beginning 30 days before the completion of the
business combination and ending when financial results covering at least 30 days
of post-merger operations of the combined entity have been published in
accordance with SEC Accounting Release No. 135.
Titan has agreed in the merger agreement to use its reasonable best efforts
to cause each person who is an affiliate of Titan, for purposes of qualifying
the merger for pooling of interests accounting treatment, to deliver to ACS no
later than 31 days before the effective time of the merger a written agreement
intended to preserve the ability to treat the merger as a pooling of interests
and to ensure compliance with the Securities Act. ACS has agreed to the same
undertaking with respect to its affiliates.
If the effective time of the merger occurs after February 29, 2000, Titan
has agreed in the merger agreement to prepare and publicly release, as soon as
practicable following the end of the first complete accounting month ending at
least 30 days after the merger closing date, combined sales and net income
figures as required by the terms of the SEC Accounting Release No. 135.
This proxy statement/prospectus does not cover any resales of Titan common
stock, including Titan common stock issuable upon the exercise of any assumed
options, to be received by ACS stockholders upon completion of the merger. No
person is authorized to make use of this proxy statement/prospectus in
connection with any resale.
ANTI-DILUTION ADJUSTMENTS
If between December 9, 1999 and the effective time of the merger, the
outstanding shares of Titan common stock or ACS common stock are changed into a
different number of shares because of any reclassification, recapitalization,
split-up, combination or exchange of shares, or if any dividend payable in stock
or other securities is declared on such shares with a record date within this
period, the merger agreement requires that the exchange ratio be adjusted
accordingly to provide the same economic effect as contemplated by the merger
agreement before such reclassification, recapitalization, split-up, combination,
exchange or dividend.
EXCHANGE OF CERTIFICATES
Titan has agreed to deposit certificates representing the shares of Titan
common stock to be issued or paid under the merger agreement with First Union
National Bank, which will act as exchange agent in the merger for the benefit of
the holders of issued and outstanding shares of ACS common stock. Within three
business days after the effective time of the merger, Titan will cause First
Union National Bank to mail a letter of transmittal to each holder of ACS common
stock. The letter of transmittal will contain instructions on how ACS
stockholders may surrender their ACS stock certificates to the exchange agent in
exchange for Titan certificates.
YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY, AND
YOU SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL YOU RECEIVE THE LETTER
OF TRANSMITTAL. FOLLOWING YOUR RECEIPT OF THE LETTER OF TRANSMITTAL, YOU SHOULD
FORWARD THE CERTIFICATES ONLY IN ACCORDANCE WITH THE INSTRUCTIONS SPECIFIED IN
THE LETTER.
After the effective time of the merger and until ACS stockholders surrender
the certificates representing their ACS common stock for exchange, holders of
these certificates will not be paid any dividends or other distributions
declared after the effective time of the merger on the Titan common stock
issuable to such stockholders in the merger. Any such unpaid dividends or other
distributions on such Titan common stock will be paid, without interest, only to
the holders who have properly tendered their ACS common stock certificates for
exchange. All stock certificates presented after the effective time of the
merger will be canceled and exchanged for a certificate or certificates
representing the applicable number of shares of Titan common stock to be
received in the merger.
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Any shares of Titan common stock that remain undistributed 12 months after
the effective time of the merger will be delivered to Titan on demand. After
that time, certificates representing ACS common stock must be surrendered for
exchange to Titan or to ACS as the surviving corporation of the merger. Titan
and ACS, as the surviving corporation of the merger, will not be liable for any
shares of Titan common stock or cash delivered to a public official under any
abandoned property, escheat or similar laws.
If a certificate representing ACS common stock has been lost, stolen or
destroyed, the exchange agent will issue the consideration payable under the
merger agreement when the claimant submits an affidavit of loss, theft or
destruction, and, if required by Titan in the case of any certificate
representing more than 7,500 shares of ACS common stock, posts a bond as
indemnity against any claim that may be made later with respect to the lost
certificate.
Upon completion of the merger, the ACS common stock will cease to be traded
on The Nasdaq National Market, and there will be no further market for the ACS
common stock.
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TERMS OF THE MERGER AGREEMENT AND RELATED TRANSACTIONS
The following summary of the material terms and provisions of the merger
agreement is qualified in its entirety by reference to the merger agreement. The
merger agreement is attached as Appendix A to this proxy statement/prospectus
and is considered a part of this document.
GENERAL
The merger agreement provides that at the effective time of the merger, A T
Acquisition Corp., a wholly owned subsidiary of Titan, will merge with and into
ACS. ACS will be the surviving corporation of the merger and will be a wholly
owned subsidiary of Titan. The separate corporate existence of A T Acquisition
Corp. will terminate at the effective time of the merger. At the effective time
of the merger, each ACS stockholder will obtain the right to receive, in
exchange for each share of ACS common stock held, the number of shares of Titan
common stock calculated as described below under "Conversion of ACS Common
Stock."
Certificate of Incorporation and Bylaws of the Surviving Corporation. The
certificate of incorporation of A T Acquisition Corp., as amended by the
certificate of merger, will become the certificate of incorporation of ACS after
the merger. The bylaws of A T Acquisition Corp. will become the bylaws of ACS
after the merger.
Directors and Officers of the ACS After the Merger. The directors and
officers of A T Acquisition Corp. will be the initial directors and officers of
ACS as the surviving corporation of the merger, and will serve until their
successors have been duly elected or appointed and qualified, or until their
earlier death, resignation or removal.
Directors and Officers of Titan After the Merger. The merger agreement
provides that George A. Robinson, who currently is the Chairman, President and
Chief Executive Officer of ACS, will become a director of Titan after the
merger. Mr. Robinson is a founder of ACS and has served as Chairman, President
and Chief Executive Officer of ACS since its inception in 1987. From 1986 to
1987, Mr. Robinson held the position of Vice President for East Coast Operations
of Advanced Digital Systems, Inc., a military communication software development
company. Before working at Advanced Digital Systems, Mr. Robinson spent over 20
years as a civilian employee in the U.S. Navy Satellite Communication program,
most recently as Deputy Director.
Conversion of ACS Common Stock. At the effective time of the merger, each
issued and outstanding share of ACS common stock will be converted into the
right to receive the number of shares of Titan common stock calculated as
described below. Fractional shares of Titan common stock will not be issued in
the merger, but instead will be rounded up or down to the nearest whole share of
Titan common stock.
The number of shares of Titan common stock you will be entitled to receive
will depend on the merger exchange ratio of Titan common stock to ACS common
stock. For example, if the exchange ratio is fixed at .70, you would receive .70
of a share of Titan common stock for each ACS share you own. The exchange ratio
has not been fixed in the merger agreement, but will be calculated at the time
of the merger in accordance with a formula contained in the merger agreement.
Under this formula, the exchange ratio will be based on the average of the
closing sale prices of the Titan common stock on the NYSE for the ten
consecutive trading days ending two trading days immediately before the merger
closing date. References to the average Titan stock price in the following
discussion mean the average of these closing sale prices over the ten-day
period.
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The following table shows the merger exchange ratio within the indicated
ranges of average Titan stock prices:
<TABLE>
<CAPTION>
RANGE OF AVERAGE
TITAN STOCK PRICES EXCHANGE RATIO
------------------ --------------
<S> <C>
greater than $35.75 22 divided by average Titan stock price,
at ACS's election
greater than $32.50 and less than .6154
or equal to $35.75
between $25.50 and $32.50 20 divided by average Titan stock price
$22.95 to less than $25.50 .7843
less than $22.95 and greater than $14.00 18 divided by average Titan stock price,
at Titan's election
</TABLE>
If the average Titan stock price is greater than $35.75, Titan has the
right to terminate the merger agreement, unless ACS elects to have the exchange
ratio fixed at an amount equal to 22 divided by the average Titan stock price.
If the average Titan stock price is less than $22.95, but greater than
$14.00, ACS has the right to terminate the merger agreement, unless Titan elects
to have the exchange ratio fixed at an amount equal to 18 divided by the average
Titan stock price. If the average Titan stock price is equal to or less than
$14.00, ACS has an unconditional right to terminate the merger agreement.
The following table lists some of the possible values of the consideration
that you may receive in the merger:
<TABLE>
<CAPTION>
AND, FOR EACH SHARE OF ACS
COMMON STOCK YOU OWN, YOU
WILL RECEIVE THE FOLLOWING
DOLLAR VALUE BASED ON THE
AVERAGE
IF THE AVERAGE TITAN STOCK PRICE IS: THE EXCHANGE RATIO WILL BE: TITAN STOCK PRICE:
<S> <C> <C>
$15.00 1.2000 $18.00
$16.00 1.1250 $18.00
$17.00 1.0588 $18.00
$18.00 1.0000 $18.00
$19.00 0.9474 $18.00
$20.00 0.9000 $18.00
$21.00 0.8571 $18.00
$22.00 0.8182 $18.00
$23.00 0.7843 $18.04
$24.00 0.7843 $18.82
$25.00 0.7843 $19.61
$26.00 0.7692 $20.00
$27.00 0.7407 $20.00
$28.00 0.7143 $20.00
$29.00 0.6897 $20.00
$30.00 0.6667 $20.00
$31.00 0.6452 $20.00
$32.00 0.6250 $20.00
</TABLE>
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<TABLE>
<CAPTION>
AND, FOR EACH SHARE OF ACS
COMMON STOCK YOU OWN, YOU
WILL RECEIVE THE FOLLOWING
DOLLAR VALUE BASED ON THE
AVERAGE
IF THE AVERAGE TITAN STOCK PRICE IS: THE EXCHANGE RATIO WILL BE: TITAN STOCK PRICE:
<S> <C> <C>
$33.00 0.6154 $20.31
$34.00 0.6154 $20.92
$35.00 0.6154 $21.54
$36.00 0.6111 $22.00
$37.00 0.5946 $22.00
$38.00 0.5789 $22.00
$39.00 0.5641 $22.00
$40.00 0.5500 $22.00
$41.00 0.5366 $22.00
$42.00 0.5238 $22.00
$43.00 0.5116 $22.00
$44.00 0.5000 $22.00
$45.00 0.4889 $22.00
$46.00 0.4783 $22.00
$47.00 0.4681 $22.00
$48.00 0.4583 $22.00
$49.00 0.4490 $22.00
$50.00 0.4400 $22.00
</TABLE>
Each share of ACS common stock held in the treasury of ACS will be canceled
at the effective time of the merger without the payment of any consideration.
Each share of common stock of A T Acquisition Corp. issued and outstanding
immediately before the effective time of the merger will be converted into and
exchanged for one share of common stock of the surviving corporation of the
merger, which will continue to be held by Titan.
Assumption of Options. As of January 20, 2000, ACS had outstanding options
to purchase 479,885 shares of ACS common stock granted to employees and
outstanding options to purchase 35,000 shares of ACS common stock granted to
directors for their services as directors. At the effective time of the merger,
Titan will assume all outstanding ACS employee stock options and director stock
options. Each assumed option will be converted in the merger into an option to
purchase shares of Titan common stock using the same exchange ratio. Except for
the number of shares issuable upon exercise of such options and the option
exercise prices, which will be adjusted based on the exchange ratio, the assumed
options will remain subject to the same terms and conditions that were in effect
before the merger. The exercise price per share of Titan common stock issuable
under the assumed options will equal the exercise price per share of ACS common
stock issuable under the applicable option at the effective time of the merger
divided by the exchange ratio, rounded to the nearest whole cent.
EFFECTIVE TIME
The merger will occur on the second business day after the satisfaction or
waiver of all of the conditions precedent set forth in the merger agreement. The
effective time of the merger will be the date and time that Titan and ACS file a
certificate of merger with the Delaware secretary of state. If the merger is not
completed by June 6, 2000, which date may be extended by mutual consent of Titan
and ACS, the merger agreement may be terminated by either Titan or ACS, unless
the failure to consummate
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the merger by this date is due to the material failure of the party seeking to
terminate the merger agreement to fulfill any of its obligations.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations of ACS, Titan and A T
Acquisition Corp.
Representations and Warranties of ACS. The merger agreement contains
representations and warranties of ACS regarding, among other matters:
- the corporate organization and existence of ACS and each of its
subsidiaries, including that it is duly organized, validly existing and
in good standing with the corporate power and authority to own, operate
and lease its assets and to carry on its business as currently conducted;
- the certificate of incorporation and bylaws or other organizational
documents of ACS and each of its subsidiaries;
- the capitalization of ACS, including the number of shares of capital
stock authorized, the number of shares and rights to acquire shares
outstanding, and the number of shares reserved for issuance;
- the corporate power and authority of ACS to execute and deliver the
merger agreement and related documents and to consummate the merger and
other contemplated transactions;
- the compliance of the merger agreement and related documents with ACS's
certificate of incorporation and bylaws, applicable laws, and material
agreements, including the absence of events of default or breach
thereunder;
- required governmental and third-party consents;
- the filing by ACS of all forms, reports, statements and other documents
required to be filed with the SEC and the accuracy of ACS's financial
reports contained in these filings;
- the absence of material undisclosed liabilities;
- the absence of specified changes in ACS's business since September 30,
1999;
- the absence of material claims, actions, suits, proceedings and specified
judgments, decrees and injunctions;
- possession and validity of all required licenses and permits;
- the ownership of intellectual property, the absence of intellectual
property infringement or contests, and the accuracy of ACS's disclosures
to the SEC relating to its computer software, firmware, hardware and
similar items;
- the adequacy of protection by ACS and its subsidiaries of their
confidential information and trade secrets;
- ACS's employee benefit plans and related matters, including that such
plans have been operated and administered in accordance with applicable
law;
- compliance with laws relating to employees or the workplace, and the
absence of material disputes with employees;
- the title to and condition of material assets owned by ACS;
- the ownership and condition of the real property owned or leased by ACS;
- the validity of and absence of defaults under certain material contracts
and other agreements of ACS;
- the validity and status of completed acquisitions by ACS;
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- the filing and accuracy of ACS's tax returns, the lack of pending or
threatened proceedings, deficiencies or audits with respect to taxes, and
the adequacy of ACS's reserves for taxes;
- compliance with environmental laws and the absence of environmental
liabilities;
- the maintenance of insurance;
- the absence of specified business practices of ACS;
- ACS's Year 2000 risk management plans and condition and the Year 2000
readiness of ACS's hardware and software;
- the absence of any material interest rate swaps, caps, floors, option
agreements and similar interest rate risk management arrangements;
- the absence of any anti-takeover provisions which apply to the merger and
other contemplated transactions;
- with respect to ACS's government contracts, the absence of any civil
fraud or criminal investigations, suspension and debarment proceedings,
contract price adjustments or claims of defective pricing, equitable
adjustments, cost disallowances, and notice of contract termination, cure
notice or show cause notice;
- the adoption by ACS's board of directors of a resolution approving the
merger agreement and the merger and recommending adoption of the merger
agreement and approval of the merger by the stockholders of ACS;
- the existence of a written opinion from Banc of America Securities
relating to the fairness of the merger;
- the absence of brokers, except as identified in the merger agreement;
- the absence of any action by ACS that would cause the merger to fail to
qualify as a reorganization under section 368(a) of the Internal Revenue
Code or fail to be treated for financial accounting purposes as a pooling
of interests in accordance with generally accepted accounting principles
and the regulations and interpretations of the SEC; and
- the absence of material misstatements or omissions in the information
furnished by ACS for inclusion in this proxy statement/prospectus.
Representations and Warranties of Titan and A T Acquisition Corp. The
merger agreement contains representations and warranties of Titan and A T
Acquisition Corp. regarding, among other matters:
- the corporate organization and existence of A T Acquisition Corp.,
including that it was formed solely for the purpose of engaging in the
merger, and that except for obligations and liabilities incurred in
connection with the merger, A T Acquisition Corp. has not incurred any
obligations or engaged in any business activities of any kind;
- A T Acquisition Corp.'s certificate of incorporation and bylaws;
- the capitalization of A T Acquisition Corp., including the number of
shares of capital stock authorized and the number of shares outstanding;
- the corporate power and authority of A T Acquisition Corp. to execute and
deliver the merger agreement and related documents and to consummate the
merger and other contemplated transactions;
- the compliance of the merger agreement and related documents with A T
Acquisition Corp's certificate of incorporation and bylaws, applicable
laws, and specified agreements of A T Acquisition Corp., including the
absence of events of default or rights of acceleration; and
- required governmental and third-party consents.
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Representations and Warranties of Titan. The merger agreement contains
representations and warranties of Titan regarding, among other matters:
- the corporate organization and existence of Titan, including that it is
duly organized, validly existing and in good standing with the corporate
power and authority to own, operate and lease its properties and to carry
on its business as currently conducted;
- Titan's certificate of incorporation and bylaws;
- the capitalization of Titan, including the number of shares of capital
stock authorized, the number of shares and rights to acquire shares
outstanding, and the number of shares reserved for issuance;
- the corporate power and authority of Titan to execute and deliver the
merger agreement and related documents and to consummate the merger and
other contemplated transactions;
- the compliance of the merger agreement and related documents with Titan's
certificate of incorporation and bylaws, applicable laws to which Titan
or any subsidiary is bound, and specified agreements of Titan, including
the absence of events of default or acceleration;
- required governmental and third-party consents;
- the filing by Titan of all forms, reports, statements and other documents
required to be filed with the SEC and the accuracy of the financial
reports contained in these filings;
- the absence of material undisclosed liabilities;
- the absence of specified changes in Titan's business since September 30,
1999;
- the absence of material claims, actions, suits, proceedings and specified
judgments, decrees and injunctions;
- the absence of certain business practices of Titan;
- with respect to Titan's government contracts, the absence of any civil
fraud or criminal investigations, suspension and debarment proceedings,
contract price adjustments or claims of defective pricing, equitable
adjustments, cost disallowances, and notice of contract termination, cure
notice or show cause notice;
- the adoption by Titan's board of directors of a resolution approving the
merger agreement and the merger;
- the absence of brokers utilized by Titan, except as identified in the
merger agreement;
- the absence of any action by Titan or any of its affiliates that would
cause the merger to fail to qualify as a reorganization under section
368(a) of the Internal Revenue Code, or fail to be treated for financial
accounting purposes as a pooling of interests in accordance with
generally accepted accounting principles and the regulations and
interpretations of the SEC;
- the absence of material misstatements or omissions in the information
furnished by Titan for inclusion in this proxy statement/prospectus;
- the absence of ownership of shares of ACS by Titan and its affiliates as
of December 9, 1999; and
- compliance with environmental laws and the absence of environmental
liabilities by Titan and its subsidiaries.
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BUSINESS AND AGREEMENTS OF ACS AND TITAN PENDING THE MERGER
Under the merger agreement, ACS has agreed to do the following, and has
agreed to cause its subsidiaries to do the following, pending the merger:
- conduct its business in the usual and ordinary course consistent with
past practice;
- use its reasonable best efforts to preserve its business organization
substantially intact, retain the services of its principal officers and
key employees and maintain its relationship with its principal customers
and suppliers;
- use its reasonable best efforts to keep its assets in good repair and
condition, ordinary wear and tear excepted;
- use its reasonable best efforts to keep in full force and effect
insurance comparable in amount and scope of coverage to that currently
maintained;
- prepare and file all tax returns required to be filed in a timely manner,
and in a manner consistent with past practices and applicable laws;
- timely file with the SEC all reports required to be filed under the
Exchange Act, which reports must comply in all material respects with the
Exchange Act; and
- operate its business in accordance with the terms of its licenses and in
all material respects with applicable laws.
In addition, ACS has agreed that, except as expressly contemplated by the
merger agreement or otherwise consented to by Titan, pending the merger, it will
not, among other matters:
- subject to specified exceptions, increase in any manner the compensation
of, or pay any bonus to, any director, executive officer or key employee;
- grant any severance or termination pay except for normal severance
practices or under existing agreements in effect on the date of the
merger agreement to, or enter into any severance agreement with, any
director, officer or employee;
- enter into any employment agreement with any director, officer or
employee, except for severance arrangements or policies entered into
before the date of the merger agreement;
- adopt or amend any employee benefit plan or arrangement, except as may be
required to comply with applicable law;
- make any loans to any officer, director or key employee;
- declare, set aside, pay any dividend, or make any other distribution in
respect of, outstanding shares of ACS common stock;
- redeem, purchase or otherwise reacquire any shares of ACS common stock or
any securities or obligations convertible into or exchangeable for any
shares of ACS common stock, or any options, warrants or conversion or
other rights to acquire any shares of ACS common stock or any such
securities or obligations, except in connection with the exercise of the
employee and director options in accordance with their terms;
- enter into any merger, consolidation, restructuring, reorganization or
recapitalization, or adopt a plan of complete or partial liquidation or
dissolution;
- split, combine or reclassify any shares of ACS common stock;
- issue or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of ACS common
stock;
- issue, pledge, deliver, award, grant or sell, or file any registration
statement covering, any shares of any class of its stock or other
securities, any securities convertible into or exercisable or
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exchangeable for any such shares or other securities, or any rights,
warrants or options to acquire any such shares or other securities, except
for the issuance of stock options to ACS employees hired after the date of
the merger agreement, ACS employees on a quarterly basis under ACS's
performance-based equity incentive program, and ACS directors in
connection with annual grants of stock options by ACS to its directors;
- acquire or agree to acquire by any manner any business or corporation,
partnership, association or other business organization or division after
the filing of this prospectus and proxy statement;
- make or commit to make any investments or capital expenditures, other
than investments or capital expenditures that do not exceed in the
aggregate $1 million from the date of the merger agreement until the
merger closing date and that are solely for purposes related to computer
hardware and software, leaseholds, furniture and fixtures;
- sell, lease, exchange, mortgage, pledge, transfer or otherwise subject to
any encumbrance or dispose of any of its assets, except for sales,
dispositions or transfers in the ordinary course of business and
consistent with past practices or sales that do not exceed $200,000 in
the aggregate;
- propose or adopt any amendments to its certificate of incorporation or
its bylaws;
- make any change in any method of accounting, accounting practice or
policy other than those required by generally accepted accounting
principles or applicable law or regulations;
- make or rescind any express or deemed election relating to taxes, settle
or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes,
except where the amount of such settlements or controversies,
individually or in the aggregate, does not exceed $100,000, or change any
of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ended December 31, 1998, except in either
case as may be required by applicable law or regulations or generally
accepted accounting principles;
- incur any indebtedness for borrowed money, unless otherwise permitted by
the merger agreement, or issue or sell any debt securities or any
warrants or rights to acquire any debt securities of ACS or any
subsidiary of ACS;
- guarantee any obligation for borrowed money, other than purchase money
indebtedness not to exceed $500,000 in the aggregate, except in the
ordinary course of business under existing loan agreements or capitalized
leases;
- prepay, before maturity, any of its long-term debt;
- engage in any transaction, whether directly or indirectly, with any
affiliate of ACS, except a subsidiary of ACS, which involves the transfer
of consideration or has a financial impact on the entity, other than
under agreements existing on the date of the merger agreement;
- except in the ordinary course of business, enter into any contract,
agreement, commitment, arrangement, lease or other instrument with a
value in excess of $50,000;
- adjust, split, combine or reclassify any capital stock;
- except for transactions in the ordinary course of business, terminate,
amend in a material way, or waive any provision of, any material ACS
contract, except for customer and service contracts entered into in the
ordinary course of business;
- settle any material claim, action or proceeding involving money damages,
except any settlement in the ordinary course of business in which the
amount of the settlement individually does not exceed $25,000, and in the
aggregate with all other settlements, does not exceed $50,000;
- take any action that is intended or would reasonably be expected to
result in any of ACS's representations and warranties set forth in the
merger agreement becoming untrue in any material
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respect before the effective time of the merger, or in any of the
conditions to the merger set forth in the merger agreement not being
satisfied or in a violation of any provision of the merger agreement; or
- agree in writing or otherwise to do any of the foregoing.
Titan has agreed that, except as expressly contemplated by the merger
agreement or otherwise consented to by ACS, pending the merger, it will not,
among other matters:
- declare, set aside or pay any dividend on, or make any other distribution
in respect of, outstanding shares of Titan common stock;
- redeem, purchase or otherwise reacquire any shares capital stock of Titan
or any securities of, or other ownership interests in, Titan or any of
its subsidiaries, except for repurchases related to shares owned by
employees or former employees of Titan or any of its subsidiaries;
- except to the extent not otherwise accounted for in the merger agreement,
split, combine or reclassify any shares of Titan common stock or issue or
authorize or propose the issuance of any other securities in respect of,
in lieu of, or in substitution for, shares of its common stock;
- take any action that would, or would be reasonably likely to, prevent the
merger from being accounted for as a pooling of interests in accordance
with generally accepted accounting principles and the rules and
regulations of the SEC;
- take any action that is intended or would reasonably be expected to
result in any of Titan's representations and warranties set forth in the
merger agreement becoming untrue in any material respect before the
effective time of the merger, or in any of the conditions to the merger
set forth in the merger agreement not being satisfied or in a violation
of any provision of the merger agreement;
- take any action that would, or would be reasonably likely to, prevent the
merger from qualifying as a reorganization under section 368(a) of the
Internal Revenue Code; or
- agree in writing or otherwise to do any of the foregoing.
In addition, except as provided in the merger agreement, Titan has agreed
that it will not do any of the following, and will not allow its representatives
to do any of the following, pending the merger:
- acquire, propose to acquire or cause to be acquired, in any manner, any
voting securities, rights or options to purchase any voting securities of
ACS or any ACS subsidiary, or any of the assets or business of ACS, its
subsidiaries and divisions;
- seek or propose to influence or control the management or policies of
ACS, obtain representation on the board of directors of ACS, solicit any
proxies or consents with respect to any securities of ACS, make any
public announcement regarding ACS or request permission to do any of
these acts;
- make any public announcement regarding or submit a proposal for any
extraordinary transaction involving ACS, its securities or its assets;
- enter into any discussions, negotiations, arrangements or understandings
with any third party with respect to any of the above items;
- seek, request permission or participate in any effort to do any of the
above acts; or
- request ACS or any of its subsidiaries, affiliates, directors, officers,
employees, agents or representatives to amend or waive any of the above
undertakings.
ACS also has agreed:
- to mail this proxy statement/prospectus to its stockholders promptly
after the registration statement of which it is a part becomes effective;
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- to take promptly all action necessary in accordance with the Delaware
General Corporation Law and ACS's certificate of incorporation and bylaws
to solicit from the stockholders of ACS proxies or consents to adopt the
merger agreement and approve the merger; and
- to furnish Titan with all information concerning ACS and the holders of
its common stock which may reasonably be requested in connection with the
filing of the registration statement of which this proxy
statement/prospectus is a part.
Titan also has agreed:
- to take any action required to be taken by the SEC or the NYSE or under
any applicable state securities laws in connection with the issuance of
Titan common stock in the merger;
- to file with the NYSE a supplemental listing application so that the
shares of Titan common stock issuable under the merger agreement are
included for quotation on the NYSE, and to use its best efforts to cause
these shares to be approved for listing, subject to official notice of
issuance, before the closing date;
- for one year following the effective time of the merger, to provide
compensation and benefits to former ACS employees employed by Titan that
are substantially the same as those provided to the ACS employees by ACS
prior to the merger; and
- for one year following the effective time of the merger, to provide
incentive compensation to former ACS employees employed by Titan that is
substantially the same as this provided to Titan employees.
ACS and Titan have further agreed:
- to consult with respect to up to 28 key employees of ACS to be identified
by ACS with whom ACS, as the surviving corporation in the merger, will
enter into retention agreements following the merger;
- to give one another access to all of their respective properties and
executive personnel, and to all information concerning their respective
businesses, properties, contracts, records and personnel, including
information related to their subsidiaries;
- to keep confidential all information received from the other party under
confidentiality agreements previously signed by Titan and ACS,
respectively;
- to prepare and file with the SEC this proxy statement/prospectus and the
registration statement of which it is a part;
- to use their reasonable best efforts to have the registration statement
of which this proxy statement/prospectus is a part declared effective
under the Securities Act as promptly as possible after filing;
- along with A T Acquisition Corp., to complete all documents required to
be filed with the Federal Trade Commission and the Department of Justice
in order to comply with the Hart-Scott-Rodino Antitrust Improvements Act,
and to take all reasonable actions and use all reasonable best efforts to
secure approval for the completion of the merger;
- to use their reasonable best efforts to take all necessary, proper or
appropriate actions to consummate the transactions contemplated by the
merger agreement; and
- to notify each other of the occurrence or non-occurrence of any event
which would likely cause any condition to the merger obligations not to
be satisfied.
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NON-SOLICITATION AGREEMENT BY ACS
ACS has agreed in the merger agreement that it will not do any of the
following pending the merger:
- initiate, solicit, knowingly facilitate or encourage the submission of an
"acquisition proposal," as this term is defined below;
- participate in any discussions, furnish any information, negotiate with
any person or otherwise take any action to facilitate any inquiries or
the making of an acquisition proposal for ACS;
- grant any waiver or release under any standstill or similar agreement
relating to any class of equity securities of ACS; or
- enter into any agreement with respect to an acquisition proposal for ACS,
other than with Titan.
ACS has further agreed:
- to notify its subsidiaries, affiliates, directors, officers, employees,
agents or representatives of the terms of its non-solicitation agreement
and use reasonable efforts to cause them to comply with the agreement;
and
- to cease immediately all existing discussions and negotiations that could
reasonably be expected to lead to an acquisition proposal for ACS.
The merger agreement provides that none of these restrictions will prohibit
the ACS board of directors from furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes a bona fide
acquisition proposal to ACS if each of the following requirements is satisfied:
- the board of directors of ACS determines in good faith, taking into
account the advice of outside counsel, that such action is reasonably
likely to be required for the board of directors of ACS to comply with
its fiduciary duties to the ACS stockholders under applicable law;
- before furnishing information to, or entering into discussions or
negotiations with, the person or entity, ACS provides written notice to
Titan of the existence of the acquisition proposal and of its intention
to furnish information or enter into discussions or negotiations with
respect to the acquisition proposal;
- before furnishing information, ACS receives an executed confidentiality
agreement with terms no less favorable to ACS than those contained in the
confidentiality agreements previously executed by Titan and ACS;
- ACS keeps Titan informed on a timely basis of the status of negotiations
and the material terms of any agreement, and promptly provides Titan with
copies of all written inquiries and proposals related to the acquisition
proposal; and
- the acquisition proposal was not solicited in violation of the merger
agreement.
For purposes of the merger agreement, "acquisition proposal" means any of
the following involving ACS or its subsidiaries, other than the transactions
contemplated by the merger agreement:
- any merger, reorganization, consolidation, share exchange,
recapitalization, business combination, liquidation, dissolution, tender
offer, exchange offer or other similar transaction; or
- any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 10% or more of the assets or equity securities of ACS in a
single transaction or series of related transactions.
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CONDITIONS TO COMPLETION OF THE MERGER
Conditions to Each Party's Obligation to Complete the Merger. Each party's
obligation to complete the merger is subject to the satisfaction or waiver,
where permissible, of the following conditions:
- the merger agreement and the merger have been approved by the
stockholders of ACS;
- the registration statement of which this proxy statement/prospectus forms
a part has become effective, and no stop order suspending its
effectiveness has been issued and no proceedings for that purpose have
been initiated or, to the knowledge of Titan or ACS, threatened by the
SEC;
- no governmental entity or court has enacted, issued, promulgated,
enforced or entered any law, statute, rule, ordinance, regulation,
executive order, decree, judgment, injunction or other order that
prevents or prohibits completion of the merger, so long as Titan and ACS
use their reasonable best efforts to cause any order of this nature to be
lifted;
- the Titan common stock issuable to holders of ACS common stock under the
merger agreement has been included for listing on the NYSE upon official
notice of issuance;
- the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act has expired or been terminated;
- Titan and ACS have obtained permits, authorizations, consents and
approvals necessary to complete the merger, unless failure to obtain them
would not have a material adverse effect on either Titan or ACS;
- the delivery to Titan and ACS of a letter from ACS's independent
accountants, addressed to Titan and dated as of the merger closing date,
setting forth the concurrence of ACS's independent accountants with ACS's
conclusion that the merger will qualify as a pooling of interests and a
statement that ACS's independent accountants, after reasonable
investigation, are not aware of any fact regarding ACS or its
stockholders or affiliates that could preclude ACS from accounting for
the merger as a pooling of interests;
- the delivery to Titan and ACS of a letter from Titan's independent
accountants, addressed to ACS and dated as of the merger closing date,
setting forth the concurrence of Titan's independent accountants with
Titan's conclusion that the merger will qualify as a pooling of interests
and a statement that Titan's independent accountants, after reasonable
investigation, are not aware of any fact regarding Titan or its
affiliates that could preclude Titan from accounting for the merger as a
pooling of interests, and that the merger is eligible to be accounted for
as a pooling of interest in accordance with generally accepted accounting
principles and the rules, policies and regulations of the SEC;
- ACS and the holders of ACS common stock at the time of closing have
received a legal opinion from Titan's counsel, dated as of the merger
closing date, to the effect that the merger will constitute a
reorganization under section 368(a) of the Internal Revenue Code; and
- Titan has received a legal opinion from ACS's counsel, dated as of the
merger closing date, to the effect that the merger will constitute a
reorganization under section 368(a) of the Internal Revenue Code.
Conditions to the Obligations of Titan and A T Acquisition Corp. to
Complete the Merger. The obligations of Titan and A T Acquisition Corp. to
complete the merger is subject to the satisfaction or waiver, where permissible,
of the following additional conditions:
- ACS's representations and warranties in the merger agreement were true
and correct when made and are true and correct on and as of the merger
closing date;
- ACS will have performed in all material respects the agreements and
covenants required to be performed by it on or before the effective date
of the merger;
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- there will not have been any material adverse effect on ACS since the
date of the merger agreement, with any decline in the price of a share of
ACS common stock not constituting a material adverse effect on ACS for
this purpose;
- there will not be pending or threatened any suit, action, proceeding or
investigation that:
-- challenges or seeks to prohibit the completion of the merger,
-- relates to the merger and seeks to obtain from Titan or any of its
subsidiaries damages that may be material to Titan,
-- seeks to prohibit or limit in any material respect Titan's ability to
vote, receive dividends or otherwise exercise ownership rights with
respect to the stock of the surviving corporation,
-- materially and adversely affects the right of ACS, as the surviving
corporation of the merger, to own the assets or operate the business
of ACS, or
-- if adversely determined, could have a material adverse effect on ACS
or Titan; and
- each ACS affiliate will have entered into an affiliate agreement which is
in full force and effect at the effective time of the merger.
Conditions to the Obligation of ACS to Complete the Merger. The obligation
of ACS to complete the merger is subject to the satisfaction or waiver, where
permissible, of the following additional conditions:
- the representations and warranties of Titan and A T Acquisition Corp. in
the merger agreement will be true and correct when made and on and as of
the merger closing date;
- Titan and A T Acquisition Corp. will have performed in all material
respects the agreements and covenants required to be performed by them on
or before the effective time of the merger;
- there will not have been any material adverse effect on Titan since the
date of the merger agreement, with any decline in the price of a share of
Titan common stock not constituting a material adverse effect on Titan
for this purpose; and
- there will not be pending or threatened any suit, action, proceeding or
investigation that:
-- challenges or seeks to prohibit the completion of the merger,
-- relates to the merger and seeks to obtain from ACS or any of its
subsidiaries damages that may be material to ACS, or
-- if adversely determined, could have a material adverse effect on ACS
or Titan.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEE
The merger agreement may be terminated at any time prior to the effective
time of the merger:
(1) by mutual written consent of Titan and ACS;
(2) by Titan, if ACS materially breaches any of its representations,
warranties, covenants or agreements, so that the conditions precedent to
the obligations of Titan to close the merger are not satisfied, except
that, if such a breach is curable by ACS through the exercise of reasonable
best efforts, for so long as ACS continues to exercise reasonable best
efforts, Titan may not terminate the merger agreement;
(3) by ACS, if Titan materially breaches any of its representations,
warranties, covenants or agreements, so that the conditions precedent to
the obligations of ACS to close the merger are not satisfied, except that,
if such a breach is curable by Titan through the exercise of reasonable
best efforts, for so long as Titan continues to exercise reasonable best
efforts, ACS may not terminate the merger agreement;
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(4) by either Titan or ACS, if any law, statute, rule, ordinance,
regulation, executive order, decree, judgment, stipulation, injunction or
other order that is final and nonappealable prevents the completion of the
merger, if the party seeking to terminate the merger agreement has used
reasonable best efforts to cause the order to be vacated or lifted;
(5) by either Titan or ACS, if the merger has not occurred on or
before June 6, 2000, except that this right to terminate the merger
agreement is not available to any party whose material breach of its
obligations was the cause of the failure of the merger to occur;
(6) by ACS or Titan at any time after the ACS special meeting, if the
vote of the stockholders of ACS required by the merger agreement has not
been obtained, provided that the right to terminate under this provision
will not be available to ACS if ACS fails to comply with its duty to mail
this proxy statement/prospectus to its stockholders in a timely manner and
to comply with the proxy solicitation rules and regulations under the
Exchange Act;
(7) by Titan, if the average Titan stock price is greater than $35.75
per share, unless ACS elects to permit the exchange ratio to be equal to
the quotient obtained by dividing 22 by the average Titan stock price;
(8) by ACS, if the average Titan stock price is less than $22.95 per
share, unless Titan elects to permit the exchange ratio to be equal to the
quotient obtained by dividing 18 by the average Titan stock price, except
that Titan will not have the right to avoid termination if its stock price
is equal to or less than $14.00 per share;
(9) by ACS, if the board of directors of ACS determines in good faith,
taking into account the advice of outside counsel, that the action is
reasonably likely to be required for the board of directors to comply with
its fiduciary duties to stockholders under applicable law, other than in
connection with an acquisition proposal;
(10) by ACS, if the ACS board of directors withdraws its
recommendation of the merger agreement, recommends an alternative
transaction in which greater aggregate financial consideration will be paid
to ACS's stockholders than under the merger agreement and determines that
the ACS board of directors is reasonably likely to be required to recommend
the alternative proposal to ACS's stockholders to comply with its fiduciary
duties under applicable law, except that termination under this provision
will not be effective if, before the close of business on the second full
business day after Titan receives written notice of termination, Titan
elects in writing to have ACS hold the ACS special meeting, in which case
ACS will be required to proceed with the meeting;
(11) by Titan, if the ACS board of directors (a) fails to recommend
approval of the merger agreement and the merger, (b) withdraws, modifies or
changes its recommendation of the merger agreement or the merger in a
manner adverse to Titan or A T Acquisition Corp., (c) fails to include a
recommendation of the merger agreement and the merger in ACS's proxy
statement, (d) fails to reaffirm its recommendation in favor of the
adoption and approval of the merger agreement and the merger within ten
days after Titan so requests or (e) resolves or publicly announces an
intention to do any of the foregoing;
(12) by Titan, if the ACS board of directors makes any recommendation
to ACS stockholders with respect to another proposal to acquire ACS other
than a recommendation to reject the proposal, or resolves or publicly
announces an intention to do the foregoing;
(13) by Titan, if any tender offer or exchange offer for 26% or more
of the outstanding shares of ACS capital stock has commenced or threatened
to commence, and the ACS board of directors within ten days thereafter
either recommends to the ACS stockholders that they tender their shares,
fails to recommend unconditionally that the ACS stockholders not accept the
tender offer, or makes no recommendation to the ACS stockholders with
respect to acceptance of the tender offer, or if the board of ACS resolves
or publicly announces an intention to do the foregoing; or
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(14) by Titan, if any person or group, as defined in section 13(d)(3)
of the Exchange Act, acquires beneficial ownership or the right to acquire
beneficial ownership of 26% or more of the outstanding shares of ACS
capital stock, or if a group forms which has beneficial ownership or the
right to acquire beneficial ownership of 26% or more of the outstanding
shares of ACS capital stock.
If the merger agreement is terminated by ACS for the reasons set forth in
paragraph (9) above, ACS will be required to pay Titan all of Titan's reasonable
expenses incurred in connection with the transactions contemplated by the merger
agreement up to $1 million. If ACS enters into a definitive agreement in
connection with, or consummates, an acquisition proposal within six months from
the date of such a termination, ACS will be required to pay Titan the difference
between $4 million and the aggregate amount ACS previously paid in reimbursement
of Titan's transaction expenses.
If the merger agreement is terminated by ACS for the reasons set forth in
paragraph (10) above, Titan may, within five business days, make an election to
receive the sum of $4 million instead of compelling ACS to proceed with the
solicitation of ACS stockholder approval of the merger.
If the merger agreement is terminated by ACS for any of the reasons set
forth in paragraph (11), (12) or (13) above, other than for the reason set forth
in clause (11)(d), or as a result of a resolution or public announcement by the
ACS board of directors of an intention to act as set forth in clause (11)(d),
then:
- if the ACS board of directors has recommended to the ACS stockholders an
acquisition proposal with a third party, ACS will be required to pay
Titan $4 million; and
- if the ACS board of directors has not recommended to the ACS stockholders
an acquisition proposal with a third party, ACS will be required to pay
Titan all of Titan's reasonable expenses up to $1 million, and if ACS
enters into a definitive agreement in connection with, or consummates, an
alternative transaction within nine months from the date of termination
of the merger agreement, ACS will be required to pay Titan the difference
between $4 million and the aggregate amount previously paid in
reimbursement of Titan's transaction expenses.
If the merger agreement is terminated by ACS as a result of Titan's
material breach of its representations, warranties, covenants or agreements in
the merger agreement, Titan will be required to pay ACS an amount equal to all
of ACS's reasonable expenses incurred in connection with the transactions
contemplated by the merger agreement and all damages caused to ACS as a result
of the breach.
If the merger agreement is terminated by Titan as a result of ACS's
material breach of its representations, warranties, covenants or agreements in
the merger agreement, ACS will be required to pay Titan an amount equal to all
of Titan's reasonable expenses incurred in connection with the transactions
contemplated by the merger agreement and all damages caused to Titan as a result
of the breach.
WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Waiver. At any time before the effective time of the merger, the parties
to the merger agreement may agree to do any of the following:
- extend the time for the performance of any obligation or other act
required to be performed under the merger agreement;
- waive any inaccuracies in the representations and warranties contained in
the merger agreement or in any document delivered in connection with it;
and
- waive compliance with any of the agreements or conditions contained in
the merger agreement.
Amendment. The merger agreement may be amended by the parties through
action authorized by their respective boards of directors at any time before the
effective time of the merger, but no amendment may be made that by law or NYSE
rule requires additional approval by the stockholders, unless stockholder
approval is obtained.
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EXPENSES
Except as described under "Termination of the Merger Agreement; Termination
Fee" above, Titan and ACS generally will bear their own costs and expenses
incurred in connection with the merger agreement, except that if the merger is
not completed, Titan and ACS will each pay one-half the costs incurred in:
- filing the registration statement of which this proxy
statement/prospectus forms a part;
- printing and mailing this proxy statement/prospectus; and
- filing the pre-merger notification and report forms required for
compliance with the Hart-Scott-Rodino Antitrust Improvements Act and any
applicable foreign laws.
ACS STOCKHOLDER AGREEMENTS
Company Stockholders Agreement. On December 9, 1999, as an essential
condition and inducement to Titan and A T Acquisition Corp. entering into the
merger agreement, Titan, A T Acquisition Corp. and several ACS stockholders,
referred to as the ACS Principal Stockholders, entered into a Company
Stockholders Agreement. Under the Company Stockholders Agreement, the ACS
Principal Stockholders have agreed to vote, or cause the record holders of their
ACS securities to vote, the ACS common stock beneficially owned by them as of
December 9, 1999 and any other voting interests in ACS acquired by them after
December 9, 1999 in the following manner:
- in favor of the merger and adoption of the merger agreement;
- in favor of other actions contemplated by the merger agreement in
connection with any meeting of, or solicitation of consents from, ACS
stockholders where such matters are submitted to a vote of ACS
stockholders;
- against approval or adoption of resolutions which would have the effect
of preventing or materially delaying completion of the merger or ACS from
performing its obligations under the merger agreement; and
- against any other action which would constitute a material breach of any
provision of the merger agreement.
The ACS common stock beneficially owned by the ACS Principal Stockholders
represented approximately 24% of the ACS common stock outstanding as of December
6, 1999. The ACS Principal Stockholders consist of the following persons:
- George A. Robinson, Chairman, President and Chief Executive Officer of
ACS, and Barbara Robinson, Mr. Robinson's wife;
- Charles G. Martinache, a director of ACS; and
- Thomas A. Costello, Executive Vice President, Chief Operating Officer,
Secretary and a director of ACS, and Margaret M. Costello, Mr. Costello's
wife.
Under the Company Stockholders Agreement, each ACS Principal Stockholder
delivered an irrevocable proxy to Titan to vote the ACS shares of such ACS
Principal Stockholder in favor of the merger, as described under "Irrevocable
Proxies" below.
The ACS Principal Stockholders have agreed not to take any of the following
actions until the effective time of the merger or, if earlier terminated, the
termination of the Company Stockholders
64
<PAGE> 71
Agreement, and to use their reasonable efforts not to allow any of their
representatives to take any of the following actions:
- initiate, solicit, facilitate or encourage the submission of an
acquisition proposal for ACS;
- participate in any discussions or provide information with respect to an
acquisition proposal for ACS;
- waive or release any standstill or similar agreement with respect to any
class of ACS equity securities;
- execute any proxies or other voting arrangements with respect to ACS
capital stock or rights to acquire ACS capital stock; or
- transfer or otherwise dispose of any shares of capital stock beneficially
owned by the ACS Principal Stockholders unless the transferee has become
bound by the Company Stockholders Agreement.
The Company Stockholders Agreement will terminate on the earlier to occur
of the effective time of the merger or on the date the merger agreement is
validly terminated.
Irrevocable Proxies. Under the Company Stockholders Agreement, and as a
condition and inducement to Titan's entering into the merger agreement, each ACS
Principal Stockholder granted an irrevocable proxy dated December 9, 1999 to
Titan, with power of substitution and resubstitution. Under the terms of each
proxy, Titan has the authority to vote the ACS common stock owned by the
applicable ACS Principal Stockholder as of December 9, 1999, together with all
other shares of ACS capital stock the ACS Principal Stockholder acquires after
December 9, 1999, in favor of the approval and adoption of the merger agreement
and the transactions contemplated by the merger agreement. Each proxy authorizes
Titan to vote these shares at any meeting of stockholders of ACS, or in
connection with any solicitation of written consents from stockholders of ACS,
called or solicited for the purpose of voting on the merger agreement, the
merger and the other actions contemplated by the merger agreement. Each proxy is
coupled with an interest and is irrevocable. The proxy and the rights contained
in it will terminate upon the termination of the Company Stockholders Agreement.
65
<PAGE> 72
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The accompanying pro forma financial statements should be read in
conjunction with the notes to the consolidated financial statements contained in
Titan's Annual Report on Form 10-K for the year ended December 31, 1998, the
notes to the consolidated financial statements contained in Titan's Quarterly
Report on Form 10-Q for the nine months ended September 30, 1999, the notes to
the consolidated financial statements contained in ACS's Annual Report on Form
10-K for the year ended September 30, 1999 and the notes to the financial
statements of TNP, Mainsaver, Assist and SFG, which are collectively referred to
as the Acquired Companies.
The following unaudited pro forma condensed balance sheets and unaudited
pro forma condensed statements of operations, which are collectively referred to
as the Pro Forma Statements, have been prepared to illustrate the estimated
effects of the merger of ACS and the acquisitions of the Acquired Companies, for
balance sheet purposes as of September 30, 1999, and for statement of operations
purposes for the years ended December 31, 1998, 1997 and 1996 and for the nine
months ended September 30, 1999. The operating results for TNP are included in
Titan's operating results for the nine months ended September 30, 1999. In the
Pro Forma Statements, Titan's revenues and expenses for the year ended December
31, 1998, which is Titan's fiscal year end, are combined with revenues and
expenses of ACS for the year ended September 30, 1998 and with the Acquired
Companies' aggregate revenues and expenses for the year ended December 31, 1998.
Titan's revenues and expenses for the nine months ended September 30, 1999 are
combined with the revenues and expenses of ACS for the nine months ended June
30, 1999 and with the Acquired Companies' aggregate revenues and expenses for
the nine months ended September 30, 1999. Titan's revenues and expenses for such
periods for the years ended December 31, 1997 and 1996 are combined with the
revenues and expenses of ACS for the years ended September 30, 1997 and 1996.
The unaudited pro forma adjustments are based upon available information
and upon assumptions that Titan believes are reasonable in the circumstances.
The unaudited pro forma statements of operations include the recurring items
which are directly attributable to the merger and the acquisitions of the
Acquired Companies, such as amortization of additional goodwill, increase in
interest expense, increase in preferred dividends, and the related tax effects
thereof. The unaudited pro forma combined balance sheet gives effect to the
merger with ACS and the acquisitions of the Acquired Companies as if they had
occurred on September 30, 1999. The unaudited pro forma combined statements of
operations give effect to the merger with ACS as if it had occurred on January
1, 1996, and give effect to the acquisitions of the Acquired Companies as if
they had occurred on January 1, 1998. The unaudited pro forma statements do not
purport to represent what Titan's financial position or results of operations
would actually have been if the merger or the acquisitions in fact had occurred
on the date or at the beginning of the periods indicated, nor do they purport to
project Titan's financial position or results of operations for any future date
or period.
66
<PAGE> 73
THE TITAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
TITAN ACS (NOTE 4) COMBINED MAINSAVER
-------- -------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES.................................................. $274,059 $156,403 $ -- $430,462 $ 6,267
Costs and expenses:
Cost of revenues........................................ 211,147 106,183 -- 317,330 1,626
Selling, general and administrative expense............. 32,957 39,265 -- 72,222 3,962
Research and development expense........................ 5,317 -- -- 5,317 1,774
Special acquisition related charges and other........... -- -- -- -- --
-------- -------- ------- -------- -------
Total costs and expenses.......................... 249,421 145,448 -- 394,869 7,362
-------- -------- ------- -------- -------
Operating profit (loss)................................... 24,638 10,955 -- 35,593 (1,095)
Interest expense.......................................... (6,712) (2,741) -- (9,453) (309)
Interest income........................................... 585 -- -- 585 --
-------- -------- ------- -------- -------
Income from continuing operations before income taxes..... 18,511 8,214 -- 26,725 (1,404)
Income tax provision...................................... 5,553 3,256 -- 8,809 --
-------- -------- ------- -------- -------
Income (loss) from continuing operations before cumulative
effect of change in accounting.......................... $ 12,958 $ 4,958 $ -- $ 17,916 $(1,404)
======== ======== ======= ======== =======
Basic earnings per share
Income from continuing operations....................... $ 0.33 $ 0.57 $ -- $ 0.38 $ --
======== ======== ======= ======== =======
Weighted average shares................................. 38,076 8,663 (1,272) 45,467 --
======== ======== ======= ======== =======
Diluted earnings per share
Income from continuing operations....................... $ 0.29 $ 0.56 $ -- $ 0.34 $ --
======== ======== ======= ======== =======
Weighted average shares................................. 45,732 8,788 (1,397) 53,123 --
======== ======== ======= ======== =======
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
ASSIST SFG (NOTE 4) COMBINED
------ ------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES.................................................. $9,585 $4,960 $ -- $451,274
Costs and expenses:
Cost of revenues........................................ 5,596 219 -- 324,771
Selling, general and administrative expense............. 4,049 4,113 2,092 86,438
Research and development expense........................ 440 597 -- 8,128
Special acquisition related charges and other........... -- -- -- --
------ ------ ------- --------
Total costs and expenses.......................... 10,085 4,929 2,092 419,337
------ ------ ------- --------
Operating profit (loss)................................... (500) 31 (2,092) 31,937
Interest expense.......................................... (234) (215) (2,269) (12,392)
Interest income........................................... 88 -- -- 585
------ ------ ------- --------
Income from continuing operations before income taxes..... (646) 184) (4,361) 20,130
Income tax provision...................................... -- -- (908) 7,901
------ ------ ------- --------
Income (loss) from continuing operations before cumulative
effect of change in accounting.......................... $ (646) $ (184) $(3,453) $ 12,229
====== ====== ======= ========
Basic earnings per share
Income from continuing operations....................... $ -- $ -- $ -- $ 0.25
====== ====== ======= ========
Weighted average shares................................. 516 -- -- 45,983
====== ====== ======= ========
Diluted earnings per share
Income from continuing operations....................... $ -- $ -- $ -- $ 0.22
====== ====== ======= ========
Weighted average shares................................. 516 -- (243) 53,396
====== ====== ======= ========
</TABLE>
67
<PAGE> 74
THE TITAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
TITAN ACS (NOTE 4) COMBINED TNP MAINSAVER
-------- ------- ----------- --------- ------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
REVENUES.......................................... $218,678 $58,398 $ -- $277,076 $3,669 $5,909
Costs and expenses:
Cost of revenues................................ 168,816 37,364 -- 206,180 2,665 2,043
Selling, general and administrative expense..... 26,936 16,130 43,066 110 3,392
Research and development expense................ 4,025 -- -- 4,025 -- 594
Special acquisition related charges and other... 4,553 -- -- 4,553 -- --
-------- ------- ----- -------- ------ ------
Total costs and expenses.................. 204,330 53,494 -- 257,824 2,775 6,029
Operating profit (loss)........................... 14,348 4,904 -- 19,252 895 (120)
Interest expense.................................. (5,399) (740) -- (6,139) -- (93)
Interest income................................... 262 -- -- 262 7 --
-------- ------- ----- -------- ------ ------
Income (loss) from continuing operations before
income taxes.................................... 9,211 4,164 -- 13,375 901 (213)
Income tax provision.............................. 3,336 1,505 -- 4,841 4 --
-------- ------- ----- -------- ------ ------
Income (loss) from continuing operations before
cumulative effect of change in accounting
principle, net.................................. $ 5,875 $ 2,659 $ -- $ 8,534 $ 898 $ (213)
======== ======= ===== ======== ====== ======
Basic earnings per share
Income from continuing operations............... $ 0.15 $ 0.40 $ -- $ 0.19 $ -- $ --
======== ======= ===== ======== ====== ======
Weighted average shares......................... 34,614 6,729 662 42,005 --
======== ======= ===== ======== ====== ======
Diluted earnings per share
Income from continuing operations............... $ 0.15 $ 0.39 $ -- $ 0.38 $ -- $ --
======== ======= ===== ======== ====== ======
Weighted average shares......................... 36,013 6,855 536 43,404 2,345 --
======== ======= ===== ======== ====== ======
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
ASSIST SFG (NOTE 4) COMBINED
------ ------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES.......................................... $8,069 $4,001 $ -- $298,724
Costs and expenses:
Cost of revenues................................ 5,132 355 -- 216,375
Selling, general and administrative expense..... 3,173 2,311 2,092 54,144
Research and development expense................ 273 1,241 -- 6,133
Special acquisition related charges and other... -- -- -- 4,553
------ ------ ------- --------
Total costs and expenses.................. 8,578 3,907 2,092 281,205
Operating profit (loss)........................... (509) 94 (2,092) 17,520
Interest expense.................................. (235) (228) (2,269) (8,964)
Interest income................................... 33 -- -- 302
------ ------ ------- --------
Income (loss) from continuing operations before
income taxes.................................... (711) (134) (4,361) 8,857
Income tax provision.............................. (207) -- (908) 3,730
------ ------ ------- --------
Income (loss) from continuing operations before
cumulative effect of change in accounting
principle, net.................................. $ (504) $ (134) $(3,453) $ 5,128
====== ====== ======= ========
Basic earnings per share
Income from continuing operations............... $ -- $ -- $ -- $ 0.11
====== ====== ======= ========
Weighted average shares......................... 516 -- -- 42,521
====== ====== ======= ========
Diluted earnings per share
Income from continuing operations............... $ -- $ -- $ -- $ 0.10
====== ====== ======= ========
Weighted average shares......................... 516 -- (2,638) 43,627
====== ====== ======= ========
</TABLE>
68
<PAGE> 75
THE TITAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
TITAN ACS (NOTE 4) COMBINED TNP MAINSAVER
-------- -------- ----------- --------- ------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
REVENUES........................... $303,428 $107,752 $ -- $411,180 $5,644 $ 7,218
Costs and expenses:
Cost of revenues................. 232,041 69,847 -- 301,888 4,067 2,387
Selling, general and
administrative expense......... 37,553 28,834 -- 66,387 146 5,187
Research and development
expense........................ 5,590 -- -- 5,590 -- 946
Special acquisition related
charges and other.............. 9,891 -- -- 9,891 -- --
-------- -------- ---- -------- ------ -------
Total costs and expenses... 285,075 98,681 -- 383,756 4,213 8,520
Operating profit (loss)............ 18,353 9,071 -- 27,424 1,431 (1,302)
Interest expense................... (7,377) (1,918) -- (9,295) -- (165)
Interest income.................... 392 82 -- 474 9 --
-------- -------- ---- -------- ------ -------
Income (loss) from continuing
operations before income taxes... 11,368 7,235 -- 18,603 1,440 (1,467)
Income tax provision............... 4,155 2,861 -- 7,016 5 --
-------- -------- ---- -------- ------ -------
Income (loss) from continuing
operations before cumulative
effect of change in accounting
principal, net................... $ 7,213 $ 4,374 $ -- $ 11,587 $1,435 $(1,467)
======== ======== ==== ======== ====== =======
Basic earnings per share
Income from continuing
operations..................... $ 0.18 $ 0.61 $ -- $ 0.26 $ -- $ --
======== ======== ==== ======== ====== =======
Weighted average shares.......... 34,895 7,221 170 42,286 -- --
======== ======== ==== ======== ====== =======
Diluted earnings per share
Income from continuing
operations..................... $ 0.18 $ 0.60 $ -- $ 0.25 $ -- $ --
======== ======== ==== ======== ====== =======
Weighted average shares.......... 36,177 7,326 65 43,568 2,345 --
======== ======== ==== ======== ====== =======
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
ASSIST SFG (NOTE 4) COMBINED
------- ------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES........................... $11,523 $4,868 $ -- $440,433
Costs and expenses:
Cost of revenues................. 6,917 206 -- 315,465
Selling, general and
administrative expense......... 4,477 3,016 3,213 82,426
Research and development
expense........................ 397 1,853 -- 8,786
Special acquisition related
charges and other.............. -- -- -- 9,891
------- ------ ------- --------
Total costs and expenses... 11,791 5,075 3,213 416,568
Operating profit (loss)............ (268) (207) (3,213) 23,865
Interest expense................... (319) (363) (2,641) (12,783)
Interest income.................... 29 -- -- 512
------- ------ ------- --------
Income (loss) from continuing
operations before income taxes... (558) (570) (5,854) 11,594
Income tax provision............... (180) -- (1,057) 5,784
------- ------ ------- --------
Income (loss) from continuing
operations before cumulative
effect of change in accounting
principal, net................... $ (378) $ (570) $(4,797) $ 5,810
======= ====== ======= ========
Basic earnings per share
Income from continuing
operations..................... $ -- $ -- $ -- $ 0.12
======= ====== ======= ========
Weighted average shares.......... 516 -- -- 42,802
======= ====== ======= ========
Diluted earnings per share
Income from continuing
operations..................... $ -- $ -- $ -- $ 0.11
======= ====== ======= ========
Weighted average shares.......... 516 -- (2,493) 43,936
======= ====== ======= ========
</TABLE>
69
<PAGE> 76
THE TITAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
TITAN ACS (NOTE 4) COMBINED
-------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues...................................... $275,923 $52,194 $ -- $328,117
Costs and expenses:
Cost of revenues............................ 216,553 37,687 -- 254,240
Selling, general and administrative
expense.................................. 36,731 11,128 -- 47,859
Research and development expense............ 7,466 -- -- 7,466
Special acquisition related charges and
other.................................... 6,600 1,910 -- 8,510
-------- ------- ------ --------
Total costs and expenses............ 267,350 50,725 -- 318,075
Operating profit (loss)....................... 8,573 1,469 -- 10,042
Interest expense.............................. (6,643) (136) -- (6,779)
Interest income............................... 872 153 -- 1,025
-------- ------- ------ --------
Income (loss) from continuing operations
before income taxes......................... 2,802 1,486 -- 4,288
Income tax provision.......................... 4,184 (250) -- 3,934
-------- ------- ------ --------
Income (loss) from continuing operations
before cumulative effect of change in
accounting.................................. $ (1,382) $ 1,736 $ -- $ 354
======== ======= ====== ========
Basic earnings per share
Income (loss) from continuing operations.... $ (0.07) $ 0.40 $ -- $ (0.01)
======== ======= ====== ========
Weighted average shares............. 33,094 4,306 3,085 40,485
======== ======= ====== ========
Diluted earnings per share
Income (loss) from continuing operations.... $ (0.07) $ 0.40 $ -- $ (0.01)
======== ======= ====== ========
Weighted average shares............. 33,094 4,352 3,039 40,485
======== ======= ====== ========
</TABLE>
70
<PAGE> 77
THE TITAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
TITAN ACS (NOTE 4) COMBINED
-------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues...................................... $245,976 $31,665 $ -- $277,641
Costs and expenses:
Cost of revenues............................ 192,657 19,307 -- 211,964
Selling, general and administrative
expense.................................. 36,226 10,253 -- 46,479
Research and development expense............ 5,023 -- -- 5,023
Special acquisition related charges and
other.................................... -- -- -- --
-------- ------- ------ --------
Total costs and expenses............ 233,906 29,560 -- 263,466
Operating profit (loss)....................... 12,070 2,105 -- 14,175
Interest expense.............................. (4,764) (257) -- (5,021)
Interest income............................... 639 57 -- 696
-------- ------- ------ --------
Income (loss) from continuing operations
before income taxes......................... 7,945 1,905 -- 9,850
Income tax provision.......................... 2,603 -- -- 2,603
-------- ------- ------ --------
Income (loss) from continuing operations
before cumulative effect of change in
accounting.................................. $ 5,342 $ 1,905 $ -- $ 7,247
======== ======= ====== ========
Basic earnings per share
Income from continuing operations........... $ 0.14 $ 0.51 $ -- $ 0.16
======== ======= ====== ========
Weighted average shares............. 32,068 3,733 3,658 39,459
======== ======= ====== ========
Diluted earnings per share
Income from continuing operations........... $ 0.14 $ 0.50 $ -- $ 0.16
======== ======= ====== ========
Weighted average shares............. 32,445 3,806 3,585 39,836
======== ======= ====== ========
</TABLE>
71
<PAGE> 78
THE TITAN CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
TITAN ACS (NOTE 4) PRO FORMA MAINSAVER ASSIST SFG (NOTE 4) PRO FORMA
-------- -------- ----------- --------- --------- ------ ------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents............. $ 4,207 $ 1,615 $ -- $ 5,822 $ -- $ 413 $ -- $ -- $ 6,235
Accounts
receivable -- net....... 131,787 67,834 -- 199,621 1,559 2,627 2,639 -- 206,446
Inventories............... 12,492 932 -- 13,424 -- -- -- -- 13,424
Prepaid expenses and
other................... 8,938 2,896 -- 11,834 69 380 290 -- 12,573
Deferred income taxes..... 5,635 -- 3,345 8,980 -- -- -- -- 8,980
-------- -------- ------ -------- -------- ------ ------ ------- --------
Total current
assets.............. 163,059 73,277 3,345 239,681 1,628 3,420 2,929 -- 247,658
Property and
equipment -- net........ 28,476 7,908 -- 36,384 805 293 693 -- 38,175
Goodwill -- net........... 89,064 61,603 -- 150,667 -- -- -- 55,794 206,461
Other assets.............. 11,929 414 -- 12,343 64 260 128 -- 12,795
Net assets of discontinued
operations.............. 580 -- -- 580 -- -- -- -- 580
-------- -------- ------ -------- -------- ------ ------ ------- --------
Total assets.......... $293,108 $143,202 $3,345 $439,655 $ 2,497 $3,973 $3,750 $55,794 $505,669
======== ======== ====== ======== ======== ====== ====== ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit............ $ 6,163 $ -- $ -- $ 6,163 $ 1,512 $ -- $ 947 $(1,512) $ 7,110
Accounts payable.......... 29,598 5,773 -- 35,371 953 1,219 1,266 -- 38,809
Acquisition debt.......... 4,800 -- -- 4,800 -- -- -- -- 4,800
Current portion of
long-term debt.......... 2,089 964 -- 3,053 211 187 400 (400) 3,451
Accrued compensation and
benefits................ 17,008 -- -- 17,008 -- 508 -- -- 17,516
Other accrued
liabilities............. 11,971 37,345 -- 49,316 2,244 445 1,996 7,300 61,301
Net liabilities of
discontinued
operations.............. 39 -- -- 39 -- -- -- -- 39
-------- -------- ------ -------- -------- ------ ------ ------- --------
Total current
liabilities......... 71,668 44,082 -- 115,750 4,920 2,359 4,609 5,388 133,026
Line of credit............ 110,712 47,580 -- 158,292 -- -- -- 39,352 197,644
Long-term debt............ 7,090 420 11,150 18,660 1,653 2,327 3,110 (6,590) 19,160
Other non-current
liabilities............. 16,801 1,226 -- 18,027 485 197 504 5,176 24,389
Redeemable preferred
stock................... -- -- -- -- -- 305 -- (305) --
STOCKHOLDERS' EQUITY:
Preferred stock:
Cumulative
convertible........... 695 -- -- 695 -- -- -- -- 695
Series A junior
participating......... -- -- -- -- -- -- -- -- --
Common stock.............. 437 115 -- 552 6,197 5 -- (6,202) 552
Capital in excess of par
value................... 98,833 42,511 -- 141,344 -- 9 2,981 (2,990) 141,344
Retained earnings
(deficit)............... (10,492) 7,578 (7,805) (10,719) (10,758) (1,229) (7,454) 21,965 (8,195)
Treasury stock............ (2,636) (310) -- (2,946) -- -- -- -- (2,946)
-------- -------- ------ -------- -------- ------ ------ ------- --------
Total stockholders'
equity.............. 86,837 49,894 (7,805) 128,926 (4,561) (1,215) (4,473) 12,773 131,450
-------- -------- ------ -------- -------- ------ ------ ------- --------
Total liabilities and
stockholders'
equity.............. $293,108 $143,202 $3,345 $439,655 $ 2,497 $3,973 $3,750 $55,794 $505,669
======== ======== ====== ======== ======== ====== ====== ======= ========
</TABLE>
72
<PAGE> 79
THE TITAN CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. GENERAL
Cayenta, Inc. ("Cayenta"), a wholly owned subsidiary of The Titan
Corporation ("Titan"), acquired substantially all of the assets and liabilities
of Transnational Partners II, LLC ("TNP") in January 1999. Thereafter, Cayenta
acquired JB Systems, Inc. in November 1999, and Assist Cornerstone Technologies,
Inc. ("Assist Cornerstone") and SFG Technologies, Inc. ("SFG Technologies") in
December 1999. (See The 1999 Acquired Companies in Note 3 below.) On December 9,
1999, Titan entered into an agreement to acquire Advanced Communication Systems,
Inc. ("ACS").
2. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial
statements are based on adjustments to the historical consolidated financial
statements of Titan to give effect to the acquisitions described in Note 3 below
and the proposed merger with ACS. The pro forma condensed consolidated
statements of operations assume the acquisitions were consummated as of the
beginning of the periods presented. The pro forma condensed consolidated
statements of operations are not necessarily indicative of results that would
have occurred had the acquisitions been consummated as of the beginning of the
periods presented or the results that may be attained in the future.
Certain information normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The pro forma condensed consolidated financial statements should be
read in conjunction with the historical consolidated financial statements of
Titan and ACS and the historical financial statements of the Acquired Companies.
The information in the unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1998 and for the nine
months ended September 30, 1999 and 1998 have been derived from (a) the audited
statements of operations of Titan, ACS, TNP and each of the 1999 Acquired
Companies for the year ended December 31, 1998 (except with respect to ACS,
which includes the audited statement of operations for the year ended September
30, 1998, and SFG Technologies, which includes the audited eight month period
ended December 31, 1998 and the unaudited four month period ended April 30,
1998), (b) the unaudited statements of operations of Titan for the nine months
ended September 30, 1999, (c) the unaudited statements of operations of ACS for
the nine months ended June 30, 1999 and 1998 and (d) the unaudited statements of
operations of the 1999 Acquired Companies for the nine months ended September
30, 1999. The information in the unaudited proforma condensed consolidated
statements of operations for the years ended December 31, 1997 and 1996 have
been derived from (a) the audited statements of operations of Titan for the
years ended December 31, 1997 and 1996 with the (b) audited statements of
operations of ACS for the years ended September 30, 1997 and 1996.
The financial statements of SFG Technologies are translated from Canadian
dollars to U.S. dollars based on the end of the period exchange rate for balance
sheet items and average for the period rates for statement of operations data.
There are no significant differences between U.S. and Canadian generally
accepted accounting principles relative to SFG Technologies.
3. ACQUISITIONS
All acquisitions were accounted for as purchases. Accordingly the operating
results are reflected in the consolidated results of Cayenta from the date of
acquisition. Summary information on the acquisitions follows:
TNP. In January 1999, Cayenta acquired substantially all of the assets of
TNP, an enterprise application integration consulting company. Cayenta acquired
these assets for an initial installment of $7.0 million in cash and 2,345,000
shares of Cayenta convertible preferred stock. Cayenta will pay an
73
<PAGE> 80
additional $2.8 million note that was issued as part of its acquisition of TNP,
plus 7% interest thereon, in January 2000. Acquisition goodwill of $12.7 million
is being amortized on a straight-line basis over 30 years.
THE 1999 ACQUIRED COMPANIES
Mainsaver. In November 1999, Cayenta acquired JB Systems, an enterprise
asset management, or EAM, company doing business under the name Mainsaver.
Cayenta acquired Mainsaver for $11.7 million in cash, of which $8.2 million was
paid at the closing. Of the $3.5 million withheld at the closing, $500,000 is
due in February 2000 and $3.0 million is due in May 2001, after satisfaction of
possible working capital adjustments or indemnification obligations. In
addition, Cayenta paid approximately $3.4 million to reduce outstanding
indebtedness of Mainsaver.
Assist Cornerstone. In December 1999, Cayenta acquired Assist Cornerstone,
an e-commerce solutions and software company. Cayenta acquired Assist
Cornerstone for 516,000 shares of Cayenta Class A common stock and approximately
$12.9 million in cash, of which $9.9 million was paid at the closing. Of the
$3.0 million withheld at the closing, $1.7 million is due in March 2000 and $1.3
million is due in June 2001, after satisfaction of possible working capital
adjustments or indemnification obligations. In addition, Cayenta paid
approximately $3.2 million to retire outstanding indebtedness of Assist
Cornerstone and redeem all of its outstanding redeemable preferred stock.
SFG Technologies. In December 1999, Cayenta acquired SFG Technologies, a
solutions and software provider focusing on revenue cycle services for the
utility industry. Cayenta acquired SFG Technologies for $11.6 million in cash,
of which $9.5 million was paid at the closing. Of the $2.0 million placed into
escrow at the closing, $500,000 is due in March 2000 and $1.5 million is due in
June 2001, after satisfaction of possible working capital adjustments or
indemnification obligations. In addition, Cayenta paid approximately $3.1
million to retire outstanding indebtedness of SFG Technologies and redeem all of
its outstanding redeemable preferred stock.
Acquisition costs related to the 1999 Acquired Companies approximated $5.1
million, which includes approximately $2.1 million of estimated fair value
assigned to 495,800 warrants granted to an investment advisor for certain
advisory services performed in connection with these acquisitions. Goodwill
related to these acquisitions amounted to approximately $55.8 million and is
being amortized over 20 years.
4. ADJUSTMENTS TO HISTORICAL FINANCIAL STATEMENTS
The following pro forma adjustments have been made to the historical
condensed consolidated balance sheets and statements of operations as if the
acquisitions described in Note 1 were consummated at September 30, 1999 and as
of the beginning of the periods presented, respectively:
BALANCE SHEETS
1999 Acquisitions:
(a) to reflect the goodwill related to the 1999 Acquired Companies;
(b) to reflect the retirement of certain debt of the 1999 Acquired
Companies using advances under Titan's line of credit;
(c) to reflect the purchase price holdbacks and to accrue for
transaction costs;
(d) to eliminate the 1999 Acquired Companies equity accounts; and
ACS Acquisition:
(e) to reflect the impact of estimated direct transaction costs of the
merger with ACS and estimated costs of integrating the companies of
approximately $11.2 million. These transaction costs consist primarily of
investment banking fees, costs of filings with regulatory agencies, and
accounting, legal, financial printing and other related costs.
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STATEMENTS OF OPERATIONS
1999 Acquisitions:
(f) to reflect incremental amortization (on a straight-line basis over
20 years) of goodwill related to the purchase of the 1999 Acquired
Companies and to reflect the amortization (on a straight line basis over 30
years) of goodwill related to the TNP acquisition;
(g) to reflect incremental interest expense on advances under Titan's
line of credit to fund the cash portion of the purchase prices of the TNP
acquisition and of the 1999 Acquired Companies and to reflect interest
expense related to holdback amounts for the 1999 Acquired Companies;
(h) to reflect (A) the change in income taxes related to pro forma
adjustments, and (B) income taxes on TNP as if it were a C corporation for
federal income tax purposes; and
ACS Acquisition:
(i) to base the unaudited pro forma combined net income (loss) per
common share on the weighted average number of common and equivalent shares
of Titan outstanding for each period at an assumed exchange ratio of .7843
of a share of Titan common stock for each share of ACS common stock,
assuming 9,424,000 shares of ACS common stock issued and outstanding. The
exchange ratio of .7843 assumes an average Titan stock price of at least
$22.95 but less than $25.50, which is the range below which ACS has the
right, subject to conditions, to terminate the merger agreement. The effect
of the assumed conversion of Titan's convertible subordinated debentures
was antidilutive for all periods presented. The assumed exchange ratio on
January 20, 2000 is .5637, based on the average of the closing sale prices
of the Titan common stock on the NYSE for the ten consecutive trading days
ending two trading days before January 20, 2000, as set forth in the merger
agreement.
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INFORMATION ABOUT TITAN
GENERAL
Titan is a leading diversified technology company that provides information
technology, communications, and electron beam food pasteurization and medical
product sterilization systems and services. Through extensive government-funded
contract and research and development activities since 1981 under contracts
totaling in excess of $2 billion, Titan has accumulated a broad portfolio of
technologies, intellectual property and expertise from which Titan has developed
many of its commercial businesses. The core technologies supporting the Titan
Scan and Titan Wireless segments were derived from technologies originally
developed for government applications. Titan believes that its government-funded
contract and research and development activities enhance its technical expertise
with sophisticated technologies and facilitate its ability to develop commercial
applications. Titan funds the development of commercial technologies from its
technology base both internally as well as in conjunction with partners. In
1997, for example, Titan contributed the core technology to form IPivot, Inc., a
company which designs and manufactures Internet commerce equipment that improves
the performance of server farms, web sites and software applications. In
November 1999, Titan received approximately $42 million in cash for its 8.1%
equity interest when IPivot was acquired by Intel Corporation. Titan plans to
continue building its technology portfolio, identifying commercial applications
and entering into strategic relationships to further its growth.
Titan has organized its business into five segments that reflect the
specific markets and industries in which Titan operates:
<TABLE>
<CAPTION>
SEGMENT SEGMENT DESCRIPTION
- ------- -------------------
<S> <C>
Titan Information technology and
communications solutions for defense,
intelligence, and other U.S. and allied
government agencies
Cayenta Comprehensive information technology
solutions for its customers' business
functions, including e-business,
finance, accounting, customer billing
and collection, contract management,
supply chain integration and enterprise
asset management
Titan Scan Electron beam food pasteurization and
medical product sterilization systems
and services
Titan Wireless Satellite communication systems and
services which support telephony in
developing countries
Emerging Technologies Development of commercial applications
for technologies created by Titan's
other business segments through
government-sponsored research and
development programs
</TABLE>
Each of Titan's segments has a management team with significant relevant
experience in the segment's particular business and market area. Consistent with
its strategy of aligning management motivation with stockholder interests, each
of Titan's segments other than Emerging Technologies, which is not a separate
subsidiary, has its own key employee stock option plan to foster an
entrepreneurial environment.
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Titan believes that the markets in which it operates are large and growing:
<TABLE>
<CAPTION>
SEGMENT TARGET MARKET PROFILE
- ------- ---------------------
<S> <C>
Titan Systems The U.S. government is among the largest
buyers of information technology systems
and services in the world. According to
the Government Electronic Industries
Alliance, the U.S. government's
information technology budget for its
fiscal year 2000 is expected to be
approximately $34 billion. In addition,
the Government Electronic Industries
Alliance forecasts that U.S. government
spending on defense information
technology will grow on an
inflated-adjusted basis at a rate of
1.3% over the next five years.
Cayenta Forrester Research projects that the
market for business to business
e-business will grow from $43 billion in
1998 to $1.3 trillion in 2003. In
addition, International Data Corporation
estimates that the worldwide market for
consulting, design, systems integration,
support, management and outsourcing
services associated with the
development, deployment and management
of Internet sites will grow at a five
year compounded annual growth rate of
59% from $7.8 billion 1998 to $78.5
billion in 2003.
Titan Scan Titan believes that, subject to consumer
acceptance, the market for food
pasteurization systems and services
could develop to be in excess of $1.5
billion annually. According to a market
research report, the global market for
sterilization services for medical
products was approximately $368 million
in 1999.
Titan Wireless In Titan's targeted markets, telephone
availability is relatively low. In 1998,
according to the International
Telecommunication Union, low income
countries, which represent approximately
one-third of the world's population, had
fewer than two subscriber lines per 100
inhabitants compared to 66.13 in the
United States.
</TABLE>
RECENT DEVELOPMENTS
Acquisitions by Titan Systems. On June 9, 1999, Titan Systems acquired
System Resources Corporation, an information technology government contractor,
through a stock purchase for a purchase price of $35 million, subject to certain
post-closing adjustments, consisting of $33 million in cash paid at closing,
less a $500,000 holdback, and $2 million in promissory notes which bear interest
at 7% per annum
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and become fully payable on June 9, 2000. In addition, Titan agreed to pay the
System Resources stockholders one-half of approximately $1.5 million in System
Resources receivables aged more than 720 days to the extent that any of those
receivables are collected within the two year period following the closing date.
The transaction was accounted for as a purchase.
On July 22, 1999, Titan Systems acquired all of the outstanding stock of
Atlantic Aerospace Electronics Corporation, a defense and commercial technology
and systems company which focuses on applied research and development in
information technologies, for cash of approximately $18 million, subject to
certain post-closing adjustments, plus potential payments of up to $3 million
contingent upon certain future contract awards. The transaction was accounted
for as a purchase.
Acquisitions by Cayenta. On January 1, 1999, Cayenta acquired
substantially all of the assets of Transnational Partners II, LLC, an enterprise
application integration consulting company. Cayenta acquired these assets for an
initial installment of $7 million in cash and 2,345,000 shares of Cayenta's
convertible preferred stock. Cayenta will pay off an additional $2.8 million
note that it issued as part of its acquisition of Transnational Partners, plus
7% interest on the note, in January 2000.
On November 2, 1999, Cayenta acquired JB Systems, Inc., an enterprise asset
management company doing business under the name Mainsaver. Cayenta acquired
Mainsaver for $11.7 million in cash, of which $8.2 million was paid at the
closing. Of the $3.5 million withheld at the closing, $500,000 is due in
February 2000 and $3 million is due in May 2001, after satisfaction of possible
working capital adjustments or indemnification obligations. In addition, Cayenta
paid approximately $3.4 million to reduce outstanding indebtedness of Mainsaver.
On December 7, 1999, Cayenta acquired Assist Cornerstone Technologies,
Inc., an e-commerce solutions and software company. Cayenta acquired Assist for
516,458 shares of its Class A common stock and approximately $12.9 million in
cash, of which $9.9 million was paid at the closing. Of the $3 million withheld
at the closing, $1.7 million is due in March 2000 and $1.3 million is due in
June 2001, after satisfaction of possible working capital adjustments or
indemnification obligations. In addition, Cayenta paid approximately $3.2
million to retire outstanding indebtedness of Assist and redeem all of its
outstanding redeemable preferred stock.
On December 23, 1999, Cayenta acquired SFG Technologies, Inc., a solutions
and software provider focusing on revenue cycle services for the utility
industry. Cayenta acquired SFG Technologies for $11.6 million in cash, of which
$9.5 million was paid at the closing. Of the $2.1 million placed into escrow at
the closing, $600,000 is due in March 2000 and $1.5 million is due in June 2001,
after satisfaction of possible working capital adjustments or indemnification
obligations. In addition, Cayenta paid approximately $3.1 million to retire
outstanding indebtedness of SFG Technologies and redeem all of its outstanding
redeemable preferred stock.
Each of Cayenta's acquisitions was accounted for using the purchase method.
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INFORMATION ABOUT ACS
GENERAL
Advanced Communication Systems, Inc. provides a wide range of technology
services and solutions, predominantly to U.S. government agencies and to
commercial customers. ACS operates primarily in three interrelated areas:
- communication services, including the design, development, integration
and implementation of complete communications solutions across the full
spectrum of media, ranging from land lines to wireless technologies, with
particular strengths in satellite communication services, information
systems and aerospace services;
- information systems, including the design and installation of and support
services for information management and LAN/WAN systems, as well as
multimedia training, Internet/Intranet solutions and database support;
and
- aerospace services, including systems engineering, life-cycle support,
and program management services for a broad range of military systems.
COMMUNICATION SERVICES
ACS designs, develops, integrates and implements complete communication
systems across the full spectrum of media, ranging from land lines to wireless
technologies, with particular strengths in satellite communications. ACS
provides technical, programmatic and financial management support for
large-scale command, control and communication system procurements, including
comprehensive communications engineering support to assist in the development of
military communication systems. ACS also supports communication systems after
development with a complete set of in-service engineering skills, which include
planning for and conducting installation, testing operational performance and
providing training and maintenance assistance for a wide variety of
communications equipment, such as antennas, receivers, processors and complete
systems. Other ACS capabilities include innovative business process
reengineering and implementation of streamlined, accountable commercial
practices that significantly enhance customer productivity. ACS's communication
services business represented approximately 52% of its overall revenues for the
fiscal year ended September 30, 1999.
INFORMATION SYSTEMS
ACS offers a broad array of professional information technology services
and information systems to commercial and government markets. These services
include information management systems design and integration; LAN/WAN design,
installation and support; database design and real-time database management;
Internet and Intranet services; and multimedia training development. ACS plans
and creates conceptual designs, system designs and system updates, including
identifying functional requirements and creating database, system and subsystem
specifications. It performs feasibility and cost-benefit studies on system
alternatives and presents recommendations. ACS also analyzes current office
functions and matches them with appropriate software and provides integrated
office tools to permit data sharing and improve efficiency. ACS provides
technical assistance to end users on system configuration issues, software
upgrades and functionality and a broad range of database support using
innovative solutions to manage databases and present the information back to a
variety of end users at the level and detail specific to their needs. To permit
its customers to communicate more efficiently, ACS develops and implements both
external (Internet) and internal (Intranet) connectivity solutions. It conducts
needs analyses to define specific objectives for Web sites; designs marketing
objectives and strategies; provides design services for the appearance of Web
sites; and provides technical and project management services and support. ACS
offers a range of training services utilizing innovative techniques and tools,
such as computer-based training aids, training videos and on-line performance
tools, to promote increased productivity and efficient use of installed systems.
ACS also provides systems integration for communication systems and to a lesser
extent acts as a value-added reseller of computer hardware, software and
integrated systems to both government
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and commercial customers. ACS supports the systems and products it sells by
providing its customers a wide range of services, including employee training,
maintenance, repair and user assistance. ACS' information systems business
represented approximately 27% of its revenues for the fiscal year ended
September 30, 1999.
AEROSPACE SERVICES
ACS applies a wide range of advanced technology to assist customers
throughout the military services in meeting their critical mission requirements.
It provides systems engineering and integration support for a diverse range of
surveillance, reconnaissance and radar systems. ACS develops and validates
software; provides system-level survivability analysis and solutions; applies
advanced corrosion inspection and control methodologies; supports the
development of advanced materials, including composites; and provides flight
test planning and related range management support. ACS provides systems
engineering, systems integration and system test support to U.S. Army, U.S. Navy
and U.S. Air Force aviation platforms and systems, and many of the afloat ships
of the U.S. Navy. Services provided include development or review of
specifications, requirements analysis, system and/or subsystem design, hardware
and software engineering, human factors engineering, test planning and test
support. ACS provides a broad range of logistics analysis and life-cycle support
services to U.S. Army, U.S. Navy, U.S. Air Force and Federal Aviation
Administration activities. ACS also provides a broad range of program management
support services to a variety of U.S. Army, U.S. Navy and U.S. Air Force
programs. ACS's aerospace business represented approximately 21% of its revenues
for the fiscal year ended September 30, 1999.
ADDITIONAL INFORMATION
Additional information concerning ACS's business is contained in ACS's
Annual Report on Form 10-K for the fiscal year ended September 30, 1999, under
the captions "Business," "Properties," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The report is incorporated by
reference in this proxy statement/prospectus. To obtain copies of this report
and other information about ACS, see "Where You Can Find More Information."
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OWNERSHIP OF TITAN COMMON STOCK
The following table presents information regarding the beneficial ownership
of Titan common stock as of January 14, 2000, and as adjusted to reflect the
issuance by Titan of 5,018,340 shares of common stock in connection with the
merger, using an assumed exchange ratio of .5637, by stockholders that include:
- each person known by Titan to be the beneficial owner of more than 5% of
the outstanding Titan common stock;
- each person or entity known by Titan to be a beneficial owner of ACS
common stock that would become a beneficial owner of more than 5% of the
outstanding Titan common stock as a result of the merger;
- each director of Titan;
- Titan's chief executive officer and the four most highly compensated
executive officers of Titan in 1998 other than the chief executive
officer;
- the directors and executive officers of ACS who are expected to serve as
directors or executive officers of Titan following completion of the
merger; and
- all such directors and executive officers of Titan and ACS as a group.
The information in the following table concerning ownership of Titan common
stock after the merger assumes an exchange ratio of .5637, which is based on the
average of closing sale prices of the Titan common stock on the NYSE for the ten
consecutive trading days ending two trading days before January 20, 2000.
<TABLE>
<CAPTION>
BEFORE THE MERGER AFTER THE MERGER
--------------------------- ---------------------------
SHARES SHARES
NAME AND ADDRESS BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE
OF BENEFICIAL OWNER(1) OWNED(2) OF CLASS(3) OWNED(2) OF CLASS(3)
- ---------------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Charles R. Allen........................... 47,420(4) * 47,420(4) *
Mellon C. Baird............................ 250,036(5) * 250,036(5) *
Herbert L. Bradley......................... 10,000(6) * 10,000(6) *
Joseph F. Caligiuri........................ 38,500(7) * 38,500(7) *
Nicholas J. Costanza....................... 179(8) * 179(8) *
Eric M. DeMarco............................ 94,316(9) * 94,316(9) *
Daniel J. Fink............................. 37,584(10) * 37,584(10) *
L.L. Fowler................................ 67,994(11) * 67,994(11) *
Ronald B. Gorda............................ 211,633(12) * 211,633(12) *
Robert I. Hanisee.......................... 1,930(13) * 1,930(13) *
Robert E. La Blanc......................... 30,500(14) * 30,500(14) *
Lawrence A. Oberkfell...................... -- -- -- --
Deanna Hom Petersen........................ 23,324(15) * 23,324(15) *
David P. Porreca........................... 7,500(16) * 7,500(16) *
Thomas G. Pownall.......................... 62,048(17) * 62,049(17) *
Gene W. Ray................................ 772,177(18) 1.68% 772,177(18) 1.50%
George Robinson............................ -- -- 272,476(19) *
James E. Roth.............................. 11,250(20) * 11,250(20) *
Dianne D. Scott............................ 20,630(21) * 20,630(21) *
All directors and executive officers as a
group (18 persons before the merger and
19 persons after the merger)............. 1,687,021(22) 3.62% 1,959,497(22) 3.79%
</TABLE>
- ---------------
* Less than 1%.
(1) Except as otherwise provided, the address of each owner is c/o The Titan
Corporation, 3033 Science Park Road, San Diego, California 92121.
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<PAGE> 88
(2) The information regarding beneficial ownership of Titan common stock has
been presented according to rules of the SEC and is not necessarily
indicative of beneficial ownership for any other purpose. Under the SEC
rules, beneficial ownership of Titan common stock includes any shares as to
which a person has sole or shared voting power or investment power and also
any shares which a person has the right to acquire within 60 days through
the exercise of any stock option or other right. Under California and some
other state laws, personal property owned by a married person may be
community property that either spouse may manage and control. Titan has no
information as to whether any shares shown in this table are subject to
such community property laws.
(3) Percentage of beneficial ownership as to any person as of a particular date
is calculated by dividing the number of shares beneficially owned by that
person by the sum of the number of shares outstanding as of such date and
the number of shares as to which that person has the right to acquire
voting or investment power with respect to their shares. Information with
respect to beneficial owners of more than 5% of the common stock is based
upon the most recent Schedule 13D or Schedule 13G on file with the SEC.
(4) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 27,500 shares.
(5) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 249,502 shares and 534 shares held by the trustees of
Titan's 401(k) Retirement Plan and Employee Stock Ownership Plan.
(6) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 10,000 shares.
(7) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 22,500 shares.
(8) Includes 179 shares held by the trustees of Titan's 401(k) Retirement Plan.
(9) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 77,500 shares and 1,496 shares held by the trustees of
Titan's 401(k) Retirement Plan and Employee Stock Ownership Plan.
(10) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 27,500 shares.
(11) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 48,500 shares and 18,381 shares held by the trustees of
Titan's 401(k) Retirement Plan and Employee Stock Ownership Plan.
(12) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 180,000 shares and 22,419 shares held by the trustees of
Titan's 401(k) Retirement Plan and Employee Stock Ownership Plan.
(13) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 1,250 shares.
(14) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 22,500 shares.
(15) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 18,375 shares and 4,449 shares held by the trustees of
Titan's 401(k) Retirement Plan and Employee Stock Ownership Plan.
(16) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 7,500 shares.
(17) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 21,250 shares.
(18) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 467,500 shares and 75,935 shares held by the trustees of
Titan's 401(k) Retirement Plan and Employee Stock Ownership Plan.
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(19) Gives effect to the exchange in the merger of Titan common stock for
333,371 shares of ACS common stock owned by the Robinson 1997 Trust No. 1
and 333,371 shares of ACS common stock owned by the Robinson 1997 Trust No.
2, for each of which George A. Robinson is the sole trustee, 180,758 shares
of ACS common stock owned by George A. Robinson and Barbara Robinson as
joint tenants and outstanding options to purchase 10,000 shares of ACS
common stock that are exercisable within 60 days.
(20) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 1,250 shares.
(21) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 18,000 shares and 2,630 shares held by the trustees of
Titan's 401(k) Retirement Plan and Employee Stock Ownership Plan.
(22) Includes outstanding options exercisable within 60 days after January 14,
2000 to purchase 1,094,652 shares and 100,384 shares held by the trustees
of Titan's 401(k) Retirement Plan and Employee Stock Ownership Plan.
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DESCRIPTION OF TITAN CAPITAL STOCK
Titan's authorized capital stock consists of 100,000,000 shares of common
stock, par value $.01 per share, of which 45,428,643 shares were outstanding as
of January 20, 2000, and 2,500,000 shares of preferred stock, par value $1.00
per share. Of the 2,500,000 authorized shares of Titan preferred stock, 250,000
shares have been designated as series A junior participating preferred stock,
none of which have been issued as of the date hereof, and 1,068,102 shares have
been designated as $1.00 cumulative convertible preferred stock, $1.00 par value
per share, 694,772 of which were issued and outstanding as of January 20, 2000.
The following summary description of Titan's capital stock and its
shareholder rights plan is not complete and is subject to the provisions of the
Titan certificate of incorporation and bylaws, the rights agreement described
below and the provisions of applicable law. Copies of these documents have been
filed as part of, or incorporated by reference as exhibits to, the registration
statement of which this proxy statement/prospectus is a part and may be obtained
as described under "Where You Can Find More Information."
COMMON STOCK
Subject to any prior rights of any holders of Titan preferred stock then
outstanding, holders of Titan common stock are entitled to such dividends as may
be declared from time to time by the Titan board of directors out of funds
legally available for dividend payments. Each holder of Titan common stock is
entitled to one vote for each share owned by the holder on all matters submitted
to a vote of common stockholders. Shares of Titan common stock are not entitled
to any cumulative voting rights. If there is a liquidation, dissolution or
winding up of Titan, holders of Titan common stock are entitled to share equally
and ratably in any assets remaining after the payment of all debt and other
liabilities, subject to the prior rights, if any, of holders of Titan preferred
stock. Holders of Titan common stock have no preemptive or other subscription or
conversion rights. The Titan common stock is not subject to redemption.
PREFERRED SHARE PURCHASE RIGHTS
Each outstanding share of Titan common stock has or will have attached to
it one preferred share purchase right, which we refer to as a right. Each right
entitles the registered holder of common stock to purchase from Titan, upon the
occurrence of specified events, one one-hundredth of a share of series A junior
participating preferred stock of Titan, which we refer to as the participating
preferred shares, at a price of $42 per one one-hundredth of a participating
preferred share, subject to adjustment. The terms of the rights are set forth in
a rights agreement dated as of August 21, 1995 between Titan and American Stock
Transfer and Trust Company, as rights agent.
Until the distribution date described below, Titan will not issue separate
certificates evidencing the rights. Until that date, the rights will be
evidenced, with respect to any common stock certificate, by that common stock
certificate. The rights will detach from the common stock and a distribution
date will occur upon the earlier of the following dates:
- subject to the exceptions described below, the tenth day following a
public announcement that an "acquiring person," which, subject to the
exceptions listed in the following sentence, includes a person or "group"
of affiliated or associated persons, has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding common
stock, or
- the tenth day following the commencement, or the first public
announcement by any person or group of an intention to commence, a tender
offer or exchange offer that would result in beneficial ownership by a
person or group of 15% or more of the outstanding common stock.
The Titan board of directors, with the concurrence of a majority of the
continuing directors, may postpone the distribution date by determining a later
distribution date before the time any person or group becomes an acquiring
person. Any board member who is not an acquiring person or an affiliate or
associate
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<PAGE> 91
of an acquiring person, or an employee, director, representative, nominee or
designee of an acquiring person, or its affiliate or associate, but who:
- was a member of the Titan board of directors before any person becomes an
acquiring person; or
- became a member of the Titan board of directors after any person becomes
an acquiring person if the member was nominated for election or elected
to the Titan board of directors upon the recommendation or approval of a
majority of the continuing directors,
is considered to be a continuing director of Titan.
The term "acquiring person" does not include Titan, any subsidiary of
Titan, any employee benefit plan of Titan or of any subsidiary of Titan, or any
entity holding Titan common stock for or under an employee benefit plan of Titan
or any of its subsidiaries. In addition, a person who would otherwise be an
acquiring person will not be considered an acquiring person if the Titan board
of directors determines in good faith that such person inadvertently became the
beneficial owner of 15% or more of the Titan common stock and such person
divests itself, as promptly as practicable, of beneficial ownership of a
sufficient number of shares of Titan common stock so that it would no longer
otherwise qualify as an acquiring person.
The rights agreement provides that, until the distribution date, or earlier
redemption or expiration of the rights, the rights will be transferred only with
the Titan common stock. The rights will be evidenced, with respect to any common
stock certificate outstanding as of September 7, 1995, by that common stock
certificate with a summary of the rights attached to it. Until the distribution
date, or earlier redemption or expiration of the rights, new common stock
certificates issued after September 7, 1995 upon transfer or new issuances of
common stock will contain a notation incorporating the rights agreement by
reference. Until the distribution date, the surrender for transfer of any
certificates for common stock, even without a summary of the rights attached to
it, also will constitute the transfer of the rights associated with the common
stock represented by that certificate. As soon as practicable after the
distribution date, separate certificates evidencing the rights will be mailed to
holders of record of the Titan common stock as of the close of business on the
distribution date, and the separate right certificates alone will evidence the
rights. Only Titan common stock issued before the distribution date will be
issued with rights.
The rights are not exercisable until the distribution date. The rights will
expire on August 17, 2005, unless the expiration date is extended or unless the
rights are earlier redeemed or exchanged by Titan, in each case as described
below.
The purchase price payable for the participating preferred shares, and the
number of participating preferred shares or other securities or property
issuable, upon exercise of the rights, as well as the number of rights
outstanding, are subject to adjustment from time to time to prevent dilution in
the following circumstances:
- in the event of a stock dividend on, or a subdivision, combination or
reclassification of the participating preferred shares,
- upon the grant to holders of the participating preferred shares of rights
or warrants to subscribe for or purchase participating preferred shares
at a price, or securities convertible into participating preferred shares
with a conversion price, less than the current market price of the
participating preferred shares, or
- upon the distribution to holders of the participating preferred shares of
evidences of indebtedness, securities or assets, excluding regular
periodic cash dividends at a rate not in excess of 125% of the last cash
dividend paid or, in the case that regular cash dividends have not been
paid, at a rate not in excess of 50% of the average net income per share
of the four quarters ended immediately before the payment of the
dividend, or dividends payable in participating preferred shares or of
subscription rights or warrants, other than those referred to above.
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The number of outstanding rights and the number of one one-hundredths of a
participating preferred share issuable upon exercise of each right are also
subject to adjustment in the event of a dividend or other distribution on the
common stock payable in common stock or subdivisions, consolidations or
combinations of Titan common stock occurring, in any of those cases, before the
distribution date.
Participating preferred shares purchasable upon exercise of the rights will
not be redeemable. Each participating preferred share will be entitled to a
minimum preferential quarterly dividend payment of $1.00 per share, but will be
entitled to an aggregate dividend of 100 times the dividend declared per share
of Titan common stock. If there is a liquidation, the holders of the
participating preferred shares will be entitled to a minimum preferential
liquidation payment of $100 per share, but will be entitled to an aggregate
payment of 100 times the payment made per share of Titan common stock. Each
participating preferred share will have 100 votes, voting together with the
Titan common stock. If there is a merger, consolidation or other transaction in
which Titan common stock is exchanged, each participating preferred share will
be entitled to receive 100 times the amount received per share of Titan common
stock. These rights are protected by customary antidilution provisions.
Because of the nature of the dividend, liquidation and voting rights of the
participating preferred shares, the value of the one one-hundredth interest in a
participating preferred share purchasable upon exercise of each right should
approximate the value of one share of Titan common stock.
If any person or group becomes an acquiring person, except pursuant to
specified cash offers for all outstanding shares of Titan common stock approved
by the Titan board of directors, or if Titan is the surviving corporation in a
merger with an acquiring person or any affiliate or associate of an acquiring
person and Titan common stock is not changed or exchanged, proper provision will
be made so that each holder of a right, other than rights beneficially owned by
the acquiring person, which will become null and void, will have the right to
receive upon exercise of the right at the then-current market price, instead of
participating preferred shares, that number of shares of Titan common stock
having a market value of two times the exercise price of the right. If Titan
does not have sufficient common stock issued but not outstanding, or authorized
but unissued, to permit the exercise in full of the rights, Titan will be
required to take all action necessary to authorize additional common stock for
issuance upon exercise of the rights. If, after a good-faith effort, Titan is
unable to take all necessary action, Titan will substitute, for each share of
common stock that would otherwise be issuable upon exercise of a right, a number
of participating preferred shares, or fractional participating preferred shares,
with the same market value as that share of common stock.
If, after a person or group has become an acquiring person, Titan is
acquired in a merger or other business combination transaction or 50% or more of
its consolidated assets or earning power are sold, proper provision will be made
so that each holder of a right, other than rights beneficially owned by the
acquiring person, which will become null and void, will have the right to
receive, upon the exercise of the right at its then-current exercise price and
instead of participating preferred shares, that number of shares of common stock
of the acquiring company, or its parent, which at the time of the transaction
will have a market value of two times the exercise price of the right.
The exercise price of a right at any date will be equal to the purchase
price at that date multiplied by the number of one one-hundredths of a
participating preferred share for which a right is exercisable at that date.
At any time after any person or group becomes an acquiring person and
before the acquisition by that person or group of 50% or more of the outstanding
Titan common stock, the Titan board of directors may exchange the rights, in
whole or in part, for a number of shares of Titan common stock, per right,
having an aggregate value equal to the excess of the value of the shares of
Titan common stock issuable upon exercise of a right after a person or group
becomes an acquiring person over the purchase price, subject to adjustment. The
Titan board of directors will not exchange the rights owned by the acquiring
person or group, which will have become null and void.
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With specified exceptions, no adjustments in the purchase price for the
preferred shares will be required until cumulative adjustments require an
adjustment of at least 1% of that purchase price. No fractional participating
preferred shares will be issued, other than fractions which are integral
multiples of one one-hundredth of a participating preferred share, which may, at
the election of Titan, be evidenced by depositary receipts. Instead of issuing
fractional participating preferred shares, Titan will make an adjustment in cash
based on the market price of the participating preferred shares on the last
trading day before the date of exercise.
Upon approval by its board of directors, Titan may redeem the rights, in
whole, but not in part, at a price of $.01 per right at any time until ten days
following the public announcement that a person or group has become an acquiring
person. The Titan board of directors, with the concurrence of a majority of the
continuing directors, may extend the period during which the rights are
redeemable beyond the ten days following the public announcement that a person
or group has become an acquiring person. Under circumstances described in the
rights agreement, the decision to redeem will require the concurrence of a
majority of the continuing directors. Immediately upon the determination of the
Titan board of directors to redeem the rights, Titan will make an announcement
of the redemption. Upon the redemption, the right to exercise the rights will
terminate and the only right of right holders will be to receive the redemption
price.
Until a right is exercised, the holder of the right, in the capacity of a
holder, will have no rights as a stockholder of Titan, including, without
limitation, the right to vote or to receive dividends. Although the distribution
of the rights will not be taxable to stockholders or to Titan, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
rights become exercisable for Titan common stock or other consideration, or for
common stock of the acquiring company or its parent as set forth above.
Any of the provisions of the rights agreement may be amended or
supplemented by the Titan board of directors before the distribution date. From
and after the distribution date, Titan and the rights agent may amend or
supplement the rights agreement from time to time without the approval of any
holders of rights
- to cure any ambiguity, to correct or supplement any defective or
inconsistent provisions,
- to shorten or lengthen any time period under the rights agreement
relating to when the rights may be redeemed, so long as, under specified
circumstances, a majority of the continuing directors approve the
shortening or lengthening, or
- to make any other provisions with respect to the rights which Titan and
the rights agent may deem necessary or desirable.
Notwithstanding this right to amend or supplement, from and after the
distribution date, the rights agreement may not be amended in any manner which
would adversely affect the interest of the holders of rights.
PREFERRED STOCK
Under the Titan certificate of incorporation, the board of directors has
the authority, without further action by Titan stockholders, to issue up to
2,500,000 shares of preferred stock in one or more series and to fix the voting
powers, designations, preferences and the relative participating, optional or
other special rights and qualifications, limitations and restrictions of each
series, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series. Of the preferred stock currently outstanding, the board of directors has
fixed the terms of the participating preferred shares issuable upon exercise of
the rights and the $1.00 cumulative convertible preferred stock. Because the
board of directors has the power to establish the preferences and rights of the
shares of any additional series of preferred stock, it may afford holders of any
preferred stock preferences, powers and rights, including voting rights, senior
to the rights of holders of the common stock, which could adversely affect the
holders of the common stock.
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Each outstanding share of the $1.00 cumulative convertible preferred stock
is convertible at any time into two-thirds of a share of Titan common stock.
Each holder of the $1.00 cumulative convertible preferred stock is entitled to
one-third vote per share of such stock. Holders of the common stock and the
$1.00 cumulative convertible preferred stock generally vote as a single class.
Upon liquidation, the $1.00 cumulative convertible preferred stockholders are
entitled to receive $20 per share, plus cumulative dividends in arrears, before
any distribution is made to the common stockholders.
ANTI-TAKEOVER EFFECT OF TITAN'S BYLAW PROVISIONS
The Titan bylaws contain provisions that could make it more difficult to
consummate an acquisition of Titan by means of a tender offer, a proxy contest
or otherwise.
Stockholder Action by Written Consent. The Titan bylaws provide that
stockholder action may be taken by written consent instead of a meeting, but
only upon compliance with advance notice and other procedural requirements
specified in the bylaws. Any Titan stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent must, by
written notice to Titan's secretary, request the Titan board of directors to fix
a record date for the purpose of determining the stockholders entitled to
consent to the action in writing without a meeting. Within ten days of receiving
the notice, the Titan board of directors must adopt a resolution fixing the
record date, which must not precede, or be more than ten days after, the date of
the resolution. If the Titan board of directors does not fix a record date in
this manner, the record date:
- when no prior action by the Titan board of directors is required by
applicable law, will be the first date on which a signed written consent
describing the action taken or proposed to be taken is delivered to
Titan; or
- when prior action by the Titan board of directors is required by
applicable law, will be at the close of business on the date on which the
Titan board of directors adopts the resolution taking the prior action.
In addition, the bylaws provide that no stockholder action by written consent is
effective until nationally recognized inspectors of election certify to Titan
that the consents properly delivered to Titan represent at least the minimum
number of votes that would be necessary to take the corporate action. All
stockholder consents must be properly delivered to Titan within 60 days of the
date that the earliest dated written consent was received by Titan.
Compliance with these requirements or the failure of Titan stockholders to
satisfy any of the requirements could delay, prevent or invalidate stockholder
action.
Stockholder Advance Notice Procedure. The Titan bylaws establish an
advance notice procedure for stockholders to make nominations of candidates for
election as directors before an annual or special meeting of Titan stockholders
or to bring other business before an annual meeting of Titan stockholders. Titan
stockholders are not authorized to bring other business before a special meeting
of Titan stockholders and are only authorized to make nominations of candidates
for election as directors before a special meeting when the election of
directors at the special meeting has been authorized by or at the direction of
the Titan board of directors.
The stockholder notice procedures provide that only persons who are
nominated by or at the direction of the Titan board of directors or by a
stockholder who has given timely written notice to the secretary of Titan before
the meeting at which directors are to be elected will be eligible for election
as directors. The notices required for a stockholder to nominate a person for
election as a director at any annual meeting or at special meetings which the
Titan board of directors has determined that directors will be elected include
specified information about the stockholder and each proposed director nominee,
a description of all arrangements or understandings between the stockholder and
each proposed nominee and any other persons, other information regarding each
proposed nominee that would be required to be included in a proxy statement
filed under SEC rules and regulations, and the written consent of each proposed
nominee to serve as a director if elected. The stockholder notice procedure also
provides that the only business that
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may be conducted at an annual meeting is business which has been brought before
the meeting by, or at the direction of, the board of directors or by a
stockholder who has given timely written notice to the secretary of Titan. This
notice is required to include a brief description of the business desired to be
brought before the meeting, any material interest of the stockholder in that
business, and specified information about the stockholder and the stockholder's
ownership of Titan capital stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Titan is subject to section 203 of the Delaware General Corporation Law,
which, with specified exceptions, prohibits a Delaware corporation from engaging
in any "business combination" with any "interested stockholder" for a period of
three years following the time that the stockholder became an interested
stockholder unless:
- before that time, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- upon completion of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will he tendered in a tender or exchange
offer; or
- at or after that time, the business combination is approved by the board
of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Section 203 defines "business combination" to include the following:
- any merger or consolidation of the corporation with the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
- subject to specified exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- any receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, section 203 defines an "interested stockholder" as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by that entity or person.
DIRECTOR LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law provides that a corporation may
eliminate or limit the personal liability of each director to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
except for liability for any breach of the director's duty of loyalty to the
corporation or its stockholders, for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, in respect of
unlawful dividend payments or stock redemptions or repurchases, and for any
transaction from which the director derives an improper personal benefit. The
Titan certificate of incorporation provides for the elimination and limitation
of the personal liability of directors for monetary damages to the fullest
extent permitted by the Delaware General Corporation Law.
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In addition, the certificate of incorporation provides that if the Delaware
General Corporation Law is amended to authorize the further elimination or
limitation of the liability of a director, then the liability of the directors
will be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. The effect of this provision is to
eliminate the rights of Titan and its stockholders, through stockholder
derivative suits on behalf of Titan, to recover monetary damages against a
director for breach of the fiduciary duty of care as a director, including
breaches resulting from negligent or grossly negligent behavior, except in the
situations described above. The provision does not limit or eliminate the rights
of Titan or any stockholder to seek non-monetary relief such as an injunction or
rescission upon breach of a director's duty of care. This provision is
consistent with section 102(b)(7) of the Delaware General Corporation Law, which
is designed, among other things, to encourage qualified individuals to serve as
directors of Delaware corporations.
The Titan bylaws provide that, to the full extent permitted by law, Titan
will indemnify, and advance expenses to, each of its currently acting and former
directors and officers.
LISTING OF COMMON STOCK
The Titan common stock is listed on the New York Stock Exchange under the
symbol "TTN."
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company serves as transfer agent and
registrar for the Titan common stock.
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DESCRIPTION OF ACS CAPITAL STOCK
ACS's authorized capital stock consists of 40,000,000 shares of common
stock, par value $.01 per share, of which 8,902,502 shares were outstanding as
of January 20, 2000, and 1,000,000 shares of preferred stock, par value $.01 per
share, none of which were outstanding as of that date.
The following summary description of ACS's capital stock is not complete
and is subject to the provisions of the ACS certificate of incorporation and
bylaws and the provisions of applicable law. Copies of these documents may be
obtained as described under "Where You Can Find More Information."
COMMON STOCK
Owners of ACS common stock are entitled to one vote per share on all
matters to be voted on by stockholders, including the election of directors. ACS
common stockholders do not have the right to cumulate votes in the election of
directors. Subject to any superior rights of holders of ACS preferred stock, the
holders of ACS common stock are entitled to receive such dividends as may be
lawfully declared by the ACS board of directors from time to time. Upon a
liquidation, dissolution or winding up of ACS, the holders of ACS common stock
are entitled to share, on a pro rata basis, in all assets remaining available
for distribution to them after liabilities and obligations have been paid in
full and after each class or series of stock, if any, having preference over the
ACS common stock in payment upon such an event has been paid all amounts to
which such class or series is entitled, or an amount sufficient for such
payments in full has been set aside. Holders of ACS common stock do not have
preemptive rights and shares of ACS common stock are neither redeemable nor
convertible.
PREFERRED STOCK
ACS's certificate of incorporation authorizes 1,000,000 shares of preferred
stock. This preferred stock may be issued from time to time in one or more
classes or series with such designations, powers, preferences, rights,
qualifications, limitations and restrictions as may be fixed by the ACS board of
directors. Such issuance does not require stockholder approval.
ANTI-TAKEOVER EFFECT OF ACS'S BYLAW PROVISIONS
ACS's bylaws contain procedural requirements for nominations of directors
by stockholders and other stockholder proposals. These requirements could make
it more difficult to consummate an acquisition of ACS through a tender offer,
proxy contest or otherwise.
Written notice of proposals by ACS stockholders to nominate directors or to
propose business for action at any meeting of stockholders must:
- be made by a stockholder of record at the time of giving notice who is
entitled to vote at such meeting; and
- be delivered to the secretary of ACS at ACS's principal executive offices
within the periods described below.
If a proposal is to be brought at an annual meeting, the notice must be
received not less than 120 days before the first anniversary of the preceding
year's annual meeting if the meeting is to be held within 30 days of the
anniversary of the previous year's annual meeting. If a proposal is to be
brought before a special meeting or an annual meeting the date of which is more
than 30 days from the anniversary date of the prior year's meeting, the notice
must be received no later than the close of business on the 10th day following
the earlier of the day on which notice of the meeting date was mailed or public
disclosure of the meeting was made. The notice must contain:
- a brief description of each matter desired to be brought before the
meeting and the reasons for bringing each matter to the meeting;
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- with respect to each person whom the stockholder proposes to nominate for
election or re-election as a director, all information relating to the
proposed nominee required under Exchange Act;
- the name and address, as they appear on ACS's records, of the stockholder
proposing such business or nominating such person or persons, and the
name and address of the beneficial owner, if any, on whose behalf the
proposal or nomination is made;
- the class and number of shares of capital stock of ACS that are owned
beneficially and of record by such stockholder of record and by the
beneficial owner, if any, on whose behalf the proposal or nomination is
made; and
- any material interest or relationship that such stockholder of record
and/or the beneficial owner, if any, on whose behalf the proposal or
nomination is made may respectively have in such business or with such
nominee.
A stockholder bringing any proposal to an annual or special meeting also must
comply with all applicable requirements of the Exchange Act and the rules and
regulations under that Act.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
ACS is subject to section 203 of the Delaware General Corporation Law,
which, with specified exceptions, prohibits a Delaware corporation from engaging
in any "business combination" with any "interested stockholder" for a period of
three years following the time that the stockholder became an interested
stockholder unless:
- before that time, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- upon completion of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- at or after that time, the business combination is approved by the board
of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Section 203 defines "business combination" to include the following:
- any merger or consolidation of the corporation with the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
- subject to specified exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- any receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, section 203 defines an "interested stockholder" as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by that entity or person.
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DIRECTOR LIABILITY AND INDEMNIFICATION OF ACS DIRECTORS AND OFFICERS
The Delaware General Corporation Law provides that a corporation may
eliminate or limit the personal liability of each director to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
except for liability for any breach of the director's duty of loyalty to the
corporation or its stockholders, for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, in respect of
unlawful dividend payments or stock redemptions or repurchases, and for any
transaction from which the director derives an improper personal benefit. ACS's
certificate of incorporation provides for the elimination and limitation of the
personal liability of directors for monetary damages to the fullest extent
permitted by the Delaware General Corporation Law. In addition, ACS's
certificate of incorporation provides that if the Delaware General Corporation
Law is amended to authorize the further elimination or limitation of the
liability of a director, then the liability of the directors will be eliminated
or limited to the fullest extent permitted by the Delaware General Corporation
Law, as so amended. The effect of this provision is to eliminate the rights of
ACS and its stockholders, through stockholder derivative suits on behalf of ACS,
to recover monetary damages against a director for breach of the fiduciary duty
of care as a director, including breaches resulting from negligent or grossly
negligent behavior, except in the situations described above. The provision does
not limit or eliminate the rights of ACS or any stockholder to seek non-monetary
relief such as an injunction or rescission upon breach of a director's duty of
care.
The ACS bylaws provide for indemnification by ACS, to the full extent
permitted by law, of its officers, directors and any other persons with respect
to service to ACS to the extent the ACS board of directors specifies that such
persons are entitled to indemnification.
LISTING OF ACS COMMON STOCK
ACS common stock is quoted on The Nasdaq National Market under the symbol
"ACSC."
ACS TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company serves as the transfer agent and
registrar for ACS common stock.
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COMPARATIVE RIGHTS OF TITAN STOCKHOLDERS
AND ACS STOCKHOLDERS
ACS is a Delaware corporation and a public company, and your rights as an
ACS stockholder are governed by the Delaware General Corporation Law and ACS's
certificate of incorporation and bylaws. Following the merger, ACS stockholders
will be common stockholders of Titan, which is also a Delaware corporation and a
public company. Your rights as a Titan stockholder will continue to be governed
by the Delaware General Corporation Law, but also will be governed by Titan's
certificate of incorporation, bylaws and shareholder rights agreement, which is
referred to as the rights agreement.
Significant differences, which Titan and ACS believe are all the material
differences, between the rights of Titan stockholders and ACS stockholders are
summarized below. This summary is not an exhaustive list or detailed description
of the provisions discussed and is qualified in its entirety by Titan's
certificate of incorporation, bylaws and rights agreement, and ACS's certificate
of incorporation and bylaws, each of which you should review carefully. For more
information on these documents, see "Description of Titan Capital Stock" and
"Description of ACS Capital Stock." Copies of these documents may be obtained as
described under "Where You Can Find More Information."
AUTHORIZED SHARES OF CAPITAL STOCK; DIVIDEND RIGHTS
Titan. Titan's authorized capital stock consists of 100,000,000 shares of
common stock, par value $.01 per share, and 2,500,000 shares of preferred stock,
par value $1.00 per share. As of January 20, 2000, 45,428,643 shares of Titan
common stock were issued and outstanding. Under Titan's certificate of
incorporation, Titan's board of directors currently has the authority, without
further action by Titan stockholders, to issue up to 2,500,000 authorized shares
of Titan preferred stock in one or more series and to fix the voting powers,
designations, preferences and the relative participating, optional or other
special rights and qualifications, limitations and restrictions of each series,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series. Of the authorized shares of Titan preferred stock, Titan's board of
directors has designated 250,000 shares as series A junior participating
preferred stock, none of which have been issued as of the date hereof, and
1,068,102 shares as $1.00 cumulative convertible preferred stock, of which
694,772 shares were issued and outstanding as of January 20, 2000. For
additional information on Titan's capital stock, see "Description of Titan
Capital Stock."
During the time that any series of Titan preferred stock is outstanding, if
the terms of the series so provide, no dividends may be declared or paid by
Titan's board of directors on Titan common stock, unless dividends on all
outstanding shares of the relevant class or series of Titan preferred stock for
the current and all past dividend periods have been declared and paid or
provision made for the payment of those dividends.
ACS. ACS's authorized capital stock consists of 40,000,000 shares of
common stock, par value $.01 per share, and 1,000,000 shares of preferred stock,
par value $.01 per share. As of January 20, 2000, 8,902,502 shares of ACS common
stock and no shares of ACS preferred stock were issued and outstanding. Shares
of ACS preferred stock may be issued from time to time by the ACS board of
directors in one or more classes or series. The ACS board has the authority to
determine the designation, voting rights, dividend rate, redemption,
liquidation, dissolution and distribution rights, payment and sinking fund
provisions, conversion rights, number of shares constituting any class or
series, and any other special rights deemed advisable by the ACS board of
directors. Such issuance does not require stockholder approval.
While any class or series of ACS preferred stock is outstanding, if the
terms of that class or series so provide, no dividends may be declared or paid
by the ACS board on ACS common stock or shares of any class or series
subordinate in right of payment of dividends to the outstanding class or series
of ACS preferred stock, unless dividends on all outstanding shares of the
relevant class or series of ACS preferred stock for the current and all past
dividend periods have been declared and paid or provision made for the payment
of all such dividends.
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VOTING RIGHTS
Titan. Subject to the voting rights of holders of any then outstanding
Titan preferred stock, each share of Titan common stock is entitled to one vote
on each matter submitted to a vote of the stockholders of Titan. Shares of Titan
common stock are not entitled to any cumulative voting rights.
Each holder of Titan's $1.00 cumulative convertible preferred stock is
entitled to one-third vote per share of such stock. Holders of the common stock
and the $1.00 cumulative convertible preferred stock generally vote as a single
class.
ACS. Each holder of ACS common stock is entitled to one vote for each
share outstanding in the holder's name on the records of ACS on each matter
submitted to a vote of the stockholders. Shares of ACS common stock are not
entitled to any cumulative voting rights.
SUPERMAJORITY VOTING REQUIREMENTS; BUSINESS COMBINATIONS
Titan and ACS are subject to section 203 of the Delaware General
Corporation Law, which, with specified exceptions, prohibits a Delaware
corporation from engaging in any "business combination" with any "interested
stockholder" for a period of three years following the time that the stockholder
became an interested stockholder unless:
- before that time, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- upon completion of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will he tendered in a tender or exchange
offer; or
- at or after that time, the business combination is approved by the board
of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Section 203 defines "business combination" to include the following:
- any merger or consolidation of the corporation with the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
- subject to specified exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- any receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, section 203 defines an "interested stockholder" as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by that entity or person.
Titan. Titan's certificate of incorporation and bylaws do not have
supermajority or other special voting requirements for business combinations or
other transactions.
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ACS. In its certification of incorporation, ACS expressly elects to be
governed by section 203 of the Delaware General Corporation Law. The ACS bylaws
do not contain any supermajority or other special voting requirements for
business combinations or other transactions.
APPRAISAL RIGHTS
Titan. Titan's certificate of incorporation does not provide for appraisal
rights other than those rights designated by the Delaware General Corporation
Law. The Delaware General Corporation Law provides for appraisal rights only in
the case of specified mergers or consolidations and not, unless the certificate
of incorporation of a corporation so provides, in the case of other mergers, a
sale or transfer of all or substantially all of its assets or an amendment to
its certificate of incorporation. In addition, the Delaware General Corporation
Law does not provide appraisal rights in connection with a merger or
consolidation, unless the certificate of incorporation of a corporation so
provides, to the holders of shares of a constituent corporation listed on a
national securities exchange, or designated as a national market system security
by the National Association of Securities Dealers, Inc., or held of record by
more than 2,000 stockholders, unless the applicable agreement of merger or
consolidation requires the holders of those shares to receive, in exchange for
those shares, any property other than shares of stock of the resulting or
surviving corporation, shares of stock of any other corporation listed on a
national securities exchange or designated as described above, or held of record
by more than 2,000 holders, cash in lieu of fractional shares or any combination
of the foregoing. The Delaware General Corporation Law also denies appraisal
rights to the stockholders of the surviving corporation in a merger if such
merger did not require approval by the stockholders of the surviving
corporation.
ACS. ACS's certification of incorporation does not provide for appraisal
rights other than those rights designated by the Delaware General Corporation
Law, as summarized above.
SPECIAL MEETINGS OF STOCKHOLDERS
Titan. Titan's bylaws provide that special meetings may be called by Titan
pursuant to Titan's notice of meeting provisions. The stockholders of Titan do
not have the right to request or call a special meeting of stockholders, but a
stockholder may nominate persons for election as directors at a special meeting
called by Titan for the purpose of electing directors if the stockholder
complies with the advance notice provisions of the bylaws. For information on
these procedures, see "Description of Titan Capital Stock -- Stockholder Advance
Notice Procedures."
ACS. The ACS certificate of incorporation and bylaws provide that special
meetings of stockholders may be called by the ACS board of directors pursuant to
a resolution adopted by a majority of the board then serving, excluding
directors elected under the terms of any class or series of preferred stock, by
the chairman of the ACS board of directors, or by any holder or holders of at
least 40% of the outstanding shares of ACS capital stock entitled to vote on any
matter for which the special meeting is being called.
STOCKHOLDER ACTION WITHOUT A MEETING
Titan. Titan's bylaws provide that stockholder action may be taken by
written consent instead of a meeting, but only upon compliance with advance
notice and other procedural requirements specified in Titan's bylaws. Any Titan
stockholder of record seeking to have Titan's stockholders authorize or take
corporate action by written consent must, by written notice to Titan's
secretary, request Titan's board of directors to fix a record date for the
purpose of determining the stockholders entitled to consent to the action in
writing without a meeting. Within ten days of receiving the notice, Titan's
board of directors must adopt a resolution fixing the record date, which must
not precede, or be more than ten days after, the date of the resolution. If the
Titan board of directors does not fix a record date in this manner, the record
date:
- when no prior action by the Titan board of directors is required by
applicable law, will be the first date on which a signed written consent
describing the action taken or proposed to be taken is delivered to
Titan; or
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- when prior action by the Titan board of directors is required by
applicable law, will be at the close of business on the date on which the
Titan board of directors adopts the resolution taking the required
action.
In addition, Titan's bylaws provide that no stockholder action by written
consent is effective until nationally recognized inspectors of election certify
to Titan that the consents properly delivered to Titan represent at least the
minimum number of votes that would be necessary to take the corporate action.
All stockholder consents must be properly delivered to Titan within 60 days of
the date that the earliest dated written consent was received by Titan.
ACS. The ACS bylaws permit any action required or permitted at any meeting
of the stockholders to be taken without a meeting, without prior notice, and
without a vote, if one or more written consents describing the action to be
taken are signed by the holders of at least that number of shares of outstanding
stock necessary to approve the matter at a meeting at which the holders of all
shares entitled to vote were present and voted. In order for such a consent to
be effective, all necessary consents must be delivered to ACS within a 60-day
period.
STOCKHOLDER PROPOSAL PROCEDURES
Titan. Titan's bylaws require that notice of proposals by stockholders to
be brought before any annual meeting must be delivered to Titan not later than
the 60th day nor earlier than the 90th day before the first anniversary of the
preceding year's annual meeting. If, however, the annual meeting is more than 30
days before or more than 60 days after the anniversary date, the notice must be
delivered not earlier than the 90th day nor later than the 60th day before the
annual meeting, or the 10th day following the date on which Titan first publicly
announces the annual meeting date. The notice must include, as to each matter
the stockholder proposes to bring before the annual meeting:
- a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting that business at the annual
meeting;
- the name, age and business and residential addresses, as they appear on
Titan's records, of the stockholders proposing such business;
- the class and number of Titan's capital stock which are beneficially
owned by the stockholder; and
- any material interest of the stockholder in the proposed business.
ACS. The ACS bylaws require that written notice of proposals by
stockholders to nominate directors or to propose business for action at any
meeting of stockholders must be made:
- by a stockholder of record at the time of giving notice who is entitled
to vote at such meeting; and
- must be delivered to the secretary of ACS at the ACS principal executive
offices within the time periods described below.
If a proposal is to be brought at an annual meeting, the notice must be
received not less than 120 days before the first anniversary of the preceding
year's annual meeting if the meeting is to be held within 30 days of the
anniversary of the previous year's annual meeting. If a proposal is to be
brought before a special meeting or at an annual meeting the date of which is
more than 30 days from the anniversary date of the prior year's meeting, the
notice must be received no later than the close of business on the 10th day
following the earlier of the day on which notice of the meeting date was mailed
or public disclosure of the meeting was made. The notice must contain:
- a brief description of each matter desired to be brought before the
meeting and the reasons for bringing each matter to the meeting;
- with respect to each person whom the stockholder proposes to nominate for
election or re-election as a director, all information relating to the
proposed nominee required under Exchange Act;
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- the name and address, as they appear on the ACS records, of the
stockholder proposing such business or nominating such person or persons,
and the name and address of the beneficial owner, if any, on whose behalf
the proposal or nomination is made;
- the class and number of shares of capital stock of ACS that are owned
beneficially and of record by such stockholder of record and by the
beneficial owner, if any, on whose behalf the proposal or nomination is
made; and
- any material interest or relationship that such stockholder of record
and/or the beneficial owner, if any, on whose behalf the proposal or
nomination is made may respectively have in such business or with such
nominee.
A stockholder bringing any proposal to an annual or special meeting also must
comply with all applicable requirements of the Exchange Act and the rules and
regulations under that Act.
SHAREHOLDER RIGHTS PLAN
Titan. Titan is a party to the rights agreement with American Stock
Transfer and Trust Company, as rights agent. For information on the rights
agreement, see "Description of Titan Capital Stock -- Preferred Share Purchase
Rights."
ACS. ACS is not a party to any shareholder rights plan.
CLASSIFIED BOARD OF DIRECTORS
Titan. Titan's certificate of incorporation and bylaws do not provide for
a classified board of directors. The size of Titan's board of directors is
currently fixed by the Titan bylaws at eight directors.
ACS. The size of the ACS board of directors is currently set by the bylaws
at six. ACS's certificate of incorporation and bylaws do not provide for a
classified board of directors.
NOMINATIONS OF DIRECTORS
Titan. Subject to the rights of holders of Titans $1.00 cumulative
convertible preferred stock described below, Titan's bylaws provide that
nominations for the election of directors may be made by Titan's board of
directors or Titan's stockholders. Titan's bylaws provide that any stockholder
wishing to nominate persons for election as directors at an annual meeting must
deliver to the secretary of Titan, at Titan's principal office in San Diego, a
written notice of the stockholder's intention to make a director nomination. The
stockholder is required to furnish the notice not later than 60 days nor earlier
than 90 days before the first anniversary of the preceding year's annual
meeting. If, however, the annual meeting is more than 30 days before or more
than 60 days after the anniversary date, the notice must be delivered not
earlier than the 90th day nor later than the 60th day before the annual meeting,
or the 10th day following the date on which Titan first publicly announces the
annual meeting date. The notice must set forth the following information:
- the name and address of record of the stockholder who intends to make the
nomination;
- a representation that the stockholder is a holder of record of Titan
common stock and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice;
- the name, age, business and residential addresses and principal
occupation or employment of each nominee;
- a description of all arrangements or understandings between the
stockholder and each proposed nominee and any other person or persons,
naming such person or persons, pursuant to which the nomination or
nominations are to be made by the stockholder;
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- other information regarding each proposed nominee as would be required to
be included in a proxy statement filed pursuant to the rules and
regulations of the SEC; and
- the written consent of each proposed nominee to serve as a director of
Titan if so elected.
Holders of Titan's $1.00 cumulative preferred stock are entitled to elect
two directors to Titan's board of directors in the event of a default in the
payment of dividends on the $1.00 cumulative convertible preferred stock. The
size of Titan's board in this event would be increased by two directors.
ACS. The ACS bylaws provide that nominations for election of directors to
the ACS board of directors may be made at an annual or special meeting of
stockholders by or at the direction of the board of directors or by any ACS
stockholder of record at the time of giving of notice, who is entitled to vote
for the election of directors at the meeting. A stockholder's written notice
must be delivered to the secretary of ACS at ACS's principal executive offices.
If a nomination is to be made at an annual meeting, the notice must be received
not less than 120 days before the first anniversary of the preceding year's
annual meeting if the meeting is to be held within 30 days of the anniversary of
the previous year's annual meeting. If a nomination is to be made at a special
meeting or at an annual meeting the date of which is more than 30 days from the
anniversary date of the prior year's meeting, the notice must be received no
later than the close of business on the 10th day following the earlier of the
day on which notice of the meeting date was mailed or public disclosure of the
meeting was made. The notice must set forth the following information:
- with respect to each person whom the stockholder proposes to nominate for
election or re-election as a director, all information relating to the
proposed nominee required under the Exchange Act;
- the name and address, as they appear on the ACS records, of the
stockholder nominating such person or persons, and the name and address
of the beneficial owner, if any, on whose behalf the proposal or
nomination is made;
- the class and number of shares of capital stock of ACS that are owned
beneficially and of record by such stockholder of record and by the
beneficial owner, if any, on whose behalf the nomination is made; and
- any material interest or relationship that such stockholder of record
and/or the beneficial owner, if any, on whose behalf the nomination is
made may have with such nominee.
A stockholder making any nomination at an annual or special meeting also must
comply with all applicable requirements of the Exchange Act and the rules and
regulations under that Act.
REMOVAL OF DIRECTORS
Titan. Under Titan's bylaws, Titan's directors may be removed at any time,
either with or without cause, by the affirmative vote of stockholders having a
majority of the voting power of Titan. This bylaw provision is subject to rights
under Titan's certificate of incorporation of holders of Titan's $1.00
cumulative convertible preferred stock during any period in which Titan defaults
on the payment of dividends on the $1.00 cumulative convertible preferred stock.
ACS. The ACS certificate of incorporation and bylaws provide that any or
all directors, excluding those elected by any class or series of preferred
stock, may be removed, with cause, at any meeting of stockholders, upon the
affirmative vote of the holders of a majority of the outstanding shares of each
class of ACS capital stock then entitled to vote in person or by proxy at an
election of such directors. The fact that removal of a director or directors is
to be acted upon at the meeting must be included in the notice of the meeting at
which such removal or removals will be considered. The ACS bylaws also provide
that, except as provided otherwise, any or all directors elected by any class or
series of preferred stock may be removed, with or without cause, at any meeting
of stockholders, upon the affirmative vote of the holders of a majority of the
outstanding shares of each class or series of ACS capital stock entitled to vote
at an election of such directors. The notice of the meeting at which the removal
is to be considered must include notice of the intention to act upon the
removal.
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VACANCIES IN THE BOARD OF DIRECTORS
Titan. Titan's bylaws provide that, when any vacancy occurs in the Titan
board of directors, whether by reason of an increase in the number of members
composing the Titan board of directors, or otherwise, a majority of the
remaining members of the Titan board of directors, even though less than a
quorum may appoint a director or directors to fill such vacancy or vacancies.
The bylaws further provide, however, that if a vacancy is caused by removal,
then the successor must be elected by Titan stockholders at a special meeting
called for that purpose. This bylaw provision is subject to rights under Titan's
certificate of incorporation of holders of Titan's $1.00 cumulative convertible
preferred stock during any period in which Titan defaults on the payment of
dividends on the $1.00 cumulative convertible preferred stock.
ACS. The ACS bylaws provide that any vacancy in the ACS board of
directors, whether occurring by reason of an increase in the number of members
composing the board of directors, or otherwise, may be filled by the vote of a
majority of the ACS directors then in office, though less than a quorum, except
as described below, or by the affirmative vote, at any meeting of ACS
stockholders called for the purpose of filling such directorship, of the holders
of a majority of the outstanding shares of each class of ACS capital stock then
entitled to vote at an election of such directors. Any vacancies on the board of
directors due to the loss of a director elected by the holders of common stock
may be filled only by the vote of a majority of the directors then in office,
excluding those elected by any series of preferred stock.
INDEMNIFICATION
Titan. Titan's bylaws provide for indemnification by Titan, to the fullest
extent permitted by law, of its officers, directors, employees and agents.
ACS. The ACS certificate of incorporation and bylaws provide for
indemnification by ACS, to the fullest extent permitted by law, of its officers,
directors and any other persons with respect of service to ACS to the extent the
ACS board of directors specifies that such persons are entitled to
indemnification.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
Titan. Titan's certificate of incorporation provides for the elimination
and limitation of the personal liability of directors for monetary damages to
the fullest extent permitted by the Delaware General Corporation Law. In
addition, Titan's certificate of incorporation provides that if the Delaware
General Corporation Law is amended to authorize the further elimination or
limitation of the liability of a director, then the liability of the directors
will be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. The effect of this provision is to
eliminate the rights of Titan and its stockholders, through stockholder
derivative suits on behalf of Titan, to recover monetary damages against a
director for breach of the fiduciary duty of care as a director, including
breaches resulting from negligent or grossly negligent behavior, except in the
situations described above. The provision does not limit or eliminate the rights
of Titan or any stockholder to seek non-monetary relief such as an injunction or
rescission upon breach of a director's duty of care. This provision is
consistent with section 102(b)(7) of the Delaware General Corporation Law, which
is designed, among other things, to encourage qualified individuals to serve as
directors of Delaware corporations.
ACS. The ACS certificate of incorporation eliminates the personal
liability of the ACS directors to the same extent that the Titan certificate of
incorporation eliminates the personal liability of the Titan directors.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Titan. Titan's certificate of incorporation may be amended under the
Delaware General Corporation Law by a majority vote of the total number of
shares outstanding and entitled to vote on the amendment. If any amendment of
Titan's certificate of incorporation would adversely affect the rights of any
holders of shares of a class or series of capital stock, or such holders are
entitled to vote on the amendment, the vote
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of the holders of a majority of all outstanding shares of the class or series,
voting as a class, is also necessary to authorize the amendment.
ACS. Except for the articles in ACS's certificate of incorporation
pertaining to indemnification and amendment of the ACS certificate of
incorporation, the certificate of incorporation may be amended under the
Delaware General Corporation Law by approval of the ACS board of directors and
the subsequent affirmative vote of a majority of the total number of shares
outstanding and entitled to vote on the amendment. If any amendment of the ACS
certificate of incorporation would adversely affect the rights of any holders
any class or series of capital stock, or such holders are entitled to vote on
the amendment, the vote of the holders of a majority of all outstanding shares
of the class or series, voting as a class, is also necessary to authorize the
amendment.
AMENDMENT OF BYLAWS
Titan. Titan's bylaws may be amended or repealed either by the Titan board
of directors, acting by the affirmative vote of a majority of the Titan
directors, or by Titan's stockholders.
ACS. ACS's bylaws may be amended or repealed either by the ACS board of
directors, acting by the affirmative vote of a majority of the ACS directors,
excluding directors elected by the holders of preferred stock, or by ACS's
stockholders.
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OTHER MATTERS
VALIDITY OF TITAN COMMON STOCK
Hogan & Hartson L.L.P., counsel to Titan, has rendered a legal opinion to
the effect that the Titan common stock offered hereby, when issued in accordance
with the merger agreement, will be validly issued, fully paid and nonassessable.
EXPERTS
The historical consolidated balance sheets of The Titan Corporation as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998, the financial statements of Transnational Partners II,
LLC as of December 31, 1997 and 1998 and for the period from February 9, 1997
(commencement of operations) through December 31, 1997 and for the year ended
December 31, 1998, and the financial statements of Mainsaver, as of December 31,
1997 and 1998 and for each of the three years in the period ended December 31,
1998, incorporated by reference in this registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
The consolidated balance sheets of Advanced Communication Systems, Inc. as
of September 30, 1998 and 1999, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1999 incorporated by reference in this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
The financial statements of Assist Cornerstone Technologies, Inc. as of
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, incorporated by reference in this registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference herein, and are incorporated by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of SFG Technologies, Inc. as of
December 31, 1998 and April 30, 1998 and for the eight months ended December 31,
1998 and for the years ended April 30, 1996, 1997 and 1998, incorporated by
reference in this registration statement have been audited by KPMG LLP,
independent auditors, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of such firm as
experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
Titan has filed the registration statement of which this proxy
statement/prospectus forms a part. The registration statement, including the
attached exhibits and schedules, contains additional information about Titan.
The rules and regulations of the SEC allow Titan to omit from this proxy
statement/prospectus certain information included in the registration statement.
Both Titan and ACS file annual, quarterly and special reports, proxy
statements and other information with the SEC under the Exchange Act. The SEC
file number for Titan's documents filed under the Exchange Act is 1-6035. The
SEC file number for ACS's documents filed under the Exchange Act is 0-22737. You
may read and copy any of this information at the following locations of the SEC:
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Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
</TABLE>
You may obtain information on the operation of the SEC's Public Reference
Room by calling the SEC at 1-800-SEC-0330.
Titan and ACS file information electronically with the SEC. Our SEC filings
are also available from the SEC's Internet site at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding issuers that file electronically.
The SEC allows both Titan and ACS to "incorporate by reference" in this
proxy statement/ prospectus certain documents the companies file with it, which
means that Titan and ACS can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this proxy statement/prospectus, and information that Titan and
ACS file later with the SEC will automatically update and supersede this
information.
Titan incorporates by reference the documents listed below and any future
filings Titan will make with the SEC under section 13(a), 13(c), 14 or 15(d) of
the Exchange Act between the date of this proxy statement/prospectus and the
date of the special meeting of ACS stockholders:
1. Titan's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, which was filed on March 31, 1999, including information
incorporated by reference in the Form 10-K from the definitive proxy
statement for the 1999 annual meeting of stockholders of Titan, which was
filed on April 1, 1999;
2. Titan's amendment to its Annual Report on Form 10-K, which was
filed on Form 10-K/A on January 24, 2000;
3. Titan's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999, which was filed on May 17, 1999, its Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1999, which was filed on
August 16, 1999, and its Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999, which was filed on November 12, 1999;
4. Titan's Current Reports on Form 8-K which were filed on June 24,
1999, November 17, 1999, December 16, 1999, January 6, 2000 and January 24,
2000;
5. Titan's amendment to its Current Report on Form 8-K filed on June
24, 1999, which was filed on August 23, 1999; and
6. Titan's amendments to its Current Report on Form 8-K filed on
January 6, 2000, which were filed on January 19, 2000 and January 24, 2000.
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ACS incorporates by reference the documents listed below and any future
filings ACS will make with the SEC under section 13(a), 13(c), 14 or 15(d) of
the Exchange Act between the date of this proxy statement/prospectus and the
date of the special meeting of ACS stockholders:
1. ACS's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999, which was filed on December 29, 1999;
2. ACS's amendment to its Annual Report on Form 10-K, which was filed
on Form 10-K/A on January 21, 2000; and
3. ACS's Current Report on Form 8-K which was filed on December 21,
1999.
In the event of conflicting information in these documents, the information
in the latest filed document should be considered correct.
You may obtain any of the documents listed above from the SEC, through the
SEC's Web site at the address described above, or from Titan or Corporate
Investor Communications, Inc., by requesting these documents in writing or by
telephone at the following addresses:
The Titan Corporation
3033 Science Park Road
San Diego, California 92121
Attn.: Investor Relations
(858) 552-9500
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
(800) 557-7141
These documents are available from Titan and Corporate Investor
Communications, Inc. without charge, excluding any exhibits to them unless the
exhibit is specifically listed as an exhibit to the registration statement of
which this proxy statement/prospectus forms a part. If you would like to request
documents, please do so by February 15, 2000 to receive them before the special
meeting of ACS's stockholders.
This document is a proxy statement of ACS and a prospectus of Titan. ACS
has supplied all information contained in, or considered a part of, this proxy
statement/prospectus relating to ACS, and Titan has supplied all such
information relating to Titan.
Neither Titan nor ACS has authorized anyone to give any information or make
any representation about the merger or Titan or ACS that is different from, or
in addition to, that contained in this proxy statement/prospectus or in any of
the materials that Titan or ACS has incorporated into this document. Therefore,
if anyone does give you information of this type, you should not rely on it. The
information contained in this proxy statement/prospectus speaks only as of the
date of this document unless the information specifically indicates that another
date applies.
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APPENDIX A
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE TITAN CORPORATION,
ADVANCED COMMUNICATION SYSTEMS, INC.
AND
A T ACQUISITION CORP.
DATED AS OF DECEMBER 9, 1999
AND AMENDED AS OF JANUARY 20, 2000
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TABLE OF CONTENTS
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Article I. The Merger.................................................. A-1
Section 1.1. The Merger.................................................. A-1
Section 1.2. Effective Time.............................................. A-1
Section 1.3. Effect of the Merger........................................ A-2
Section 1.4. Certificate of Incorporation; Bylaws........................ A-2
Section 1.5. Directors and Officers...................................... A-2
Section 1.6. Closing..................................................... A-2
Section 1.7. Subsequent Actions.......................................... A-2
Section 1.8. Tax and Accounting Treatment of the Merger.................. A-2
Article II. Conversion of Securities; Exchange of Certificates.......... A-3
Section 2.1. Conversion of Securities.................................... A-3
Section 2.2. Exchange of Certificates.................................... A-4
Section 2.3. Assumption of Obligations to Issue Stock.................... A-6
Section 2.4. Stock Transfer Books........................................ A-8
Section 2.5. Certain Adjustments......................................... A-8
Article III. Representations and Warranties of the Company............... A-8
Section 3.1. Organization and Qualification; Subsidiaries................ A-8
Section 3.2. Certificate of Incorporation and Bylaws..................... A-8
Section 3.3. Capitalization.............................................. A-9
Section 3.4. Authority................................................... A-10
Section 3.5. No Conflict; Required Filings and Consents.................. A-10
Section 3.6. SEC Filings; Financial Statements........................... A-11
Section 3.7. No Undisclosed Liabilities.................................. A-12
Section 3.8. Absence of Certain Changes or Events........................ A-12
Section 3.9. Absence of Litigation....................................... A-12
Section 3.10 Licenses and Permits; Compliance With Laws.................. A-13
Section 3.11. Intellectual Property....................................... A-13
Section 3.12. Employee Benefit Plans and Related Matters.................. A-14
Section 3.13. Properties.................................................. A-16
Section 3.14. Contracts................................................... A-16
Section 3.15. Taxes....................................................... A-18
Section 3.16. Environmental Matters....................................... A-19
Section 3.17. Insurance................................................... A-19
Section 3.18. Certain Practices........................................... A-20
Section 3.19. Year 2000................................................... A-20
Section 3.20. Interest Rate and Foreign Exchange Contracts................ A-20
Section 3.21. State Takeover Statutes..................................... A-20
Section 3.22. Government Contracts........................................ A-20
Section 3.23. Board Approval; Vote Required............................... A-21
Section 3.24. Opinion of Financial Advisor................................ A-21
Section 3.25. Brokers..................................................... A-21
Section 3.26. Pooling; Tax Matters........................................ A-21
Section 3.27. Registration Statement; Proxy Statement/Prospectus.......... A-22
Article IV. Representations and Warranties of Acquiror and Merger Sub... A-22
Section 4.1. Organization and Qualification.............................. A-22
Section 4.2. Certificate of Incorporation and Bylaws..................... A-22
Section 4.3. Capitalization.............................................. A-23
Section 4.4. Authority................................................... A-23
Section 4.5. No Conflict; Required Filings and Consents.................. A-23
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Article V. Representations and Warranties of Acquiror.................. A-23
Section 5.1. Organization and Qualification; Subsidiaries................ A-24
Section 5.2. Certificate of Incorporation and Bylaws..................... A-24
Section 5.3. Capitalization.............................................. A-24
Section 5.4. Authority................................................... A-25
Section 5.5. No Conflict; Required Filings and Consents.................. A-25
Section 5.6. SEC Filings; Financial Statements........................... A-26
Section 5.7. No Undisclosed Liabilities.................................. A-26
Section 5.8. Absence of Certain Changes or Events........................ A-27
Section 5.9. Absence of Litigation....................................... A-27
Section 5.10. Certain Practices........................................... A-27
Section 5.11. Government Contracts........................................ A-27
Section 5.12. Board Approval; Vote Required............................... A-28
Section 5.13. Opinion of Financial Advisor................................ A-28
Section 5.14. Brokers..................................................... A-28
Section 5.15. Pooling; Tax Matters........................................ A-28
Section 5.16. Registration Statement; Proxy Statement/Prospectus.......... A-28
Section 5.17. Share Ownership............................................. A-29
Section 5.18. Environmental Matters....................................... A-29
Article VI. Covenants................................................... A-29
Section 6.1. Affirmative Covenants of the Company........................ A-29
Section 6.2. Negative Covenants of the Company........................... A-29
Section 6.3. Affirmative Covenants of Acquiror........................... A-32
Section 6.4. Negative Covenants of Acquiror.............................. A-32
Article VII. Additional Agreements....................................... A-32
Section 7.1. Access and Information...................................... A-32
Section 7.2. Confidentiality............................................. A-32
Section 7.3. Proxy Statement and Registration Statement; Stockholders A-33
Meetings....................................................
Section 7.4. HSR Act Matters............................................. A-34
Section 7.5. Public Announcements........................................ A-34
Section 7.6. Indemnification............................................. A-34
Section 7.7. Further Action; Reasonable Best Efforts..................... A-35
Section 7.8. No Solicitation............................................. A-36
Section 7.9. NYSE Listing................................................ A-36
Section 7.10. Employee Matters............................................ A-37
Section 7.11. Affiliates.................................................. A-37
Section 7.12. Event Notices............................................... A-38
Section 7.13. Tax Treatment............................................... A-38
Section 7.14. Pooling of Interests........................................ A-39
Section 7.15. Merger Sub.................................................. A-39
Section 7.16. Board of Directors of Acquiror.............................. A-39
Section 7.17. Publishing Financial Results................................ A-39
Section 7.18. Stand-Still................................................. A-39
Section 7.19. Stockholder Rights Plan..................................... A-40
Article VIII. Closing Conditions.......................................... A-40
Section 8.1. Conditions to Obligations of the Parties to Effect the A-40
Merger......................................................
Section 8.2. Additional Conditions to Obligations of Acquiror and Merger A-41
Sub.........................................................
Section 8.3. Additional Conditions to Obligations of the Company......... A-42
</TABLE>
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<TABLE>
<CAPTION>
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Article IX. Termination, Amendment and Waiver........................... A-42
Section 9.1. Termination................................................. A-42
Section 9.2. Effect of Termination....................................... A-44
Section 9.3. Amendment................................................... A-44
Section 9.4. Extension; Waiver........................................... A-44
Section 9.5. Transaction Fees, Expenses and Other Payments............... A-45
Section 9.6. Termination Fees............................................ A-45
Article X. General Provisions.......................................... A-46
Section 10.1. Effectiveness of Representations, Warranties and A-46
Agreements..................................................
Section 10.2. Notices..................................................... A-46
Section 10.3. Certain Definitions......................................... A-47
Section 10.4. Headings.................................................... A-49
Section 10.5. Severability................................................ A-49
Section 10.6. Entire Agreement............................................ A-49
Section 10.7. Specific Performance........................................ A-49
Section 10.8. Assignment.................................................. A-49
Section 10.9. Third Party Beneficiaries................................... A-50
Section 10.10. Governing Law............................................... A-50
Section 10.11. Counterparts................................................ A-50
Section 10.12. Waiver Of Jury Trial........................................ A-50
</TABLE>
<TABLE>
<S> <C>
Exhibits
Exhibit A Company Affiliate Agreement
Exhibit B Acquiror Affiliate Agreement
</TABLE>
<TABLE>
<S> <C>
Schedules
Schedule 3.1 Organization and Qualification; Subsidiaries
Schedule 3.3 Capitalization of the Company
Schedule 3.5 Required Filings and Consents
Schedule 3.8 Absence of Certain Changes or Events
Schedule 3.9 Litigation
Schedule 3.10 Licenses and Permits
Schedule 3.11 Company Intellectual Property
Schedule 3.12 Employee Benefit Plans
Schedule 3.14 Contracts
Schedule 3.15 Taxes
Schedule 3.22 Government Contracts
Schedule 3.25 Brokers
Schedule 3.26 Pooling; Tax Matters
Schedule 5.3 Capitalization of Acquiror
Schedule 5.5 Required Filings and Consents
Schedule 5.8 Absence of Certain Changes or Events
Schedule 5.9 Litigation
Schedule 5.11 Government Contracts
Schedule 5.15 Pooling; Tax Matters
Schedule 6.2 Negative Covenants of the Company
Schedule 7.10 Employee Matters
Schedule 7.11 Affiliates of the Company and Acquiror
</TABLE>
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
SECTION
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<S> <C>
Acquiror.................................................... PREAMBLE
Acquiror Common Stock....................................... 2.1(a)
Acquiror Confidentiality Agreement.......................... 7.2
Acquiror Counter Proposal................................... 7.3(c)
Acquiror Financial Statements............................... 5.6(b)
Acquiror Floating Rate Election............................. 2.1(c)
Acquiror Preferred Stock.................................... 5.3(a)
Acquiror SEC Reports........................................ 5.6(a)
Acquiror Stock Option Plan.................................. 5.3(a)
Acquiror Stock Price........................................ 2.1(c)
Acquiror Stock Purchase Plan................................ 5.3(a)
Acquiror Subsidiary and Acquiror Subsidiaries............... 5.1
Acquiror's Legal Counsel.................................... 8.1(i)
Acquisition Agreement....................................... 3.14(e)
Acquisition Proposal........................................ 10.3
Affiliate................................................... 10.3
Affiliate Agreement......................................... 2.2(c)
Agreement................................................... PREAMBLE
Beneficial owner, beneficial ownership or beneficially 10.3
own.......................................................
Bid......................................................... 3.22(b)
Business Day................................................ 10.3
Certificate and Certificates................................ 2.1(a)
Certificate of Merger....................................... 1.2
Claim....................................................... 7.6(b)
Closing..................................................... 1.6
Closing Date................................................ 1.6
Code........................................................ RECITALS
Company..................................................... PREAMBLE
Company Acquisition......................................... 6.2(e)
Company Benefit Plans....................................... 3.12(a)
Company Common Stock........................................ 2.1(a)
Company Confidentiality Agreement........................... 7.2
Company Financial Statements................................ 3.6(b)
Company Floating Rate Election.............................. 2.1(c)
Company Intellectual Property............................... 3.11(a)
Company Leases.............................................. 3.13
Company Permits............................................. 3.10
Company Preferred Stock..................................... 3.3(a)
Company Recommendation...................................... 3.4(b)
Company SEC Reports......................................... 3.6(a)
Company Stock Option Plans.................................. 2.3(a)
Company Stockholder Agreement............................... PREAMBLE
Company Stockholder Approval................................ 3.4(a)
Company Stockholders Meeting................................ 7.3(b)
Company Subsidiary and Company Subsidiaries................. 3.1
Confidentiality Agreement................................... 7.2
Continuing Employees........................................ 7.10(a)
Contracts................................................... 3.14(a)
Control, controlled by, under common control with........... 10.3
</TABLE>
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<TABLE>
<CAPTION>
SECTION
-------
<S> <C>
Credit Facility............................................. 10.3
D&O Insurance............................................... 7.6(b)
Delaware Law................................................ RECITALS
Director Option............................................. 2.3(c)
Effective Time.............................................. 1.2
Employee benefit plans...................................... 3.12(a)
Encumbrance................................................. 10.3
Environmental Laws.......................................... 3.16(a)
ERISA Affiliate............................................. 3.12(a)
ERISA....................................................... 3.12(a)
Exchange Act................................................ 3.5(b)
Exchange Agent.............................................. 2.2(a)
Exchange Fund............................................... 2.2(a)
Exchange Ratio.............................................. 2.1(b)
GAAP........................................................ RECITALS
Government Contract......................................... 3.22(b)
Governmental Entity......................................... 3.5(b)
Hazardous Substances........................................ 3.16(a)
Holder and Holders.......................................... 2.1(a)
HSR Act..................................................... 3.5(b)
Incentive stock options..................................... 2.3(a)
Indemnified Parties......................................... 7.6(b)
Information Technology...................................... 3.19
Intellectual Property....................................... 10.3
Interim Period.............................................. 7.1
Proxy Statement............................................. 3.17
Legal Opinions.............................................. 8.1(i)
Material Adverse Effect..................................... 10.3
Material Contract........................................... 3.14(a)
Merger...................................................... RECITALS
Merger Consideration........................................ 2.1(a)
Merger Sub.................................................. PREAMBLE
Merger Sub Stock............................................ 2.1(f)
Multiemployer plan.......................................... 3.12(a)
NASD........................................................ 3.5(b)
Nasdaq...................................................... 3.5(b)
NYSE........................................................ 2.1(c)
Option...................................................... 2.3(a)
Order....................................................... 8.1(c)
Outside Date................................................ 9.1(e)
Person...................................................... 10.3
Pooling of interests........................................ 3.26(a); 5.15; 6.2(o);
6.4(c); 7.11(b); 7.14;
8.1(g); 8.1(h)
Reasonable best efforts..................................... 10.3
Receiving Party............................................. 7.2
Registration Statement...................................... 3.27
Representation Letters...................................... 7.13
Representatives............................................. 7.8(a)
SEC......................................................... RECITALS
Securities Act.............................................. 3.5(b)
</TABLE>
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<TABLE>
<CAPTION>
SECTION
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<S> <C>
Stockholder Vote Election................................... 9.1(i)
Subsidiary.................................................. 10.3
Superior Proposal........................................... 10.3
Surviving Corporation....................................... 1.1
Tax......................................................... 3.15(g)
Terminating Acquiror Breach................................. 9.1(c)
Terminating Company Breach.................................. 9.1(b)
Termination Election........................................ 9.6(b)
Termination Fee............................................. 9.6(a)
Treasury Stock.............................................. 2.1(d)
Year 2000 Compliant......................................... 3.19
Year 2000 Meeting........................................... 7.16
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of December
9, 1999, and amended as of January 20, 2000, by and among The Titan Corporation,
a Delaware corporation ("Acquiror"), Advanced Communication Systems, Inc., a
Delaware corporation (the "Company") and A T Acquisition Corp., a Delaware
corporation ("Merger Sub").
WHEREAS, Merger Sub is a newly formed corporation that is a wholly owned
direct subsidiary of Acquiror, organized and existing under the laws of the
State of Delaware;
WHEREAS, the Board of Directors of the Company, Acquiror and Merger Sub has
each determined that it is fair to, advisable, and in the best interests of, the
stockholders of the Company, Acquiror and Merger Sub that Merger Sub be merged
with and into the Company (the "Merger") pursuant to and subject to the terms
and conditions of this Agreement and the Delaware General Corporation Law
("Delaware Law");
WHEREAS, as a condition and inducement to Acquiror's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Acquiror and
Merger Sub are entering into a Stockholders Agreement with certain stockholders
of the Company (the "Company Stockholders Agreement"), pursuant to which, among
other things, such stockholders have agreed to vote their Shares of Company
Common Stock in favor of the Merger and granted Acquiror an irrevocable proxy to
vote such shares of Company Common Stock;
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the Merger
be accounted for as a pooling of interests under United States generally
accepted accounting principles ("GAAP") and the rules and regulations of the
Securities and Exchange Commission (the "SEC").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER.
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with Delaware Law, at the Effective Time (as defined in
Section 1.2) the Merger shall be effected and, pursuant thereto, Merger Sub
shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Merger Sub
shall cease and the Company shall continue as the surviving corporation of the
Merger (sometimes referred to herein as the "Surviving Corporation") and shall
become a wholly owned subsidiary of Acquiror. The name of the Company shall
continue as the name of the Surviving Corporation.
SECTION 1.2. EFFECTIVE TIME.
On the Closing Date (as defined in Section 1.6), the parties hereto shall
cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
as required by, and executed in accordance with the relevant provisions of,
Delaware Law and in such form as approved by the Company and Acquiror prior to
such filing (the time of the filing of the Certificate of Merger or the
effective time specified therein being the "Effective Time").
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SECTION 1.3. EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as set forth
herein and as provided in the applicable provisions of Delaware Law. Without
limiting the generality of the foregoing, at the Effective Time, except as
otherwise provided herein, all the rights, privileges, powers and franchises of
Merger Sub and the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Merger Sub and the Company shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
At the Effective Time: (a) the certificate of incorporation of Merger Sub,
as in effect immediately prior to the Effective Time and as amended by the
Certificate of Merger, shall become the certificate of incorporation of the
Surviving Corporation and shall reflect a name change to that of the Surviving
Corporation, and (b) the bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall become the bylaws of the Surviving Corporation.
SECTION 1.5. DIRECTORS AND OFFICERS.
The officers and directors of Merger Sub shall be initial directors and
officers of the Surviving Corporation. Each such officer and director shall hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation and until his or her successor is duly elected or
appointed and qualified in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation.
SECTION 1.6. CLOSING.
Unless this Agreement shall have been terminated and the transactions
herein contemplated shall have been abandoned pursuant to Section 9.1, and
subject to the terms and conditions of this Agreement (including, without
limitation, the satisfaction or, if permissible, waiver of the conditions set
forth in Article VIII hereof) the closing of the Merger (the "Closing") shall
take place at 11 a.m. Washington, D.C. time on the second Business Day after the
satisfaction or waiver of the last to be fulfilled or waived of the conditions
set forth in Article VIII (the "Closing Date"), at the offices of Hogan &
Hartson, LLP, 8300 Greensboro Drive, Suite 1100, McLean, Virginia 22102, unless
another place or time is agreed to in writing by the parties hereto.
SECTION 1.7. SUBSEQUENT ACTIONS.
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any deeds, bills of sale, assignments, assurances or
any other actions or things are necessary or desirable to continue, vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties,
privileges, franchises or assets of either of its constituent corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be directed and
authorized to execute and deliver, in the name and on behalf of either of the
Company or the Merger Sub, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of such
corporations or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties, privileges, franchises or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.8. TAX AND ACCOUNTING TREATMENT OF THE MERGER.
It is intended by the parties hereto that the Merger shall (a) constitute a
reorganization of Merger Sub and the Company within the meaning of Section
368(a) of the Code, and (b) be accounted for as a pooling of interests under
GAAP and the rules and regulations of the SEC. The parties hereby adopt this
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Agreement as a "plan of reorganization" of Merger Sub and the Company within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
ARTICLE II.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. CONVERSION OF SECURITIES.
At the Effective Time, by virtue of the Merger and without any action on
the part of Acquiror, Merger Sub, the Company or the holders of any of the
securities referred to in this Section 2.1:
(a) Common Stock. Each share of common stock, par value $.01 per share, of
the Company (the "Company Common Stock") (excluding any shares of Treasury Stock
(as hereinafter defined) and any shares held by Acquiror or any Affiliate of
Acquiror) issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding and shall be converted into and exchanged for the right
to receive that number, rounded up or down, as the case may be to the nearest
whole number of share(s) of common stock, par value $.01 per share, of the
Acquiror (the "Acquiror Common Stock") equal to the "Exchange Ratio" (as defined
below) upon surrender of the certificate representing such shares in accordance
with Section 2.2. The shares of Acquiror Common Stock issuable to the holders of
Company Common Stock outstanding immediately prior to the Effective Time (each,
a "Holder" and collectively, the "Holders") pursuant hereto shall be referred to
hereinafter as the "Merger Consideration." All such shares of Company Common
Stock shall automatically be canceled and retired and shall cease to exist, and
each certificate previously evidencing any such shares (a "Certificate" and
collectively, the "Certificates") shall thereafter represent only the right to
receive the Merger Consideration. At the Effective Time, the Holders shall cease
to have any rights with respect to such shares of Company Common Stock, except
the right to receive the Merger Consideration and as otherwise provided herein
or afforded by applicable law;
(b) Exchange Ratio.
The "Exchange Ratio" shall be determined as follows:
(i) if the Acquiror Stock Price is less than or equal to $32.50 per
share and greater than or equal to $25.50 per share, the Exchange Ratio equals
the quotient obtained by dividing 20 by the Acquiror Stock Price;
(ii) if the Acquiror Stock Price is less than $25.50 per share and
greater than or equal to $22.95 per share, the Exchange Ratio is .7843;
(iii) if the Acquiror Stock Price is greater than $32.50 per share and
less than or equal to $35.75 per share, the Exchange Ratio is .6154;
(iv) if the Acquiror Stock Price is greater than $35.75 per share and
the Company makes a "Company Floating Rate Election," the Exchange Ratio shall
be equal to the quotient obtained by dividing 22 by the Acquiror Stock Price;
and
(v) if the Acquiror Stock Price is less than $22.95 per share and
Acquiror makes an "Acquiror Floating Rate Election," the Exchange Ratio shall be
equal to the quotient obtained by dividing 18 by the Acquiror Stock Price.
(c) Certain Definitions. For purposes of this Agreement, (i) the term
"Acquiror Stock Price" shall mean the average of the closing sale prices of a
share of Acquiror Common Stock as reported on the New York Stock Exchange
("NYSE") for the ten (10) trading day period ending two (2) trading days
immediately preceding the Closing Date; (ii) the term "Acquiror Floating Rate
Election" shall mean an election made by Acquiror upon determination of the
Acquiror Stock Price in the event that the Acquiror Stock Price is less than
$22.95 per share, whereby Acquiror agrees to use the Exchange Ratio which equals
the quotient obtained by dividing 18 by the Acquiror Stock Price; and (iii) the
term "Company
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Floating Rate Election" shall mean an election made by the Company upon
determination of the Acquiror Stock Price in the event that the Acquiror Stock
Price is greater than $35.75 per share, whereby the Company agrees to use the
Exchange Ratio which equals the quotient obtained by dividing 22 by the Acquiror
Stock Price.
(d) Treasury Stock. All shares of capital stock of the Company held by
Acquiror, any Affiliate of Acquiror and in the treasury of the Company
immediately prior to the Effective Time ("Treasury Stock") shall be canceled and
extinguished without any conversion thereof and no consideration shall be
delivered or deliverable in exchange therefor;
(e) Other Rights Relating to the Company Stock. Except as set forth in
Section 2.3, all options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
the Company or obligating the Company to issue or sell any shares of capital
stock of, or other equity interests in the Company, including any securities
directly or indirectly convertible into or exercisable or exchangeable for any
capital stock or other equity securities of the Company that have not been
exercised, or that have not vested, prior to the Effective Time shall be
canceled and extinguished without any conversion thereof and no Merger Stock or
other consideration shall be delivered or deliverable in exchange therefor;
(f) Merger Sub Stock. Each share of common stock, par value $.01 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time ("Merger Sub Stock") shall be converted into and exchanged for one (1) duly
and validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation; and
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Promptly (and in no event later than the third
business day) after the Effective Time, Acquiror shall deposit with First Union
National Bank (the "Exchange Agent") for the benefit of the Holders for issuance
and payment in accordance with this Article II: the shares of Acquiror Common
Stock issuable pursuant to Section 2.1(a) (such shares of Acquiror Common Stock
being hereinafter referred to as the "Exchange Fund"). At the Effective Time,
Acquiror shall cause the Exchange Agent, pursuant to irrevocable instructions
delivered to the Exchange Agent prior thereto, to deliver Acquiror Common Stock
contemplated to be issued pursuant to Section 2.1(a) out of the Exchange Fund.
The Exchange Fund shall not be used for any purpose other than as set forth in
this Section 2.2(a).
(b) Payment Procedures. Promptly (and in no event later than the third
business day) after the Effective Time, Acquiror shall cause the Exchange Agent
to mail to each Holder who, as of the Effective Time, holds a Certificate or
Certificates (excluding any Certificates for Treasury Stock): (i) a form letter
of transmittal; and (ii) instructions for use in effecting the surrender of the
Certificates for cancellation and delivery in exchange for the Merger
Consideration. Upon surrender to the Exchange Agent and cancellation of a
Certificate, together with such letter of transmittal duly executed and any
other reasonably required documents, the Holder of such Certificate shall be
entitled to receive in exchange therefor the applicable amount of the Merger
Consideration as determined pursuant to Section 2.1(a). In the event of a
surrender of a Certificate representing shares of Company Common Stock that are
not registered in the transfer records of the Company under the name of the
Holder surrendering such Certificate, a certificate representing the proper
number of shares of Acquiror Common Stock may be issued to a Person other than
the Holder in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such issuance shall pay any transfer or other
Taxes required by reason of the issuance of shares of Acquiror Common Stock to a
Person other than the Holder of such Certificate or shall establish to the
satisfaction of Acquiror that such Taxes have been paid or are not applicable.
Until surrendered in accordance with the provisions of this Section 2.2, each
Certificate shall represent for all purposes only the right to receive the
applicable amount of the Merger Consideration with respect thereto as determined
pursuant to Section 2.1(a), in such case without any interest thereon.
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(c) Issuances to Affiliates. Notwithstanding anything herein to the
contrary, any Certificate surrendered for exchange by any Affiliate of the
Company shall not be exchanged until Acquiror shall have received a signed
agreement from such Affiliate (an "Affiliate Agreement") as provided in Section
7.11 hereof.
(d) No Further Rights in Stock. All shares of Acquiror Common Stock issued
upon the surrender for exchange of Certificates pursuant to Section 2.1 and in
accordance with this Section 2.2 shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, and there shall be no further
registration of transfers on the stock transfer books of the Company as the
Surviving Corporation of the shares of Company Common Stock represented by such
Certificates that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, any Certificates are presented to Acquiror, the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided herein, except as otherwise provided by law.
(e) RESERVED.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the Holders for twelve (12) months after the Effective
Time shall be delivered to Acquiror, upon demand, and any Holder that has not
theretofore received Merger Consideration in respect of any shares of Company
Common Stock held thereby shall thereafter look only to the Surviving
Corporation and Acquiror for the applicable amount of the Merger Consideration
to which such Holder is entitled pursuant hereto.
(g) Withholding of Tax. Acquiror or the Exchange Agent shall be entitled
to deduct and withhold from the applicable amount of the Merger Consideration
otherwise issuable or payable to, any Holder such amounts as Acquiror (or any
Affiliate thereof) or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign Tax law. To the extent that amounts are so withheld by Acquiror
(or any Affiliate thereof) or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the Holder in
respect of whom such deduction and withholding was made.
(h) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit
setting forth that fact by the Person claiming such loss, theft or destruction
and the granting of a reasonable indemnity against any claim that may be made
against Acquiror or the Exchange Agent with respect to such Certificate (and, if
required by Acquiror in the case of any Certificate or Certificates from any
Holder representing more than Seven Thousand Five Hundred (7,500) shares of
Company Common Stock, the posting by such Person of a bond, in such reasonable
amount as Acquiror may direct), Acquiror shall cause the Exchange Agent to issue
to such Person the applicable amount of the Merger Consideration and any cash
payments with respect to such lost, stolen or destroyed Certificate to which the
Holder thereof may be entitled pursuant to this Article II.
(i) Distributions With Respect to Unexchanged Shares of Acquiror Common
Stock. No dividends or other distributions declared or made after the Effective
Time with respect to Acquiror Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Acquiror Common Stock evidenced thereby until the
holder of such Certificate shall properly surrender such Certificate in
accordance with the requirements of Section 2.2(b). Subject to the effect of
escheat, tax or other applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates evidencing
whole shares of Acquiror Common Stock issued in exchange therefor, without
interest, (i) promptly the amount of dividends or other distributions with a
record date after the Effective Time and theretofore paid with respect to such
whole shares of Acquiror Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions, with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of Acquiror Common Stock.
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(j) No Liability. Neither Acquiror nor the Surviving Corporation shall be
liable to any Holder of shares of Company Common Stock for any shares of
Acquiror Common Stock (or dividends or distributions with respect thereto), or
cash delivered to a public official pursuant to any abandoned property, escheat
or similar law.
SECTION 2.3. ASSUMPTION OF OBLIGATIONS TO ISSUE STOCK.
(a) Company Options. As of the Effective Time, each outstanding Option (as
hereinafter defined) shall be converted into an option to acquire Acquiror
Common Stock as provided in this Section 2.3(a). The term "Option" shall mean
any option to purchase or acquire shares of Company Common Stock granted under
the Company's 1996 Stock Incentive Plan and 1997 Stock Incentive Plan, as
amended (the "Company Stock Option Plans"). Following the Effective Time, each
Option shall continue to have, and shall be subject to, the terms and conditions
of each agreement pursuant to which such Option was subject immediately prior to
the Effective Time (including, in the case of each Option granted under the
Company Stock Option Plans, the terms and conditions of the Company Stock Option
Plans under which such Option was granted), except that: (i) each Option (as
converted pursuant to this Section 2.3(a)) shall be exercisable for that number
of whole shares of Acquiror Common Stock equal to the product of (A) the
aggregate number of shares of Company Common Stock for which such Option was
exercisable at the Effective Time, multiplied by (B) the Exchange Ratio,
provided, however, that no fractional shares of Acquiror Common Stock shall be
issued upon the exercise of any Option (as converted pursuant to this Section
2.3(a)) and the holder of any Option (as converted pursuant to this Section
2.3(a)) granted under the Company Stock Option Plans otherwise exercisable for a
fractional share of Acquiror Common Stock shall be entitled to receive, upon
exercise thereof, cash (without interest) in such amount to which such holder
would otherwise be entitled as determined pursuant to the provisions of the
Company Stock Option Plans and the agreement under which such Option was granted
(provided that all references in such Company Stock Option Plans and such
agreement to the Company shall be references to Acquiror and references to the
Company's Common Stock shall be references to Acquiror Common Stock); and (ii)
the exercise price per share of Acquiror Common Stock issuable pursuant to each
Option (as converted pursuant to this Section 2.3(a)) shall be equal to the
exercise price per share of Company Common Stock under such Option at the
Effective Time divided by the Exchange Ratio, rounded to the nearest whole cent.
The assumption and substitution of Options as provided herein shall not give the
holders of such Options additional benefits or additional (or accelerated)
vesting rights that they did not have immediately prior to the Effective Time or
relieve the holders of such Options from any obligations or restrictions
applicable to their Options or the shares obtainable upon exercise of the
Options. The adjustment provided herein with respect to any Options that are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be, effected in a manner that is consistent with continued
treatment of such Options as "incentive stock options" under Section 424(a) of
the Code. The duration and other terms of the converted options provided for in
this Section 2.3(a) shall be the same as the Options except that all references
to the Company shall be references to Acquiror and references to the Company's
Common Stock shall be references to Acquiror Common Stock. Acquiror shall take
all corporate action necessary to reserve for issuance, at all times any
converted options provided for in this Section 2.3(a) are outstanding, a
sufficient number of shares of Acquiror Common Stock for delivery upon the
exercise of such converted Options. The Company will take such action as shall
be reasonably necessary (including but not limited to obtaining waivers from
holders of Options) so that each Option that was unvested or subject to a
repurchase option, risk of forfeiture or other condition under any applicable
Company Stock Option Plans immediately prior to the Effective Time shall
continue to be subject to such vesting, repurchase, forfeiture or other
conditions with respect to the Acquiror Common Stock that may be issuable with
respect thereto after the occurrence of the Effective Time or the consummation
of the transactions contemplated by this Agreement.
(b) Form S-8. Acquiror shall: (i) promptly following the Effective Time,
file all necessary registration statements on Form S-8 (or amend existing
registration statements on Form S-8) to become effective as soon as practicable
after the Effective Time in order to effectively register the shares of Acquiror
Common Stock subject to Options outstanding as of the Effective Time (as
converted pursuant
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to Section 2.3(a)) that were granted under the Company Stock Option Plans; (ii)
use reasonable best efforts to maintain the effectiveness of such registration
statement(s) (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such Options (as converted pursuant to Section
2.3(a)) remain outstanding; and (iii) promptly following the Effective Time
prepare and submit to the NYSE the Supplemental Listing Application relating to
inclusion for quotation on the NYSE of the shares of Acquiror Common Stock
subject to such Options (as converted pursuant to Section 2.3(a)) and use
reasonable best efforts to cause such securities to be approved for listing on
the NYSE as soon as practicable after the Effective Time, subject to official
notice of issuance.
(c) Director Options. As of the Effective Time, each outstanding Director
Option (as hereinafter defined) shall be converted into an option to acquire
Acquiror Common Stock as provided in this Section 2.3(c). The term "Director
Option" shall mean any option to purchase or acquire shares of Company Common
Stock granted to any director of the Company in such individual's capacity as a
director (specifically excluding any Options granted under the Company Stock
Option Plans). Following the Effective Time, each Director Option shall continue
to have, and shall be subject to, the terms and conditions of each agreement to
which such Director Option was subject immediately prior to the Effective Time,
except that: (i) each Director Option (as converted pursuant to this Section
2.3(c)) shall be exercisable for that number of whole shares of Acquiror Common
Stock equal to the product of (A) the aggregate number of shares of Company
Common Stock for which such Director Option was exercisable at the Effective
Time, multiplied by (B) the Exchange Ratio, provided, however, that no
fractional shares of Acquiror Common Stock shall be issued upon the exercise of
any Director Option (as converted pursuant to this Section 2.3(c)) and the
holder of any Director Option (as converted pursuant to this Section 2.3(c))
otherwise exercisable for a fractional share of Acquiror Common Stock shall be
entitled to receive, upon exercise thereof, cash (without interest) in an amount
equivalent to the fair market value (at the time of exercise) of the fractional
share of Acquiror Common Stock to which such holder would otherwise be entitled
(as determined pursuant to the provisions of the applicable Director Option
agreement); and (ii) the exercise price per share of Acquiror Common Stock
issuable pursuant to each Director Option (as converted pursuant to this Section
2.3(c)) shall be equal to the exercise price per share of Company Common Stock
under such Director Option at the Effective Time divided by the Exchange Ratio,
rounded to the nearest whole cent. The assumption and substitution of Director
Options as provided herein shall not give the holders of such Director Options
additional benefits or additional (or accelerated) vesting rights that they did
not have immediately prior to the Effective Time or relieve the holders of such
Director Options from any obligations or restrictions applicable to their
Director Options or the shares obtainable upon exercise of their Director
Options. The duration and other terms of the converted Director Options provided
for in this Section 2.3(c) shall be the same as the Director Options except that
all references to the Company shall be references to Acquiror and references to
the Company's Common Stock shall be references to Acquiror Common Stock.
Acquiror shall take all corporate action necessary to reserve for issuance, at
all times any converted Director Options provided for in this Section 2.3(c) are
outstanding, a sufficient number of shares of Acquiror Common Stock for delivery
upon the exercise of such converted Director Options. The Company will take such
action as shall be reasonably necessary (including but not limited to obtaining
waivers from holders of Director Options) so that each Director Option that was
unvested or subject to a repurchase option, risk of forfeiture or other
condition immediately prior to the Effective Time shall continue to be subject
to such vesting, repurchase, forfeiture or other conditions with respect to the
Acquiror Common Stock that may be issuable with respect thereto after the
occurrence of the Effective Time or the consummation of the transactions
contemplated by this Agreement.
(d) Except as may otherwise be agreed to by Acquiror and the Company or as
otherwise contemplated or required to effectuate the provisions of this Section
2.3, the Company Stock Option Plans shall terminate as of the Effective Time and
the provisions of any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Company Subsidiary shall expire as of the Effective Time. The
termination of any Company Stock Option Plans shall not affect any Options
granted under such plans prior to the date of termination.
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(e) Company Employee Stock Purchase Plan. The Company's Employee Stock
Purchase Plan under Code Section 423 shall be terminated on or before the
Effective Time, with a refund to participants of any payroll deductions for the
then current Offering Period (as defined therein) which have not been used to
purchase shares of the Company's Common Stock pursuant to the terms of the plan
on or before the Effective Time.
SECTION 2.4. STOCK TRANSFER BOOKS.
At the Effective Time, the transfer books of the Company with respect to
all shares of capital stock or other securities of the Company shall be closed
and no further registration of transfers of such shares of capital stock or
other securities shall thereafter be made on the records of the Company.
SECTION 2.5. CERTAIN ADJUSTMENTS.
If between the date hereof and the Effective Time, the outstanding shares
of Company Common Stock or Acquiror Common Stock shall be changed into a
different number of shares by reason of any reclassification, recapitalization,
split-up, combination or exchange of shares, or any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, the Exchange Ratio shall be adjusted accordingly to provide the same
economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror and Merger Sub,
subject to the exceptions set forth herein and in the Company's disclosure
schedules (which exceptions shall specifically identify a section, subsection or
clause of a single section or subsection hereof, as applicable, to which such
exception relates, it being understood and agreed that each such exception shall
be deemed to be disclosed both under such section, subsection or clause hereof
and any other section, subsection or clause hereof to which such disclosure
reasonably relates) that:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Each of the Company and each Subsidiary of the Company (each a "Company
Subsidiary" and collectively, the "Company Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each of the Company and each Company
Subsidiary is duly qualified to conduct its business, and is in good standing,
in each jurisdiction where such qualification is necessary, except for such
failures that would not have a Material Adverse Effect on the Company. Each of
the Company and each Company Subsidiary has the requisite corporate power and
authority to own, operate, lease and otherwise to hold its assets and properties
and to carry on its business as now being conducted, except for such failures
that would not have a Material Adverse Effect on the Company. Section 3.1 of the
Disclosure Schedule sets forth, as of the date of this Agreement, a true and
complete list of all Company Subsidiaries, together with the jurisdiction of
incorporation of each Company Subsidiary and the percentage of each Company
Subsidiary's outstanding capital stock or other equity interests owned by the
Company and Company Subsidiaries, as the case may be. Except as set forth in
Schedule 3.1, the Company does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
The Company has heretofore delivered to Acquiror a complete and correct
copy of the certificate or articles of incorporation and the bylaws of the
Company and each Company Subsidiary, each as amended to date. Each such
certificate or articles of incorporation and bylaws is in full force and effect.
None of the
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Company or any Company Subsidiary is in violation of any of the provisions of
its articles or certificate of incorporation, bylaws or equivalent
organizational documents.
SECTION 3.3. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of forty million
(40,000,000) shares of Company Common Stock and one million (1,000,000) shares
of preferred stock, par value $.01 per share ("Company Preferred Stock").
(1) As of December 6, 1999, (i) 8,776,448 shares of Company Common Stock
are issued and outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable, (ii) no shares of Company Preferred Stock were
issued and outstanding, (iii) 2,679,636 shares of Company Common Stock are held
in the treasury of the Company, and (iv) 648,323 shares of Company Common Stock
are reserved for future issuance pursuant to outstanding Options and Director
Options for an aggregate exercise price of $6,395,659.00.
(b) All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except for the shares of Company Common Stock outstanding as of the date
hereof, the shares of Company Common Stock issuable pursuant to the Options and
Director Options and such Options and Director Options, each of which Options
and Director Options are described in Schedule 3.3 (which Schedule sets forth
the (w) the name of the optionee, (x) the particular plan pursuant to which such
Option or Director Option was granted, (y) the date of grant and number of
shares of Company Common Stock subject to such Option or Director Option and (z)
whether the exercisability of such option will be accelerated by the transaction
contemplated by this Agreement) and the shares of Company Common Stock issuable
pursuant to the Company's Employee Stock Purchase Plan: (i) there are not
issued, reserved for issuance or outstanding (A) any shares of capital stock or
other voting securities of the Company or any Company Subsidiary, (B) any
securities of the Company or any Company Subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting securities or
ownership interests of the Company or any Company Subsidiary, (C) any warrants,
calls, options or other rights to acquire from the Company or any Company
Subsidiary, or any obligation of the Company or any Company Subsidiary to issue,
any capital stock, voting securities or other ownership interests in, or
securities convertible into or exchangeable or exercisable for capital stock or
voting securities of or other ownership interests in, the Company or any Company
Subsidiary, and (ii) there are no outstanding obligations of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities. The conversion of the Options and the Director
Options into options to acquire Acquiror Common Stock pursuant to and in
accordance with the terms set forth in Section 2.3 of this Agreement may be
effected in all respects without the consent of any holder of an Option or a
Director Option.
(c) Except as described in Schedule 3.3, neither the Company nor any
Company Subsidiary is a party to or aware of, any stockholder agreement, voting
trust or agreement (i) restricting or requiring the purchase or transfer of,
relating to the voting or disposition of, requiring registration of, or granting
any preemptive or, except as provided by the terms of the Company Stock Option
Plans and Director Options, antidilutive rights with respect to, any of the
securities of the Company or any of the Company Subsidiaries that are
outstanding or that may be subsequently issued upon the conversion or exercise
of any instrument or otherwise or (ii) granting to any person or group the right
to elect or to designate or nominate for election a director to the board of
directors of the Company or any Company subsidiary.
(d) All the outstanding shares of capital stock of each Company Subsidiary
have been validly issued and are fully paid and nonassessable and are owned by
the Company, and other than in connection with the Credit Facility, are free and
clear of all Encumbrances, options, rights of first refusal, agreements,
limitations on the Company's or such Company Subsidiary's voting rights, charges
and other Encumbrances of any nature whatsoever.
(e) Except as previously disclosed to Acquiror, as of the date of this
Agreement, none of the Company or any Company Subsidiary directly or indirectly
owns, or has agreed to purchase or otherwise
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acquire, 5% or more of the capital stock of, or any interest convertible into or
exchangeable or exercisable for 5% or more of the capital stock of, any
corporation, partnership, joint venture or other business association or entity
(other than the Company Subsidiaries set forth in Schedule 3.1) other than a
Company Acquisition as permitted pursuant to the provisions of Section 6.3(i).
There are no material outstanding contractual obligations of the Company or any
Company Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Company Subsidiary or any other
person except as permitted pursuant to the provisions of Section 6.3(i).
SECTION 3.4. AUTHORITY.
(a) The Company has the necessary corporate power and authority to enter
into this Agreement and the other agreements referred to herein (the "Ancillary
Agreements") and, subject to obtaining the requisite approval of this Agreement,
the Merger and the other transactions contemplated hereby by the Company's
stockholders as required by Delaware Law and as contemplated in Section 7.3(b)
("Company Stockholder Approval"), to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
Except for Company Stockholder Approval, the execution and delivery of this
Agreement and the Ancillary Agreements by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and the Ancillary Agreements or to consummate the transactions contemplated
hereby and thereby. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Acquiror
and Merger Sub, constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity (it being
understood that, with respect to the Company's obligation to consummate the
Merger, the Company Stockholder Approval is required as set forth herein and
that nothing in this Agreement shall be construed or interpreted as a guaranty
by the Company that such approval will be obtained).
(b) The Board of Directors of the Company has, on December 8, 1999, by
unanimous resolution (i) approved and adopted this Agreement and the
transactions contemplated by this Agreement, (ii) determined that the Merger is
in the best interests of the Company and its stockholders and that the terms of
this Agreement are fair to the Company and its stockholders and (iii) declared
the advisability of this Agreement and recommended that the stockholders of the
Company approve and adopt this Agreement and the transactions contemplated by
this Agreement and directed that this Agreement and such transactions be
submitted for approval by the Company's stockholders at the Company Stockholders
Meeting (as hereinafter defined) (the "Company Recommendation").
SECTION 3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company do not, and
the performance by the Company of its obligations under this Agreement will not:
(i) conflict with or violate the certificate or articles of incorporation or
bylaws of the Company or any Company Subsidiary; (ii) subject to obtaining the
approvals and compliance with the requirements set forth in Section 3.5(b),
conflict with or violate any Order applicable to the Company or any Company
Subsidiary or by which any of their respective properties or assets is bound or
affected; or (iii) except as set forth in Schedule 3.5, result in any breach of
or constitute a default (or an event that with or without notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the properties or assets of the Company or
any Company Subsidiary pursuant to any Material Contract, except, in the case of
clauses (ii) and (iii) above, for any such conflicts, violations, breaches,
defaults or other alterations or occurrences that would not: (x) prevent or, to
the knowledge of the Company, delay in any material respect, consummation of the
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Merger; (y) otherwise prevent the Company from performing its obligations under
this Agreement in any material respect; or (z) have a Material Adverse Effect on
the Company.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require by, with
respect to or on behalf of the Company or any Company Subsidiary any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign (each a "Governmental
Entity"), except: (i) for (A) applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act of
1933, as amended (the "Securities Act"), the National Association of Securities
Dealers, Inc. (the "NASD"), the Nasdaq National Market, Inc. ("Nasdaq") and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) applicable requirements, if any, of the consents, approvals,
authorizations or permits described in Schedule 3.5, and (C) filing and
recordation of appropriate merger documents as required by Delaware Law; or (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not: (x) prevent or delay in any
material respect the consummation of the Merger; (y) otherwise prevent the
Company from performing its obligations under this Agreement in any material
respect; or (z) would not individually, or in the aggregate, have a Material
Adverse Effect on the Company.
SECTION 3.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports, statements and other
documents required to be filed with the SEC since January 1, 1997, and has
heretofore furnished to Acquiror, in the form filed with the SEC since such
date, together with any amendments thereto, all of such forms, reports,
statements and other documents, including without limitation, its: (i) Annual
Reports on Form 10-K; (ii) Quarterly Reports on Form 10-Q; (iii) proxy
statements relating to meetings of stockholders (whether annual or special);
(iv) reports on Form 8-K; and (v) other reports or registration statements filed
by the Company and such Company Subsidiaries (collectively, the "Company SEC
Reports"). As of their respective filing dates, the Company SEC Reports
(including all Company SEC Reports filed after the date of this Agreement and
prior to the Effective Time): (x) complied (or will comply when filed) as to
form in all material respects with the requirements of the Exchange Act and the
Securities Act, as applicable; and (y) did not or shall not at the time they are
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. No Company Subsidiary is required to file any form, report,
statement or other document with the SEC other than in conjunction with the
filing of the Company SEC Reports.
(b) The audited consolidated financial statements and unaudited interim
financial statements of the Company (including the notes and schedules thereto)
contained or incorporated by reference in the Company SEC Reports (including all
Company SEC Reports filed after the date of this Agreement and prior to the
Effective Time) (the "Company Financial Statements") complied or shall comply in
all material respects with applicable GAAP accounting requirements and with the
rules and regulations of the SEC with respect thereto. The Company Financial
Statements present or shall present fairly in all material respects the
consolidated financial position of the Company and the Company Subsidiaries at
the respective dates thereof and the consolidated results of operations and cash
flows of the Company and the Company Subsidiaries for the periods indicated, in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be noted therein) and subject in the case of interim
financial statements to normal year-end adjustments.
(c) Except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement, none of the Company or any of the Company Subsidiaries is
indebted to any director, officer, employee, agent or consultant of the Company
or any of the Company Subsidiaries (except for amounts due as normal salaries
and bonuses, retention bonuses or retirement payments that have been previously
disclosed to Acquiror, and in reimbursement of ordinary or relocation expenses)
and no such person is indebted to the
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Company or any of the Company Subsidiaries, and there have been no other
transactions of the type required to be disclosed pursuant to Items 402 and 404
of Regulation S-K under the Exchange Act.
(d) The Company has filed all exhibits to the Company SEC Reports required
by Item 601 of SEC Regulation S-K and has filed all contracts required to be
filed pursuant to paragraph (b)(10) of such Item 601.
SECTION 3.7. NO UNDISCLOSED LIABILITIES.
Neither the Company nor any of the Company Subsidiaries has any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
except: (a) liabilities or obligations reflected in the Company SEC Reports; (b)
liabilities or obligations incurred since September 30, 1999, in the ordinary
course of business consistent with past practices that have not had and are not
reasonably likely to have a Material Adverse Effect on the Company (without
taking into account the effects of the consummation of the Merger); and (c)
liabilities or obligations that have not had and are not reasonably likely to
have a Material Adverse Effect on the Company (without taking into account the
effects of the consummation of the Merger).
SECTION 3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since September 30, 1999, except as contemplated by this Agreement or as
disclosed in any Company SEC Report filed since September 30, 1999, or as set
forth in Schedule 3.8, the Company and the Company Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been (a) any change in the
business, operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of the
Company or any Company Subsidiary having, individually or in the aggregate, a
Material Adverse Effect on the Company, (b) any material change by the Company
in its accounting methods, principles or practices, (c) any material revaluation
by the Company of any material asset (including, without limitation, any writing
down of the value of inventory or writing off of notes or accounts receivable),
other than in the ordinary course of business consistent with past practice, (d)
any entry by the Company or any Company Subsidiary into any commitment or
transaction material to the Company and the Company Subsidiaries taken as a
whole, except in the ordinary course of business and consistent with past
practice, (e) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of its capital stock or any redemption,
purchase or other acquisition of any of its securities, (f) except as previously
disclosed to Acquiror, any increase in the benefits under, or the establishment
or amendment of, any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or employees of the Company or any Company
Subsidiary, except in the ordinary course of business consistent with past
practice, (g) except as previously disclosed to Acquiror, any entry by the
Company or any Company Subsidiary into any employment, consulting, severance,
termination or indemnification agreement with any officer or employee of the
Company or any Company Subsidiary or entry into any such agreement with any
other person outside the ordinary course of business, or (h) any agreement by
the Company or any Company Subsidiary to take any of the actions described in
this Section 3.8 except as expressly contemplated by this Agreement. Between
September 30, 1999, and the date of this Agreement (inclusive), neither the
Company nor any of the Company Subsidiaries has taken, or agreed to take, any
action that would constitute a material breach of Section 6.1 or Section 6.2 if
taken after the date of this Agreement.
SECTION 3.9. ABSENCE OF LITIGATION.
Except as set forth in the Company SEC Reports or in Schedule 3.9, there
are: (a) no claims, actions, suits, investigations or proceedings pending or, to
the Company's knowledge, threatened against the Company or any of the Company
Subsidiaries, or any material asset thereof, before any court,
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administrative, governmental, arbitral, mediation or regulatory authority or
body, domestic or foreign, that have had or are reasonably likely to have a
Material Adverse Effect on the Company (without taking into account the effects
of the consummation of the Merger) or that would prevent or enjoin, or, to the
knowledge of the Company, delay in any material respect, consummation of the
Merger or any of the other transactions contemplated hereby; and (b) no Orders
of any Governmental Entity or arbitrator outstanding against the Company or any
Company Subsidiary that have had or are reasonably likely to have a Material
Adverse Effect on the Company (without taking into account the effects of the
consummation of the Merger) or that would prevent or enjoin, or, to the
knowledge of the Company, delay in any material respect, consummation of the
Merger or any of the other transactions contemplated hereby. As of the date
hereof, to the actual knowledge of the Company, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that will, or that
would reasonably be expected to, cause or provide a bona fide basis for a
director or officer of the Company or any Company Subsidiary to seek
indemnification from the Company or any Company Subsidiary, except for events,
claims, disputes and other conditions or circumstances that would not be
reasonably expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
SECTION 3.10. LICENSES AND PERMITS; COMPLIANCE WITH LAWS.
Except as set forth on Schedule 3.10, the Company and Company Subsidiaries
hold and at all applicable times hereunder held, all material permits, licenses,
franchises, authorizations and approvals from all Governmental Entities that are
required for the operation of the businesses of the Company and the Company
Subsidiaries as presently conducted and the ownership, operation, lease and
holding by the Company and the Company Subsidiaries of their respective
properties and assets (the "Company Permits"). As of the date hereof, no
suspension or cancellation of any of the Company Permits is pending or, to the
knowledge of the Company, threatened, except where the failure to have, or the
suspension or cancellation of, any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Except where individually or in the aggregate the existence of a conflict with,
a violation of, or a default under would have a Material Adverse Effect on the
Company, none of the Company or any Company Subsidiary is in conflict with, or
in default under or violation of, (i) any Order applicable to the Company or any
Company Subsidiary or by which any asset of the Company or any Company
Subsidiary is bound or affected, (ii) any Material Contract or (iii) any Company
Permits.
SECTION 3.11. INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 3.11, the Company and the Company
Subsidiaries have good title to or the right to use all the Intellectual
Property owned, utilized or licensed by the Company and the Company Subsidiaries
(all of the foregoing items collectively referred to as the "Company
Intellectual Property") and all material inventions, processes, designs,
formulae, trade secrets and know-how necessary for the conduct of the businesses
of the Company and the Company Subsidiaries, as presently conducted. To the
Company's knowledge, none of the Company or any of the Company Subsidiaries is
infringing on any Intellectual Property right of others, and the Company has no
knowledge of any infringement by others of such rights owned by the Company or
any of the Company Subsidiaries, except where such infringement is not
reasonably likely to have a Material Adverse Effect on the Company.
(b) Except as set forth on Schedule 3.11 and except as is not reasonably
likely to have a Material Adverse Effect on the Company, with respect to each
item of Company Intellectual Property necessary for the conduct of the business
of the Company and the Company Subsidiaries as currently conducted: (i) the
owner thereof (if such owner is the Company or any Company Subsidiary) possesses
all right, title and interest in and to the item, subject to and except as may
be limited by the Credit Facility; (ii) the item is not subject to any
outstanding Order or charge; (iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand is pending or, to the
knowledge of the Company, is threatened that challenges the legality, validity,
enforceability, use or ownership of the item.
(c) The Company's disclosure in the Company's SEC Reports with respect to
all of the computer software, computer firmware, computer hardware (whether
general or special purpose), and other similar
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or related items of automated, computerized, and/or software system(s) that are
developed and sold by the Company or any of the Company Subsidiaries (other than
third-party software) or that are used or relied on by the Company or any
Company Subsidiary in the administration and conduct of their respective
businesses does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) RESERVED.
(e) Company and each Company Subsidiary has taken all steps that are
required to protect Company and each Company Subsidiary's rights in confidential
information and trade secrets of the Company and each Company Subsidiary or
provided by any other Person to Company or any Company Subsidiary.
(f) Neither this Agreement nor the assignment to Acquiror or the Surviving
Corporation, by operation of law or otherwise, of title to or the rights to use
all of the Company Intellectual Property will, after the Closing (a) cause or
result in an infringement or misappropriation of any Intellectual Property right
of any person; (b) cause or prevent Acquiror or the Surviving Corporation from
using the Company Intellectual Property in substantially the same manner as it
is used by Company and each Company Subsidiary prior to the Closing; or (c)
subject Acquiror or the Surviving Corporation to any obligation to pay royalties
or other amounts to any third party in excess of those payable by the Company or
any Company Subsidiary, respectively, prior to the Closing.
SECTION 3.12. EMPLOYEE BENEFIT PLANS AND RELATED MATTERS.
(a) The Company has made available to Acquiror copies of the governing
documents with respect to each pension, retirement, profit sharing, deferred
compensation, bonus, stock option, stock purchase, severance pay, vacation,
tuition reimbursement, cafeteria plan or other employee benefit plan, including,
but not limited to, any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
the Company, or any entity required to be aggregated with the Company under Code
Sections 414(b), (c), (m) or (o) (an "ERISA Affiliate"), maintains, sponsors, or
contributes to and under which employees or former employees (or their
respective beneficiaries) of the Company or an ERISA Affiliate are covered
("Company Benefit Plans"). None of the Company Benefit Plans is a "multiemployer
pension plan," as such term is defined in section 3(37) of ERISA, or a "single
employer plan", as defined in ERISA Section 4001(a)(15). None of the Company
Benefit Plans is a "Employee Stock Ownership Plan" ("ESOP") within the meaning
of Section 4975(e)(7) of the Code. With respect to each of the Company Benefit
Plans; Company has made available to Acquiror copies of each of the following
documents: (i) the most recent annual report (Form 5500), if any; (ii) the most
recent summary plan description and subsequent summaries of material
modifications required under ERISA, if any; (iii) the most recent determination
letter received from the Internal Revenue Service with respect to each Company
Benefit Plan that is intended to be tax-qualified under Section 401(a) of the
Code; (iv) all related trust agreements or annuity agreements (and any other
funding Document for each Plan; (v) all DOL opinions on any Plan and all
correspondence relating to the request for and receipt of each opinion; (vi) all
IRS rulings, opinions or technical advice relating to any Plan and all
correspondence relating to the request for and receipt of each ruling, opinion
or technical advice; and (vii) all Agreements with service providers or
fiduciaries for providing services on behalf of any Plan.
(b) Except where noncompliance would not have a Material Adverse Effect on
the Company or where otherwise disclosed on Schedule 3.12, the Company Benefit
Plans are in compliance with all applicable provisions of the Code, ERISA, the
National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Fair Labor Standards Act, the Securities
Act, the Securities Exchange Act of 1934, and all other Laws pertaining to the
Plans.
(c) Except as set forth on Schedule 3.12, to Company's knowledge, there are
no pending unfair labor practice charges, contract grievances under any
collective bargaining agreement, other administrative charges, claims,
grievances or suits, claims or actions filed in any court or with any
administrative agency
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or arbiter by any current or former employee of the Company or an ERISA
Affiliate relating to or arising out of any conduct, action or event occurring
prior to the date hereof with respect to the employment or termination of
employment of any such current or former employee of the Company or ERISA
Affiliate or relating to any Plan, nor are there any pending suits,
investigations or audits by any governmental agencies regarding any of the
Company Benefit Plans that would reasonably be expected to result in a Material
Adverse Effect on the Company, and to the knowledge of the Company, there exist
no facts that could reasonably be expected to give rise to such a claim.
(d) Neither the Company nor any Company Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by the Company or any Company Subsidiary. As of
the date hereof, there is no labor dispute, strike or work stoppage against the
Company or any Company Subsidiary pending or threatened in writing that may
interfere with the respective business activities of the Company or any Company
Subsidiary, except where such dispute, strike or work stoppage would not have a
Material Adverse Effect on the Company. As of the date hereof, to the knowledge
of the Company, none of the Company, any Company Subsidiary, or their respective
representatives or employees, has committed any unfair labor practices in
connection with the operation of the respective businesses of the Company or any
Company Subsidiary, and there is no charge or complaint against the Company or
any Company Subsidiary by the National Labor Relations Board or any comparable
state agency pending or threatened in writing, except where such unfair labor
practice, charge or complaint would not have a Material Adverse Effect on the
Company.
(e) Neither the Company nor any Company Subsidiary maintains or contributes
to any multiemployer or single employer plan as defined in Section 4001 of ERISA
nor any pension plan subject to Section 412 of the Code or Title IV of ERISA.
(f) The Company and the Company Subsidiaries have made and/or accrued all
contributions and other payments required by and due under the terms of each
Plan.
(g) The Disclosure Schedule sets forth a list of all Qualified Plans. The
trusts established under such Plans are exempt from federal income taxes under
Section 501(a) of the Code. Except as disclosed on Schedule 3.12, the Company
and the Company Subsidiaries have received determination letters issued by the
IRS with respect to each Qualified Plan, and the Company has Furnished to
Acquiror true and complete copies of all such determination letters. Except as
disclosed on Schedule 3.12, to the knowledge of the Company, nothing has
occurred since the date of the most recent applicable determination letter that
would reasonably be expected to adversely affect the tax-qualified status of any
Qualified Plan.
(h) The Disclosure Schedule identifies any Plan that covered any current or
former the Company or Company Subsidiary employees that has been terminated and
under which the Company or any Company Subsidiary currently has or can
reasonably be expected in the future to have any current liability.
(i) No Plan or Other Arrangement, individually or collectively, provides
for any payment by the Company or any Company Subsidiary to any employee or
independent contractor that is not deductible under Section 162(a)(1) or 404 of
the Code or that is an "excess parachute payment" pursuant to Section 280G of
the Code.
(j) No Plan is a "qualified foreign plan" (as such term is defined in
Section 404A(e) of the Code), and no Plan is subject to the Laws of any
jurisdiction other than the United States of America or one of its political
subdivisions.
(k) No Plan is a Voluntary Employees' Beneficiary Association ("VEBA")
within the meaning of Section 501(c)(9) of the Code.
(l) The Disclosure Schedule (i) identifies all post-retirement medical,
life insurance or other benefits promised, provided or otherwise due now or in
the future to current, former or retired employees of the Company or any Company
Subsidiary, (ii) identifies the method of funding (including, without
limitation, any individual accounting) for all such benefits, (iii) discloses
the funded status of the Plans providing or
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promising such benefits and (iv) sets forth the method of accounting for such
benefits to any key employees (as defined in Section 416(i) of the Code) of the
Company or any Company Subsidiary.
(m) Except as disclosed in Schedule 3.12, the Company and the Company
Subsidiaries have filed or caused to be filed all Forms 5500 (and Forms 5500
C/R) for the Company Benefit Plans that they are required to file. If not, on or
before Closing the Company and/or Company Subsidiary shall cause the required
Forms 5500 (and Form(s) 5500 C/R) to be filed.
(n) For any Code Section 125 Plans maintained, the Company has filed or
caused to be filed any required Form 5500 (or Form 5500 C/R), with Schedule F
attached, to satisfy the requirements of Code Section 6039(D)(a). If not, on or
before Closing the Company shall cause the required Form(s) 5500 (or Form(s)
5500 C/R), with Schedule F attached, to be filed to satisfy the requirements of
Code Section 6039(D)(a).
SECTION 3.13. PROPERTIES.
Each of the Company and the Company Subsidiaries has good, valid and, in
the case of real property, marketable fee simple, title to all the material
assets and properties that it owns and that are reflected on the Company's
consolidated balance sheet as of September 30, 1999, or that were thereafter
acquired (except for assets and properties sold, consumed or otherwise disposed
of in the ordinary course of business by them since such date), and such assets
and properties are owned free and clear of all liens, claims and Encumbrances,
except for (a) liens for taxes and assessments not yet due and payable or for
taxes the validity of which is being contested in good faith, (b) liens, claims
and Encumbrances to secure indebtedness reflected on the Company's consolidated
balance sheet as of September 30, 1999, or indebtedness (including purchase
money indebtedness) incurred in the ordinary course of business and consistent
with past practice after the date thereof, (c) mechanic's, materialmen's and
other liens, claims and Encumbrances that have arisen in the ordinary course of
business and (d) imperfections of title and liens, claims and Encumbrances the
existence of which do not have a Material Adverse Effect on the Company. The
Company and each Company Subsidiary is not, nor will the Company or any Company
Subsidiary be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement or the consummation of the
transactions contemplated by this Agreement, in breach of any lease agreement to
which the Company or any Company Subsidiary is a party (the "Company Leases")
the breach of which could reasonably be expected to have a Material Adverse
Effect on the Company or cause a loss of material rights under any Company
Lease, and such execution, delivery and performance will not otherwise give rise
to any right of any third party to terminate any Company Lease, the termination
of which could reasonably be expected to have a Material Adverse Effect on the
Company or cause a loss or impairment of material rights under any Company
Lease. All the material buildings, structures, equipment and other tangible
assets of the Company and the Company Subsidiaries (whether owned or leased) are
in normal operating condition (normal wear and tear excepted) and are fit for
use in the ordinary course of business of the Company. Notwithstanding anything
to the contrary, no representations or warranties set forth in this Section 3.13
shall apply to any personal property of the Company or any Company Subsidiary
that is surplus to the operating needs of the business of the Company or any
Company Subsidiary as presently conducted.
SECTION 3.14. CONTRACTS.
(a) For the purposes of this Agreement, (i) with respect to any party, the
term "Contracts" means all contracts, agreements, leases (including leases of
real property), licenses, commitments, sales and purchase orders, intercompany
work transfer agreements) with respect to work by or for another of such party's
businesses) and other instruments of any kind, whether written or oral and (ii)
the term "Material Contract" shall mean any Contract that is material to the
business of the Company or any Company Subsidiary including without limitation
all (i) employment, severance, termination, consulting (to the extent any
thereof (A) involve any payments to officers and directors of the Company or (B)
involve annual payments of at least $100,000 or are not terminable on less than
thirty days' notice without material penalty) and retirement agreements to which
the Company or any Company Subsidiary is a
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party, (ii) collective bargaining agreements to which the Company or any Company
Subsidiary is a party, (iii) agreements (excluding agreements that constitute
Government Contracts) that require aggregate future payments by or to the
Company or any Company Subsidiary of, more than $250,000 that are not terminable
by the Company or such Company Subsidiary on less than thirty days' notice
without material penalty, (iv) Government Contracts having a backlog in excess
of $20,000,000, (v) material agreements containing covenants limiting the
freedom of the Company or any Company Subsidiary to compete with any person in
any line of business in which the Company or any Company Subsidiary engages or
in any area or territory, or requiring the exclusive or minimum use or otherwise
restricting the use by the Company or any Company Subsidiary of any services,
products or technology to those provided by or available through any third
party, (vi) agreements of the Company or any Company Subsidiary with any
stockholder, executive officer or director of the Company, (vii) agreements
under which the Company or any Company Subsidiary has advanced or loaned any
amount in excess of $10,000 to any of its directors, officers or employees
except for reimbursement of ordinary or relocation expenses, and (viii) all
contracts listed as an exhibit to any of the Company SEC Reports under the rules
and regulations of the SEC relating to the business of the Company and the
Company Subsidiaries and any contracts that would be required to be so listed
but for the exceptions with respect to listing contracts set forth in Item
601(b)(10) of Regulation S-K (collectively, the "Material Contracts").
(b) All the Material Contracts are valid and in full force and effect
except to the extent they have previously expired in accordance with their
terms, and none of the Company or any of the Company Subsidiaries has violated
any material provision of, or committed or failed to perform any material act
that, with or without notice, lapse of time, or both, would constitute a default
under the provisions of, any Material Contract, except for defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
(c) To the knowledge of the Company, no counterparty to any Material
Contract has violated any material provision of, or committed or failed to
perform any act that, with or without notice, lapse of time, or both, would
constitute a default or other breach under the provisions of, such Material
Contract, except for defaults or breaches that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company.
(d) Except as set forth in Schedule 3.14, no officer or director of the
Company or any Company Subsidiary, or any "associate" (as such term is defined
in Rule 14a-1 under the Exchange Act) of any such officer or director, has any
material interest in any material contract or material property (real or
personal, tangible or intangible), used in, or pertaining to the business of the
Company or any Company Subsidiary.
(e) The Company has delivered or made available to Acquiror a complete and
correct copy of each acquisition agreement (including all material schedules,
exhibits, amendments, supplements, modifications, assignments and all other
documents delivered pursuant thereto or in connection therewith (the
"Acquisition Agreement") pursuant to which it or a Company Subsidiary has
acquired or proposes to acquire any assets or securities of a third party other
than in the ordinary course of business. The Company and the Company
Subsidiaries and, to the knowledge of the Company, no other person party thereto
is in default in the performance or compliance with any material provisions
thereof. Each Acquisition Agreement has been consummated; is in full force and
effect; and has not been terminated, rescinded or withdrawn. The consummation
thereof has not had, and is not reasonably expected to cause, a Material Adverse
Effect on the Company. All requisite approvals by and permits from Governmental
Entities with respect to the transactions contemplated by the Acquisition
Agreements and the Company's ownership of the assets and business of the third
parties so acquired have been obtained, and no such approvals or permits impose
any burdensome conditions on the Company or any Company Subsidiary. To the
Company's knowledge, none of the representations or warranties in any
Acquisition Agreement contain any untrue statement of a material fact or omit
any material fact necessary to make the statements therein not misleading.
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SECTION 3.15. TAXES.
Except as set forth in Schedule 3.15:
(a) The Company and each of the Company Subsidiaries has timely filed, or
will timely file, all material Tax Returns and reports required to be filed by
or with respect to any of them, either separately or as a member of a combined,
consolidated or unitary group of which the Company or any of the Company
Subsidiaries is or has been a member, for all periods ending prior to the
Effective Time and for the period from the date hereof up to and including the
Effective Time and has timely paid all Taxes shown on such Tax Returns. All such
returns and reports were true, complete and correct when they were filed and
will be true, correct and complete when they are filed on or before the
Effective Time. The Company and each of the Company Subsidiaries has timely paid
(or the Company has timely paid on behalf of the Company Subsidiaries), or made
provision for payment of (in accordance with GAAP), or accrued or reserved for
on the consolidated balance sheet as at September 30, 1999, (or in the case of
amounts becoming due after the date hereof prior to the Effective Time will have
paid, accrued or reserved for) whether asserted or unasserted, contingent or
otherwise, all Taxes that may have or may become due (including any withholding,
sales, value added or similar taxes that may have or may become due) for all
periods ending on or before the Effective Time. The Company has made available
to Acquiror complete copies of all Tax Returns that the Company and each of the
Company Subsidiaries has filed for the past three years and will, before
Closing, indicate which of those Tax Returns have been audited and which of
those Tax Returns are currently the subject of audit. The Company also will
deliver or make available to Acquiror correct and complete copies of all
examination reports and statements of deficiencies assessed against or agreed to
by any of the Company and the Subsidiaries during the past three years.
(b) To the Company's knowledge, there are no pending, proposed, threatened,
audits, judicial proceedings, assessments or deficiencies with respect to
material Taxes of the Company or any of the Company Subsidiaries. To the
Company's knowledge, there is no pending proposed, or threatened, claim by any
Tax authority in any jurisdiction in which the Company or any of the Company
Subsidiaries does not pay Tax or file Tax Returns that the Company or any of the
Company Subsidiaries is required to pay material Taxes or file material Tax
Returns. The Company has not given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes by
the Company or any of the Company Subsidiaries or for which they may be liable.
Prior to Closing, the Company will indicate where there is any dispute or claim
concerning any Tax Liability of any of the Company or the Company Subsidiaries
either (A) claimed or raised by any authority in writing or (B) as to which any
of the Company or the Company Subsidiaries has knowledge based upon personal
contact with any agent of such authority.
(c) The Company shall deliver or make available on or before Closing any
Tax sharing agreement, Tax allocation agreement, Tax indemnity or assumption
obligation or similar written or unwritten agreement, arrangement, understanding
or practice with respect to Taxes (including any advance pricing agreement,
closing agreement or other agreement relating to Taxes with any Tax authority)
to which the Company or any of the Company Subsidiaries is a party, subject,
obligated or bound in any manner.
(d) No property of the Company or any of the Company Subsidiaries (i) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code, or
(ii) secures any debt the interest on which is exempt from tax under Section 103
of the Code.
(e) The Company is a "United States Person," as defined in Section
7701(a)(30) of the Code.
(f) The charges, accruals, and reserves with respect to Taxes on the books
of the Company are adequate and are at least equal to the Company's and any of
the Company Subsidiaries' liability for Taxes. No consent to the application of
Section 341(f)(2) of the Code, has been filed with respect to any property or
assets held, acquired, or to be acquired by the Company or any of the Company
Subsidiaries.
(g) As used in this Agreement, "Tax" or "Taxes" means (i) any and all taxes
(whether federal, state and local, domestic or foreign) including, without
limitation, income, gross receipts, profits, property, sales, use, capital
stock, net worth, occupation, value added, ad valorem, transfer, franchise,
recapture, excise,
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windfall, withholding, payroll, social security, workers' compensation,
unemployment compensation or employment taxes, tariffs, imposts, duties, levies,
fees or governmental charges of any nature whatsoever, together with any
interest, penalties or additions to tax imposed with respect to any of the
foregoing, and (ii) any obligations under any agreements or arrangements with
respect to any tax or taxes described in clause (i) above. As used in this
Agreement, "Tax Return" means any return, declaration, report, claim for refund,
information return, or statement, estimated return or statement or other
document (including any related or supporting estimates, elections, schedules,
statements or information) filed or required to be filed in connection with the
determination, assessment or collection of any Tax or the administration of any
laws, regulations or administrative requirements relating to any Tax.
SECTION 3.16. ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) those substances
defined in or regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and any regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act; (B) petroleum and petroleum products including crude
oil and any fractions thereof; (C) natural gas, synthetic gas, and mixtures
thereof; (D) radon; (E) asbestos; (F) any other contaminant; and (G) any
substance with respect to which a federal, state or local agency requires
environmental investigation, monitoring, reporting or remediation; and (ii)
"Environmental Laws" means any federal, state or local law relating to (A)
releases or threatened releases of Hazardous Substances or materials containing
Hazardous Substances; (B) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or materials containing Hazardous
Substances; or (C) otherwise relating to pollution of the environment.
(b) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company: (i) the Company and each Company Subsidiary is
not in violation of any Environmental Law; (ii) none of the properties owned or,
to the Company's knowledge, leased by the Company or any Company Subsidiary is
contaminated with any Hazardous Substance; (iii) to the Company's knowledge, the
Company and each Company Subsidiary is not liable for any off-site
contamination; (iv) to the Company's knowledge, the Company and each Company
Subsidiary is not liable under any Environmental Law; (v) the Company and each
Company Subsidiary has all permits, licenses and other authorizations required
under any Environmental Law ("Environmental Permits"); (vi) the Company and each
Company Subsidiary is in compliance with its Environmental Permits and (vii)
there are no pending, or, to the knowledge of the Company, threatened claims
against the Company or any Company Subsidiary relating to any Environmental Law
or Hazardous Substance.
SECTION 3.17. INSURANCE.
The Company and the Company Subsidiaries have obtained and maintained in
full force and effect insurance with responsible and reputable insurance
companies or associations in such amounts, on such terms and covering such
risks, including fire, earthquake and other risks insured against by extended
coverage, as is customarily carried by reasonably prudent persons conducting
businesses or owning assets similar to those of the Company and the Company
Subsidiaries, and each has maintained in full force and effect public liability
insurance, insurance against claims for personal injury or death or property
damage occurring in connection with the activities of the Company and the
Company Subsidiaries or any properties owned, occupied or controlled by the
Company or any Company Subsidiary, in such amount as is customarily carried by
reasonably prudent persons conducting businesses or owning assets similar to
those of the Company and the Company Subsidiaries.
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SECTION 3.18. CERTAIN PRACTICES.
Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, none of the Company or any Company Subsidiary or
any director, officer, agent, consultant or employee of the Company or any
Company Subsidiary has: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item or property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which is in any manner related to the business or operations of the Company or
any Company Subsidiary, that was illegal under any federal, state or local Laws
of the United States or any other country having jurisdiction; (c) made any
payment to any customer or supplier of the Company or any Company Subsidiary or
any officer, director, partner, employee, consultant or agent of any such
customer or supplier, for the unlawful sharing of fees or to any such customer
or supplier or any such officer, director, partner, employee, consultant or
agent for the unlawful rebating of charges, or engaged in any other unlawful
reciprocal practice, or made any other unlawful payment or given any other
unlawful consideration to any such customer or supplier or any such officer,
director, partner, employee, consultant or agent, in respect of the business of
the Company or any Company Subsidiary; (d) made any other unlawful payment; or
(e) established or maintained any fund or asset that has not been appropriately
recorded in the books and records of the Company that would be in violation of
law.
SECTION 3.19. YEAR 2000.
To the Company's knowledge, each of the Company's and each Company
Subsidiary's products: (i) will record, store, process, calculate and present
calendar dates falling on and after January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information dependent on or relating to such dates
(collectively, "Year 2000 Compliant"). To the Company's knowledge, all of the
Company's and each Company's Subsidiary's Information Technology (as defined
below) is Year 2000 Compliant. To the Company's knowledge, all of the Company's
and each Company's Subsidiary's essential hardware, software and services
received from vendors and suppliers is Year 2000 Compliant. For purposes of the
foregoing, the term "Information Technology" shall mean the internal mission
critical systems, including local and wide area networks, financial systems and
embedded microcontrollers within facility, security, telephone and other systems
(other than general utility services including gas, electric, telephone and
postal) that are owned by the Company or any Company Subsidiary in the conduct
of its business.
SECTION 3.20. INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS.
Neither the Company nor any Company Subsidiary has entered into any
material interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements or foreign exchange contracts either
for the account of the Company or any Company Subsidiary.
SECTION 3.21. STATE TAKEOVER STATUTES.
The Company has taken all actions required to be taken by it in order to
exempt this Agreement and the transactions contemplated hereby from the
provisions of Section 203 of Delaware Law, and accordingly, such Sections do not
apply to the Merger or any of such transactions. No other "control share
acquisition," "fair price" or other anti-takeover laws or regulations enacted
under state or federal laws in the United States apply to this Agreement or any
of the transactions contemplated hereby.
SECTION 3.22. GOVERNMENT CONTRACTS.
(a) Except as disclosed in Schedule 3.22, to the knowledge of the Company,
with respect to Government Contracts held by the Company or any of its
Subsidiaries, there is, as of the date hereof, no (i) civil fraud or criminal
investigation by any government investigative agency that is reasonably likely
to
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have a Material Adverse Effect on the Company, (ii) suspension or debarment
proceeding (or equivalent proceeding) against the Company or any Company
Subsidiaries that is reasonably likely to have a Material Adverse Effect on the
Company, (iii) request by the government for a contract price adjustment based
on a claimed disallowance by Defense Contract Audit Agency or claim of defective
pricing, (iv) claim or equitable adjustment by the Company or any Company
Subsidiaries against the U.S. Government or any third party in excess of
$500,000, (v) written notice challenging, questioning or disallowing any cost(s)
in excess of $500,000, or (vi) notice of contract termination, cure notice or
show cause notice.
(b) For the purposes of this Agreement, with respect to any party,
"Government Contract" means any prime contract, subcontract, teaming agreement
or arrangement, joint venture, basic ordering agreement, pricing agreement,
letter contract, purchase order, delivery order, change order, Bid or other
arrangement of any kind between such party or any of its Subsidiaries and (i)
the U.S. Government (acting on its own behalf or on behalf of another country or
international organization), (ii) any prime contractor of the U.S. Government or
(iii) any subcontractor with respect to any contract of a type described in
clauses (i) or (ii) above. For the purposes of this Agreement, with respect to
any party, "Bid" means any quotation, bid or proposal made by such party or any
of its Subsidiaries that if accepted or awarded would lead to a Contract with
the U.S. Government or any other person for the design, manufacture and sale of
products or the provision of services.
SECTION 3.23. BOARD APPROVAL; VOTE REQUIRED.
The Board of Directors of the Company has determined that the transactions
contemplated by this Agreement are fair to, advisable and in the best interests
of the Company and its stockholders and has resolved to recommend to such
stockholders that they vote in favor of this Agreement. The affirmative vote at
the Company Stockholders Meeting of a majority of all outstanding shares of
Company Common Stock to adopt this Agreement is the only vote of the holders of
any class or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby, including the Merger.
SECTION 3.24. OPINION OF FINANCIAL ADVISOR.
The Board of Directors of the Company has received the written opinion
dated the date hereof of Banc of America Securities LLC, the Company's financial
advisor, to the effect that the Exchange Ratio is fair from a financial point of
view to the Holders as of the date of such opinion. A copy of such opinion has
been delivered to Acquiror.
SECTION 3.25. BROKERS.
Other than Banc of America Securities LLC, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. Prior to the date of this
Agreement, the Company has provided to Acquiror a complete and correct copy of
all agreements between the Company and any Person set forth on Schedule 3.25
pursuant to which such firm will be entitled to any payment relating to the
transactions contemplated by this Agreement.
SECTION 3.26. POOLING; TAX MATTERS.
Neither the Company nor any of its Affiliates has taken or agreed to take
any action or failed to take any action that would prevent the Merger from (a)
being treated for financial accounting purposes as a "pooling of interests" in
accordance with GAAP and the regulations and interpretations of the SEC; or (b)
constituting a reorganization within the meaning of Section 368(a) of the Code.
Schedule 3.26 contains a true and complete list of all persons who may be deemed
to be Affiliates of the Company.
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SECTION 3.27. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
The information supplied by the Company or required to be supplied by the
Company (except to the extent revised or superseded by amendments or
supplements) for inclusion in the registration statement on Form S-4, or any
amendment or supplement thereto, relating to the registration under the
Securities Act of the shares of Acquiror Common Stock to be issued in the Merger
(including any amendments or supplements, the "Registration Statement") shall
not, at the time the Registration Statement is declared effective by the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The information supplied by the Company or required to be supplied
by the Company (except to the extent revised or superseded by amendments or
supplements) for inclusion in the proxy statement relating to the Company
Stockholders Meeting (as hereinafter defined) (such proxy statement, as amended
or supplemented from time to time, the "Proxy Statement") shall not, on the date
the Proxy Statement is first mailed to the Holders, at the time of the Company
Stockholders Meeting and at the Effective Time, contain any untrue statement of
a material fact, or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies by or on behalf of the Company for the Company
Stockholders Meeting that has become false or misleading. Notwithstanding the
foregoing, the Company makes no representation, warranty or covenant with
respect to any information supplied or required to be supplied by Acquiror that
is contained in or omitted from any of the foregoing documents. If at any time
prior to the Effective Time any event or circumstance relating to the Company or
any Company Subsidiary, or their respective officers or directors, should be
discovered by the Company that should be set forth in an amendment or a
supplement to the Registration Statement or the Proxy Statement, as the case may
be, the Company shall promptly inform Acquiror. All documents that the Company
is responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND MERGER SUB
Acquiror and Merger Sub jointly and severally represent and warrant to the
Company as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION.
Merger Sub is a corporation duly organized, validly existing and in good
standing under Delaware Law. Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement. As of the date of
this Agreement, except for obligations or liabilities incurred in connection
with its incorporation and organization and otherwise in connection with the
transactions contemplated by this Agreement, Merger Sub has not incurred,
directly or indirectly, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person.
SECTION 4.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Merger Sub has heretofore delivered to the Company a complete and correct
copy of the certificate of incorporation and the bylaws of Merger Sub, each as
amended to date. Such certificate of incorporation and bylaws are in full force
and effect. Merger Sub is not in violation of any of the provisions of its
certificate of incorporation or bylaws.
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SECTION 4.3. CAPITALIZATION.
The authorized capital of Merger Sub is as set forth in its certificate of
incorporation. As of the date hereof, there are One Hundred (100) shares of
Merger Sub Stock issued and outstanding, all of which are owned by Acquiror.
SECTION 4.4. AUTHORITY.
Merger Sub has the necessary corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Merger Sub and the consummation by Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Merger Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Merger Sub and, assuming the due authorization, execution and delivery of this
Agreement by the Company and Acquiror, constitutes a legal, valid and binding
obligation of Merger Sub, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
SECTION 4.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Merger Sub do not, and
the performance by Merger Sub of its obligations under this Agreement will not:
(i) conflict with or violate the certificate of incorporation or bylaws of
Merger Sub; (ii) subject to compliance with the requirements set forth in
Section 4.5(b) below, conflict with or violate any Order applicable to Merger
Sub or by which any of its properties or assets is bound or affected; or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any Encumbrance on any of the properties or assets of Merger Sub
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Merger Sub
is a party or by which Merger Sub or any of its properties or assets is bound or
affected, except, in the case of clauses (ii) and (iii) above, for any such
conflicts, violations, breaches, defaults or other alterations or occurrences
that would not: (x) prevent or, to the knowledge of Acquiror, delay in any
material respect consummation of the Merger; (y) otherwise prevent Merger Sub
from performing its obligations under this Agreement in any material respect; or
(z) have a Material Adverse Effect on Merger Sub.
(b) The execution and delivery of this Agreement by Merger Sub does not,
and the performance of this Agreement by Merger Sub will not, require by, with
respect to or on behalf of Merger Sub any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except:
(i) for (A) applicable requirements, if any, of the Exchange Act, the Securities
Act, state securities or blue sky laws, state takeover laws, the NASD, and the
HSR Act, (B) applicable requirements, if any, of the consents, approvals,
authorizations or permits described in Schedule 5.5, and (C) filing and
recordation of appropriate merger documents as required by Delaware Law; or (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not: (x) prevent or, to the
knowledge of Acquiror, delay in any material respect consummation of the Merger;
(y) otherwise prevent Merger Sub from performing its obligations under this
Agreement in any material respect; or (z) have a Material Adverse Effect on
Merger Sub.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to the Company, subject to the
exceptions set forth herein and in the Acquiror's disclosure schedules (which
exceptions shall specifically identify a section, subsection
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or clause of a single section or subsection hereof, as applicable, to which such
exception relates, it being understood and agreed that each such exception shall
be deemed to be disclosed both under such section, subsection or clause hereof
and any other section, subsection or clause hereof to which such disclosure
reasonably relates) that:
SECTION 5.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Each of Acquiror and each Subsidiary of Acquiror (each an "Acquiror
Subsidiary" and collectively, the "Acquiror Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each of Acquiror and each Acquiror Subsidiary
is duly qualified to conduct its business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its business makes such qualification necessary, except for such
failures that would not have a Material Adverse Effect on Acquiror. Each of
Acquiror and each Acquiror Subsidiary has the requisite corporate power and
authority to own, operate, lease and otherwise to hold its assets and properties
and to carry on its business as now being conducted, except for such failures
that would not have a Material Adverse Effect on Acquiror.
SECTION 5.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Acquiror has heretofore delivered to the Company a complete and correct
copy of the certificate of incorporation and the bylaws of Acquiror, each as
amended to date. Such articles of incorporation and bylaws are in full force and
effect. Acquiror is not in violation of any of the provisions of its certificate
of incorporation or bylaws.
SECTION 5.3. CAPITALIZATION.
(a) The authorized capital stock of Acquiror consists of one hundred
million (100,000,000) shares of Acquiror Common Stock and two million five
hundred thousand (2,500,000) shares of preferred stock, par value $.01 per share
("Acquiror Preferred Stock"). As of December 6, 1999: (i) 45,346,383 shares of
Acquiror Common Stock were issued and outstanding; (ii) 694,872 shares of
Acquiror Preferred Stock were issued and outstanding; (iii) 5,000,000 shares of
Acquiror Common Stock were reserved for issuance upon the exercise of
outstanding employee stock options or other rights to purchase or receive
Acquiror Common Stock granted under Acquiror's Stock Option Plan of 1997 (the
"Acquiror Stock Option Plan"); (iv) 500,000 shares of Acquiror Common Stock were
reserved for issuance pursuant to Acquiror's Employee Stock Purchase Plan (the
"Acquiror Stock Purchase Plan"); and (v) 966,398 shares of Acquiror Common Stock
were held by Acquiror in Acquiror's treasury.
(b) All outstanding shares of capital stock of Acquiror are, and all shares
that may be issued pursuant to the Acquiror Stock Option Plan or Acquiror Stock
Purchase Plan will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except as set forth in
this Section 5.3 and except for changes since September 30, 1999 resulting from
the issuance of shares of Acquiror Common Stock pursuant to the Acquiror Stock
Option Plan or the Acquiror Stock Purchase Plan or as expressly permitted by
this Agreement: (i) there are not issued, reserved for issuance or outstanding
(A) any shares of capital stock or other voting securities of Acquiror, (B) any
securities of Acquiror or any Acquiror Subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting securities of
or ownership interests in Acquiror or any Acquiror Subsidiary, (C) any warrants,
calls, options or other rights to acquire from Acquiror or any Acquiror
Subsidiary, or any obligation of Acquiror or any Acquiror Subsidiary to issue,
any capital stock, voting securities or other ownership interests in, or
securities convertible into or exchangeable or exercisable for capital stock or
voting securities of or other ownership interests in, Acquiror or any Acquiror
Subsidiary; and (ii) there are no outstanding obligations of Acquiror or any
Acquiror Subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities.
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(c) Except as described in Schedule 5.3, neither Acquiror nor any Acquiror
Subsidiary is a party to any agreement restricting the purchase or transfer of,
relating to the voting of, requiring registration of, or granting any preemptive
or, except as provided by the terms of Acquiror Stock Option Plans or the
Acquiror Stock Purchase Plan, antidilutive rights with respect to, any
securities of the type described in this Section 5.3.
SECTION 5.4. AUTHORITY.
(a) Acquiror has the necessary corporate power and authority to enter into
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Acquiror and the consummation by Acquiror of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other proceedings on the part of Acquiror are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. Acquiror has
taken all steps necessary, as the sole stockholder of Merger Sub, to authorize
and approve the execution, delivery and performance of the terms of this
Agreement by Merger Sub. This Agreement has been duly executed and delivered by
Acquiror and, assuming the due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of Acquiror,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity.
(b) The Board of Directors of Acquiror has, on December 8, 1999, by
unanimous resolution (i) approved and adopted this Agreement and the
transactions contemplated by this Agreement and (ii) determined that the Merger
is in the best interests of Acquiror and its stockholders and that the terms of
this Agreement are fair to Acquiror and its stockholders.
SECTION 5.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Acquiror do not, and
the performance by Acquiror of its obligations under this Agreement will not:
(i) conflict with or violate the certificate of incorporation or bylaws of
Acquiror; (ii) subject to obtaining the approvals and compliance with the
requirements set forth in Section 5.5(b) below, conflict with or violate any
Order applicable to Acquiror or any Acquiror Subsidiary or by which any of their
respective properties or assets is bound or affected; or (iii) except as set
forth in Schedule 5.5, result in any breach of or constitute a default (or an
event that with or without notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
any of the properties or assets of Acquiror or any Acquiror Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Acquiror or any
Acquiror Subsidiary is a party or by which Acquiror, any Acquiror Subsidiary or
any of their respective properties or assets is bound or affected, except, in
the case of clauses (ii) and (iii) above, for any such conflicts, violations,
breaches, defaults or other alterations or occurrences that would not: (x)
prevent or, to the knowledge of Acquiror, delay in any material respect
consummation of the Merger; (y) otherwise prevent Acquiror from performing its
obligations under this Agreement in any material respect; or (z) have a Material
Adverse Effect on Acquiror.
(b) The execution and delivery of this Agreement by Acquiror does not, and
the performance of this Agreement by Acquiror will not, require by, with respect
to or on behalf of Acquiror or any Acquiror Subsidiary any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except (i) for (A) applicable requirements, if any, of the Securities
Act, state securities or blue sky laws, Exchange Act, state takeover laws, the
NYSE, the NASD and the HSR Act, (B) applicable requirements, if any, of the
consents, approvals, authorizations or permits described in Schedule 5.5, and
(C) filing and recordation of appropriate merger documents as required by
Delaware Law, or (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not:
(x) prevent or, to the knowledge of Acquiror, delay in any material
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respect consummation of the Merger; (y) otherwise prevent Acquiror from
performing its obligations under this Agreement in any material respect; or (z)
have a Material Adverse Effect on Acquiror.
SECTION 5.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Acquiror, and each Acquiror Subsidiary required to file, has filed all
forms, reports, statements and other documents required to be filed with the SEC
since January 1, 1997, and has heretofore furnished to the Company, in the form
filed with the SEC since such date, together with any amendments thereto, all of
such forms, reports, statements and other documents, including without
limitation, its (i) Annual Reports on Form 10-K; (ii) Quarterly Reports on Form
10-Q; (iii) proxy statements relating to meetings of stockholders (whether
annual or special); (iv) reports on Form 8-K; and (v) other reports or
registration statements filed by Acquiror and/or such Acquiror Subsidiaries
(collectively, the "Acquiror SEC Reports"). As of their respective filing dates,
the Acquiror SEC Reports (including all Acquiror SEC Reports filed after the
date of this Agreement and prior to the Effective Time): (x) complied (or will
comply when filed) as to form in all material respects with the requirements of
the Exchange Act and the Securities Act, as applicable; and (y) did not or shall
not at the time they are filed contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. No Acquiror Subsidiary is required to file any form,
report, statement or other document with the SEC except in conjunction with the
filling of the Acquiror SEC Reports.
(b) The audited consolidated financial statements and unaudited interim
financial statements of Acquiror (including the notes and schedules thereto)
contained or incorporated by reference in the Acquiror SEC Reports (including
all Acquiror SEC Reports filed after the date of this Agreement and prior to the
Effective Time) (the "Acquiror Financial Statements") complied or shall comply
in all material respects with applicable GAAP accounting requirements and with
the rules and regulations of the SEC with respect thereto. The Acquiror
Financial Statements present or shall present fairly in all material respects
the consolidated financial position of Acquiror and the Acquiror Subsidiaries at
the respective dates thereof and the consolidated results of operations and cash
flows of Acquiror and the Acquiror Subsidiaries for the periods indicated, in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be noted therein) and subject in the case of interim
financial statements to normal year-end adjustments.
(c) Except as disclosed in the Acquiror SEC Reports filed prior to the date
of this Agreement, none of Acquiror or any of the Acquiror Subsidiaries is
indebted to any director, officer, employee, agent or consultant of Acquiror or
any of the Acquiror Subsidiaries (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses) and no such person is
indebted to Acquiror or any of the Acquiror Subsidiaries, and there have been no
other transactions of the type required to be disclosed pursuant to Items 402
and 404 of Regulation S-K under the Exchange Act.
(d) Acquiror has filed all exhibits to the Acquiror SEC Reports required by
Item 601 of SEC Regulation S-K and has filed (or made available to the Company)
all material contracts that would have been required to be filed if there were
no exclusions or exceptions in paragraph (b)(10) of such Item 601.
SECTION 5.7. NO UNDISCLOSED LIABILITIES.
Neither Acquiror nor any of the Acquiror Subsidiaries has any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
except: (a) liabilities or obligations reflected in the Acquiror SEC Reports;
(b) liabilities or obligations incurred since September 30, 1999, in the
ordinary course of business consistent with past practices that have not had,
and are not reasonably likely to have (without taking into account the effects
of the consummation of the Merger), a Material Adverse Effect on Acquiror; and
(c) liabilities or obligations that have not had, and are not reasonably likely
to have (without taking into account the effects of the consummation of the
Merger), a Material Adverse Effect on Acquiror.
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SECTION 5.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since September 30, 1999, except as contemplated by this Agreement or as
disclosed in any Acquiror SEC Report filed since September 30, 1999, or as set
forth in Schedule 5.8, Acquiror and the Acquiror Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been (a) any change in the
business, operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of Acquiror
or any Acquiror Subsidiary having, individually or in the aggregate, a Material
Adverse Effect on Acquiror, (b) any declaration, setting aside or payment of any
dividend or distribution in respect of the shares of its capital stock or any
redemption, purchase or other acquisition of any of its securities, or (c) any
agreement by Acquiror or any Acquiror Subsidiary to take any of the actions
described in this Section 5.8 except as expressly contemplated by this
Agreement. Between September 30, 1999, and the date of this Agreement
(inclusive), neither Acquiror nor any of the Acquiror Subsidiaries has taken, or
agreed to take, any action that would constitute a material breach of Section
6.3 or Section 6.4 if taken after the date of this Agreement.
SECTION 5.9. ABSENCE OF LITIGATION.
Except as set forth in the Acquiror SEC Reports or in Schedule 5.9, there
are: (a) no claims, actions, suits, investigations, or proceedings pending or,
to Acquiror's knowledge, threatened against Acquiror or any of the Acquiror
Subsidiaries before any court, administrative, governmental, arbitral, mediation
or regulatory authority or body, domestic or foreign, that would be reasonably
likely to have a Material Adverse Effect on Acquiror or that would prevent or
enjoin, or delay in any material respect, consummation of the Merger or the
transactions contemplated hereby; and (b) no Orders of any Governmental Entity
or arbitrator outstanding against Acquiror or any Acquiror Subsidiary that would
reasonably be likely to have a Material Adverse Effect on Acquiror or that would
prevent or enjoin, or delay in any material respect, consummation of the Merger
or the transactions contemplated hereby.
SECTION 5.10. CERTAIN PRACTICES.
Except as would not, individually or in the aggregate, have a Material
Adverse Effect on Acquiror, none of Acquiror or any Acquiror Subsidiary or any
director, officer, agent, consultant or employee of Acquiror or any Acquiror
Subsidiary has: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item or property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which is in any manner related to the business or operations of Acquiror or any
Acquiror Subsidiary, that was illegal under any federal, state or local Laws of
the United States or any other country having jurisdiction; (c) made any payment
to any customer or supplier of Acquiror or any Acquiror Subsidiary or any
officer, director, partner, employee, consultant or agent of any such customer
or supplier, for the unlawful sharing of fees or to any such customer or
supplier or any such officer, director, partner, employee, consultant or agent
for the unlawful rebating of charges, or engaged in any other unlawful
reciprocal practice, or made any other unlawful payment or given any other
unlawful consideration to any such customer or supplier or any such officer,
director, partner, employee, consultant or agent, in respect of the business of
Acquiror or any Acquiror Subsidiary; (d) made any other unlawful payment; or (e)
established or maintained any fund or asset that has not been appropriately
recorded in the books and records of Acquiror that would be in violation of law.
SECTION 5.11. GOVERNMENT CONTRACTS.
Except as disclosed in Schedule 5.11, to the knowledge of the Acquiror,
with respect to Government Contracts held by Acquiror or any of its
Subsidiaries, there is, as of the date hereof, no (i) civil fraud or criminal
investigation by any government investigative agency that is reasonably likely
to have a Material Adverse Effect on the Acquiror, (ii) suspension or debarment
proceeding (or equivalent proceeding) against the Acquiror or any Acquiror
Subsidiaries that is reasonably likely to have a Material Adverse
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Effect on the Acquiror, (iii) request by the government for a contract price
adjustment based on a claimed disallowance by Defense Contract Audit Agency or
claim of defective pricing, (iv) claim or equitable adjustment by the Acquiror
or any Acquiror Subsidiaries against the U.S. Government or any third party in
excess of $500,000, (v) written notice challenging, questioning or disallowing
any cost(s) in excess of $500,000, or (vi) notice of contract termination, cure
notice or show cause notice.
SECTION 5.12. BOARD APPROVAL; VOTE REQUIRED.
The Board of Directors of Acquiror has determined that the transactions
contemplated by this Agreement are advisable and in the best interests of
Acquiror and its stockholders. The affirmative vote of the Board of Directors to
approve the transactions contemplated by this Agreement is the only vote
necessary for consummation by Acquiror of the Merger and the other transactions
contemplated hereby.
SECTION 5.13. OPINION OF FINANCIAL ADVISOR.
The Board of Directors of Acquiror has received the written opinion of
Credit Suisse First Boston Corporation, Acquiror's financial advisor, addressed
to the stockholders of Acquiror, to the effect that, as of the date of such
opinion, the Exchange Ratio is fair from a financial point of view to the
holders of Acquiror Common Stock. A copy of such opinion has been delivered to
the Company and such opinion has not been withdrawn or modified in any material
respect.
SECTION 5.14. BROKERS.
Other than Credit Suisse First Boston Corporation, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Acquiror. Within two (2)
days subsequent to the date of this Agreement, the Acquiror shall provide to the
Company a complete and correct copy of all agreements between the Acquiror and
any Person pursuant to which such Person will be entitled to any payment
relating to the transactions contemplated by this Agreement.
SECTION 5.15. POOLING; TAX MATTERS.
Neither Acquiror nor any of its Affiliates has taken or agreed to take any
action or failed to take any action that would prevent the Merger from: (a)
being treated for financial accounting purposes as a "pooling of interests" in
accordance with GAAP and the regulations and interpretations of the SEC; or (b)
constituting a reorganization within the meaning of Section 368(a) of the Code.
Schedule 5.15 contains a true and complete list of all persons who may be deemed
to be Affiliates of Acquiror.
SECTION 5.16. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
The information supplied by Acquiror or required to be supplied by Acquiror
(except to the extent revised or superseded by amendments or supplements) for
inclusion in the Registration Statement shall not, at the time the Registration
Statement is declared effective by the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
supplied by Acquiror or required to be supplied by Acquiror (except to the
extent revised or superseded by amendments or supplements) for inclusion in the
Proxy Statement shall not, on the date the Proxy Statement is first mailed to
the Company's stockholders, at the time of the Company Stockholders Meeting and
at the Effective Time, contain any statement that, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies by or on behalf of the
Company for the Company Stockholders Meeting that has become false or
misleading. Notwithstanding the foregoing, Acquiror makes no representation,
warranty or covenant with respect to any information supplied or
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required to be supplied by the Company that is contained in or omitted from any
of the foregoing documents. If at any time prior to the Effective Time any event
or circumstance relating to Acquiror or any Acquiror Subsidiary, or their
respective officers or directors, should be discovered by Acquiror that should
be set forth in an amendment or a supplement to the Registration Statement or
the Proxy Statement, as the case may be, Acquiror shall promptly inform the
Company. All documents that Acquiror is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply as to form and
substance in all material respects with the applicable requirements of the
Securities Act and the Exchange Act.
SECTION 5.17. SHARE OWNERSHIP.
Neither Acquiror nor any Affiliate of Acquiror, beneficially owned, as of
the date of this Agreement, any Shares of the Company and none of the forgoing
is an "Interested Stockholder" for purposes of Section 203 of the Delaware Law.
SECTION 5.18. ENVIRONMENTAL MATTERS.
Except as would not, individually or in the aggregate, have a Material
Adverse Effect on Acquiror: (i) Acquiror and each Acquiror Subsidiary is not in
violation of any Environmental Law; (ii) none of the properties owned or to
Acquiror's knowledge, leased by Acquiror or any Acquiror Subsidiary is
contaminated with any Hazardous Substance; (iii) to Acquiror's knowledge,
Acquiror and each Acquiror Subsidiary is not liable for any off-site
contamination; (iv) to Acquiror's knowledge, Acquiror and each Acquiror
Subsidiary is not liable under any Environmental Law; (v) Acquiror and each
Acquiror Subsidiary has all Environmental Permits; (vi) Acquiror and each
Acquiror Subsidiary is in compliance with its Environmental Permits and (vii)
there are no pending, or, to the knowledge of Acquiror, threatened claims
against Acquiror or any Acquiror Subsidiary relating to any Environmental Law or
Hazardous Substance.
ARTICLE VI.
COVENANTS
SECTION 6.1. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees that, prior to the Effective Time,
unless otherwise expressly contemplated by this Agreement or consented to in
writing by Acquiror (which consent shall not be unreasonably withheld, delayed
or conditioned), the Company shall, and shall cause each Company Subsidiary to:
(a) operate its business in the usual and ordinary course consistent with past
practices; (b) use its reasonable best efforts to preserve substantially intact
its business organization, maintain its rights and franchises, retain the
services of its respective principal officers and key employees and maintain its
relationship with its respective principal customers and suppliers; (c) use its
reasonable best efforts to maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and tear excepted; (d)
use its reasonable best efforts to keep in full force and effect insurance
comparable in amount and scope of coverage to that currently maintained; (e)
prepare and file all Tax returns required to be filed in a timely manner, and in
a manner consistent with past practices and applicable laws and regulations; (f)
timely file with the SEC all reports required to be filed under the Exchange
Act, which reports (including the unaudited interim financial statements
included in such reports) shall comply in all material respects with the
Exchange Act, the rules and regulations promulgated thereunder and all
applicable accounting requirements; and (g) operate its business in accordance
with the terms of its licenses and in all material respects with all applicable
laws.
SECTION 6.2. NEGATIVE COVENANTS OF THE COMPANY.
Except as set forth in Schedule 6.2 or as expressly contemplated by this
Agreement or otherwise consented to in writing by Acquiror (which consent shall
not be unreasonably withheld, delayed or
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conditioned), from the date hereof until the Effective Time the Company shall
not, and shall cause each Company Subsidiary not to, do any of the following:
(a) (i) increase the periodic compensation payable to or to become payable
to any of its directors, executive officers or any key employees; (ii) grant any
severance or termination pay (other than pursuant to existing severance
arrangements or policies as in effect on the date of this Agreement) to, or
enter into or modify any employment or severance agreement with, any of its
directors, officers or employees; (iii) adopt or amend any employee benefit plan
or arrangement, except as may be required by applicable law; or (iv) pay any
cash bonuses; provided, however, without the prior written consent of Acquiror,
the Company shall be permitted during each full fiscal quarter of the Company,
beginning with the fiscal quarter of the Company beginning on December 31, 1999,
between the date hereof and the Effective Time to pay cash bonuses and increase
periodic compensation as described in clause (i) hereof as long as the aggregate
amount of any such cash bonuses and the annualized effect of such compensation
increases does not exceed $2,000,000 from the date hereof until Closing (except
any retention bonuses previously disclosed to Acquiror) or (v) except as
previously disclosed to Acquiror, make any loans to any officer, director or key
employee of the Company.
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of Company Common Stock;
(c) (i) redeem, repurchase or otherwise reacquire any shares of Company
Common Stock or any securities or obligations convertible into or exchangeable
for any shares of Company Common Stock or other securities or obligations of the
Company, or any options, warrants or conversion or other rights to acquire any
shares of Company Common Stock or any such other securities or obligations
(except in connection with the exercise of the Options and Director Options in
accordance with their terms); (ii) effect any merger, consolidation,
restructuring, reorganization or recapitalization or adopt a plan of complete or
partial liquidation or dissolution; or (iii) split, combine or reclassify any
shares of Company Common Stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of, or in substitution for, shares
of Company Common Stock or other securities;
(d) (i) issue, pledge, deliver, award, grant or sell, or register under the
Securities Act or the Exchange Act or otherwise file any registration statement
under any such statute covering, or authorize or propose the issuance, pledge,
delivery, award, grant or sale of (including the grant of any Encumbrances on)
or registration of or filing of any registration statement covering, any shares
of any class of its capital stock (including shares of Treasury Stock) or other
securities (except in connection with the Options and Director Options), any
securities convertible into or exercisable or exchangeable for any such shares
or other securities, or any rights, warrants or options to acquire any such
shares or other securities (except for the issuance of options to acquire shares
of Company Common Stock: (A) to new employees of the Company that are hired
after the date hereof; (B) to employees of the Company on a quarterly basis
pursuant to the Company's performance-based equity incentive program; provided
that the number of shares of Company Common Stock subject to options issued by
the Company pursuant to this clause (B) shall not exceed 50,000 in the aggregate
per any fiscal quarter of the Company beginning with the fiscal quarter of the
Company beginning on December 31, 1999; and (C) to directors of the Company (in
their capacity as directors) in connection with annual grants of stock options
by the Company to the members of the Company's Board of Directors; provided that
the number of shares of Company Common Stock subject to options issued by the
Company pursuant to this clause (C) shall not exceed options covering 20,000
shares of Company Common Stock; provided, that any issuances of options by the
Company pursuant to clauses (A), (B) and (C) shall only be to the extent such
issuances are in the ordinary course of business and consistent with past
practice); or (ii) amend or otherwise modify the terms of any such rights,
warrants or options (including, without limitation, any Option or Director
Option);
(e) (i) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or any division (other than a Company Subsidiary) thereof
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(except that prior to the initial filing of the Registration Statement, the
Company may enter into a transaction to acquire substantially all the equity
securities or assets of an entity (a "Company Acquisition") so long as the
aggregate consideration payable for such target entity in a Company Acquisition
consists solely of cash in an amount not to exceed $10 million) or (ii) make or
commit to make any investments or capital expenditures, other than investments
or capital expenditures not exceeding in the aggregate $1,000,000 from the date
hereof until Closing, and that are solely for purposes related to computer
hardware and software, leaseholds, furniture and fixtures;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise encumber
or dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise encumber or dispose of, any of its assets, except for dispositions in
the ordinary course of business and consistent with past practice or sales that
do not exceed $200,000 in the aggregate;
(g) propose or adopt any amendment to its certificate or articles of
incorporation or its bylaws;
(h) (i) make any material change in any of its methods of accounting; or
(ii) make or rescind any express or deemed election relating to Taxes, settle or
compromise any claim, action, lawsuit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes (except where the amount
of such settlements or controversies, individually or in the aggregate, does not
exceed $100,000), or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ended December 31, 1998, except,
in the case of clause (i) or clause (ii), as may be required by applicable law
or regulations or GAAP;
(i) incur or increase any obligation for borrowed money (except that the
Credit Facility may be increased by no more than $10 million in general and an
additional $10 million in the case that the Company undertakes a Company
Acquisition), whether or not evidenced by a note, bond, debenture or similar
instrument, or capitalized lease obligation or issue or sell any debt securities
or any warrants or rights to acquire any debt securities of the Company or any
Company Subsidiary, or any guarantee of any obligation for borrowed money, other
than purchase money indebtedness not to exceed $500,000 in the aggregate, except
in the ordinary course of business under existing loan agreements or capitalized
leases, or prepay, before the scheduled maturity thereof, any of its long-term
debt;
(j) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any Affiliate
(except a Company Subsidiary) which involves the transfer of consideration or
has a financial impact on such entity, other than pursuant to such agreements,
arrangements, or understandings existing on the date of this Agreement;
(k) except in the ordinary course of business, enter into any contract,
agreement, commitment, arrangement, lease (including with respect to personal
property), policy or other instrument that has a value in excess of $50,000;
(l) adjust, split, combine or reclassify any capital stock;
(m) except for transactions in the ordinary course of business, terminate
or amend in a material way, or waive any provision of, any material Company
Contract; provided that this provision shall not prohibit the Company from
entering into customer and service contracts in the ordinary course of business;
(n) settle any material claim, action or proceeding involving money
damages, except any settlement in the ordinary course of business where the
amount of such settlement individually does not exceed $25,000, and in the
aggregate with all other such settlements, does not exceed $50,000;
(o) take any action that would, or would be reasonably likely to, prevent
the Merger from being accounted for as a "pooling of interests" in accordance
with GAAP and the rules and regulations of the SEC;
(p) take any action that is intended or would reasonably be expected to
result in any of the Company's representations and warranties set forth in this
Agreement being or becoming untrue in any
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material respect at any time prior to the Effective Time, or in any of the
conditions to the Merger set forth in Article VIII not being satisfied or in a
violation of any provision of this Agreement; or
(q) agree in writing or otherwise to do any of the foregoing.
SECTION 6.3. RESERVED.
SECTION 6.4. NEGATIVE COVENANTS OF ACQUIROR.
Except as expressly contemplated by this Agreement, from the date hereof
until the Effective Time, without the written consent of the Company (which
consent shall not be unreasonably withheld, delayed or conditioned) Acquiror
shall not, and shall not permit any Acquiror Subsidiary to, do any of the
following:
(a) (i) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of Acquiror Common Stock; (ii) repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other securities
of, or other ownership interests in, Acquiror or any Acquiror Subsidiary (except
for those repurchases related to shares owned by employees or former employees
of Acquiror or any Acquiror Subsidiary); or (iii) except to the extent not
accounted for in Section 2.5 hereof, split, combine or reclassify any shares of
Acquiror Common Stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares of Acquiror
Common Stock or other securities;
(b) take any action that is intended or would reasonably be expected to
result in any of Acquiror's representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior to
the Effective Time, or in any of the conditions to the Merger set forth in
Article VIII not being satisfied or in a violation of any provision of this
Agreement;
(c) take any action that would, or would be reasonably likely to, prevent
the Merger from being accounted for as a "pooling of interests" in accordance
with GAAP and the rules and regulations of the SEC;
(d) take any action that would, or would be reasonably likely to, prevent
the Merger from qualifying as a reorganization under the provisions of Section
368(a) of the Code; or
(e) agree in writing or otherwise to do any of the foregoing.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS AND INFORMATION.
During the period from the date hereof to the Effective Time (the "Interim
Period"), the Company and Acquiror shall, and shall cause the Company
Subsidiaries and the Acquiror Subsidiaries, respectively, to, afford to each
other and their respective officers, employees, accountants, consultants, legal
counsel and other representatives reasonable access during normal business hours
(and at such other times as the parties may mutually agree) to the properties,
executive personnel and all information concerning the business, properties,
contracts, records and personnel of the Company and the Company Subsidiaries or
Acquiror and the Acquiror Subsidiaries, as the case may be, as such other party
may reasonably request; provided that no investigation pursuant to this Section
7.1 shall affect any representations or warranties made herein or the conditions
to the obligations of the respective parties to consummate the Merger.
SECTION 7.2. CONFIDENTIALITY.
Acquiror and the Company each acknowledge and agree that all information
received by it (the "Receiving Party") from or on behalf of the other party in
connection with the transactions contemplated under this Agreement shall be
deemed received pursuant to the confidentiality letter agreements, effective
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as of November 23, 1999 (the "Company Confidentiality Agreement"), and October
25, 1999 (the "Acquiror Confidentiality Agreement"), between the Company and
Acquiror (together, the "Confidentiality Agreements"), and such Receiving Party
shall, and shall cause its officers, directors, employees, Affiliates, financial
advisors and agents to, comply with the provisions of the Confidentiality
Agreements with respect to such information, and the provisions of the
Confidentiality Agreements are hereby incorporated herein by reference with the
same effect as if fully set forth herein, provided, however, that (i) in the
event the Merger is consummated, the term of the Confidentiality Agreements
shall survive the Closing Date with respect to the safeguarding of confidential
information and (ii) in the event this Agreement is terminated pursuant to
Article IX, the Confidentiality Agreements shall survive such termination in
their entirety and remain in full force and effect.
SECTION 7.3. PROXY STATEMENT AND REGISTRATION STATEMENT; STOCKHOLDERS MEETINGS.
(a) As soon as practicable following the date of this Agreement but no
later than January 15, 2000, the Company shall prepare and file with the SEC the
Proxy Statement and Acquiror shall prepare and file with the SEC the
Registration Statement in which the Proxy Statement will be included as a
prospectus. Each of the Company and Acquiror shall use reasonable best efforts
to have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing. The Company shall use reasonable
best efforts to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act. Acquiror also shall take any action
required to be taken by the SEC, NYSE or under any applicable state securities
laws in connection with the issuance of Acquiror Common Stock in the Merger and
the Company shall furnish all information concerning the Company and the holders
of Company Common Stock as may be reasonably requested in connection with any
such action. No filing of, or amendment or supplement to, the Registration
Statement will be made by Acquiror without the Company's prior consent (which
shall not be unreasonably withheld, delayed or conditioned) and without
providing the Company the reasonable and adequate opportunity to review and
comment thereon. Acquiror shall advise the Company, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, the issuance of any stop order,
the suspension of the qualification of Acquiror Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information. If at any time prior to the Effective Time any
information relating to the Company or Acquiror, or any of their respective
Affiliates, officers or directors, should be discovered by the Company or
Acquiror that should be set forth in an amendment or supplement to any of the
Registration Statement or the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party that
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company and Acquiror.
(b) The Company shall, as promptly as practicable after the Registration
Statement is declared effective under the Securities Act, duly call, give notice
of, convene and hold a meeting of its stockholders (the "Company Stockholders
Meeting") in accordance with Delaware Law and its certificate of incorporation
and bylaws for the purpose of obtaining the Company Stockholder Approval as
required by Delaware Law and otherwise, and shall, through the unanimous action
of its Board of Directors, declare that this Agreement is advisable and
recommend to its stockholders the approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby; provided, however, that
the Board of Directors of the Company shall submit this Agreement to the
Company's stockholders, whether or not the Board of Directors of the Company at
any time subsequent to the date hereof determines that this Agreement is no
longer advisable or recommends that the stockholders of the Company reject it.
Unless the Board of Directors of the Company has withdrawn its recommendation of
this Agreement in compliance herewith, the Company shall use reasonable best
efforts to solicit from its stockholders proxies
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in favor of the approval and adoption of this Agreement and the Merger and to
secure the vote or consent of stockholders required by Delaware Law and its
certificate of incorporation and bylaws to approve and adopt this Agreement and
the Merger.
(c) Notwithstanding the provisions of Section 7.3(b), in the event that an
Acquisition Proposal for the Company received by the Company in writing
constitutes a Superior Proposal and the Board of Directors of the Company has
resolved to recommend such Superior Proposal to its stockholders, the Board of
Directors of the Company may, at any time prior to the Stockholders Meeting,
withdraw its recommendation of this Agreement as required under Section 7.3(b)
hereof and recommend such the Superior Proposal to its stockholders (i) if, but
only if, the Company (A) complies fully with this Section 7.3(c) and (B)
provides Acquiror with at least five (5) Business Days' prior written notice of
its intent to withdraw its recommendation of this Agreement along with a
description in writing of all of the material terms and conditions of such
Superior Proposal and (ii) if, in the event that during such five (5) Business
Days Acquiror makes a counter proposal to such Superior Proposal (the "Acquiror
Counter Proposal"), the Company's Board of Directors in good faith, taking into
account the advice of its outside financial advisors, determines that the
Acquiror Counter Proposal is not at least as favorable to the Company's
stockholders as the Superior Proposal (taking into account all financial and
strategic considerations and other relevant factors, including relevant legal,
financial, regulatory and other aspects of such proposals, and the conditions,
prospects and time required for completion of such proposal).
SECTION 7.4. HSR ACT MATTERS.
Acquiror, Merger Sub and the Company (as may be required pursuant to the
HSR Act) promptly will complete all documents required to be filed with the
Federal Trade Commission and the United States Department of Justice in order to
comply with the HSR Act and, not later than fifteen (15) calendar days after the
date hereof, together with the Persons, if any, who are required to join in such
filings, shall file such documents with the appropriate Governmental Entities.
Acquiror, Merger Sub and the Company shall promptly furnish all materials
thereafter required by any of the Governmental Entities having jurisdiction over
such filings, and shall take all reasonable actions and shall file and use all
reasonable best efforts to have declared effective or approved all documents and
notifications with any such Governmental Entity, as may be required under the
HSR Act or other federal or state antitrust laws for the consummation of the
Merger and the other transactions contemplated hereby. Acquiror and the Company
shall each pay one-half of the filing fees related to compliance with the HSR
Act in connection with the transactions contemplated hereby.
SECTION 7.5. PUBLIC ANNOUNCEMENTS.
The initial press release relating to this Agreement shall be a joint press
release and thereafter Acquiror and the Company shall consult with each other
and use reasonable efforts to agree upon the text of any press release or public
statement before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated hereunder and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with
Nasdaq or the NYSE.
SECTION 7.6. INDEMNIFICATION.
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the certificate of incorporation and bylaws of the Company on the date
of this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six (6) years after the Effective Time in any manner
that would adversely affect the rights thereunder of persons who at any time
prior to the Effective Time were identified as prospective indemnitees under the
certificate of incorporation or bylaws of the Company in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), unless such
modification is required by applicable law.
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(b) From and after the Effective Time, Acquiror shall cause the Surviving
Corporation to indemnify, defend and hold harmless the present and former
officers, directors and employees of the Company and the Company Subsidiaries
(collectively, the "Indemnified Parties") against all losses, expenses, claims,
damages, liabilities or amounts that are paid, with the approval of Acquiror, in
settlement of or otherwise in connection with, any claim, action, suit,
proceeding or investigation (a "Claim"), based in whole or in part on the fact
that such person is or was such a director, officer or employee and arising out
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), in each
case to the fullest extent permitted under Delaware Law (and shall pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Delaware Law upon
receipt from the Indemnified Party to whom expenses are advanced of the
undertaking to repay such advances contemplated by Section 145(e) of Delaware
Law), provided, however, that no Indemnified Party shall be entitled to any
indemnification or expenses pursuant to this Section 7.6 in respect of any
Claim, issue or matter as to which such Indemnified Party shall have been
adjudged to be grossly negligent or to have committed or engaged in willful
misconduct. To that end, Acquiror shall maintain the Company's existing
officers' and directors' liability insurance policy ("D&O Insurance") for a
period of not less than six (6) years after the Effective Time, but only to the
extent related to actions or omissions prior to the Effective Time; provided,
however, that Acquiror may substitute therefor policies of substantially similar
coverage and amounts containing terms no less advantageous to such former
directors or officers of the Company and provided, further, Acquiror shall not
be required to pay an annual premium for such insurance in excess of $100,000.
(c) In the event any Claim or Claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such Claim or
Claims shall continue until disposition of any and all such claims. Any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under Delaware Law, the Company's
certificate of incorporation or bylaws or such agreements, as the case may be,
shall be made by any method permitted under Delaware Law. Nothing set forth
herein shall impair any rights or obligations of any Indemnified Party. In the
event that any Claim or Claims are brought against any Indemnified Party
(whether arising before or after the Effective Time), Acquiror may select
counsel for the defense of such Claim, which counsel shall be reasonably
acceptable to such Indemnified Party.
(d) Any Indemnified Party seeking indemnification under this Section 7.6,
promptly upon learning of any such Claim, shall notify Acquiror and the
Surviving Corporation (although the failure so to notify Acquiror and the
Surviving Corporation shall not relieve Acquiror and the Surviving Corporation
from any liability that Acquiror and the Surviving Corporation may have under
this Section 7.6, except to the extent such failure prejudices Acquiror or the
Surviving Corporation), and shall deliver to Acquiror and the Surviving
Corporation the undertaking contemplated by Section 145(e) of Delaware Law.
SECTION 7.7. FURTHER ACTION; REASONABLE BEST EFFORTS.
(a) Each of the parties hereto shall use all reasonable best efforts to
take, or cause to be taken, all appropriate action, and do, or cause to be done,
all things necessary, proper or advisable under applicable laws or otherwise to
consummate and make effective the transactions contemplated by this Agreement as
promptly as practicable, including, without limitation, using all reasonable
best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts with the Company, Acquiror or any Company Subsidiary or Acquiror
Subsidiary as are necessary for the transactions contemplated herein. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall use all reasonable best efforts to take
all such action. Without limiting the generality of the foregoing, Acquiror
shall use all reasonable best efforts to cause Merger Sub to perform its
obligations under this Agreement and to effect the transactions contemplated
hereby.
(b) During the Interim Period, each of the parties hereto shall promptly
notify the other in writing of any pending or, to the knowledge of such party,
threatened action, proceeding or investigation by any
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Governmental Entity or any other Person: (i) challenging or seeking damages in
connection with the Merger or the conversion of Company Common Stock into the
Merger Consideration pursuant to the Merger; or (ii) seeking to restrain or
prohibit the consummation of the Merger or any of the transactions contemplated
by this Agreement or otherwise to limit the right of Acquiror to own or operate
all or any portion of the business or assets of the Company.
(c) Each of the parties hereto shall use reasonable best efforts to refrain
from taking any action, or entering into any transaction, which would cause any
of its representations or warranties contained in this Agreement to be untrue or
that would result in a breach of any covenant made by it in this Agreement.
SECTION 7.8. NO SOLICITATION.
(a) From the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to the terms of this Agreement, the
Company shall not and shall not permit any of its Subsidiaries, Affiliates,
directors, officers, employees, agents or representatives, including, without
limitation, any investment banker, attorney or accountant of the Company or any
of its Subsidiaries (collectively, "Representatives"), directly or indirectly,
to: (i) initiate, solicit, knowingly facilitate or encourage the submission of
an Acquisition Proposal for the Company; (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any information with respect
to, or take any other action knowingly to facilitate any inquiries or the making
of any proposal that constitutes an Acquisition Proposal for the Company; (iii)
grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of the Company; or (iv) enter into any
agreement with respect to any Acquisition Proposal for the Company, other than
with Acquiror. The Company shall notify its Representatives of the terms of this
Section 7.8 and use reasonable efforts to cause such Representatives to comply
with such terms. The Company shall cease and cause to be terminated immediately
all existing discussions or negotiations with any persons conducted heretofore
with respect to, or that could be reasonably expected to lead to, any
Acquisition Proposal for the Company.
(b) Nothing contained in this Section 7.8 shall prohibit the Company from:
(i) taking and disclosing to its stockholders a position contemplated by Rule
14e-2 promulgated under the Exchange Act; (ii) making a recommendation in
compliance with Rule 14d-9 promulgated under the Exchange Act; or (iii)
furnishing information to, or engaging in discussions or negotiations with, any
Person that makes a bona fide proposal or offer with respect to the Company that
constitutes an Acquisition Proposal for the Company, if: (1) the Board of
Directors of the Company determines in good faith, taking into account the
advice of outside counsel, that such action is reasonably likely to be required
for the Board of Directors to comply with its fiduciary duties to stockholders
under applicable law, (2) prior to furnishing such information to, or entering
into discussions or negotiations with, such Person the Company provides written
notice to Acquiror of the existence of such Acquisition Proposal for the Company
and that it intends to furnish information to, or enter into discussions or
negotiations with respect to such Acquisition Proposal for the Company, (3) the
Company enters into a confidentiality agreement with the Person making such
Acquisition Proposal for the Company on terms in the aggregate not more
favorable to such Person than the terms of the Confidentiality Agreements, (4)
the Company shall keep Acquiror informed on a timely basis of the status of such
negotiations and all material terms and conditions thereof and promptly provide
Acquiror with copies of any and all written inquiries or proposals relating
thereto, and (5) such Acquisition Proposal was not solicited in violation of
this Agreement.
SECTION 7.9. NYSE LISTING.
Acquiror shall, prior to the Closing Date file with the NYSE a Supplemental
Listing Application providing for inclusion for quotation on the NYSE of the
shares of Acquiror Common Stock issuable pursuant to Section 2.1(a) and shall
use reasonable best efforts to cause the shares of Acquiror Common Stock to be
issued pursuant to Section 2.1(a) of this Agreement to be approved for listing
on the NYSE, subject to official notice of issuance, prior to the Closing Date.
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SECTION 7.10. EMPLOYEE MATTERS.
(a) For a period of one (1) year following the Effective Time, to the
extent that Acquiror provides continued employment to employees of the Company
and its Subsidiaries ("Continuing Employees") after the Effective Time, such
employment shall be (x) at a base salary or base hourly wage that, in the
aggregate, is not less favorable than that which the Continuing Employee was
receiving immediately prior to the Effective Time, (y) at a level of and current
value of incentive compensation which, in the aggregate is no less favorable
than incentive compensation provided to similarly situated employees of Acquiror
and its Subsidiaries and (z) at a level of and current value of employee
benefits (including, but not limited to, the provision of vacation, sick leave,
pension and welfare benefits but excluding any incentive compensation, retention
compensation or bonuses) which, in the aggregate and including any increase in
base salary or base hourly wage that Acquiror reasonably believes, are no less
favorable than those applicable to each such employee immediately prior to the
Effective Time; and (ii) provide to Continuing Employees employee benefit plans,
programs and arrangements under Acquiror Benefit Plans that in the aggregate are
no less favorable to those employee benefit plans, programs and arrangements
generally provided to the Continuing Employees under any Company Benefit Plans
(excluding any incentive compensation, retention compensation or bonuses)
immediately prior to the Effective Time.
(b) Following the Effective Time, Acquiror shall cause the Acquiror Benefit
Plans to (i) treat credited employment and service of the Continuing Employees
with the Company, its Affiliates and any predecessor employers through the
Effective Time as employment and service with Acquiror for all purposes under
the Acquiror Benefit Plans except for benefit accrual purposes under any
"defined benefit" pension plans; and (ii) give full credit to the Continuing
Employees under the Acquiror Benefit Plans that provide vacation and sick leave
benefits for all unused vacation days and sick leave accrued by the Continuing
Employees while employees of the Company.
(c) In the event of any change in coverage that applies generally to the
Continuing Employees during the two-year period following the Effective Time
under any Acquiror Benefit Plan that provides medical or health benefits, the
Acquiror shall cause such plan to recognize credit toward satisfying deductible
expense requirements, out-of-pocket expense limits and maximum lifetime benefit
limits of such Continuing Employees or their eligible dependents, and to waive
any pre-existing condition, exclusion or limitation, as and to the extent any
such matter would previously have been recognized or waived (as the case may be)
under the applicable Company Benefit Plan.
(d) The Acquiror shall cause the Surviving Corporation to honor in
accordance with their terms and to perform the obligations of the Surviving
Corporation under the severance and retention plans and agreements listed on
Schedule 7.10.
(e) Immediately following the Effective Time, the Acquiror shall cause the
Surviving Corporation to enter into retention agreements with not more than
twenty-eight (28) of its key employees to be identified and selected by the
Company after consultation with the Acquiror.
(f) Following the Effective Time, the Acquiror shall cause Continuing
Employees who have previously been eligible to participate in the Company Stock
Option Plans to be eligible to participate in the Acquiror Stock Option Plans.
At each meeting of the Compensation Committee of the Acquiror Board of Directors
during the two-year period following the Effective Time at which stock options
are granted to Acquiror employees generally, Acquiror shall cause a
recommendation to be made to the Compensation Committee to grant options under
the Acquiror Stock Option Plans to such Continuing Employees on a basis that
takes into consideration prior performance and service of the Continuing
Employees to the Company prior to the Effective Time.
SECTION 7.11. AFFILIATES.
(a) Each of the Company and Acquiror: (i) has disclosed to the other in
Schedule 7.11 hereto all Persons who are, or may be, as of the date hereof its
Affiliates; and (ii) shall use all reasonable best efforts to cause each Person
who is identified as an Affiliate of it in Schedule 7.11 to deliver to the other
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as promptly as practicable but in no event later than thirty-one (31) days prior
to the Closing Date, a signed Affiliate Agreement substantially in the form
attached hereto as Exhibit A, in the case of the Company, and Exhibit B, in the
case of Acquiror. The Company and Acquiror shall notify each other from time to
time of all other Persons who then are or may be such an Affiliate and use all
reasonable best efforts to cause each additional Person who is identified as an
Affiliate to execute an Affiliate Agreement as set forth in this Section
7.11(a).
(b) Shares of Company Common Stock and shares of Acquiror Common Stock held
by such Affiliates of the Company or Acquiror, as the case may be, shall not be
transferable during the thirty (30) day period prior to the Effective Time, and
shares of Acquiror Common Stock issued to, or as of the Effective Time held by,
such Affiliates shall not be transferable until such time as financial results
covering at least thirty (30) days of combined operations of the Company and
Acquiror have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
Affiliate has provided the signed Affiliate Agreement referred to in Section
7.11(a), except to the extent permitted by, and in accordance with, SEC
Accounting Series Release 135 and SEC Staff Accounting Bulletins 65 and 76. Any
Company Common Stock and any Acquiror Common Stock held by any such Affiliate
shall not be transferable, regardless of whether such Affiliate has provided the
applicable signed agreement referred to in Section 7.11(a), if such transfer,
either alone or in the aggregate with other transfers by Affiliates, would
preclude the ability of the parties hereto to have the Merger and the
transactions contemplated hereby accounted for as a "pooling of interests" in
accordance with GAAP, Accounting Principles Board Opinion No. 16 and all rules,
regulations and policies of the SEC. Neither the Company nor Acquiror shall
register the transfer of any shares of Company Common Stock or Acquiror Common
Stock, as applicable, unless such transfer is made in compliance with the
foregoing.
SECTION 7.12. EVENT NOTICES.
From and after the date of this Agreement until the Effective Time, each
party hereto will promptly notify the other parties hereto of (a) the occurrence
or nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any condition to the obligations of such party to effect the
Merger and the other transactions contemplated by this Agreement not to be
satisfied and (b) the failure of such party to comply with any covenant or
agreement to be complied with by it pursuant to this Agreement that would be
likely to result in any condition to the obligations of such party to effect the
Merger and the other transactions contemplated by this Agreement not to be
satisfied. No delivery of any notice pursuant to this Section 7.12 will cure any
breach of any representation or warranty, covenant, condition or agreement of
such party contained in this Agreement or otherwise limit or affect the remedies
available hereunder to the party receiving such notice.
SECTION 7.13. TAX TREATMENT.
Each of Acquiror and the Company shall use all reasonable best efforts to
cause the Merger to qualify as a reorganization under the provisions of Section
368(a) of the Code and will characterize the Merger as such a reorganization for
purposes of all Tax returns and other relevant filings. The Company and Acquiror
shall cooperate and use their best efforts in obtaining the Legal Opinions. In
connection therewith, each of the Company, Acquiror and Merger Sub shall deliver
to the other a representation letter (collectively, the "Representation
Letters"), dated as of the Closing Date, in form and substance to be reasonably
agreed upon by the Company, Acquiror and Merger Sub, on which each party shall
be entitled to rely in rendering its Legal Opinion pursuant to Section 8.1(i);
provided, however, that the failure of any of the Company, Acquiror or Merger
Sub to make any statement in a Representation Letter because of an event, or a
change in facts or law, in either case outside of such party's control, shall
not constitute a breach of this covenant.
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SECTION 7.14. POOLING OF INTERESTS.
Each of the Company and Acquiror shall use all reasonable best efforts to
cause the Merger to be accounted for as a "pooling of interests" in accordance
with GAAP, Accounting Principles Board Opinion 16 and applicable SEC rules,
regulations and policies and shall take no action that would cause such
accounting treatment not to be obtained.
SECTION 7.15. MERGER SUB.
Acquiror shall cause Merger Sub to approve and adopt, and to perform its
obligations in accordance with, this Agreement and shall take any and all steps
necessary to cause Merger Sub to effect the transactions contemplated hereby.
SECTION 7.16. BOARD OF DIRECTORS OF ACQUIROR.
Promptly following the Effective Time, the Board of Directors of Acquiror
will take all actions necessary such that George A. Robinson, who as of the date
hereof is the Chief Executive Officer of the Company, shall be appointed to
Acquiror's Board of Directors with a term expiring at the annual meeting of
Acquiror's stockholders to be held in calendar year 2000 (the "Year 2000
Meeting") and shall include George A. Robinson in the slate of nominees
recommended by Acquiror's Board of Directors to the stockholders of Acquiror at
the Year 2000 Meeting.
SECTION 7.17. PUBLISHING FINANCIAL RESULTS.
If the Effective Time shall occur after February 29, 2000, Acquiror shall
prepare and publicly release, as soon as practicable following the end of the
first complete accounting month ending at least thirty (30) days after the
Closing Date, a report filed with the SEC on Form 8-K or any other public
filing, statement or announcement that includes the combined financial results
(including combined sales and net income) of the Acquiror and the Company for a
period of at least thirty (30) days of combined operations of the Acquiror and
the Company following the Closing Date; provided, however, that the Acquiror
shall not be obligated to make such public release if the Acquiror determines
based on Acquiror's good faith business judgment that such public release would
be reasonably likely to (a) limit in any material respect the Acquiror's ability
to undertake a planned underwritten public offering of Acquiror's securities to
be covered by a registration statement to be filed with the SEC, or (b) cause a
Material Adverse Effect on Acquiror.
SECTION 7.18. STAND-STILL.
From the date of this Agreement until the Effective Time or the termination
of this Agreement pursuant to the terms of this Agreement, except as provided
herein, the Acquiror shall not and shall not permit any of its Representatives,
directly or indirectly, to: (i) acquire or agree, offer, seek or propose to
acquire, or cause to be acquired, directly or indirectly, by purchase or
otherwise, ownership (including, without limitation, beneficial ownership as
defined in Rule 13d-3 of the Exchange Act) of any voting securities or direct or
indirect rights or options to acquire any voting securities of the Company or
any Subsidiary thereof, or of any successor to or person in control of the
Company, any of the assets or businesses of the Company or any Subsidiary or
division thereof or of any such successor or controlling person or any bank
debt, claims or other obligations of the Company or any rights or options to
acquire (other than those currently owned) such ownership (including from a
third party); (ii) seek or propose to influence or control the management or
policies of the Company or to obtain representation on the Company's Board of
Directors, or solicit, or participate in the solicitation of, any proxies or
consents with respect to any securities of the Company, or make any public
announcement with respect to any of the foregoing or request permission to do
any of the foregoing; (iii) make any public announcement with respect to, or
submit a proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Company or its securities or assets;
(iv) enter into any discussions, negotiations, arrangements or understandings
with any third party with respect to any of the foregoing, or otherwise
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form, join or in any way participate in a "group" (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) in
connection with any of the foregoing; (v) seek or request permission or
participate in any effort to do any of the foregoing or make or seek permission
to make any public announcement with respect to the foregoing; or (vi) request
the Company or any of its Representatives, directly or indirectly, to amend or
waive any provision of this paragraph. Acquiror shall promptly advise the
Company of any inquiry or proposal made to it with respect to any of the
foregoing.
SECTION 7.19. STOCKHOLDER RIGHTS PLAN.
From and after the date hereof until the termination of this Agreement,
without the Acquiror's prior written consent, the Company shall not amend its
Certificate of Incorporation or otherwise take any action to provide for the
issuance of securities pursuant to a stockholder rights plan ("poison pill") or
any other program or plan having a similar effect.
ARTICLE VIII.
CLOSING CONDITIONS
SECTION 8.1. CONDITIONS TO OBLIGATIONS OF THE PARTIES TO EFFECT THE MERGER.
The respective obligations of the parties hereto to effect the Merger and
the other transactions contemplated herein shall be subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by applicable
law:
(a) Stockholder Approval. The Company Stockholder Approval shall have been
obtained.
(b) Effectiveness of Registration Statement. The Registration Statement
shall have been declared effective by the SEC under the Securities Act prior to
the mailing of the Proxy Statement by the Company to its stockholders and no
stop order suspending the effectiveness of such Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the knowledge of Acquiror or the Company, be threatened by the
SEC.
(c) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, statute, rule, ordinance, regulation, executive order, decree,
judgment, stipulation, injunction or other order (whether temporary, preliminary
or permanent) (collectively, an "Order"), in any case, that is in effect and
that prevents or prohibits consummation of the Merger or any other transactions
contemplated in this Agreement; provided, however, that the parties shall use
their reasonable best efforts to cause any such Order to be vacated or lifted.
(d) NYSE Listing. Acquiror Common Stock issuable to the holders of Company
Common Stock pursuant to Section 2.1(a) of this Agreement shall have been
included for listing on the NYSE upon official notice of issuance.
(e) HSR Act. Any waiting period with any extensions thereof under the HSR
Act shall have expired or been terminated.
(f) Permits. Each of the Company and Acquiror shall have obtained such
permits, authorizations, consents and approvals required to consummate the
transactions contemplated hereby except for such permits, authorizations,
consents and approvals the failure of which to obtain would not have a Material
Adverse Effect on the Company or Acquiror.
(g) Company Pooling Letter. There shall have been delivered to Acquiror
and the Company a letter from the Company's independent accountants, dated as of
the Closing Date and addressed to Acquiror and the Company, reasonably
satisfactory in form and substance to Acquiror, setting forth the concurrence of
the Company's independent accountants with the conclusion of the Company's
management that the
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transactions contemplated herein will qualify as a "pooling of interests" and to
the effect that (i) after reasonable investigation, the Company's independent
accountants are not aware of any fact concerning the Company or any of the
Holders or any Affiliates of the Company that could preclude Acquiror from
accounting for the Merger as a "pooling of interests" in accordance with GAAP,
Accounting Principles Board Opinion No. 16 and all rules, regulations and
policies of the SEC, and (ii) the Merger is eligible to be accounted for as a
"pooling of interests" in accordance with GAAP, Accounting Principles Board
Opinion No. 16 and all rules, regulations and policies of the SEC;
(h) Acquiror Pooling Letter. There shall have been delivered to Acquiror
and the Company a letter from Acquiror's independent accountants, dated as of
the Closing Date and addressed to the Company and Acquiror, reasonably
satisfactory in form and substance to Acquiror, to the effect that (i) after
reasonable investigation, Acquiror's independent accountants are not aware of
any fact concerning Acquiror or any of its Affiliates that could preclude
Acquiror from accounting for the Merger as a "pooling of interests" in
accordance with GAAP, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC, and (ii) the Merger is
eligible to be accounted for as a "pooling of interests" in accordance with
GAAP, Accounting Principles Board Opinion No. 16 and all rules, regulations and
policies of the SEC; and
(i) Legal Opinions. (A) The Company and the Holders shall have received a
legal opinion addressed to the Company and the Holders from Venable, Baetjer,
Howard & Civiletti, LLP ("Company's Legal Counsel"), dated as of the Closing
Date to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code; and (B) the Acquiror shall have received
a legal opinion addressed to the Acquiror from Hogan & Hartson L.L.P.
("Acquiror's Legal Counsel"), dated as of the Closing Date to the effect that
the Merger will constitute a reorganization within the meaning of Section 368(a)
of the Code. The legal opinions to be delivered by Company's Legal Counsel and
Acquiror's Legal Counsel pursuant to this Section 8.1(i) shall be referred to
herein as the "Legal Opinions."
SECTION 8.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB.
The obligations of Acquiror and Merger Sub to effect the Merger and the
other transactions contemplated in this Agreement shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived by Acquiror, in whole or in part, to the extent
permitted by applicable law:
(a) Representations and Warranties. The representations and warranties of
the Company made in this Agreement shall be true and correct in all material
respects when made and on and as of the Closing Date (except for representations
and warranties that speak as of a specific date or time, which need only be true
and correct in all material respects as of such date or time). Acquiror shall
have received a certificate of the Chief Executive Officer or Chief Financial
Officer of the Company to such effect.
(b) Agreements and Covenants. The agreements and covenants of the Company
required to be performed on or before the Effective Time shall have been
performed in all material respects. Acquiror shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of the Company to such
effect.
(c) No Material Adverse Changes. There shall have been no Material Adverse
Effect on the Company since the date of this Agreement (it being understood that
a decline in the price of a share of Company Common Stock shall not constitute a
Material Adverse Effect on the Company for purposes of any provision of this
Agreement).
(d) No Litigation. There shall not be pending or threatened any suit,
action, proceeding or investigation: (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (ii) relating to the Merger and seeking to
obtain from Acquiror or any Acquiror Subsidiary any damages that may be material
to Acquiror, (iii) seeking to prohibit or limit in any material respect
Acquiror's ability to vote, receive dividends with respect to or
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otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; (iv) which would materially and adversely affect the right of the
Surviving Corporation to own the assets or operate the business of the Company;
or (v) which, if adversely determined, could have a Material Adverse Effect on
the Company or Acquiror.
(e) Affiliate Agreement. Each of the Affiliates shall have entered into an
Affiliate Agreement and each of such Agreements shall be in full force and
effect as of the Effective Time.
SECTION 8.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the satisfaction
at or prior to the Effective Time of the following conditions any or all of
which may be waived by the Company, in whole or in part, to the extent permitted
by applicable law:
(a) Representations and Warranties. The representations and warranties of
Acquiror and Merger Sub made in this Agreement shall be true and correct in all
material respects when made and on and as of the Closing Date (except for
representations and warranties that speak as of a specific date or time, which
need only be true and correct in all material respects as of such date and
time). The Company shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of Acquiror to such effect.
(b) Agreements and Covenants. The agreements and covenants of Acquiror and
Merger Sub required to be performed on or before the Effective Time shall have
been performed in all material respects. The Company shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
Acquiror to such effect.
(c) No Material Adverse Change. There shall have been no Material Adverse
Effect on Acquiror since the date of this Agreement (it being understood that a
decline in the price of a share of Acquiror Common Stock shall not constitute a
Material Adverse Effect on Acquiror for purposes of any provision of this
Agreement).
(d) No Litigation. There shall not be pending or threatened any suit,
action, proceeding or investigation: (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (ii) relating to the Merger and seeking to
obtain from the Company or any Company Subsidiary any damages that may be
material to the Company, or (iii) which, if adversely determined, could have a
Material Adverse Effect on the Company or Acquiror.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, whether before or after approval of this
Agreement and the Merger by the stockholders of the Company (except as
specifically provided below):
(a) by mutual written consent of Acquiror and the Company;
(b) by Acquiror, upon a material breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement
such that the conditions set forth in Section 8.2(a) or Section 8.2(b) would not
be satisfied (a "Terminating Company Breach"); provided that, if such
Terminating Company Breach is curable by the Company through the exercise of
reasonable best efforts and for so long as the Company continues to exercise
such reasonable best efforts, Acquiror may not terminate this Agreement under
this Section 9.1(b);
(c) by the Company, upon a material breach of any representation, warranty,
covenant or agreement on the part of Acquiror set forth in this Agreement such
that the conditions set forth in Section 8.3(a) or
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Section 8.3(b) would not be satisfied (a "Terminating Acquiror Breach");
provided that, if such Terminating Acquiror Breach is curable by Acquiror
through the exercise of reasonable best efforts and for so long as Acquiror
continues to exercise such reasonable best efforts, the Company may not
terminate this Agreement under this Section 9.1(c);
(d) by either Acquiror or the Company, if there shall be any Order that is
final and nonappealable preventing the consummation of the Merger; provided that
the party seeking to terminate this Agreement pursuant to this Section 9.1(d)
shall have used reasonable best efforts to cause any such Order to be vacated or
lifted;
(e) by either Acquiror or the Company, if the Merger shall not have been
consummated on or before that date that is One Hundred Eighty (180) calendar
days after the date hereof (the "Outside Date"); provided, however, that the
right to terminate this Agreement under this Section 9.1(e) shall not be
available to any party whose material breach of its obligations under this
Agreement has been the cause of the failure of the Merger to occur on or before
the Outside Date;
(f) by the Company or Acquiror at any time after the Company Stockholders
Meeting (including any adjournment or postponement thereof), if the requisite
vote of the stockholders of the Company required by this Agreement shall not
have been obtained at the Company Stockholders Meeting (including any
adjournment or postponement thereof); provided that the right to terminate this
Agreement under this Section 9.1(f) shall not be available to the Company if it
has not complied with its obligations under Section 7.3(b) and taking into
account the provisions of Section 7.3(c);
(g) (i) by Acquiror, if the Acquiror Stock Price is greater than $35.75 per
share unless the Company makes a Company Floating Rate Election, in which case
the Acquiror shall have no right of termination pursuant to this Section 9.1(g)
or (ii) by the Company, if the Acquiror Stock Price is less than $22.95 per
share unless Acquiror makes an Acquiror Floating Rate Election, provided that in
no event shall Acquiror have the right to make such election if the Acquiror
Stock Price is equal to or less than $14.00 per share; provided further that any
such termination pursuant to this Section 9.1(g) shall be without any liability
to the parties hereto solely by virtue of the fact that the Acquiror Stock Price
is greater than $35.75 or less than $22.95 per share or equal to or less than
$14.00 per share, as the case may be;
(h) by the Company, if the Board of Directors of the Company determines in
good faith, taking into account the advice of outside counsel, that such action
is reasonably likely to be required for the Board of Directors to comply with
its fiduciary duties to stockholders under applicable law (other than in
connection with an Acquisition Proposal);
(i) by the Company, if the Board of Directors of the Company shall have
withdrawn its recommendation of this Agreement and recommended a Superior
Proposal to its stockholders pursuant to and in compliance with Section 7.3(c);
provided that any termination of this Agreement by the Company pursuant to this
Section 9.1(i) shall not be effective if, prior to the close of business on the
second full business day after Acquiror receives written notice of such
termination, Acquiror elects, and Acquiror provides written notice to the
Company of its election, to have the Company hold the Company Stockholders'
Meeting (the "Stockholder Vote Election") in which event this Agreement,
including without limitation the obligation to hold a Company Stockholders'
Meeting, shall remain in full force and effect; provided further that in the
event that Acquiror has not made the Stockholder Vote Election, this Agreement
shall terminate on the date on which payment of a Termination Fee required by
Section 9.6(b) is paid; or
(j) by Acquiror, if (i) the Board of Directors of the Company (A) fails to
recommend approval and adoption of this Agreement, the Merger and the
transactions contemplated by this Agreement by the Company's stockholders, (B)
withdraws, modifies or changes such recommendation in a manner adverse to
Acquiror or Merger Sub, (C) fails to include such recommendation (without
withdrawal, modification or change) in the Proxy Statement or (D) fails to
reaffirm its recommendation in favor of the adoption and approval of this
Agreement, the Merger and transactions contemplated by this Agreement within ten
(10) days after Acquiror requests in writing that such recommendation be
reaffirmed; provided that
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subsequent to the Acquiror's first such request, Acquiror may make further
requests only after Acquiror has received written notice from the Company (or a
public announcement has been made) of the existence of an Acquisition Proposal
for the Company, (ii) the Board of Directors of the Company makes any
recommendation to the Company's stockholders with respect to any proposal
involving an Acquisition Proposal for the Company (or shall have resolved to do
so), other than a recommendation to reject such proposal, (iii) a tender offer
or exchange offer for 26% or more of the outstanding shares of capital stock of
the Company is commenced (or any person or "group" (as defined in Section
13(d)(3) of the Exchange Act) shall have commenced or threatened to commence
either with respect to the Company), and the Board of Directors of the Company,
within ten (10) business days after such tender offer or exchange offer is so
commenced, either recommends to the stockholders of the Company that they tender
their shares into such tender or exchange offer, fails to unconditionally
recommend to the stockholders of the Company that they not accept such tender
offer or exchange offer or makes no recommendation to the Company's stockholders
with respect to the acceptance of such tender offer or exchange offer by the
Company's stockholders, (iv) after the date hereof, any person or "group" (as
defined in Section 13(d)(3) of the Exchange Act) (other than Acquiror or any
Acquiror Subsidiaries) shall have acquired (or agreed to acquire) beneficial
ownership or the right to acquire beneficial ownership of, or any "group" (as
defined in Section 13(d)(3) of the Exchange Act) shall have been formed that
beneficially owns or has the right to acquire beneficial ownership of, or has
agreed to acquire beneficial ownership of, 26% or more of the then outstanding
shares of capital stock of the Company, or (v) the Board of Directors of the
Company shall have resolved or publicly announced an intention to do any of the
foregoing.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Affiliate of
such party or any of their respective officers, directors, representatives or
agents, whether prior to or after the execution of this Agreement.
SECTION 9.2. EFFECT OF TERMINATION.
Except as provided in Section 9.5 and Section 9.6 of this Agreement, in the
event of the termination of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void, there shall be no liability on the part
of Acquiror or the Company or any of their respective officers, directors,
stockholders or Affiliates to the other, and all rights and obligations of any
party hereto shall cease, except that nothing herein shall relieve any party
from liability for any willful breach by a party of any of its representations,
warranties, covenants or agreements in this Agreement; and provided that the
provisions of Section 7.2 (Confidentiality), Section 9.5 (Transaction Fees,
Expenses and Other Payments) and Section 9.6 (Termination Fees) of this
Agreement will remain in full force and effect and survive any termination of
this Agreement.
SECTION 9.3. AMENDMENT.
This Agreement may be amended by the parties hereto by action taken or
authorized by their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made that by law or rule of the
NYSE requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto.
SECTION 9.4. EXTENSION; WAIVER.
At any time prior to the Effective Time, any party hereto may (a) extend
the time for the performance of any of the obligations or other acts of any
other party hereto, (b) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by any other party with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
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SECTION 9.5. TRANSACTION FEES, EXPENSES AND OTHER PAYMENTS.
Except as otherwise set forth in this Section 9.5, all costs and expenses
incurred by the parties hereto shall be borne solely and entirely by the party
that has incurred such costs and expenses, whether or not the Merger is
consummated; provided, however, that in the event that the Merger and the other
transactions contemplated hereby are not consummated, Acquiror and the Company
shall share equally all costs and expenses (other than attorneys' and
accountants' fees and expenses) incurred in relation to printing and filing and,
as applicable, mailing the Registration Statement and the Proxy Statement and
any amendments or supplements thereto and all SEC and other regulatory filing
fees incurred in connection with the Registration Statement and the Proxy
Statement and the fees required under the HSR Act and applicable foreign laws,
if any, incurred in connection with the transactions contemplated under this
Agreement.
SECTION 9.6. TERMINATION FEES.
(a) If this Agreement is terminated by the Company pursuant to Section
9.1(h), (i) the Company shall pay to Acquiror an amount equal to all of
Acquiror's reasonable expenses incurred in connection with the transactions
contemplated by this Agreement not to exceed $1,000,000 payable within ninety
(90) days from the date of such termination and (ii) and in the event the
Company enters into a definitive agreement in connection with, or consummates,
an Acquisition Proposal within six (6) months from the date of such termination,
the Company shall pay to Acquiror the difference between four million dollars
($4,000,000) (the "Termination Fee") and the aggregate amount paid to Acquiror
pursuant to Section 9.6(a)(i) above, within five (5) Business Days after the
closing date of such transaction.
(b) If this Agreement is terminated by the Company pursuant to Section
9.1(i), Acquiror may, within five (5) business days thereafter, make an election
(the "Termination Election") to receive the Termination Fee, in which event the
Company shall pay to Acquiror the Termination Fee within five (5) Business Days
after the date of such Termination Election and this Agreement (except those
provisions that, pursuant to Section 9.2, survive termination) shall be deemed
to terminate, become void and be of no further force or effect immediately upon
the Termination Election. Acquiror shall not have any right to receive, and the
Company shall not have any obligation to pay, the Termination Fee except
pursuant to a valid and timely Termination Election.
(c) If this Agreement is terminated by Acquiror pursuant to Section 9.1(j)
(excluding Sections 9.1(j)(i)(D), 9.1(iv) and 9.1(v) (only to the extent Section
9.1(j)(v) relates to Sections 9.1(j)(i)(D) or 9.1(j)(iv)), then (i) if the Board
of Directors of the Company has recommended to its stockholders an Acquisition
Proposal with a third party, then the Company shall pay to Acquiror the
Termination Fee or (ii) if the Board of Directors of the Company has not
recommended to its stockholders an Acquisition Proposal with a third party, then
(A) the Company shall pay to Acquiror an amount equal to all of Acquiror's
reasonable expenses incurred in connection with the transactions contemplated by
this Agreement not to exceed $1,000,000 payable within ninety (90) days from the
date of such termination and (B) if the Company thereafter enters into a
definitive agreement in connection with, or consummates, an Acquisition Proposal
within nine (9) months from the date of such termination, the Company shall pay
to Acquiror the difference between the Termination Fee and the aggregate amount
paid to Acquiror pursuant to Section 9.6(c)(ii)(A) above, within five (5)
Business Days after the closing date of such transaction.
(d) If this Agreement is terminated by the Company pursuant to Section
9.1(c) as a result of a Terminating Acquiror Breach that has not been cured by
Acquiror pursuant to Section 9.1(c), then Acquiror shall pay to the Company
within thirty (30) days after such termination an amount equal to all of the
Company's reasonable expenses incurred in connection with the transactions
contemplated by this Agreement and all damages caused to the Company as a result
of such Terminating Acquiror Breach.
(e) If this Agreement is terminated by Acquiror pursuant to Section 9.1(b)
as a result of a Terminating Company Breach that has not been cured by the
Company pursuant to Section 9.1(b), then the Company shall pay to Acquiror
within thirty (30) days after such termination an amount equal to all
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of Acquiror's reasonable expenses incurred in connection with the transactions
contemplated by this Agreement and all damages caused to Acquiror as a result of
such Terminating Company Breach. Notwithstanding any of the foregoing, to the
extent that subsequent to the date hereof Acquiror terminates this Agreement by
reason of the Company entering into an agreement to purchase substantially all
of the assets or equity securities of an entity, such acquisition is not a
Company Acquisition and Acquiror has not consented to such acquisition, then the
Company shall be obligated to pay to Acquiror its reasonable expenses incurred
in connection with the transactions contemplated by this Agreement but shall
have no liability to Acquiror for any damages.
(f) Any payment required to be made by either the Company or the Acquiror
pursuant to Section 9.6 of this Agreement shall be made by wire transfer of
immediately available funds to an account designated by the party receiving
payment. If any party fails to pay any termination fee or any expenses or
damages in connection with a termination when due and payable, such party shall
pay all costs and expenses (including reasonable legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee, expense and/or damages at the publicly announced prime rate of
Citibank, N.A. from the date such fee was required to be paid to the date on
which it is paid.
(g) The Company and Acquiror each agrees that, except as expressly provided
therein, the payments provided for in clauses (a) through (e) above, to the
extent applicable, shall be the sole and exclusive remedies of the parties
against each other upon a termination of this Agreement pursuant to Section 9.1.
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.1. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as set forth in Section 10.1(b) of this Agreement, the
representations, warranties, covenants and agreements of each party hereto shall
remain operative and in full force and effect up to the Effective Time
regardless of any investigation made by or on behalf of any other party hereto,
any Person controlling any such party or any of their officers, directors,
representatives or agents whether prior to or after the execution of this
Agreement.
(b) The representations and warranties in this Agreement will terminate at
the Effective Time; provided, however, that the covenants and agreements of the
parties that by their respective terms contemplate performance after the
Effective Time or after the termination of this Agreement pursuant to Article IX
shall survive the Effective Time or the termination, as applicable.
SECTION 10.2. NOTICES.
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted, and shall be effective upon receipt, if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like changes of address) or
sent by electronic transmission to the telecopier number specified below:
(a) If to Acquiror or Merger Sub:
The Titan Corporation
3033 Science Park Road
San Diego, CA 92121
Telecopier No.: (619) 552-9759
Attention: Nicholas J. Costanza, Esq., General Counsel
With a copy (which shall not constitute notice) to:
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Hogan & Hartson L.L.P.
8300 Greensboro Drive, Suite 1100
McLean, VA 22102
Telecopier No.: (703) 610-6200
Attention: Richard K.A. Becker, Esq.
(b) If to the Company:
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, VA 22030
Attention: George A. Robinson, Chief Executive Officer
With a copy (which shall not constitute notice) to:
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, N.W., Suite 1100
Washington, DC 20005
Telecopier No.: (202) 962-8300
Attention: Wallace E. Christner, Esq.
SECTION 10.3. CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
"Acquisition Proposal" means an inquiry, offer or proposal regarding any of
the following (other than the transactions contemplated by this Agreement)
involving the Company or its Subsidiaries: any merger, reorganization,
consolidation, share exchange, recapitalization, business combination,
liquidation, dissolution, tender offer or exchange offer or other similar
transaction involving, or, any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of ten percent (10%) or more of the assets or equity
securities of, the Company or any of its Subsidiaries, in a single transaction
or series of related transactions;
"Affiliate" of any Person means: (a) a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person; and (b) as the context requires
(including, without limitation, for purposes of Section 7.11 hereof), any Person
who is or may be an "affiliate" of such Person for purposes of Rule 145 under
the Securities Act or SEC Accounting Series Release 135;
"Beneficial Owner" (including the terms "beneficial ownership" and
"beneficially own") means with respect to any shares of capital stock, a Person
who shall be deemed to be the beneficial owner or have beneficial ownership of
such shares (a) which such Person or any of its Affiliates or associates
beneficially owns, directly or indirectly, (b) which such Person or any of its
Affiliates or associates (as such term is defined in Rule 12b-2 of the Exchange
Act) has, directly or indirectly, (i) the right to acquire (whether such right
is exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii) the right to
vote pursuant to any agreement, arrangement or understanding, (c) which are
beneficially owned, directly or indirectly, by any other Persons with whom such
Person or any of its Affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding voting or disposing of any
such shares or (d) pursuant to Section 13(d) of the Exchange Act and any rules
or regulations promulgated thereunder;
"Business Day" means any day other than a day on which banks in the
Commonwealth of Virginia are authorized or obligated to be closed;
"Control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of
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the management or policies of a Person, whether through the ownership of stock
or as trustee or executor, by contract or credit arrangement or otherwise;
"Credit Facility" means the $60,000,000 Amended and Restated Credit
Agreement among NationsBank, N.A. and Mellon Bank, N.A., and Advanced
Communication Systems, Inc. and its subsidiaries, Integrated Systems Control,
Inc., RF Microsystems, Inc., Advanced Management Incorporated and Semcor, Inc.,
dated as of February 3, 1999 (the "Credit Agreement"), as amended, and other
"loan documents" related thereto.
"Encumbrance" means any lien, pledge, charge, security interest or other
Encumbrance of any nature;
"Intellectual Property" means all (a) patents, utility models, invention
disclosures, industrial designs, and applications for registration thereof and
all reissues, divisions, reexaminations, renewals, extensions, provisionals,
continuations, and continuations in part thereof, (b) trademarks, service marks,
trade dress, logos, trade names, domain names, web site addresses, and corporate
names and registrations and applications for registration thereof and the
goodwill associated therewith, (c) copyrights and registrations and applications
for registration thereof, (d) computer software, data, and documentation, (e)
trade secrets and confidential business information (including formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing, and business data, pricing and cost information, business and
marketing plans, and customer and supplier lists and information, (f) other
proprietary rights, and (g) copies and tangible embodiments thereof (in whatever
form or medium);
"Material Adverse Effect" means, with respect to a specified Person, any
event, change, circumstance, condition, development, effect or occurrence that
individually or in the aggregate (taking into account all other such events,
changes, circumstances, conditions, developments, effects or occurrences) has
had, caused or resulted in (or with the passage of time would be reasonably
likely to have, cause, or result in) a material adverse effect on the business,
operations, earnings, assets, properties, results of operations or condition
(financial or otherwise) of such Person and its Subsidiaries, if any, taken as a
whole, except to the extent that any such event, change, circumstance,
condition, development, effect or occurrence is directly caused by: (a)
conditions generally affecting national, regional or world economics; (b)
conditions generally affecting the industry of such Person; (c) the
announcement, pendency or process of effectuating the Merger or the transactions
contemplated hereby that directly results in a delay of, reduction in or
cancellation or change in the terms of customer engagements, projects or
relationships; or (d) a change in the market price or trading volume of the
securities of such Person; which conditions (in the case of clauses (a) and (b)
do not affect such Person in a disproportionate manner as compared with other
Persons in such Person's industry). For purposes of this Agreement, the parties
acknowledge and agree that (i) the industry of the Company is the government
information technology services industry, and (ii) the industry of Acquiror is
the government information technology services industry. In addition to the
foregoing, the execution or consummation after the date hereof by Acquiror of
any merger, acquisition or other similar transaction involving Acquiror and a
third party shall constitute a Material Adverse Effect with respect to Acquiror
if such merger, acquisition or similar transaction involves a third party in the
same line of business as the Company or any Company Subsidiary and could be
reasonably expected to have a materially adverse effect on the future employment
prospects of Continuing Employees (in aggregate) with the Acquiror or its
Affiliates subsequent to the Effective Time.
"Person" means an individual, corporation, partnership, association, trust,
unincorporated organization, other entity or group (as defined in Section 13(d)
of the Exchange Act);
"Reasonable Best Efforts" means, as to a party hereto, an undertaking by
such party to perform or satisfy an obligation or duty or otherwise act in a
manner reasonably calculated to obtain the intended result by action or
expenditure not substantially disproportionate or unduly burdensome in the
circumstances;
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"Subsidiary" of any Person means any corporation, partnership, joint
venture or other legal entity of which such Person (either alone or through or
together with any other Subsidiary of such Person) (a) owns, directly or
indirectly, fifty percent (50%) or more of the capital stock, partnership
interests or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing body of
such corporation, partnership, joint venture or other legal entity; or (b)
possesses, directly or indirectly, control over the direction of management or
policies of such corporation, partnership, joint venture or other legal entity
(whether through ownership of voting securities, by agreement or otherwise);
"Superior Proposal" means a bona fide Acquisition Proposal made by any
Person that the Board of Directors of the Company determines in its good faith
judgment (taking into account the advice of a financial advisor of nationally
recognized reputation) will result in a transaction pursuant to which greater
aggregate financial consideration will be paid to the Company's stockholders
than pursuant to this Agreement and the transactions contemplated by this
Agreement and for which financing, to the extent required, is then committed;
provided that the Board of Directors of the Company has determined in good
faith, taking into account the advice of outside counsel, that it is reasonably
likely to be required to recommend such proposal to the Company's stockholders
to comply with its fiduciary duties to stockholders under applicable law .
SECTION 10.4. HEADINGS.
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 10.5. SEVERABILITY.
If any term or other provision of this Agreement is deemed invalid, illegal
or incapable of being enforced pursuant to any rule of law or public policy or
other Order by a court of competent jurisdiction or otherwise, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.6. ENTIRE AGREEMENT.
This Agreement (together with the Exhibits, the disclosure schedules of the
parties and the other documents specified herein and delivered pursuant hereto)
and the Confidentiality Agreement constitute the entire agreement of the parties
with respect to the subject matter contained herein and therein and supersede
all prior agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof and, except
as otherwise expressly provided herein, are not intended to confer upon any
other Person any rights or remedies hereunder.
SECTION 10.7. SPECIFIC PERFORMANCE.
The transactions contemplated by this Agreement are unique. Accordingly,
the parties acknowledge and agree that, in addition to all other remedies to
which they may be entitled, each shall be entitled to a decree of specific
performance.
SECTION 10.8. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties hereto. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and permitted assigns.
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SECTION 10.9. THIRD PARTY BENEFICIARIES.
Subject to Section 10.8, this Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement except for the Indemnified Parties under Section 7.6.
SECTION 10.10. GOVERNING LAW.
This Agreement will be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts between residents of that
State and executed in and to be performed entirely within that State. Each party
hereby irrevocably submits to the exclusive jurisdiction of the courts in the
State of Delaware in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding shall be
brought only in such courts (and waives any objection based on forum non
conveniens or any other objection to venue therein); provided, however, that
such consent to jurisdiction is solely for the purpose referred to in this
Section 10.10 and shall not be deemed to be a general submission to the
jurisdiction of such courts or in the State of Delaware other than for such
purposes.
SECTION 10.11. COUNTERPARTS.
This Agreement may be executed and delivered in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.12. WAIVER OF JURY TRIAL.
EACH OF ACQUIROR, THE COMPANY AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE ACTIONS OF ACQUIROR, THE COMPANY OR MERGER SUB IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be executed and delivered as of the date first written above.
THE TITAN CORPORATION
By: /s/ GENE W. RAY
---------------------------------------
Name: Gene W. Ray
Title: Chairman and Chief Executive
Officer
ADVANCED COMMUNICATION SYSTEMS, INC.
By: /s/ GEORGE A. ROBINSON
---------------------------------------
Name: George A. Robinson
Title: Chief Executive Officer
A T ACQUISITION CORP.
By: /s/ GENE W. RAY
---------------------------------------
Name: Gene W. Ray
Title: Chairman and Chief Executive
Officer
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
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EXHIBIT A
FORM OF
COMPANY AFFILIATE AGREEMENT
DECEMBER 9, 1999
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, Virginia 22030
The Titan Corporation
3033 Science Park Road
San Diego, California 92121
Re: Affiliate Agreement
Ladies and Gentlemen:
The undersigned is a stockholder of Advanced Communication Systems, Inc., a
Delaware corporation (the "Company"), and will become a stockholder of The Titan
Corporation, a Delaware corporation ("Acquiror"), pursuant to the transactions
described in the Agreement and Plan of Merger, dated as of December 9, 1999 (the
"Merger Agreement"), by and among the Company, Acquiror, and A T Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Acquiror ("Merger
Sub"). Under the terms of the Merger Agreement, the Merger Sub will be merged
with and into the Company and the shares of common stock of the Company, $.01
par value per share (the "Company Common Stock"), will be converted into and
exchanged for shares of common stock of Acquiror, par value $.01 per share
("Acquiror Common Stock"). This Affiliate Agreement represents an agreement by
and among the undersigned, the Company and Acquiror regarding certain rights and
obligations of the undersigned in connection with the (i) shares of Company
Common Stock beneficially owned by the undersigned and (ii) shares of Acquiror
Common Stock into which such shares of Company Common Stock are to be converted
as a result of the merger (the "Merger") of the Merger Sub with and into the
Company.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned, the Company and Acquiror hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to the
Company he or she may be deemed to be an "affiliate" as that term is used in SEC
Accounting Series Release Nos. 130 and 135 and Rule 145 of the rules and
regulations of the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and the undersigned
anticipates that the undersigned will be such an "affiliate" at the time of the
Merger.
2. Restriction on Disposition.
(a) The undersigned agrees that during the Pooling Period (as defined
below) he or she will not sell, transfer, or otherwise dispose of his or her
interests in, or reduce his or her risk relative to, any of the (i) shares of
Company Common Stock over which the undersigned has or shares voting or
dispositive power with respect thereto or (ii) shares of Acquiror Common Stock
into which such shares of Company Common Stock are converted upon consummation
of the Merger or upon the exercise of any options to purchase Acquiror Common
Stock. Notwithstanding the foregoing, the undersigned may sell, transfer or
otherwise dispose of his or her interests in, or reduce his or her risk relative
with respect to a de minimis (such amount to be determined in accordance with
accounting rules, regulations, interpretations and bulletins of the SEC) number
of (i) shares of Company Common Stock over which the undersigned has or shares
voting or dispositive power with respect there to or (ii) shares of Acquiror
Common Stock into which such shares of Company Common Stock are converted upon
consummation of the Merger or upon the exercise of any options to purchase
Acquiror Common Stock (any such transfer, a "De Minimis Transfer"), provided,
however, that any De Minimis Transfer shall be subject to the prior written
consent and approval of Acquiror and Acquiror shall be entitled to withhold such
consent and approval if the
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Acquiror reasonably believes (based upon consultation with Acquiror's
independent public accountants) that such De Minimis Transfer (along with any
other De Minimis Transfers by the undersigned or any other "affiliate" of the
Company or the Acquiror) would prevent accounting for the Merger as a "pooling
of interests".
(b) For purposes of this Affiliate Agreement, "Pooling Period" shall mean
the period commencing thirty (30) days prior to the Effective Time (as defined
in the Merger Agreement) and ending on the date which is two (2) business days
after publication by Acquiror of its results of post-Merger operations for the
period which includes at least thirty (30) days of post-Merger combined
operations of Acquiror and the Company whether by issuance of a quarterly
earnings report on Form 10-K, 10-Q, 8-K or other public issuance (such as a
press release) that includes such information. The undersigned understands that
reducing his or her risk relative to such shares of Company Common Stock or
Acquiror Common Stock includes, but is not limited to, using such shares to
secure a loan, purchasing a put option to sell such shares or otherwise entering
into a put agreement with respect to such shares.
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) The Acquiror Common Stock received by the undersigned as a result of
the Merger will be taken for the undersigned's own account and not for others,
directly or indirectly, in whole or in part; and
(b) Within thirty (30) days of execution hereof, the undersigned will,
and will cause each of the other parties whose shares are deemed to be
beneficially owned by the undersigned pursuant to Section 7 hereof to, have all
of the Company Common Stock beneficially owned by the undersigned registered in
the name of the undersigned or such parties as applicable, prior to the
effective date of the Merger and not in the name of any bank, broker dealer,
nominee or clearinghouse.
4. Restrictions on Transfer. The undersigned understands and agrees that
stop transfer instructions with respect to the shares of Acquiror Common Stock
received by the undersigned pursuant to the Merger will be given to the
Acquiror's transfer agent and that there will be placed on the certificates for
such shares, or shares issued in substitution thereof, a legend stating
substantially as follows:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as The Titan Corporation ("Acquiror")
has published the financial results covering at least 30 days of combined
operations after the effective date of the merger through which the
business combination was effected (except for such sales to the extent
permitted pursuant to a limited de minimis transfer exception under the
accounting rules, regulations, interpretations and bulletins of the SEC).
In addition, the shares represented by this certificate may not be sold,
transferred or otherwise disposed of except or unless (1) covered by an
effective registration statement under the Securities Act of 1933, as
amended, (2) in accordance with (i) Rule 145(d) of the Rules and
Regulations of such Act (in the case of shares issued to an individual who
is not an affiliate of Acquiror) or (ii) Rule 144 (in the case of shares
issued to an individual who is an affiliate of Acquiror), or (3) in
accordance with a legal opinion satisfactory to counsel for Acquiror that
such sale or transfer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate representing Acquiror
securities issued subsequent to the original issuance of the Acquiror Common
Stock pursuant to the Merger as a result of any stock dividend, stock split, or
other recapitalization as long as the Acquiror Common Stock issued to the
undersigned pursuant to the Merger has not been transferred in such manner to
justify the removal of the legend therefrom. Upon the request of the
undersigned, Acquiror shall cause the certificates representing the shares of
Acquiror Common Stock issued to the undersigned in connection with the Merger to
be reissued free of any legend relating to restrictions on transfer by virtue of
ASR 130 and 135 promptly after the requirements of ASR 130 and 135 have been met
upon receipt of an opinion of counsel reasonably acceptable to Acquiror to the
effect that such legend may be removed (the Acquiror may waive, in the
Acquiror's sole and absolute discretion, the Acquiror's right to receive such
opinion). In addition, if the
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provisions of Rules 144 and 145 are amended to eliminate restrictions applicable
to the Acquiror Common Stock received by the undersigned pursuant to the Merger,
or at the expiration of the restrictive period set forth in Rule 145(d),
Acquiror, upon the request of the undersigned, will cause the certificates
representing the shares of Acquiror Common Stock issued to the undersigned in
connection with the Merger to be reissued free of any legend relating to the
restrictions set forth in Rules 144 and 145(d), or upon receipt by Acquiror of
an opinion of counsel reasonably acceptable to Acquiror to the effect that such
legend is not required under the 1933 Act and may be removed.
5. Certain Understandings and Acknowledgments. The undersigned
acknowledges and understands that the representations, warranties and covenants
of the undersigned set forth herein will be relied upon by Acquiror and the
Company and their respective affiliates, counsel and accounting firms, and that
substantial losses and damages may be incurred by these persons if such
representations, warranties or covenants are breached. The undersigned has
carefully read the Merger Agreement and this Affiliate Agreement and discussed
their requirements and impact upon the undersigned's ability to sell, transfer,
or otherwise dispose of, or reduce his risks relative to, the shares of Acquiror
Common Stock to be received by the undersigned, to the extent the undersigned
believes necessary, with his or her counsel or counsel for the Company.
6. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of Acquiror Common Stock received by him in
connection with the Merger at any time during the restrictive period set forth
in Rule 145(d), the undersigned will provide the necessary representation letter
to the transfer agent for Acquiror Common Stock together with such additional
information as the transfer agent may reasonably request. If counsel reasonably
acceptable to Acquiror concludes that such proposed sale or transfer complies
with the requirements of Rule 145(d), upon receipt of an opinion of counsel
reasonably acceptable to Acquiror, Acquiror will so instruct the transfer agent
and provide such opinions to the transfer agent as may be necessary so that the
undersigned may complete the proposed sale or transfer.
7. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also may apply to (i) the undersigned's spouse, if that
spouse has the same home as the undersigned, (ii) any relative of the
undersigned who has the same home as the undersigned, (iii) any trust or estate
in which the undersigned, such spouse, and any such relative collectively own at
least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, such spouse, and any such relative
collectively own at least 10% of any class of equity securities or of the equity
interest.
8. Termination. This Affiliate Agreement shall be terminated and shall be
of no further force and effect upon the termination of the Merger Agreement.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between the Company, Acquiror and the undersigned concerning the subject matter
hereof. Nothing set forth herein, however, shall be construed to limit in any
way any of the undersigned's other rights incident to ownership of shares of
Company Common Stock or Acquiror Common Stock. Any notice required to be sent to
any party hereunder shall be sent by registered or certified mail, return
receipt requested, using the addresses set forth herein or such other address as
shall be furnished in writing by the parties. This Affiliate Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to the principles of conflicts of law.
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This Affiliate Agreement is executed as of the 9th day of December, 1999.
Very truly yours,
--------------------------------------
Signature
Name:
--------------------------------
Address:
------------------------------
------------------------------
------------------------------
AGREED TO AND ACCEPTED as of
December 9, 1999
THE TITAN CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ADVANCED COMMUNICATION SYSTEMS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE> 174
EXHIBIT B
FORM OF
ACQUIROR AFFILIATE AGREEMENT
DECEMBER 9, 1999
The Titan Corporation
3033 Science Park Road
San Diego, California 92121
Re: Affiliate Agreement
Ladies and Gentlemen:
The undersigned is a stockholder of The Titan Corporation, a Delaware
corporation ("Acquiror"). Under the terms of the Agreement and Plan of Merger,
dated as of December 9, 1999 (the "Merger Agreement"), by and among Acquiror,
Advanced Communication Systems, Inc., a Delaware corporation (the "Company"),
and A T Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Acquiror ("Merger Sub"), the Merger Sub will be merged with and into the
Company (the "Merger") and the shares of common stock of the Company, $.01 par
value per share, will be converted into and exchanged for shares of common stock
of Acquiror, par value $.01 per share ("Acquiror Common Stock"). This Affiliate
Agreement represents an agreement between the undersigned and Acquiror regarding
certain rights and obligations of the undersigned in connection with the shares
of Acquiror Common Stock beneficially owned by the undersigned.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and Acquiror hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
Acquiror he or she may be deemed to be an "affiliate" as that term is used in
SEC Accounting Series Release Nos. 130 and 135 and Rule 145 of the rules and
regulations of the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and the undersigned
anticipates that the undersigned will be such an "affiliate" at the time of the
Merger.
2. Restriction on Disposition.
(a) The undersigned agrees that during the Pooling Period (as defined
below) he or she will not sell, transfer, or otherwise dispose of his or her
interests in, or reduce his or her risk relative to, any of the shares of
Acquiror Common Stock over which the undersigned has or shares voting or
dispositive power with respect thereto. Notwithstanding the foregoing, the
undersigned may sell, transfer or otherwise dispose of his or her interests in,
or reduce his or her risk relative with respect to a de minimis (such amount to
be determined in accordance with accounting rules, regulations, interpretations
and bulletins of the SEC) number of shares of Acquiror Common Stock (any such
transfer, a "De Minimis Transfer"), provided, however, that any De Minimis
Transfer shall be subject to the prior written consent and approval of Acquiror
and Acquiror shall be entitled to withhold such consent and approval if Acquiror
reasonably believes (based upon consultation with Acquiror's independent public
accountants) that such De Minimis Transfer (along with any other De Minimis
Transfers by the undersigned or any other "affiliate" of Acquiror) would prevent
accounting for the Merger as a "pooling of interests".
(b) For purposes of this Affiliate Agreement, "Pooling Period" shall mean
the period commencing thirty days (30) days prior to the Effective Time (as
defined in the Merger Agreement) and ending on the date which is two (2)
business days after publication by Acquiror of its results of post-Merger
operations for the period which includes at least thirty (30) days of
post-Merger combined operations of Acquiror and the Company whether by issuance
of a quarterly earnings report on Form 10-K, 10-Q, 8-K or other public issuance
(such as a press release) that includes such information. The undersigned
understands that reducing his or her risk relative to such shares of Acquiror
Common Stock includes, but is not limited to,
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<PAGE> 175
using such shares to secure a loan, purchasing a put option to sell such shares
or otherwise entering into a put agreement with respect to such shares.
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that within thirty (30) days of execution hereof, the
undersigned will, and will cause each of the other parties whose shares are
deemed to be beneficially owned by the undersigned pursuant to Section 4(b)
hereof to, have all of the Acquiror Common Stock beneficially owned by the
undersigned registered in the name of the undersigned or such parties as
applicable, prior to the effective date of the Merger and not in the name of any
bank, broker dealer, nominee or clearinghouse.
4. Certain Understandings and Acknowledgments.
(a) The undersigned acknowledges and understands that the representations,
warranties and covenants of the undersigned set forth herein will be relied upon
by Acquiror and its respective affiliates, counsel and accounting firms, and
that substantial losses and damages may be incurred by these persons if the
undersigned's representations warranties or covenants are breached. The
undersigned has carefully read the Merger Agreement and this Affiliate Agreement
and discussed their requirements and impact upon his ability to sell, transfer,
or otherwise dispose of, or reduce his risks relative to, the shares of Acquiror
Common Stock beneficially owned by the undersigned, to the extent he or she
believes necessary, with his or her counsel or counsel for the Acquiror.
(b) The undersigned recognizes and agrees that the foregoing provisions of
this Affiliate Agreement also may apply to (i) the undersigned's spouse, if that
spouse has the same home as the undersigned, (ii) any relative of the
undersigned who has the same home as the undersigned, (iii) any trust or estate
in which the undersigned, such spouse, and any such relative collectively own at
least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, such spouse, and any such relative
collectively own at least 10% of any class of equity securities or of the equity
interest.
5. Termination. This Affiliate Agreement shall be terminated and shall be
of no further force and effect upon the termination of the Merger Agreement.
6. Miscellaneous. This Affiliate Agreement is the complete agreement
between Acquiror and the undersigned concerning the subject matter hereof.
Nothing set forth herein, however, shall be construed to limit in any way any of
the undersigned's other rights incident to ownership of shares of Acquiror
Common Stock. Any notice required to be sent to any party hereunder shall be
sent by registered or certified mail, return receipt requested, using the
addresses set forth herein or such other address as shall be furnished in
writing by the parties. This Affiliate Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of law.
[The remainder of this page is intentionally left blank]
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This Affiliate's Agreement is executed as of the 9th day of December, 1999.
Very truly yours,
--------------------------------------
Signature
Name:
--------------------------------
Address:
-----------------------------
-----------------------------
-----------------------------
AGREED TO AND ACCEPTED as of
December 9, 1999
THE TITAN CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE> 177
APPENDIX B
<PAGE> 178
December 8, 1999
Board of Directors
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, VA 22030
Members of the Board of Directors:
You have requested our opinion as to the fairness from a financial point of
view to Advanced Communication Systems, Inc. (the "Company") of the Exchange
Ratio (as defined below) provided for in connection with the proposed merger
(the "Merger") of the Company with a wholly owned subsidiary of The Titan
Corporation (the "Purchaser"). Pursuant to the terms of the December 7, 1999
draft of an Agreement and Plan of Merger (the "Agreement") to be entered into by
and among the Company, the Purchaser and AT Acquisition Corp. ("Acquisition
Sub"), the Company will become a wholly owned subsidiary of the Purchaser, and
stockholders of the Company will receive for each share of common stock, par
value $.01 per share, of the Company (the "Company Common Stock"), held by them,
other than shares held in treasury or held by the Purchaser or any affiliate of
the Purchaser, consideration in the form of shares of common stock, par value
$.01 per share, of the Purchaser (the "Purchaser Common Stock") equal to an
amount (the "Exchange Ratio") calculated pursuant to a formula contained in the
Agreement. The terms and conditions of the Merger are more fully set out in the
Agreement.
You have informed us, and we have assumed, that the Merger will be
accounted for as a pooling of interests in accordance with U.S. Generally
Accepted Accounting Principles. You also have informed us, and we have assumed,
that the Merger will be treated as a tax-free reorganization and/or exchange,
each pursuant to the Internal Revenue Code of 1986, as amended.
For purposes of the opinion set forth herein, we have:
(xv) reviewed certain publicly available financial statements and
other business and financial information of the Company and the Purchaser,
respectively;
(xv) reviewed certain internal financial statements and other
financial and operating data concerning the Company and the Purchaser,
respectively;
(xv) analyzed certain financial forecasts prepared by the managements
of the Company and the Purchaser, respectively;
(xv) reviewed and discussed with senior executives of the company and
the Purchaser information relating to certain strategic, financial and
operational benefits anticipated from the Merger, prepared by the
management of the Company;
(xv) discussed the past and current operations, financial condition
and prospects of the Company with senior executives of the Company and
discussed the past and current operations, financial condition and
prospects of the Purchaser with senior executives of the Purchaser;
(xv) reviewed the pro forma impact of the Merger on the Purchaser's
earnings per share, cash flow, consolidated capitalization and financial
ratios;
(xv) reviewed and considered in the analysis, information prepared by
members of senior management of the Company and the Purchaser relating to
the relative contributions of the Company and the Purchaser to the combined
company;
(xv) reviewed the reported prices and trading activity for the Company
Common Stock and the Purchaser Common Stock;
(xv) compared the financial performance of the Company and the
Purchaser and the prices and trading activity of the Company Common Stock
and the Purchaser Common Stock with that of certain other publicly traded
companies we deemed relevant;
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(xv) compared certain financial terms to financial terms, to the
extent publicly available, of certain other business combination
transactions we deemed relevant;
(xv) participated in discussions and negotiations among
representatives of the Company and the Purchaser and their financial and
legal advisors;
(xv) reviewed the Agreement and certain related documents;
(xv) at the request of management of the Company, spoken with a number
of potential purchasers concerning their interest in the Company and their
preliminary range of possible purchase prices;
(xv) analyzed various segments of the Purchaser's business and
compared them to publicly available information on other market
participants; and
(xv) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the financial and other information reviewed by us
for the purposes of this opinion. With respect to the financial forecasts,
including information relating to certain strategic, financial and operational
benefits anticipated from the Merger, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and good faith judgments of the future financial performance of the Company and
the Purchaser. With respect to the forecasts for the Company provided to us by
its management, for purposes of our analyses we have adjusted such forecasts to
reflect more conservative assumptions than those made by management of the
Company. We have discussed the adjusted forecasts with management of the Company
and they have acknowledged our use of such adjusted forecasts in arriving at our
opinion. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
appraisals. No opinion is expressed as to whether any alternative transaction
might produce consideration for the Company's stockholders in an amount in
excess of that contemplated in the Merger.
We have assumed that in connection with the receipt of all the necessary
regulatory approvals for the proposed Merger, no restrictions will be imposed
that would have a material adverse effect on the contemplated benefits expected
to be derived in the proposed Merger. We have relied upon, without independent
verification, the assessment by the management of the Company and the Purchaser
of their respective technology, products and services and the integration of the
Company's technology with the Purchaser's technology and the timing of
introduction of future products and services incorporating such technology. We
have also assumed that the Purchaser will be able to retain the Company's key
managers upon consummation of the Merger.
We have acted as sole financial advisor to the Board of Directors of the
Company in connection with this transaction and will receive a fee for our
services, including a fee which is contingent upon rendering this opinion and a
fee which is contingent upon the consummation of the Merger. In the past, Banc
of America Securities LLC or its affiliates have provided financial advisory and
financing services for the Company and have received fees for the rendering of
these services. We serve as agent bank under the Company's senior credit
facility and have received fees for the rendering of such services. In the
ordinary course of our businesses, we and our affiliates may actively trade the
debt and equity securities of the Company and the Purchaser for our own account
or for the accounts of customers and, accordingly, we or our affiliates may at
any time hold long or short positions in such securities.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in connection with and for purposes of its
evaluation of the Merger and is not on behalf of, and shall not confer rights or
remedies upon, any person, including without limitation any stockholder of the
Company, other than the Board of Directors. This opinion may not be disclosed,
referred to, or communicated (in whole or in part) to any third party for any
purpose whatsoever except with our prior written consent in each instance.
However, this opinion may be included in its entirety in any filing made by the
Company in
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<PAGE> 180
respect of the Transactions with the Securities and Exchange Commission, so long
as this opinion is reproduced in such filing in full and any description of or
reference to us or summary of this opinion and the related analysis in such
filing is in a form acceptable to us and our counsel. In furnishing this
opinion, we do not admit that we are experts within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations promulgated thereunder, nor do we admit
that this opinion constitutes a report or valuation within the meaning of
Section 11 of the Securities Act. Our opinion is necessarily based on economic,
market and other conditions as in effect on, and the information made available
to us as of, the date hereof. It should be understood that subsequent
developments may affect this opinion and we do not have any obligation to
update, revise, or reaffirm this opinion. This opinion does not in any manner
address the prices at which the shares of Company Common Stock or Purchaser
Common Stock have traded or at which shares of Purchaser Common Stock will trade
following consummation of the Merger. No opinion is rendered with respect to any
shares of Company Common Stock held by the Purchaser or any affiliate of the
Purchaser. In addition, we express no opinion or recommendation as to how the
stockholders of the Company should vote at the stockholders' meeting held in
connection with the Merger.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, we are of the opinion on the date hereof that
the Exchange Ratio to be received by the Company's stockholders in the proposed
Merger is fair from a financial point of view to the Company.
Very truly yours,
BANC OF AMERICA SECURITIES LLC
By: /s/ STEWART M. BOSWELL
------------------------------------
Name: Stewart M. Boswell
Title: Managing Director
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<PAGE> 181
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement of such action, suit or proceeding, provided that
amounts paid in settlement of such action, suit or proceeding, provided that
such officer or director acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the corporation's best interest,
and, for criminal proceedings, had no reasonable cause to believe his or her
conduct was illegal. A Delaware corporation may indemnify officers and directors
against expenses (including attorney's fees) in connection with the defense or
settlement of an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is successful on the merits or otherwise in
the defense of any action referred to above, the corporation must indemnify him
or her against the expenses which such officer or director actually and
reasonably incurred.
The Bylaws of The Titan Corporation ("Titan") contain a provision to limit
the personal liability of the directors of Titan for violations of their
fiduciary duty, except to the extent such limitation of liability is prohibited
by the Delaware Law. This provision eliminates each director's liability to
Titan or its stockholders for monetary damages except (i) for any breach of the
director's duty of loyalty to Titan or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware Law providing for
liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions, or (iv) for any transaction from which a director
derived an improper personal benefit. The Bylaws of Titan provide that Titan
will indemnify directors and officers to the fullest extent permitted by law.
The effect of these provisions is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.
In addition, Titan has entered into indemnity agreements with its executive
officers and directors whereby Titan obligates itself to indemnify such officers
and directors from any amounts which the officer or director becomes obligated
to pay because of any claim made against such officer or director arising out of
any act or omission committed while such officer or director is acting in the
capacity of an officer or director of Titan.
Titan maintains directors and officers liability insurance coverage that
insures its officers and directors against certain losses that may arise out of
their positions with Titan and insures Titan for liabilities it may incur to
indemnity its officers and directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) The following exhibits, as required by Item 601 of Regulation S-K, are
filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger by and among The Titan
Corporation, Advanced Communications Systems, Inc. and A T
Acquisition Corp. dated as of December 9, 1999, as amended
as of January 20, 2000 (included as Appendix A to the Proxy
Statement/ Prospectus contained in this Registration
Statement).
3.1* Registrant's Restated Certificate of Incorporation, as
amended.
</TABLE>
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<PAGE> 182
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
3.2 Registrant's By-laws, as amended, which was Exhibit 6(a)(3)
to Registrant's Quarterly Report on Form 10-Q dated November
13, 1995, is incorporated herein by this reference.
4.1* Specimen of certificate representing Registrant's Common
Stock, $.01 par value.
4.2 Rights Amendment, dated as of August 21, 1995, between the
Titan Corporation and American Stock Transfer and Trust
Company, which was Exhibit 1 to Registrant's Form 8-A dated
September 5, 1995, is incorporated herein by this reference.
5.1* Legal opinion of Hogan & Hartson L.L.P. regarding the
validity of the securities registered hereby.
8.1* Legal opinion of Hogan & Hartson L.L.P. with respect to
certain tax matters.
8.2* Legal opinion of Venable, Baetjer, Howard & Civiletti, LLP
with respect to certain tax matters.
10.1* Company Stockholders Agreement by and among The Titan
Corporation, A T Acquisition Corp. and each other person
listed on the signature page thereto dated as of December 9,
1999.
10.2* Irrevocable Proxy of Charles G. Martinache dated December 9,
1999.
10.3* Irrevocable Proxy of George A. Robinson and Barbara Robinson
dated December 9, 1999.
10.4* Irrevocable Proxy of Thomas A. Costello and Margaret M.
Costello dated December 9, 1999.
21* Subsidiaries of Registrant as of December 31, 1999.
23.1* Consent of Arthur Andersen LLP, Independent Public
Accountants with respect to Registrant.
23.2* Consent of Arthur Andersen, LLP, Independent Public
Accountants with respect to Advanced Communication Systems,
Inc.
23.3* Consent of Hogan & Hartson L.L.P. (contained in its opinions
filed as Exhibits 5.1 and 8.1).
23.4* Consent of Venable, Baetjer, Howard & Civiletti, LLP
(contained in its opinion filed as Exhibit 8.2).
23.5* Consent of Arthur Andersen LLP, Independent Public
Accountants, with respect to the audited financial
statements of Transnational Partners, II, LLC which were
filed as part of Registrant's Form 8-K/A filed on January
19, 2000.
23.6* Consent of Arthur Andersen LLP, Independent Public
Accountants, with respect to the audited financial
statements of JB Systems, Inc. which were filed as part of
the Registrant's Form 8-K/A filed on January 19, 2000.
23.7* Consent of Ernst & Young LLP, Independent Public
Accountants, with respect to the audited financial
statements of Assist Cornerstone Technologies, Inc. which
were filed as part of Registrant's Form 8-K/A filed on
January 19, 2000.
23.8* Consent of KPMG LLP, Independent Public Accountants, with
respect to the audited financial statements of SFG
Technologies, Inc. which were filed as part of Registrant's
Form 8-K/A filed on January 24, 2000.
99.1* Consent of Banc of America Securities LLC.
99.2* Consent of George A. Robinson.
99.3* Form of ACS Proxy for Special Meeting of Stockholders.
</TABLE>
- ---------------
* Filed herewith.
II-2
<PAGE> 183
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus that is a part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such offering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information caused for by the
other items of the applicable form.
(d) The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (c) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing
II-3
<PAGE> 184
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statements through the date
of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 185
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on the 24(th) day of January, 2000.
The Titan Corporation
/s/ NICHOLAS J. COSTANZA
--------------------------------------
Nicholas J. Costanza
Senior Vice President,
General Counsel and Secretary
(duly authorized officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GENE W. RAY President and Chief Executive January 24, 2000
- --------------------------------------------------- Officer and Director
Gene W. Ray (principal executive officer)
/s/ ERIC M. DEMARCO Senior Vice President and January 24, 2000
- --------------------------------------------------- Chief Financial Officer
Eric M. DeMarco (principal financial officer)
/s/ DEANNA H. PETERSEN Corporate Controller and Vice January 24, 2000
- --------------------------------------------------- President (principal
Deanna H. Petersen accounting officer)
/s/ CHARLES R. ALLEN Director January 24, 2000
- ---------------------------------------------------
Charles R. Allen
/s/ JOSEPH F. CALIGIURI Director January 24, 2000
- ---------------------------------------------------
Joseph F. Caligiuri
/s/ DANIEL J. FINK Director January 24, 2000
- ---------------------------------------------------
Daniel J. Fink
/s/ THOMAS G. POWNALL Director January 24, 2000
- ---------------------------------------------------
Thomas G. Pownall
/s/ ROBERT E. LABLANC Director January 24, 2000
- ---------------------------------------------------
Robert E. LaBlanc
/s/ ROBERT HANISEE Director January 24, 2000
- ---------------------------------------------------
Robert Hanisee
Director January , 2000
- ---------------------------------------------------
James Roth
</TABLE>
II-5
<PAGE> 186
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger by and among The Titan
Corporation, Advanced Communications Systems, Inc. and A T
Acquisition Corp. dated as of December 9, 1999, as amended
as of January 20, 2000 (included as Appendix A to the Proxy
Statement/ Prospectus contained in this Registration
Statement).
3.1* Registrant's Restated Certificate of Incorporation, as
amended.
3.2 Registrant's By-laws, as amended, which was Exhibit 6(a)(3)
to Registrant's Quarterly Report on Form 10-Q dated November
13, 1995, is incorporated herein by this reference.
4.1* Specimen of certificate representing Registrant's Common
Stock, $.01 par value.
4.2 Rights Amendment, dated as of August 21, 1995, between the
Titan Corporation and American Stock Transfer and Trust
Company, which was Exhibit 1 to Registrant's Form 8-A dated
September 5, 1995, is incorporated herein by this reference.
5.1* Legal opinion of Hogan & Hartson L.L.P. regarding the
validity of the securities registered hereby.
8.1* Legal opinion of Hogan & Hartson L.L.P. with respect to
certain tax matters.
8.2* Legal opinion of Venable, Baetjer, Howard & Civiletti, LLP
with respect to certain tax matters.
10.1* Company Stockholders Agreement by and among The Titan
Corporation, A T Acquisition Corp. and each other person
listed on the signature page thereto dated as of December 9,
1999.
10.2* Irrevocable Proxy of Charles G. Martinache dated December 9,
1999.
10.3* Irrevocable Proxy of George A. Robinson and Barbara Robinson
dated December 9, 1999.
10.4* Irrevocable Proxy of Thomas A. Costello and Margaret M.
Costello dated December 9, 1999.
21* Subsidiaries of Registrant as of December 31, 1999.
23.1* Consent of Arthur Andersen LLP, Independent Public
Accountants with respect to Registrant.
23.2* Consent of Arthur Andersen, LLP, Independent Public
Accountant, with respect to Advanced Communication Systems,
Inc.
23.3* Consent of Hogan & Hartson L.L.P. (contained in its opinions
filed as Exhibits 5.1 and 8.1).
23.4* Consent of Venable, Baetjer, Howard & Civiletti, LLP
(contained in its opinion filed as Exhibit 8.2).
23.5* Consent of Arthur Andersen LLP, Independent Public
Accountants, with respect to the audited financial
statements of Transnational Partners, II, LLC which were
filed as part of the Registrant's Form 8-K/A dated January
19, 2000.
23.6* Consent of Arthur Andersen LLP, Independent Public
Accountants, with respect to the audited financial
statements of JB Systems, Inc. which were filed as part of
the Registrant's Form 8-K/A dated January 19, 2000.
23.7* Consent of Ernst & Young LLP, Independent Public
Accountants, with respect to the audited financial
statements of Assist Cornerstone Technologies, Inc. which
were filed as part of the Registrant's Form 8-K/A dated
January 19, 2000.
23.8* Consent of KPMG LLP, Independent Public Accountants, with
respect to the audited financial statements of SFG
Technologies, Inc. which were filed as part of the
Registrant's Form 8-K/A dated January 24, 2000.
99.1* Consent of Banc of America Securities LLC.
99.2* Consent of George A. Robinson.
99.3* Form of ACS Proxy for Special Meeting of Stockholders.
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3.1
State of Delaware
Office of the Secretary of State PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION
OF "THE TITAN CORPORATION", FILED IN THIS OFFICE ON THE FIRST DAY OF OCTOBER,
A.D. 1999, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SEAL]
/s/ Edward J. Freel
---------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
0720430 8100 0023599
DATE:
991415908 10-13-99
<PAGE> 2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/01/1999
991415908 - 0720430
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE TITAN CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is
THE TITAN CORPORATION
2. The Certificate of Amendment of the Certificate of
Incorporation of the Corporation, which was filed by the Secretary of
State of Delaware on October 22, 1998, is hereby corrected.
3. The inaccuracy [DEFECT] to be corrected is the wording in the
opening paragraph of Article 4.
4. The portion of the instrument in CORRECTED form is as
follows:
FIRST: The Board of Directors of the Corporation declared an
amendment to the Corporation's Certificate of Incorporation,
as amended, (the "Certificate") advisable and approved a
resolution to amend the opening paragraph of Article Fourth
of the Certificate to read as follows:
Signed on this 8th day of October 1999.
/s/ CHERYL L. BARR
-----------------------------------
Cheryl L. Barr, Assistant Secretary [SEAL]
CERTIFICATE OF CORRECTION
TO THE CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION OF
THE TITAN CORPORATION
DATED OCTOBER 22, 1998
<PAGE> 3
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "THE TITAN CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-SECOND DAY OF
OCTOBER, A.D. 1998, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTRY RECORDER OF DEEDS.
(SEAL) /s/ EDWARD J. FREEL,
-----------------------------------
Edward J. Freel, Secretary of State
0720430 8100
AUTHENTICATION: 9368642
981408772 DATE: 10-23-98
<PAGE> 4
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/22/1998
981408772 -- 0720430
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
THE TITAN CORPORATION
The Titan Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
FIRST: The Board of Directors of the Corporation declared an amendment to
the Corporation's Certificate of Incorporation, as amended (the "Certificate")
advisable and approved a resolution to delete Article Fourth of the Certificate
in its entirety and replace it with the following:
Fourth: The Corporation is authorized to issue two classes of stock,
which shall be designated Preferred Stock and Common Stock,
respectively. The total number of shares of all classes of stock which
the Corporation shall have the authority to issue shall be
102,500,000, consisting of 2,500,000 shares of Preferred Stock of the
par value of $1.00 per share, and 100,000,000 shares of Common Stock
of the par value of $.01 per share.
SECOND: Thereafter, the Board of Directors called a Special Meeting of the
Stockholders for October 21, 1998, at which the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed and attached by its duly authorized officer this 21st day
of October, 1998.
By: /s/ CHERRYL BARR
---------------------------------
Cherryl Barr, Assistant Secretary
<PAGE> 5
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "THE TITAN CORPORATION", FILED IN THIS OFFICE ON THE TENTH DAY OF JULY, A.D.
1997, AT 9 O'CLOCK A.M.
/s/ EDWARD J. FREEL
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
0720430 8100 AUTHENTICATION: 9754607
991200153 DATE: 05-19-99
<PAGE> 6
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/10/1997
971228652 - 0720430
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
The Titan Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of The Titan
Corporation resolutions were duly adopted setting forth an
amendment to the Restated Certificate of Incorporation of said
Corporation, declaring such amendment to be advisable and
direction that the amendments proposed be considered at the next
annual meeting of the stockholders of said Corporation.
The amendment amends the opening paragraph of Article Fourth of
the Restated Certificate of Incorporation, which paragraph now reads as follows:
"Fourth: The Corporation is authorized to issue two classes of
stock, which shall be designated Preferred Stock and Common Stock,
respectively. The total number of shares of all classes of stock
which the Corporation shall have the authority to issue shall be
32,500,000, consisting of 2,500,000 shares of Preferred Stock of
the par value of $1.00 per share, and 30,000,000 shares of Common
Stock of the par value of $.01 per share."
so that from and after adoption of the amendment, said paragraph shall read as
follows:
"Fourth: The Corporation is authorized to issue two classes of
stock, which shall be designated Preferred Stock and Common Stock,
respectively. The total number of shares of all classes of stock
which the Corporation shall have the authority to issue shall be
47,500,000, consisting of 2,500,000 shares of Preferred Stock of
the par value of $1.00 per share, and 45,000.000 shares of Common
Stock of the par value of $.01 per share."
<PAGE> 7
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of the stockholders of said Corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, The Titan Corporation has caused this Certificate to be
signed by Gene W. Ray, its President and Chief Executive Officer, and attested
by Philip J. Englund, its Secretary, this 30th day of June, 1997.
THE TITAN CORPORATION
/s/ GENE W. RAY
-----------------------
Gene W. Ray
President and
Chief Executive Officer
ATTEST:
/s/ PHILIP J. ENGLUND
-----------------
Philip J. Englund
Secretary
<PAGE> 8
PAGE 1
State of Delaware
Office of the Secretary of State
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "THE TITAN CORPORATION", FILED IN THIS OFFICE ON THE THIRTIETH DAY OF JUNE,
A.D. 1987, AT 10 O'CLOCK A.M.
(seal)
/s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
0720430 8100 AUTHENTICATION: 9754594
991200153 DATE: 05-19-99
<PAGE> 9
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
The Titan Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of The Titan
Corporation resolutions were duly adopted setting forth two proposed
amendments to the Restated Certificate of Incorporation of said Corporation,
declaring said amendments to be advisable and directing that the amendments
proposed be considered at the next annual meeting of the stockholders of said
Corporation.
The first amendment renumbers Articles Ninth, Tenth and Eleventh of the
Restated Certificate of Incorporation as Articles Tenth, Eleventh and Twelfth
and adds a new Article Ninth to the Restated Certificate of Incorporation to
read in its entirety as follows:
"Ninth: A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for broach of fiduciary
duty as director, except to the extent such limitation of liability is
prohibited by Delaware General Corporation Law as the same exists or may
hereafter be amended."
The second amendment amends the opening paragraph of Article Fourth of the
Restated Certificate of Incorporation, which paragraph now reads as follows:
"Fourth: The Corporation is authorized to issue two classes of shares of
stock, which shall be designated Preferred Stock and Common Stock,
respectively. The total number of shares of all classes of stock which the
Corporation shall have authority to issue shall be 22,500,000, consisting of
2,500,000 shares of Preferred Stock of the par value of $1.00 per share, and
20,000,000 shares of Common Stock of the par value of $.01 per share."
so that from and after adoption of the second amendment, said paragraph shall
read as follows:
"Fourth: The Corporation is authorized to issue two classes of stock,
which shall be designated Preferred Stock and Common Stock, respectively. The
total number of shares of all classes of stock which the Corporation shall have
the authority to issue shall be 32,500,000, consisting of 2,500,000 shares
of Preferred Stock of the par value of $1.00 per share, and 30,000,000 shares
of Common Stock of the par value of $.01 per share."
<PAGE> 10
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of the stockholders of said Corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendments.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, The Titan Corporation has caused this Certificate to
be signed by Gene W. Ray, its President and Chief Executive Officer, and
attested by D. Marshall Nelson, its Secretary, this 25th day of June, 1987.
THE TITAN CORPORATION
By: /s/ GENE W. RAY
----------------------------
President
ATTEST:
By: /s/ D. MARSHALL NELSON
---------------------------
Secretary
<PAGE> 11
STATE OF DELAWARE PAGE 1
[SEAL]
OFFICE OF SECRETARY OF STATE
-----------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RESTATED
CERTIFICATE OF INCORPORATION OF THE TITAN CORPORATION FILED IN THIS OFFICE ON
THE NINETEENTH DAY OF NOVEMBER, A.D. 1986, AT 12 O'CLOCK P.M.
:::::::::::::::::::::::
[SEAL] /s/ MICHAEL HARKINS
-----------------------------------
736323068 Michael Harkins, Secretary of State
AUTHENTICATION: 11014542
DATE: 11/20/1986
<PAGE> 12
RESTATED CERTIFICATE OF INCORPORATION
OF
THE TITAN CORPORATION
THE TITAN CORPORATION, a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
1. The name of the Corporation is THE TITAN CORPORATION. This Corporation
was originally incorporated under the name "Electronic Memories & Magnetics
Corporation." The date of filing the Corporation's original Certificate of
Incorporation with the Secretary of State of the State of Delaware was July 11,
1969.
2. The text of the Certificate of Incorporation as amended or supplemented
heretofore is hereby restated to read as herein set forth in full:
First: The name of this Corporation is The Titan Corporation.
Second: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address is The Corporation
Trust Company.
Third: The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
Fourth: The Corporation is authorized to issue two classes of shares of
stock, which shall be designated Preferred Stock and Common Stock, respectively.
The total number of shares of all classes of stock which the Corporation shall
have authority to issue shall be 22,500,000, consisting of 2,500,000 shares of
Preferred Stock of the par value of $1 per share, and 20,000,000 shares of
Common Stock of the par value of $.01 per share.
Preferred Stock: Preferred Stock may be issued from time to time in one or
more series. The initial series of Preferred Stock is designated $1.00
Cumulative Convertible Preferred Stock (referred to hereinafter as the "Initial
Series Preferred Stock"), and the number of shares of the Initial Series
Preferred Stock is 1,068,102 shares.
1. Initial Series of Preferred Stock. The powers, preferences and rights,
and qualifications, limitations or restrictions thereof, of the Initial Series
Preferred Stock shall be as follows:
(a) Dividends. The holders of outstanding shares of Initial Series
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors of the Corporation out of any funds legally available therefor,
cash dividends at the rate of One Dollar ($1.00) per share per annum. Dividends
shall
<PAGE> 13
be payable quarterly on the 10th day of each March, June, September and December
in each year. Such dividends shall be cumulative and shall accrue daily, whether
or not earned or declared, from the date of issuance or, in the case of Initial
Series Preferred Stock issued when other shares of such stock are outstanding,
from the end of the last quarterly dividend period for which dividends have been
paid in full on outstanding Initial Series Preferred Stock. No dividend or other
distribution, other than a dividend solely in shares of the class or series upon
which it is distributed, shall be paid upon or declared or set apart for any
share of any class or series junior as to dividends to the Initial Series
Preferred Stock for any quarterly dividend period unless the dividends accrued
and payable on the Initial Series Preferred Stock for that period and all prior
periods have been paid or declared. No interest shall be payable on any
accumulation of unpaid dividends.
(b) Voting Rights. The holders of shares of Initial Series Preferred Stock
shall be entitled to one-third vote per share in the election of directors and
all other matters coming before any vote of the stockholders. Except as
otherwise provided by law and hereinbelow, such shares shall not vote as a
class.
If and whenever accrued dividends on the Initial Series Preferred Stock
shall not have been paid, or declared and a sum sufficient for the payment
thereof set aside, in an amount equivalent to six (6) quarterly dividends on all
shares of Initial Series Preferred Stock at the time outstanding, then and in
such event the holders of the Initial Series Preferred Stock, voting separately
as a class, shall be entitled at any annual meeting of the stockholders or
special meeting held in place thereof, or at a special meeting of the holders of
the Initial Series Preferred Stock called as hereinafter provided, to elect two
(2) directors. Such right of the holders of Initial Series Preferred Stock to
elect two (2) directors may be exercised until all dividends in default on the
Initial Series Preferred Stock shall have been paid in full or declared and
funds sufficient therefor set aside, and when so paid or provided for the right
of the holders of Initial Series Preferred Stock to elect such number of
directors shall cease, but subject always to the same provisions for the vesting
of such voting rights in the case of any such future dividend default or
defaults. At any time when such voting rights shall have so vested in the
holders of the Initial Series Preferred Stock, the Secretary of the Corporation
may, and upon the written request of the holders of not less than twenty five
percent of the number of shares of the Initial Series Preferred Stock then
outstanding, addressed to him at the principal office of the Corporation,
shall, call a special meeting of the holders of the Initial Series Preferred
Stock for the election of the directors to be elected by them as hereinafter
provided, to be held in the case of such written request within forty (40) days
after delivery of such request, and in either case to be held at the place and
upon the notice provided by law and in the By-Laws for the holding of meetings
of stockholders; provided, however, that the Secretary shall not be required to
call such a special meeting in the case
2
<PAGE> 14
of any such request received less than ninety (90) days before the date fixed
for the next ensuing annual meeting of stockholders. No such special meeting
and no adjournment thereof shall be held on a date less than thirty (30) days
before the annual meeting of the stockholders or a special meeting held in
place thereof next succeeding the time when the holders of the Initial Series
Preferred Stock become entitled to elect directors as above provided. If at any
such annual or special meeting or any adjournment thereof the holders of at
least a majority of the Initial Series Preferred Stock then outstanding shall
be present or represented by proxy, then by vote of the holders of at least a
majority of the shares of Initial Series Preferred Stock present or so
represented at such meeting, the then authorized number of directors of the
Corporation shall be increased by two (2) and the holders of the Initial Series
Preferred Stock shall be entitled to elect the additional directors so provided
for. The directors so elected shall serve until the next annual meeting or
until their respective successors shall be elected and qualify, provided,
however, that whenever the holders of the Initial Series Preferred Stock shall
be divested of voting rights as above provided, the terms of office of all
persons elected as directors by the holders of the Initial Series Preferred
Stock as a class, or elected to fill any vacancies resulting from the death,
resignation or removal of directors so elected by the holders of Initial Series
Preferred Stock, shall forthwith terminate, and the authorized number of
directors shall be reduced accordingly.
If, during any interval between any special meeting of the holders of the
Initial Series Preferred Stock for the election of directors to be elected by
them as provided above and the next ensuing annual meeting of stockholders, or
between annual meetings of stockholders, or between annual meetings of
stockholders for the election of directors, and while the holders of the Initial
Series Preferred Stock shall be entitled to elect two (2) directors, the number
of directors who have been elected by the holders of the Initial Series
Preferred Stock shall, by reason of resignation, death or removal be less than
the total number of directors subject to election by the holders of the Initial
Series Preferred Stock, (i) the vacancy or vacancies in the directors elected by
the holders of the Initial Series Preferred Stock may be filled by a majority
vote of the remaining directors then in office, although less than a quorum, and
(ii) if such vacancy or vacancies be not so filled within forty (40) days after
the creation thereof, the Secretary of the Corporation shall call a special
meeting of the holders of the Initial Series Preferred Stock and such vacancy or
vacancies shall be filled at such special meeting.
No director elected by the vote of the holders of Initial Series Preferred
Stock as a class, or elected by other directors to fill a vacancy resulting
from the death, resignation or removal of a director elected by such class
vote, may be removed from office by the vote or written consent of stockholders
unless such vote or written consent includes that of the holders of a majority
of the outstanding shares of Initial Series Preferred Stock.
3
<PAGE> 15
So long as any shares of Initial Series Preferred Stock are outstanding,
the Corporation shall not, by an amendment to the Certificate of Incorporation
or by merger or consolidation or in any other manner, authorize or increase any
class or series of stock ranking prior to the Initial Series Preferred Stock
either as to payment of dividends or distribution of assets or both, or change
the preferences or limitations of the Initial Series Preferred Stock in any
material respect adverse to the holders thereof, without the affirmative vote or
written consent of the holders of at least two-thirds (2/3rds) of the shares of
Initial Series Preferred Stock at the time outstanding.
(c) REDEMPTION. Shares of Initial Series Preferred Stock shall be
redeemable on and after, but not before, the fifth anniversary of the date upon
which the Agreement of Consolidation of which this Certificate is a part is
filed with the Secretary of State of the State of Delaware (the "filing date").
The Redemption Price per share shall be the amount shown in the following table
plus an amount equal to any accrued and unpaid dividends (whether or not earned
or declared) to the date fixed for redemption.
<TABLE>
<CAPTION>
REDEMPTION PRICE
PER SHARE
(EXCLUSIVE OF
DATE OF REDEMPTION UNPAID DIVIDENDS)
------------------ -----------------
<S> <C>
On and after fifth anniversary date of the filing
date and prior to sixth anniversary date thereof $21.50
On and after sixth anniversary date of the filing
date and prior to seventh anniversary date thereof 21.25
On and after seventh anniversary date of the filing
date and prior to eighth anniversary date thereof 21.00
On and after eighth anniversary date of the filing
date and prior to ninth anniversary date thereof 20.75
On and after ninth anniversary date of the filing
date and prior to tenth anniversary date thereof 20.50
On and after tenth anniversary date of the filing
date and prior to eleventh anniversary date thereof 20.25
On and after eleventh anniversary date of the filing date 20.00
</TABLE>
When the shares of Initial Series Preferred Stock shall have become subject
to redemption, they may be redeemed in whole or in part, but only at the option
of the Corporation, by the vote of its Board of Directors, at any time, or from
time to time, at the then applicable Redemption Price. In case of the redemption
of a part only of the shares then outstanding, the shares to be redeemed shall
be selected pro rata or by lot or in such other manner as the Board of Directors
may determine. At least thirty (30) days prior notice of every redemption shall
be mailed to the record holders of the shares to be redeemed at their addresses
shown on the books of the Corporation. Notice shall also be published at least
once not less than thirty (30) days prior to the redemption date in a daily
newspaper printed in the English
4
<PAGE> 16
language and published and of general circulation in the Borough of Manhattan,
City of New York.
If such notice of redemption shall have been made by the Corporation, and
if on or before the date fixed for redemption an amount in cash sufficient to
pay the Redemption Price of the shares called for redemption shall have been
deposited as a trust fund for the benefit of holders of such shares, with a bank
or trust company in the Borough of Manhattan, City of New York or City of Los
Angeles, California, and having capital, surplus and undivided profits of at
least $5,000,000.00, then after the making of such deposit the holders of such
shares shall be entitled to no rights whatsoever except (a) the right to receive
payment of the Redemption Price from such bank or trust company or from the
Corporation, as hereinafter provided, upon surrender of the certificates
therefor and (b) the right to exercise prior to the close of business on the
date fixed for redemption the right to convert the shares so called for
redemption into Common Stock as set forth hereinbelow.
Any funds so deposited which shall not be required for such redemption
because of the exercise of such right to convert subsequent to the date of such
deposit shall be returned to the Corporation forthwith. Any interest accrued on
the funds so deposited shall belong to the Corporation and be paid to it from
time to time. Any funds so deposited by the Corporation and unclaimed at the end
of two years from the date fixed for such redemption shall be repaid to the
Corporation, upon its request, after which repayment the holders of such shares
so called for redemption shall look only to the Corporation for payment of the
Redemption Price thereof.
On or after the date fixed for redemption and stated in such notice, each
holder of shares called for redemption shall surrender his certificate or
certificates evidencing such shares to the Corporation at the place designated
in such notice and shall thereupon be entitled to receive payment of the
Redemption Price. In case less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
The Corporation shall not redeem or purchase less than all of the shares of
the Initial Series Preferred Stock outstanding at any time unless all dividends
upon the Initial Series Preferred Stock for all previous quarterly dividend
periods and for the current quarterly dividend period shall have been paid or
declared and funds therefor set apart. The shares of Initial Series Preferred
Stock shall not be subject to the operation of a purchase, retirement or sinking
fund.
All shares of Initial Series Preferred Stock which shall have been redeemed
as herein provided shall be permanently retired and shall not be reissued and
the Corporation may from time to time take such appropriate corporate action as
may be necessary to reduce the authorized Initial Series Preferred Stock
accordingly.
5
<PAGE> 17
(d) Liquidation Preference. In the event of a voluntary or involuntary
liquidation or winding up or dissolution of the Corporation, the holders of
shares of Initial Series Preferred Stock shall be entitled to be paid Twenty
Dollars ($20.00) per share plus, in each case, a further amount equal to the
dividends unpaid and accrued thereon to the date of such distribution, and no
more, before any payment shall be made or any assets distributed to the holders
of any stock of any class or series ranking junior in liquidation to the Initial
Series Preferred Stock.
If the amounts payable upon liquidation on shares of Initial Series
Preferred Stock have been paid in full, the remaining assets and funds of the
Corporation shall be distributed among the holders of the Common Stock and the
holders of stock of any other class or series ranking junior in liquidation to
Initial Series Preferred Stock according to their respective interests; however,
if the amounts available for distribution upon liquidation to holders of Initial
Series Preferred Stock and of shares of any class or series ranking on a parity
with Initial Series Preferred Stock in liquidation are not sufficient to pay in
full the holders of all outstanding shares of Initial Series Preferred Stock and
of such class or series ranking on a parity with it, then such amounts shall be
distributed ratably among the holders of Initial Series Preferred Stock and the
holders of shares of such other class or series ranking on a parity with Initial
Series Preferred Stock, in proportion to the full preferential amounts to which
the holders of such shares are respectively entitled.
A consolidation or merger of this Corporation with or into any other
corporation or corporations, shall not be deemed to be a liquidation,
dissolution, or winding up within the meaning of this paragraph (d).
(e) Conversion Rights. The holders of shares of Initial Series Preferred
Stock shall have conversion rights as follows:
(1) Each holder of shares of Initial Series Preferred Stock may at
any time on or prior to the close of business on such date, if any, as may
have been fixed for the redemption of said shares in any notice of
redemption given pursuant to the provisions hereof, upon surrender of the
certificates therefor, convert any or all of his shares of Initial Series
Preferred Stock into full paid and nonassessable shares of the Common Stock
of the Corporation at the rate of one-third (1/3rd) share of Common Stock
for each share of Initial Series Preferred Stock surrendered for
conversion, provided, however, that no payment or adjustment shall be made
on account of any dividends due or accumulated on shares of Initial Series
Preferred Stock surrendered for conversion. Such conversion rights shall be
exercised by surrendering for such purpose to the Corporation, at any place
where the Corporation shall maintain a transfer agency for its Common Stock
or its Initial Series Preferred Stock, certificates representing the shares
6
<PAGE> 18
to be converted, duly endorsed in blank or accompanied by proper
instruments of transfer, and upon such surrender the person exercising
such option to convert shall be deemed to be holder of record of the
shares of Common Stock issuable upon such conversion, notwithstanding
that the share register of the Corporation shall then be closed or the
certificates representing such shares of Common Stock shall not then be
actually delivered to him.
(2) The number of shares of Common Stock into which shares of
Initial Series Preferred Stock may be converted shall be subject to
adjustment from time to time in certain cases as follows:
(a) In case the Corporation shall (i) pay a dividend in
shares of its Common Stock, (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Common Stock any shares of the
Corporation, the number and kind of shares into which the Initial
Series Preferred Stock is convertible shall be adjusted so that
the holder of any share of Initial Series Preferred Stock
thereafter surrendered for conversion shall be entitled to receive
the number and kind of shares of the Corporation which he would
have owned or have been entitled to receive after the happening of
any of the events described above, had such a share of Initial
Series Preferred Stock been converted immediately prior to the
happening of such event. Such adjustment shall be made whenever
any of the events listed above shall occur and shall become
effective retroactively immediately after the record date in the
case of a dividend and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification.
(b) In case the Corporation shall issue rights or warrants
to all holders of its Common Stock entitling them to subscribe for
or purchase shares of Common Stock at a price per share less than
the current market price per share of Common Stock (as defined in
Paragraph (d) below) at the record date mentioned below, the
number of shares of Common Stock into which each share of Initial
Series Preferred Stock shall thereafter be convertible shall be
determined by multiplying the number of shares of Common Stock
into which such share of Initial Series Preferred Stock was
theretofore convertible by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on the
record date for determination of holders entitled to receive such
rights or warrants plus the number of additional shares of Common
Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock
outstanding on such record date plus the
7
<PAGE> 19
number of shares which the aggregate offering price (before
deduction of underwriting discounts or commissions and expenses)
of the total number of shares so offered would purchase at such
current market price. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective
retroactively immediately after the record date for the
determination of stockholders entitled to receive such rights or
warrants.
(c) In case the Corporation shall distribute to all holders
of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions) or rights to subscribe
or warrants (excluding those referred to in Paragraph (b) above),
then in each such case the number of shares of Common Stock into
which each share of Initial Series Preferred Stock shall
thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which such share of Initial
Series Preferred Stock was theretofore convertible by a fraction,
of which the numerator shall be the current market price per share
of Common Stock (as defined in Paragraph (d) below) at the record
date mentioned below, and of which the denominator shall be such
current market price per share of the Common Stock, less the then
fair market value (as determined by the Board of Directors of the
Corporation, whose determination shall be conclusive) of the
portion of the evidences of indebtedness, assets, rights to
subscribe or warrants so distributed applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(d) For the purpose of any computation under Paragraphs (b)
and (c) above, the current market price per share of Common Stock
at any record date shall be deemed to be the average of the daily
closing prices for the thirty consecutive business days commencing
forty-five business days before such record date. The closing
price for each day shall be the last reported sale price (regular
way) or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices (regular
way), in either case on the New York Stock Exchange, or, if the
Common Stock is not listed on such Exchange, on the principal
national securities exchange on which the Common Stock is listed,
or if not listed on any national securities exchange, the average
of the closing bid and asked prices as furnished by any New York
Stock Exchange firm selected from time to time by the Corporation
for the purpose.
8
<PAGE> 20
(e) In case of any capital reorganization or any
reclassification of the capital stock of the Corporation or in
case of the consolidation or merger of the Corporation with or
into another corporation or the sale or conveyance of all or
substantially all of the assets of the Corporation to another
corporation, each share of Initial Series Preferred Stock shall be
convertible, as of the day following the date upon which such
reorganization, reclassification, consolidation, merger, sale or
conveyance becomes effective, into the same kind and amount of
securities (including shares of stock) or other assets, or both,
which were issuable or distributable to the holders of outstanding
shares of Common Stock of the Corporation upon such
reorganization, reclassification, consolidation, merger, sale or
conveyance, in respect of that number of shares of Common Stock
into which such share of initial Series Preferred Stock might have
been converted immediately prior to such reorganization,
reclassification, consolidation, merger, sale or conveyance; and
in any such case, appropriate adjustments (as determined by the
Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and
interests thereafter of the holders of shares of Initial Series
Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in, and other
adjustments of, the conversion rate) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any
securities or other assets thereafter deliverable upon the
conversion of shares of Initial Series Preferred Stock.
(f) Whenever the number of shares of Common Stock or other
securities deliverable upon the conversion of shares of Initial
Series Preferred Stock shall be adjusted pursuant to the
provisions hereof, the Corporation shall forthwith file, at its
principal office and with any transfer agent or agents for shares
of Initial Series Preferred Stock and for shares of Common Stock,
a statement, signed by the President or one of the Vice Presidents
of the Corporation, and by its Treasurer or one of its Assistant
Treasurers, stating the adjusted number of its shares of Common
Stock or other securities deliverable per share of Initial Series
Preferred Stock calculated to the nearest one-hundredth (1/100)
and setting forth in reasonable detail the method of calculation
and the facts requiring such adjustment and upon which such
calculation is based. Each adjustment shall remain in effect until
a subsequent adjustment hereunder is required.
(g) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock the full number of shares of Common Stock deliverable upon
conversion of all the then outstanding
9
<PAGE> 21
shares of Initial Series Preferred Stock and shall take all such
action as may be necessary to enable the Corporation lawfully to
issue such shares of Common Stock upon the conversion of shares of
Initial Series Preferred Stock.
(h) No fractional shares of Common Stock shall be issued
upon conversion, but in lieu thereof non-dividend bearing,
non-voting scrip (exchangeable for full shares) shall be issued in
such form, bearer or registered, in such denominations, expiring
after such reasonable time and containing such provision for the
sale of the full number of shares of Common Stock for which such
scrip is exchangeable for the account of the holders of such scrip
and such other terms and provisions, as the Board of Directors of
the Corporation may from time to time determine prior to the issue
of such scrip. The Corporation may, however, at its option, in
lieu of issuing such scrip, make such equitable provision for the
stockholders entitled to such scrip as the Board of directors may
determine, including payment in cash, or sale of stock to the
extent of such scrip and distribution of the net proceeds or
otherwise. The number of full shares issuable upon conversion
shall be computed on the basis of the aggregate number of shares
of Initial Series Preferred Stock evidenced by certificates
surrendered for conversion at one time by the same holder.
(i) All shares of Initial Series Preferred Stock which shall
have been surrendered for conversion as herein provided shall be
permanently retired and shall not be reissued, and the Corporation
may from time to time take such appropriate corporate action as
may be necessary to reduce the authorized Initial Series Preferred
Stock accordingly.
2. Other Series of Preferred Stock. With respect to any and all series of
Preferred Stock other than Initial Series Preferred Stock, the Board of
Directors of the Corporation is hereby expressly authorized to fix by resolution
or resolutions:
(i) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not below
the number of shares then outstanding) from time to time by like action of
the Board of Directors;
(ii) The dividend rights and rate of such series, the conditions and
times upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class of stock
or series thereof, or any other series of the same class, and whether
10
<PAGE> 22
preferential dividends, if any, shall be cumulative or non-cumulative;
(iii) Whether and the conditions upon which the shares of such series
shall be subject to redemption by the Corporation and the times, prices and
other terms and provisions upon which the shares of the series may be
redeemed;
(iv) Whether or not the shares of the series shall be subject to the
operation of a retirement or sinking fund to be applied to the purchase or
redemption of such shares and, if such retirement or sinking fund be
established, the annual amount thereof and the terms and provisions
relative to the operation thereof;
(v) Whether or not the shares of the series shall be convertible into
or exchangeable for shares of any other class or classes, or of any other
series of the same class, and, if provision is made for conversion or
exchange, the times prices, rates, adjustments, and other terms and
conditions of such conversion or exchange;
(vi) Whether or not the shares of the series shall have voting rights,
in addition to the voting rights provided by law, and, if so, the terms of
such voting rights;
(vii) The rights of the share of the series in the event of voluntary
or involuntary liquidation, dissolution, or upon the distribution of assets
of the Corporation;
(viii) Any other powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such series, as the Board of
Directors may deem advisable and as shall not be inconsistent with the
provisions of this Certificate of Incorporation.
Voting Rights of Common Stock: The holders of Common Stock of the
Corporation shall be entitled to one vote per share in the election of directors
and upon each other matter coming before any vote of stockholders.
Fifth: No holders of any shares of any class or series of stock of the
Corporation shall have any preemptive right to subscribe to any additional
issues of any class or series of stock or other securities of the Corporation.
Sixth: Whenever the vote of stockholders at a meeting thereof is required
or permitted to be taken for in connection with any corporate action, the
meeting and vote of stockholders may be dispensed with and such action may be
taken with the written consent of stockholders having not less than the minimum
percentage of the total vote required by statute for the proposed corporate
action, provided that prompt notice be given to all
11
<PAGE> 23
stockholders of the taking of corporate action without a meeting and by less
than unanimous written consent.
Seventh: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said organization shall,
if sanctioned by the court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
Eighth: Meetings of stockholders may be held at such place, either within
or without the State of Delaware, as may be designated by or in the manner
provided in the By-Laws. The books of the Corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the By-Laws of the Corporation. Elections of directors need not be by
written ballot unless the By-Laws of the Corporation shall so provide.
Ninth: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Tenth: In addition to the other powers expressly granted by statute, the
Board of Directors of the Corporation shall have the power to repeal, alter or
amend the By-Laws of the Corporation.
Eleventh: Headings are for convenience of reference only and do not limit,
extend or otherwise affect the meaning of any section, subsection or paragraph.
3. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors, at a meeting thereof duly
12
<PAGE> 24
called and held pursuant to the By-laws on November 6, 1986, at which meeting a
quorum was present and acting throughout, in accordance with Section 245 of the
Delaware General Corporation Law.
4. The Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Corporation's
Certificate of Incorporation as heretofore amended, and there is no discrepancy
between those provisions and the provisions of the Restated Certificate of
Incorporation.
IN WITNESS WHEREOF, The Titan Corporation has caused this Restated
Certificate of Incorporation to be made and to be signed by Gene W. Ray, its
President, and attested by D. Marshall Nelson, its Secretary, this 6th day of
November, 1986.
THE TITAN CORPORATION
By: /s/ Gene W. Ray
---------------------------
Gene W. Ray
President
ATTEST:
/s/ D. Marshall Nelson
- --------------------------------
D. Marshall Nelson,
Secretary
13
<PAGE> 1
EXHIBIT 4.1
[TITAN GRAPHIC LOGO]
NYS
COMMON COMMON
THE TITAN CORPORATION
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 888266 10 3
This Certifies that
is the registered owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
THE PAR VALUE OF $.01 EACH OF
CERTIFICATE OF STOCK
Witness the facsimile signatures of the Corporation's duly authorized officers.
Dated
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
Secretary Chairman of the Board
<PAGE> 2
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between The Titan Corporation and
American Stock Transfer and Trust Company dated as of August 21, 1995 (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of
The Titan Corporation. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Titan Corporation will mail to the
holder of this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. As described in the Rights Agreement,
Rights which are held by or have been held by Acquiring Persons or Associates or
Affiliates thereof (as defined in the Rights Agreement) shall become null and
void.
The following abbreviations, when used in the Inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ____________ Guardian ____________
TEN ENT -- as tenants by the entirety (Cust) (Minor)
JT ENT -- as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as tenants Act ______________________________
in common (State)
UNIF TAF MIN ACT -- ______ Custodian (until age ______)
(Cust)
___________Under Uniform Transfers
(Minor)
Minor Act_________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________________________________ hereby sell, assign and transfer unto
</TABLE>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------
- ------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ____________________________________
<TABLE>
<S> <C>
X ____________________________________________________________________
X ____________________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN ON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
</TABLE>
Signature(s) Guaranteed
By _____________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO
S.E.C. RULE 17ad-15.
<PAGE> 1
EXHIBIT 5.1
[Hogan and Hartson L.L.P. Letterhead]
January 24, 2000
Board of Directors
The Titan Corporation
3033 Science Park Road
San Diego, California 92121
Ladies and Gentlemen:
We are acting as special counsel to The Titan Corporation, a
Delaware corporation ("Titan"), in connection with its registration statement on
Form S-4 (the "Registration Statement") filed with the Securities and Exchange
Commission relating to the proposed offering of shares of Titan's common stock,
par value $.01 per share, all of which shares (the "Shares") may be issued by
Titan in accordance with the terms of the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of December 9, 1999 and amended as of January 20,
2000, by and among Titan, Advanced Communication Systems, Inc. and A T
Acquisition Corp. This opinion letter is furnished to you at your request to
enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17
C.F.R. Section 229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion letter, we have examined copies of
the following documents:
1. An executed copy of the Registration Statement.
2. An executed copy of the Merger Agreement.
3. The Restated Certificate of Incorporation of Titan,
with amendments thereto as certified by the Secretary
of Titan on the date hereof as then being complete,
accurate and in effect.
4. The bylaws of Titan, as certified by the Secretary of
Titan on the date hereof as then being complete,
accurate and in effect.
5. Resolutions of the Board of Directors of Titan adopted
at a meeting held on December 8, 1999, as certified
by the Secretary of Titan on the date hereof as then
being complete, accurate and in effect, relating to,
among other things, the issuance of the Shares and
arrangements in connection therewith.
In our examination of the aforesaid documents, we have assumed
the genuineness of all signatures, the legal capacity of all natural persons,
the accuracy and completeness of all documents submitted to us, the authenticity
of all original documents, and the conformity with the
<PAGE> 2
Board of Directors
The Titan Corporation
January 24, 2000
Page 2
original documents of all documents submitted to us as copies (including
telecopies). This opinion letter is given, and all statements herein are made,
in the context of the foregoing.
This opinion letter is based as to matters of law solely on
the Delaware General Corporation Law, as amended. We express no opinion herein
as to any other laws, statutes, ordinances, rules, or regulations. As used
herein, the term "Delaware General Corporation Law, as amended" includes the
statutory provisions contained therein, all applicable provisions of the
Delaware Constitution and reported judicial decisions interpreting these laws.
Based upon, subject to and limited by the foregoing, we are of
the opinion that following (i) effectiveness of the Registration Statement, (ii)
issuance of the Shares pursuant to the terms of the Merger Agreement, and (iii)
receipt by Titan of the consideration for the Shares specified in the Merger
Agreement and resolutions of the Board of Directors, the Shares will be validly
issued, fully paid and nonassessable.
This opinion letter has been prepared for your use in
connection with the Registration Statement and speaks as of the date hereof. We
assume no obligations to advise you of any changes in the foregoing subsequent
to the delivery of this opinion letter.
We hereby consent to the filing of this opinion letter as
Exhibit 5 to the Registration Statement and to the reference to this firm under
the caption "Legal Matters" in the Proxy Statement/Prospectus constituting a
part of the Registration Statement. In giving this consent, we do not thereby
admit that we are an "expert" within the meaning of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ HOGAN & HARTSON L.L.P.
HOGAN & HARTSON L.L.P.
<PAGE> 1
EXHIBIT 8.1
[HOGAN & HARTSON L.L.P. LETTERHEAD]
January 24, 2000
Board of Directors
The Titan Corporation
3033 Science Park Road
San Diego, CA 92121
Ladies and Gentlemen:
This opinion is being delivered to you in accordance with
Section 8.1(i) of the Agreement and Plan of Merger (the "Agreement"), dated as
of December 9, 1999 and as amended as of January 20, 2000, by and among The
Titan Corporation ("Acquiror"), a Delaware corporation, A T Acquisition Corp.
("Merger Sub"), a Delaware corporation and wholly-owned subsidiary of Acquiror,
and Advanced Communication Systems, Inc. (the "Company"), a Delaware
corporation. Pursuant to the Agreement, Merger Sub will be merged with and into
the Company (the "Merger").
In connection with the preparation of this opinion, we have
examined and with your consent relied upon (without any independent
investigation or review thereof) the following documents (including all exhibits
and schedules thereto): (1) the Agreement; (2) the Registration Statement on
Form S-4 to be filed with the Securities and Exchange Commission (the
"Registration Statement") and/or the Proxy Statement/Prospectus of Acquiror and
the Company; (3) representations and certifications made to us by Acquiror
(attached hereto as Exhibit A); (4) representations and certifications made to
us by the Company (attached hereto as Exhibit B); (5) such other instruments and
documents related to the formation, organization and operation of Acquiror,
Merger Sub and the Company or to the consummation of the Merger and the
transactions contemplated thereby as we have deemed necessary or appropriate. In
addition, we have reviewed the form of opinion of counsel received by the
Company from Venable, Baetjer, Howard & Civiletti, LLP with respect to the tax
consequences of the proposed transaction (the "Venable Opinion"). 1/
- --------
1/ All capitalized terms used herein and not otherwise defined shall have the
same meaning as they have in the Agreement. All section references, unless
<PAGE> 2
The Titan Corporation
January 24, 2000
Page 2
The Proposed Transaction
Based solely upon our review of the documents set forth above,
and upon such information as Acquiror, Merger Sub and the Company have provided
to us (which we have not attempted to verify in any respect), and in reliance
upon such documents and information, we understand that the proposed transaction
and the relevant facts with respect thereto are as follows:
Acquiror is a leading provider of communications and
information solutions to U.S. military and allied government agencies, as well
as to commercial customers. Merger Sub was organized solely for the purpose of
accomplishing the merger described below. The Company provides communications
services, information systems and aerospace services predominantly to U.S.
government agencies and commercial customers.
For the reasons set forth in the Registration Statement, it is
proposed that pursuant to the Agreement and the laws of the State of Delaware,
Merger Sub merge with and into the Company. Merger Sub's separate corporate
existence will cease and the Company will be the surviving corporation (the
"Surviving Corporation"). As the Surviving Corporation, the Company will succeed
to all of the assets and liabilities of Merger Sub under Delaware corporate law.
By virtue of the Merger, each share of Company Common Stock,
excluding any Treasury Shares and any shares held by Acquiror or Merger Sub (and
Acquiror has represented that neither Acquiror nor Merger Sub owns any Company
stock other than stock issued in the Merger), issued and outstanding at the
Effective Time will be converted into the right to receive that number of shares
of Acquiror Common Stock equal to the Exchange Ratio. The Exchange Ratio will be
based on the average of the closing sale prices of the Acquiror Common Stock on
the New York Stock Exchange for the ten consecutive trading days ending two
trading days immediately before the Closing Date. Fractional shares of Acquiror
Common Stock will not be issued in the Merger. Rather, fractional shares will be
rounded up or down to the nearest whole share of Acquiror Common Stock. There
will be no dissenters' rights.
- --------
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
<PAGE> 3
The Titan Corporation
January 24, 2000
Page 3
Assumptions and Representations
In connection with rendering this opinion, we have assumed or
obtained representations (and, with your consent, are relying thereon, without
any independent investigation or review thereof, although we are not aware of
any material facts or circumstances contrary to or inconsistent therewith) that:
1. All information contained in each of the documents we have
examined and relied upon in connection with the preparation of this opinion is
accurate and completely describes all material facts relevant to our opinion,
all copies are accurate and all signatures are genuine. We have also assumed
that there has been (or will be by the Effective Time of the Merger) due
execution and delivery of all documents where due execution and delivery are
prerequisites to the effectiveness thereof.
2. The Merger will be consummated in accordance with
applicable state law and will qualify as a statutory merger under applicable
state law.
3. All representations made in the exhibits hereto are true,
correct, and complete in all material respects. Any representation or statement
made "to the best of knowledge" or similarly qualified is correct without such
qualification.
4. The Merger will be consummated in accordance with the
Agreement and as described in the Proxy Statement/Prospectus (including
satisfaction of all covenants and conditions to the obligations of the parties
without amendment or waiver thereof); each of Acquiror, Merger Sub and the
Company will comply with all reporting obligations with respect to the Merger
required under the Code and the Treasury Regulations thereunder; and the
Agreement and all other documents and instruments referred to therein or in the
Proxy Statement/Prospectus are valid and binding in accordance with their terms.
5. The Venable Opinion has been concurrently delivered and not
withdrawn.
Opinion - Federal Income Tax Consequences
Based upon and subject to the assumptions and qualifications
set forth herein, it is our opinion that for federal income tax purposes: (1)
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code; and (2) the discussion in the Registration Statement under the
heading "Federal Income
<PAGE> 4
The Titan Corporation
January 24, 2000
Page 4
Tax Consequences," to the extent such discussion describes applicable federal
income tax law, is correct in all material respects, as of the date hereof.
In addition to the assumptions set forth above, this opinion
is subject to the exceptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment
regarding the application of relevant current provisions of the Code and
interpretations of the foregoing as expressed in existing court decisions,
administrative determinations (including the practices and procedures of the
Internal Revenue Service (the "IRS") in issuing private letter rulings, which
are not binding on the IRS except with respect to the taxpayer that receives
such a ruling) and published rulings and procedures all as of the date hereof.
An opinion of counsel merely represents counsel's best judgment with respect to
the probable outcome on the merits and is not binding on the IRS or the courts.
There can be no assurance that positions contrary to our opinions will not be
taken by the IRS, or that a court considering the issues would not hold contrary
to such opinions. Acquiror has not requested a ruling from the IRS (and no
ruling will be sought) as to any of the federal income tax consequences
addressed in this opinion. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a prospective or
retroactive basis, would not adversely affect the accuracy of the opinion
expressed herein. Nevertheless, we undertake no responsibility to advise you of
any new developments in the law or in the application or interpretation of the
federal income tax laws.
2. This letter addresses only the specific tax opinions set
forth above. This letter does not address any other federal, state, local or
foreign tax consequences that may result from the Merger or any other
transaction (including any transaction undertaken in connection with the
Merger).
3. Our opinion is intended to address only the tax
consequences to Acquiror and is not intended to address (nor may it be relied
upon for) the tax consequences to the Company or the Holders. We express no
opinion regarding, among other things, the tax consequences of the Merger
(including the opinion set forth above) as applied to specific stockholders of
the Company that may be relevant to particular classes of the Company
shareholders, such as dealers in securities, corporate shareholders subject to
the alternative minimum tax, foreign persons, and holders of shares acquired
upon exercise of stock options or in other compensatory transactions.
<PAGE> 5
The Titan Corporation
January 24, 2000
Page 5
4. Our opinion set forth herein is based upon the description
of the contemplated transactions as set forth above in the section captioned
"The Proposed Transaction," the Agreement and the Proxy Statement/Prospectus. If
the actual facts relating to any aspect of the transactions differ from this
description in any material respect, our opinion may become inapplicable. No
opinion is expressed as to any transaction other than those set forth in the
section captioned "The Proposed Transaction," the Agreement and the Proxy
Statement/Prospectus or to any transaction whatsoever, including the Merger, if
all the transactions described in the section captioned "The Proposed
Transaction," the Agreement and the Proxy Statement/Prospectus are not
consummated in accordance with the terms of the section captioned "The Proposed
Transaction," the Agreement and the Proxy Statement/Prospectus and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
This opinion is provided to Acquiror only, and without our
prior consent, may not be relied upon, used, circulated, quoted or otherwise
referred to in any manner by any person, firm, governmental authority or entity
whatsoever other than reliance thereon by Acquiror. Notwithstanding the prior
sentence, we hereby consent to the use of the opinion letter as an exhibit to
the Registration Statement and to the use of our name in the Registration
Statement. In giving the consent, we do not thereby admit that we are an
"expert" within the meaning of the Securities Act of 1933, as amended.
Sincerely yours,
/s/ HOGAN & HARTSON L.L.P.
HOGAN & HARTSON L.L.P.
<PAGE> 1
EXHIBIT 8.2
[VENABLE, BAETJER, HOWARD & CIVILETTI, LLP LETTERHEAD]
January 24, 2000
Directors and Shareholders
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, VA 22030
RE: Acquisition by The Titan Corporation
Ladies and Gentlemen:
We have acted as counsel for Advanced Communication Systems, Inc. (the
"Company"), a Delaware corporation, in connection with the preparation and
execution of the Agreement and Plan of Merger (the "Agreement"), dated as of
December 9, 1999, by and among the Company, The Titan Corporation ("Acquiror"),
a Delaware corporation, and A T Acquisition Corp. ("Merger Sub"), a Delaware
corporation and wholly-owned subsidiary of Acquiror. This opinion is being
delivered to you in accordance with Section 8.1(i) of the Agreement. Pursuant to
the Agreement, Merger Sub will merge with and into the Company (the "Merger").
All section references in this opinion, unless otherwise indicated, are to the
Internal Revenue Code of 1986, as amended (the "Code"). All capitalized terms
used in this opinion and not otherwise defined in this opinion shall have the
meaning assigned to those terms in the Agreement.
In rendering this opinion, we have examined and, with your consent, have
relied upon (without any independent investigation or review thereof) the
following documents (including all exhibits and schedules thereto): (i) the
Agreement; (ii) the Registration Statement on Form S-4 to be filed with the
Securities and Exchange Commission (the "Registration Statement") and/or the
Proxy Statement/Prospectus of the Company and Acquiror; (iii) representations
and certifications made to us by the Company (attached hereto as Exhibit A);
(iv) representations and certifications made to us by Acquiror (attached hereto
as Exhibit B); (v) such other instruments and documents related to the
formation, organization and operation of the Company, Acquiror and Merger Sub or
to the consummation of the Merger and the transactions contemplated thereby as
we have deemed necessary or appropriate. In addition, we have reviewed the form
of opinion of counsel, which will be delivered to Acquiror from Hogan & Hartson
L.L.P., with respect to the tax consequences of the proposed transaction (the
"Hogan Opinion").
The Proposed Transaction
<PAGE> 2
Directors and Shareholders
Advanced Communication Systems, Inc.
January 24, 2000
Page 2
Based solely upon our review of the documents set forth above and the
information contained therein (which information we have not attempted to verify
in any respect), and in reliance upon such documents and information, we
understand that the proposed transaction and the relevant facts with respect
thereto are as follows:
The Company provides communications services, information systems and
aerospace services predominantly to U.S. government agencies and commercial
customers. Acquiror is a leading provider of communications and information
solutions to U.S. military and allied government agencies, as well as to
commercial customers. Merger Sub was organized solely for the purpose of
accomplishing the merger described below.
For the reasons set forth in the Registration Statement, it is proposed
that pursuant to the Agreement and the laws of the State of Delaware, Merger Sub
merge with and into the Company. Merger Sub's separate corporate existence will
cease and the Company will be the surviving corporation (the "Surviving
Corporation"). As the Surviving Corporation, the Company will succeed to all of
the assets and liabilities of Merger Sub under Delaware corporate law.
By virtue of the Merger, each share of the Company Common Stock, excluding
any Treasury Shares, issued and outstanding at the Effective Time will be
converted into the right to receive that number of shares of Acquiror Common
Stock equal to the Exchange Ratio. The Exchange Ratio will be based on the
average of the closing sale prices of the Acquiror Common Stock on the New York
Stock Exchange for the ten consecutive trading days ending two trading days
immediately before the Closing Date. Fractional shares of Acquiror Common Stock
will not be issued in the Merger. Instead, fractional shares will be rounded up
or down to the nearest whole share of Acquiror Common Stock. There will be no
dissenters' rights.
Assumptions and Representations
In connection with rendering this opinion, we have assumed or obtained
representations (and, with your consent, are relying thereon, without any
independent investigation or review thereof, although we are not aware of any
material facts or circumstances contrary to or inconsistent therewith) that:
1. All information contained in each of the documents we have examined and
relied upon in connection with the preparation of this opinion is accurate and
completely describes all material facts relevant to our opinion. With respect to
such documents, we have also assumed the genuineness of all signatures, the
legal capacity of all individuals signing the documents, the authenticity of the
documents and the
<PAGE> 3
Directors and Shareholders
Advanced Communication Systems, Inc.
January 24, 2000
Page 3
conformity with originals of all documents submitted to us as copies. We have
further assumed that there has been (or will be by the Effective Time of the
Merger) due execution and delivery of all documents where due execution and
delivery are prerequisites to the effectiveness thereof.
2. The Merger will be consummated in accordance with Delaware law and will
qualify as a statutory merger under Delaware law.
3. All representations made in the exhibits hereto are true, correct, and
complete in all material respects.
4. The Merger will be consummated in accordance with the Agreement and as
described in the Proxy Statement/Prospectus (including satisfaction of all
covenants and conditions to the obligations of the parties without amendment or
waiver thereof); each of Acquiror, Merger Sub and the Company will comply with
all reporting obligations with respect to the Merger required under the Code and
the Treasury Regulations thereunder; and the Agreement and all other documents
and instruments referred to therein or in the Proxy Statement/Prospectus are
valid and binding in accordance with their terms.
5. The Hogan Opinion has been concurrently delivered and not withdrawn.
Opinion - Federal Income Tax Consequences
Based upon and subject to the assumptions and qualifications set forth
herein, it is our opinion that for federal income tax purposes: (i) the Merger
will qualify as a reorganization within the meaning of Section 368(a); and (ii)
the discussion in the Registration Statement under the heading "Federal Income
Tax Consequences," to the extent such discussion describes applicable federal
income tax law, is correct in all material respects, as of the date hereof.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment regarding
the application of relevant current provisions of the Code and interpretations
of the foregoing as expressed in existing court decisions, administrative
determinations (including the practices and procedures of the Internal Revenue
Service (the "IRS") in issuing private letter rulings, which are not binding on
the IRS except with respect to the taxpayer that receives such a ruling) and
published rulings and procedures all as of the
<PAGE> 4
Directors and Shareholders
Advanced Communication Systems, Inc.
January 24, 2000
Page 4
date hereof. An opinion of counsel merely represents counsel's best judgment
with respect to the probable outcome on the merits and is not binding on the IRS
or the courts. There can be no assurance that positions contrary to our opinions
will not be taken by the IRS, or that a court considering the issues would not
hold contrary to such opinions. The Company has not requested a ruling from the
IRS (and no ruling will be sought) as to any of the federal income tax
consequences addressed in this opinion. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
opinion expressed herein. Nevertheless, we undertake no responsibility to advise
you of any new developments in the law or in the application or interpretation
of the federal income tax laws.
2. This letter addresses only the specific tax opinions set forth above.
This letter does not address any other federal, state, local or foreign tax
consequences that may result from the Merger or any other transaction (including
any transaction undertaken in connection with the Merger).
3. Our opinion is intended to address only the tax consequences to the
Company and its shareholders generally and is not intended to address (nor may
it be relied upon for) the tax consequences to Acquiror or any other person. We
express no opinion regarding, among other things, the tax consequences of the
Merger (including the opinion set forth above) as applied to specific
stockholders of the Company, such as dealers in securities, corporate
shareholders subject to the alternative minimum tax, foreign persons, and
holders of shares acquired upon exercise of stock options or in other
compensatory transactions.
4. Our opinion set forth herein is based upon the description of the
contemplated transaction as set forth in (i) the section of this opinion
captioned "The Proposed Transaction;" (ii) the Agreement; and (iii) the Proxy
Statement/Prospectus. If the actual facts relating to any aspect of the
transaction differ from this description in any material respect, our opinion
may become inapplicable. No opinion is expressed as to any transaction other
than the one set forth in the section captioned "The Proposed Transaction," the
Agreement and the Proxy Statement/Prospectus. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
5. In basing matters set forth herein on our knowledge or awareness, the
words "knowledge" and "awareness" (and any variations thereof) signify that in
the course of our representation as counsel to the Company, no information has
come to our attention that would give us actual knowledge or actual notice that
any such matters are
<PAGE> 5
Directors and Shareholders
Advanced Communication Systems, Inc.
January 24, 2000
Page 5
not accurate or that any of the documents, certificates and information on which
we have relied are not accurate and complete. The words "knowledge" and
"awareness" and similar language used herein are intended to be limited to
knowledge of the lawyers within our firm who have been actively involved in
specific matters for the Company insofar as such knowledge pertains to the
area(s) of their involvement.
This opinion is provided only to the Company and its shareholders, and
without our prior consent, may not be relied upon, used, circulated, quoted or
otherwise referred to in any manner by any person, firm, governmental authority
or entity whatsoever other than the Company and a shareholder of the Company.
Notwithstanding the prior sentence, we hereby consent to the use of the opinion
letter as an exhibit to the Registration Statement and to the use of our name in
the Registration Statement.
Sincerely yours,
/s/ Venable, Baetjer, Howard & Civiletti, LLP
<PAGE> 1
EXHIBIT 10.1
COMPANY STOCKHOLDERS AGREEMENT
THIS COMPANY STOCKHOLDERS AGREEMENT (this "Agreement") is entered into
this 9th day of December, 1999, by and among The Titan Corporation, a Delaware
corporation ("Acquiror"), A T Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Acquiror ("Merger Sub"), and each other Person
listed on the signature page hereof who is a stockholder (each a "Stockholder"
and collectively, the "Stockholders") of Advanced Communication Systems, Inc.,
a Delaware corporation (the "Company").
WHEREAS, the Stockholders own of record and beneficially the shares of
common stock, par value $.01 per share of the Company ("Company Common Stock")
set forth opposite their respective names on Schedule A hereto (the "Shares")
and desire to enter into this Agreement with respect to such shares of Company
Common Stock;
WHEREAS, Acquiror, Merger Sub and the Company have contemporaneously with
the execution of this Agreement entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of the date hereof, which provides, among
other things, for the merger (the "Merger") of the Merger Sub with and into the
Company pursuant to the terms and conditions thereof; capitalized terms used
herein and not otherwise defined shall have the meanings given to such terms as
in the Merger Agreement;
WHEREAS, as an essential condition and inducement to Acquiror and Merger
Sub entering into the Merger Agreement, Acquiror has required that the
Stockholders agree, and the Stockholders have agreed, to enter into this
Agreement; and
NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the
mutual covenants and agreements contained herein and in the Merger Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which hereby are acknowledged, and intending to be legally bound hereby, agree
as follows:
SECTION 1. VOTING
(a) Each Stockholder hereby agrees to appear, or to cause the holder of
record on any applicable record date (the "Record Holder") to appear, in person
or by proxy, for the purpose of obtaining a quorum at any annual or special
meeting of stockholders of the Company and at any adjournment thereof at which
matters relating to the Merger, Merger Agreement or any transaction
contemplated thereby are considered; and
(b) Each Stockholder further agrees that, it shall vote, or cause the Record
Holder to vote, in person or by proxy all of the Shares, and any other voting
interests in the Company owned or hereafter acquired beneficially or of record
by such Stockholder:
(i) in favor of the Merger and the adoption of the Merger Agreement
and the transactions contemplated thereby (including any amendments or
modifications of the terms thereof approved by the Board of Directors of the
Company and by Acquiror) in
<PAGE> 2
connection with any meeting of, or solicitation of consents from, the
stockholders of the Company at which or in connection with which the Merger and
the Merger Agreement are submitted for the consideration and vote of the
stockholders of the Company;
(ii) against approval or adoption of resolutions which would have the
effect of preventing or materially delaying consummation of the Merger or
otherwise preventing or materially delaying the Company from performing its
obligations under the Merger Agreement; and
(iii) against any action which would constitute a material breach of
any provision of the Merger Agreement.
To the extent inconsistent with the foregoing provisions of this Section 1,
each Stockholder revokes any and all previous proxies with respect to Shares
owned beneficially or of record by such Stockholder and agrees not to grant any
proxy with respect to and any other voting interests in the Company owned or
hereafter acquired beneficially or of record by such Stockholder.
SECTION 2. PROXY; FURTHER ASSURANCES
(a) Contemporaneously with the execution of this Agreement: (i) each
Stockholder has delivered to Acquiror a proxy in the form attached to this
Agreement as Exhibit A, which shall be coupled with an interest and
irrevocable, with respect to the shares referred to therein (the "Proxy"); and
(ii) each Stockholder has caused to be delivered to Acquiror an additional
proxy (in the form attached hereto as Exhibit A) executed on behalf of the
record owner of any outstanding shares of Company Common Stock that are owned
beneficially (within the meaning of Rule 13d-3 under the Exchange Act), but not
of record, by such Stockholder, which proxy shall be irrevocable to the fullest
extent permitted by law and to the extent provided therein, with respect to the
shares referred to therein.
(b) Each Stockholder shall, at Acquiror's expense, perform such further
acts and execute such further documents and instruments as may reasonably be
required to vest in Acquiror the power to carry out and give effect to the
provisions of this Agreement. Without limiting the generality of the foregoing,
none of the parties hereto shall enter into any agreement or arrangement (or
alter, amend or terminate any existing agreement or arrangement) or transaction
if such action would materially impair or materially interfere with the ability
of any party to effectuate, carry out and comply with all of the terms of this
Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder hereby, severally and not jointly, represents and
warrants to Acquiror as follows:
2
<PAGE> 3
(a) Such Stockholder has the legal capacity and all other power and
authority necessary to enter into this Agreement, to perform the obligations
hereunder and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by such Stockholder and,
assuming due authorization, execution and delivery of this Agreement by
Acquiror, Merger Sub and the other parties hereto, constitutes a legal, valid
and binding obligation of such Stockholder, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditor's rights generally and by the application of
general principles of equity.
(b) The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated will not to the knowledge of such
Stockholder, (i) conflict with or violate any law, regulation, court order,
judgment or decree applicable to such Stockholder or by which the property of
such Stockholder is bound or affected, or (ii) conflict with or result in any
breach of or constitute a default under any contract or agreement to which such
Stockholder is a party or by which such Stockholder or such Stockholder's
property is bound or affected, which conflict, violation, breach or default
would materially impair or materially interfere with such Stockholder's ability
to perform its obligations under this Agreement.
(c) To the knowledge of such Stockholder, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not require any consent or other action by any Person under, any
provision of any agreement, contract or other instrument binding on such
Stockholder.
(d) The Shares reflected on Schedule A as being owned by such Stockholder
are the only shares of voting capital stock of the Company or any other voting
interests in the Company owned beneficially or of record by such Stockholder,
and except as set forth in Schedule A, such Stockholder does not own any other
options, warrants or rights to acquire shares of any class of capital stock of
the Company or any other voting interests in the Company. Such Stockholder has
the requisite power respecting voting and transfer of such Stockholder's
Shares. Except as set forth on Schedule 3(d) hereto, the shares and
certificates representing such Shares held by such Stockholder are owned as
indicated on Schedule A by such Stockholder, free and clear of all liens,
claims, security interests, proxies, options, warrants or other rights, voting
trusts or agreements, understandings or arrangements or any other Encumbrances
whatsoever, except for any such Encumbrances or proxies arising hereunder.
(e) No investment banker, broker, finder or other intermediary is entitled
to a fee or commission in respect of this Agreement based upon any arrangement
or agreement made by or on behalf of such Stockholder, except for fees that may
be payable by the Company or Acquiror in conjunction with the transactions
contemplated by the Merger Agreement.
SECTION 4. COVENANTS OF EACH STOCKHOLDER
3
<PAGE> 4
(a) From the date of this Agreement until the Effective Time or, if
earlier, the termination of this Agreement pursuant to Section 17 (Termination)
hereof, each Stockholder agrees severally and not jointly that such Stockholder
will not, and will use its "reasonable efforts" to not permit any of the
Representatives of the Company to, directly or indirectly, (i) initiate,
solicit, knowingly facilitate or encourage the submission of an Acquisition
Proposal for the Company; (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or take
any other action knowingly to facilitate any inquiries or the making of any
proposal that constitutes an Acquisition Proposal for the Company; (iii) grant
any waiver or release under any standstill or similar agreement with respect to
any class of equity securities of the Company; or (iv) enter into any agreement
with respect to any Acquisition Proposal for the Company, other than with
Acquiror, or authorize or permit any of Stockholder's Representatives to take
any such action and, such Stockholder shall promptly notify Acquiror of any
such inquiries and proposals received by such Stockholder or, to such
Stockholder's knowledge, any of such Stockholder's Representatives, relating to
any of such matters. Each Stockholder severally and not jointly further agrees
to use its "reasonable efforts" as a stockholder to cause the Company to comply
with the obligations of the Company set forth in Section 7.8 of the Merger
Agreement.
(b) Except pursuant to the terms of this Agreement, each Stockholder agrees
severally and not jointly that such Stockholder will not, without the prior
written consent of Acquiror or Merger Sub, directly or indirectly, grant any
proxies or enter into any voting trust or other agreement or arrangement with
respect to the voting of any capital stock or any options, warrants or other
rights to acquire stock of the Company.
(c) Each Stockholder agrees that, during the period from the date of this
Agreement through the Termination Date, such Stockholder shall not cause or
permit any transfer, assignment, conveyance or other disposition of his Shares,
or any other voting interests in the Company owned or hereafter acquired
beneficially or of record by such Stockholder, unless each Person to which any
Shares or any interest therein is or may be transferred shall have: (i)
executed a counterpart to this Agreement; and (ii) agreed to hold such Shares
or any interest therein subject to the terms and provisions of this Agreement.
SECTION 5. [RESERVED]
SECTION 6. SPECIFIC PERFORMANCE
Each Stockholder acknowledges and agrees that there would be no adequate
remedy at law for Acquiror or Merger Sub if such Stockholder fails to perform
any of such Stockholder's obligations hereunder, and accordingly agrees that
Acquiror and Merger Sub, in addition to any other remedy to which they may be
entitled at law or in equity, shall be entitled to compel specific performance
of the obligations of such Stockholder under this Agreement in accordance with
the terms and conditions of this Agreement in any court of the United States or
any State thereof having jurisdiction.
4
<PAGE> 5
SECTION 7. GOVERNING LAW
This Agreement will be governed by and construed in accordance with the
laws of the State of Delaware without regard to principles of conflicts of law.
SECTION 8. PARTIES IN INTEREST
This Agreement shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, legal representatives and permitted
assigns. If any Stockholder shall at any time hereafter acquire ownership of,
or voting power with respect to, any additional shares of capital stock or any
other voting interests in the Company in any manner, whether by the exercise of
any options or any securities or rights convertible into or exchangeable for
shares of capital stock or any other voting interests in the Company, by
operation of law or otherwise, such shares or other interests shall be held
subject to all of the terms and provisions of this Agreement. Without limiting
the foregoing, each Stockholder specifically agrees that the obligations of
such Stockholder hereunder shall not be terminated by operation of law, whether
by death or incapacity of such Stockholder or otherwise.
SECTION 9. AMENDMENT
This Agreement shall not be amended, altered or modified except by an
instrument in writing duly executed and delivered on behalf of each of the
parties hereto.
SECTION 10. SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in a mutually acceptable manner in order that the terms of this
Agreement remain as originally contemplated to the fullest extent possible.
SECTION 11. WAIVER
Except as provided in this Agreement, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a wavier
of any prior or subsequent breach of the same or any other provision hereunder.
5
<PAGE> 6
SECTION 12. NOTICES
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted, and shall be effective upon receipt, if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like changes of address) or
sent by electronic transmission to the telecopier number specified below:
If to a Stockholder:
To such Stockholder's address
or telecopier number as set forth
on Schedule A attached hereto
with a copy to:
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, N.W., Suite 1100
Washington, DC 20005
Telecopier No.: (202) 962-8300
Attention: Wallace E. Christner, Esq.
If to Acquiror or Merger Sub:
The Titan Corporation
3033 Science Park Road
San Diego, CA 92121
Telecopier No.: (619) 552-9759
Attention: Nicholas J. Costanza, Esq., General Counsel
with a copy to:
Hogan & Hartson L.L.P.
8300 Greensboro Drive, Suite 1100
McLean, VA 22102
Telecopier No.: (703) 610-6200
Attention: Richard K.A. Becker, Esq.
SECTION 13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties.
6
<PAGE> 7
SECTION 14. ASSIGNMENT
The Stockholders may not assign any of their rights or obligations under
this Agreement to any other Person, without the express written consent of
Acquiror. Acquiror may not assign any of its rights or obligations under this
Agreement to any other Person.
SECTION 15. HEADINGS
Section headings are included solely for convenience and are not considered
to be part of this Agreement and are not intended to be an accurate description
of the contents thereof.
SECTION 16. COUNTERPARTS
This Agreement may be executed and delivered in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed and delivered shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 17. TERMINATION
This Agreement and all of the parties' rights and obligations hereunder
shall terminate on the earlier to occur of (a) the date on which the Merger
Agreement is validly terminated pursuant to the provisions thereof, or (b) the
Effective Time; as defined in the Merger Agreement, (the "Termination Date").
SECTION 18. OFFICERS AND DIRECTORS; AFFILIATE AGREEMENTS
(a) Notwithstanding anything else herein to the contrary but subject to the
proviso set forth in this Section 19(a), (i) nothing set forth herein shall be
deemed to restrict or otherwise prohibit a Stockholder who is an officer or
director of the Company from exercising, in such individual's capacity as an
officer or director of the Company, what such Stockholder believes in good
faith to be his or her fiduciary duties as an officer or director of the
Company to the stockholders of the Company, and (ii) and no action or inaction
required hereby shall require a Stockholder who is an officer or director of
the Company to take any action or refrain from taking any action, in such
individual's capacity as an officer or director of the Company, that such
Stockholder believes in good faith is required by or would be a breach of his
or her fiduciary duties as an officer or director of the Company to the
stockholders of the Company; provided, however, that, notwithstanding the
foregoing, with respect to any matter set forth in Section 7.8 of the Merger
Agreement, each Stockholder who is an officer or director of the Company shall
exercise his or her fiduciary duties to the stockholders of the Company
pursuant to and in accordance with the provisions of Section 7.8 of the Merger
Agreement.
(b) Each Stockholder who also executes and enters into an Affiliate Agreement
7
<PAGE> 8
hereby agrees and acknowledges that, notwithstanding any other provisions of
this Agreement and in addition to any obligations of such Stockholder
hereunder, such Stockholder is and will be subject to all of the terms and
provisions of such Affiliate Agreement and the obligations of such Stockholder
contained in such Affiliate Agreement are and will be independent, separate and
apart from the obligations of such Stockholder hereunder.
SECTION 19. SURVIVAL
The representations and warranties in this Agreement shall survive the
execution and delivery of this Agreement and expire on the Termination Date;
provided, however, that the covenants and agreements of the parties shall
survive the execution and delivery of this Agreement and terminate on the
earlier to occur of: (i) the Termination Date or (ii) the date on which the
parties' obligations under this Agreement are fully performed.
[The remainder of this page intentionally left blank.]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Company Stockholders Agreement, or have caused this Company Stockholders
Agreement to be executed and delivered on their behalf, as of the date first
above written.
THE TITAN CORPORATION
By: /s/ Gene W. Ray
---------------------------
Name: Gene W. Ray
Title: Chairman and Chief Executive Officer
A T ACQUISITION CORP.
By: /s/ Gene W. Ray
---------------------------
Name: Gene W. Ray
Title: Chairman and Chief Executive Officer
STOCKHOLDERS
By: /s/ George A. Robinson
---------------------------
Name: George A. Robinson
Address: 8237 Taunton Place
Springfield, VA 22152
By: /s/ Barbara Robinson
---------------------------
Name: Barbara Robinson
Address: 8237 Taunton Place
Springfield, VA 22152
By: /s/ Thomas A. Costello
---------------------------
Name: Thomas A. Costello
Address: 6293 Columbus Hall Court
McLean, VA 22101
By: /s/ Margaret M. Costello
---------------------------
Name: Margaret M. Costello
Address: 6293 Columbus Hall Court
McLean, VA 22101
By: /s/ Charles G. Martinache
---------------------------
Name: Charles G. Martinache
Address: P.O. Box 160
Huger, SC 29450
9
<PAGE> 10
SCHEDULE A
<TABLE>
<CAPTION>
Stockholder Name and Address Shares of Company Common Stock
- ---------------------------- ------------------------------
<S> <C>
George A. and Barbara Robinson(1) 847,500
8237 Taunton Place
Springfield, VA 22152
Charles G. Martinache(2) 425,021
P.O. Box 160
Huger, SC 29450
Thomas A. and Margaret M. Costello(3) 847,500
6293 Columbus Hall Court
McLean, VA 22101
</TABLE>
- ------------------
1 Includes 333,371 shares owned by the Robinson 1997 Trust No. 1 and 333,371
shares owned by the Robinson 1997 Trust No. 2, both of which George A. Robinson
is the sole trustee, and 180,758 shares owned by George A. Robinson and Barbara
Robinson as joint tenants.
2 Includes 136,274 shares owned by the Charles G. Martinache Trust No. 1,
of which Charles G. Martinache is the sole trustee, and 3,783 shares held
in trust for the benefit of Andrew Martinache.
3 Includes: (i) 216,609 shares owned by the Costello 1997 Trust No. 1; (ii)
216,609 shares owned by the Costello 1997 Trust No. 2; (iii) 207,141 shares
owned by Thomas A. Costello Revocable Trust; and (iv) 207,141 shares owned by
Margaret M. Costello Revocable Trust. Margaret M. Costello and Thomas A.
Costello are trustees for the Costello 1997 Trust No. 1 and Costello 1997 Trust
No. 2; Thomas A. Costello is the trustee for the Thomas A. Costello Revocable
Trust; and Margaret M. Costello is the trustee for Margaret M. Costello
Revocable Trust.
10
<PAGE> 11
EXHIBIT A
Form of Irrevocable Proxy
The undersigned Stockholder of Advanced Communication Systems, Inc., a
Delaware corporation (the "Company"), hereby appoints and constitutes The Titan
Corporation, a Delaware corporation ("Acquiror"), the attorneys and proxies of
the undersigned, with full power of substitution and resubstitution, to the
full extent of the undersigned's voting rights with respect to (a) the
outstanding shares of common stock, par value $.01 per share, of the Company
(the "Company Common Stock") or any other capital stock of the Company
(collectively with the Company Common Stock, the "Capital Stock") owned of
record by the undersigned as of the date of this proxy, which shares are
specified on the final page of this proxy, and (b) any and all other shares of
Capital Stock of the Company which the undersigned may acquire on or after the
date hereof, provided that this proxy automatically shall be revoked with
respect to any shares of Capital Stock that are sold, transferred or otherwise
disposed of by the undersigned in accordance with the Company Stockholders
Agreement (as hereinafter defined) ("Transferred Stock") effective as of the
date of such sale, transfer or other disposition ("Date of Disposition"). Upon
the execution hereof, all prior proxies given by the undersigned with respect
to any of the Capital Stock are hereby revoked, and the undersigned agrees that
no subsequent proxy will be given with respect to the voting of any of the
Capital Stock (other than Transferred Stock after the Date of Disposition given
by the purchaser, transferee or other beneficiary of such other disposition
with respect to such stock) except to the extent that such proxies do not
prevent the voting of this proxy in favor of the transactions described herein.
This proxy is coupled with an interest and irrevocable. This proxy is
granted (i) in connection with the execution and delivery of the Company
Stockholders Agreement, dated as of the date hereof, among Acquiror and the
undersigned (the "Company Stockholders Agreement") and (ii) in consideration of
Acquiror entering into the Agreement and Plan of Merger, dated as of the date
hereof, among Acquiror, A T Acquisition Corp., a Delaware corporation (the
"Merger Sub") and the Company (the "Merger Agreement").
The proxy named above (and its successors) will, prior to the Termination
Date (as hereinafter defined), be empowered, and may exercise this proxy, to
vote the Capital Stock at any meeting of the Stockholders of the Company,
however called, or in connection with any solicitation of written consents from
Stockholders of the Company, called or solicited, as the case may be, for the
purpose of voting on the Merger Agreement and the transactions contemplated
thereby in favor of the approval and adoption of the Merger Agreement and the
approval of the merger contemplated thereby, and in favor of each of the other
actions contemplated by the Merger Agreement. The undersigned may vote the
Capital Stock on all other matters.
This proxy shall be binding upon the representatives, successors and
permitted assigns of the undersigned.
11
<PAGE> 12
If any provision of this proxy or any part of any such provision is held
under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the
validity or enforceability of the remainder of such provision or the validity
or enforceability of any other provision of this proxy. Each provision of this
proxy is separable from every other provision of this proxy, and each part of
each provision of this proxy is separable from every other part of such
provision.
This proxy and the rights contained herein shall terminate upon the
termination of the Company Stockholders Agreement as provided therein (the
"Termination Date").
Date: December 9, 1999
-----------------------------------------
Stockholder's Name
Number of shares of common stock and other
capital stock of the Company owned of record
and beneficially as of the date of this
proxy:
-----------------------------------------
12
<PAGE> 1
EXHIBIT 10.2
Irrevocable Proxy
The undersigned Stockholder of Advanced Communication Systems, Inc., a
Delaware corporation (the "Company"), hereby appoints and constitutes The Titan
Corporation, a Delaware corporation ("Acquiror"), the attorneys and proxies of
the undersigned, with full power of substitution and resubstitution, to the full
extent of the undersigned's voting rights with respect to (a) the outstanding
shares of common stock, par value $.01 per share, of the Company (the "Company
Common Stock") or any other capital stock of the Company (collectively with the
Company Common Stock, the "Capital Stock") owned of record by the undersigned as
of the date of this proxy, which shares are specified on the final page of this
proxy, and (b) any and all other shares of Capital Stock of the Company which
the undersigned may acquire on or after the date hereof, provided that this
proxy automatically shall be revoked with respect to any shares of Capital Stock
that are sold, transferred or otherwise disposed of by the undersigned in
accordance with the Company Stockholders Agreement (as hereinafter defined)
("Transferred Stock") effective as of the date of such sale, transfer or other
disposition ("Date of Disposition"). Upon the execution hereof, all prior
proxies given by the undersigned with respect to any of the Capital Stock are
hereby revoked, and the undersigned agrees that no subsequent proxy will be
given with respect to the voting of any of the Capital Stock (other than
Transferred Stock after the Date of Disposition given by the purchaser,
transferee or other beneficiary of such other disposition with respect to such
stock) except to the extent that such proxies do not prevent the voting of this
proxy in favor of the transactions described herein.
This proxy is coupled with an interest and irrevocable. This proxy is
granted (i) in connection with the execution and delivery of the Company
Stockholders Agreement, dated as of the date hereof, among Acquiror and the
undersigned (the "Company Stockholders Agreement") and (ii) in consideration of
Acquiror entering into the Agreement and Plan of Merger, dated as of the date
hereof, among Acquiror, A T Acquisition Corp., a Delaware corporation (the
"Merger Sub") and the Company (the "Merger Agreement").
The proxy named above (and its successors) will, prior to the
Termination Date (as hereinafter defined), be empowered, and may exercise this
proxy, to vote the Capital Stock at any meeting of the Stockholders of the
Company, however called, or in connection with any solicitation of written
consents from Stockholders of the Company, called or solicited, as the case may
be, for the purpose of voting on the Merger Agreement and the transactions
contemplated thereby in favor of the approval and adoption of the Merger
Agreement and the approval of the merger contemplated thereby, and in favor of
each of the other actions contemplated by the Merger Agreement. The undersigned
may vote the Capital Stock on all other matters.
This proxy shall be binding upon the representatives, successors and
permitted assigns of the undersigned.
<PAGE> 2
If any provision of this proxy or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this proxy. Each provision of this
proxy is separable from every other provision of this proxy, and each part of
each provision of this proxy is separable from every other part of such
provision.
This proxy and the rights contained herein shall terminate upon the
termination of the Company Stockholders Agreement as provided therein (the
"Termination Date").
Date: December 9, 1999
/s/ Charles G. Martinache
--------------------------------
Charles G. Martinache
Number of shares of common stock and other capital
stock of the Company owned of record and
beneficially as of the date of this proxy: 425,021
2
<PAGE> 1
EXHIBIT 10.3
Irrevocable Proxy
The undersigned Stockholder of Advanced Communication Systems, Inc., a
Delaware corporation (the "Company"), hereby appoints and constitutes The Titan
Corporation, a Delaware corporation ("Acquiror"), the attorneys and proxies of
the undersigned, with full power of substitution and resubstitution, to the full
extent of the undersigned's voting rights with respect to (a) the outstanding
shares of common stock, par value $.01 per share, of the Company (the "Company
Common Stock") or any other capital stock of the Company (collectively with the
Company Common Stock, the "Capital Stock") owned of record by the undersigned as
of the date of this proxy, which shares are specified on the final page of this
proxy, and (b) any and all other shares of Capital Stock of the Company which
the undersigned may acquire on or after the date hereof, provided that this
proxy automatically shall be revoked with respect to any shares of Capital Stock
that are sold, transferred or otherwise disposed of by the undersigned in
accordance with the Company Stockholders Agreement (as hereinafter defined)
("Transferred Stock") effective as of the date of such sale, transfer or other
disposition ("Date of Disposition"). Upon the execution hereof, all prior
proxies given by the undersigned with respect to any of the Capital Stock are
hereby revoked, and the undersigned agrees that no subsequent proxy will be
given with respect to the voting of any of the Capital Stock (other than
Transferred Stock after the Date of Disposition given by the purchaser,
transferee or other beneficiary of such other disposition with respect to such
stock) except to the extent that such proxies do not prevent the voting of this
proxy in favor of the transactions described herein.
This proxy is coupled with an interest and irrevocable. This proxy is
granted (i) in connection with the execution and delivery of the Company
Stockholders Agreement, dated as of the date hereof, among Acquiror and the
undersigned (the "Company Stockholders Agreement") and (ii) in consideration of
Acquiror entering into the Agreement and Plan of Merger, dated as of the date
hereof, among Acquiror, A T Acquisition Corp., a Delaware corporation (the
"Merger Sub") and the Company (the "Merger Agreement").
The proxy named above (and its successors) will, prior to the
Termination Date (as hereinafter defined), be empowered, and may exercise this
proxy, to vote the Capital Stock at any meeting of the Stockholders of the
Company, however called, or in connection with any solicitation of written
consents from Stockholders of the Company, called or solicited, as the case may
be, for the purpose of voting on the Merger Agreement and the transactions
contemplated thereby in favor of the approval and adoption of the Merger
Agreement and the approval of the merger contemplated thereby, and in favor of
each of the other actions contemplated by the Merger Agreement. The undersigned
may vote the Capital Stock on all other matters.
This proxy shall be binding upon the representatives, successors and
permitted assigns of the undersigned.
3
<PAGE> 2
If any provision of this proxy or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this proxy. Each provision of this
proxy is separable from every other provision of this proxy, and each part of
each provision of this proxy is separable from every other part of such
provision.
This proxy and the rights contained herein shall terminate upon the
termination of the Company Stockholders Agreement as provided therein (the
"Termination Date").
Date: December 9, 1999
/s/ George A. Robinson
-------------------------------
George A. Robinson
/s/ Barbara. Robinson
-------------------------------
Barbara Robinson
Number of shares of common stock and other
capital stock of the Company owned of record
and beneficially as of the date of this
proxy: 847,500
4
<PAGE> 1
EXHIBIT 10.4
Irrevocable Proxy
The undersigned Stockholder of Advanced Communication Systems, Inc., a
Delaware corporation (the "Company"), hereby appoints and constitutes The Titan
Corporation, a Delaware corporation ("Acquiror"), the attorneys and proxies of
the undersigned, with full power of substitution and resubstitution, to the full
extent of the undersigned's voting rights with respect to (a) the outstanding
shares of common stock, par value $.01 per share, of the Company (the "Company
Common Stock") or any other capital stock of the Company (collectively with the
Company Common Stock, the "Capital Stock") owned of record by the undersigned as
of the date of this proxy, which shares are specified on the final page of this
proxy, and (b) any and all other shares of Capital Stock of the Company which
the undersigned may acquire on or after the date hereof, provided that this
proxy automatically shall be revoked with respect to any shares of Capital Stock
that are sold, transferred or otherwise disposed of by the undersigned in
accordance with the Company Stockholders Agreement (as hereinafter defined)
("Transferred Stock") effective as of the date of such sale, transfer or other
disposition ("Date of Disposition"). Upon the execution hereof, all prior
proxies given by the undersigned with respect to any of the Capital Stock are
hereby revoked, and the undersigned agrees that no subsequent proxy will be
given with respect to the voting of any of the Capital Stock (other than
Transferred Stock after the Date of Disposition given by the purchaser,
transferee or other beneficiary of such other disposition with respect to such
stock) except to the extent that such proxies do not prevent the voting of this
proxy in favor of the transactions described herein.
This proxy is coupled with an interest and irrevocable. This proxy is
granted (i) in connection with the execution and delivery of the Company
Stockholders Agreement, dated as of the date hereof, among Acquiror and the
undersigned (the "Company Stockholders Agreement") and (ii) in consideration of
Acquiror entering into the Agreement and Plan of Merger, dated as of the date
hereof, among Acquiror, A T Acquisition Corp., a Delaware corporation (the
"Merger Sub") and the Company (the "Merger Agreement").
The proxy named above (and its successors) will, prior to the
Termination Date (as hereinafter defined), be empowered, and may exercise this
proxy, to vote the Capital Stock at any meeting of the Stockholders of the
Company, however called, or in connection with any solicitation of written
consents from Stockholders of the Company, called or solicited, as the case may
be, for the purpose of voting on the Merger Agreement and the transactions
contemplated thereby in favor of the approval and adoption of the Merger
Agreement and the approval of the merger contemplated thereby, and in favor of
each of the other actions contemplated by the Merger Agreement. The undersigned
may vote the Capital Stock on all other matters.
This proxy shall be binding upon the representatives, successors and
permitted assigns of the undersigned.
5
<PAGE> 2
If any provision of this proxy or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this proxy. Each provision of this
proxy is separable from every other provision of this proxy, and each part of
each provision of this proxy is separable from every other part of such
provision.
This proxy and the rights contained herein shall terminate upon the
termination of the Company Stockholders Agreement as provided therein (the
"Termination Date").
Date: December 9, 1999
/s/ Thomas A. Costello
-------------------------------
Thomas A. Costello
/s/ Margaret M. Costello
-------------------------------
Margaret M. Costello
Number of shares of common stock and other
capital stock of the Company owned of record
and beneficially as of the date of this
proxy: 847,500
6
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE TITAN CORPORATION
Name Domicile
- ---- --------
The Titan Corporation Delaware
Assist Cornerstone Technologies, Inc. Utah
(a subsidiary of Cayenta, Inc. and Cayenta Operating Company)
Atlantic Aerospace Electronics Corporation Delaware
(a wholly owned subsidiary of Titan Systems Corporation)
Cayenta, Inc. Delaware
Cayenta Operating Company Delaware
(a subsidiary of Cayenta, Inc.)
DBA Systems, Inc. Florida
Delfin Systems California
Diversified Control Systems, Inc. Delaware
Eldyne, Inc. California
Horizons Technology, Inc. Delaware
J.B. Systems, Inc. (d/b/a Mainsaver Corporation) California
(a wholly-owned subsidiary of Cayenta, Inc.)
Linkabir Wireless, Inc. Delaware
MERGECO, Inc. Delaware
Pulse Sciences, Inc. California
Sakon, LLC Delaware
SFG Technologies Inc. Canada
(a wholly-owned subsidiary of Cayenta, Inc.)
System Resources Corporation Delaware
(a wholly-owned subsidiary of Titan Systems Corporation)
Titan Africa, Inc. (f/k/a Titan Afronet, Inc.) Delaware
Titan Food Pasteurization Corp. Delaware
(a wholly-owned subsidiary of Titan Sean Corp.)
Titan Medical Sterilization Corp. Delaware
(a wholly-owned subsidiary of Titan Sean Corp.)
Titan Sean Corp. (f/k/a Titan Purification, Inc.) Delaware
Titan Systems Corporation
(f/k/a Titan Technologies and Information Systems Corporation) Delaware
Titan Unidyne Corporation Delaware
Titan Wireless, Inc. Delaware
Tomotherapeutics, Inc. Delaware
Validity Corporation
(a wholly-owned subsidiary of Titan Systems Corporation) California
VisiCom Laboratories, Inc. Delaware
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 15, 1999
(except with respect to the matters discussed in Notes 1 and 5, as to which the
date is March 31, 1999) included in The Titan Corporation's Form 10-K/A for the
year ended December 31, 1998 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
San Diego, California
January 24, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated
November 12, 1999, included in Advanced Communication Systems, Inc.'s Form 10-K,
for the fiscal year ended September 30, 1999 and to all references to our Firm
included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Vienna, Virginia
January 20, 2000
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated December 28,1999
on the financial statements of Transnational Partners II, LLC as of December 31,
1997 and 1998 and for the period from February 9, 1997 (commencement of
operations) to December 31, 1997, and for the year ended December 31, 1998
included in The Titan Corporation's Form 8-K/A dated January 24, 2000 and to
all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
San Diego, California
January 24, 2000
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated December 28, 1999
on the financial statements of J B Systems, Inc. (d.b a. Mainsaver), as of
December 31, 1997 and 1998 and for each of the three years in the period ended
December 31, 1998, included in The Titan Corporation's Form 8-K/A dated January
24, 1999 and to all references to our Firm included in this registration
statement.
/s/ARTHUR ANDERSEN LLP
San Diego, California
January 24, 2000
<PAGE> 1
EXHIBIT 23.7
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 33-00000) and related Prospectus of The
Titan Corporation for the registration of shares (the number of which will be
determined by an exchange ratio as defined in the Prospectus) of its common
stock and to the incorporation by reference therein of our report dated May 28,
1999 (except Note 9, as to which the date is September 22, 1999), with respect
to the financial statements of Assist Cornerstone Technologies, Inc. for the
year ended December 31, 1998, included in the Form 8-K/A of The Titan
Corporation dated January 19, 2000 filed with the Securities and Exchange
Commission. It should be noted that we have not audited any financial statements
of Assist Cornerstone Technologies, Inc. subsequent to December 31, 1998 or
performed any audit procedures subsequent to the date of our report.
/s/ Ernst & Young LLP
Salt Lake City, Utah
January 21, 2000
<PAGE> 1
EXHIBIT 23.8
[KPMG LLP LETTERHEAD]
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
The Board of Directors
SFG Technologies Inc.
We consent to the use of our report dated June 22, 1999, except as to note 13
which is as of November 26, 1999, relating to the consolidated balance sheets of
SFG Technologies Inc. as at December 31, 1998 and April 30, 1998 and the
consolidated statements of operations, deficit, and cash flows for the eight
month period ended December 31, 1998 and for each of the years in the three year
period ended April 30, 1998, incorporated by reference in the registration
statement on Form S-4 of The Titan Corporation. We also consent to the reference
to our firm under the heading "Experts" in the Form S-4 of The Titan
Corporation.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
January 24, 2000
<PAGE> 1
EXHIBIT 99.1
BANC OF AMERICA SECURITIES LLC
BANK OF AMERICA CORPORATE CENTER
100 NORTH TRYON STREET, SEVENTH FLOOR
CHARLOTTE, NORTH CAROLINA 28255
January 24, 2000
Board of Directors
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, VA 22030
Members of the Board of Directors:
We hereby consent to the inclusion of our opinion letter, dated December 8,
1999, to the Board of Directors of Advanced Communication Systems, Inc. (the
"Company") regarding the proposed merger of the Company with a wholly owned
subsidiary of The Titan Corporation, in the Registration Statement on Form S-4
of the Titan Corporation to which this consent is filed as an exhibit (the
"Registration Statement") and to the reference in the Registration Statement to
our firm and to our opinion under the headings "SUMMARY - ACS's Reasons for the
Merger; - Opinion of Financial Advisor to ACS," "THE MERGER - Background of the
Merger; - Recommendation of ACS Board of Directors; ACS Reasons for the Merger;
- - Opinion of Financial Advisor to ACS" and "TERMS OF THE MERGER AGREEMENT AND
RELATED TRANSACTIONS - Representations and Warranties" and in Appendix B to the
Registration Statement. In giving the foregoing consent, we do not admit (1)
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended (the "Securities Act"), or
the rules and regulations of the Securities and Exchange Commission (the
"Commission") promulgated thereunder and (2) that we are experts with respect to
any part of the Registration Statement within the meaning of the term "experts"
as used in the Securities Act and the rules and regulations of the Commission
promulgated thereunder.
Very truly yours,
/s/ Banc of America Securities LLC
BANC OF AMERICA SECURITIES LLC
<PAGE> 1
EXHIBIT 99.2
CONSENT OF DIRECTOR NOMINEE
To The Titan Corporation:
Pursuant to Rule 438 promulgated under the Securities Act of
1933, as amended, I hereby consent to the references in the Registration
Statement of The Titan Corporation (the "Company") on Form S-4 (File No.
333-________), and any amendments thereto, which indicate that I have accepted a
nomination to become a director of the Company following the closing of the
merger of A T Acquisition Corp, a wholly owned subsidiary of the Company, with
and into Advanced Communication Systems, Inc.
/s/ GEORGE A. ROBINSON
Dated: January 21, 2000
<PAGE> 1
EXHIBIT 99.3
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of ADVANCED COMMUNICATION SYSTEMS, INC., a
Delaware corporation, hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement/Prospectus, each dated January 24,
2000, and hereby appoints George A. Robinson and Terrence E. Hileman, and each
of them, proxies and attorneys-in-fact, with several power of substitution and
resubstitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Special Meeting of Stockholders of ADVANCED COMMUNICATION
SYSTEMS, INC. to be held on Wednesday, February 23, 2000, at 10:30 a.m., local
time, at the offices of ADVANCED COMMUNICATION SYSTEMS, INC., at 10089 Lee
Highway, Fairfax, Virginia 22030, and at any and all adjournments, postponements
or reschedulings thereof, and to vote all shares of Common Stock of ADVANCED
COMMUNICATION SYSTEMS, INC. which the undersigned would be entitled to vote, if
then and there personally present, on the matters set forth below.
To adopt the Agreement and Plan of Merger, dated as of December 9, 1999, as
amended, by and among The Titan Corporation, A T Acquisition Corp., a wholly
owned subsidiary of The Titan Corporation, and Advanced Communication Systems,
Inc. and to approve the merger and the other transactions contemplated by the
Agreement and Plan of Merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To authorize postponement or adjournment of the Special Meeting of Stockholders,
if necessary, to solicit additional votes to adopt the Agreement and Plan of
Merger and to approve the merger and the other transactions contemplated by the
Agreement and Plan of Merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DISCRETIONARY AUTHORITY
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OF STOCKHOLDERS OR ANY
ADJOURNMENT, POSTPONEMENT OR RESCHEDULING THEREOF.
(Continued and to be signed and dated on other side)
<PAGE> 2
(Continued from other side)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN. IF NO
DIRECTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR"
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER, DATED AS OF DECEMBER 9, 1999, AS
AMENDED, BY AND AMONG THE TITAN CORPORATION, A T ACQUISITION CORP., A WHOLLY
OWNED SUBSIDIARY OF THE TITAN CORPORATION, AND ADVANCED COMMUNICATION SYSTEMS,
INC. AND APPROVAL OF THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE
AGREEMENT AND PLAN OF MERGER, AND "FOR" ANY PROPOSAL TO POSTPONE OR ADJOURN THE
MEETING IN ORDER TO ALLOW TIME TO SOLICIT ADDITIONAL VOTES TO ADOPT THE
AGREEMENT AND PLAN OF MERGER AND TO APPROVE THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND PLAN OF MERGER, AND AS THE
PROXIES NAMED HEREIN DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS HEREON.
-----------------------------------------
DATE
-----------------------------------------
SIGNATURE OF OWNER
-----------------------------------------
ADDITIONAL SIGNATURE OF JOINT OWNER (IF
ANY)
IF STOCK IS JOINTLY HELD, EACH JOINT
OWNER SHOULD SIGN. WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN,
CORPORATE OFFICER OR PARTNER, PLEASE GIVE
FULL TITLE.
