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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 30, 1998
MRV COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-23452 06-1340090
(Commission File Number) (I.R.S. Employer Identification No.)
8917 Fullbright Ave.
Chatsworth, CA 91311
(Address of principal executive officers) (Zip Code)
818 773-9044
Registrant's telephone number, including area code
N.A.
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On January 30, 1998, the Registrant completed an acquisition from
Whittaker Corporation ("Whittaker") of all of the outstanding capital stock of
Whittaker Xyplex, Inc. a Delaware corporation (the "Acquisition"). Whittker
Xyplex, Inc., is a holding corporation owning all of the outstanding capital
stock of Xyplex, Inc., a Massachusetts corporation ("Xyplex"). Accordingly, as
result of the Acquisition, the Registrant acquired Xyplex. The purchase price
paid to Whittaker, which was arrived at as the result of arms' length
negotiations, consisted of $35,000,000 in cash and 3-year warrants to purchase
up to 500,000 shares of common stock of the Registrant ("Common Stock") at an
exercise price of $35 per share.
The source of the cash paid by Registrant was net proceeds from the
Company's public offering of Common Stock completed in September 1997. Warrants
to purchase 421,402 shares of Common Stock were issued to Whitaker at the
closing and Warrants to purchase 78,598 shares of Common Stock are issuable to
Whittaker if Whittaker delivers Xyplex's audited financial statements to the
Registrant by March 30, 1998.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
It is impracticable to file the required financial statements of Xyplex
with this Form 8-K report. Such of the required financials statements as are
available are being filed herewith as Exhibit 2.2(a) to this Form 8-K report.
Registrant plans to file the remainder of the required financial statements as
an amendment to this Form as soon as practicable, but not later than 60 days
following the date by which this report on Form 8-K is required be filed.
(b) Pro forma Financial Information
It is impracticable to file the required pro forma financial
information with this Form 8-K report. Registrant plans to file the required pro
forma financial information as an amendment to this Form as soon as practicable,
but not later than 60 days following the date by which this report on Form 8-K
must be filed.
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(c) Exhibits
2.1 (a) Stock Purchase Agreement dated January 19, 1998 by and
between Whittaker and Registrant.
2.1 (b) Warrant Agreement dated January 30, 1998 by and
between Whittaker and Registrant.
2.1 (c) Warrant Certificate No. Whittaker#1 to purchase
421,402 shares of Common Stock of Registrant issued to Whitaker on Janaury 30,
1998.
2.2 (a) Xyplex, Inc. Financial Statements for the years ended
December 31, 1995 and 1994, consisting of:
Report of Independent Accountants
Xyplex, Inc. Balance Sheets December 31, 1995 and 1994
Xyplex, Inc. Statements of Income for the years ended
December 31, 1995 and 1994
Xyplex, Inc. Statements of Stockholder's Equity for
the years ended December 31, 1995 and
1994
Xyplex, Inc. Statements of Cash Flows for the years
ended December 31, 1995 and 1994
Xyplex, Inc. Notes to Financial Statements
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MRV Communications, Inc.
Dated February 12, 1998
/s/ Edmund Glazer
-----------------------------------
Edmund Glazer
Vice President of Finance and
Administration and Chief Financial
Officer
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EXHIBIT 2.1(a)
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of January 19, 1998, by and between
Whittaker Corporation, a Delaware corporation (the "Seller"), and MRV
Communications, Inc. (the "Buyer"). The Buyer and the Seller are referred to
collectively herein as the "Parties."
The Seller owns all of the outstanding capital stock of Whittaker
Xyplex, Inc., a Delaware corporation (the "Target"). The Target owns all of the
outstanding capital stock of Xyplex, Inc., a Massachusetts corporation (the
"Subsidiary").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of the Target in return for the consideration set
forth herein.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Acquisition Agreement" has the meaning set forth in Section 6(i)
below.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Broker's Contract" has the meaning set forth in Section 3(a)(iv).
"Buyer" has the meaning set forth in the preface above.
"Buyer's Stock" has the meaning set forth in Section 2(b) below.
"Closing" has the meaning set forth in Section 2(c) below.
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"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
business and affairs of the Target that is not already generally available to
the public.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Deferred Intercompany Transaction" has the meaning set forth in Reg.
Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Sections 3 and 4
below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes, as in effect on the date hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Reg. Section
1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
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"Financial Statement" has the meaning set forth in Section 4(f) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(f) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(f) below.
"Most Recent Fiscal Year End" means October 31, 1997.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Raytheon" has the meaning set forth in Section 6(i) below.
"Raytheon Obligations" has the meaning set forth in Section 6(i) below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Subsidiary" has the meaning set forth in the preface above.
"Subsidiary Share" means any share of Common Stock of the Subsidiary.
"S-X" has the meaning set forth in Section 6(g).
"Target" has the meaning set forth in the preface above.
"Target Share" means any share of the Common Stock, par value $.01 per
share, of the Target.
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"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
"Warrants" means the warrants to purchase shares of Buyer's Stock,
issued in accordance with the Warrant Agreement attached as Exhibit A hereto,
which comprise a portion of the Purchase Price.
2. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of the Target Shares for the consideration
specified below in this Section 2.
(b) Purchase Price. The Buyer agrees to deliver to the Seller at the
Closing $35,000,000 in cash and warrants to purchase 421,402 shares of common
stock of the Buyer ("Buyer's Stock"), such warrants to be issued pursuant to the
Warrant Agreement, a form of which is attached as Exhibit A hereto, (such cash
and Warrant, together with the Warrant for 78,598 shares of Buyer's Stock to be
issued pursuant to Section 6(g) hereof, if any, the "Purchase Price").
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Freshman, Marantz,
Orlanski, Cooper & Klein, 9100 Wilshire Boulevard, 8 East, Beverly Hills,
California, commencing at 9:00 a.m. local time on the fifth business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Buyer and the Seller may mutually
determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer stock certificates representing all of the Target Shares,
endorsed in blank or accompanied by duly executed assignment documents and a
standard investment representation letter with respect to the Warrants, and (ii)
the Buyer will deliver to the Seller the consideration specified in Section 2(b)
above.
(e) Other Actions. At or immediately prior to the Closing, (i) the
Subsidiary, the Target and the Seller shall release and cancel any intercompany
loans, guaranties, liens and other
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intercompany obligations (except for that certain License Agreement dated as of
January 24, 1997 between the Subsidiary, on one hand, and Seller and Whittaker
Communications, Inc., on the other), and (ii) the Seller will require its
lenders to release any liens on the Target Shares, the Subsidiary Shares or the
assets of the Subsidiary in favor of Seller's lenders.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Seller. The Seller represents
and warrants to the Buyer that the statements contained in this Section 3(a) are
correct and complete as of the date of this Agreement, except as set forth in
Schedule 3(a) attached hereto.
(i) Organization of Seller. The Seller is duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Seller has full
corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Seller, enforceable in
accordance with its terms and conditions. The Seller need not give any
notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement, other than
filings required by the Hart-Scott-Rodino Act.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Seller is subject or any provision of its charter or
bylaws or (B) conflict with, result in a breach of or constitute a
default under any material contract to which the Seller is a party,
including any agreement to merge the Target or the Subsidiary, sell or
transfer the Target Shares or the Subsidiary Shares, or sell all or
substantially all of the Subsidiary's assets.
(iv) Brokers' Fees. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated, other than fees and
expenses owed to Dillon, Read & Co., Inc. pursuant to the Seller's
contract with Dillon, Read & Co., Inc. dated as of February 7, 1997
(the "Broker's Contract").
(v) Target Shares. The Seller holds of record and owns
beneficially all of the outstanding Target Shares, and as of the
Closing Date such Shares shall be free and clear of any restrictions
on transfer (other than any restrictions under the Securities Act and
state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option, warrant, purchase
right, or other contract or commitment that could require the Seller
to sell, transfer, or otherwise dispose of any capital stock of the
Target (other than this
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Agreement). The Seller is not a party to any voting trust, proxy, or
other agreement or understanding with respect to the voting of any
capital stock of the Target.
(vi) Guaranties. At the Closing, the Seller will not be the
guarantor for any obligations or Liabilities of the Target or the
Subsidiary.
(vii) Investment. The Seller is not acquiring the Warrants
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(b) Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this Section 3(b)
are correct and complete as of the date of this Agreement, except as set forth
in Schedule 3(b) attached hereto.
(i) Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms and
conditions. The Buyer need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the
transactions contemplated by this Agreement other than the filing of a
Notice under Regulation D of the Securities Act and filings required
by the Hart-Scott-Rodino Act.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Buyer is subject or any provision of its charter or
bylaws or (B) conflict with, result in a breach of or constitute a
default under any material contract to which the Buyer is a party.
(iv) Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
(v) Investment. The Buyer is not acquiring the Target Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(vi) Capitalization. The entire authorized capital stock of
the Buyer consists of 40,000,000 Shares. The Buyer has, and at all
times during which the Warrants are exercisable shall reserve and keep
available, free from preemptive rights, out of its
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authorized but unissued common stock or its authorized and issued
common stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Buyer's Shares upon the exercise of
Warrants.
4. Representations and Warranties Concerning the Target and the
Subsidiary. The Seller represents and warrants to the Buyer that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement, except as set forth in the disclosure schedules delivered by the
Seller to the Buyer on the date hereof (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 4.
(a) Organization, Qualification, and Corporate Power. Each of the
Target and the Subsidiary is a corporation duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation. Each
of the Target and the Subsidiary is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction where such qualification is
required. The Subsidiary has full corporate power and authority and all material
licenses, permits, and authorizations necessary to carry on the business in
which it is engaged and to own and use the properties owned and used by it.
Section 4(a) of the Disclosure Schedule lists the directors and officers of the
Target and the Subsidiary. The Seller has delivered to the Buyer correct and
complete copies of the charter and bylaws of the Target and the Subsidiary (as
amended to date). Neither the Target nor the Subsidiary is in default under or
in violation of any provision of its charter or bylaws. The Target has no equity
interest in any Person, except for the Subsidiary. The Subsidiary has no equity
interest in any other Person.
(b) Capitalization.
(i) The entire authorized capital stock of the Target
consists of 40,000,000 Target Shares, 36,800,000 of which are issued
and outstanding. All of the outstanding Target Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are
held of record and are beneficially owned by the Seller. There are no
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Target to issue, sell,
or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to the
Target. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Target.
(ii) The entire authorized capital stock of the Subsidiary
consists of 1,000 Subsidiary Shares, all of which are issued and
outstanding, and there are no Subsidiary Shares held in the treasury
of Subsidiary. All of the outstanding Subsidiary Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are
held of record and are beneficially owned by the Target. There are no
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Subsidiary to issue,
sell, or
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otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the
Subsidiary. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of
the Subsidiary.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target or the Subsidiary is subject
or any provision of the charter or bylaws of the Target or the Subsidiary or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material agreement, contract,
lease, license, instrument, or other arrangement to which the Subsidiary is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets). The
Subsidiary does not need to give any notice to, make any filing with, or obtain
the authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement other than filings required by the Hart-Scott-Rodino Act.
(d) Brokers' Fees. Neither the Target nor the Subsidiary has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(e) Title to Assets. The Subsidiary has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, and as of the Closing Date will be free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet.
(f) Financial Statements. Attached hereto as Schedule 4(f) are the
following financial statements (collectively the "Financial Statements"): (i)
unaudited balance sheet and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal year ended October 31, 1997 for
the Subsidiary; (ii) unaudited balance sheet and statements of income, changes
in stockholders' equity, and cash flow (the "Most Recent Financial Statements")
as of and for the two months ended January 4, 1998 (the "Most Recent Fiscal
Month End") for the Subsidiary; and (iii) unaudited balance sheet and statements
of income, changes in stockholders' equity and cash flow for the period from
April 10, 1996 to October 31, 1996. The Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Subsidiary as of such dates and the results of
operations of the Subsidiary for such periods, are correct and complete, and are
consistent with the books and records of the Subsidiary (which books and records
are correct and complete); provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
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(g) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations or results of operations of the
Subsidiary. Without limiting the generality of the foregoing, since that date:
(i) the Subsidiary has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, outside the
Ordinary Course of Business;
(ii) the Subsidiary has not entered into any material
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) outside the Ordinary
Course of Business;
(iii) no party (including the Subsidiary) has accelerated,
terminated, modified, or canceled any material agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) to which the Subsidiary is a party or by which it is
bound;
(iv) the Subsidiary has not imposed any Security Interest
upon any of its assets, tangible or intangible outside the Ordinary
Course of Business;
(v) the Subsidiary has not made any material capital
expenditures outside the Ordinary Course of Business;
(vi) the Subsidiary has not made any material capital
investment in, any loan to, or any acquisition of the securities or
assets of, any other Person outside the Ordinary Course of Business;
(vii) the Subsidiary has not accelerated the collection of
outstanding accounts receivable, through the offer of discounts or
otherwise, outside the Ordinary Course of Business;
(viii) the Subsidiary has not created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease
obligation either involving more than $200,000 singly or $1.5 million
in the aggregate;
(ix) the Subsidiary has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary Course
of Business;
(x) the Subsidiary has not canceled, compromised, waived, or
released any material right or claim outside the Ordinary Course of
Business;
(xi) the Subsidiary has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property
outside the Ordinary Course of Business;
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(xii) the Subsidiary has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiii) there has been no change made or authorized in the
charter or bylaws of the Subsidiary;
(xiv) the Subsidiary has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(xv) the Subsidiary has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(xvi) the Subsidiary has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xvii) the Subsidiary has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement outside
the Ordinary Course of Business;
(xviii) the Subsidiary has not granted any increase in the
base compensation of any of its directors, officers or employees
outside the Ordinary Course of Business;
(xix) the Subsidiary has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xx) the Subsidiary has not made any other material change in
employment terms for any of its directors, officers, or employees
outside the Ordinary Course of Business;
(xxi) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Subsidiary; and
(xxii) the Subsidiary has not committed to any of the
foregoing.
(h) Undisclosed Liabilities. The Subsidiary does not have any Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against it giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of
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which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(i) Legal Compliance. The Subsidiary, and its predecessors and
Affiliates, has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) other than where noncompliance with such laws would not have a material
adverse effect on the Subsidiary, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply.
(j) Tax Matters.
(i) The Subsidiary has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all material respects. All Taxes owed by the Subsidiary (whether or
not shown on any Tax Return) have been paid. The Subsidiary currently
is not the beneficiary of any extension of time within which to file
any Tax Return. No claim has been made since April 10, 1996 by an
authority in a jurisdiction where the Subsidiary does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of the Subsidiary
that arose in connection with any failure (or alleged failure) to pay
any Tax.
(ii) The Subsidiary has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder,
or other third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of the Subsidiary expects any authority
to assess any additional Taxes for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax
Liability of the Subsidiary either (A) claimed or raised by any
authority in writing or (B) as to which any of the Seller and the
directors and officers (and employees responsible for Tax matters) of
the Subsidiary has Knowledge based upon personal contact with any
agent of such authority. Schedule 4(j) lists all federal, state,
local, and foreign income Tax Returns filed with respect to the
Subsidiary for taxable periods ended on or after October 31, 1996,
indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The Seller
has delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Subsidiary since
October 31, 1996.
(iv) The Subsidiary has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency.
(v) The Subsidiary has not filed a consent under Code
ss.341(f) concerning collapsible corporations. The Subsidiary has not
made any payments, is not obligated to
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make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will
not be deductible under Code Section 280G. The Subsidiary has not been
a United States real property holding corporation within the meaning
of Code Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii). The Subsidiary is not a party to any
Tax allocation or sharing agreement. The Subsidiary (A) has not been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the
Subsidiary) and (B) does not have any Liability for the Taxes of any
Person (other than the Subsidiary) under Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) The unpaid Taxes of the Subsidiary (A) did not, as of
the Most Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto)
and (B) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and
practice of the Subsidiary in filing its Tax Returns.
(k) Real Property. Schedule 4(k) lists and describes briefly all real
property leased or subleased to the Subsidiary. The Seller has delivered to the
Buyer correct and complete copies of the leases and subleases listed in Schedule
4(k) (as amended to date). With respect to each lease and sublease listed in
Schedule 4(k):
(A) the lease or sublease is legal, valid, binding
and enforceable against the Subsidiary, and in full force and
effect;
(B) as to each lease and sublease, the Subsidiary is
not in default, and no event has occurred which, with notice
or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(C) as to each lease and sublease, the Subsidiary has
not repudiated any provision thereof;
(D) there are no material disputes, oral agreements,
or forbearance programs in effect as to the lease or sublease;
(E) the Subsidiary has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold; and
(F) to the Knowledge of the Subsidiary, all
facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and
have been operated and maintained in accordance with
applicable laws, rules, and regulations.
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(l) Intellectual Property.
(i) The Subsidiary has not interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights
of third parties in any material respect, and neither the Seller nor
the directors and officers of the Subsidiary have received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation by the Subsidiary
(including any claim that the Subsidiary must license or refrain from
using any Intellectual Property rights of any third party). To the
Knowledge of the Subsidiary, no third party has interfered with,
infringed upon, misappropriated, or violated any material Intellectual
Property rights of the Subsidiary in any material respect.
(ii) The Subsidiary owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the business of the Subsidiary
as presently conducted. Each item of Intellectual Property owned or
used by the Subsidiary immediately prior to the Closing hereunder will
be owned or available for use by the Subsidiary on identical terms and
conditions immediately subsequent to the Closing hereunder. The
Subsidiary has taken all necessary action to maintain and protect each
item of Intellectual Property that it owns or uses.
(iii) Schedule 4(l)(iii) identifies each patent or
registration which has been issued to the Subsidiary with respect to
any of its Intellectual Property, identifies each pending patent
application or application for registration which the Subsidiary has
made with respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which the Subsidiary has
granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller has delivered to
the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date). Schedule 4(l)(iii) also identifies each trade name
or unregistered trademark used by the Subsidiary in connection with
its business. With respect to each item of Intellectual Property
identified in Schedule 4(l)(iii):
(A) the Subsidiary possesses all right, title, and
interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of the Subsidiary, is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Subsidiary has no existing contracts or
indemnification agreements whereby it is obligated to
indemnify any Person for or against any interference,
infringement or misappropriation with respect to the items.
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<PAGE> 15
(iv) Schedule 4(l)(iv) identifies each material item of
Intellectual Property that any third party owns and that the
Subsidiary uses pursuant to license, sublicense, agreement, or
permission. With respect to each item of Intellectual Property
required to be identified in Schedule 4(l)(iv):
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the
consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in
Section 2 above);
(C) no party to the license, sublicense, agreement,
or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or
acceleration thereunder;
(D) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the
underlying license;
(F) to the Knowledge of the Subsidiary the underlying
item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of the Subsidiary, is threatened which
challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(H) the Subsidiary has not granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of the Subsidiary, the Subsidiary will
not, prior to the Closing, knowingly interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the continued
operation of its business as presently conducted.
(m) Tangible Assets. The Subsidiary owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
business as presently conducted. Each such tangible asset is free from defects
(patent and latent), has been maintained in
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<PAGE> 16
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
(n) Inventory. The inventory of the Subsidiary consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured, and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory writedown set
forth in the Most Recent Balance Sheet, as adjusted for the passage of time
through the Closing Date, in accordance with the past custom and practice of the
Subsidiary and in accordance with GAAP.
(o) Contracts. Schedule 4(o) lists the following contracts and other
agreements to which the Subsidiary is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $300,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to the Subsidiary, or involve
consideration in excess of $1.6 million;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $1.6 million or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Seller and its Affiliates
(other than the Subsidiary);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $100,000 or providing severance benefits in
excess of $100,000;
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(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations or results of operations of the
Subsidiary; or
(xii) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $1.6
million.
The Seller has provided Buyer with access to a correct and complete
copy of each written agreement listed in Schedule 4(o) and a written summary
setting forth the material terms and conditions of each oral agreement referred
to in Schedule 4(o).
With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) no party is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (C) no party has repudiated any provision
of the agreement.
(p) Notes and Accounts Receivable. All notes and accounts receivable of
the Subsidiary are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims and are current and
collectible at their recorded amounts, subject only to the reserve for bad debts
set forth in the Most Recent Balance Sheet as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Subsidiary and in accordance with GAAP.
(q) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Target or the Subsidiary.
(r) Insurance. Schedule 4(r) sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which the Subsidiary has been a party, a named insured, or
otherwise the beneficiary of coverage at any time since April 10, 1996:
(i) the name, addresses and phone numbers of the agents;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the type and amount (including deductible and ceiling
amounts) of coverage; and
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(v) the description of any retroactive premium adjustments or
other material loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the Subsidiary is
not in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (C) no party to the policy
has repudiated any provision thereof. Schedule 4(r) describes any self-insurance
arrangements affecting the Subsidiary.
(s) Litigation. Schedule 4(s) sets forth each instance in which the
Subsidiary (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the Knowledge of the
Subsidiary, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Schedule 4(s) could result in any material adverse
change in the business, financial condition, operations or results of operations
of the Subsidiary. The Subsidiary has no reason to believe that any such action,
suit, proceeding, hearing, or investigation will be brought or threatened
against the Subsidiary.
(t) Product Warranty. Each product manufactured, sold, leased, or
delivered by the Subsidiary has been in conformity with all applicable
contractual commitments and all express and implied warranties, and the
Subsidiary does not have any Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against it giving rise to any Liability) for replacement or
repair thereof or other damages in connection therewith, subject only to the
reserve for product warranty claims set forth in Most Recent Balance Sheet as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Subsidiary and in accordance with GAAP. No
product manufactured, sold, leased, or delivered by the Subsidiary is subject to
any guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale or lease. Schedule 4(t) includes copies of the standard
terms and conditions of sale or lease for the Subsidiary (containing applicable
guaranty, warranty, and indemnity provisions).
(u) Product Liability. The Subsidiary does not have any Liability (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product sold, leased or delivered by
the Subsidiary prior to the Closing Date.
(v) Employees. To the Knowledge of any of the Seller and the directors
and officers of the Subsidiary, no executive, key employee, or significant group
of employees plans to terminate employment with the Subsidiary during the next
12 months. The Subsidiary is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances,
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claims of unfair labor practices, or other collective bargaining disputes since
April 10, 1996. The Subsidiary has not committed any unfair labor practice since
April 10, 1996. The Subsidiary does not have Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Subsidiary.
(w) Employee Benefits.
(i) Schedule 4(w) lists each Employee Benefit Plan that the
Subsidiary maintains or to which the Subsidiary contributes.
(ii) With respect to each Employee Benefit Plan that the
Subsidiary maintains or to which the Subsidiary contributes, except
for such matters as, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the
financial condition of the Subsidiary:
(A) Each such Employee Benefit Plan (other than any
Multiemployer Plan) (and each related trust, insurance
contract, or fund), complies in form and in operation in all
material respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(B) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's,
and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan
(other than any Multiemployer Plan). The requirements of Part
6 of Subtitle B of Title I of ERISA and of Code Section 4980B
have been met in all material respects with respect to each
such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Subsidiary. All premiums
or other payments for all periods ending on or before the
Closing Date have been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) meets the requirements of a "qualified plan" under Code
Section 401(a) and has received, within the last two years, a
favorable determination letter from the Internal Revenue
Service.
(E) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan)
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equals or exceeds the present value of all vested and
nonvested Liabilities thereunder determined in accordance
with PBGC methods, factors, and assumptions applicable to an
Employee Pension Benefit Plan terminating on the date for
determination.
(F) The Seller has delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received
from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each
such Employee Benefit Plan (other than any Multiemployer
Plan).
(iii) With respect to each Employee Benefit Plan that the
Subsidiary, or the Controlled Group of Corporations which includes the
Subsidiary, has maintained since April 10, 1996 for the benefit of the
Subsidiary or to which any of them has contributed since April 10,
1996 for the benefit of the Subsidiary:
(A) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other
than any Multiemployer Plan) has been instituted or, to the
Knowledge of the Subsidiary, threatened.
(B) To the Knowledge of the Seller, there have been
no Prohibited Transactions with respect to any such Employee
Benefit Plan (other than any Multiemployer Plan). To the
Knowledge of the Seller, no Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply
in connection with the administration or investment of the
assets of any such Employee Benefit Plan (other than any
Multiemployer Plan). No action, suit, proceeding, hearing, or
investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
(other than any Multiemployer Plan) (other than routine claims
for benefits) is pending or, to the Knowledge of the
Subsidiary, threatened. The Subsidiary has no Knowledge of any
Basis for any such action, suit, proceeding, hearing, or
investigation.
(C) The Subsidiary has not incurred, and the
Subsidiary has no reason to expect that the Subsidiary will
incur, any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any
withdrawal Liability) or under the Code with respect to any
such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan).
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(iv) The Subsidiary, or the Controlled Group of Corporations
that includes the Subsidiary, has not since April 10, 1996 contributed
to any Multiemployer Plan for the benefit of the Subsidiary, and does
not have any Liability (including withdrawal Liability) under any
Multiemployer Plan.
(v) The Subsidiary does not maintain or contribute, or is required to
contribute, to any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits for current
or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B, Title I
of ERISA, or any applicable state statute).
(x) Guaranties. Neither the Target nor the Subsidiary is a guarantor or
is otherwise liable for any Liability or obligation (including indebtedness) of
any other Person.
(y) Environmental, Health, and Safety Laws.
(i) The Subsidiary has complied with all Environmental,
Health, and Safety Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to
comply other than failure to comply which would not have a material
adverse effect on the Subsidiary. Without limiting the generality of
the preceding sentence, the Subsidiary has obtained and been in
compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and
Safety Laws.
(ii) The Subsidiary does not have any material Liability
under any Environmental Law.
(z) Target Operations. The Target has no material business or
operations, except for its ownership of the stock of the Subsidiary and
maintenance of a stock option plan for the benefit of officers, directors and
employees of the Subsidiary.
(aa) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7 below).
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(b) Notices and Consents. The Seller will cause the Subsidiary to give
any notices to third parties, and will cause the Subsidiary to use its best
efforts to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in Section 4(c) above. Each
of the Parties will (and the Seller will cause the Subsidiary to) give any
notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Sections 3(a)(ii), 3(b)(ii), and
4(c) above. Without limiting the generality of the foregoing, each of the
Parties will file any Notification and Report Forms and related material that he
or it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act no later than five business days after the date hereof,
will use its best efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable in connection therewith.
(c) Operation of Business. The Seller will not cause or permit the
Subsidiary to engage in any practice or take any action outside the Ordinary
Course of Business of the Subsidiary or which results in a material adverse
change in the business, financial condition, operations or results of operations
of the Subsidiary, except for actions to which Buyer has given its prior
consent.
(d) Preservation of Business. The Seller will cause the Subsidiary to
keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) Full Access. The Seller will permit, and the Seller will cause the
Subsidiary to permit, representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Subsidiary, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Subsidiary; provided, however, that the Seller and the
Subsidiary shall not be required to allow Buyer access to competitively
sensitive information, such as that relating to prices or customers.
(f) Notice of Developments. The Seller will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of its own representations and warranties in Section 3 above.
(g) Exclusivity. Seller will not (and Seller will not cause or permit
the Subsidiary or the Target to) solicit, initiate, or encourage the submission
of any proposal or offer from any other Person relating to the acquisition of
any capital stock or other voting securities, or any substantial portion of the
assets, of the Subsidiary (including any acquisition structured as a merger,
consolidation or share exchange).
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6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8 below).
The Seller acknowledges and agrees that from and after the Closing the Buyer
will be entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the Subsidiary.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Subsidiary, each of the other Parties will
cooperate with him or it and its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c) Transition. The Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Subsidiary from maintaining the
same business relationships with the Subsidiary after the Closing as it
maintained with the Subsidiary prior to the Closing. the Seller will refer all
customer inquiries relating to the business of the Subsidiary to the Buyer from
and after the Closing.
(d) Confidentiality. The Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information which are in its possession. In the
event that any of the Seller is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, that Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this Section 6(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, the Seller
is, on the advice of counsel, compelled to disclose any Confidential Information
to any tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the Seller
shall use its best efforts to obtain, at the reasonable request of the Buyer, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Buyer
shall designate. The foregoing provisions shall
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<PAGE> 24
not apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure (other than as a result of a
disclosure directly or indirectly by Seller or its agents or representatives in
violation of this Section 6(d)).
(e) Covenant Not to Compete. For a period of three years from and after
the Closing Date, the Seller will not engage directly or indirectly in any
business that the Subsidiary conducts as of the Closing Date in any geographic
area in which the Subsidiary conducts that business as of the Closing Date;
provided, however, that no owner of less than 10% of the outstanding stock of
any publicly-traded corporation shall be deemed to engage in such business by
virtue of such stock ownership. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 6(e) is invalid
or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provisions, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(f) Name Change. Seller will, within 30 days after the Closing Date,
change the name of the Target to a name which does not include the word
"Whittaker."
(g) Delivery of Audited Financial Statements. As soon as reasonably
practical following the Closing and in any event within 60 days thereafter,
Seller shall deliver to Buyer the balance sheets and statements of operations,
changes in stockholders' equity, and cash flow covering the periods either (i)
(A) for the fiscal year ended October 31, 1997, (B) for the period from April
10, 1996 to October 31, 1996, (C) for the period from January 1, 1996 through
April 9, 1996, and (D) from January 1, 1995 through December 31, 1995, or (ii)
(A) for the period from April 1, 1996 to December 31, 1996, and (B) for the
period from January 1, 1997 to December 31, 1997, in either case prepared in
accordance with Regulation S-X promulgated by the Securities and Exchange
Commission ("S-X"), audited by a nationally recognized accounting firm, and
together with a manually signed accountant's report thereon that complies with
Rule 2-02 of S-X. If Seller delivers such audited financial statements to Buyer
within 60 days of the Closing Date, Buyer shall deliver to Seller a warrant to
purchase 78,598 shares of the Buyer's common stock exercisable from the date of
delivery of such financial statements to the third anniversary of the Closing
Date, pursuant to the Warrant Agreement attached as Exhibit A hereto.
(h) Auditors' Consents. Each of the parties shall use its best efforts
to obtain consents of the accounting firm performing such audits to the use of
the accountant's reports described in Section 6(g) above in any registration
statement of Buyer within three business days of any request for such a consent;
provided that Buyer shall have the sole responsibility for payment of any fees
in connection with such consents.
(i) Rights Against Raytheon. Seller and Buyer acknowledge that Seller
acquired the capital stock of Subsidiary from Raytheon Company ("Raytheon")
pursuant to that certain Stock
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Purchase Agreement, dated as of March 2, 1996 between Raytheon and Seller (the
"Acquisition Agreement") under which Raytheon made certain representations,
warranties and agreements (collectively the "Raytheon Obligations") to Seller
relative to Subsidiary and that the Raytheon Obligations may overlap or cover
matters in addition to the representations, warranties and agreements of Seller
to Buyer under this Agreement. Seller agrees to use its best efforts to obtain
the consent of Raytheon to its assignment of the Raytheon obligations to Buyer
and upon obtaining such consent, shall assign the Raytheon Obligations to Buyer.
In the event that Seller is unable to obtain Raytheon's consent to such
assignment and a matter or event occurs or a liability is discovered for which
Seller could pursue a claim or action under the Raytheon Obligations or for
indemnity, Seller agrees to cooperate with Buyer and at Buyer's request to
diligently prosecute such claim or action in Seller's name on behalf and for the
benefit of Buyer. Any such claim or action shall be prosecuted at Buyer's sole
cost and expense using counsel of Buyer's choice and any recovery obtained shall
be allocated between Buyer and Seller in accordance with each Party's claim.
Nothing herein shall preclude Seller from bringing an action against Raytheon on
its own behalf and at its own expense.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) (A) the representations and warranties set forth in
Sections 2(e), 3(a)(i), 3(a)(iii)(A), 3(a)(v), 4(b) and 5(c) (except
as the Disclosure Schedule sets forth exceptions to such Sections)
above shall be true and correct in all material respects as of the
Closing Date, (B) the Seller shall have full corporate power and
authority to execute and deliver this Agreement and perform its
obligations hereunder, (C) neither the execution and the delivery of
this Agreement nor the consummation of the transactions contemplated
hereby will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to which
any of the Seller, the Target or the Subsidiary is a party or any
provision of their respective charters or bylaws, and (D) each of the
Target and the Subsidiary is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation;
(ii) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated; and
(iii) the Buyer shall have received the resignations,
effective as of the Closing, of each director on the board of
directors of the Target.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
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<PAGE> 26
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section
3(b) above shall be true and correct in all material respects as of
the Closing Date; and
(ii) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated.
The Seller may waive any condition specified in this Section 7(b) if it executes
a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Seller contained in Section 4 above, other
than the representations contained in Sections 4(j) and 4(y), shall survive the
Closing hereunder (even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of two years thereafter; provided, however,
that the representations and warranties contained in Sections 4(j) and 4(y)
above relating to Tax Matters and Environmental, Health, and Safety Laws,
respectively, shall survive the Closing hereunder (even if the Buyer knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for the relevant statute of
limitations periods; provided further, that the representations and warranties
contained in Section 4(l)(v) shall not survive the Closing. All of the other
representations and warranties of the Parties contained in this Agreement
(including the representations and warranties of the Parties contained in
Section 3 above) shall survive the Closing (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for two years thereafter (subject
to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event the Seller breaches any of its
representations, warranties, and covenants contained herein (other
than the covenants in Section 2(a) above and the representations and
warranties in Section 3(a) above), and, if there is an applicable
survival period pursuant to Section 8(a) above, provided that the
Buyer makes a written claim for indemnification against the Seller
pursuant to Section 11(g) below within such survival period, then the
Seller agrees to indemnify the Buyer from and against the entirety of
any Adverse Consequences the Buyer may suffer through and after the
date of the claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach; provided, however, that the Seller
shall not have any obligation to indemnify the Buyer from and against
any Adverse Consequences resulting from, arising out of, relating to,
in the nature of, or caused by the breach of any
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representation or warranty of the Seller contained in Section 4 above
until the Buyer has suffered Adverse Consequences by reason of all
such breaches in excess of a $500,000 aggregate threshold (at which
point the Seller will be obligated to indemnify the Buyer from and
against all such Adverse Consequences relating back to the first
dollar).
(ii) In the event Seller breaches any of its covenants in
Section 2(a) above or any of its representations and warranties in
Section 3(a) above, and, if there is an applicable survival period
pursuant to Section 8(a) above, provided that the Buyer makes a
written claim for indemnification against the Seller pursuant to
Section 11(g) below within such survival period, then the Seller
agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer through and after the date
of the claim for indemnification (including any Adverse Consequences
the Buyer may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or
caused by the breach.
(c) Indemnification Provisions for Benefit of the Seller. In the event
the Buyer breaches any of its representations, warranties, and covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 8(a) above, provided that any of the Seller makes a written claim for
indemnification against the Buyer pursuant to Section 11(g) below within such
survival period, then the Buyer agrees to indemnify the Seller from and against
the entirety of any Adverse Consequences the Seller may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
the Seller may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to
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the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an injunction or
other equitable relief, (D) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment
of the Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying
Party, and (C) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified
Party.
(iv) In the event any of the conditions in Section 8(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party
may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any
manner it reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying
Party in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the
costs of defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (C) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim to the fullest extent provided
in this Section 8.
9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Seller for certain tax matters following the
Closing Date:
(a) Seller will include the income of the Subsidiary on Seller's
Returns for all periods through the Closing Date in which the Subsidiary was
included in such Returns and account for and pay any federal income taxes
attributable to such income on such returns. Seller shall deliver to Buyer
copies of such Returns and any Returns relating to the Subsidiary for the period
prior to the Closing Date within 10 days of the filing of such Returns with the
appropriate Tax Authority. The Subsidiary shall be responsible for and shall pay
to Seller the portion of the consolidated tax liability for such periods
chargeable to the Subsidiary under the principles of Treas. Reg. Section
1.1552-1(a)(2) and applicable state and local laws and regulations. The
Subsidiary will furnish tax information to Seller for inclusion in Seller's
Returns for the period which includes the Closing Date in accordance with the
Subsidiary's past custom and practice. The income of the Subsidiary
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will be apportioned between the period up to and including the Closing Date and
the period after the Closing Date by closing the books of the Subsidiary as of
the end of the Closing Date.
(b) At Seller's request, Buyer will cause the Subsidiary to make or
join with Seller in making any election if the making of such election does not
have a material adverse impact on Buyer (or the Subsidiary) for any tax period
beginning on or after the Closing Date.
(c) It is agreed and understood that the parties shall not make an
election under Section 338(h)(10) of the Code in respect of the purchase and
sale of the Target Shares pursuant to this Stock Purchase Agreement.
(d) Seller will elect to retain any net operating loss carryovers or
capital loss carryovers of the Subsidiary or the Target under Treasury
Regulation Section 1.1502-20(g), or have any such losses reattributed to Seller
prior to the Closing.
(e) Any refunds received after the Closing Date by Seller attributable
to any Tax losses or Tax credits of the Subsidiary arising after the Closing
Date shall be remitted promptly to Buyer.
(f) Each of Seller and Buyer shall (i) make available for inspection
and copying upon the reasonable request of the other party all working papers,
books of account and records relating to the periods before and after,
respectively, the Closing Date, and (ii) shall cooperate with each other in the
event of any Tax audit, dispute or protest.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing; and
(ii) either the Buyer or the Seller may terminate this
Agreement by giving written notice to the other party if the Closing
shall not have occurred on or before March 31, 1998.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
Buyer and the Seller; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
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listing or trading requirement concerning its publicly-traded securities (in
which case the disclosing Party will notify the other Parties of such disclosure
48 hours prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the Buyer and the Seller; provided, however, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be deemed effectively
given (i) upon personal delivery to the party notified, (ii) five days after
deposit with the United States Post Office, by registered or certified mail,
postage prepaid, return receipt requested, (iii) one business day after deposit
with a nationally recognized air courier service such as DHL or Federal Express
for next day delivery, or (iv) on the day of facsimile transmission, with
confirmed transmission, to the facsimile number shown below (or to such other
facsimile number as the party to be notified may indicate by ten days advance
written notice to the other party in the manner herein provided), provided that
notice is also given under clauses (i), (ii) or (iii) above; in any such case
addressed to the party to be notified at the address indicated below for that
party, or at such other address as that party may indicate by ten days advance
written notice to the other party in the manner herein provided:
If to the Seller:
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John K. Otto
Chief Financial Officer
Whittaker Corporation
1955 N. Surveyor Avenue
Simi Valley, CA 93063
Fax: (805) 584-4148
with a copy to:
John R. Light, Esq.
Latham & Watkins
633 W. 5th Street, Suite 4000
Los Angeles, CA 90071
Fax: (213) 891-8763
If to the Buyer:
Noam Lotan
President and Chief Executive Officer
MRV Communications, Inc.
8943 Fullbright Avenue
Chatsworth, CA 91311
Fax: (818) 407-5656
with a copy to:
Mark A. Klein, Esq.
Freshman, Marantz, Orlanski, Cooper & Klein
9100 Wilshire Boulevard
Eight Floor East Tower
Beverly Hills, CA 90212-3480
Fax: (310) 274-8357
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
DELAWARE OR ANY OTHER
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JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF DELAWARE.
(i) Amendments and Waivers No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby. The Seller agrees that the Subsidiary
has not borne or will bear any of the Seller' costs and expenses (including any
of their legal fees and expenses) in connection with this Agreement or any of
the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that,
subject to Section 11(p), the other Parties shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United
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States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 11(o) below), in addition to any
other remedy to which they may be entitled, at law or in equity.
(o) Submission to Jurisdiction. Subject to the provisions of Section
11(p) below, each of the Parties submits to the jurisdiction of any state or
federal court sitting in Delaware, in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of the action
or proceeding may be heard and determined in any such court. Each Party further
agrees not to bring any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Any Party may make service on any other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 11(g)
above. Nothing in this Section 11(o), however, shall affect the right of any
Party to serve legal process in any other manner permitted by law or at equity.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
MRV COMMUNICATIONS, INC.
/s/ Zeev Rav Noy
--------------------------------
By: Zeev Rav Noy
Title: Chief Operating Officer
/s/ Edmund Glazer
------------------------------------------------
By: Edmund Glazer
Title: Vice President of Finance and
Administration, and Chief Financial Officer
WHITTAKER CORPORATION
/s/ Joseph F. Alibrandi
------------------------------------------------
By: Joseph F. Alibrandi
Title: President and Chief Executive Officer
/s/ John K. Otto
------------------------------------------------
By: John K. Otto
Title: Vice President, Chief Financial Officer
and Treasurer
34
<PAGE> 1
EXHIBIT 2.1(b)
MRV COMMUNICATIONS, INC.
and
WHITTAKER CORPORATION
-------------------------------
WARRANT AGREEMENT
Dated as of January 30, 1998
<PAGE> 2
WARRANT AGREEMENT dated as of January 30, 1998 between MRV
Communications, Inc., a Delaware corporation (the "Company"), and Whittaker
Corporation, a Delaware corporation (the "Holder").
WHEREAS, the Company proposes to issue Common Stock Purchase
Warrants, as hereinafter described (the "Warrants"), to purchase up to an
aggregate of 500,000 shares of Common Stock, par value $0.0034 per share (the
"Common Stock"), of the Company (the Common Stock issuable on exercise of the
Warrants being referred to herein as the "Warrant Shares"), each Warrant
entitling the holder thereof to purchase one Warrant Share.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Warrant Certificates. The certificates evidencing
the Warrants (the "Warrant Certificates") to be delivered pursuant to this
Agreement shall be in registered form only and shall be substantially in the
form set forth in Exhibit A attached hereto.
SECTION 2. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board or its President or a Vice President and by its Secretary or an Assistant
Secretary under its corporate seal. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of the present or any
future Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, President,
Vice President, Secretary or Assistant Secretary, notwithstanding the fact that
at the time the Warrant Certificates shall be countersigned and delivered or
disposed of he shall have ceased to hold such office. The seal of the Company
may be in the form of a facsimile thereof and may be impressed, affixed,
imprinted or otherwise reproduced on the Warrant Certificates.
Any Warrant Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such Warrant
Certificate, although at the date of the execution of this Warrant Agreement any
such person was not such officer.
SECTION 3. Warrant Register. The Company shall number and
register the Warrant Certificates in a register as they are issued by the
Company. The Company may deem and treat the registered holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for all purposes, and the
Company shall not be affected by any notice to the contrary.
SECTION 4. Registration of Transfers and Exchanges. The
Company shall from time to time register the transfer of any outstanding Warrant
Certificates upon the records to be
<PAGE> 3
maintained by it for that purpose, upon surrender thereof accompanied (if so
required by it) by a written instrument or instruments of transfer duly executed
by the registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be cancelled by the
Company. Cancelled Warrant Certificates shall thereafter be disposed of in a
manner satisfactory to the Company.
The Holder agrees that each certificate representing Warrant
Shares will bear the following legend:
"The securities evidenced or constituted hereby have been
acquired for investment and have not been registered under the
Securities Act of 1933, as amended. Such securities may not be
sold, transferred, pledged or hypothecated unless the
registration provisions of said Act have been complied with or
unless the Company has received an opinion of counsel
reasonably satisfactory to the Company that such registration
is not required."
Warrant Certificates may be exchanged at the option of the
holder(s) thereof, when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be cancelled by the Company.
SECTION 5. Terms of Warrants; Exercise of Warrants. Subject to
the terms of this Agreement, the Warrant holder shall have the right, which may
be exercised commencing at the opening of business on January 30, 1998 and until
5:00 p.m., Pacific time on January 29, 2001 to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the Warrant holder
may at the time be entitled to receive on exercise of such Warrants and payment
of the Exercise Price then in effect for such Warrant Shares. In the
alternative, the Warrant holder may exercise its right, during the Exercise
Period, to receive Warrant Shares on a net basis, such that, without the
exchange of any funds, the Warrant holder receives that number of Warrant Shares
otherwise issuable (or payable) upon exercise of its Warrants less that number
of Warrant Shares having an aggregate current market price at the time of
exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the Warrant holder. For purposes of the foregoing sentence, "current
market price" of the Warrant Shares will be determined in the manner set forth
in Section 10(d) hereof. Each Warrant not exercised prior to 5:00 p.m., Pacific
time, on January 29, 2001 shall become void and all rights thereunder and all
rights in respect thereof under this agreement shall cease as of such time. No
adjustments as to dividends will be made upon exercise of the Warrants.
A Warrant may be exercised upon surrender to the Company at
its principal office of the certificate or certificates evidencing the Warrants
to be exercised with the form of election to purchase on the reverse thereof
duly filled in and signed, and upon payment to the Company
2
<PAGE> 4
of the exercise price (the "Exercise Price") which is set forth in the form of
Warrant Certificate attached hereto as Exhibit A as adjusted as herein provided,
for the number of Warrant Shares in respect of which such Warrants are then
exercised. Payment of the aggregate Exercise Price shall be made (i) in cash or
by certified or official bank check payable to the order of the Company, or (ii)
in the manner provided in the first paragraph of this Section 5.
Upon such surrender of Warrants and payment of the Exercise
Price the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the Warrant holder and in such name or
names as the holder may designate, a certificate or certificates for the number
of full Warrant Shares issuable upon the exercise of such Warrants together with
cash as provided in Section 11; provided, however, that if any consolidation,
merger or lease or sale of assets is proposed to be effected by the Company as
described in subsection (m) of Section 10 hereof, or a tender offer or an
exchange offer for shares of Common Stock of the Company shall be made, upon
such surrender of Warrants and payment of the Exercise Price as aforesaid, the
Company shall, as soon as possible, but in any event not later than two business
days thereafter, issue and cause to be delivered the full number of Warrant
Shares issuable upon the exercise of such Warrants in the manner described in
this sentence together with cash as provided in Section 11. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price.
The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part and, in the event
that a certificate evidencing Warrants is exercised in respect of fewer than all
of the Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued pursuant to the provisions of this Section.
All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Company. Such cancelled Warrant Certificates shall
then be disposed of by the Company.
SECTION 6. Payment of Taxes. The Company will pay all
documentary stamp taxes attributable to the initial issuance of Warrant Shares
upon the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue of any Warrant Certificates or any certificates for
Warrant Shares in a name other than that of the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant, and the Company shall
not be required to issue or deliver such Warrant Certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 7. Mutilated or Missing Warrant Certificates. In case
any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed,
the Company may in its
3
<PAGE> 5
discretion issue in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent number of Warrants, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant Certificate and indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
SECTION 8. Reservation of Warrant Shares. The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will supply such Transfer Agent with
duly executed certificates for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 11. The Company
will furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto, transmitted to each holder pursuant to Section 12
hereof.
Before taking any action which would cause an adjustment
pursuant to Section 10 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
SECTION 9. Obtaining Stock Exchange Listings. The Company will
from time to time take all action which may be necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of Warrants, will be
listed on the principal securities exchanges and markets within the United
States of America, if any, on which other shares of Common Stock are then
listed.
4
<PAGE> 6
SECTION 10. Adjustment of Exercise Price and Number of Warrant
Shares Issuable. The Exercise Price and the number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 10. For purposes of
this Section 10, "Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(3) combines its outstanding shares of Common Stock
into a smaller number of shares;
(4) makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock
any shares of its capital stock; then the Exercise Price in effect
immediately prior to such action shall be proportionately adjusted so
that the holder of any Warrant thereafter exercised may receive the
aggregate number and kind of shares of capital stock of the Company
which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise of
it may receive shares of two or more classes of capital stock of the Company,
the Company shall determine the allocation of the adjusted Exercise Price
between the classes of capital stock. After such allocation, the exercise
privilege and the Exercise Price of each class of capital stock shall thereafter
be subject to adjustment on terms comparable to those applicable to Common Stock
in this Section.
5
<PAGE> 7
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them for a period expiring within 60
days after the record date mentioned below to purchase shares of Common Stock at
a price per share less than the current market price per share on that record
date, the Exercise Price shall be adjusted in accordance with the formula:
O + N x P
-------
E' = E x M
-----------
O + N
where:
E'= the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock
any of its assets or debt securities or any rights or warrants to purchase debt
securities, assets or other securities of the Company, the Exercise Price shall
be adjusted in accordance with the formula:
6
<PAGE> 8
E' = E x M - F
------------
M
where:
E'= the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of
Common Stock. The Board of Directors shall determine the fair
market value.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection (c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this subsection does not apply to rights, options
or warrants referred to in subsection (b) of this Section 10.
(d) Current Market Price.
In subsections (b) and (c) of this Section 10 the current
market price per share of Common Stock on any date is the average of the Quoted
Prices of the Common Stock for 30 consecutive trading days commencing 45 trading
days before the date in question. The "Quoted Price" of the Common Stock is the
last reported sales price of the Common Stock as reported on the Nasdaq National
Market, or if the Common Stock is listed on a securities exchange, the last
reported sales price of the Common Stock on such exchange which shall be for
consolidated trading if applicable to such exchange, or if neither so reported
or listed, the last reported bid price of the Common Stock. In the absence of
one or more such quotations, the Board of Directors of the Company shall
determine the current market price on the basis of such quotations as it in good
faith considers appropriate.
(e) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
7
<PAGE> 9
All calculations under this Section shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
(f) When No Adjustment Required.
No adjustment need be made for a transaction referred to in
subsections (a), (b) or (c) of this Section 10 if Warrant holders are to
participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction.
No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(g) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall
provide the notices required by Section 12 hereof.
(h) Voluntary Reduction.
The Company from time to time may reduce the Exercise Price by
any amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period; provided, however, that in no event
may the Exercise Price be less than the par value of a share of Common Stock.
Whenever the Exercise Price is reduced, the Company shall mail
to Warrant holders a notice of the reduction. The Company shall mail the notice
at least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction of the Exercise Price does not change or adjust
the Exercise Price otherwise in effect for purposes of subsections (a), (b) and
(c) of this Section 10.
8
<PAGE> 10
(i) Notice of Certain Transactions.
If:
(1) the Company takes any action that would require
an adjustment in the Exercise Price pursuant to subsections (a), (b) or
(c) of this Section 10 and if the Company does not arrange for Warrant
holders to participate pursuant to subsection (i) of this Section 10;
(2) the Company takes any action that would require a
supplemental Warrant Agreement pursuant to subsection (j) of this
Section 10; or
(3) there is a liquidation or dissolution of the
Company, the Company shall mail to Warrant holders a notice stating the
proposed record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution. The
Company shall mail the notice at least 15 days before such date.
Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
(j) Reorganization of Company.
If the Company consolidates or merges with or into, or
transfers or leases all or substantially all its assets to, any person, upon
consummation of such transaction the Warrants shall automatically become
exercisable for the kind and amount of securities, cash or other assets which
the holder of a Warrant would have owned immediately after the consolidation,
merger, transfer or lease if the holder had exercised the Warrant immediately
before the effective date of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than the Company, or the person to which such
sale or conveyance shall have been made, shall enter into a supplemental Warrant
Agreement so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for in this
Section. The successor Company shall mail to Warrant holders a notice describing
the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
If this subsection (j) applies, subsections (a), (b) and (c)
of this Section 10 do not apply.
9
<PAGE> 11
(k) When Issuance or Payment May Be Deferred.
In any case in which this Section 10 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 11; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional Warrant Shares, other capital stock and cash
upon the occurrence of the event requiring such adjustment.
(l) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 10, each Warrant outstanding prior to the making of the adjustment in
the Exercise Price shall thereafter evidence the right to receive upon payment
of the adjusted Exercise Price that number of shares of Common Stock (calculated
to the nearest hundredth) obtained from the following formula:
N' = N x E
---------
E'
where:
N' = the adjusted number of Warrant Shares issuable upon exercise
of a Warrant by payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price prior
to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(m) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
10
<PAGE> 12
SECTION 11. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 11,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the Exercise Price on the day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
SECTION 12. Notices to Warrant Holders. Upon any adjustment of
the Exercise Price pursuant to Section 10, the Company shall promptly thereafter
(i) cause to be given to each of the registered holders of the Warrant
Certificates at his address appearing on the Warrant register a certificate of a
firm of independent public accountants of recognized standing selected by the
Board of Directors of the Company (who may be the regular auditors of the
Company) setting forth the Exercise Price after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, by first-class mail, postage prepaid. Where appropriate, such
notice may be given in advance and included as a part of the notice required to
be mailed under the other provisions of this Section 12.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or warrants;
or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock or
distributions referred to in subsection (a) of Section 10 hereof); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
11
<PAGE> 13
(e) the Company proposes to take any action (other than
actions of the character described in Section 10(a)) which would require an
adjustment of the Exercise Price pursuant to Section 10; then the Company shall
cause to be given to each of the registered holders of the Warrant Certificates
at his address appearing on the Warrant register, at least 20 days (or 10 days
in any case specified in clauses (a) or (b) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for which
there is no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such rights, options, warrants or distribution are
to be determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the notice
required by this Section 12 or any defect therein shall not affect the legality
or validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
SECTION 13. Notices to Company. Any notice or demand
authorized by this Agreement to be given or made by the Company or by the
registered holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company), as follows:
MRV Communications, Inc.
8917 Fullbright Avenue
Chatsworth, California 91311
Attention: Corporate Secretary
In case the Company shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Transfer Agent.
SECTION 14. Supplements and Amendments. The Company and the
Warrant holders may from time to time supplement or amend this Agreement with
the approval of all holders of Warrant Certificates.
12
<PAGE> 14
SECTION 15. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Holder shall bind and
inure to the benefit of their respective successors and assigns hereunder.
SECTION 16. Termination. This Agreement shall terminate at
5:00 p.m., Pacific time on January 29, 2001. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been
exercised.
SECTION 17. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be construed in
accordance with the internal laws of said State.
SECTION 18. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Holder and the registered holders of the Warrant Certificates any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the Holder
and the registered holders of the Warrant Certificates.
SECTION 19. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
13
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
MRV COMMUNICATIONS, INC.
/s/ ZEEV RAV-NOY C.O.O.
-------------------------
By
Title
[Seal]
Attest: /s/ EDMUND GLAZER
----------------------
Secretary
WHITTAKER CORPORATION
/s/ JOHN K. OTTO
-------------------------
By John K. Otto
Title Vice President
Attest: /S/ LYNNE M. O. BRICKNER
----------------------
Secretary
14
<PAGE> 16
EXHIBIT A
TO WARRANT AGREEMENT
[Form of Warrant Certificate]
THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE
REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
EXERCISABLE ON OR BEFORE FEBRUARY ___, 2001
No. [1][2] [421,402][78,598] Warrants
Warrant Certificate
MRV COMMUNICATIONS, INC.
This Warrant Certificate certifies that WHITTAKER CORPORATION,
or registered assigns, is the registered holder of Warrants expiring February
___, 2001 (the "Warrants") to purchase Common Stock, par value $0.0034 per share
(the "Common Stock"), of MRV Communications, Inc., a Delaware corporation (the
"Company"). Each Warrant entitles the holder upon exercise to receive from the
Company on or before 5:00 p.m. Pacific time on February ___, 2001, one fully
paid and nonassessable share of Common Stock (a "Warrant Share") at the initial
exercise price (the "Exercise Price") of $35.00 payable in lawful money of the
United States of America upon surrender of this Warrant Certificate and payment
of the Exercise Price at the office of the Company, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to herein.
Notwithstanding the foregoing, Warrants may be exercised without the exchange of
funds pursuant to the net exercise provisions of Section 5 of the Warrant
Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., Pacific time on
February ___, 2001, and to the extent not exercised by such time such Warrants
shall become void.
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of Delaware.
A-1
<PAGE> 17
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring February ___, 2001 entitling the
holder on exercise to receive shares of Common Stock, par value $0.0034 per
share, of the Company (the "Common Stock"), and are issued or to be issued
pursuant to a Warrant Agreement dated as of February ___, 1998 (the "Warrant
Agreement"), duly executed and delivered by the Company to Whittaker
Corporation, a Delaware corporation (the "Holder"), which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company, the Holder and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or before February
___, 2001. The holder of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price in cash at the office of the Company. In the
event that upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment shall
be made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Company a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
A-2
<PAGE> 18
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, of any distribution to the holder(s) hereof, and
for all other purposes, and the Company shall not be affected by any notice to
the contrary. Neither the Warrants nor this Warrant Certificate entitles any
holder hereof to any rights of a stockholder of the Company.
IN WITNESS WHEREOF, MRV Communications, Inc. has caused this
Warrant Certificate to be signed by its President and by its Secretary, and has
caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated: February ___, 1998
MRV COMMUNICATIONS, INC.
By
------------------------
President
By
------------------------
Secretary
A-3
<PAGE> 19
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive __________ shares of
Common Stock and herewith tenders payment for such shares to the order of MRV
Communications, Inc. in the amount of $______ in accordance with the terms
hereof, unless the holder is exercising Warrants pursuant to the net exercise
provisions of Section 5 of the Warrant Agreement. The undersigned requests that
a certificate for such shares be registered in the name of ________________,
whose address is _______________________________ and that such shares be
delivered to ________________ whose address is ___________
______________________. If said number of shares is less than all of the shares
of Common Stock purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________, whose address is
_________________________, and that such Warrant Certificate be delivered to
_________________, whose address is __________________.
Signature:
Date:
A-4
<PAGE> 1
EXHIBIT 2.1(c)
THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE
REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
EXERCISABLE ON OR BEFORE JANUARY 29, 2001
No. Whittaker #1 421,402 Warrants
Warrant Certificate
MRV COMMUNICATIONS, INC.
This Warrant Certificate certifies that WHITTAKER CORPORATION,
or registered assigns, is the registered holder of Warrants expiring January 29,
2001 (the "Warrants") to purchase Common Stock, par value $0.0034 per share (the
"Common Stock"), of MRV Communications, Inc., a Delaware corporation (the
"Company"). Each Warrant entitles the holder upon exercise to receive from the
Company on or before 5:00 p.m. Pacific time on January 29, 2001, one fully paid
and nonassessable share of Common Stock (a "Warrant Share") at the initial
exercise price (the "Exercise Price") of $35.00 payable in lawful money of the
United States of America upon surrender of this Warrant Certificate and payment
of the Exercise Price at the office of the Company, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to herein.
Notwithstanding the foregoing, Warrants may be exercised without the exchange of
funds pursuant to the net exercise provisions of Section 5 of the Warrant
Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., Pacific time on
January 29, 2001, and to the extent not exercised by such time such Warrants
shall become void.
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of Delaware.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring January 29, 2001 entitling the
holder on exercise to receive shares of Common Stock, par value $0.0034 per
share, of the Company (the "Common Stock"), and are issued or to be issued
pursuant to a Warrant Agreement dated as of January 30, 1998 (the "Warrant
Agreement"), duly executed and delivered by the Company to Whittaker
Corporation, a Delaware corporation (the "Holder"), which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company, the Holder and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or before January 29,
2001. The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with
1
<PAGE> 2
payment of the Exercise Price in cash at the office of the Company. In the event
that upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment shall
be made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Company a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, of any distribution to the holder(s) hereof, and
for all other purposes, and the Company shall not be affected by any notice to
the contrary. Neither the Warrants nor this Warrant Certificate entitles any
holder hereof to any rights of a stockholder of the Company.
IN WITNESS WHEREOF, MRV Communications, Inc. has caused this
Warrant Certificate to be signed by its Chief Operating Officer and by its
Assistant Secretary, and has caused its corporate seal to be affixed hereunto or
imprinted hereon.
Dated: January 30, 1998
MRV COMMUNICATIONS, INC.
By /s/ ZEEV RAV-NOY
---------------------------------
Chief Operating Officer
By /s/ EDMUND GLAZER
---------------------------------
Assistant Secretary
2
<PAGE> 3
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive __________ shares of
Common Stock and herewith tenders payment for such shares to the order of MRV
Communications, Inc. in the amount of $______ in accordance with the terms
hereof, unless the holder is exercising Warrants pursuant to the net exercise
provisions of Section 5 of the Warrant Agreement. The undersigned requests that
a certificate for such shares be registered in the name of ________________,
whose address is _______________________________ and that such shares be
delivered to ________________ whose address is ___________
______________________. If said number of shares is less than all of the shares
of Common Stock purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________, whose address is ________________, and
that such Warrant Certificate be delivered to _________________, whose address
is __________________.
Signature:
----------------------------
Date: ___________
3
<PAGE> 1
EXHIBIT 2.2(a)
[COOPERS & LYBRAND LETTERHEAD]
XYPLEX, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<PAGE> 2
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Raytheon Company:
We have audited the accompanying balance sheets of Xyplex, Inc. as of
December 31, 1995 and 1994, and the related statements of income, stockholder's
equity, and cash flows for the years then ended. These financial statements are
the responsibility of management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As discussed in Note 1, interest expense associated with Raytheon Company's
general corporate debt has not been allocated to Xyplex, Inc.'s financial
statements. Also as discussed in Note 1, Xyplex, Inc. has earned interest income
primarily on its intercompany receivable from Raytheon based on an agreed-upon
rate. As discussed in Note 2, certain costs and expenses presented in the
financial statements represent allocations of the costs of services provided to
Xyplex, Inc. by Raytheon Company. As a result of these factors, the financial
statements presented may not be indicative of the financial position or results
of operations that would have been achieved had Xyplex, Inc. operated as a
nonaffiliated entity.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Xyplex, Inc. as of December
31, 1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 22, 1996
<PAGE> 3
XYPLEX, INC.
BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 113,000 $ 140,000
Short-term investments 400,000 400,000
Accounts receivable, less reserve of $805,000
and $719,000 in 1995 and 1994, respectively 19,584,000 18,663,000
Inventory 8,974,000 8,397,000
Other current assets 790,000 456,000
Receivable from parent company 33,774,000 35,447,000
------------ ------------
Total current assets 63,635,000 63,503,000
Property and equipment, net 7,854,000 6,386,000
Deferred tax asset 6,136,000 3,168,000
Other assets 2,032,000 1,627,000
Goodwill 85,624,000 123,982,000
------------ ------------
Total assets $165,281,000 $198,666,000
============ ============
LIABILITIES AND PARENT COMPANY INVESTMENT
Current liabilities:
Current portion of capital lease obligations 472,000 796,000
Accounts payable 7,517,000 6,504,000
Accrued payroll and employee benefits 4,749,000 3,326,000
Other accrued expenses 1,700,000 900,000
Deferred revenue 3,134,000 1,551,000
------------ ------------
Total current liabilities 17,572,000 13,077,000
Long-term portion of capital lease obligations 84,000 604,000
Commitments and contingencies
Parent company investment 147,625,000 184,985,000
------------ ------------
Total liabilities and parent company investment $165,281,000 $198,666,000
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 4
XYPLEX, INC.
STATEMENTS OF INCOME
for the years ended December 31, 1995 and 1994
1995 1994
---- ----
Net sales $107,617,000 $95,233,000
Cost of sales 49,360,000 40,646,000
------------ -----------
Gross profit 58,257,000 54,587,000
------------ -----------
Operating expenses:
Selling and marketing 35,675,000 25,283,000
General and administrative 6,300,000 5,008,000
Research and development 16,039,000 13,045,000
Parent company allocations 425,000 24,000
Amortization of goodwill 8,358,000 1,393,000
Impairment of goodwill 30,000,000 -
Acquisition charges - 4,299,000
------------ -----------
Total operating expenses 96,797,000 49,052,000
------------ -----------
(Loss) income from operations (38,540,000) 5,535,000
Interest expense (74,000) (131,000)
Interest income 22,000 834,000
Interest income from parent company 2,238,000 212,000
------------ -----------
Net (loss) income before tax provision (36,354,000) 6,450,000
Provision for federal income taxes 1,006,000 3,152,000
------------ ----------
Net (loss) income $(37,360,000) $ 3,298,000
============ ===========
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
XYPLEX, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
for the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL PARENT TOTAL
----------------------- RETAINED PAID-IN COMPANY STOCKHOLDERS'
SHARES AMOUNT EARNINGS CAPITAL INVESTMENT EQUITY
---------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 6,055,000 $ 61,000 $ 22,083,000 $ 34,537,000 $ 56,681,000
Exercise of stock options 141,000 1,000 -- 46,000 47,000
Tax benefit related to employee
stock options -- -- -- 1,172,000 1,172,000
Sale of common stock under employee
stock purchase plan 60,000 1,000 -- 805,000 806,000
Net income earned through date of
acquisition -- -- 1,641,000 -- 1,641,000
Acquisition by Raytheon Company (6,256,000) (63,000) (23,724,000) (36,560,000) $ 60,347,000 --
Allocation of goodwill to parent
company investment -- -- -- -- 122,981,000 122,981,000
Net income -- -- -- -- 1,657,000 1,657,000
---------- -------- ------------ ------------ ------------ ------------
Balance, December 31, 1994 -- -- -- -- 184,985,000 184,985,000
Net loss -- -- -- -- (37,360,000) (37,360,000)
---------- -------- ------------ ------------ ------------ ------------
Balance, December 31, 1995 -- -- -- -- $147,625,000 $147,625,000
========== ======== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
XYPLEX, INC.
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (37,360,000) $ 3,298,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 13,868,000 5,239,000
Impairment of goodwill 30,000,000 --
Tax benefit from employee stock options -- 1,172,000
Deferred income tax provision (2,968,000) (2,453,000)
Changes in assets and liabilities:
Accounts receivable (921,000) (5,546,000)
Inventory (577,000) (3,402,000)
Other current assets (334,000) (114,000)
Accounts payable and accrued expenses 1,096,000 893,000
Deferred revenue 1,583,000 720,000
Other assets (110,000) (18,000)
-------------- --------------
Net cash provided by (used in)
operating activities 4,277,000 (211,000)
-------------- --------------
Cash flows from investing activities:
Purchase and sale of equipment, net (6,437,000) (3,760,000)
Purchase of licenses and other
intangible assets (836,000) (1,090,000)
Net proceeds from sales of securities -- 19,917,000
-------------- --------------
Net cash (used in) provided
by investing activities (7,273,000) 15,067,000
Cash flows from financing activities:
Increase in accounts payable
related to cash overdrafts 2,140,000 1,866,000
Repayment of note payable -- (253,000)
Proceeds from exercise of stock options -- 46,000
Proceeds from sale of stock under
employee stock purchase plan -- 805,000
Payments of capital leases (844,000) (863,000)
Net receipts from (payments to)
parent company 1,673,000 (33,140,000)
-------------- --------------
Net cash provided by (used in)
financing activities 2,969,000 (31,539,000)
Net decrease in cash and cash equivalents (27,000) (16,683,000)
Cash and cash equivalents, beginning of year 140,000 16,823,000
-------------- --------------
Cash and cash equivalents, end of year $ 113,000 $ 140,000
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
BASIS OF PRESENTATION
Xyplex, Inc. (the "Company" or "Xyplex") designs, manufactures, markets and
supports data networks. On October 7, 1994, Xyplex was acquired by Raytheon
Company ("Raytheon") for total consideration of $186,000,000. Pursuant to
the purchase method of accounting, the assets and liabilities acquired by
Raytheon were revalued to their fair value. The excess of the purchase
price over the fair value of the net assets acquired was approximately
$125,000,000 and accordingly, goodwill and the parent company investment
were increased by $125,000,000. Effective on the close of business on April
9, 1996, Xyplex was acquired by Whittaker Corporation.
The accompanying historical financial statements present the Company's
results of operations and its financial condition as a stand alone entity
through October 7, 1994 and as a wholly-owned subsidiary of Raytheon
thereafter. Interest expense associated with Raytheon's general corporate
debt has not been allocated to the Company's financial statements. Certain
costs and expenses presented in the financial statements represent
intercompany allocations and management's estimates of the costs of
services provided to the Company by Raytheon. (See Note 2 for further
discussion of allocations.) Additionally, as discussed in further detail
below, Xyplex earned interest income primarily on its intercompany
receivable from Raytheon based on an agreed-upon rate. As a result of these
factors, the financial statements presented may not be indicative of the
results that would have been achieved had the Company operated as a
non-affiliated entity.
The Company has had transactions in the normal course of business with
Raytheon and its subsidiaries. Revenues from these transactions, totaling
$1,172,000 in 1995 and $128,000 in 1994, are in accordance with Xyplex's
normal terms and conditions. The remaining receivables from these
transactions with Raytheon are included in trade accounts receivable and
totaled $458,000 and $28,000 as of December 31, 1995 and 1994,
respectively.
Additionally, Xyplex transferred a substantial amount of its cash and
investments to Raytheon upon the acquisition date and has subsequently
participated in the Raytheon cash management program. All of this cash
management activity is recorded in the receivable from parent company
account. Intercompany activity also includes allocations of corporate
expenses, state and federal income tax payments and credits, and interest
earned on the intercompany receivable balance itself. Interest is earned on
the intercompany receivable balance at a rate of 6.25% in 1995 and 5% in
1994 and totaled approximately $2,238,000 in 1995 and $212,000 in 1994.
PARENT COMPANY INVESTMENT
The parent company investment account represents the net assets of the
company. As described above, this account was credited with the excess of
the purchase price over the fair value of Xyplex's net assets at the time
of Raytheon's purchase.
Continued
6
<PAGE> 8
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company and
its wholly owned subsidiaries, Xyplex Foreign Sales Corporation, Inc., a foreign
sales corporation formed in April 1990 and Xyplex Security Corp., formed in May
1991. Significant intercompany accounts and transactions have been eliminated in
consolidation. The assets of Xyplex Security Corp. were liquidated during 1994
after the Company was purchased by Raytheon. Effective in 1995, the Company's
foreign sales were reported under Raytheon's foreign sales corporation (RITL).
USE OF ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents include all highly liquid investments with original maturities
of ninety days or less at the time of acquisition. All other investments are
considered to be short-term investments and are recorded at cost which
approximates fair value. Under the Company's cash management system with
Raytheon, checks issued but not presented to banks frequently result in
overdraft balances for accounting purposes. The Company has determined the net
overdraft balance by bank and has correspondingly reclassified these amounts to
Accounts Payable.
REVENUE RECOGNITION
The Company recognizes product revenue upon shipment of goods and software.
Maintenance and support fees greater than $10,000 are recognized ratably over
the life of the contract. A provision is made at the time of shipment for
estimated warranty costs to be incurred.
INVENTORY
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Continued
7
<PAGE> 9
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for maintenance and
repairs are charged to expense while the costs of significant improvements are
capitalized. Depreciation is computed using the straight-line and accelerated
methods in amounts that allocate the cost of these assets over their estimated
useful lives as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
- -------------------- -----------
<S> <C>
Equipment 5 years
Computer equipment 3 years
Furniture and fixtures 5 years
Leasehold improvements Term of Lease
Demonstration units 3 years
Equipment under capital lease Term of Lease
</TABLE>
Upon retirement or sale, the cost of assets disposed and the related
accumulated depreciation are eliminated and the related gains or losses are
reflected in income.
INTANGIBLES
Goodwill, which represents the amount Raytheon incurred in excess of the fair
value of the net assets of Xyplex on the date of purchase, is amortized on a
straight-line basis over a period of 15 years. For the years ended December 31,
1995 and 1994, the Company incurred amortization expense related to this asset
of $8,358,000 and $1,393,000. Accumulated amortization related to goodwill
totaled $9,751,000 and $1,393,000 as of December 31, 1995 and 1994.
Other intangibles assets, consisting primarily of licenses, are included in
other assets. These assets are amortized over a one to three year period based
on net realizable value. For the years ended December 31, 1995 and 1994, the
Company incurred amortization expense of $444,000 and $245,000. Accumulated
amortization related to these other assets totaled $624,000 and $180,000 as of
December 31, 1995 and 1994.
The Company periodically reviews the carrying value of its intangible assets as
well as the amortization periods to determine whether current events and
circumstances warrant adjustment to the carrying values or estimated useful
lives. At each balance sheet date, management evaluates the carrying value of
intangible assets to determine whether there has been any permanent impairment.
As of December 31, 1995, the Company recognized goodwill impairment of
$30,000,000. This amount represents the approximate difference between the fair
value and the carrying value of the Company's net assets based on the
anticipated sale of the Company.
Continued
8
<PAGE> 10
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred. In
accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
capitalization of internally developed computer software costs begins upon
the establishment of technological feasibility. The Company believes that
once a working model has been established, the additional development costs
to bring the product to a commercially acceptable level are not
significant. There were no software development costs capitalized as of
December 31, 1995 and 1994.
INCOME TAXES
The Company records income taxes based on an asset and liability approach
which results in the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the
book and tax bases of assets and liabilities. For purposes of these
financial statements, income taxes have been calculated as if Xyplex had
prepared a tax return on a stand alone basis.
In accordance with Raytheon's policy, all sate and local taxes have been
included in general and administrative expenses.
2. ALLOCATED COSTS:
The historical statements of operations, include charges from Raytheon
representing the Company's share of the cost of support services provided.
These charges are allocations of corporate expenses associated with legal,
marketing, management, financial and facilities management services. The
basis of the allocation is dependent on the functions and includes net
sales, square feet occupied, and percentage share of all other corporate
assessments. For these services, the Company was charged $425,000 and
$24,000 in 1995 and 1994, respectively.
Management believes the methods used to allocate the costs are reasonable
based on the company's use of such facilities and services.
3. INVENTORY:
Inventories consist of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials $ 987,000 $1,753,000
Work in process 3,856,000 2,874,000
Finished goods 4,131,000 3,770,000
---------- ----------
$8,974,000 $8,397,000
========== ==========
</TABLE>
Continued
9
<PAGE> 11
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Work in process and finished goods inventories include materials, labor
and manufacturing overhead. At December 31, 1995 and 1994, finished goods
include approximately $2,553,000 and $1,747,000, respectively, of
demonstration products located at the sales and support offices and
potential customer sites.
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Equipment $ 5,810,000 $ 3,413,000
Computer equipment 8,433,000 6,302,000
Furniture and fixtures 1,626,000 835,000
Leasehold improvements 2,515,000 2,090,000
Demonstration units 3,080,000 2,372,000
Equipment under capital lease 3,513,000 3,528,000
----------- -----------
24,977,000 18,540,000
Less - Accumulated depreciation and amortization (17,123,000) (12,154,000)
----------- -----------
$ 7,854,000 $ 6,386,000
=========== ===========
</TABLE>
Equipment under capital leases had accumulated amortization of $2,942,000
and $2,078,000 as of December 31, 1995 and 1994. Acquisitions for equipment
under capital lease obligations totaled $477,000 in 1994. There were no
such acquisitions in 1995.
5. LONG-TERM DEBT:
At December 31, 1993, the Company had approximately $253,000 outstanding
under a term note payable. Until the acquisition by Raytheon, the Company
made the required monthly principal payments of approximately $23,000 plus
interest. In October 1994, the Company paid this note off in full.
6. STOCK PLANS:
During 1994, the Company had two stock options plans in effect: the 1991
Restated Stock Option Plan (the "1991 Plan") and the 1989 Consultant's
Stock Option Plan (the "1989 Plan"). Under the 1991 Plan, incentive stock
options were granted at an exercise price of not less than the fair market
value of common stock as determined in accordance with the 1991 Plan and
nonqualified options were granted at an exercise price of not less than 50%
of the fair market value of the common stock
Continued
10
<PAGE> 12
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
at the date of grant. Under the 1989 Plan, stock options were granted to
eligible consultants, as defined, at a price of not less than the fair
value of the common stock at the date of grant. At the time the Company was
acquired by Raytheon, the outstanding options of both of these plans were
exchanged for options to purchase Raytheon stock.
A summary of stock option activity under the 1991 Plan and the 1989 Plan
follows:
<TABLE>
<CAPTION>
1991 1989
Related Consultant's
Stock Option Plan Stock Option Plan
------------------------- -----------------
Number of Option Number of Option
Options Price Options Price
-------- -------------- --------- -----
<S> <C> <C> <C> <C>
Outstanding at December 31, 1993 613,532 $ .12 - 28.62 333 $.12
Granted 24,069 $11.63 - 18.50
Exercised (140,963) $ .12 - 26.00
Canceled (28,075) $ 1.84 - 21.25 (333)
Exchanged for Raytheon stock options 468,563
-------- ----
Outstanding at December 31, 1994 - -
======== ====
</TABLE>
Prior to the acquisition by Raytheon, the Company also had the 1991
Employee Stock Purchase Plan (the "ESPP") in effect. Under the terms of the
ESPP, the Company was authorized to grant options to purchase an aggregate
of 140,000 shares of common stock in a series of six-month periods. The
purchase price was 85% of the lower of the fair value per share of common
stock, as defined in the ESPP. At the time the Company was acquired by
Raytheon, these shares were converted to Raytheon Stock.
7. INCOME TAXES:
The provision for income taxes in the accompanying consolidated statements
of income consists of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Federal:
Current $ 3,450,000 $ 4,238,000
Deferred (2,444,000 (1,086,000)
----------- -----------
$ 1,006,000 $ 3,152,000
=========== ===========
</TABLE>
Continued
11
<PAGE> 13
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
A reconciliation of the federal statutory rate percentage to the Company's
effective tax rate percentage is as follows for the years ended December
31, 1995 and 1994.
1995 1994
---- ----
Income tax provision
at federal statutory rate (35.0)% 35.0 %
Amortization of nondeductible goodwill 36.9 7.6
Non-deductible acquisition charges - 16.2
Other 0.9 (9.9)
------------ -----------
Effective tax rate 2.8 % 48.9 %
------------ -----------
The approximate income tax effect of each type of temporary difference
compromising the deferred tax asset at December 31, 1995 and 1994 is as
follows:
1995 1994
---- ----
Inventory $1,736,000 $ 829,000
Deferred revenue 957,000 305,000
Depreciation 935,000 443,000
Accrued vacation 463,000 394,000
Accrued warranty 306,000 181,000
Bad debt 282,000 252,000
Other, net 374,000 205,000
========== ==========
Total federal deferred tax asset 5,053,000 2,609,000
State deferred tax asset, net 1,083,000 559,000
Total deferred tax asset $6,136,000 $3,168,000
========== ==========
Income taxes paid totaled approximately $3,322,000 and $2,935,000 in 1995
and 1994, respectively.
8. 401(k) RETIREMENT PLAN:
The Company had a 401(k) retirement plan covering all employees who are
regularly scheduled to work 1,000 or more hours of service per year.
Participants may elect to defer up to 15% of their compensation for deposit
under the plan, subject to certain IRS limitations. The Company may elect
to make contributions to the plan. The contributions are allocated to each
eligible participant's account in proportion to each participant's
deferrals for the plan year, subject to IRS limitations; participants'
deferrals in excess of 6% of compensation are not matched. The Company
elected not
Continued
12
<PAGE> 14
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
to make contributions to the plan for the year ended December 31, 1994. In
1995, the Company contributed approximately $275,000.
9. LEASE COMMITMENTS:
The Company has both operating and capital lease commitments for certain
facilities and equipment. These leases expire at various dates through the
year 2014.
Future minimum lease payments under these noncancelable leases are as
follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR LEASES LEASES
---- --------- -------
<S> <C> <C>
1996 $1,458,000 $495,000
1997 761,000 85,000
1998 633,000 -
1999 416,000
2000 416,000 -
Thereafter 2,278,000 -
---------- --------
Total minimum lease payments $5,962,000 580,000
========== ========
Less amount represent interest 24,000
--------
Present value of minimum lease payments 556,000
Less current portion of capital lease obligations 472,000
-------
$ 84,000
========
</TABLE>
Rent expense was approximately $1,911,000 and $1,479,000 in 1995 and 1994,
respectively.
10. SIGNIFICANT CUSTOMERS AND EXPORT SALES:
During 1994, sales to one customer totaled approximately $12,045,000 or
12.5% of net sales. No single customer accounted for more than 10% of net
sales during 1995.
Continued
13
<PAGE> 15
XYPLEX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Export sales as a percentage of net sales for the years ended December
31, 1995 and 1994, respectively, are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Europe 12.5% 12.0%
Pacific Rim 5.0 4.1
Canada 4.0 4.4
Other 9.8 5.1
---- ----
31.3% 25.6%
==== ====
</TABLE>
11. EMPLOYMENT AGREEMENTS:
During 1995, Raytheon and Xyplex provided strategic resolution bonuses
to key employees. These bonuses, totaling approximately $1,500,000,
were due and payable on March 1, 1996 for each employee who continued
to be an employee on March 1, 1996. Of the $1,500,000 charge,
approximately $250,000 was funded by Xyplex with the remainder being
funded by Raytheon.
Also during 1995, Raytheon entered into employment agreements with
certain key employees of the Company which provide for salary
continuation of up to 12 months in the event of termination of
employment without cause. The aggregate commitment under these
employment agreements should all covered employees be terminated is
approximately $1,500,000.
14
