EXHIBIT 10.1
STOCK PURCHASE AND SALE AGREEMENT
BY AND AMONG
EMERGENT INFORMATION TECHNOLOGIES, INC.,
("Parent")
XXXXXX XXXXX HOLDING INC.
("Seller")
AND
L-3 COMMUNICATIONS CORPORATION
("Buyer")
November 19, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I PURCHASE AND SALE OF THE COMPANY SHARES............................................1
1.1 Purchase and Sale.............................................................1
1.2 Purchase Price................................................................2
1.3 The Closing...................................................................2
1.4 Closing Date Balance Sheet Adjustment.........................................3
1.5 Net Operating Loss Carryovers Adjustment. ...................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER...............................9
2.1 Organization, Qualification and Corporate Power...............................9
2.2 Capitalization and Ownership.................................................10
2.3 Authority....................................................................12
2.4 The Subsidiary...............................................................12
2.5 Financial Statements.........................................................12
2.6 Undisclosed Liabilities......................................................12
2.7 Tax Matters..................................................................13
2.8 Intellectual Property........................................................15
2.9 Contracts....................................................................18
2.10 Litigation...................................................................21
2.11 Employee Benefits............................................................22
2.12 Permits......................................................................25
2.13 Noncontravention.............................................................25
2.14 Owned and Leased Real Property...............................................26
2.15 Labor Matters................................................................27
2.16 Environmental Matters........................................................27
2.17 Legal Compliance.............................................................28
2.18 Brokers' Fees................................................................28
2.19 Absence of Certain Changes...................................................29
2.20 Assets.......................................................................31
2.21 Insurance....................................................................31
2.22 Business Relationships with Affiliates.......................................31
2.23 Government Contracts.........................................................32
2.24 Government Furnished Equipment...............................................33
2.25 Receivables..................................................................33
2.26 Service Warranties...........................................................34
2.27 Customers....................................................................34
2.28 Order Backlog................................................................34
2.29 No Retention Agreements, etc.................................................34
2.30 Real Property Holding Company................................................34
2.31 Organizational Conflicts of Interest.........................................34
2.32 Power of Attorney/Bank Accounts..............................................35
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER.........................................35
- i -
3.1 Organization.................................................................35
3.2 Authorization of Transaction.................................................35
3.3 Litigation...................................................................35
3.4 No Knowledge of Misrepresentation or Omission................................35
3.5 Accredited Investor Status...................................................36
3.6 Investment Intent............................................................36
3.7 Noncontravention.............................................................36
3.8 Broker's Fees................................................................36
3.9 Financing....................................................................37
ARTICLE IV PRE-CLOSING COVENANTS............................................................37
4.1 Efforts......................................................................37
4.2 Operation of Business........................................................37
4.3 Dealings with Affiliates.....................................................40
4.4 Access.......................................................................40
4.5 Antitrust....................................................................41
4.6 Exclusivity..................................................................41
4.7 Insurance....................................................................42
4.8 Lockbox Accounts; Certain Payments...........................................42
4.9 Agreements Concerning Real Property Leases...................................42
4.10 Distribution of Membership Interest in Joint Venture.........................42
4.11 Elimination of Indebtedness..................................................42
4.12 Assignment of Certain Contracts..............................................43
ARTICLE V CONDITIONS PRECEDENT TO CLOSING...................................................43
5.1 Conditions to Obligations of Buyer...........................................43
5.2 Conditions to Obligations of Parent and Seller...............................45
ARTICLE VI INDEMNIFICATION..................................................................46
6.1 Indemnification by Parent and Seller.........................................46
6.2 Indemnification by Buyer.....................................................47
6.3 Claims for Indemnification...................................................47
6.4 Survival.....................................................................49
6.5 Limitations..................................................................50
6.6 Treatment of Indemnification Payments........................................51
ARTICLE VII TERMINATION.....................................................................52
7.1 Termination of Agreement.....................................................52
7.2 Effect of Termination........................................................53
ARTICLE VIII TAX MATTERS....................................................................53
8.1 Preparation and Filing of Tax Returns........................................53
8.2 Tax Indemnification by Parent and Seller.....................................54
8.3 Tax Indemnification by Buyer.................................................54
8.4 Allocation of Certain Taxes..................................................55
8.5 Refunds and Carrybacks.......................................................55
8.6 Cooperation on Tax Matters; Tax Audits.......................................56
8.7 Termination of Tax-Sharing Agreements........................................57
ARTICLE IX FURTHER AGREEMENTS...............................................................57
- ii -
9.1 Access to Information; Record Retention; Cooperation.........................57
9.2 Director and Officer Indemnification.........................................59
9.3 Certain Retention and Severance Agreements...................................59
9.4 Further Assurances...........................................................59
9.5 Acknowledgements by Buyer....................................................59
9.6 Certain Employee Benefits Matters............................................60
9.7 Covenant Not to Compete......................................................61
9.8 Insurance....................................................................62
9.9 Names and Logos..............................................................62
9.10 Government Audit Assistance..................................................63
9.11 Notices of Certain Events....................................................63
9.12 Audit Assistance.............................................................63
9.13 Certain Permitted Liens......................................................63
9.14 Property of the Other Party..................................................64
ARTICLE X MISCELLANEOUS.....................................................................64
10.1 Press Releases and Announcements.............................................64
10.2 No Third Party Beneficiaries.................................................64
10.3 Action to be Taken by Affiliates.............................................64
10.4 Entire Agreement.............................................................64
10.5 Succession and Assignment....................................................65
10.6 Counterparts; Facsimile Signatures...........................................65
10.7 Headings.....................................................................65
10.8 Notices......................................................................65
10.9 Governing Law................................................................66
10.10 Amendments and Waivers.....................................................66
10.11 Severability...............................................................67
10.12 Expenses...................................................................67
10.13 Specific Performance.......................................................67
10.14 Submission to Jurisdiction.................................................67
10.15 Arbitration Procedure......................................................68
10.16 Construction...............................................................68
10.17 Incorporation of Exhibits and Schedules....................................69
10.18 Attorneys' Fees............................................................69
10.19 Liability for Transfer Taxes...............................................69
10.20 Parent and Seller Acknowledgment...........................................69
10.21 Performance of Seller, etc. ..............................................69
ARTICLE XI DEFINITIONS......................................................................69
11.1 Definition of Certain Terms..................................................69
11.2 Use of Certain Terms.........................................................72
11.3 Accounting Terms.............................................................73
11.4 References to Agreements.....................................................73
11.5 References to Articles or Sections...........................................73
11.6 References to the Company....................................................73
- iii -
Disclosure Schedule
Exhibit A -- Cash Collections and Disbursements
Exhibit B -- Baseline Balance Sheet
- iv -
TABLE OF DEFINED TERMS
Defined Term Section
------------ -------
AAA 10.14(a)
Acquired Tax Liability 8.2(b)
Adjusted Purchase Price 1.2
Adjustment Trigger Amount 1.4(c)(ii)
Affiliate 11.1
Agreed Amount 6.3(b)
Agreement 11.1
Antitrust Laws 4.5
Applicable Law 11.1
Backlog 2.28
Base Purchase Price 1.2
Baseline Balance Sheet 11.1
Books and Records 11.1
Buyer Preliminary Statement
Buyer Indemnitees 6.1
Buyer's 401(k) Plan 9.6
Certified NOL Amount 1.5(a)
Certified NOL Report 1.5(a)
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.1
Closing Date 1.3(a)
Closing Date Balance Sheet 1.4(b)
Closing Date Net Working Capital 1.4(a)
COBRA 9.6(a)
Code 2.7(c)
Company Introduction
Company Intellectual Property 2.8(b)
Company Material Adverse Effect 2.1(b)
Company Plans 2.11(a)
Company Shares Introduction
Confidentiality Agreement 10.4
Consent 11.1
Continuing Employee 9.6(a)
Contract; Contracts 2.9(a)
Damages 6.1
Disclosure Schedule Article II
Dispute 10.14(a)
DOJ 4.5
- v -
Defined Term Section
------------ -------
$ or dollars 11.1
EAC's 1.4(b)
Employee Benefit Plan 2.11(a)
Environmental Actions 6.3(c)
Environmental Laws 11.1
Environmental Liabilities and Costs 11.1
ERISA 2.11(a)
ERISA Affiliate 2.11(a)
ETC's 1.4(b)
Existing 401(k) Plan 9.6
Final Baseline Balance Sheet 1.4(c)(iii)
Final Closing Date Balance Sheet 1.4(c)(iii)
Financial Statements 2.5
FTC 4.5
Government Bid 11.1
Government Contract 11.1
Governmental Entity 2.7(a)
Hazardous Substance 11.1
HSR Act 11.1
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Information 9.1(a)
Intellectual Property 2.8(a)
Intercompany Agreements 2.22
Leased Real Property 2.14
Logo 11.1
Logo License Agreement
Name 11.1
Net Revenues 11.1
Neutral Auditor 1.4(c)(ii)
NOL Resolution Period 1.5(b)
Noncompetition Period 9.7(a)
Notice 10.8
Ordinary Course of Business 2.9(a)(vi)
Parent Preliminary Statement
Party; Parties Preliminary Statement
PBGC 2.11(d)
Permits 2.12
Person 11.1
Real Property Lease; Real Property Leases 2.14
Release 11.1
Resolution Period 1.4(c)(ii)
- vi -
Defined Term Section
------------ -------
SEC 9.13
Securities Act 2.2(b)
Security Interest 2.9(a)
Seller Preliminary Statement
Seller Indemnitees 6.2
Seller's Auditors 1.4(b)(v)
Share Encumbrances 1.1
Subsidiary 2.4
Target Net Working Capital 1.4(a)
Tax Audit 8.6(b)
Tax Returns 2.7(a)
Taxes 2.7(a)
Taxing Authority 8.6(a)
Transaction Documents 11.1
Transfer Taxes 10.18
Transferred NOL Carryovers 1.5(a)
Transition Services Agreement 1.3(b)
Treasury Regulation 11.1
U.S. GAAP 11.1
- vii -
STOCK PURCHASE AND SALE AGREEMENT
This STOCK PURCHASE AND SALE AGREEMENT is entered into as of November
19, 2001, by and among Emergent Information Technologies, Inc., a California
corporation ("Parent"), Xxxxxx Xxxxx Holding Inc., a Delaware corporation
("Seller"), and L-3 Communications Corporation, a Delaware corporation
("Buyer"). Parent, Seller and Buyer are sometimes referred to herein
collectively as the "Parties" and individually as a "Party."
INTRODUCTION
A. Seller owns, beneficially and of record, all of the outstanding
shares of the capital stock of Emergent Information Technologies - East, a
California corporation (the "Company").
B. Seller is an indirect, wholly owned subsidiary of Parent.
C. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, all of the outstanding shares of capital stock of the Company (the
"Company Shares") for the consideration set forth below, subject to the terms
and conditions of this Agreement.
D. Capitalized and other defined terms used herein without separate
definition have the meanings given to such terms in Section 11.1.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged, the
Parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE COMPANY SHARES
1.1 Purchase and Sale. Upon and subject to the terms and conditions
of this Agreement, at the closing of the purchase and sale of the Company Shares
contemplated by this Agreement (the "Closing"), Seller shall sell, transfer, set
over, convey, assign and deliver to Buyer, and Buyer shall purchase, acquire and
accept from Seller, all of the right, title and interest of Seller in and to the
Company Shares as set forth in Section 1.1 of the Disclosure Schedule. Subject
to the terms and conditions hereof, at the Closing, the Company Shares shall be
transferred or otherwise conveyed to Buyer free and clear of any liens,
encumbrances, hypothecations, rights of others, charges, adverse claims or
interests, title defects, pledges, voting trusts or similar arrangements,
limitations on voting rights, options, restrictions on transfer, proxies, title
retention agreements, securityholder agreements or other similar restrictions or
limitations (collectively, "Share Encumbrances"), excepting only restrictions on
the subsequent transfer of the Company Shares by Buyer imposed under applicable
securities laws.
1.2 Purchase Price. The purchase price to be paid by Buyer at the
Closing for all the Company Shares shall be Thirty-Eight Million and 00/100
Dollars ($38,000,000) (the "Base Purchase Price"). The Base Purchase Price is
subject to adjustment after the Closing as described in Section 1.5. In
addition, The Base Purchase Price is subject to adjustment after the Closing as
described in Section 1.4. The Base Purchase Price as adjusted pursuant to
Sections 1.4 and 1.5 shall be referred to herein as the "Adjusted Purchase
Price".
1.3 The Closing
(a) Time and Location. If this Agreement has not been
earlier terminated in accordance with Section 7.1, the Closing shall take place
at the offices of Winston & Xxxxxx in New York, New York, commencing at 10:00
a.m., local time, no later than four business days after the date on which all
of the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby in Article V hereof have been satisfied or
waived, or at such other time, date and place as shall be agreed upon by the
Parties (the "Closing Date"). The Closing shall be effective as of 5:00 p.m. on
the Closing Date.
(b) Actions at the Closing.
At the Closing:
(i) Each of Parent and Seller, as the case may be,
shall deliver (or cause to be delivered) to Buyer the various certificates,
instruments and documents required to be delivered by it under Section 5.1;
(ii) Buyer shall deliver (or cause to be delivered)
to Seller the various certificates, instruments and documents required to be
delivered under Section 5.2;
(iii) Seller shall deliver to Buyer certificates
evidencing all of the Company Shares, duly endorsed in blank by Seller or with
stock powers for the Company Shares duly executed in blank by Seller, in proper
form for transfer;
(iv) Parent, Buyer and the Company shall enter into a
Transition Services Agreement in a form that is mutually acceptable to the
Parties pursuant to which the Parties will provide certain services to each
other for a reasonable period of time following the Closing, it being understood
that such services shall be provided at the provider's cost (including overhead
rate allocation and general and administrative costs and expenses) and that the
requesting party will reimburse the providing party for all out of pocket costs
incurred in providing such services (the "Transition Services Agreement");
(v) Parent, Seller, Buyer and the Company shall
enter into the Logo License Agreement in form and substance satisfactory to
Buyer;
- 2 -
(vi) Seller shall deliver (or shall cause to be
delivered) to Buyer all Books and Records in the possession of the Company, the
Subsidiary, and any of their respective Affiliates, counsel, agents and
representatives;
(vii) Buyer shall deliver to Seller the Base Purchase
Price by wire transfer of immediately available funds into an account designated
by Seller in writing, at least three days prior to the scheduled date of
payment; and
(viii) Buyer and Seller shall execute and deliver to
each other a cross-receipt evidencing the transactions referred to above.
1.4 Closing Date Balance Sheet Adjustment.
(a) Calculation of Adjustment. The Base Purchase Price, as
the same may have been adjusted pursuant to Section 1.5, shall be: (i) increased
dollar-for-dollar by the amount that the Closing Date Net Working Capital is
greater than the Target Net Working Capital; or (ii) decreased dollar-for-dollar
by the amount that the Closing Date Net Working Capital is less than the Target
Net Working Capital.
For purposes of this Agreement: (i) "Target Net Working Capital"
means $9,718,000 (i.e., the excess of the consolidated current assets set forth
on the Baseline Balance Sheet over the consolidated current liabilities
(excluding for the purposes of this calculation current liabilities related to
current income taxes payable) set forth on the Baseline Balance Sheet); and (ii)
"Closing Date Net Working Capital" means the excess of the consolidated current
assets set forth on the Final Closing Date Balance Sheet over the consolidated
current liabilities (excluding for the purposes of this calculation current
liabilities related to current income taxes payable) set forth on the Final
Closing Date Balance Sheet, determined in accordance with the procedures set
forth below in this Section 1.4.
The amount of any decrease or increase to the Base Purchase Price
(as the same may have been adjusted pursuant to Section 1.5), pursuant to this
Section 1.4(a) plus interest from and including the Closing Date to but
excluding the date of payment at the rate of 8.5% per annum shall be paid by
Buyer to Seller (in the case of an increase in the Base Purchase Price (as the
same may have been adjusted pursuant to Section 1.5)), or by Seller to Buyer (in
the case of a decrease in the Base Purchase Price (as the same may have been
adjusted pursuant to Section 1.5)), in either case by wire transfer in
immediately available funds within five business days after the Final Closing
Date Balance Sheet is agreed to by Seller and Buyer in accordance with Section
1.4(c)(ii) or is determined by the Neutral Auditor in accordance with Section
1.4(c)(iii).
(b) Preparation of Closing Date Balance Sheet. As soon as
practicable, and in any event within 60 days after the Closing Date, Parent and
Seller shall prepare and deliver to Buyer a consolidated statement of Closing
Date Net Working Capital for the Company and the Subsidiaries as of 11:59 p.m.
(New York time) on the Closing Date, determined on a pro forma
- 3 -
basis as if the Parties hereto had not consummated the transactions contemplated
by this Agreement (the "Closing Date Balance Sheet"), to be prepared as set
forth in this Section 1.4(b). The Closing Date Balance Sheet shall be prepared
applying U.S. GAAP on a basis consistent with the Baseline Balance Sheet (it
being understood and agreed that no liabilities related to current income taxes
payable that are accrued on the Baseline Balance Sheet or the Closing Date
Balance Sheet shall be included in the computation of the Target Net Working
Capital and the Closing Date Net Working Capital, respectively; it being further
understood and agreed that the current assets relating to current deferred
income taxes reflected on the Final Closing Date Balance Sheet shall not exceed
$1,002,674 (i.e., the amount of such current assets reflected on the Baseline
Balance Sheet)) with contract estimates at completion ("EAC's") and estimates to
complete ("ETC's") determined on a basis consistent with the method used for the
determination of the Baseline Balance Sheet, except as modified in subparagraphs
(i) through (vii) below in this Section 1.4(b).
(i) Adjustment of Reserves and Valuation Accounts.
The amount of any reserve or valuation accounts shall be determined by applying
methods, practices, assumptions, policies, factors and underlying data
consistent with those used in determining the reserves or valuation accounts
included in the Baseline Balance Sheet, and there shall be no increases or
decreases made to any reserves or valuation accounts in the Closing Date Balance
Sheet (including contract reserves, purchase accounting reserves, deferred tax
asset valuation accounts, allowances for bad debts, inventory reserves of any
kind, warranty reserves, income tax reserves and other reserves), except to the
extent that such changes are required by documented and substantiated changes in
facts and events occurring after September 30, 2001 and on or before the Closing
Date and are not solely the result of changes in management estimates. It is
further understood that there shall be no increase in the Closing Date Net
Working Capital as a result of any reversal, reduction or other usage of
reserves included in the Baseline Balance Sheet unless such reversal, reduction
or usage was caused by facts or events that occurred after September 30, 2001
and on or before the Closing Date; provided, however, that if such facts causing
such reversal or reduction existed and applied to, and were known or should have
been known as of September 30, 2001, the reversals or reductions also shall be
made to the Baseline Balance Sheet for purposes of increasing the Target Net
Working Capital.
(ii) Contract Estimates at Completion. There shall be
no changes to the contract EACs from those contract EACs used in the preparation
of the Baseline Balance Sheet, except to the extent that such changes are
required by documented and substantiated changes in facts and events occurring
after September 30, 2001 and on or before the Closing Date and are not solely
the result of changes in management estimates. Notwithstanding subparagraph (v)
below in this Section 1.4(b), it is further understood that if the contract EACs
used in preparation of the Baseline Balance Sheet are discovered to have been
incorrect because of estimating errors, of any kind, including because certain
costs were omitted from or included in those contract EACs, for whatever
reason(s), including misallocation of direct or indirect costs to such contract
EACs, such errors (including costs that were omitted from or included in the
- 4 -
contract EACs) in the preparation of the Baseline Balance Sheet shall be
corrected in the contract EACs used in the preparation of the Closing Date
Balance Sheet.
(iii) Loss Contracts. There shall be no changes made
to the provisions for loss contracts from those used in the preparation of the
Baseline Balance Sheet, except to the extent that such changes are required by
documented and substantiated changes in facts and events occurring after
September 30, 2001 and on or before the Closing Date and are not solely the
result of changes in management estimates. It is further understood that loss
contract reserves for contract bids and proposals and unexercised contract
options of the Company that were in a loss position and outstanding at September
30, 2001 and which are awarded or exercised during the period between September
30, 2001 through and including the Closing Date shall be accrued and included in
the consolidated statement of Closing Date Net Working Capital.
(iv) Adjustment of Liability and Accrual Accounts.
The amount of all liability and accrual accounts, shall be determined by
applying methods, practices, assumptions, policies, factors and underlying data
consistent with those used in determining such accounts included in the Baseline
Balance Sheet, and there shall be no changes made to any accounts, except to the
extent that such changes are required by documented and substantiated changes in
facts and events occurring after September 30, 2001 and on or before the Closing
Date and are not solely the result of changes in management estimates. It is
further understood that there shall be no increase in the Closing Date Net
Working Capital as a result of reversals or reductions of liability and accrual
accounts, unless such reversal or reduction was caused by facts or events that
occur after September 30, 2001 and on or before the Closing Date; provided,
however, that if such facts causing such reversal or reduction existed and
applied to, and were known or should have been known as of September 30, 2001,
the reversals or reductions also shall be made to the Baseline Balance Sheet for
purposes of increasing the Target Net Working Capital.
(v) Consistent Application of Accounting Policies,
Methods and Practices. The accounting policies, methods and practices and their
related applications used by Parent and Seller to prepare the Closing Date
Balance Sheet shall be consistent with those underlying the Baseline Balance
Sheet. Use of different or alternative accounting policies and methods that are
otherwise in accordance with U.S. GAAP is not permitted because such use
violates this consistency requirement. Specifically, Parent and Seller shall be
precluded from waiving or allowing "inconsistency" adjustments recorded by the
Company during the preparation of the Closing Balance Sheet on the basis of
"materiality" as the term is used and understood by Parent, Seller and Ernst &
Young LLP ("Seller's Auditors").
(vi) Accounting for Certain Assumed Liabilities. The
Closing Date Balance Sheet shall include liabilities required by U.S. GAAP for
all assumed obligations of the Company that accrue from September 30, 2001 to
the Closing Date including those that accrue because of the passage of time or
the achievement or reasonably expected achievement of a performance measurement,
even if such liabilities were not included in the Baseline Balance
- 5 -
Sheet. Examples of these types of liabilities include, but are not limited to
warranties, customer and vendor claims against the Company, litigation, taxes,
management incentive bonuses, profit sharing plans, employer matching
contributions for sponsored savings plans, and compensated absences (vacation
time, sick pay, etc.). Such liabilities shall be accrued on a pro rata basis as
of the Closing Date even if the Company's accounting policies, including those
accounting policies underlying the Baseline Balance Sheet, only required that
such liabilities be accrued at the end of the Company's fiscal year.
(vii) Notes Payable. Any and all liabilities relating
to those notes payable listed on Section 4.11 of the Disclosure Schedule that
are due and payable by the Company or the Subsidiary on or prior to the first
anniversary of the Closing Date shall be included as current liabilities on the
Final Closing Date Balance Sheet.
(c) Review Procedure.
(i) The Closing Date Balance Sheet shall be
accompanied by a certificate signed by the Chief Financial Officer of Parent,
which shall state that the Closing Date Balance Sheet presents fairly in all
material respects the financial condition of the Company at the Closing Date in
conformity with U.S. GAAP on a basis consistent with the Baseline Balance Sheet
and in accordance with the provisions of Section 1.4(b). Buyer shall provide
Seller's Auditors and the Neutral Auditor such access during normal business
hours to the Books and Records of the Company and the Subsidiary as may
reasonably be required for the preparation and/or review of the Closing Date
Balance Sheet. All fees, costs and expenses of Seller's Auditors relating to the
preparation of the Closing Date Balance Sheet shall be borne by Parent and
Seller.
(ii) After receipt of the Closing Date Balance Sheet,
Buyer shall have 60 days to review it. Buyer and Buyer's independent accountants
shall have reasonable access during normal business hours to the books and
records of Parent and Seller, to the extent reasonably required to complete
their review of the Closing Date Balance Sheet. Buyer shall deliver notice to
Parent and Seller on or prior to the 60th day after receipt of the Closing Date
Balance Sheet specifying in reasonable detail all disputed items and the basis
therefor. If the Buyer so notifies Parent and Seller of any objections to the
Closing Date Balance Sheet and the correction of the disputed items as proposed
by Buyer would result in an aggregate increase or decrease in the Closing Date
Net Working Capital of Two Hundred Thousand Dollars ($200,000) or less, then the
Closing Date Balance, as delivered to Buyer, shall be final and binding upon the
Parties. If the Buyer so notifies Parent and Seller of any objections to the
Closing Date Balance Sheet and the correction of the disputed items as proposed
by Buyer would result in an aggregate increase or decrease in the Closing Date
Net Working Capital in excess of Two Hundred Thousand Dollars ($200,000), then
the Parties shall, within 30 days following the date of such notice (the
"Resolution Period"), attempt to resolve their differences and any written
resolution by them as to any disputed amount shall be final, binding, conclusive
and nonappealable for all purposes under this Agreement.
- 6 -
(iii) If at the conclusion of the Resolution Period
the Parties have not reached an agreement on Buyer's objections, then all
amounts and issues remaining in dispute shall be submitted by Parent, Seller and
Buyer to a mutually acceptable nationally recognized independent accounting firm
(the "Neutral Auditor"). Each party agrees to execute, if requested by the
Neutral Auditor, a reasonable engagement letter. All fees and expenses relating
to the work, if any, to be performed by the Neutral Auditor shall be borne
equally by Parent and Seller, on the one hand, and Buyer, on the other hand.
Except as provided in the preceding sentence, all other costs and expenses
incurred by the Parties in connection with resolving any dispute hereunder
before the Neutral Auditor shall be borne by the party incurring such cost and
expense. The Neutral Auditor shall act as an arbitrator to determine only those
issues still in dispute at the end of the Resolution Period. The Neutral
Auditor's determination shall be made within 45 days after its engagement (which
engagement shall be made no later than five business days after the end of the
Resolution Period), or as soon thereafter as possible, shall be set forth in a
written statement delivered to Parent, Seller and Buyer and shall be final,
binding, conclusive and nonappealable for all purposes hereunder. The term
"Final Closing Date Balance Sheet" shall mean the definitive Closing Date
Balance Sheet agreed to by Parent, Seller and Buyer in accordance with Section
1.4(c)(ii) or the definitive Closing Date Balance Sheet resulting from the
determination made by the Neutral Auditor in accordance with this Section
1.4(c)(iii).
1.5 Net Operating Loss Carryovers Adjustment.
(a) Buyer shall receive a report (the "Certified NOL
Report"), prepared and certified by the Chief Financial Officer of Parent,
within 90 days after the close of Parent's Tax year ending December 31, 2001,
setting forth in reasonable detail the amount and calculation of the Company's
federal net operating loss carryovers available for use against post-Closing
income of the Company or Buyer (the "Transferred NOL Carryovers") . The amount
of such Transferred NOL Carryovers shall be at least $3,750,000. If the amount
of the Transferred NOL Carryovers as set forth in the Certified NOL Report (the
"Certified NOL Amount") is less than $3,750,000, then on the next business day
after delivery of the Certified NOL Report, Seller shall wire transfer to an
account designated by Buyer an amount equal to 40% of the deficiency. The
Parties agree to treat any amount so transferred as an adjustment to the
Purchase Price.
(b) If Buyer agrees with Seller's calculation, or upon
resolution of any dispute, each of Parent, Seller, Buyer and the Company shall
not thereafter take a position on any federal income Tax return inconsistent
with such calculation or resolution, as finally determined.
(c) All fees, costs and expenses relating to the preparation
of the Certified NOL Report and the calculation of the Certified NOL Amount by
Parent and Seller shall be borne by Parent and Seller. After receipt of the
Certified NOL Report, Buyer shall have 60 days to review it. Buyer and Buyer's
independent accountants shall have reasonable access during normal business
hours to the books and records of Parent and Seller, to the extent reasonably
required to complete their review of the Certified NOL Report and the
calculation of the Certified NOL Amount. Buyer shall deliver notice to Parent
and Seller on or prior to the 60th
- 7 -
day after receipt of the Certified NOL Report specifying in reasonable detail
any dispute in respect of the calculation of the Certified NOL Amount. If the
Buyer so notifies Parent and Seller of any objections to the calculation of the
Certified NOL Amount, then the Parties shall, within 30 days following the date
of such notice (the "NOL Resolution Period"), attempt to resolve their
differences and any written resolution by them as to any disputed amount shall
be final, binding, conclusive and nonappealable for all purposes under this
Agreement. If at the conclusion of the NOL Resolution Period the Parties have
not reached an agreement on Buyer's objections, then all amounts and issues
remaining in dispute shall be submitted by Parent, Seller and Buyer to the
Neutral Auditor. Each party agrees to execute, if requested by the Neutral
Auditor, a reasonable engagement letter. All fees and expenses relating to the
work, if any, to be performed by the Neutral Auditor shall be borne equally by
Parent and Seller, on the one hand, and Buyer on the other hand. Except as
provided in the preceding sentence, all other costs and expenses incurred by the
Parties in connection with resolving any dispute hereunder before the Neutral
Auditor shall be borne by the party incurring such cost and expense. The Neutral
Auditor shall act as an arbitrator to determine only those issues still in
dispute at the end of the NOL Resolution Period. The Neutral Auditor's
determination shall be made within 45 days after its engagement (which
engagement shall be made no later than five business days after the end of the
NOL Resolution Period), or as soon thereafter as possible, shall be set forth in
a written statement delivered to Parent, Seller and Buyer and shall be final,
binding, conclusive and nonappealable for all purposes hereunder. Upon
resolution of the dispute pursuant to this Section 1.5(c), Parent and Seller
promptly and in any event within five business days thereafter, shall pay by
wire transfer to an account designated by Buyer an amount equal to 40% of the
additional deficiency, if any, in the Transferred NOL Carryovers.
(d) If at any time and from time to time, the amount of the
Transferred NOL Carryovers, as the same may have been adjusted pursuant to
Section 1.5(c), is further reduced (other than as a result of any limitations or
disallowances pursuant to Section 382 or Section 269 of the Code or similar
provisions governing companies that file consolidated Tax Returns) pursuant to
an agreement with the Internal Revenue Service or the judgment or order of a
court, then Parent and Seller promptly, and in any event within five business
days thereafter, shall pay by wire transfer to an account designated by Buyer an
amount equal to 40% of the amount of such further reduction.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Parent and Seller jointly and severally represent and warrant to Buyer
as of the date hereof and as of the Closing Date as follows. The disclosure
schedule attached hereto (the "Disclosure Schedule") shall be arranged in
sections corresponding to the sections contained in this Agreement, and the
disclosures in any section of the Disclosure Schedule shall qualify only
- 8 -
(1) the corresponding section of this Agreement and (2) other sections in
Article II or Article III, as applicable, to the extent it is clear
(notwithstanding the absence of a specific cross-reference) from a reading of
the disclosure that such disclosure is applicable to such other sections.
2.1 Organization, Qualification and Corporate Power.
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on the business in which it is
now engaged and to own or lease and to use the properties now owned, leased or
used by it. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all requisite
corporate power and authority to carry on the business in which it is now
engaged and to own or lease and to use the properties now owned, leased or used
by it.
(b) The Company and the Subsidiary are each a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and are each duly qualified or licensed
to conduct business and are in good standing under the laws of each jurisdiction
set forth in Section 2.1(b) of the Disclosure Schedule, which are all the
jurisdictions where the character of the properties owned, leased or operated by
it or the nature of their activities makes such qualification or licensing and
good standing necessary, except for any such failures to be qualified and in
good standing that would not have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and the Subsidiary have all requisite
corporate power and authority to carry on the businesses in which they are now
engaged and to own, lease and use the properties now owned, leased or used by
them.
For purposes of this Agreement, "Company Material Adverse Effect"
means any event, occurrence, fact, condition, change, effect or circumstance
that (i) is, or that could reasonably be expected to be, materially adverse to
the assets, business, financial condition, operations, properties, liabilities
or results of operations of the Company and the Subsidiary, taken as a whole
(other than conditions, changes, effects or circumstances that (A) affect the
economy as a whole, (B) generally affecting the industry or specific markets in
which the Company operates, or (C) result primarily from the announcement in
accordance with the terms of this Agreement of the transactions contemplated by
this Agreement), or (ii) materially impairs the ability of Parent or Seller to
consummate the purchase and sale of the Company Shares contemplated by, or to
perform their other obligations under, this Agreement or any of the other
Transaction Documents to which it is a party.
(c) Seller has made available to Buyer true, correct and
complete copies of (i) the certificate of incorporation and bylaws (or
equivalent or comparable documents) of the Company and the Subsidiary (as
amended to date), and (ii) the minute books (containing the records of meetings
(or written consents executed in lieu of such meetings) of the stockholders, the
board of directors, and any committees of the board of directors), the stock
certificate books and the stock record books of the Company and the Subsidiary.
Neither the Company nor the
- 9 -
Subsidiary is in default under or in violation of any provision of its
certificate of incorporation or bylaws (or equivalent or comparable documents).
(d) The Books and Records are true, correct and complete in
all material respects.
2.2 Capitalization and Ownership.
(a) The authorized and issued capital stock of the Company
and the Subsidiary is as set forth on Section 2.2(a) of the Disclosure Schedule.
(b) All of the issued and outstanding shares of capital
stock of the Company and the Subsidiary are duly authorized, validly issued,
fully paid and nonassessable. No other class or series of capital stock of the
Company or the Subsidiary is authorized, and no other securities are authorized,
issued or outstanding (including options, warrants, conversion privileges or
other rights, agreements or commitments, contingent or otherwise), relating to
the issuance, redemption, disposition or acquisition of (or requiring the
issuance, redemption, disposition, or acquisition of) any shares of capital
stock or other securities of the Company or the Subsidiary. There are no issued,
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company or the Subsidiary. There are no agreements, voting
trusts, proxies or understandings with respect to the voting, or registration
under the Securities Act of 1933, as amended (the "Securities Act"), of any
Company Shares or any capital stock or other securities of the Company or the
Subsidiary. All of the issued and outstanding shares of capital stock of the
Company and the Subsidiary were issued in compliance with all Applicable Laws
(including any applicable securities laws) and in compliance with their
respective certificate of incorporation and bylaws (or equivalent or comparable
documents).
(c) All of the issued and outstanding Company Shares are
owned of record and beneficially by Seller and Seller has good and valid title
to the Company Shares, free and clear of any Share Encumbrances other than
applicable securities law restrictions. At the Closing, Seller will have
transferred to Buyer, and Buyer will have acquired from Seller, good and valid
title to the Company Shares free and clear of any Share Encumbrances excepting
only restrictions on the subsequent transfer of the Company Shares by Buyer
imposed under applicable securities laws. All of the issued and outstanding
shares of capital stock of the Subsidiary are owned of record and beneficially
by the Company, and the Company has good and valid title to such shares, free
and clear of any Share Encumbrances except for the subsequent transfer of such
shares by the Company imposed under applicable securities laws.
2.3 Authority. Parent and Seller have all requisite corporate power
and authority to execute and deliver this Agreement and the other Transaction
Documents to which they are parties, to perform fully their respective
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Parent and Seller of this Agreement and the other Transaction Documents to
- 10 -
which they are parties and the consummation by Parent and Seller of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Seller,
respectively. This Agreement has been (and at the Closing the other Transaction
Documents to which Parent and Seller are parties will be) duly and validly
executed and delivered by Parent and Seller, as the case may be. This Agreement
constitutes (and at the Closing the other Transaction Documents to which Parent
and Seller are parties will constitute) legal, valid and binding obligations of
Parent and Seller, respectively, enforceable against Parent and Seller, as the
case may be, in accordance with their respective terms.
2.4 The Subsidiary. Except for its equity interest in SMD Software,
L.L.C., a Washington limited liability company ("SMD"), which will be
transferred to Parent or one of its Affiliates prior to the Closing as
contemplated by Section 4.10, the Company has no direct or indirect beneficial
or of record equity interest in any Person other than Kapos Associates,
Incorporated, a Virginia corporation (the "Subsidiary"). Neither the Company nor
the Subsidiary has any obligation to redeem, purchase or otherwise acquire, any
capital stock or other securities of any Person.
2.5 Financial Statements. Seller has provided to Buyer copies of (a)
the unaudited pro forma consolidated statements of operations for the Company
for the fiscal year ended December 31, 2000 and for the nine-month period ended
September 30, 2001, (b) the unaudited pro forma consolidated balance sheet for
the Company as of December 31, 2000, and (c) the Baseline Balance Sheet
(collectively, the "Financial Statements"). Except as set forth in Section 2.5
of the Disclosure Schedule, the Financial Statements (i) have been prepared in
accordance with U.S. GAAP, applied on a consistent basis throughout the periods
involved except as disclosed in the footnotes thereto, (ii) fairly present, in
all material respects, the financial condition and consolidated results of
operations of the Company and the Subsidiaries as of the respective dates
thereof and for the periods referred to therein, and (iii) are consistent with
the Books and Records. Attached hereto as Exhibit A is a schedule of cash
collections and disbursements of the Company and the Subsidiary for the nine
month period ended September 30, 2001. Such schedule of cash collections and
disbursements has been prepared from, and is consistent with, the Books and
Records and accurately reflects the cash collections and the cash disbursements
of the Company and the Subsidiary for the period covered thereby.
2.6 Undisclosed Liabilities. Neither the Company nor the Subsidiary
has any material debts, claims, commitments, liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent or otherwise and
whether due or to become due, asserted or unasserted, except (a) as set forth in
Section 2.6 of the Disclosure Schedule, (b) as and to the extent set forth as
liabilities on the Baseline Balance Sheet, and (c) for liabilities and
obligations that were incurred after September 30, 2001 in the Ordinary Course
of Business and which will be reflected in the Final Closing Date Balance Sheet
to the extent required by Section 1.4.
- 11 -
2.7 Tax Matters.
(a) Except as set forth in Section 2.7(a) of the Disclosure
Schedule, the Company and the Subsidiary have filed all material Tax Returns
that they were required to file and all such Tax Returns were true, correct and
complete in all material respects. Except as set forth in Section 2.7(a) of the
Disclosure Schedule, all Taxes owed by the Company and the Subsidiary (whether
or not shown on any Tax Returns) have been paid. Since July 2, 1998, no written
claim has been made by (and, to Parent's and Seller's knowledge, no claim of any
kind, written or oral, has ever been made by) any Governmental Entity in a
jurisdiction in which the Company or the Subsidiary does not file Tax Returns
that the Company or the Subsidiary is or may be subject to taxation by that
jurisdiction. Except as set forth in Section 2.7(a) of the Disclosure Schedule,
to Parent's and Seller's knowledge, there are no Security Interests on any of
the properties or assets of the Company or the Subsidiary that arose in
connection with any failure (or alleged failure) to pay any Tax. Neither the
Company nor the Subsidiary has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. To Parent's and Seller's knowledge, except as set forth in Section
2.7(a) of the Disclosure Schedule, all Taxes that the Company or the Subsidiary
are or were required by Applicable Law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity.
For purposes of this Agreement, "Taxes" means all taxes,
including income, gross receipts, ad valorem, value-added, excise, real
property, personal property, sales, use, transfer, withholding, employment and
franchise taxes imposed by the United States of America or any state, local or
foreign government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof.
For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements, forms or other information required to be
supplied to a taxing authority in connection with Taxes.
For purposes of this Agreement, "Governmental Entity" means any
nation or government, any state or other political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (including any government authority,
agency, department, board, commission or instrumentality of the United States,
any state of the United States or any political subdivision thereof), or any
tribunal or arbitrator(s) of competent jurisdiction, or any self-regulatory
organization.
(b) Except as set forth in Section 2.7(b) of the Disclosure
Schedule, neither the Company nor the Subsidiary has received any written
notice, or to the knowledge of Parent and Seller, any other notice, that any
examination or audit of any Tax Return of the Company or the Subsidiary by any
Governmental Entity is currently in progress.
- 12 -
(c) Neither the Company nor the Subsidiary has made any
election under Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code") (or any corresponding provision of state, local or foreign income
Tax law).
(d) Other than as accrued on the Baseline Balance Sheet,
neither the Company nor the Subsidiary has any Tax liability as a result of
being a member of a group with which it has filed or been included in a
combined, consolidated or unitary income Tax Return other than a group the
common parent of which was Parent.
(e) Buyer will not be required to deduct and withhold any
amount pursuant to Section 1445(a) of the Code upon the transfer of the Company
Shares to Buyer.
(f) Neither the Company nor the Subsidiary is required to
make any material adjustment under Section 481(a) of the Code by reason of a
change or proposed change in accounting method.
(g) Except as described in Section 2.7(g) of the Disclosure
Schedule, neither the Company nor the Subsidiary is liable for the Taxes of any
Person other than Seller and its affiliates 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, for any taxable period beginning before the Closing
Date. Neither the Company nor the Subsidiary is obligated to make, and as a
result of any event connected with the transactions contemplated by this
Agreement, will not become obligated to make any "excess parachute payment"
within the meaning of Section 280G of the Code, determined without regard to
subsection (b)(4) thereof.
2.8 Intellectual Property.
(a) For purposes of this Agreement, "Intellectual Property"
means: (i) any and all inventions, developments, improvements, discoveries,
know-how, concepts and ideas, whether patentable or not in any jurisdiction and
whether or not reduced to practice, (ii) any and all patents and patent
applications (including without limitation reissues, reexaminations,
continuations, divisions, continuations-in-part, extensions, revisions and
counterparts thereof in any jurisdiction), patent disclosures, revalidations,
industrial designs, industrial models and utility models, (iii) any and all
trademarks, service marks, certification marks, logos, trade dress, trade names,
corporate names, brand names, domain names and all other indicia of origin
(whether registered or unregistered), and including all goodwill associated
therewith and all applications and registrations therefor in any jurisdiction
and any extension, modification or renewal of any such application or
registration, (iv) any and all copyrights, copyright registrations and
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof, (v) any and all writings and other works of
authorship, whether copyrighted, copyrightable or not in any jurisdiction, such
works including, without limitation, computer programs and software (including
source code, object code, data, databases and documentation therefor), together
with all translations, adaptations, derivations and combinations
- 13 -
thereof, (vi) any and all mask works and other semiconductor chip rights and
registrations thereof, (vii) any and all non-public information, trade secrets
and proprietary or confidential information (including without limitation trade
secrets, proprietary or confidential information with respect to or contained in
ideas, research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer lists, pricing and cost information and business and
marketing plans and proposals) and rights in any jurisdiction to limit the use
or disclosure thereof by any Person, (viii) any and all other intellectual
property or proprietary rights, (ix) any and all agreements, licenses,
immunities, covenants not to xxx and the like relating to any of the foregoing,
(x) any and all copies and tangible embodiments of any of the foregoing (in
whatever form or medium), and (xi) any and all claims or causes of action
arising out of or related to any infringement or misappropriation of any of the
foregoing.
(b) For purposes of this Agreement, "Company Intellectual
Property" means Intellectual Property that is currently used in the business and
operations of the Company or the Subsidiary or is owned or licensed by the
Company or the Subsidiary.
(c) Except for (i) "off the shelf" computer software that is
commercially available without material restriction or limitation and (ii)
software owned by SMD, Section 2.8(c) of the Disclosure Schedule sets forth a
list of all material trademarks, service marks, trade names, and domain names,
as well as all patents, patent applications, copyright registrations, copyright
registration applications, trademark registrations, trademark registration
applications and all other registered Intellectual Property or applications
therefor owned by or licensed (as indicated) to the Company. Except as specified
in Section 2.8(c) of the Disclosure Schedule, all material Company Intellectual
Property is valid, enforceable and subsisting. No Intellectual Property owned or
used by SMD is used by the Company or the Subsidiary or in any of their
respective businesses.
(d) To Parent's and Seller's knowledge, the Company owns or
is validly licensed or otherwise possesses valid rights to use, the Company
Intellectual Property. To Parent's and Seller's knowledge, the Company either
exclusively owns all right, title and interest in and to the Company
Intellectual Property or uses the Company Intellectual Property pursuant to a
valid license, sublicense, agreement or other permission which (i) is not
currently terminable by anyone other than the Company, and (ii) which shall not
be adversely affected by the transactions contemplated herein. Section 2.8(d) of
the Disclosure Schedule indicates which material Company Intellectual Property
is used by the Company pursuant to a license, sublicense, agreement or other
permission. All such licenses, sublicenses, agreements and permissions are
legal, valid, binding, enforceable and in full force and effect in all material
respects, and, neither the Company nor, to Parent's and Seller's knowledge, any
other party to any such license, sublicense, agreement or permission is in
material breach thereof. No licenses or permissions from third parties or
releases of third party rights in respect of any Intellectual Property are
necessary for consummation of the transactions contemplated by this Agreement.
- 14 -
(e) The Company has the exclusive right to file, prosecute
and maintain all of its material patent applications and other applications to
register Company Intellectual Property, and has the exclusive right to maintain
its material patents and other registrations of Company Intellectual Property
and is not aware of any written claim by third parties regarding title to same
or derivative works of same.
(f) The Company has not been named in any suit, action or
proceeding which involves a claim of infringement of any Company Intellectual
Property or any Intellectual Property of any third party. No allegations or
claims with respect to any Company Intellectual Property or any third party
Intellectual Property have been asserted in writing or, to Parent's and Seller's
knowledge, threatened by any third party against (i) Parent, Seller, the
Company, or any of their Affiliates, or (ii) to Parent's and Seller's knowledge,
against any other third party based on the third party's use of any Company
Intellectual Property.
(g) To Parent's and Seller's knowledge, no Company
Intellectual Property or use of any Company Intellectual Property by Company or
any of its customers constitutes or has constituted an unauthorized use,
inducement to infringe, contributory infringement, misappropriation or other
violation of the Intellectual Property rights of any third party and, to
Parent's and Seller's knowledge, no valid grounds exist for any bona fide claims
against the Company or any of its customers with respect to any Company
Intellectual Property. Without limiting the generality of the foregoing, no
Person ever employed or otherwise engaged by the Company has asserted in writing
or, to Parent's and Seller's knowledge, threatened any material claim against
the Company relating to any Company Intellectual Property.
(h) No threats or allegations have been made, nor notice of
any kind given, by the Company or any of its Affiliates to any third parties
regarding allegedly infringing activities or misappropriation of or with respect
to any Company Intellectual Property.
(i) To Parent's and Seller's knowledge, and except as set
forth in Section 2.8(i) of the Disclosure Schedule, there has not been, and
there is not presently, any material unauthorized use, infringement,
misappropriation or violation of any material Company Intellectual Property by
any Person. Except as set forth in Section 2.8(i) of the Disclosure Schedule,
the Company does not co-own any Intellectual Property in which the Company has
an ownership interest.
(j) Except as set forth in Section 2.8(j) of the Disclosure
Schedule, no material Company Intellectual Property is subject to any
outstanding order, award, decision, injunction, judgment, decree, stipulation or
agreement in any manner restricting the transfer, use, enforcement or licensing
thereof . Except as set forth in Section 2.8(j) of the Disclosure Schedule, the
Company has not entered into any agreement to indemnify any other Person against
any charge of infringement of any Intellectual Property which could have a
Company Material Adverse Effect. The Company has not entered into any agreement
granting any third
- 15 -
party the right to bring infringement actions with respect to, or otherwise to
enforce rights with respect to, any of the Company Intellectual Property.
(k) The Company (i) has taken all commercially reasonable
actions to maintain and protect the material Company Intellectual Property,
including payment of all fees, annuities and all other payments which have
heretofore become due to any Government Entity with respect to the material
Company Intellectual Property, and (ii) has taken all reasonable steps necessary
to prosecute and maintain the same.
(l) Except as set forth in Section 2.8(l) of the Disclosure
Schedule, the Company has not transferred its title in or to any copy of any
material computer programs or software (including source code, object code, data
and databases developed or distributed by them). No Company Intellectual
Property has been supplied by the Company to any Person except pursuant to a
binding license. Except as listed in Section 2.8(l) of the Disclosure Schedule,
all computer programs and software which are distributed by the Company (i)
conform in all material respects with all specifications conveyed to its
customers or other transferees, and (ii) are operative for their intended
purposes free of any material defects or deficiencies.
(m) Each of the current employees of the Company is, and
each of the former employees of the Company was, an "employee" within the
meaning of and pursuant to 17 U.S.C. 101. All current and former employees,
independent contractors and consultants of the Company have assigned to the
Company all of their respective rights in any Intellectual Property developed
for the Company by such employees, independent contractors and consultants. No
current or former employee, independent contractor or consultant has any
interest in any Company Intellectual Property.
(n) Except as set forth in Section 2.8(n) of the Disclosure
Schedule, none of Company's rights in or to any of the Company Intellectual
Property shall be adversely affected by the execution or delivery of this
Agreement by Parent or Seller or by the full performance by Parent or Seller of
any of their respective obligations hereunder.
(o) Section 2.8(o) of the Disclosure Schedule identifies
each license, sublicense or other permission which the Company has granted to
any third party with respect to any material Company Intellectual Property. The
Company is not, and to Parent's and Seller's knowledge each other party to any
such license, sublicense or other permission is not, in material breach thereof,
and the consummation of the transactions contemplated by this Agreement will not
materially conflict with or breach any such license, sublicense or other
permission.
2.9 Contracts.
(a) Section 2.9(a) of the Disclosure Schedule contains a
true, complete and correct list of all agreements, contracts, arrangements,
commitments, licenses, leases and other instruments, whether written or oral
(collectively, "Contracts" and each, a "Contract") of the
- 16 -
types described below to which the Company or the Subsidiary is a party or by
which the Company or the Subsidiary or any of their respective properties or
assets are bound and under which any such Person continues to have any
obligation (the "Designated Contracts"):
(i) any Contract (or group of related Contracts with
the same Person or such Person's Affiliates) for the lease of personal property
from or to third parties, in each case involving in excess of $100,000;
(ii) any Contract establishing a partnership, joint
venture, teaming arrangement or similar contract involving a sharing of profits
or expenses (including joint research and development and joint marketing
contracts);
(iii) any Contract (or group of related Contracts with
the same Person or such Person's Affiliates) under which the Company or the
Subsidiary has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) Indebtedness (including capitalized lease obligations, loan
agreements, indentures, letters of credit, mortgages, security agreements,
pledge agreements, deeds of trust, bonds, notes, and other agreements and
instruments relating to the borrowing of money or obtaining of an extension of
credit but excluding accounts payable), in excess of $50,000 individually or
$250,000 in the aggregate, or under which it has imposed (or may impose) a
Security Interest on any of the Company's or the Subsidiary's properties or
assets tangible or intangible;
(iv) any Contract that prohibits or restricts the
Company or the Subsidiary from freely engaging in any business or line of
business or competing anywhere in the world;
(v) any Contract involving any, officer, director,
stockholder or Affiliate of the Company or the Subsidiary and involving an
amount in excess of $5,000 or $100,000 in the aggregate;
(vi) (A) any Contract which contains any provisions
requiring the Company or the Subsidiary to indemnify any other party thereto
other than in the ordinary course of the Company's business, consistent with
past custom and practice (including in respect of frequency and amount) (the
"Ordinary Course of Business"); and (B) any guarantee of the payment or
performance of any Person or any Contract to indemnify any Person, or act as a
surety, or to be contingently or secondarily liable for, or to provide credit
support in respect of, the obligations of any Person other than (1) the
endorsement of checks in the Ordinary Course of Business, and (2) guarantees or
Contracts which individually do not exceed $50,000 or in the aggregate do not
exceed $100,000 and which do not impose (or may not impose) a Security Interest
on any of the Company's or the Subsidiary's assets;
(vii) any Contract (or group of related Contracts with
the same Person or such Person's Affiliates) for the purchase by the Company or
the Subsidiary of goods and
- 17 -
services, in each case, involving in excess of $100,000, other than Contracts
relating to the purchase by the Company or the Subsidiary of inventory in the
Ordinary Course of Business which are cancelable by the Company or the
Subsidiary, without penalty, upon 60 days' or shorter notice;
(viii) any Contract (or group of related Contracts with
the same Person or such Person's Affiliates) for the sale by the Company or the
Subsidiary of goods or services, in each case, involving in excess of $100,000,
other than Government Contracts;
(ix) any material Contract with a sales
representative, manufacturer's representative, or distributor, and each material
marketing Contract;
(x) employment, consulting, agency, collective
bargaining or other similar contracts or Contract, in each case providing for
annual base compensation in excess of $100,000 during the fiscal year 2001 and
which is not terminable on not more than 30 days' notice without penalty or
premium, and other material instruments and arrangements relating to or for the
benefit of employees, sales representatives, distributors, dealers, agents or
independent contractors;
(xi) any other Contract (or group of related
Contracts with the same Person or such Person's Affiliates) involving payments
to be made or received by or to the Company or the Subsidiary in excess of
$250,000 per annum;
(xii) any Contract involving the licensing of, or
assignment or transfer of, any rights in any material Intellectual Property,
other than in the Ordinary Course of Business;
(xiii) any license, licensing arrangement or other
similar contract providing in whole or in part for the use of, or limiting the
use of, any material Company Intellectual Property other than pursuant to any
Government Contract;
(xiv) leases, licenses and other similar material
Contracts, and material Permits concerning or relating to the real property used
by the Company or the Subsidiary;
(xv) brokerage or finder's agreements;
(xvi) asset purchase agreements, stock purchase
agreements and other acquisition or divestiture agreements, including any
Contracts relating to the sale, lease or disposal of any assets of the Company
or the Subsidiary for consideration in excess of $100,000 or involving
continuing indemnity or other obligations;
(xvii) Contracts with respect to the representation of
the Company or the Subsidiary in foreign countries;
- 18 -
(xviii) any Contract with any employee, agent,
consultant, distributor, dealer or franchisee other than those involving in the
aggregate consideration or other expenditures of less than $100,000 per annum;
(xix) any outstanding bid (including any Government
Bid) or proposal or any outstanding customer option relating to Contracts in the
Backlog, in each case involving an amount in excess of $250,000 or that was bid,
knowing that when accepted it would result in a loss;
(xx) any Government Contract involving in the
aggregate consideration or other expenditures of $500,000 or more; and
(xxi) any other Contract not the subject matter of
clauses (i) through (xx) above that is material to the Company or the
Subsidiary.
For purposes of this Agreement, "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge, lien, hypothecation,
adverse claim or interest, easement, encroachment, title defect, title retention
agreement or other similar restriction or limitation (whether arising by
contract, by operation of law or otherwise), other than (i) mechanic's,
materialmen's, and similar liens, in each case that are not delinquent or which
are being actively contested in good faith by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or the applicable Subsidiary, as the case may be, to the extent required
by U.S. GAAP, (ii) liens arising under workers' compensation, unemployment
insurance, social security, retirement, and similar legislation, in each case
that are not delinquent or which are being actively contested in good faith by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the Company or the applicable Subsidiary, as the case may be, to
the extent required by U.S. GAAP, and (iii) statutory liens with respect to
current Taxes not yet due and payable.
(b) Seller has made available to Buyer a true, complete and
accurate copy of each written Designated Contract (as amended, supplemented or
modified to date) listed in Section 2.9(a) of the Disclosure Schedule and an
accurate summary of any oral Designated Contracts listed in Section 2.9(a) of
the Disclosure Schedule. With respect to each Designated Contract: (i) such
Designated Contract is a legal, valid, binding and enforceable obligation of the
Company or the applicable Subsidiary, as the case may be, and to Parent's and
Seller's knowledge, the other party or parties thereto (subject to bankruptcy
and insolvency laws and equitable principles (whether applied at law or in
equity)) and is in full force and effect; and (ii) neither the Company nor the
Subsidiary nor, to Parent's and Seller's knowledge, any other party thereto is
in material breach or violation of, or material default under, any such
Designated Contract, and no event of default or event or condition exists, has
occurred, is pending or, to the knowledge of Parent and Seller, is threatened,
which, after the giving of notice, lapse of time, both or otherwise, would
constitute a material violation, breach or default thereunder by the Company or
the Subsidiary or, to the knowledge of Parent and Seller, any other party under
such
- 19 -
contract. Except as set forth in Section 2.9(b) of the Disclosure Schedule, no
Consent of any third party is required under any Designated Contract as a result
of or in connection with the execution and delivery by Parent or Seller of this
Agreement or the performance by Parent or Seller of its obligations hereunder or
the consummation by Parent or Seller of the transactions contemplated hereby,
except for Consents with respect to Governments Contracts which, if not
obtained, would not result in a Company Material Adverse Effect.
(c) Except as set forth in Section 2.9(c) of the Disclosure
Schedule, no outstanding bid or proposal (or series of related bids or
proposals) was bid knowing that when accepted it would result in a loss.
2.10 Litigation. Except as set forth in Section 2.10 of the
Disclosure Schedule, there is no (a) unsatisfied judgment against the Company or
the Subsidiary or any of their respective assets, (b) order, decree, stipulation
or injunction to which the Company, the Subsidiary or any of their respective
assets are subject, and/or (c) claim, complaint, demand, grievance, inquiry,
action, suit, proceeding, hearing, investigation, arbitration, citation,
summons, or subpoena, civil, criminal, regulatory or otherwise, in law or in
equity, of or in any Governmental Entity or before any arbitrator to which the
Company or the Subsidiary is a party or, to Parent's and Seller's knowledge,
which has been threatened against the Company or the Subsidiary and are seeking
unspecified damages, damages in excess of $50,000 or injunctive relief. There is
no action, suit or proceeding pending, or to Parent's and Seller's knowledge,
threatened, by or against or affecting Parent, Seller, the Company or the
Subsidiary in connection with or relating to the transactions contemplated by
this Agreement or of any action taken or to be taken in connection herewith or
the consummation of the transactions contemplated hereby. Since July 2, 1998,
there have been no liability suits, actions or proceedings involving the Company
or the Subsidiary or relating to services provided by the Company or the
Subsidiary.
2.11 Employee Benefits.
(a) Section 2.11(a) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Company, the Subsidiary or any ERISA Affiliate for the
benefit of employees of the Company or the Subsidiary (and their beneficiaries)
that are material to the Company and the Subsidiary, taken as a whole (the
"Company Plans").
For purposes of this Agreement, "Employee Benefit Plan" means any
"employee pension benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) other than a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA, any "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA), and, to the extent
applicable to more than one employee, any other written or oral plan, agreement
or arrangement involving direct or indirect compensation, including pension,
retirement profit sharing or supplemental executive retirement plans, insurance
coverage, severance benefits, medical, vision, dental or other health benefits,
life insurance or disability
- 20 -
benefits, deferred compensation, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or
post-retirement compensation.
For purposes of this Agreement, "ERISA Affiliate" means any
entity which is a member of (i) a controlled group of corporations (as defined
in Section 414(b) of the Code), (ii) a group of trades or businesses under
common control (as defined in Section 414(c) of the Code), or (iii) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes either the
Company or the Subsidiary.
Complete and accurate copies of all documentation constituting
the Company Plans and all related trust agreements, insurance contracts, third
party administration contracts and summary plan descriptions, have been made
available to Buyer. Each Company Plan has been administered in accordance with
its terms in all material respects, and the Company or the applicable Subsidiary
has made all contributions and met its obligations in all material respects with
respect to such Company Plan. The Company, the Subsidiary and the Company Plans
are in material compliance with the currently applicable provisions of ERISA and
the Code and the regulations thereunder and other Applicable Laws.
(b) There are no termination proceedings or other claims
(except claims for benefits payable in the normal operation of the Employee
Benefit Plans and proceedings with respect to qualified domestic relations
orders), actions, suits or proceedings against or involving any Company Plan or
asserting any rights or claims to benefits under any Company Plan, or, to
Parent's and Seller's knowledge, investigations by any Governmental Entity
involving any Company Plan.
(c) The Company Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Company Plans are qualified,
and nothing has occurred since their inception which would adversely affect in
any material respect the qualified status of any such Company Plans, and the
plans and the trusts related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code.
(d) No Employee Benefit Plan contributed to, or maintained
by, the Company, the Subsidiary or any ERISA Affiliate which is subject to Title
IV of ERISA has been terminated. The Pension Benefit Guaranty Corporation
("PBGC") has not instituted proceedings to terminate any plan that is subject to
Title IV of ERISA, nor would it have any reasonable basis for doing so, nor to
Parent's and Seller's knowledge, is PBGC considering instituting such
proceedings. No Employee Benefit Plan contributed to, or maintained by the
Company, the Subsidiary or any ERISA Affiliate which is subject to Title IV of
ERISA, has benefit liabilities, the present value of which as of the last
actuarial valuation for such plan (but not prior to twelve months from the
Closing Date) determined (i) on the basis of the shutdown of the Company,
Subsidiary, or any ERISA Affiliate, as applicable, (ii) in accordance with the
actuarial
- 21 -
assumptions used by the PBGC in single employer plan terminations and, (iii) to
the extent participants and beneficiaries under such plan had an option to elect
lump sum distributions or annuities, on the assumption they would elect the more
costly option exceed the market value of plan assets (exclusive of any
contributions due to the plan); nor has there been any amendment to such plan
that materially increased the present value of accrued benefits, nor any other
material adverse changes in the funding status of such plan. Neither the
Company, and Subsidiary, nor any ERISA Affiliate is required to provide security
to an Employee Benefit Plan which is subject to Title IV of ERISA pursuant to
Section 307 of ERISA or Section 401(a)(29) of the Code. No "accumulated funding
deficiency" (as defined in Section 412 of the Code) has occurred with respect to
any Employee Benefit Plan contributed to, or maintained by, the Company, the
Subsidiary or any ERISA Affiliate which is subject to Section 412 of the Code or
Title IV of ERISA, whether or not waived.
(e) Neither the Company, the Subsidiary nor any ERISA
Affiliate contributes to or is obligated to contribute to any multiemployer
plan. Neither the Company, the Subsidiary nor any ERISA Affiliate has withdrawn
from any multiemployer plan in a complete or partial withdrawal which has
resulted in any withdrawal liability.
(f) No act or omission has occurred with respect to any
Employee Benefit Plan maintained by the Company, the Subsidiary, any of their
Affiliates or any ERISA Affiliate that would subject the Company, the Subsidiary
or any ERISA Affiliate, whether directly or indirectly and whether by way of
indemnity or otherwise, to any material fine, penalty, Tax or liability of any
kind imposed under ERISA or the Code (other than liabilities for benefits
accrued under Company Plans for employees of the Company and the Subsidiary and
their beneficiaries).
(g) No Employee Benefit Plan is a "multiple employer plan"
within the meaning of Section 413(c) of the Code, or a defined benefit plan
within the meaning of Section 3(35) of ERISA.
(h) Except as set forth in Section 2.11(h) of the Disclosure
Schedule, the execution and performance of the transactions contemplated by the
Agreement will not (either alone or upon the occurrence of any additional or
subsequent event) (i) constitute an event under any Employee Benefit Plan or
individual agreement that will or may result in any payment (whether of
severance pay or otherwise), acceleration, vesting or increase in material
benefits with respect to any employee, former employee, consultant, agent or
director of the Company or the Subsidiary, or (ii) require (or permit any party
thereto to require) the payment by the Company or the Subsidiary to any
employee, former employee, director, consultant or agent thereof that would or
could be characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Code.
(i) Each "group health plan" (within the meaning of Section
4980B of the Code) maintained by the Company, the Subsidiary or any ERISA
Affiliate has been administered in material compliance with the coverage
continuation requirements contained in the
- 22 -
Consolidated Omnibus Budget Reconciliation Act of 1985 and as provided under
Section 4980B of the Code and any regulations promulgated or proposed under the
Code.
(j) No prohibited transaction (as defined in Section 4975 of
the Code or Section 406 of ERISA) has occurred with respect to any Employee
Benefit Plan, which could subject any Employee Benefit Plan or any related
trust, the Company, the Subsidiary, any ERISA Affiliate or any director or
employee of any of them to any material tax or penalty imposed under Section
4975 of the Code or Section 502(i) or 502(l) of ERISA, either directly or
indirectly, and whether by way of indemnity or otherwise.
(k) Neither the Company nor the Subsidiary nor any of their
ERISA Affiliates maintains, sponsors or contributes to any plan or program
providing retiree medical or life insurance benefits to any employees of the
Company or the Subsidiary, except to the extent required by applicable law.
(l) None of the Company, the Subsidiary and the ERISA
Affiliates has engaged in any transaction which could subject it to liability
under ERISA Section 4069 or 4212(c).
(m) Except as set forth in Section 2.11(m) of the Disclosure
Schedule, no reportable event within the meaning of ERISA 4043 has occurred with
respect to any Employee Benefit Plan subject to Title IV of ERISA.
2.12 Permits. The Company holds all Consents of, with or to any
Governmental Entity and other Consents material to the conduct of the business
of the Company and the Subsidiary as currently conducted and ownership of the
assets of each of the Company and the Subsidiary (collectively, "Permits").
Except as set forth in Section 2.12 of the Disclosure Schedule, all such Permits
and other Consents have been duly obtained and are in full force and effect, and
neither the Company nor the Subsidiary is in material violation of or material
default under any such Permits and other Consents held by it. No such Permit or
other Consent will be revoked, terminated prior to its normal expiration date or
not renewed solely as a result of the consummation of the transactions
contemplated by this Agreement and the other Transaction Documents.
2.13 Noncontravention. Subject to compliance with the applicable
requirements of the HSR Act, none of the execution and delivery by each of
Parent and Seller of this Agreement and the other Transaction Documents to which
it is a party, the performance by Parent and Seller of their respective
obligations hereunder and thereunder and the consummation by Parent and Seller
of the transactions contemplated hereby and thereby, will: (a) conflict with or
violate any provision of the charter or bylaws (or equivalent or comparable
documents) of Parent, Seller, the Company or the Subsidiary, (b) except as set
forth in Section 2.13(b) of the Disclosure Schedule, require on the part of
Parent, Seller, the Company or the Subsidiary the making or obtaining of any
Permit or other Consent, except where the failure to obtain any such Permit or
Consent
- 23 -
required with respect to any Government Contract would not result in a Company
Material Adverse Effect, (c) conflict with, result in (with or without due
notice or lapse of time or both) a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
require any Consent under, or result in the loss of any rights, privileges,
options or alternatives under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
arrangement, instrument of indebtedness, Security Interest, commitment or other
arrangement or understanding, to which Parent, Seller, the Company or the
Subsidiary is a party or by which Parent, Seller, the Company or the Subsidiary
is bound or to which any of their respective assets is subject, except for any
conflict, breach, default, acceleration, right to accelerate, termination,
modification, cancellation, Consent, or loss of rights, privileges, opinions or
alternatives that would not have a Company Material Adverse Effect, (d) result
in the imposition of any Share Encumbrance upon the Company Shares, (e) except
as set forth in Section 2.13(e) of the Disclosure Schedule, result in the
imposition of any Security Interest upon any assets of Parent, Seller, the
Company or the Subsidiary, or (f) violate in any material respect any Applicable
Law applicable to Parent, Seller, the Company or the Subsidiary or any of their
respective properties or assets (it being understood that the accuracy of this
representation as to compliance with applicable Federal and state securities
laws, is dependent in part on, and assumes the accuracy of, Buyer's
representations in Sections 3.5 and 3.6).
2.14 Owned and Leased Real Property.
(a) Neither the Company nor the Subsidiary owns any real
property. Section 2.14(a) of the Disclosure Schedule lists all real property
leased or subleased to the Company or the Subsidiary as of the date of this
Agreement or leased by Parent, Seller or an Affiliate of Seller other than the
Company or a Subsidiary and are used in the conduct of the business of the
Company or the Subsidiary (the "Leased Real Property"). Neither the Company nor
the Subsidiary uses any real property other than the Leased Real Property.
Seller has made available to Buyer true, correct and complete copies of the
leases and subleases (as amended to date) and other agreements for occupancy,
including all amendments, extensions and other modifications thereto as of the
date of this Agreement with respect to each Leased Real Property (each, a "Real
Property Lease" and, collectively, the "Real Property Leases").
(b) With respect to each Real Property Lease, except as
would not have a Company Material Adverse Effect:
(i) Such Real Property Lease is a legal, valid and
binding obligation of the Company or the Subsidiary, and is in full force and
effect;
(ii) Neither the Company or the Subsidiary, nor, to
Parent's and Seller's knowledge, any other party to such Real Property Lease is
in breach or default, and, to Parent's and Seller's knowledge, no event has
occurred which, with notice or lapse of time,
- 24 -
would constitute a breach or default or permit termination, modification or
acceleration thereunder; and
(iii) to Parent's and Seller's knowledge, there are no
disputes, oral agreements or forbearance programs in effect as to the Real
Property Leases.
(c) The Leased Real Property is sufficient for the continued
conduct of the respective businesses of the Company and the Subsidiary in
substantially the same manner as such businesses are currently conducted.
(d) The property covered by such Real Property Leases may
legally be used for the operations presently conducted thereon. The improvements
on the properties are in commercially reasonable operating condition and repair
and are suitable for the purposes for which they are currently used.
(e) Neither the Company nor the Subsidiary, as applicable,
has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered
any of its interest in any of the Real Property Leases.
2.15 Labor Matters. Neither the Company nor the Subsidiary is a party
to or bound by any collective bargaining agreement, and there are no labor
unions or other organizations representing or purporting to represent any
employees of the Company or the Subsidiary. Since July 2, 1998, neither the
Company nor the Subsidiary has experienced, or to Parent's and Seller's
knowledge, there has not been threatened, any material strikes, labor
grievances, claims of unfair labor practices or other collective bargaining
disputes or other similar labor activity with respect to any employees of the
Company or the Subsidiary. Parent and Seller have no knowledge of any
organizational effort being made or threatened since July 2, 1998 by or on
behalf of any labor union with respect to employees of the Company or the
Subsidiary.
2.16 Environmental Matters.
(a) Compliance with Environmental Law. To Parent's and
Seller's knowledge, each of the Company and the Subsidiary is and has been in
compliance in all material respects with all applicable Environmental Laws
pertaining to any of the properties and assets of its business and the use
thereof by the Company or the Subsidiary, as the case may be. Except as
disclosed in Section 2.16(a) of the Disclosure Schedule each of the Company and
the Subsidiary has obtained all material Permits, licenses and other
authorizations that are required under Environmental Laws to operate its
business and the same are listed in Section 2.16(a) of the Disclosure Schedule.
None of the Company, the Subsidiary, Parent or Seller has received written
notice of any violation of any applicable Environmental Law relating to any of
the assets or to any premises utilized by the Company or the Subsidiary and, to
Parent's and Seller's knowledge, no written notice of any such violation has
been threatened.
- 25 -
(b) Other Environmental Matters. To Parent's and Seller's
knowledge, neither the company nor the Subsidiary has caused or taken any action
that resulted in, and none of them is, subject to, any material liability or
obligation relating to (i) the environmental conditions on, under, or about any
part of the premises now or formerly utilized by its business or other
properties or assets owned, leased, operated or used by the Company or the
Subsidiary in its business, including the air, soil and groundwater conditions
at such properties, or (ii) the use, management, handling, transport, treatment,
generation, storage, disposal or Release of any Hazardous Substances by the
Company or the Subsidiary.
(c) No Hazardous Substances. To Parent's and Seller's
knowledge, no Hazardous Substances have been treated, stored or disposed of by
the Company or the Subsidiary (or, to Parent's and Seller's knowledge, any other
Person) at, on, or under any part of the premises now or formerly utilized by
it, except: (i) in compliance with Environmental Laws; and (ii) which does not
require investigation or remediation pursuant to Environmental Laws.
(d) No Proceedings. Except as disclosed in Section 2.16(d)
of the Disclosure Schedule, none of the Company, the Subsidiary, Parent and
Seller has received written notice or other written communication concerning any
alleged liability for Environmental Liabilities and Costs and, to Parent's and
Seller's knowledge, there exists no writ, injunction, decree, order, judgment,
lawsuit, claim, proceeding, citation, directive, or summons, pending or
threatened, relating to any environmental matters.
(e) Acknowledgement and Agreement. The Parties agree that
the only representations and warranties of Parent or Seller herein as to any
Environmental Laws, any environmental matter or environmental litigation are
those contained in this Section 2.16. Without limiting the generality of the
foregoing, Buyer specifically acknowledges that the representations and
warranties contained in Sections 2.10, 2.12 and 2.17 do not relate to
Environmental Laws, environmental matters or environmental litigation.
2.17 Legal Compliance. Except as set forth in Section 2.17 of the
Disclosure Schedule, each of the Company and the Subsidiary is in compliance in
all material respects with all Applicable Laws applicable to it and to its
assets. Except as set forth on Section 2.17 of the Disclosure Schedule, there is
no pending, or to Parent's and Seller's knowledge, threatened, action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
relating to the Company or the Subsidiary alleging any failure so to comply.
2.18 Brokers' Fees. Neither the Company nor the Subsidiary has any
liability or obligation (a) to pay any fees, commissions or similar compensation
to any broker, finder or agent, or (b) except as set forth in Section 2.11(h) of
the Disclosure Schedule, any bonus payable to any officer, director, employee,
agent or sales representative of or consultant to the Company or the Subsidiary
or any of their respective Affiliates or any other Person, in each case with
respect to, or upon the consummation of, any of the transactions contemplated by
this Agreement and the other Transaction Documents. Parent shall be responsible
for and shall pay all brokers'
- 26 -
fees and commissions and similar compensation payable to Quarterdeck Investment
Partners, LLC.
2.19 Absence of Certain Changes. Except as set forth in Section 2.19
of the Disclosure Schedule, since September 30, 2001, the Company and the
Subsidiary have operated their respective operations in the Ordinary Course of
Business and have complied in all material respects with the covenants and
agreements set forth in Section 4.2(a) (assuming that Section 4.2(a) had been in
effect since September 30, 2001 instead of the date hereof) and neither the
Company nor the Subsidiary has:
(a) suffered any Company Material Adverse Effect;
(b) experienced any event or condition that could result in
a Company Material Adverse Effect in the future;
(c) subjected to any Security Interest any portion of the
Company's or the Subsidiary's assets, properties or business (whether tangible
or intangible);
(d) sold, assigned, leased to others or transferred or
otherwise disposed of any portion of the Company's or the Subsidiary's current
assets in a single transaction or series of related transactions in an amount in
excess of $25,000 individually or $50,000 in the aggregate, except in the
Ordinary Course of Business;
(e) sold, assigned, leased to others or transferred or
otherwise disposed of any portion of the Company's or the Subsidiary's
noncurrent assets in a single transaction or series of related transactions,
except for sales, assignments, leases to others, transfers or other dispositions
made in the Ordinary Course of Business in which the proceeds therefrom are
invested in new noncurrent assets or otherwise retained by the Company;
(f) received any written notice of termination of any
Designated Contract with required payments thereunder in excess of $50,000;
(g) suffered any damage, destruction or losses (whether or
not covered by insurance) to property, in excess of $25,000 individually or
$10,000 in the aggregate, or canceled or compromised any debt, claim,
commitment, liability or obligation, or waived or released any right of
substantial value, involving an amount in excess of $25,000 individually or
$50,000 in the aggregate;
(h) authorized, issued, sold or transferred any capital
stock of the Company or the Subsidiary or other securities (including any,
securities convertible or exercisable into or exchangeable for any capital stock
or other securities of, or any warrants, options or other rights to acquire any
capital stock or other securities of, the Company or the Subsidiary);
- 27 -
(i) made any non-cash dividend or distribution in respect
of, or redeemed, retired, acquired or purchased, any of the Company's or the
Subsidiary's capital stock or other securities;
(j) made any capital expenditures or commitments therefor in
excess of $25,000 individually or $100,000 in the aggregate;
(k) made any capital investment in, any loan to, or any
acquisition of, any of the securities or all or substantially all of the assets
of, any other Person (or series of related capital investments, loans and
acquisitions involving the same Person or such Person's Affiliates) in an amount
in excess of $25,000 individually or $100,000 in the aggregate, except for (i)
overnight deposits, (ii) short-term money market investments, or (iii) loans in
the Ordinary Course of Business to employees in an aggregate amount not to
exceed $50,000;
(l) acquired any entity or business (whether by the
acquisition of stock, the acquisition of assets, merger or otherwise);
(m) made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or agreed or
made any enforceable oral promise to pay, conditionally or otherwise, any bonus,
incentive, retention or other compensation, retirement, welfare, fringe or
severance benefit or vacation pay, to or in respect of any, director, employee,
distributor or agent, in each case other than increases in the Ordinary Course
of Business in the compensation payable to persons earning less than $125,000
per year, or entered into any employment, compensation or deferred compensation
agreement (or any amendment to any such existing agreement);
(n) except as required by Applicable Law, amended any
material term of any existing Company Plan;
(o) changed or authorized any change in the certificate of
incorporation or bylaws (or equivalent documents) of the Company or the
Subsidiary;
(p) except in the Ordinary Course of Business, transferred
or granted any rights under, or entered into any settlement regarding the
breach, misappropriation, infringement or violation of, any Intellectual
Property, or modified any existing rights with respect thereto in a manner
involving payments by or to the Company or the Subsidiary in excess of $25,000
individually or $50,000 in the aggregate;
(q) given notice to a third party of allegedly infringing
activities with respect to any Company Intellectual Property, where such notice
could be found by a court within the jurisdiction in which the notice was given,
to place such third party in reasonable apprehension of litigation;
- 28 -
(r) made any change in its accounting, auditing or tax
methods, practices or principles;
(s) made any grant of credit to any customer or distributor
on terms or in amounts materially more favorable than had been extended to that
customer or distributor in the past;
(t) received written notice of any condemnation proceedings
commenced with respect to any Leased Real Property or written notice as to the
proposed commencement of any such proceedings;
(u) incurred, assumed or guaranteed any Indebtedness; or
(v) taken any action or knowingly omitted to take any action
that would result in the occurrence of any of the foregoing.
2.20 Assets. The Company and the Subsidiary have good and valid title
to their respective assets, free and clear of all Security Interests, except for
Security Interests listed on Section 2.20 of the Disclosure Schedule. Except as
set forth on Section 2.20 of the Disclosure Schedule, the assets of the Company
and the Subsidiary include all assets reasonably required for the conduct of the
business of the Company or such Subsidiary, as the case may be, by Buyer
(through the ownership of the Company Shares) as such business is now being
conducted. The material tangible assets of the Company and the Subsidiary are in
good operating condition and repair (normal wear and tear excepted) and free
from any known defects (except such minor defects as do not interfere with the
use thereof). None of the assets of SMD are used in the business of the Company
or the Subsidiary.
2.21 Insurance. Section 2.21 of the Disclosure Schedule contains a
true, complete and correct list of each insurance policy maintained by the
Company and the Subsidiary. All of such insurance policies are in full force and
effect and, each of the Company and the Subsidiary is in compliance in all
material respects with respect to its obligations under such insurance policies.
Neither the Company nor the Subsidiary has failed to give any notice under any
such insurance policies in due time.
2.22 Business Relationships with Affiliates. Section 2.22 of the
Disclosure Schedule sets forth a true, complete and correct list (including the
parties) of all agreements, arrangements, contracts, commitments, understandings
or other relationships (written or oral) currently in effect, between or among
the Company or the Subsidiary, on the one hand, and any of its officers,
directors, stockholders or Affiliates (or any Affiliate of any of its officers,
directors or stockholders), on the other hand (the "Intercompany Agreements").
Seller heretofore has delivered or made available to Buyer true, complete and
correct copies (or a detailed summary in the case of an oral agreement) of each
such Intercompany Agreement.
- 29 -
2.23 Government Contracts.
(a) Except as set forth in Section 2.23(a) of the Disclosure
Schedule: (i) each of the Company and its Subsidiary has fully complied with all
material terms and conditions of each Government Contract and Government Bid to
which it is a party as required; (ii) each of the Company and the Subsidiary has
complied with all material requirements of any Applicable Law pertaining to such
Government Contract or for Government Bid; (iii) all representations and
certifications made by the Company or the Subsidiary with respect to such
Government Contract or Government Bid were, to Parent's and Seller's knowledge,
accurate in every material respect as of their effective date and the Company or
the applicable Subsidiary, as the case may be, has, to Parent's and Seller's
knowledge, fully complied with all such representations and certifications in
all material respects; and (iv) no termination or default, cure notice or show
cause notice has been issued and remains unresolved.
(b) Except as set forth in Section 2.23(b) of the Disclosure
Schedule: (i) to Parent's and Seller's knowledge, none of the Company's and the
Subsidiary's employees, consultants or agents is (or during the last five years
has been) under administrative, civil or criminal investigation or indictment by
any Governmental Entity with respect to the conduct of the business of the
Company or the Subsidiary, as the case may be; (ii) to Parent's and Seller's
knowledge, there is no pending audit or investigation of the Company or the
Subsidiary or any of their respective officers, employees or representatives nor
within the last five years has there been any audit or investigation of the
Company or the Subsidiary or any of their respective officers, employees or
representatives resulting in a material adverse finding with respect to any
material alleged irregularity, misstatement or omission arising under or
relating to any Government Contract or Government Bid; and (iii) during the last
five years, the Company and the Subsidiary have not made any voluntary
disclosure in writing to the U.S. Government or any non-U.S. government with
respect to any alleged irregularity, misstatement or omission arising under or
relating to a Government Contract or Government Bid. Except as set forth in
Section 2.23(b) of the Disclosure Schedule, the Company and the Subsidiary have
not had any such irregularities, misstatements or omissions arising under or
relating to any such Government Contract or Government Bid that has led to any
of the consequences set forth in clause (i) or (ii) of the immediately preceding
sentence or any other material damage, penalty assessment, recoupment of payment
or disallowance of cost.
(c) Except as set forth in Section 2.23(c) of the Disclosure
Schedule, there are (i) no outstanding material written claims against the
Company or the Subsidiary, either by the U.S. Government or any non-U.S.
Government or by any prime contractor, subcontractor, vendor or other third
party arising under or relating to any Government Contract or Government Bid
referred to in Section 2.23(a) of the Disclosure Schedule, and (ii) no material
written disputes between the Company or the Subsidiary, on the one hand, and the
U.S. Government or any non-U.S. Government, on the other hand, under the
Contract Disputes Act or any other Federal statute or between the Company or the
Subsidiary, on the one hand, and any prime
- 30 -
contractor, subcontractor or vendor, on the other hand, arising under or
relating to any such Government Contract or Government Bid.
(d) Except as set forth in Section 2.23(d) of the Disclosure
Schedule, none of the Company and the Subsidiary, nor to Parent's and Seller's
knowledge, any of their respective employees, consultants or agents is (or
during the last five years has been) suspended or debarred from doing business
with the U.S. Government or any non-U.S. government or is (or during such period
was) the subject of a finding of non-responsibility or ineligibility for U.S.
Government or non-U.S. government contracting. Except as set forth in Section
2.23(d) of the Disclosure Schedule, to Parent's and Seller's knowledge, each of
the Company and the Subsidiary conducted its operations in all material respects
in compliance with all requirements of all laws pertaining to all Government
Contracts and Government Bids.
(e) Section 2.23(e) of the Disclosure Schedule lists all
Government Bids submitted by the Company or the Subsidiary and outstanding as of
the date of this Agreement. Except as set forth in Section 2.23(e) of the
Disclosure Schedule, no outstanding Government Bid (or series of related
Government Bids) was bid knowing that when accepted it would result in a loss.
(f) Except as set forth on Section 2.23(f) of the Disclosure
Schedule, the rates and rate schedules submitted to the U.S. Government with
respect to Government Contracts included in the Business have been closed for
all years prior to 1996.
(g) The Company and the Subsidiary are each in compliance in
all material respects with all national security obligations, including, without
limitation, those specified in the National Industrial Security Program
Operating Manual, DOD 5220.22-M (January 1995).
2.24 Government Furnished Equipment. Section 2.24 of the Disclosure
Schedule incorporates the most recent schedule delivered to the U.S. Government
or any non-U.S. government which identifies by description or by inventory
number certain equipment and fixtures loaned, bailed or otherwise furnished to
or held by the Company or the Subsidiary by or on behalf of the United States or
any foreign country. Such schedule was accurate and complete in all material
respects on its date and, if dated on the Closing Date, would contain only those
additions and omit only those deletions of equipment and fixtures that have
occurred in the Ordinary Course of Business.
2.25 Receivables. The receivables of the Company and the Subsidiary
(including accounts receivable, loans receivable and advances) have arisen only
from bona fide transactions in the Ordinary Course of Business. There has not
been any material adverse change in the collectibility of such receivables since
the date of the Baseline Balance Sheet. Section 2.25 of the Disclosure Schedule
sets forth a list of all such receivables which are more than 30 days past due
as of October 31, 2001, and of all such receivables classified as doubtful
accounts as of October 31, 2001.
- 31 -
2.26 Service Warranties. Section 2.26 of the Disclosure Schedule sets
forth a description of the standard warranties offered by each of the Company
and the Subsidiary with respect to their respective services (other than
warranties under Applicable Law, if any). Section 2.26 of the Disclosure
Schedule sets forth a list as of the date hereof of all pending or, to Parent's
and Seller's knowledge, threatened warranty claims against the Company or the
Subsidiary in excess of $100,000 individually or $250,000 in the aggregate.
2.27 Customers. To Parent's and Seller's knowledge, the relationship
of the Company and the Subsidiary with each of their respective customers is a
good commercial working relationship. Schedule 2.27 of the Disclosure Schedule
sets forth an accurate list of the ten Contracts that generated the largest
revenues for the Company during the nine-month period ended September 30, 2001.
None of such Contracts have been cancelled or materially and adversely modified.
None of the Company, the Subsidiary, Parent or Seller has received written
notice that any material customer intends to cancel or otherwise materially and
adversely modify its relationship with it or limit materially its services,
supplies or materials to it, or its usage or purchase of the services of its
business either as a result of the transactions contemplated hereby or
otherwise.
2.28 Order Backlog. A true, correct and complete list of (a) all firm
service purchase orders and contracts for the delivery of services by the
Company or the Subsidiary in connection to Persons other than Governmental
Entities, and (b) all firm funded service purchase orders and contracts for the
delivery of services by the Company or the Subsidiary to Governmental Entities
(collectively, the "Backlog") pending as of the latest practical date prior to
the date of this Agreement is set forth in Section 2.28 of the Disclosure
Schedule.
2.29 No Retention Agreements, etc. Except as set forth in Section
2.29 of the Disclosure Schedule, there are no retention agreements, severance
agreements, change of control agreements or similar arrangements to which the
Company or the Subsidiary, on the one hand, and any employee, consultant or
other Person, on the other hand, are a party.
2.30 Real Property Holding Company. None of the Company, the
Subsidiary, Parent and Seller is a real property holding company within the
meaning of Section 897 of the Code.
2.31 Organizational Conflicts of Interest. Except as set forth in
Section 2.31 of the Disclosure Schedule, Parent, Seller, the Company and the
Subsidiary, in the past six years, have not, to Parent's and Seller's knowledge,
had access to non-public information nor provided systems engineering, technical
direction, consultation, technical evaluation, source selection services or
services of any type, nor prepared specifications or statements of work, nor
engaged in any other conduct that would create in any current Government
procurement an Organizational Conflict of Interest, as defined in Federal
Acquisition Regulation 9.501, with the Company or the Subsidiary.
- 32 -
2.32 Power of Attorney/Bank Accounts. Section 2.32 of the Disclosure
Schedule sets forth the names and locations of (a) each Person holding a power
of attorney on behalf of the Company or the Subsidiary, and (b) all banks, trust
companies, brokerage firms or other financial institutions at which the Company
or the Subsidiary maintain an account or safe-deposit box and the name of each
Person authorized to draw thereon or make withdrawals therefrom.
- 33 -
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date as follows:
3.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Delaware.
3.2 Authorization of Transaction. Buyer has all requisite corporate
power and authority to execute and deliver this Agreement and the other
Transaction Documents to which it is a party, to perform fully its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by Buyer of this Agreement
and the other Transaction Documents to which it is a party and the consummation
by Buyer of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of Buyer. This
Agreement has been (and at the Closing the other Transaction Documents to which
Buyer is a party will be) duly and validly executed and delivered by Buyer. This
Agreement constitutes (and at the Closing the other Transaction Documents to
which Buyer is a party will constitute) legal, valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
3.3 Litigation. As of the date hereof, there are no actions, suits,
claims or legal, administrative or arbitration proceedings pending against, or,
to Buyer's knowledge, threatened against, Buyer which would materially adversely
affect Buyer's performance under this Agreement or Buyer's ability to consummate
the transactions contemplated by this Agreement.
3.4 No Knowledge of Misrepresentation or Omission. As of the date
hereof, none of Buyer's representatives listed in Section 3.4 of the Disclosure
Schedule has actual knowledge that any of the representations and warranties of
Parent or Seller contained in this Agreement that is qualified as to materiality
are not true and correct and any of such representations and warranties that is
not so qualified is not true and correct in any material respect.
Notwithstanding anything in this Agreement to the contrary, nothing in this
Section 3.4 shall preclude Buyer from seeking indemnification, damages or other
remedies from Parent or Seller for breach of any representation or warranty of
Parent or Seller.
3.5 Accredited Investor Status. Buyer is an "accredited investor" as
such term is defined in Rule 501 promulgated under the Securities Act.
3.6 Investment Intent. Buyer is acquiring the Company Shares for
investment for its own account and not with a view to the distribution of any
part thereof. Buyer acknowledges that the Company Shares have not been
registered under U.S. federal or any applicable state securities laws or the
laws of any other jurisdiction and cannot be resold without registration under
such laws or an exemption therefrom. Buyer further acknowledges that it has
knowledge
- 34 -
and experience in financial and business matters, that it is capable of
evaluating the merits and risks of an investment in the Company Shares, and that
it can bear the economic risk of an investment in the Company Shares.
3.7 Noncontravention. Subject to compliance with the applicable
requirements of the HSR Act, none of the execution and delivery by Buyer of this
Agreement and the other Transaction Documents to which it is a party, the
performance by Buyer of its obligations hereunder and thereunder and the
consummation by Buyer of the transactions contemplated hereby and thereby, will:
(a) conflict with or violate any provision of the charter or bylaws (or
equivalent or comparable documents) of Buyer, (b) except as set forth in Section
3.7(b) of the Disclosure Schedule, require on the part of Buyer the making or
obtaining of any Permit or other Consent, (c) conflict with, result in (with or
without due notice or lapse of time or both) a breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any Consent under, or result in the loss of any rights,
privileges, options or alternatives under, any contract, agreement, instrument,
commitment or understanding, to which Buyer is a party or by which Buyer is
bound or to which any of its assets is subject, except for any conflict, breach,
default, acceleration, right to accelerate, termination, modification,
cancellation, Consent, or loss of rights, privileges, opinions or alternatives
that would not have a material adverse effect on the assets, business, financial
condition or results of operations of Buyer or on the ability of Buyer to
consummate the transactions contemplated by this Agreement or the other
Transaction Documents to which it is a party, or (d) violate in any material
respect any Applicable Law applicable to Buyer or any of its properties or
assets.
3.8 Broker's Fees. 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.
3.9 Financing. Buyer has all funds necessary to consummate the
transactions contemplated by this Agreement and the payment of all fees and
expenses incurred by Buyer in connection therewith.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 Efforts.
(a) As promptly as practicable during the period from the
date of this Agreement to and including the Closing Date, each of the Parties
shall use commercially reasonable efforts to take all actions and to do all
things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and shall:
- 35 -
(i) file or supply, or cause to be filed or
supplied, all applications, notifications and information required to be filed
or supplied by it pursuant to Applicable Law in connection with this Agreement,
Buyer's acquisition of the Company Shares pursuant to this Agreement and the
consummation of the other transactions contemplated hereby;
(ii) use commercially reasonable efforts to obtain,
or cause to be obtained, all Consents (including all Permits and any Consents
required under any Designated Contract) necessary to be obtained or made by it
in order to consummate the purchase of the Company Shares pursuant to this
Agreement or to consummate the other transactions contemplated hereby; and
(iii) reasonably coordinate and cooperate with the
other Party in exchanging such information and supplying such assistance as may
be reasonably requested by such other Party in connection with any applicable
filings and other actions contemplated by this Article IV.
(b) As promptly as practicable during the period from the
date of this Agreement to and including the Closing Date, Parent and Seller
shall reasonably coordinate and cooperate with Buyer to enable Buyer to secure
such Consents from Governmental Entities as will permit Buyer to conduct after
the Closing the businesses conducted by the Company prior to the Closing.
4.2 Operation of Business.
(a) Except as expressly contemplated by this Agreement
(including Section 4.2(b)), during the period from the date of this Agreement to
and including the Closing Date, Parent and Seller shall cause the Company to
conduct its operations in the Ordinary Course of Business. Without limiting the
foregoing, Parent and Seller shall cause the Company to:
(i) carry on its business in the Ordinary Course of
Business, including using all commercially reasonable efforts to maintain its
business in good operating condition and repair and to preserve its
relationships with customers, and take all steps commercially reasonable to
maintain its intangible assets;
(ii) not grant (or commit to grant) any increase in
the compensation (including incentive or bonus compensation) of any employee
(other than increases in the Ordinary Course of Business in the compensation
payable to its employees); or institute, adopt or materially amend (or commit to
institute, adopt or materially amend) any compensation or benefit plan, policy,
program or arrangement or collective bargaining agreement applicable to any
employee except as required to comply with Applicable Law or with any collective
bargaining agreements;
(iii) not enter into, amend or terminate any
employment agreement or collective bargaining agreement or similar commitment
(including any commitment to pay
- 36 -
retirement or other benefits) to or with any of its employees other than in the
Ordinary Course of Business;
(iv) not grant any severance or termination pay to
any of its present or former directors or officers other than in the Ordinary
Course of Business;
(v) not make any capital investment in, any loan to,
or any acquisition of, any of the securities or all or substantially all of the
assets of, any other Person (or series of related capital investments, loans and
acquisitions involving the same Person or such Person's, except for (i)
overnight deposits, (ii) short-term money market investments, or (iii) loans in
the Ordinary Course of Business to employees in an aggregate amount not to
exceed $25,000;
(vi) not enter into, amend or terminate any bid,
contract, commitment agreement, order, license, lease, profit, instrument, or
agreement which involves aggregate consideration in excess of $25,000,
individually or in the aggregate, other than in the Ordinary Course of Business,
or that was expected to result in a loss to the Company;
(vii) not sell, assign, lease to others or transfer or
otherwise dispose of the Company's current assets in a single transaction or
series of related transactions, except for sales, assignments, leases to others,
transfers or other dispositions made in the Ordinary Course of Business;
(viii) not sell, assign, lease to others or transfer or
otherwise dispose of any portion of the Company's or the Subsidiary's noncurrent
assets in a single transaction or series of related transactions, except for
sales, assignments, leases to others, transfers or other dispositions made in
the Ordinary Course of Business in which the proceeds therefrom are invested in
new noncurrent assets or otherwise retained by the Company;
(ix) not without Buyer's prior written consent, (A)
enter into, amend or terminate any material lease of real estate related to its
business, (B) create any Security Interest on its assets or business, or (C)
make any material modifications of or changes in or terminate any existing
material license, lease, agreement or contract included in its assets other
than, in the case of this clause (C), such modifications, changes or
terminations in the Ordinary Course of Business;
(x) not make any capital expenditure or capital
expenditure commitment involving an amount or amounts exceeding $50,000 in the
aggregate;
(xi) not repay or prepay any material liability or
obligation prior to its stated maturity;
(xii) not write off any account receivable due to the
Company other than in the Ordinary Course of Business;
- 37 -
(xiii) not waive any material claims or rights relating
to any of its material assets;
(xiv) not make, or permit to be made, any change in
its accounting, auditing or tax methods, practices or principles unless required
by U.S. GAAP;
(xv) not enter into, or permit to be entered into,
without the prior written consent of Buyer, any closing or other agreement or
settlement with respect to Taxes affecting or relating to the Company;
(xvi) not incur, or suffer to exist, any Security
Interest on the assets, properties or businesses of the Company (whether
tangible or intangible);
(xvii) not cancel or compromise any debt, claim,
commitment liability or obligation, or waive or release any right of substantial
value, involving an amount in excess of $25,000, individually or in the
aggregate;
(xviii) except in respect of the Company Shares to be
sold to Buyer pursuant hereto, not authorize, issue, sell or transfer any
capital stock of the Company or other securities (including any securities
convertible or exercisable into or exchangeable for any capital stock or other
securities of, or any warrants, options or other rights to acquire any capital
stock or other securities of, the Company);
(xix) not make any non-cash dividend or distribution
in respect of, nor redeem, retire, acquire or purchase, any of the Company's
capital stock or other securities;
(xx) except in the Ordinary Course of Business, not
transfer or grant any rights under, or enter into any settlement regarding the
breach, misappropriation, infringement or violation of, any Intellectual
Property, or modify any existing rights with respect thereto;
(xxi) not change or authorize any change in the
certificate of incorporation or bylaws (or equivalent documents) of the Company;
(xxii) not make any grant of credit to any customer or
distributor on terms or in amounts materially more favorable than had been
extended to that customer or distributor in the past;
(xxiii) not acquire any entity or business (whether by
the acquisition of stock, the acquisition of assets, merger or otherwise);
(xxiv) not pay or agree to pay any brokerage or
finder's fee, or not incur any severance pay or retention obligations by reason
of this Agreement or any of the transactions contemplated hereby;
- 38 -
(xxv) not incur, assume or guarantee any Indebtedness;
and
(xxvi) not agree, whether or not in writing, to do any
of the foregoing.
(b) The foregoing notwithstanding, Seller and the Company
shall be permitted to effect the transactions contemplated by Sections 4.3, 4.9,
4.10 and 4.12 and to accept capital contributions and loans from Seller or its
Affiliates.
4.3 Dealings with Affiliates. As of the Closing Date, Parent and
Seller shall cause all Intercompany Agreements to be terminated and of no force
and effect, and there shall be no unsatisfied obligations or liabilities
thereunder, pursuant to termination agreements in form and substance reasonably
satisfactory to Buyer.
4.4 Access. During the period from the date of this Agreement to and
including the Closing Date, Parent and Seller shall cause the Company to permit
representatives of Buyer to have reasonable access (at reasonable times, on
reasonable prior written notice and in a manner so as not to interfere with the
normal business operations of the Company) to the premises, properties,
financial and accounting records, contracts, other records and documents, and
personnel, of or pertaining to the Company for reasonable business purposes;
provided, however, that Parent or Seller may limit access to any premises,
properties, records, contracts, documents or personnel to the extent required to
comply with any contractual obligations of confidentiality to which Parent,
Seller, the Company or the Subsidiary may be bound or to comply with any law or
regulations concerning the treatment of classified information. Prior to the
Closing, Buyer and its representatives shall not contact or communicate with the
employees and customers of the Company or any of its Affiliates in connection
with the transactions contemplated by this Agreement except with the prior
written consent of Seller, which consent will not be unreasonably withheld.
4.5 Antitrust. To the extent required under the HSR Act, each of the
Parties shall (i) promptly following the execution of this Agreement, file (or
cause to be filed) any Notification and Report Forms and related material that
it may be required to file with the United States Federal Trade Commission (the
"FTC") or the United States Department of Justice (the "DOJ") under the HSR Act,
(ii) use commercially reasonable efforts to obtain an early termination of the
applicable waiting period under the HSR Act as a result of the transactions
contemplated by this Agreement, and (iii) make any further filings or
information submissions pursuant thereto that may be reasonably necessary,
proper or advisable. Buyer shall pay all filing fees incurred in connection with
such filings under the HSR Act. Each Party hereto shall promptly inform the
other of any material communication from the FTC, the DOJ or any other
Governmental Entity under any of the Antitrust Laws regarding the transactions
contemplated hereby. If a Party or any of their respective Affiliates receives a
request for additional information or documentary material from any Governmental
Entity under the Antitrust Laws with respect to the transactions contemplated by
this Agreement, then such Party shall endeavor in good faith to make, or cause
to be made, as soon as reasonably practicable and after consultation with the
other Party, an
- 39 -
appropriate response in compliance with such request. Seller shall advise Buyer,
and Buyer shall advise Seller, promptly in respect of any understandings,
undertakings or agreements (oral or written) which it proposes to make or enter
into with the FTC, the DOJ or any other Governmental Entity under the Antitrust
Laws regarding the transactions contemplated hereby. For purposes of this
Agreement, "Antitrust Laws" shall mean and include the Xxxxxxx Act, as amended,
the Xxxxxxx Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other Federal and state statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines, and other laws that are designed
or intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade.
4.6 Exclusivity. During the period from the date of this Agreement
until the Closing Date (or such earlier date as this Agreement may be terminated
in accordance with Article IX), Parent and Seller shall not and shall cause
their respective Affiliates and each of the respective officers, directors,
employees, representatives and agents of Parent, Seller and their respective
Affiliates not to, directly or indirectly, encourage, solicit, initiate, engage
or participate in discussions or negotiations with (and to immediately suspend
any existing discussions or negotiations with) any Person (other than Buyer)
concerning any merger or consolidation involving the Company, any sale of
material assets by the Company not in the Ordinary Course of Business, sale of
the capital stock of the Company, any joint venture or other business
combination involving the Company.
4.7 Insurance. Seller shall cause the Company to maintain, until the
Closing (or such earlier date as this Agreement may be terminated in accordance
with Article VII), insurance coverage that is similar to the insurance coverage
under the insurance policies identified in Section 2.21 of the Disclosure
Schedule.
4.8 Lockbox Accounts; Certain Payments. Effective at the close of
business on the Closing Date, Parent and Seller shall cause all lockbox
accounts, blocked accounts and other similar accounts into which payments from
third parties to the Company are made to be transferred to Buyer. If, after the
Closing Date, Parent or Seller shall receive any money from any lockbox account,
blocked account or other similar account of the Company, Parent or Seller, as
the case may be, shall hold such amounts in trust for Buyer and promptly remit
such amounts to Buyer.
4.9 Agreements Concerning Real Property Leases. The Parties shall
use commercially reasonable efforts to take the actions described in Section 4.9
of the Disclosure Schedule with respect to the Real Property Leases, such
actions to be effective, if possible, as of the Closing Date. To the extent that
the Parties are unable to take any of the actions described in Section 4.9 of
the Disclosure Schedule effective as of the Closing Date, they shall continue to
use commercially reasonable efforts to take such actions after the Closing Date
and shall, pending the taking of any such action after the Closing Date, work
together in good faith to make arrangements between the Parties (including, with
limitation, entering into sublease arrangements or occupancy licenses) so as to
put the Parties in substantially the same economic
- 40 -
position as if all of the actions described in Section 4.9 of the Disclosure
Schedule had been effective as of the Closing Date. Each Party shall bear its
own legal fees with respect to the foregoing actions and all other costs
incurred in connection with the foregoing actions shall be equitably allocated
among the Parties.
4.10 Distribution of Membership Interest in Joint Venture. Prior to
the Closing, Seller shall cause the Company to assign or otherwise transfer to
Parent or an Affiliate of Parent all of its membership interest in SMD.
4.11 Elimination of Indebtedness. Parent shall take all such actions
as may be necessary to ensure that neither the Company nor the Subsidiary has
any Indebtedness as of the Closing Date other than the notes payable in
connection with the Company's acquisition of System Simulation Solutions, Inc.
that are listed in Section 4.11 of the Disclosure Schedule (it being understood
and agreed that any and all liabilities relating to those notes payable that are
due and payable by the Company or the Subsidiary on or prior to the first
anniversary of the Closing Date shall be included as current liabilities on the
Final Closing Date Balance Sheet).
4.12 Assignment of Certain Contracts. Prior to the Closing, Seller
shall cause the Company to assign to an Affiliate of Parent those Contracts
listed in Section 4.12 of the Disclosure Schedule.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions to Obligations of Buyer. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or waiver in writing by Buyer) of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Seller set forth in Article II that are qualified as to
materiality or Company Material Adverse Effect shall be true and correct and
such representations and warranties that are not so qualified shall be true and
correct in all material respects at and as of the Closing Date as if made on and
as of the Closing Date, except those representations and warranties that address
matters only as of a particular date, which shall be true and correct, or true
and correct in all material respects, as applicable, as of such date.
(b) Performance. Each of Parent and Seller shall have
performed and complied with in all material respects the agreements and
covenants required to be performed or complied with by it under this Agreement
as of or prior to the Closing.
(c) Officer's Certificate. Each of Parent and Seller shall
have delivered to Buyer a certificate, dated the Closing Date and signed by its
duly authorized officer, to the effect that each of the conditions specified in
clauses (a), (b) and (f) of this Section 5.1 is satisfied in all respects.
- 41 -
(d) Governmental Permits. All requisite Permits necessary,
including any such approvals or authorizations under the HSR Act, for the
consummation of the transactions contemplated by this Agreement shall have been
duly issued or granted and all applicable waiting periods shall have expired or
been earlier terminated.
(e) Certain Consents. Parent and Seller shall have obtained
(or caused to be obtained) all of the Consents listed on Section 5.1(e) of the
Disclosure Schedule.
(f) No Material Adverse Change. Except as set forth in
Section 2.19 of the Disclosure Schedule, since September 30, 2001, there shall
not have occurred any Company Material Adverse Effect.
(g) No Injunction, etc. No action, suit or proceeding shall
be pending by or before any Governmental Entity wherein an unfavorable judgment,
order, decree, stipulation or injunction would reasonably be expected to (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect materially and adversely the
right of Buyer to own the Company Shares and to control the Company or (iv)
affect materially and adversely the right of the Company or the Subsidiary to
own its assets and to operate its businesses, and no such judgment, order,
decree, stipulation or injunction shall be in effect.
(h) Corporate Proceedings. All corporate and other
proceedings of Parent and Seller in connection with this Agreement and the
transactions contemplated hereby, and all documents and instruments incident
thereto, shall be reasonably satisfactory in form and substance to Buyer and its
counsel, and Buyer and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.
(i) Closing Documents. Each and every document and
instrument required by Section 1.3(b) to be delivered to Buyer at or before the
Closing shall have been delivered to Buyer.
(j) FIRPTA Certificate. Buyer shall have received a
certificate of each of Parent and Seller, dated the Closing Date and sworn under
penalty of perjury, setting forth its name, address and federal tax
identification and stating that it is not a "foreign person" within the meaning
of Section 1445 of the Code, such certificate to be in the form set forth in the
Treasury Regulations.
(k) Base Period R&E Information. Seller shall have delivered
to Buyer on the Company's letterhead, all information reasonably requested by
Buyer relating to the Company's base period research and experimental expenses
and any other information reasonably requested by Buyer to allow Buyer to claim
research and experimental tax credits in accordance with the relevant sections
of the Code and the Treasury Regulations promulgated thereunder.
- 42 -
(l) Good Standing Certificates.
(i) Parent shall have delivered to Buyer a
certificate of good standing from the secretary of state of Parent's
organization.
(ii) Seller shall have delivered to Buyer a
certificate of good standing from each of the secretaries of state of Seller's
organization, the Company's organization, the Subsidiary's organization and the
states identified in Section 2.1(b) of the Disclosure Schedule.
(m) Resignations. Except as otherwise instructed by Buyer,
Seller shall have delivered to Buyer evidence of the resignation of all the
directors and all of the non-operating officers of the Company.
(n) Incumbency Certificate. Parent and Seller shall have
delivered a certificate of incumbency with respect to the office and authority
of their respective officers executing this Agreement and the other documents
delivered by them at Closing, duly executed by their respective Secretaries or
Assistant Secretaries.
(o) Intercompany Agreements. Each Intercompany Agreement
shall have been terminated and of no force and effect, and there shall be no
unsatisfied obligations or liabilities thereunder, pursuant to termination
agreements in form and substance satisfactory to Buyer.
5.2 Conditions to Obligations of Parent and Seller. The obligation
of each of Parent and Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (or waiver by Parent or Seller, as the
case may be) of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in Article III that are qualified as to
materiality shall be true and correct and such representations and warranties
that are not so qualified shall be true and correct in all material respects at
and as of the Closing Date as if made on and as of the Closing Date, except
those representations and warranties that address matters only as of a
particular date, which shall be true and correct, or true and correct in all
material respects, as applicable, as of such date.
(b) Performance. Buyer shall have performed and complied
with in all material respects the agreements and covenants required to be
performed or complied with by it under this Agreement as of or prior to the
Closing.
(c) Officer's Certificate. Buyer shall have delivered to
Seller a certificate, dated the Closing Date and signed by its duly authorized
officer, to the effect that each of the conditions specified in clauses (a) and
(b) of this Section 5.2 is satisfied in all respects.
(d) Governmental Permits. All requisite Governmental Permits
necessary, including any such approvals or authorizations under the HSR Act, for
the consummation of the
- 43 -
transactions contemplated by this Agreement shall have been duly issued or
granted and all applicable waiting periods shall have expired or been earlier
terminated.
(e) Certain Consents. Buyer shall have obtained (or caused
to be obtained) all of the Consents listed in Section 5.2(e) of the Disclosure
Schedule.
(f) Corporate Proceedings. All corporate and other
proceedings of Buyer in connection with this Agreement and the transactions
contemplated hereby, and all documents and instruments incident thereto, shall
be reasonably satisfactory in form and substance to Seller and its counsel, and
Seller and its counsel shall have received all such documents and instruments,
or copies thereof, certified if requested, as may be reasonably requested.
(g) No Injunction, etc. No action, suit or proceeding shall
be pending by or before any Governmental Entity wherein an unfavorable judgment,
order, decree, stipulation or injunction would reasonably be expected to (i)
prevent consummation of any of the transactions contemplated by this Agreement,
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, and no such judgment, order, decree,
stipulation or injunction shall be in effect.
(h) Closing Documents. Each and every document and
instrument required by Section 1.3(b) to be delivered to Seller at or before the
Closing shall have been delivered to Seller.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Parent and Seller. Subject to the terms and
conditions of this Article VI, Parent and Seller, jointly and severally, shall
defend, indemnify and hold harmless Buyer, its Affiliates (including, after the
Closing, the Company and the Subsidiary) and their respective successors,
officers, directors, shareholders, employees, agents, trustees, advisers,
lenders and representatives (collectively, the "Buyer Indemnitees"), from and
against, and pay or reimburse the Buyer Indemnitees for, any and all claims,
debts, obligations, liabilities (including Tax liabilities), monetary damages,
fines, fees, penalties, interest obligations, deficiencies, judgments,
proceedings, losses, costs and expenses (whether absolute, accrued, conditional
or otherwise and whether or not resulting from third party claims), including
without limitation reasonable out-of-pocket expenses, consulting fees, court
costs, expert witness fees and reasonable attorneys' fees and expenses incurred
in the investigation or defense of any of the same or in asserting any of their
respective rights hereunder (collectively, "Damages"), resulting from, arising
out of or relating to:
(a) any misrepresentation or breach of warranty of Parent or
Seller contained in this Agreement or the certificate of Parent or the
certificate of Seller delivered at the Closing pursuant to Section 5.1(c);
- 44 -
(b) any failure of Parent or Seller to perform any covenant
or agreement made or contained in this Agreement or fulfill any obligation in
respect thereof;
(c) any failure of Seller to have and transfer to Buyer good
and valid title to the issued and outstanding Company Shares free and clear of
any Share Encumbrances;
(d) any Environmental Liabilities and Costs arising from,
relating to, in respect of or incurred in connection with conditions existing or
events occurring prior to the Closing;
(e) SMD or the conduct of the business operated by SMD,
including any existing, historical or future liability or commitment of SMD, the
Company's ownership interest in SMD or the assignment or other transfer of the
Company's equity interest in SMD to Parent or an Affiliate of Parent as
contemplated by Section 4.10;
(f) the items set forth in Section 2.10 of the Disclosure
Schedule; or
(g) the earnout payments due in respect of the Company's
acquisition of System Simulation Solutions, Inc. and set forth in item 1 of
Section 2.6 of the Disclosure Schedule (which earnout payments shall be the
responsibility of and shall be paid by Parent and Seller); or
(h) the Contracts listed in Section 4.12 of the Disclosure
Schedule.
6.2 Indemnification by Buyer. Subject to the terms and conditions of
this Article VI, from and after the Closing, Buyer shall defend, indemnify and
hold harmless Parent, Seller, their respective Affiliates and their respective
successors, officers, directors, shareholders, employees, agents, advisers,
lenders and representatives (collectively, the "Seller Indemnitees"), from and
against, and pay or reimburse the Seller Indemnitees for, any and all Damages
resulting from, arising out of or relating to:
(a) any misrepresentation or breach of warranty of Buyer
contained in this Agreement or the certificate of Buyer delivered at the Closing
pursuant to Section 5.2(c);
(b) any failure of Buyer to perform any covenant or
agreement of Buyer made or contained in this Agreement or fulfill any obligation
in respect thereof; or
(c) the conduct of the business or operations of the Company
following the Closing, in each case except as otherwise specifically provided
for in this Agreement or in any other Transaction Document and except for any
Damages that result from actions taken by Parent, Seller, the Company or any of
their respective Affiliates prior to the Closing; provided, however, that this
Section 6.2(c) shall not apply with respect to any Damages in respect of which
Parent or Seller have an indemnification obligation hereunder or for which
Parent or Seller are responsible hereunder after the Closing.
- 45 -
6.3 Claims for Indemnification.
(a) Third-Party Claims. A Person entitled to indemnification
under this Article VI (an "Indemnified Party") shall give prompt written
notification to the Person from whom indemnification is sought (the
"Indemnifying Party") of the commencement of any action, suit or proceeding
relating to a third-party claim for which indemnification may be sought or, if
earlier, upon the assertion of any such claim by a third party; 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 actually damaged as a result of such failure to give notice. Within 30 days
after delivery of such notification, the Indemnifying Party may, upon written
notice thereof to the Indemnified Party, assume control of the defense of such
action, suit, proceeding or claim with counsel reasonably satisfactory to the
Indemnified Party. If the Indemnifying Party does not assume control of such
defense, the Indemnified Party shall control such defense. The Party not
controlling such defense may participate therein at its own expense; provided,
however, that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that, based on advice from counsel, the
Indemnifying Party and the Indemnified Party have conflicting interests or
defenses with respect to such action, suit, proceeding or claim, then the
reasonable fees and expenses of counsel to the Indemnified Party shall be
considered "Damages" for purposes of this Agreement. The Party controlling such
defense shall keep the other Party advised of the status of such action, suit,
proceeding or claim and the defense thereof and shall consider recommendations
made by the other Party with respect thereto. The Indemnified Party shall not
agree to any settlement of such action, suit, proceeding or claim or consent to
the entry of any judgment without the prior written consent of the Indemnifying
Party which shall not be unreasonably withheld or delayed. The Indemnifying
Party shall not agree to any settlement of such action, suit, proceeding or
claim or consent to the entry of any judgment that does not include a complete,
general and unconditional release of the Indemnified Party or Parties from all
liability with respect thereto or that imposes any liability or obligation on
the Indemnified Party or Parties without the prior written consent of the
Indemnified Party or Parties.
(b) Procedure for Other Claims. An Indemnified Party wishing
to assert a claim for indemnification under this Article VI which is not subject
to Section 6.3(a) shall deliver to the Indemnifying Party a written notice (a
"Claim Notice") which contains (i) a description and the amount (to the extent
then known and quantifiable) (the "Claimed Amount") of any Damages incurred by
the Indemnified Party, (ii) a statement that the Indemnified Party is entitled
to indemnification under this Article VI and a reasonable explanation of the
basis therefor, and (iii) a demand for payment in the amount of such Damages.
Within 30 days after delivery of a Claim Notice, the Indemnifying Party shall
deliver to the Indemnified Party a written response in which the Indemnifying
Party shall: (A) agree that the Indemnified Party is entitled to receive all of
the Claimed Amount (in which case such response shall be accompanied by a
payment by the Indemnifying Party to the Indemnified Party of the Claimed
Amount, by check or by wire transfer), (B) agree that the Indemnified Party is
entitled to receive part, but not
- 46 -
all, of the Claimed Amount (the "Agreed Amount") (in which case such response
shall be accompanied by a payment by the Indemnifying Party to the Indemnified
Party of the Agreed Amount, by check or by wire transfer), or (C) contest that
the Indemnified Party is entitled to indemnification or to receive any of the
Claimed Amount (in which case the response shall be accompanied by a reasonably
detailed description of the reason for such contest). If the Indemnifying Party
in such response contests the right to indemnification or the payment of all or
part of the Claimed Amount, the Indemnifying Party and the Indemnified Party
shall use good faith efforts to resolve such dispute. If such dispute is not
resolved within 30 days following the delivery by the Indemnifying Party of such
response, the Indemnifying Party and the Indemnified Party shall each have the
right to submit such dispute to arbitration in accordance with the provisions of
Section 10.15.
(c) Environmental Actions. If, after the Closing Date,
Parent or Seller is required to perform any investigation, monitoring, clean-up,
containment, response, removal, remedial, compliance or other action relating to
any Environmental Liabilities and Costs for which Parent or Seller are obligated
to defend, indemnify and hold Buyer Indemnities harmless pursuant to Section 6.1
(such work is referred to herein as the "Environmental Actions"), then Parent or
Seller, as the case may be, shall perform, or cause to be performed, the
Environmental Action(s) subject to the limitations contained in Section 6.5. In
connection with such performance, Parent or Seller, as the case may be, shall
have (i) the continuing right of access to the property during normal business
hours, and (ii) the exclusive right to manage and control all Environmental
Actions undertaken pursuant to this Section 6.3(c), including selection of any
contractor or consultant, any contracts entered into with such parties, any
disclosures to or agreements with any public or private agencies relating to the
Environmental Action and any written plan for the particular Environmental
Action, subject to the requirements of this Agreement, and Buyer shall
reasonably cooperate with Parent's or Seller's, as the case may be, efforts to
carry out its obligations under this Agreement, including by executing any
documents reasonably requested by Parent or Seller; provided, however, that
Buyer shall not be required to execute any document which will cause Buyer to
incur any additional liability or obligations hereunder under Applicable Law or
otherwise. Parent and Seller shall conduct the Environmental Actions:
(A) using an environmental consulting firm reasonably
acceptable to Buyer;
(B) in a manner which does not impair the use, in any
material respect, of any of the Leased Real Property as currently used,
including refusing to accept any deed restriction which may impair such use, in
any material respect, of any of the Leased Real Property; and
(C) in a manner consistent with Buyer's reasonable security
requirements, and which minimizes the intrusion upon business operations,
including providing reasonable notice at least 24 hours prior to entry.
- 47 -
6.4 Survival.
(a) Except as otherwise provided in this Section 6.4, the
representations and warranties of Parent, Seller and Buyer set forth in this
Agreement shall survive the Closing and the consummation of the transactions
contemplated hereby and continue until the end of the eighteen-month period
immediately following the Closing Date, at which time they shall expire.
Notwithstanding the foregoing, (i) the representations and warranties of Parent
and Seller contained in Sections 2.1, 2.2 and 2.3 and of Buyer contained in
Sections 3.1 and 3.2 shall survive the Closing and the consummation of the
transactions contemplated hereby without limitation, (ii) the representations
and warranties contained in Sections 2.7, 2.8 and 2.16 shall survive the Closing
and the consummation of the transactions contemplated hereby for the period of
time equal to the applicable statute of limitations in respect of claims
relating thereto. The covenants and agreements of Parent, Seller and Buyer set
forth herein shall survive the Closing and the consummation of the transactions
contemplated hereby.
(b) Any claim relating to a representation or warranty set
forth herein that is properly asserted in writing pursuant to Section 6.3 prior
to the expiration of the applicable survival period, if any, as provided in
Section 6.4(a) of the representation or warranty that is the basis for such
claim shall survive until such claim is finally resolved and satisfied.
6.5 Limitations.
(a) Except with respect to claims (i) based on fraud,
criminal activity, intentional misrepresentation or intentional misconduct, or
(ii) made pursuant to Article VIII, and subject to Section 10.13, the rights of
the Indemnified Parties under this Article VI shall be the sole and exclusive
remedies of the Indemnified Parties with respect to claims resulting from or
relating to any misrepresentation, breach of warranty or failure to perform any
covenant or agreement contained in this Agreement.
(b) Notwithstanding anything to the contrary contained in
this Agreement, each of the following limitations shall apply:
(i) Parent and Seller shall not be required to
indemnify Buyer Indemnitees with respect to any claim for indemnification
pursuant to Section 6.1(a) unless and until the aggregate amount of all claims
for indemnification under Section 6.1(a) exceeds $400,000, at which point Buyer
Indemnitees shall be entitled to indemnification only for the amount by which
such claims exceed such $400,000 amount. After the aggregate amount of all
claims exceeds $400,000, claims may be asserted regardless of amount. The
limitations contained in this Section 6.5(b)(i) shall not apply with respect to
claims for indemnification relating to Section 2.7.
(ii) The aggregate liability of Parent and Seller for
monetary Damages with respect to claims for indemnification pursuant to Section
6.1(a) shall not exceed
- 48 -
$10,000,000, subject, however, to the other provisions of this Section 6.5. The
limitations contained in this Section 6.5(b)(ii) shall not apply with respect to
claims for indemnification relating to Section 2.7.
(iii) Buyer shall not be required to indemnify the
Seller Indemnitees with respect to any claim for indemnification pursuant to
Section 6.2(a) unless and until the aggregate amount of all claims for
indemnification under Section 6.2(a) exceeds $400,000, at which point, the
Seller Indemnitees shall be entitled to indemnification only for the amount by
which such claims exceed such $400,000 amount. After the aggregate amount of all
claims exceeds $400,000, claims may be asserted regardless of amount.
(iv) The aggregate liability of Buyer for monetary
Damages under this Agreement shall not exceed $10,000,000.
(c) Neither Parent nor Seller shall have any right of
contribution against the Company or the Subsidiary with respect to any breach by
Seller or Parent of any of their representations, warranties, covenants or
agreements.
(d) The amount of any Damages for which indemnification is
provided under this Article VI shall be reduced by any related recoveries that
the Indemnified Party actually receives pursuant to any insurance policies or
other related payments actually received from non-Affiliate third parties and
any Tax benefits actually received by the Indemnified Party or any of its
Affiliates within one year of the date such Damages were paid on account of the
payment of such Damages.
(e) Notwithstanding anything to the contrary in this
Agreement, Buyer shall not be entitled to make any claim for indemnification
with respect to any matter to the extent the Base Purchase Price (as the same
may have been adjusted pursuant to Section 1.5) has been adjusted to reflect
such matter pursuant to Section 1.4 and the amount of any Damages for which
indemnification is provided under this Article VI shall be calculated net of any
accruals, reserves or provisions reflected in the Final Closing Date Balance
Sheet that relate to the nature of the claim from which such Damages arose. By
way of illustration, this shall mean that, subject to the other provisions
herein, Seller shall be responsible for, and Buyer may make, a claim relating to
accounts receivable only after indemnifiable Damages relating to accounts
receivable exceed the reserve for doubtful accounts reflected in the Final
Closing Date Balance Sheet; however, such reserve for doubtful accounts shall
not affect Seller's responsibility for, or Buyer's ability to make, any claim
for indemnifiable Damages relating to, for example, Intellectual Property.
6.6 Treatment of Indemnification Payments. All indemnification
payments made under this Agreement shall be treated by the Parties as an
adjustment to the Adjusted Purchase Price.
- 49 -
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. The Parties may terminate this
Agreement prior to the Closing as provided below:
(a) the Parties may terminate this Agreement by mutual
written consent;
(b) Buyer may terminate this Agreement by giving written
notice to Parent and Seller if (i) the representations and warranties of Parent
and Seller that are qualified by materiality shall not have been true and
correct as of the date when made or the representations and warranties of Parent
and Seller that are not so qualified shall not have been true and correct in all
material respects as of the date when made, or (ii) if any of the conditions set
forth in Section 5.1 shall not have been, or if it becomes apparent that any of
such conditions will not be, fulfilled by 5:00 p.m. Los Angeles time on January
31, 2002, unless such failure shall be due to the failure of Buyer to perform or
comply with any of the covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing or in each case unless
such breach is not remedied within fifteen (15) business days of delivery of
written notice thereof;
(c) Parent and Seller may terminate this Agreement by giving
written notice to Buyer if (i) the representations and warranties of Buyer that
are qualified by materiality shall not have been true or correct as of the date
when made or the representations and warranties of Buyer that are not so
qualified shall have been true and correct in all material respects as of the
date when made, or (ii) if any of the conditions set forth in Section 5.2 shall
not have been, or if it becomes apparent that any of such conditions will not
be, fulfilled by 5:00 p.m. Los Angeles time on January 31, 2002, unless such
failure shall be due to the failure of Seller to perform or comply with any of
the covenants, agreements or conditions hereof to be performed or complied with
by it prior to the Closing or in each case unless such breach is not remedied
within fifteen (15) business days of delivery of written notice thereof;
(d) Buyer may terminate this Agreement by giving written
notice to Parent and Seller if the Closing shall not have occurred pursuant
hereto by 5:00 p.m. Los Angeles time on or before January 31, 2002 (unless such
failure results from a breach by Buyer of this Agreement); or
(e) Parent and Seller may terminate this Agreement by giving
written notice to Buyer if the Closing shall not have occurred pursuant hereto
by 5:00 p.m. Los Angeles time on or before January 31, 2002 (unless such failure
results from a breach by Parent or Seller of this Agreement).
- 50 -
7.2 Effect of Termination.
(a) Except as set forth in Section 7.2(b), if either Party
terminates this Agreement pursuant to Section 7.1, this Agreement will become
void and have no effect and all obligations of the Parties hereunder shall
terminate without any liability of either Party to the other Party.
(b) Termination of this Agreement pursuant to Section 7.1(b)
or Section 7.1(c) by reason of a breach by either Party prior to the time of
such termination of this Agreement shall not relieve the defaulting or breaching
Party (whether or not it is the terminating Party) from any liability to the
other Party (including pursuant to Article VI).
ARTICLE VIII
TAX MATTERS
8.1 Preparation and Filing of Tax Returns.
(a) Seller shall prepare and timely file or shall cause to
be prepared and timely filed the following Tax Returns with respect to the
Company or in respect of its businesses, assets or operations:
(i) All Tax Returns for any Taxes for any taxable
period ending on or before the Closing Date imposed upon, or measured by,
income; and
(ii) All other Tax Returns required to be filed
(taking into account extensions) prior to the Closing Date.
(b) Buyer shall prepare and timely file or shall cause to be
prepared and timely filed all other Tax Returns with respect to the Company or
in respect of its businesses, assets or operations.
(c) Any Tax Return to be prepared and filed by Buyer for
taxable periods beginning on or before the Closing Date and ending after the
Closing Date shall, to the extent permitted by Applicable Law, be prepared on a
basis consistent with the last previous Tax Return of the Company. At Seller's
request, Buyer shall provide Seller a copy of such state and local Tax Returns
(or at the Buyer's option pro-forma state and local returns) promptly after
filing.
- 51 -
8.2 Tax Indemnification by Parent and Seller.
(a) Parent and Seller shall, jointly and severally,
indemnify Buyer Indemnitees in respect of, and hold the Buyer Indemnitees
harmless against, any and all of the following Taxes (and any and all related
Damages) with respect to the Company:
(i) Any and all Taxes in respect of the Company or
for which the Company may be liable for any taxable period ending (or deemed
pursuant to Section 8.4(b) to end) on or before the Closing Date;
(ii) Any liability or obligation of the Company for
Taxes for periods ending on or before the Closing Date under Treasury Regulation
Section 1.1502-6 or under any comparable or similar provision under state, local
or foreign laws, rules or regulations or as a result of the Company being a
member of a group with which it has filed or been included in a combined,
consolidated or unitary income Tax Return; and
(iii) Any Taxes arising out of, relating to, or in
connection with a breach of the representations and warranties contained in
Article II.
(b) Notwithstanding the foregoing, neither Parent nor Seller
shall indemnify Buyer Indemnities in respect of, or hold Buyer Indemnitees
harmless against, the federal Tax liability incurred by Decision Science
Applications, Inc. prior to its acquisition by the Company and accrued for on
the Baseline Balance Sheet or any related Damages, in an amount up to but not to
exceed $767,128 (the "Acquired Tax Liability"). Buyer shall pay and be
responsible for the Acquired Tax Liability. Parent and Seller shall pay and be
responsible for any such federal Tax liability or any related Damages in respect
of such federal Tax liability in excess of the Acquired Tax Liability.
(c) The Parties agree that to the maximum extent allowable
under applicable Tax laws, amounts payable to Buyer Indemnitees pursuant to this
Section 8.2 shall be treated (and reported on all applicable Tax Returns) as
adjustments to the Adjusted Purchase Price.
8.3 Tax Indemnification by Buyer.
(a) Buyer shall indemnify the Seller Indemnitees in respect
of, and hold the Seller Indemnitees harmless, against any and all Taxes (and any
and all related Damages) with respect to the Company for any taxable period
beginning (or deemed pursuant to Section 8.4(b) to begin) after the Closing
Date.
(b) The Parties agree that to the maximum extent allowable
under applicable Tax laws, amounts payable to the Seller Indemnitees pursuant to
this Section 8.3 shall be treated (and reported on all applicable Tax Returns)
as adjustments to the Adjusted Purchase Price.
- 52 -
8.4 Allocation of Certain Taxes.
(a) The Parties agree that if the Company is permitted but
not required under applicable state, local or foreign Tax laws to treat the
Closing Date as the last day of a taxable period, the Parties shall treat such
day as the last day of a taxable period. The Parties agree that they will treat
the Company as if it ceased to be part of the affiliated group of corporations
of which Parent and Seller are members within the meaning of Section 1504 of the
Code, and any comparable or similar provision of state, local or foreign laws,
rules or regulations, as of 11:59 p.m., local time, on the Closing Date.
(b) Any Taxes for a taxable period ending after the Closing
Date with respect to the Company shall be paid by Buyer and/or the Company, and
the Taxes for such period shall be apportioned for purposes of Section 8.2 and
Section 8.3 between the Parties based on the actual operations of the Company
during the portion of such period ending on the Closing Date, if any, and the
portion of such period beginning on the day following the Closing Date, and for
purposes of the provisions of Sections 8.2, 8.3 and 8.5, each portion of such
period shall be deemed to be a taxable period (whether or not it is in fact a
taxable period).
(c) Parent and Seller shall make any payment of Taxes
apportioned under Section 8.4(b) for which they are liable under Section
8.2(a)(i) to Buyer not later than five business days prior to the due date for
the payment of such Taxes (including estimated Taxes).
8.5 Refunds and Carrybacks.
(a) Seller shall be entitled to an amount equal to any
refunds (including any interest paid thereon) or credits of Taxes attributable
to taxable periods ending (or deemed pursuant to Section 8.4(b) to end) on or
before the Closing Date. Buyer shall promptly notify Seller in writing of any
Tax refund(s) received by or payable to the Company after the Closing in respect
of periods before or including the Closing Date.
(b) Buyer, the Company and/or their Affiliates, as the case
may be, shall be entitled to any refunds (including any interest paid thereon)
or credits of Taxes attributable to taxable periods beginning (or deemed
pursuant to Section 8.4(b) to begin) after the Closing Date.
(c) Buyer shall, or shall cause the Company promptly to,
forward to or reimburse Seller for any refunds (including any interest paid
thereon) or credits due Seller (pursuant to the terms of this Agreement) after
receipt thereof, and Parent and Seller shall promptly forward to Buyer or the
Company or reimburse Buyer or the Company for any refunds (including any
interest paid thereon) or credits due Buyer or the Company after receipt
thereof.
(d) Buyer, Parent and Seller agree that the Company shall
not carry back in respect to any consolidated, combined or unitary Tax Return
any item of loss, deduction or credit which arises in any taxable period ending
after the Closing Date to any taxable period ending on or before the Closing
Date.
- 53 -
(e) Neither Parent nor Seller nor any of their respective
Affiliates will elect to retain any net operating loss carryovers of the Company
under Regulation Section 1502-20(g).
8.6 Cooperation on Tax Matters; Tax Audits.
(a) In addition to the agreements of the Parties set forth
in Section 9.1, the Parties and their respective Affiliates shall cooperate in
the preparation of all Tax Returns for any Tax periods for which one Party could
reasonably require the assistance of the other Party in obtaining any necessary
information. Such cooperation shall include, but not be limited to, furnishing
prior years' Tax Returns or return preparation packages to the extent related to
the Company illustrating previous reporting practices or containing historical
information relevant to the preparation of such Tax Returns, and furnishing such
other information within such Party's possession requested by the Party filing
such Tax Returns as is relevant to their preparation. Such cooperation and
information also shall include without limitation provision of powers of
attorney for the purpose of signing Tax Returns and defending audits and
promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any applicable Governmental Entity
responsible for the imposition of Taxes (a "Taxing Authority") which relate to
the Company, and providing copies of all relevant Tax Returns to the extent
related to the Company, together with accompanying schedules and related
workpapers, documents relating to rulings or other determinations by any Taxing
Authority and records concerning the ownership and Tax basis of property, which
the requested Party may possess. The Parties and their respective Affiliates
shall make their respective employees and facilities available on a mutually
convenient basis to explain any documents or information provided hereunder.
Each Party shall be reimbursed for such assistance in the manner provided for in
Section 9.1(c).
(b) Parent and Seller shall have the right, at their own
expense, to control any audit or examination by any Taxing Authority ("Tax
Audit"), initiate any claim for refund, contest, resolve and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment
relating to any and all Taxes for any taxable period ending on or before the
Closing Date with respect to the Company. Buyer shall have the right, at its own
expense, to control any other Tax Audit, initiate any other claim for refund,
and contest, resolve and defend against any other assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to Taxes with
respect to the Company; provided that, with respect to (i) any state, local or
foreign Taxes for any taxable period beginning before the Closing Date and
ending after the Closing Date, and (ii) any item the adjustment of which may
cause Parent or Seller to become obligated to make any payment pursuant to
Section 8.2(a) hereof, Buyer shall consult with Parent and Seller with respect
to the resolution of any issue that would affect Parent and Seller.
8.7 Termination of Tax-Sharing Agreements. All Tax sharing
agreements or similar arrangements with respect to or involving the Company
shall be terminated prior to the Closing Date and, after the Closing Date, the
Company shall not be bound thereby or have any liability thereunder for amounts
due in respect of periods ending on or before the Closing Date.
- 54 -
ARTICLE IX
FURTHER AGREEMENTS
9.1 Access to Information; Record Retention; Cooperation.
(a) Access to Information. Subject to compliance with
Applicable Laws regarding classified information, for the six-year period from
and after the Closing, each Party shall (and shall cause its accountants,
counsel, consultants, employees and agents to) afford to the other Party and to
its authorized accountants, counsel and other designated representatives
reasonable access (including using reasonable efforts to give access to third
parties possessing information and providing reasonable access to its own
employees who are in possession of relevant information) and duplicating rights
during normal business hours (with reasonable prior notice and in a manner not
unduly interfering with such Party's business) to all non-privileged records,
books, contracts, instruments, documents, correspondence, computer data and
other data and information (collectively, "Information") within the possession
or control of such Party or its Affiliates, relating to the Company or its
businesses or operations prior to the Closing, insofar as such access is
reasonably required by the other Party. Information may be requested under this
Section 9.1(a) for any financial reporting and accounting matters, preparing or
verifying financial statements, preparing and filing of any Tax Returns,
prosecuting any claims for refund, defending any Tax claims or assessment,
preparing securities law or exchange filings, prosecuting, defending or settling
any litigation, Environmental Matter or insurance claim and complying with any
governmental proceeding or audit, performing this Agreement and the transactions
contemplated hereby.
(b) Access to Personnel. Subject to compliance with
Applicable Laws regarding classified information, for the six-year period from
and after the Closing, each Party shall use reasonable efforts to make available
to the other Party (upon reasonable prior notice and in a manner not unduly
interfering with such Party's business), such Party's and its Affiliates'
officers, directors, employees and agents to the extent that such persons may
reasonably be required in connection with any legal, administrative or other
proceedings in which the requesting Party may from time to time be involved
relating to the Company or its business or operations prior to the Closing or
for any other matter referred to in Section 9.1(a).
(c) Reimbursement. A Party providing Information or
personnel to the other Party under Section 9.1(a) or Section 9.1(b) shall be
entitled to receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts, relating to supplies, disbursements and
other out-of-pocket expenses, as may be reasonably incurred in providing such
Information; provided, however, that no such reimbursements shall be required
for the salary or cost of fringe benefits or similar expenses pertaining to
employees or directors of the providing Party or its Affiliates.
- 55 -
(d) Retention of Records. Except as otherwise required by
Applicable Law or agreed to in writing by the Parties, each Party shall (and
shall cause its Affiliates to) use reasonable efforts to preserve all material
Information in its possession pertaining to the Company and its business and
operations prior to the Closing until the sixth anniversary of the Closing Date.
Notwithstanding the foregoing, in lieu of retaining any specific material
Information, any Party may offer in writing to the other Party to deliver such
Information to the other Party and, if such offer is not accepted within 90
days, the offered Information may be disposed of at any time.
(e) Confidentiality. Each of Buyer, Parent and Seller shall
hold, and shall use reasonable efforts to cause their respective Affiliates,
consultants and advisors to hold, in strict confidence all Information
concerning the other Party furnished to it by the other Party or the other
Party's representatives at any time prior to Closing or pursuant to this Section
9.1 (except to the extent that such Information (i) is or becomes generally
available to the public other than as a result of a disclosure by the receiving
Party in violation of the terms of this Section 9.1, (ii) was within the
possession of the receiving Party prior to it being furnished to the receiving
Party by or on behalf of the other Party pursuant hereto, provided that the
source of such information was not known by the receiving Party at the time of
receipt to be bound by a confidentiality agreement with or other contractual,
legal or fiduciary obligation of confidentiality to the other Party or any other
party with respect to such information, (iii) is or becomes available to the
receiving Party from a source other than the other Party, provided that such
source is not, to the knowledge of the receiving Party at the time of receipt,
bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the other Party or any other party
with respect to such information, or (iv) was or is independently developed by
the receiving Party without utilizing any Information or violating any of the
receiving Party's obligations under this Agreement), and each Party shall not
release or disclose such Information to any other Person (except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors, in
which case they shall be advised of the restrictions contained herein in respect
of such Information and such Party shall cause them not to release or disclose
such Information), unless compelled to disclose such Information by judicial or
administrative process or, as advised by its counsel, by other requirements of
Applicable Law; provided, however, that in the case of disclosure compelled by
judicial or administrative process, the disclosing Party shall (unless expressly
prohibited by Applicable Law) notify the non-disclosing Party promptly of the
request or requirement so that the non-disclosing Party may seek an appropriate
protective order or waive compliance with the provisions of this Section 9.1(d).
If, in the absence of a protective order or the receipt of a waiver hereunder, a
Party is, on the advice of counsel, compelled to disclose any Information by
judicial or administrative process, such Party may so disclose the Information;
provided further, however, that, at the written request of the non-disclosing
Party, the disclosing Party shall use commercially reasonable efforts to obtain,
at the expense of the non-disclosing Party an order or other assurance that
confidential treatment will be accorded to such portion of the Information
required to be disclosed.
- 56 -
9.2 Director and Officer Indemnification. From and after the
Closing, Buyer shall not take any action to alter or impair any exculpatory or
indemnification provisions, now existing in the charter or bylaws of the Company
or the Subsidiary, for the benefit of any individual who served as a director or
officer of the Company at any time prior to the Closing Date, except for any
changes that may be required to conform with changes in Applicable Law and any
changes that do not affect the application of such provisions to acts or
omissions of such individuals prior to the Closing Date.
9.3 Certain Retention and Severance Agreements. Buyer shall pay and
be responsible for any Severance Benefit (as defined in Section 2.29 of the
Disclosure Schedule). Parent shall pay and be responsible for any Retention
Bonus (as defined in Section 2.29 of the Disclosure Schedule).
9.4 Further Assurances. At any time and from time to time after the
Closing, as and when requested by any Party hereto and at such Party's expense,
the other Party shall promptly execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions as such other Party may reasonably deem
necessary or desirable to evidence and effectuate the transactions contemplated
by this Agreement.
9.5 Acknowledgements by Buyer. THE REPRESENTATIONS AND WARRANTIES OF
PARENT AND SELLER, EXPRESSLY AND SPECIFICALLY SET FORTH IN THIS AGREEMENT,
INCLUDING THE DISCLOSURE SCHEDULES, CONSTITUTE THE SOLE AND EXCLUSIVE
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER TO BUYER IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED HEREBY, AND BUYER UNDERSTANDS, ACKNOWLEDGES AND
AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE
WHETHER EXPRESS, IMPLIED OR STATUTORY (INCLUDING, BUT NOT LIMITED TO, ANY
RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS,
ASSETS OR LIABILITIES OF THE COMPANY) ARE SPECIFICALLY DISCLAIMED BY PARENT AND
SELLER.
- 57 -
9.6 Certain Employee Benefits Matters
(a) For a period of at least 12 months following the
Closing, Buyer shall provide (or shall cause the Company to provide) each
employee who is employed by the Company as of the Closing Date (a "Continuing
Employee") with compensation and employee benefits (other than stock or other
equity or equity-linked based plans) which are substantially comparable in the
aggregate to those provided by the Company as of the date hereof. Buyer
acknowledges that the Company Plans are all sponsored by Parent and that, after
the Closing, all employee benefits will be provided to employees of the Company
under plans sponsored by Buyer or an Affiliate of Buyer. Buyer agrees (i) to
waive or have the Company waive any waiting period or limitations regarding
pre-existing conditions with respect to Continuing Employees and their
beneficiaries under any group health or other benefit plan maintained by Buyer
for the benefit of any Continuing Employees after the Closing (but only to the
extent that there would have been no such waiting period or limitations under
the Company Plans if the transactions contemplated hereby had not been
consummated), (ii) to credit any covered expenses incurred by any employee under
Parent's group health plan prior to the Closing towards any deductibles, limits
or out-of-pocket maximums under any group health plan maintained by Buyer for
the benefit of any Continuing Employees after the Closing, (iii) to credit the
service of each Continuing Employee with the Company or any of its Affiliates
prior to the Closing for the purposes of determining such continuing Employee's
Years of Service under plans maintained by Buyer for the benefit of any
Continuing Employee after the Closing, (iv) subject to Section 9.3, provide
severance benefits to Continuing Employees terminated without cause within 12
months of the Closing that are at least equal to the severance that would have
been provided by the Company under the Company's severance plans in effect
immediately prior to the Closing, and (v) provide continuation health care
coverage to all Continuing Employees and their qualified beneficiaries who incur
a qualifying event on and after the Closing Date in accordance with the
continuation health care coverage requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA").
(b) Parent and Seller will cause the Seller's Retirement
Savings 401(K) Plan (the "Existing 401(K) Plan") to be amended to provide that
the transaction contemplated by this Agreement shall be a distributable event
under the Existing 401(K) Plan. Buyer will amend its 401(K) Plan to accept
rollover contributions and direct rollovers from the Continuing Employees,
including any outstanding loans held under the Existing 401(K) Plan. In
addition, Buyer shall assume responsibility for the cafeteria plan which is
maintained under Section 125 of the Code for the benefit of the Continuing
Employees of the Company, and Seller shall provide to Buyer prior to the Closing
Date a list of those Continuing Employees participating in the cafeteria plan,
together with a list of their elections made prior to the Closing Date, and any
balances in their respective accounts as of the Closing Date.
- 58 -
9.7 Covenant Not to Compete.
(a) During the period commencing on the Closing Date and
continuing until the third anniversary of the Closing Date (the "Noncompetition
Period"), neither Parent nor Seller shall (and each of Parent and Seller shall
cause each of its Affiliates not to), directly or indirectly, compete anywhere
in the world with Buyer, the Company or any of their Affiliates with respect to
(i) the provision of services by the Company or the Subsidiary (including
extensions of such services) of the type provided under the terms of any
Government Contract or task order to which the Company or the Subsidiary is a
party or by which the Company or the Subsidiary or any of their respective
properties or assets are bound and under which any such Person continues to have
any obligation, in each case, as of the Closing Date, or (ii) any follow-on
Government Contract or task order relating to the provision of services
(including extensions of such services) of the type provided under the terms of
any Government Contract or task order referred to in clause (i) of this
sentence. As used in the foregoing sentence, the term "compete" shall be limited
to the provision of services under the terms of a Government Contract of the
type provided by the Company and the Subsidiary on the Closing Date (including
extensions of such services) in the form of systems engineering, program
integration services, information technology services, modeling and simulation
support, and advanced scientific research, and shall not include bid or proposal
management services or competitive strategy consulting services (in each case,
with respect to Government Contracts or otherwise), even though such services
may be provided to a competitor of Buyer or the Company. The terms of this
Section 9.7(a) are not intended to, and shall not apply to, any Person who
acquires all or substantially all of the business of Parent after the date
hereof (other than a Person who is an Affiliate of Parent prior to such
acquisition unless such Person becomes an Affiliate solely to effect such
acquisition) by way of merger, sale of the capital stock of Parent or sale of
all or substantially all of the assets of Parent.
(b) During the Noncompetition Period, each of Parent and
Seller will not (and will cause its Affiliates and its directors and officers
and their respective Affiliates not to), on its behalf or on behalf of any other
Person, directly or indirectly, (a) solicit or hire or engage, whether as an
employee, consultant or otherwise, any Person who has been engaged, whether as
an employee, consultant or otherwise, by the Company at any time during the 12
months immediately preceding such solicitation, hiring or engagement; provided,
however, that the foregoing shall not prohibit Parent and Seller or any of their
respective Affiliates from (i) soliciting, hiring or engaging any person who was
terminated by the Company (or Buyer or an Affiliate of Buyer) after the Closing
Date or who resigned after the Closing Date under circumstances that would
constitute constructive termination (e.g., substantial change in job or salary,
required relocation, etc.), or (ii) placing any general advertisements for
employees so long as such general advertisements are not directed to any
employees of the Company or from hiring or engaging any employee, consultant or
otherwise in response thereto; or (b) knowingly induce any Person who is an
agent, contractor, customer of the Company to leave, stop selling to or stop
buying from the Company.
- 59 -
(c) The Parties hereto agree that the foregoing covenants in
this Section 9.7 are reasonable under the circumstances, and further agree that
if in the opinion of any court of competent jurisdiction such covenants are not
reasonable in any respect, such court shall have the right, power and authority
to, and shall, modify such provision or provisions of such covenants to the
extent the court determines such covenants are not reasonable and to enforce
such covenants as so amended. Parent and Seller agree that any breach of such
covenants would irreparably injure the Company. Accordingly, each of Parent and
Seller agrees that Buyer may enforce the provisions hereof and, in addition to
pursuing any other remedies it may have in law or in equity, may seek an
injunction against Parent or Seller from any court having jurisdiction over the
matter restraining any violation by Parent or Seller of such covenants. Each of
Parent and Seller agrees that the existence of any claim or cause of action by
it against Buyer shall not constitute a defense to the enforcement of such
covenants. Each of Parent and Seller agrees that a breach of such covenants will
automatically toll and suspend the running of the Noncompetition Period.
9.8 Insurance. Each of Parent and Seller shall (and shall cause its
Affiliates to) reasonably cooperate with Buyer and Buyer will reimburse Seller
or its Affiliates for any reasonable, direct, out-of-pocket expenses incurred by
any of them and paid to any unaffiliated third party in connection with such
cooperation) in order to afford the Company the full benefit of all insurance
policies and all rights thereunder (including rights to causes of action,
lawsuits, claims and demands, rights of recovery and set-off) covering the
assets, properties and business of the Company, and proceeds under or with
respect to such insurance policies, for periods prior to the Closing to the
extent claims thereunder relate to any of the assets, properties and business or
liabilities of the Company.
9.9 Names and Logos. After the Closing, Buyer will not use (and will
cause each of its Affiliates not to use) the Name "Emergent Information
Technologies", or any similar Name or any Logo incorporating such Name or any
similar Name in any manner, including in connection with the sale of any
products or services or otherwise in the conduct of its business; provided,
however, that during a transition period of not more than three months, Buyer
and its Affiliates may use pursuant to a license agreement (a "Logo License
Agreement") at no cost to be entered into prior to the Closing, any stationery
or similar items used in the business of the Company or the Subsidiary any such
Name or Logo. Promptly after the Closing, Buyer shall amend the Articles of
Incorporation of the Company to change the name of the Company as appropriate to
comply with the foregoing sentence.
9.10 Government Audit Assistance. Each Party and its Affiliates shall
furnish each other Party with such assistance as may be reasonably requested by
such other Party in Government Contract audits and Tax audits.
9.11 Notices of Certain Events. Prior to or after the Closing, Parent
and Seller shall notify Buyer promptly upon becoming aware of:
- 60 -
(a) any notice or other written communication from any
Person alleging that the Consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(b) any notice or other written communication from any
Governmental Entity in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, charges, complaints, claims,
investigations or proceedings commenced or threatened against, relating to,
involving or otherwise affecting the Company or any of its assets or properties,
including the Leased Real Property, which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
2.14 or which relate to the consummation of the transactions contemplated by
this Agreement; and
(d) any change that (i) has had, individually or in the
aggregate with all other changes, a Company Material Adverse Effect, or (ii)
materially impairs or delays the ability of Parent or Seller to effect the
Closing.
Parent's and Seller's notification of Buyer of any of the events set
forth above in accordance with this Section 9.11 shall not be deemed to cure any
related breaches of the representations, warranties, covenants or agreements
contained in this Agreement, nor shall the failure of Buyer to take any action
with respect to such notice be deemed a waiver of any such breach or breaches.
9.12 Audit Assistance. Each Party shall accord to the other Party and
such other Party's independent auditors reasonable assistance and access, during
normal business hours and with reasonable prior notice, to any books and records
of the Company retained by such Party to enable the other Party to prepare
financial statements required under the rules and regulations of the U.S.
Securities and Exchange Commission ("SEC") and for any other reasonable purpose.
Reimbursement for actions taken by any Party at the request of the other Party
shall be payable in the manner provided for in Section 9.1(c).
9.13 Certain Permitted Liens. Parent, Seller and their respective
Affiliates will not suffer or permit any of the material assets of the Company
to be foreclosed upon as a result of those Security Interests specified in
clause (iii) of the definition thereof in connection with any Taxes for which
Parent or Seller are liable or responsible under this Agreement.
9.14 Property of the Other Party. After the Closing, each Party
promptly shall deliver (and shall cause its Affiliates to deliver) to the other
Party any mail, documents, cash, checks or other property that belongs to the
other Party and shall hold the same in trust for the other Party until such
delivery. Parent and Seller shall reimburse the Company for any checks or other
instruments of payment, dated or drawn prior to the Closing, but paid after the
Closing, except to
- 61 -
the extent that the amount of any such checks or other instruments of payment is
included as current liability in the Final Closing Date Balance Sheet.
ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Announcements. No Party shall issue (and each
Party shall cause its Affiliates not to issue) any press release or public
disclosure relating to the subject matter of this Agreement without the prior
written approval of the other Party; provided, however, that any Party may make
any public disclosure it believes in good faith is required by Applicable Law or
stock market or exchange rule (in which case the disclosing Party shall advise
the other Party and the other Party shall have the right to review such press
release or announcement prior to its publication). Buyer acknowledges that
Parent believes that it will be required by Applicable Law or stock market or
exchange rules to make a press release concerning this transaction as a result
of the execution of this Agreement and hereby consents to such release, provided
that Seller shall provide a copy thereof to Buyer for review prior to its
release.
10.2 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 and, to the extent specified herein,
their respective Affiliates; provided, however, that the provisions of Article
VI and Section 9.2 are intended for the benefit of the entities and individuals
specified therein and their respective legal representatives, successors and
assigns.
10.3 Action to be Taken by Affiliates. The Parties shall cause their
respective Affiliates to comply with all of the obligations specified in this
Agreement to be performed by such Affiliates. Prior to the Closing, the Company
will be deemed to be an Affiliate of Parent and Seller and not of Buyer.
Following the Closing, the Company will be deemed to be an Affiliate of Buyer
and not of Parent and Seller.
10.4 Entire Agreement. This Agreement (including the Disclosure
Schedule and the Exhibits hereto) and Section 3 of the Confidentiality
Agreement, dated August 21, 2001 (the "Confidentiality Agreement"), between
Buyer and Quarterdeck Investment Partners, LLC, constitute the entire agreement
between Buyer and its Affiliates, on the one hand, and Parent, Seller and their
respective Affiliates, on the other hand. This Agreement supersedes any prior
understandings, agreements, or representations by or between Buyer and its
Affiliates, on the one hand, and Parent, Seller and their respective Affiliates,
on the other hand, whether written or oral, with respect to the subject matter
hereof (including the Confidentiality Agreement, other than Section 3 thereof).
10.5 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
- 62 -
Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder (whether by merger, sale of stock, sale of all or
substantially all of the assets or business, by operation of law or otherwise)
without the prior written approval of the other Party, such consent not to be
unreasonably withheld or delayed; provided, however, that either Party may,
without the prior consent of the other Party, assign or otherwise transfer its
rights and obligations hereunder to (a) any of its Affiliates; provided,
however, that such Affiliate remains an Affiliate of such Party at all times
following such assignment or other transfer and such Party continues to be
responsible for its obligations hereunder; or (b) any successor-in-interest to
substantially all of the assignor's business (whether by stock sale, asset sale
or otherwise) or (c) in the case of Buyer, any successor-in-interest to
substantially all of the Company's business (whether by stock sale, asset sale
or otherwise. Any assignment under this Section 10.5 shall not relieve the
assigning party of any of its obligations hereunder.
10.6 Counterparts; Facsimile Signatures. This Agreement may be
executed with counterpart signature pages or in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument. This Agreement may be executed by facsimile
signature.
10.7 Headings. The table of contents and headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.8 Notices. All notices, requests, demands, claims, waivers and
other communications (each, a "Notice") hereunder shall be in writing. Any
Notice shall be: (a) sent by a reputable courier service guaranteeing delivery
within one business day, (b) personally delivered; or (c) sent by facsimile,
provided electronic confirmation of successful transmission is received by the
sending Party and a confirmation copy is sent on the same day as the facsimile
transmission by reputable courier service guaranteeing delivery within one
business day or by certified mail, return receipt requested (postage prepaid),
in each case to the intended recipient as set forth below:
If to Parent or Seller: Emergent Information Technologies, Inc.
0000 XxXxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
- 63 -
Copy to: Xxxxxxx & XxXxxxxx
000 Xxxxx Xxxx., Xxxxx 0000
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Loss
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Buyer: L-3 Communications Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Telephone: 000-000-0000
Telecopy: 000-000-0000
Copy to: Winston & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Gerkis, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Each Notice shall be effective and deemed given upon receipt (or refusal
of receipt). Either Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Party notice in the manner herein set forth.
10.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of laws
of any jurisdiction other than those of the State of New York.
10.10 Amendments and Waivers. The Parties may mutually amend or waive
any provision of this Agreement at any time. No amendment or waiver of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by each of the Parties. Any such waiver shall constitute a waiver
only with respect to the specific matter described in such writing and shall in
no way impair the rights of the party granting such waiver in any other respect
or at any other time. 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.
- 64 -
10.11 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. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the body 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 provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
10.12 Expenses. Except as otherwise specifically provided to the
contrary in this Agreement, 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.
10.13 Specific Performance. Each of the Parties acknowledges and
agrees that the other Party 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
the other Party 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 States or any state thereof having jurisdiction over the
Parties and the matter.
10.4 Submission to Jurisdiction. Each of the Parties (a) consents to
submit itself to the personal jurisdiction of any state or federal court sitting
in the State of New York or the State of California in any action or proceeding
for the adjudication of any dispute hereunder or in connection herewith
(including to compel arbitration pursuant to Section 10.15) or with any
transaction contemplated hereby or discussed herein except as provided in
Section 10.15, (b) agrees that all claims in respect of such action or
proceeding may be heard and determined only in any such court, (c) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, and (d) agrees not to bring any
action or proceeding for the compelling of arbitration pursuant to Section 10.15
or for the enforcement of any arbitration decision pursuant to Section 10.15 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. Either Party may make service on the other Party by sending or
delivering a copy of the process to the entity to be served at the address and
in the manner provided for the giving of notices in Section 10.8. Nothing in
this Section 10.14, however, shall affect the right of either Party to serve
legal process in any other manner permitted by law.
10.15 Arbitration Procedure.
- 65 -
(a) Any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach thereof (each a "Dispute") that the
Parties are not able to resolve after good faith efforts over a period of 15
days shall be settled by arbitration conducted in Chicago, Illinois and
administered by the American Arbitration Association (the "AAA"). Such
arbitration shall be under the Commercial Arbitration Rules of the AAA, except
as otherwise set forth in this Section 10.15, and judgment on the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
(b) If any party asserts there exists a Dispute, such party
shall select one arbitrator and the other party shall select one arbitrator. If
either party fails to make a selection, the AAA shall select one arbitrator on
behalf of such party. The two arbitrators so selected will choose within 20 days
after their selection a third arbitrator (or, if they fail to make a choice, the
AAA shall choose a third arbitrator).
(c) In making their determination, the arbitrators shall not
have the authority to modify any term or provision of this Agreement. The
decision of any two of the arbitrators shall be final, conclusive and binding on
the Parties, absent fraud or manifest error. The arbitrators shall award the
costs and expenses of the arbitration, including reasonable attorneys' fees,
disbursements, arbitrators' fees and fees payable to the AAA, to the prevailing
party as they see fit. The arbitrators shall deliver a written decision with
respect to the dispute to each of the Parties, who promptly shall act in
accordance therewith.
(d) Pre-hearing discovery shall be limited to exchange or
production of documents and other written information. The arbitrators shall
conduct the arbitration so that a final accord is made or rendered as soon as
practicable, but in no event later than 120 days after the commencement of the
arbitration nor later than ten days following the completion of the arbitration.
10.16 Construction. The language used in this Agreement shall be
deemed to be the language chosen by the Parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against either
Party. Whenever the context may require, the singular form of nouns and pronouns
shall include the plural, and vice versa. 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. All
references to "$", or "Dollars" or "US$" refer to currency of the United States
of America.
10.17 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
10.18 Attorneys' Fees. If any Party hereto initiates any legal action
arising out of or in connection with this Agreement, the prevailing party in
such legal action shall be entitled to recover from the other party all
reasonable attorneys' fees, expert witness fees and expenses incurred by the
prevailing party in connection therewith.
- 66 -
10.19 Liability for Transfer Taxes. Buyer and Seller shall each bear
one half of all sales, use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other similar
Taxes and fees ("Transfer Taxes"), arising out of or in connection with or
attributable to the transactions effected pursuant to this Agreement. Each Party
hereto shall prepare and timely file all Tax returns required to be filed in
respect of Transfer Taxes that are the primary responsibility of such Party
under Applicable Law; provided, however, that such Party's preparation of any
such Tax returns shall be subject to the other Party's approval, which approval
shall not be unreasonably withheld or delayed.
10.20 Parent and Seller Acknowledgment. Each of Parent and Seller
acknowledges that the representations and warranties contained in this
Agreement, the other Transaction Documents and in any document or instrument
delivered to Buyer pursuant hereto or thereto or in connection herewith or
therewith shall not be deemed waived or otherwise affected by any investigation
by Buyer, its officers, directors, employees, counsel, accountants, advisors,
representatives and agents.
10.21 Performance of Seller, etc. Parent shall cause Seller to perform
and comply with each agreement and covenant required to be performed or complied
with by Seller under this Agreement and the other Transaction Documents to which
Seller is a party as and when such performance or compliance is due.
ARTICLE XI
DEFINITIONS
11.1 Definition of Certain Terms. The terms defined in this Section
11.1, whenever used in this Agreement, shall have the respective meanings
indicated below for all purposes of this Agreement. To the extent that certain
of the terms defined in this Agreement are defined by cross-reference to
documents which may not be in full force and effect during the entire term of
this Agreement, the definitions contained in such documents shall be and remain
effective for purposes of implementing this Agreement during the term of this
Agreement.
"Affiliate": of a specified Person means a Person that directly
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such specified Person. "Control" (including the
terms "controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management policies of a Person, whether through the ownership of voting
securities, by contract or credit arrangement, as trustee or executor, or
otherwise. Notwithstanding anything herein to the contrary, in the case of
Buyer, "Affiliate" means L-3 Communications Holdings, Inc. and any of its direct
or indirect subsidiaries.
- 67 -
"Agreement": means this Stock Purchase Agreement (including the
Disclosure Schedule and the Exhibits hereto), as the same from time to time may
be amended, supplemented or waived.
"Applicable Law": means, with respect to any Person, any and all
provisions of any and all (i) constitutions, treaties, statutes, laws (including
the common law), rules, regulations, ordinances or codes of any Governmental
Entity applicable to such Person, (ii) Permits applicable to such Person, and
(iii) orders, decisions, injunctions, judgments, awards and decrees of or
agreements with any Governmental Entity, in each case in this clause (iii)
specifically naming or applicable to such Person.
"Baseline Balance Sheet": means the pro forma unaudited
consolidated balance sheet of the Company at and as of September 30, 2001
attached hereto as Exhibit B.
"Books and Records": means all books and records, including
corporate records (such as minute books, seals, stock ledgers and similar
items), manuals, price lists, mailing lists, lists of customers, slides and
promotional materials, purchasing materials, personnel records, quality control
records and procedures, research and development files, financial and accounting
records, environmental records and litigation files (regardless of the media in
which stated), in each case relating to or used by the Company or the
Subsidiary.
"Consent": means any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any Person, including any Governmental Entity.
"$" or "dollars": means lawful money of the United States of
America.
"Environmental Laws": means any and all Applicable Laws relating
to the protection of the environment, to human health and safety, or to any
emission, discharge, generation, processing, storage, abatement, Release,
threatened Release, arranging for the disposal or transportation of any
Hazardous Substances.
"Environmental Liabilities and Costs": means any and all
Damages: (a) relating to, or resulting from, the presence (including any
allegation by a third party of the presence) of Hazardous Substances in the
environment in quantities or concentrations exceeding those allowed pursuant to
any Environmental Law, including claims for diminution of property value,
Personal injury or property damages; and/or (b) imposed by, under or pursuant to
Environmental Laws, based on, arising out of or otherwise in respect of (i) any
real property owned, leased or operated by the Company, or (ii) the
environmental conditions existing on the Closing Date on, under or above any
real property owned, leased or operated by the Company.
"Government Bid": means any offer to sell made by the Company
prior to the Closing Date which, if accepted, would result in a Government
Contract.
- 68 -
"Government Contract": means any prime contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering agreement,
pricing agreement, letter contract, purchase order, delivery order, change order
or other similar arrangement of any kind between the Company, one the one hand
and (i) any Governmental Entity, (ii) any prime contractor of a Governmental
Entity in its capacity as a prime contractor, or (iii) any subcontractor with
respect to any contract of a type described in clauses (i) or (ii) above, on the
other hand.
"Hazardous Substance": means any substance that requires
investigation, removal or remediation under any Environmental Law, or is
defined, listed or identified as a "hazardous waste", "hazardous material",
"oil" or "hazardous substance" thereunder.
"HSR Act": means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Indebtedness": means, with respect to any Person, (i) any
indebtedness for borrowed money of such Person, (ii) any capital lease
obligations or any other similar capital obligations of such Person, (iii) any
synthetic lease obligations or any other similar lease obligations of such
Person, (iv) any obligations of such Person under any derivative agreements or
any other similar agreements (including interest-rate, exchange-rate, commodity
and equity-linked agreements), (v) any obligations of such Person in respect of
off-balance-sheet agreements or transactions that are in the nature of, or in
substitution of, financings, and (vi) any indebtedness or other obligations of
any other Person of the type specified in any of the foregoing clauses, the
payment or collection of which such Person has guaranteed or in respect of which
such Person is liable, contingently or otherwise, including liable by way of
agreement to purchase products or securities, to provide funds for payment, to
maintain working capital or other balance sheet conditions or otherwise to
assure a creditor against loss.
"Logo": means any symbol or logo incorporating a Name.
"Name": means any name, xxxx, trade name, trademark, service
name or service xxxx.
"Person" or "person": means any natural Person, firm,
partnership, association, corporation, company, limited liability company,
trust, business trust, Governmental Entity or other entity.
"Release": means any releasing, disposing, discharging,
injecting, spilling, leaking, leaching, pumping, dumping, emitting, escaping,
emptying, seeping, dispersal, migration, transporting, placing and the like,
including the moving of any materials through, into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the environment.
- 69 -
"Transaction Documents": means this Agreement, the Transition
Services Agreement and each certificate, instrument, or document to be executed
and delivered by either Party on or prior to the Closing pursuant to this
Agreement.
"Treasury Regulations": means the regulations prescribed
pursuant to the Code.
"U.S. GAAP": means United States generally accepted accounting
principles.
11.2 Use of Certain Terms.
(a) As used herein, unless the context requires otherwise,
the masculine, feminine and neuter genders include one another.
(b) The words "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. Each of the words "include",
"includes", "included" and "including" when used herein is not intended to be
exclusive, is by way of example and not limitation and shall be construed as if
followed by the phrase ",without limitation,". References herein to a Section,
subsection or clause shall refer to the appropriate Section, subsection or
clause in this Agreement.
(c) The term "or" is disjunctive; the term "and" is
conjunctive. The term "shall" is mandatory; the term "may" is permissive.
11.3 Accounting Terms. All accounting terms not specifically or
completely defined in this Agreement shall be construed in conformity with, and
all financial data required to be submitted by this Agreement shall be prepared
in conformity with, U.S. GAAP applied on a consistent basis, as in effect on the
date hereof, except as otherwise specifically prescribed herein.
11.4 References to Agreements. Unless otherwise expressly provided
herein, references to agreements (including the Transaction Documents) and other
contractual instruments shall include all amendments and other modifications and
supplements thereto (unless prohibited by any Transaction Document).
11.5 References to Articles or Sections. All references herein to an
Article or Section are to an Article or Section of this Agreement, unless
otherwise indicated.
11.6 References to the Company. For all purposes of this Agreement,
including Article II, the term "Company", the phrase "Company and the
Subsidiary" or any other similar phrase shall include the Company and the
Subsidiary, unless the context otherwise expressly requires. Without limiting
the generality of the foregoing, the fact that in any particular Section of this
Agreement the term "Company" is used alone (i.e., not followed by the phrase
"and the Subsidiary", the phrase "or the Subsidiary" or any other similar
phrase) and in the same Section
- 70 -
the phrase "Company and the Subsidiary", the phrase "Company or the Subsidiary"
or any other similar phrase also is used, shall not, in and of itself, mean that
the use of the term "Company" alone in such Section is to exclude the
Subsidiary.
[The remainder of this page has been intentionally left blank -
Signature page follows]
- 71 -
[Signature Page to Stock Purchase Agreement]
IN WITNESS WHEREOF, the Parties hereto have executed this Stock Purchase
and Sale Agreement as of the date first above written.
EMERGENT INFORMATION TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
---------------------------------
Title: Chairman, President and CEO
--------------------------------
XXXXXX XXXXX HOLDING INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
---------------------------------
Title: Director and President
--------------------------------
L-3 COMMUNICATIONS CORPORATION
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxx
---------------------------------
Title: Senior Vice President, Secretary
and General Counsel
--------------------------------
- 72 -