EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY
EDO CORPORATION
CAS, INC.
XXXXXXX X. XXXXXXX, XX.
XXXXXXX X. XXXXX
AND
XXXXXXXXX X. XXXXX, AS TRUSTEE OF THE
XXXXXXX X. XXXXXXX, XX. ESTATE PRESERVATION TRUST
DATED AS OF JULY 26, 2006
TABLE OF CONTENTS
PAGE
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1. DEFINITIONS........................................................ 1
2. SALE AND TRANSFER OF SHARES; CLOSING............................... 15
2.1 Shares..................................................... 15
2.2 Purchase Price............................................. 15
2.3 Closing.................................................... 15
2.4 Closing Obligations. At the Closing....................... 16
2.5 Estimated Closing Balance Sheet; Estimated
Purchase Price............................................. 20
2.6 Adjustment Amount.......................................... 21
2.7 Adjustment Procedure....................................... 21
3. REPRESENTATIONS AND WARRANTIES OF SELLERS.......................... 24
3.1 Organization and Good Standing; Subsidiaries............... 24
3.2 Authority; No Conflict..................................... 25
3.3 Capitalization............................................. 27
3.4 Financial Statements....................................... 28
3.5 Books and Records.......................................... 28
3.6 Title to Properties; Encumbrances.......................... 29
3.7 Condition and Sufficiency of Assets........................ 30
3.8 Accounts Receivable........................................ 30
3.9 Inventory.................................................. 30
3.10 No Undisclosed Liabilities................................. 30
3.11 Taxes...................................................... 31
3.12 No Material Adverse Change................................. 33
3.13 Employee Benefits.......................................... 33
3.14 Compliance with Legal Requirements; Governmental
Authorizations............................................. 35
3.15 Legal Proceedings; Orders.................................. 36
3.16 Absence of Certain Changes and Events...................... 37
3.17 Contracts; No Defaults..................................... 38
3.18 Insurance.................................................. 43
3.19 Environmental Matters...................................... 45
3.20 Employees.................................................. 46
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TABLE OF CONTENTS
(continued)
3.21 Labor Relations; Compliance................................ 47
3.22 Intellectual Property...................................... 48
3.23 Banking Arrangements....................................... 52
3.24 Certain Payments........................................... 53
3.25 Relationships with Related Persons......................... 53
3.26 Brokers or Finders......................................... 53
3.27 Business Relationships..................................... 53
3.28 Product Liability; Product Warranty........................ 54
3.29 Indebtedness by Related Persons............................ 54
3.30 Disclosure................................................. 54
4. REPRESENTATIONS AND WARRANTIES OF BUYER............................ 55
4.1 Organization and Good Standing............................. 55
4.2 Authority; No Conflict..................................... 55
4.3 Investment Intent.......................................... 56
4.4 Certain Proceedings........................................ 56
4.5 Payment of Purchase Price.................................. 56
4.6 Brokers or Finders......................................... 56
4.7 Investigation by Buyer..................................... 56
5. COVENANTS OF SELLERS............................................... 57
5.1 Access and Investigation................................... 57
5.2 Operation of the Businesses of the Company................. 57
5.3 Negative Covenants......................................... 57
5.4 Required Approvals......................................... 57
5.5 Notification............................................... 58
5.6 Payment of Indebtedness by Related Persons................. 58
5.7 No Negotiation............................................. 58
5.8 Best Efforts............................................... 58
5.9 Protection of Relationships................................ 58
5.10 Further Assurances......................................... 58
5.11 Tax Election............................................... 59
5.12 Noncompetition............................................. 59
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TABLE OF CONTENTS
(continued)
5.13 Confidentiality Agreement of Sellers....................... 61
5.14 Remedies................................................... 61
6. COVENANTS OF BUYER................................................. 62
6.1 Approvals of Governmental Bodies........................... 62
6.2 Best Efforts............................................... 62
6.3 Notification............................................... 62
6.4 Further Assurances......................................... 62
6.5 Tax Election............................................... 62
6.6 Director and Officer Indemnification and Insurance
Indemnification............................................ 63
6.7 Confidentiality Agreement of Buyer......................... 63
6.8 Accounts Receivable........................................ 64
6.9 Success Bonuses Payment.................................... 64
6.10 Retention Payment.......................................... 65
6.11 MDDC Contract.............................................. 65
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE................ 65
7.1 Accuracy of Representations................................ 65
7.2 Sellers' Performance....................................... 65
7.3 Consents................................................... 66
7.4 Additional Documents....................................... 66
7.5 No Action to Debar or Suspend.............................. 66
7.6 Vehicle Leases............................................. 66
7.7 No Material Adverse Change................................. 66
7.8 No Injunction.............................................. 67
7.9 No Proceedings............................................. 67
7.10 No Claim Regarding Stock Ownership or Sale Proceeds........ 67
7.11 No Prohibition............................................. 67
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE............... 67
8.1 Accuracy of Representations................................ 67
8.2 Buyer's Performance........................................ 68
8.3 Consents................................................... 68
8.4 Additional Documents....................................... 68
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TABLE OF CONTENTS
(continued)
8.5 No Injunction.............................................. 68
8.6 No Proceedings............................................. 68
8.7 No Prohibition............................................. 68
9. TERMINATION........................................................ 68
9.1 Termination Events......................................... 68
9.2 Effect Of Termination...................................... 69
9.3 Expenses................................................... 69
9.4 Liquidated Damages......................................... 70
10. INDEMNIFICATION; REMEDIES.......................................... 71
10.1 Survival; Right to Indemnification Not Affected by
Knowledge.................................................. 71
10.2 Indemnification and Payment of Damages by Sellers and the
Company.................................................... 71
10.3 Indemnification and Payment of Damages by
Sellers--Environmental Matters............................. 73
10.4 Indemnification and Payment of Damages by Buyer............ 74
10.5 Time Limitations........................................... 75
10.6 Limitations on Amounts - Sellers........................... 76
10.7 Limitations on Amount -- Buyer............................. 76
10.8 Escrow..................................................... 76
10.9 Procedure for Indemnification - Third Party Claims......... 77
10.10 Procedure for Indemnification - Other Claims............... 78
10.11 Notice to Sellers.......................................... 78
10.12 Tax Indemnification; Tax Benefit........................... 78
10.13 Subrogation................................................ 79
10.14 No Double Recovery......................................... 79
10.15 Treatment of Indemnity Payments Between the Parties........ 80
10.16 Exclusive Remedies......................................... 80
10.17 Use of Insurance........................................... 80
10.18 Mitigation................................................. 80
11. GENERAL PROVISIONS.................................................. 80
11.1 Purchase Price Allocation.................................. 80
11.2 Tax Returns................................................ 81
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TABLE OF CONTENTS
(continued)
11.3 Cooperation on Tax Matters................................. 81
11.4 Expenses................................................... 83
11.5 Public Announcements....................................... 83
11.6 Confidentiality............................................ 83
11.7 Notices.................................................... 83
11.8 Jurisdiction; Service of Process........................... 84
11.9 Further Assurances......................................... 84
11.10 Waiver..................................................... 84
11.11 Entire Agreement and Modification.......................... 84
11.12 Sellers' Representative.................................... 85
11.13 Disclosure Letter.......................................... 85
11.14 Assignments, Successors, and No Third-Party Rights......... 86
11.15 Severability............................................... 86
11.16 Section Headings, Construction............................. 86
11.17 Time of Essence............................................ 86
11.18 Governing Law.............................................. 86
11.19 Counterparts............................................... 86
Exhibits and Schedules
Exhibits
Exhibit 2.2 Success Bonuses
Exhibit 2.4(a)(ii) Form of Sellers and Company Mutual Release
Exhibit 2.4(a)(iii) Form of Retention and Noncompetition Agreements
Exhibit 2.4(a)(iv) Form of Proprietary Information and Inventions Agreements
Exhibit 2.4(a)(vi) Form of Lease Amendment
Exhibit 2.4(a)(xix) Form of Opinion of Holland & Knight LLP
Exhibit 2.4(a)(xxi) Form of Opinion of Sirote & Permutt, P.C.
Exhibit 2.4(b)(ix) Form of Opinion of General Counsel of Buyer
Exhibit 2.4(b)(x) Form of Opinion of Day, Xxxxx & Xxxxxx LLP
Exhibit 2.4(c) Form of Master Escrow Agreement
Exhibit 7.4(a) Form of Estoppel Certificate
Exhibit 7.6 Vehicle Leases
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TABLE OF CONTENTS
(continued)
General Schedules:
Schedule I Closing Date Retention Agreement Recipients
Schedule II Share Ownership
Schedule III Retention Agreement Recipients
Schedule IV Notice Information
Seller and Company Schedules
Disclosure Letter
Section 3.1(a) Jurisdictions; Stockholders
Section 3.1(c) Affiliated Entities
Section 3.1(d) Securities of Affiliated Entities
Section 3.2(b) Conflicts
Section 3.2(c) Consents and Notices
Section 3.3(a) Capitalization
Section 3.3(b) Powers of Attorney; Securities Contracts
Section 3.4 Financial Statements
Section 3.5 Books and Records
Section 3.6(a) Property
Section 3.6(b) Customer Furnished Property
Section 3.8 Accounts Receivable
Section 3.10 Liabilities
Section 3.11(a) Taxes
Section 3.11(b) Tax Returns
Section 3.11(c) Tax Assessment
Section 3.11(d) Due Payment, Withholding and Collection of Taxes
Section 3.11(f) Tax Elections; Pass-Through Entity
Section 3.12 Material Adverse Change
Section 3.13(a) Company Plans
Section 3.13(c) Breaches, Termination and Material Increases of/in
Company Plans
Section 3.13(d) Claims Against and Legal Compliance of Company Plans
Section 3.13(e) Impact of Contemplated Transactions on Company Plans
Section 3.14(a) Compliance with Legal Requirements
Section 3.14(b) Governmental Authorizations
Section 3.15(a) Legal Proceedings
Section 3.15(b) Subject to Orders
Section 3.15(c) Violation of Orders
Section 3.16 Absence of Certain Changes and Events
Section 3.17(a) Contracts
Section 3.17(b) Seller-Related Contracts
Section 3.17(c) Invalid Contracts
Section 3.17(d) Breached Contracts
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TABLE OF CONTENTS
(continued)
Section 3.17(e) Contract Renegotiations
Section 3.17(g) Breached Government Contracts
Section 3.18(b) Insurance
Section 3.18(c) Insurance Loss Experience
Section 3.18(d) Insurance Compliance
Section 3.19 Environmental Matters
Section 3.20(a) Employees
Section 3.20(b) Employees - Termination
Section 3.20(d) Employees - Terms/Contracts
Section 3.21 Labor Relations; Compliance
Section 3.22(b) Intellectual Property Asset Contracts
Section 3.22(c) Intellectual Property Ownership
Section 3.22(d) Patents
Section 3.22(e) Marks
Section 3.22(f) Copyrights
Section 3.22(g) Software
Section 3.22(i) Web Sites
Section 3.22(j) Government Contracts Requiring Intellectual Property
Deliverable
Section 3.23 Banking Arrangements
Section 3.25 Relationship with Related Persons
Section 3.27 Business Relationship
Section 3.28 Product Liability; Product Warranty
Section 3.29 Indebtedness by Related Persons
Section 6.6(a) Indemnified Employees
Buyer Schedules:
Schedule 4.2(b) No Conflict
Schedule 4.2(c) Consents
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("AGREEMENT") is made and entered into
effective as of July 26, 2006, by EDO Corporation, a New York corporation
("BUYER"), CAS, Inc., a corporation organized under the laws of the State of
Alabama (the "COMPANY"), Xxxxxxx X. Xxxxxxx, Xx., an individual resident in
Alabama ("WHS"), Xxxxxxx X. Xxxxx, an individual resident in Tennessee ("FHC")
and Xxxxxxxxx X. Xxxxx, as Trustee of the Xxxxxxx X. Xxxxxxx, Xx. Estate
Preservation Trust, dated July 8, 2005 (the "TRUST"). Each of WHS, FHC and the
Trust are referred to herein from time to time as a "SELLER" and collectively as
"SELLERS."
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "SHARES") of the Company for the consideration and
on the terms set forth in this Agreement. In connection with the sale of the
Shares, Sellers shall enter into the Sellers' and Company Mutual Release and
certain other Ancillary Agreements (each as defined below), and certain
employees of the Company shall enter into Retention and Noncompetition
Agreements and a Proprietary Information and Inventions Agreement (each as
defined below).
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section 3.8.
"ADJUSTMENT AMOUNT" shall have the meaning set forth in Section 2.6.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, claims, demands, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, Taxes, liens, losses, expenses, and fees,
including court costs and attorneys' fees and expenses.
"AFFILIATED ENTITY" means each Person identified in Section 3.1(c) of the
Disclosure Letter.
"AGREEMENT" shall have the meaning set forth in the first paragraph of this
Agreement.
"ANCILLARY AGREEMENTS" means the Master Escrow Agreement, the Sellers' and
Company Mutual Release, the Share Restriction Agreements, the Retention and
Noncompetition Agreements and the Proprietary Information and Inventions
Agreement.
"APPLICABLE CONTRACT" shall mean any Contract to which the Company is a
party and (a) under which the Company has or may acquire any rights, (b) under
which the Company has or may become subject to any obligation or liability, or
(c) by which the Company or any of the assets owned or used by it is or may
become bound.
"BALANCE SHEET" shall have the meaning set forth in Section 3.4(c).
"BASKET" shall have the meaning set forth in Section 10.6.
"BEST EFFORTS" shall mean the efforts that a prudent Person desirous of
achieving a result would reasonably use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"BREACH" shall mean a "breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement which will be deemed to have occurred if there is or
has been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"BUSINESS DAY" shall mean a day, other than a Saturday or a Sunday, on
which banking institutions in the State of New York are required to be open.
"BUYER" shall have the same meaning set forth in the first paragraph of
this Agreement.
"BUYER COMMON SHARES" means shares of common stock, par value $1.00 per
share, of Buyer.
"BUYER COMMON SHARE PRICE" means one hundred percent (100%) of the average
closing price for Buyer Common Shares, as reported in The Wall Street Journal or
a mutually agreed upon successor publication, for the twenty (20) trading days
prior to the Closing.
"BUYER PRICE ADJUSTMENT ESCROW AMOUNT" shall have the meaning set forth in
Section 2.4(d).
"BUYER RESTRICTED SHARES" means any Buyer Common Shares issued by Buyer to
Sellers in connection with this Agreement as part of the Purchase Price.
"BUYER TAX INDEMNITEE" shall have the meaning set forth in Section
10.12(a).
"BUYER TAX INDEMNITY PAYMENT" shall have the meaning set forth in Section
10.12(b).
"BUYER TAX LOSS" shall have the meaning set forth in Section 10.12(b).
"BUYER'S ADVISORS" shall have then meaning set forth in Section 5.1.
"BUYER'S CLOSING DOCUMENTS" shall have the meaning set forth in Section
4.2(a).
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"CAP" shall have the meaning set forth in Section 10.6.
"CAS CARES" shall have the meaning set forth in Section 3.1(b).
"CLASS A STOCK" shall have the meaning set forth in Section 3.3.
"CLASS B STOCK" shall have the meaning set forth in Section 3.3
"CLEANUP PLAN" shall have the meaning set forth in Section 10.3.
"CLOSING" shall have the same meaning set forth in Section 2.3.
"CLOSING DATE" means the date and time as of which the Closing actually
takes place.
"CLOSING FINANCIAL STATEMENTS" shall have the meaning set forth in Section
2.7(a).
"COMPANY" shall have the meaning set forth in the Recitals of this
Agreement.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation owed,
adopted, or followed by the Company or an ERISA Affiliate of the Company.
"COMPANY PLAN" means any Plan, Company Other Benefit Obligation, Company
VEBA or other arrangement or agreement of which the Company or an ERISA
Affiliate of the Company is or was a Plan Sponsor, or to which the Company or an
ERISA Affiliate of the Company otherwise contributes or has contributed, or in
which the Company or an ERISA Affiliate of the Company otherwise participates or
has participated.
"COMPANY VEBA" means a VEBA whose members include employees of the Company
or any ERISA Affiliate of the Company.
"COMPETING BUSINESS" shall have the meaning set forth in Section 3.25.
"COMPETING PRODUCTS AND SERVICES" shall have the meaning set forth in
Section 5.12(a).
"CONFIDENTIAL INFORMATION" shall mean any and all confidential business
information and any and all information, however documented, that is a trade
secret within the meaning of applicable statutory or case law concerning the
business and affairs of the Company, Sellers or Buyer, whether or not marked as
"secret" or "confidential," including, without limitation, (i) product
specifications; data; know-how; formulas; compositions; processes; designs;
sketches; photographs; graphs; drawings; samples; inventions and ideas; past,
current and planned research and development; current and planned manufacturing
and distribution methods and processes; customer lists; current and anticipated
customer requirements; price lists; market studies; business plans; computer
software and programs; database technologies; concepts, ideas and methods; (ii)
to the extent such information is not publicly disclosed by the Company, Sellers
or Buyer in filings with Governmental Bodies, in press releases or otherwise,
all financial statements; financial projections and budgets; historical and
projected sales; capital spending budgets and plans; the names and backgrounds
of key personnel, personnel training techniques
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and personnel materials; and (iii) any and all notes, analysis, compilations,
studies, summaries and other material prepared by or for the Company, Sellers or
Buyer containing or based, in whole or in part, on any of the foregoing
information. Notwithstanding the foregoing, for purposes of this Agreement,
Confidential Information shall not include any information that (i) is or
becomes generally known to the public or available for use without any special
knowledge by the public other than as a result of Seller's fault or the fault of
any other Person bound by a duty of confidentiality to Buyer or the Company or,
(ii) becomes available to Seller on a non-confidential basis, from a source who
is entitled to disclose such information without breach of confidentiality to
the Company, other than the Company or any of its employees.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Sellers' and Company
Mutual Release, the Retention and Noncompetition Agreements, the
Proprietary Information and Inventions Agreement, the Share
Restriction Agreements, and the Master Escrow Agreement;
(c) the performance by Buyer, Sellers and the Company of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise of
control over the Company.
"CONTRACT" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding, including any amendment, supplement or modification (whether
written or oral) in respect of any of the foregoing.
"COPYRIGHTS" shall have the meaning set forth in Section 3.22(a).
"DAMAGES" means the amount of any loss (including lost profits), liability,
claim, damage (including incidental and consequential damages) or expense
(including costs of investigation and defense and reasonable attorneys' fees),
whether or not involving a third-party claim, but specifically excluding any
diminution of value.
For the avoidance of doubt, the term "diminution of value" shall not mean
and shall not include any (i) loss resulting from any lost profits, (ii) Damages
(including incidental and consequential damages) or (iii) expense (including
costs of investigation and defense and reasonable attorneys' fees), whether or
not involving a third-party claim.
"DEBT" means any negative cash balances, all interest bearing indebtedness,
notes and equivalents which are to be repaid in full and discharged by the
Company at or prior to the Closing and all liabilities between or among the
Company, Sellers and Related Persons of any
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Seller which are to be cancelled at or prior to the Closing; provided that for
purposes of this Agreement, "Debt" shall not include accounts payable of the
Company or other liabilities of the Company incurred in the Ordinary Course of
Business.
"DEFECTIVE ELECTION EVENT" shall have the meaning set forth in Section
10.12(a).
"DISCLOSURE LETTER" means the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"DOD" means the United States Department of Defense or any branch or agency
thereof.
"EDO GROUP" means EDO Corporation and all members of the affiliated group
of corporations (within the meaning of IRC Section 1504) of which EDO
Corporation is the parent.
"ENCUMBRANCE" means any charge, claim, community property interest,
condition, equitable interest, lien, mortgage, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, if applicable, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams and jurisdictional wetlands),
groundwaters, drinking water supply, stream sediments, ambient air, plant and
animal life, and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, natural
resource damages or other remediation or response actions ("CLEANUP")
taken in compliance with applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required
or requested by any Governmental Body or any other Person provided
such Cleanup is taken in compliance with applicable Environmental and
Occupational Safety or Health Law); or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health
Law.
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The terms "removal," "remedial," and "response action" include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et esq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" means any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and
of the commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are formulated, packaged and used so that they
do not present unreasonable risks to human health or the Environment
when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ENVIRONMENTAL PHASE I STUDY" means the environmental site assessments
prepared for Day, Xxxxx and Xxxxxx, LLP by Conestoga-Rovers & Associates and
dated March and April 2006.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law, and regulations and rules
issued pursuant to that Act or any successor law.
"ERISA AFFILIATE" means, with respect to the Company, any other person
that, together with the Company, would be treated as a single employer under IRC
Section 414 or under Section 4001 of ERISA.
"ESTIMATED CLOSING BALANCE SHEET" shall have the meaning set forth in
Section 2.5.
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"ESTIMATED PURCHASE PRICE" shall have the meaning set forth in Section 2.5.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"FACILITIES" means any real property, leaseholds, or other interests in
real property or equipment currently or formerly owned or operated by the
Company and any buildings, plants, structures, or equipment (including motor
vehicles, tank cars, and rolling stock) currently or formerly owned or operated
by the Company.
"FHC" shall have the meaning set forth in the first paragraph of this
Agreement.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.4.
"FORMER SHAREHOLDER" shall mean Xxxxxx X. Xxxxxxxxx.
"FORMER SHAREHOLDER ACKNOWLEDGEMENT" means that certain Acknowledgement and
Agreement dated July 7, 2006 by and between FHC, WHS and the Former Shareholder.
"FORMER SHAREHOLDER EMPLOYMENT AGREEMENT" means that certain Employment
Agreement dated January 1, 2005 by and between the Company and the Former
Shareholder.
"FORMER SHAREHOLDER STOCK PURCHASE AGREEMENT" means that certain Stock
Purchase Agreement dated as of December 31, 2004 by and between FHC, WHS and the
Former Shareholder.
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the audited year-end
financial statements of the Company were prepared.
"GOVERNMENT BID" means any offer or proposal made by the Company prior to
the Closing Date which, if accepted, would result in a Government Contract.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
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(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"GOVERNMENT CONTRACT" means a Contract between the Company and the DOD or
any other Governmental Body, including any facilities contract for the use of
government-owned facilities. A task, purchase or delivery order under a
Government Contract or an amendment, supplement or modification to a Government
Contract shall not constitute a separate Government Contract, for purposes of
this definition, but shall be part of the Government Contract to which it
relates.
"GOVERNMENT SUBCONTRACT" means a Contract that is a subcontract between the
Company and any third party relating to a prime contract with the DOD or any
other Governmental Body.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Company,
other than such activities undertaken in the Ordinary Course of Business of the
Company and Sellers in full compliance with Environmental Laws.
"HAZARDOUS MATERIALS" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, petroleum and
all derivatives thereof or synthetic substitutes therefor, asbestos or
asbestos-containing materials and mold or other fungi which have been determined
to pose a threat to the health and safety of any Person.
"HSR ACT" means the Xxxx Xxxxx Xxxxxx Antitrust Improvement Act of 1976 or
any successor law, and rules and regulations issued pursuant thereto or any
successor law.
"INDEMNIFIED EMPLOYEES" shall have the meaning set forth in Section 6.6(a).
"INDEMNIFIED PERSONS" shall have the meaning set forth in Section 10.2(a).
"INDEPENDENT ACCOUNTANTS" shall have the meaning set forth in Section 2.7.
"INTELLECTUAL PROPERTY ASSETS" shall have the meaning set forth in Section
3.22(a).
"IRC" means the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
-8-
"KEY EMPLOYEE" means those employees of the Company listed as on Exhibit
2.2(Exh A) attached to Exhibit 2.2 hereof.
"KNOWLEDGE" of a particular fact or other matter means with respect to an
individual that such individual is actually aware of such fact or other matter,
and a Person (other than an individual and other than the Company and Buyer)
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as a director,
officer, partner, employee, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
The Company will be deemed to have "Knowledge" of a particular fact or
other matter if, and only if, any one or more of Sellers, Xxxx Xxxxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxxxxx, Xxxxxx Xxxxxxxxxxx or Xxxxxxx Xxxxxx
has, or at any time had, Knowledge of such fact or other matter. Buyer will be
deemed to have "Knowledge" of a particular fact or other matter if, and only if,
any one or more of Xxxxxxx X. Xxxxxx, Xxxx X. Xxxxxxx or Xxxxx X. Xxxxxx has, or
at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MARKS" shall have the meaning set forth in Section 3.22(a)(i).
"MASTER ESCROW AGENT" shall have the meaning set forth in Section 2.4(c).
"MASTER ESCROW AGREEMENT" shall have the meaning set forth in Section
2.4(c).
"MASTER ESCROW AMOUNT" shall have the meaning set forth in Section
2.4(b)(ii).
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, any event,
fact, condition, change, circumstance, occurrence or effect (excluding general
economic conditions, conditions affecting the industry in which such Person
operates, considered as a whole, acts of war or terrorism that have no direct
impact on the business of such Person or adverse effects arising from the
announcement or consummation of the transactions contemplated hereby), which,
either individually or in the aggregate, (i) is or would reasonably be expected
to be materially adverse to the business, properties, assets, liabilities,
capitalization, stockholders' equity, financial condition, operations, licenses
or other franchises or results of operations of such Person, considered as a
whole or (ii) does or would reasonably be expected to materially impair or delay
the ability of such Person (or, in the case of Company, the Sellers) to perform
its obligations under this Agreement or to consummate the transactions
contemplated hereby.
"MDDC CONTRACT" means Contract DASG60-99-D-0002, Missile Defense Data
Center between the Company and the U.S. Army Space and Missile Defense Command.
"NET BOOK VALUE" means (i) total assets of the Company less good will,
intangible assets, notes issued by the Company to Sellers, related party
receivables and cash minus (ii) total liabilities of the Company exclusive of
any Debt, each as determined in accordance with GAAP;
-9-
provided, however, that the Company's target rates of expense for periods after
March 31, 2006 rather than actual rates of expense shall be used in determining
Net Book Value.
"NONCOMPETE TERM" shall have the meaning set forth in Section 5.12(e).
"OCCUPATIONAL SAFETY AND HEALTH LAW" shall mean any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means with respect to a Person that an action
taken by such Person will be deemed to have been taken in the "Ordinary Course
of Business" only if:
(a) such action is recurring in nature, consistent with the past practices
of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person;
(b) such action is taken in accordance with sound and prudent business
practices and is consistent with industry practices of similarly
situated defense contractors;
(c) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising
similar authority); and
(d) such action is similar in nature and magnitude to actions customarily
taken by such Person, without any authorization by the board of
directors of such Person (or by any Person or group of Persons
exercising similar authority), in the ordinary course of the normal
day-to-day operations of such Person.
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the articles of organization
or certificate of formation and the operating agreement or limited liability
company agreement of a limited liability company; (c) the partnership agreement
and any statement of partnership of a general partnership; (d) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (e) the declaration of trust for any trust; (f) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (g) any amendment to any of the foregoing.
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, or agents, other than any obligation, arrangement, or
practice that is a Plan. Other Benefit Obligations include consulting agreements
under which the compensation paid does not depend upon the amount of
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service rendered, sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC Section 132.
"OVERALL CAP" shall have the meaning set forth in Section 10.6.
"PATENTS" shall have the meaning set forth in Section 3.22(a)(iii).
"PELORUS SOFTWARE" means each and every version of the Software used by the
Company, and marketed prior to the Closing as "Pelorus," "Pelorus Gold,"
"Pelorus Blue," Pelorus Green," "Jessiz," "Flotsam," "Snoopy" and "Tsunami" and
any error corrections or updates prior to the Closing.
"PELORUS SOFTWARE AGREEMENT" means that certain agreement by and between
the Company and Xxxx Xxxxxxx dated on or about July 26, 2006 with respect to the
Pelorus Software.
"PENSION PLAN" has the meaning given in ERISA Section 3(2)(A).
"PERMITTED ENCUMBRANCES" means (a) an Encumbrance for Taxes not yet due and
payable, (b) an Encumbrance that does not interfere with the use by the Company
of the Company's properties or assets and which does not impair the value of
such properties or assets, and (c) an Encumbrance as of the date hereof as set
forth in Section 3.2(b) (Conflicts), Section 3.4 (Financial Statements), Section
3.6(a) (Leases and Liens), Section 3.10 (Liabilities), Section 3.13(a) (Company
Plans), Section 3.15(a) (Legal Proceedings, including audits), Section 3.17(a)
(Contracts, including leases) and Section 3.18 (b) (Insurance) of the Disclosure
Letter.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B).
"PROCEEDING" means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT" shall have the meaning
set forth in Section 2.4(a)(iv).
"PROPRIETARY RIGHTS AGREEMENT" shall have the meaning set forth in Section
3.20(b).
"PURCHASE PRICE" shall have the meaning set forth in Section 2.2.
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC Section 401(a).
"RELATED PARTY INDEBTEDNESS" shall have the meaning set forth in Section
3.29.
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"RELATED PERSON" means with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "FAMILY" of an individual includes
(i) the individual, (ii) the individual's spouse and former spouses, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides in the
same household as such individual, and (b) "MATERIAL INTEREST" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5% of the outstanding
equity securities or equity interests in a Person.
"RELEASE" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" means with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
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"RETENTION AND NONCOMPETITION AGREEMENTS" shall have the meaning set forth
in Section 2.4(a)(iii).
"RETENTION PAYMENT" shall have the meaning set forth in Section 6.10.
"RIGHTS IN MASK WORKS" shall have the meaning set forth in Section
3.22(a)(iv).
"SCOPE OF WORK PLAN" shall have the meaning set forth in Section 10.3.
"SEC" means the Securities and Exchange Commission or any other federal
agency at the time administering the Exchange Act.
"SECTION 338(H)(10) ELECTION" shall have the meaning set forth in Section
5.11.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant thereto or any
successor law.
"SELLER INDEMNIFIED PERSONS" shall have the meaning set forth in Section
10.4(d).
"SELLER TAX INDEMNITEE" shall have the meaning set forth in Section
10.12(c).
"SELLERS" shall have the meaning set forth in the first paragraph of this
Agreement.
"SELLERS' BROKER" shall have the meaning set forth in Section 3.26.
"SELLERS' CLOSING DOCUMENTS" shall have the meaning set forth in Section
3.2.
"SELLERS' AND COMPANY MUTUAL RELEASE" shall have the meaning set forth in
Section 2.4(a)(ii).
"SELLERS' PRICE ADJUSTMENT ESCROW AMOUNT" shall have the meaning set forth
in Section 2.4(e)
"SELLERS' REPRESENTATIVE" shall have the meaning set forth in Section
11.12.
"SHARE RESTRICTION AGREEMENTS" means the Subscription and Restricted Share
Agreements attached as Exhibit 2.2(Exh D) to Exhibit 2.2, to be executed and
delivered as provided in Exhibit 2.2 and in Section 2.4(a)(v).
"SHARES" shall have the meaning set forth in the Recitals of this
Agreement.
"SOFTWARE" shall have the meaning set forth in Section 3.22(a)(vi).
"SOURCE CODE" means the Software written in programming languages,
including, but not limited to, "C++", and all comments and procedural code such
as job control language statements, in a form intelligible to trained
programmers and capable of being translated into object code for operation on
computer equipment through assembly or compiling, and accompanied by
documentation, including flow charts, schematics, statements of principles of
operations, and architecture standards, describing the data flows, data
structures, and control
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logic of the software in sufficient detail to enable a trained programmer
through study of such documentation to maintain and/or modify the software
without undue experimentation.
"SPA" as used in Exhibit 2.2 shall mean this Agreement.
"SPECIAL CAP" shall have the meaning set forth in Section 10.6.
"SUBSIDIARY" means as to any Person, any other Person at least forty
percent (40%) of whose equity or voting interests are owned, directly or
indirectly, by such first Person.
"SUCCESS BONUSES" shall have the meaning set forth in Exhibit 2.2.
"TAX" means any tax (including, without limitation, any income tax, capital
gains tax, value-added tax, sales tax, use tax, gift tax, franchise tax,
transfer tax, ad valorem tax, excise tax, payroll tax or estate tax), levy,
duty, assessment, deficiency, withholding or other fee and any related charge or
amount (including any fine, penalty, interest or addition to tax with respect to
the foregoing) imposed, assessed or collected by or under the authority of any
Governmental Body or payable pursuant to any tax- sharing agreement or other
Contract relating thereto.
"TAX OBJECTION PROCESS". If Buyer or Sellers gives written notice
requesting a Tax Objection Process (such party, the "OBJECTING PARTY"), and
Buyer and Sellers cannot resolve the related objection within fourteen (14)
Business Days thereafter, then the issues in dispute will be submitted to the
certified public accountants who review the tax returns of the non-Objecting
Party (the "PARTY TAX ACCOUNTANTS") for determination within fourteen (14)
Business Days thereafter. If Buyer or Sellers continue to object, the matter
shall be submitted for resolution to a tax accountant at a nationally recognized
certified public accounting firm selected by the non-Objecting Party and
acceptable to Objecting Party, which consent shall not be unreasonably withheld
(the "INDEPENDENT EVALUATOR") within an additional fourteen (14) Business Days
and whose review shall certify that the process followed by Buyer or Sellers, as
applicable, as adjusted by Party Tax Accountants is consistent with applicable
law and that the amount determined is within five percent (5%) of the amount
that Independent Evaluator would have determined based on the materials
presented (the "EVALUATION CERTIFICATE"), which determination shall be final,
conclusive, non-appealable and binding for all purposes hereunder. The Objecting
Party shall pay the fees and disbursements of the Independent Evaluator unless
it cannot issue the Evaluation Certificate, in which case the Independent
Evaluator will be asked to compute the proper amounts within an additional
fourteen (14) Business Days and the parties shall be bound by that determination
and the non-Objecting Party shall pay the fees and disbursements of the
Independent Evaluator.
"TAX RETURN" means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THIRD PARTY IP" means Intellectual Property Assets currently used in the
Company's business, which are licensed to the Company from a third party.
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"THREAT OF RELEASE" means a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED" means with respect to any claim, Proceeding, dispute, action,
or other matter if any demand or statement has been made (orally or in writing)
or any notice has been given (orally or in writing), or if any other event has
occurred or any other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise pursued in the future.
"TRADE SECRETS" shall have the meaning set forth in Section 3.22(a)(vii).
"TRUST" shall have the meaning set forth in the first paragraph of this
Agreement.
"VEBA" means a voluntary employees' beneficiary association under IRC
Section 501(c)(9).
"WAIVER" shall have the meaning set forth in Section 11.3(c).
"WEB SITES" shall have the meaning set forth in Section 3.22(a)(v).
"WHS" shall have the meaning set forth in the first paragraph of this
Agreement.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this Agreement, at the
Closing, Sellers will sell and transfer the Shares to Buyer free and clear of
all Encumbrances, and Buyer will purchase the Shares from Sellers.
2.2 PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for the
Shares will be $175,625,000.00 reduced or increased by the Adjustment Amount as
set forth in Sections 2.6 and 2.7, payable $170,753,269.00 in cash and delivery
of that number of Buyer Restricted Shares equal to (i) $4,871,731.00, divided by
(ii) the Buyer Common Share Price, to or at the direction of the Sellers, all as
hereinafter provided. The process set forth on Exhibit 2.2 (and the exhibits
thereto) attached hereto and made a part hereof, will be used by the parties
with respect to the transfer of the Buyer Restricted Shares and certain other
amounts at the direction of the Sellers.
2.3 CLOSING. The purchase and sale (the "CLOSING") provided for in this
Agreement will take place at the offices of Buyer's counsel at Day, Xxxxx &
Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, at 10:00 a.m. (local time) on
the later of (i) September 6, 2006, (ii) the date that is three (3) Business
Days following the termination of the applicable waiting period under the HSR
Act, or (iii) at such other time and place as the parties may agree. Subject to
the provisions of Section 9, failure to consummate the purchase and sale
provided for in this Agreement on the date and time and at the place determined
pursuant to this Section 2.3 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
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2.4 CLOSING OBLIGATIONS. AT THE CLOSING:
(a) Sellers will deliver or cause to be delivered to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to Buyer in form and
substance satisfactory to Buyer;
(ii) a release in the form of Exhibit 2.4(a)(ii) attached hereto
executed by each of Sellers (the "SELLERS' AND COMPANY MUTUAL RELEASE");
(iii) retention and noncompetition agreements in the form of
Exhibit 2.4(a)(iii) attached hereto, executed by each of the employees of the
Company identified on Schedule I attached hereto (collectively, the "RETENTION
AND NONCOMPETITION AGREEMENTS");
(iv) a proprietary information and inventions agreement in the
form of Exhibit 2.4(a)(iv) attached hereto, executed by Xxxxx Xxxxxx (the
"PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT") and a copy of the Pelorus
Software Agreement executed by Xxxx Xxxxxxx and the Company;
(v) confirmation that no change has been made or, if Sellers have
made changes in accordance with Section 6.9, a written schedule of such changes,
with respect to the payment instructions for a portion of the Purchase Price by
transfer of cash to the Company and Buyer Restricted Shares pursuant to the
outline on Exhibit 2.2, against delivery by the individuals identified on
Exhibit 2.2(Exh A) thereto of a Share Restriction Agreement in the form of
Exhibit 2.2(Exh D) attached thereto for each such individual and evidence
regarding satisfaction by the Company of its withholding obligations with
respect to the Success Bonuses;
(vi) an amendment to that certain Lease Agreement by and between
TERA Properties, LLC and the Company, with respect to the leased premises
located at 000 Xxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx in the form attached hereto as
Exhibit 2.4(a)(vi), executed by TERA Properties, LLC and the Company;
(vii) an executed termination letter with respect to that certain
Lease Agreement by and between Pinnacle Technologies LLC and the Company with
respect to the leased premises located at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxx;
(viii) an executed termination letter with respect to that
certain Lease Agreement by and between Perfect Homes, LLC and the Company with
respect to the leased premises located at 0000 Xxxx Xxxxxx Xxx, Xxxxxxxxxx,
Xxxxxxx;
(ix) an executed termination letter with respect to that certain
Lease Agreement by and between Affordable Storage and the Company with respect
to the leased premises located at 0000 XXX. 00, Xxxxxxx, Xxxxxxx;
(x) the Disclosure Letter executed by Sellers;
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(xi) a cross-receipt executed by each Seller, in a form
reasonably satisfactory to Buyer and Sellers;
(xii) a Purchase Price flow of funds statement executed by each
Seller, in a form reasonably satisfactory to Buyer and Sellers;
(xiii) a consent executed by the spouse of FHC, in form and
substance reasonably satisfactory to Buyer and FHC;
(xiv) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and warranties in this
Agreement was accurate in all respects as of the date of this Agreement and is
accurate in all material respects (or in all respects with regard to such
representations and warranties that are qualified by materiality) as of the
Closing Date as if made on the Closing Date, except to the extent that any
inaccuracies in such representations and warranties, considered individually or
collectively, as of the Closing Date could not reasonably be expected to have a
Material Adverse Effect on the Company;
(xv) a certificate executed by Sellers and the Company certifying
that Sellers and the Company have satisfied all conditions set forth in Section
7 of this Agreement;
(xvi) executed resignations, effective as of the Closing Date of
each officer and director of the Company;
(xvii) executed resignations, effective as of the Closing Date of
each officer and director of CAS Cares who is also an officer or director of the
Company;
(xviii) an IRS Form W-9, completed by each Seller, in form
reasonably satisfactory to Buyer;
(xix) an opinion of Holland & Knight LLP, dated as of the Closing
Date, in the form of Exhibit 2.4(a)(xix) attached hereto;
(xx) an executed copy of the opinion of Sirote & Permutt, P.C.
dated March 21, 2006, as to certain tax matters, which shall be in full force
and effect;
(xxi) an opinion of Sirote & Permutt, P.C., dated as of the
Closing Date, in the form of Exhibit 2.4(a)(xxi) attached hereto;
(xxii) copies of all Consents required pursuant to Section 3.2(b)
of this Agreement;
(xxiii) possession or control of the corporate seal, all books of
account, minute books, stock record books, and other records of the Company and
any Affiliated Entity then in the possession or control of Sellers or their
Representatives;
(xxiv) copies of the Company's Organizational Documents,
certified by a Secretary or Assistant Secretary of the Company to be true,
correct, complete and in full force and effect and unmodified as of the Closing
Date; a complete list of the officers and directors of
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the Company, certified by a Secretary or Assistant Secretary of the Company to
be true and correct as of the Closing Date; a long form certificate of good
standing from the Secretary of State of the State of Alabama showing all
documents filed in such office with regard to the Company; tax clearance
certificates (to the extent reasonably and customarily available) and good
standing certificates from California, Colorado, Florida, Maryland, New Jersey,
New Mexico, Oklahoma, South Carolina, Texas and Virginia; copies of resolutions
adopted by the Board of Directors of the Company authorizing the execution and
delivery of the Agreement and the consummation of the Contemplated Transactions,
certified by a Secretary or Assistant Secretary of the Company to be true,
correct, complete and in full force and effect and unmodified as of the Closing
Date;
(xxv) an updated list of employees of the Company setting forth
the information requested in Section 3.20; and
(xxvi) such other certificates, agreements and other documents as
are listed in the schedule of closing documents.
(b) Buyer will deliver to Sellers or caused to be delivered at the
direction of Sellers:
(i) following the payment by Buyer of the amounts set forth in
Sections 2.4(b)(ii) through (iv) and Section 2.4(e), if applicable, the balance
of the Purchase Price to Sellers pro rata in accordance with their ownership of
the Shares of the Company, as specified in Schedule II attached hereto, by wire
transfer of immediately available funds to accounts specified by Sellers in
writing no later than five (5) days prior to the Closing Date;
(ii) the sum of $15,000,000 (the "MASTER ESCROW AMOUNT") to the
Master Escrow Agent, subject to the requirements of the Master Escrow Agreement,
by bank cashier's or certified check or wire transfer to an account specified by
the Master Escrow Agent;
(iii) the sum of $16,447,982.00 (as such amount may be adjusted
pursuant to Section 6.9), to the Company on behalf and at the direction of the
Sellers as a portion of the Purchase Price, payable $11,576,251.00 in cash and
$4,871,731.00 by delivery of that number of Buyer Restricted Shares equal to (i)
$4,871,731.00, divided by (ii) the Buyer Common Share Price. The cash payment
shall be made by wire transfer of immediately available funds to the Company and
then paid by the Company to the individuals and in the amounts specified on
Exhibit 2.2 (Exh A) and Exhibit 2.2 (Exh B) attached to Exhibit 2.2 hereof, and
the Buyer Restricted Shares shall be distributed in the amounts and to the
individuals set forth on Exhibit 2.2(Exh A) attached to Exhibit 2.2 hereof, in
each case against delivery by each of the individuals identified on Exhibit
2.2(Exh A) of a Share Restriction Agreement in the form of Exhibit 2.2(Exh D)
attached to Exhibit 2.2 hereof. Sellers may change the amounts and remove
individuals set forth on Exhibit 2.2(Exh A) and Exhibit 2.2(Exh B) attached to
Exhibit 2.2 hereof, by delivering to the Company and Buyer an amended Exhibit
2.2(Exh A) or Exhibit 2.2(Exh B), as the case may be, to be attached to Exhibit
2.2 hereof no later than five (5) days prior to the Closing Date; provided that
Sellers may not (i) add any individual to Exhibit 2.2(Exh A) or Exhibit 2.2(Exh
B), or (ii) remove any employee identified on Schedule I attached hereto from
Exhibit 2.2(Exh A) or eliminate or reduce the amount of any Success Bonus
payable to any
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such employee as set forth on Exhibit 2.2(Exh A), without the prior written
consent of Buyer, such consent not to be unreasonably withheld.
(iv) the amounts required to payoff all indebtedness listed in
Section 3.29 of the Disclosure Letter and all other Debt to be repaid in full
and discharged by the Company on or prior to the Closing Date, by wire transfer
of immediately available funds in amounts and to accounts specified by Sellers
in writing no later than five (5) days prior to the Closing Date;
(v) a certificate executed by Buyer representing and warranting
to Sellers that each of Buyer's representations and warranties in this Agreement
was accurate in all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing Date, except to
the extent that any inaccuracies in such representations and warranties,
considered individually or collectively, as of the Closing Date could not
reasonably be expected to have a Material Adverse Effect on the Buyer;
(vi) a certificate executed by Buyer certifying that Buyer has
satisfied all conditions set forth in Section 8 of this Agreement;
(vii) a cross-receipt executed by Buyer, in a form reasonably
satisfactory to Buyer and Sellers;
(viii) a Purchase Price flow of funds statement executed by
Buyer, in a form reasonably satisfactory to Buyer and Sellers;
(ix) an opinion of the General Counsel of Buyer, dated as of the
Closing Date, in the form of Exhibit 2.4(b)(ix) attached hereto;
(x) an opinion of Day, Xxxxx & Xxxxxx LLP, dated as of the
Closing Date, in the form of Exhibit 2.4(b)(x) attached hereto; and
(xi) the Sellers' and Company Mutual Release, the Retention and
Noncompetition Agreements, and the Proprietary Information and Inventions
Agreement, each executed by Buyer and/or the Company, as the case may be and the
Share Restriction Agreements, executed as provided on Exhibit 2.2.
(c) Buyer and Sellers will enter into a master escrow agreement in the
form of Exhibit 2.4(c) attached hereto (the "MASTER ESCROW AGREEMENT") with
Xxxxx Fargo Bank, National Association (the "MASTER ESCROW AGENT").
(d) In the event that the Estimated Purchase Price is greater than
$175,625,000 then Buyer shall pay the amount of such difference (the "BUYER
PRICE ADJUSTMENT ESCROW AMOUNT") to the Master Escrow Agent, subject to the
requirements of the Master Escrow Agreement, by bank cashier's or certified
check or wire transfer to an account specified by the Master Escrow Agent.
(e) In the event that the Estimated Purchase Price is less than
$175,625,000 then Buyer shall reduce the amount to be delivered to Sellers
pursuant to Section 2.4(b)(i) by the
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amount of such difference (the "SELLERS' PRICE ADJUSTMENT ESCROW AMOUNT") and
Buyer shall on behalf of Sellers pay the Sellers' Price Adjustment Escrow Amount
to the Master Escrow Agent, subject to the requirements of the Master Escrow
Agreement, by bank cashier's or certified check or wire transfer to an account
specified by the Master Escrow Agent.
(f) Buyer and Sellers shall have delivered the completed and signed
Form 8023 pursuant to the requirements of Section 5.11.
(g) All of the transactions to be concluded at the Closing shall be
deemed concluded simultaneously at 10:00 a.m. Eastern Time on the Closing Date.
Unless waived, no transaction or delivery to be concluded at the Closing shall
be deemed finally concluded unless and until all such transactions or deliveries
are concluded.
(h) Buyer's delivery of the funds via wire transfer in the amounts and
to the accounts specified in Sections 2.4(b)(i) through 2.4(b)(iv) and Buyer's
delivery of certificates for Buyer Restricted Shares in the amounts and to the
addresses specified in Exhibit 2.2 shall, to the extent of the funds and the
certificates for Buyer Restricted Shares so delivered and subject to the terms
of the Master Escrow Agreement, fully and finally discharge the obligation of
Buyer with regard to the payment to Sellers of the Purchase Price; provided,
however, that such Purchase Price shall be reduced or increased by the
Adjustment Amount as set forth in Sections 2.6 and 2.7.
2.5 ESTIMATED CLOSING BALANCE SHEET; ESTIMATED PURCHASE PRICE. As soon as
practicable but not less than five Business Days prior to the Closing Date,
Sellers shall deliver to Buyer in writing a good faith estimate of the balance
sheet of the Company as of the Closing (the "ESTIMATED CLOSING BALANCE SHEET").
The Estimated Closing Balance Sheet shall be determined in accordance with GAAP
and prepared in the same manner as and consistent with the audited year-end
financial statements of the Company (except that target rates of expense for
periods after March 31, 2006 shall be used instead of actual rates of expense
for purposes of determining Net Book Value). The Estimated Closing Balance Sheet
shall include any employee or other bonus payments and any other liabilities to
be paid by the Company following the Closing that should have been accrued for
the period ending as of the Closing Date, but shall exclude any employee or
other bonus payments (including any Success Bonuses paid by the Company after
giving effect to the transactions contemplated by this Agreement) and any other
liabilities that have actually been paid by the Company before the Closing. The
Estimated Closing Balance Sheet shall further include the Company's share of any
employee withholding, Social Security and Medicare taxes payable with respect to
the Success Bonuses and not paid by the Company before the Closing. The
Estimated Closing Balance Sheet shall also exclude any Retention Payment to be
paid following the Closing Date. The Estimated Closing Balance Sheet shall
further include as a liability the Company's anticipated obligation to the U.S.
Army Space and Missile Defense Command in the amount of $399,099 with respect to
an anticipated task order under the MDDC Contract, to the extent not paid or
satisfied as of the date of the Estimated Closing Balance Sheet. The Estimated
Closing Balance Sheet shall further include (i) a statement of the calculation
of a good faith estimate of the Purchase Price based thereon (the "ESTIMATED
PURCHASE PRICE"), (ii) the financial information used to derive the Estimated
Closing Balance Sheet and the Estimated Purchase Price, and (iii) a certificate
signed by Sellers to the effect that the Estimated Closing Balance Sheet and the
Estimated Purchase Price were
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derived and determined in good faith in accordance with GAAP and prepared in the
same manner as and consistent with the audited year-end financial statements of
the Company (except that target rates of expense for periods after March 31,
2006 were used instead of actual rates of expense for purposes of determining
Net Book Value) and include any employee or other bonus payments and any other
liabilities to be paid by the Company following the Closing that should have
been accrued for the period ending as of the Closing Date. In preparing and
determining the Estimated Closing Balance Sheet and the Estimated Purchase
Price, (x) Sellers shall, and shall cause the Company's independent accountants
to, regularly consult with Buyer and the Buyer's independent accountants and
apprise them of the details of the preparation and determination of the
Estimated Closing Balance Sheet and the Estimated Purchase Price and (y) Buyer
and the Buyer's accountants shall have the right, and Sellers shall, and shall
cause the Company's independent accountants to, permit Buyer and the Buyer's
accountants, to actively participate in all aspects of the preparation and
determination of the Estimated Closing Balance Sheet and the Estimated Purchase
Price. For such purpose, Sellers shall afford to Buyer and the Buyer's
accountants full and complete access to all of the Company's management and
books, documents and records that relate to the Business. In addition, as part
of the preparation of the Estimated Closing Balance Sheet, within thirty (30)
days before the Closing Date, Sellers shall cause the Company to prepare (i) an
"Estimate at Completion" for each Applicable Contract with customers of the
Company that is a fixed-price contract and (ii) a written comparison of the
Company's actual rate of expense and the Company's target rate of expense,
together with the associated calculations, for the current fiscal year. The
Estimated Closing Balance Sheet and the Estimated Purchase Price shall be
subject to objection by Buyer as not being determined in accordance with GAAP
(subject to confirmation of estimates) applied on a consistent basis with prior
periods.
2.6 ADJUSTMENT AMOUNT. The adjustment amount (the "ADJUSTMENT AMOUNT")
(which may be a positive or negative number) will be equal to (a) the Net Book
Value of the Company as of the Closing Date determined in accordance with
Section 2.7 and GAAP and shall include any employee or other bonus payments and
any other liabilities to be paid by the Company following the Closing that
should have been accrued for the period ending as of the Closing Date (including
the Company's share of any employee withholding, Social Security and Medicare
taxes payable with respect to the Success Bonuses and not paid by the Company
before the Closing and including the Company's anticipated obligation to the
U.S. Army Space and Missile Defense Command in the amount of $399,099 with
respect to an anticipated task order under the MDDC Contract, to the extent not
paid or satisfied as of the Closing Date) but shall exclude any employee or
other bonus payments (including any Success Bonuses paid by the Company after
giving effect to the transactions contemplated by this Agreement) and any other
liabilities that have actually been paid by the Company before the Closing and
shall also exclude any Retention Payment to be paid following the Closing Date,
minus (b) the amount of $8,601,834.00. The Purchase Price shall be increased by
the Adjustment Amount, to the extent that it is a positive number, and shall be
decreased by the Adjustment Amount, to the extent that it is a negative number.
2.7 ADJUSTMENT PROCEDURE.
(a) Sellers will prepare or cause to be prepared unaudited
consolidated financial statements ("CLOSING FINANCIAL STATEMENTS") of the
Company as of the Closing Date in
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accordance with GAAP for the period from April 1, 2005 through the Closing Date,
including a computation of Net Book Value as of the Closing Date. The Closing
Financial Statements shall be determined in accordance with GAAP and prepared in
the same manner as and consistent with the audited year-end financial statements
of the Company (except that target rates of expense for periods after March 31,
2006 shall be used instead of actual rates of expense for purposes of
determining Net Book Value). The Closing Financial Statements shall include any
employee or other bonus payments and any other liabilities to be paid by the
Company following the Closing that should have been accrued for the period
ending as of the Closing Date, but shall exclude any employee or other bonus
payments (including any Success Bonuses paid by the Company after giving effect
to the transactions contemplated by this Agreement) and any other liabilities
that have actually been paid by the Company before the Closing. The Closing
Financial Statements shall further include the Company's share of any employee
withholding, Social Security and Medicare taxes payable with respect to the
Success Bonuses and not paid by the Company before the Closing. The Closing
Balance Sheet shall further include as a liability the Company's anticipated
obligation to the U.S. Army Space and Missile Defense Command in the amount of
$399,099 with respect to an anticipated task order under the MDDC Contract, to
the extent not paid or satisfied as of the Closing Date. The Closing Financial
Statements shall also exclude any Retention Payment to be paid following the
Closing Date. The Closing Financial Statements shall also include an accrual for
the fees and expenses that the Company would have paid to the Company's
accountants had such accountants prepared audited financial statements for the
Company for the fiscal year ended March 31, 2006. The fees and expenses of
Sellers (including the fees and expenses of Sellers' counsel, accountants,
brokers, investment bankers, financial advisors, representatives and other
agents), to the extent paid or to be paid by the Company as permitted hereunder,
shall be reflected either as a reduction in cash or as a liability in the
Closing Financial Statements, and no fees or expenses of Sellers shall be paid
by the Company after the Closing that are not reflected as liabilities on the
Closing Financial Statements. Sellers will deliver to Buyer within forty-five
(45) days after the Closing Date the Closing Financial Statements, it being the
understanding and agreement of the parties that Sellers and their
Representatives will be provided access to all documents and information of the
Company needed for preparation of the Closing Financial Statements and may
request that certain employees of the Company prepare and provide assistance
with respect to such Closing Financial Statements for Sellers without any cost
to Sellers, provided that such preparation of such Closing Financial Statements
does not unreasonably interfere with the day to day activities for and on behalf
of the Company of such employees requested to prepare such Closing Financial
Statements. Following delivery of the Closing Financial Statements Sellers
shall, at the request of Buyer, promptly deliver or cause to be delivered to
Buyer, any and all work papers or other documents created or used by the Company
or its Representatives in the preparation of the Closing Financial Statements.
If within forty-five (45) days following Buyer's receipt of the Closing
Financial Statements, Buyer has not given Sellers notice of its objection to the
Closing Financial Statements (such notice must contain a statement of the basis
of Buyer's objection), then the Net Book Value reflected in the Closing
Financial Statements will be used in computing the Adjustment Amount. If Buyer
gives such notice of objection and Buyer and Sellers cannot agree with regard to
such objection within fourteen (14) Business Days thereafter, then the issues in
dispute will be submitted to nationally recognized certified public accountants
mutually agreed upon by the parties (which have not been engaged by either party
or their respective subsidiaries or affiliates for at least two (2) years prior
to the date of delivery to Buyer of the
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Closing Financial Statements) (the "INDEPENDENT ACCOUNTANTS"), for resolution.
If issues in dispute are submitted to the Independent Accountants for
resolution, (i) within fifteen (15) Business Days after request, each party will
furnish to the Independent Accountants such work papers and other documents and
information relating to the disputed issues as the Independent Accountants may
request and are available to that party (or its independent public accountants),
and each party will be afforded the opportunity to present to and discuss with
the Independent Accountants any material relating to the dispute prior to the
Independent Accountants' determination; (ii) the determination by the
Independent Accountants, as set forth in a notice delivered to Buyer and Sellers
by the Independent Accountants, will be binding and conclusive on parties in the
absence of manifest error; and (iii) the fees and disbursements of the
Independent Accountants shall be allocated between Buyer and Sellers so that
Buyer's share of such fees and disbursements shall be in the same proportion
that the aggregate amount that is unsuccessfully disputed by Buyer (as finally
determined by the Independent Accountants) bears to the total amount initially
disputed by Buyer. The Independent Accountants shall determine only those issues
in dispute, and the Independent Accountants' determination shall be based upon
and consistent with the terms and conditions of this Agreement. The
determination by the Independent Accountants shall be based solely on
presentations with respect to such disputed items by Buyer and Sellers to the
Independent Accountants and not on the Independent Accountants' independent
review. Buyer and Sellers shall use their best efforts to make their respective
presentations as promptly as practicable following submission to the Independent
Accountants of the disputed items, and each such party shall be entitled, as
part of its presentation, to respond to the presentation of the other party and
any questions and requests of the Independent Accountants. Buyer and Sellers
shall provide each other the same information as provided to the Independent
Accountants at the same time that the Buyer or the Sellers provides such
information to the Independent Accountants. In deciding any matter, the
Independent Accountants (i) shall be bound by the provisions of this Section
2.7(a) and (ii) may not assign a value to any item greater than the greatest
value for such item claimed by either Buyer or Sellers or less than the smallest
value for such item claimed by Buyer or Sellers. The Independent Accountants'
determination shall be made within forty-five (45) days after its engagement
(which engagement shall be made no later than five (5) Business Days after the
parties determine that there is a need to select the Independent Accountants),
or as soon thereafter as possible. As set forth above, the Independent
Accountants' determination shall be set forth in a written statement delivered
to Sellers and Buyer and shall be final, conclusive, non-appealable and binding
for all purposes hereunder; provided that such determination may be reviewed,
corrected or set aside by a court of competent jurisdiction but only if upon a
finding that the Independent Accountants failed to follow the provisions of this
Agreement or made mathematical errors with respect to its determination. The
determination of the Independent Accountants shall not be deemed an award
subject to review under the Federal Arbitration Act or any other statute.
(b) Within thirty (30) days following the final determination of the
Adjustment Amount, if the Purchase Price (after consideration of the Adjustment
Amount) is greater than the aggregate of the payments made pursuant to Sections
2.4(b)(i) through 2.4(b)(iv), then an amount equal to the difference shall be
deducted on a dollar for dollar basis from the Buyer Price Adjustment Escrow
Amount and paid to Sellers in accordance with the provisions of the Master
Escrow Agreement, and if the Purchase Price (after consideration of the
Adjustment Amount) is less than such aggregate amount, then an amount equal to
the difference shall be deducted on a
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dollar for dollar basis from the Sellers' Price Adjustment Escrow Amount and
paid to Buyer in accordance with the provisions of the Master Escrow Agreement.
In the event that the Buyer Price Adjustment Escrow Amount or the Sellers' Price
Adjustment Escrow Amount, as the case may be, shall be insufficient to reimburse
the other party in accordance with the preceding sentence then Buyer or Sellers,
as the case may be, shall pay the remaining balance to the other party in cash
within such thirty (30) day period following the final determination of the
Adjustment Amount. All deductions or payments pursuant to this Section 2.7(b)
shall be made in immediately available funds together with simple interest at a
rate equal to the rate on U.S. Treasury Bills with a maturity of three months,
as reported in the Wall Street Journal for the Closing Date, beginning on the
Closing Date and ending on the date of payment. The Purchase Price shall be the
Purchase Price as adjusted on a dollar-for-dollar basis by the Adjustment
Amount. Any payments or deductions attributable to Sellers pursuant to this
Section 2.7(b) shall be allocated in the proportions set forth in Schedule II
attached hereto. Any good faith dispute in the calculation of the Adjustment
Amount will not constitute a breach of any of the representations or warranties
of either Buyer or Sellers hereunder and will not give either party any right to
indemnification hereunder.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company, jointly and severally, represent and warrant to
Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING; SUBSIDIARIES.
(a) Section 3.1(a) of the Disclosure Letter contains a complete and
accurate list of the Company's jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each). The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Alabama, with full corporate power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to perform all
its obligations under Applicable Contracts. The Company is duly qualified to do
business as a foreign corporation and is in good standing or the equivalent
qualification under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification and where failure to
qualify would reasonably be expected to have a Material Adverse Effect on the
Company. Sellers have delivered to Buyer copies of the Organizational Documents
of the Company, as currently in effect.
(b) The Company has no Subsidiaries. The Company has no direct or
indirect ownership interest in CAS Cares, Inc., a not-for-profit corporation
organized under the laws of the State of Alabama ("CAS CARES").
(c) Except as set forth in Section 3.1(c) of the Disclosure Letter,
the Company does not directly or indirectly own any equity securities of any
other Person (each such Person, an "AFFILIATED ENTITY"). Section 3.1(c) of the
Disclosure Letter contains a complete and accurate list of the jurisdiction of
organization of each Affiliated Entity and, to the Knowledge of the Company and
the Sellers, the other jurisdictions in which each Affiliated Entity is
authorized to
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do business. Each Affiliated Entity is duly organized, validly existing and in
good standing or the equivalent qualification under the laws of its jurisdiction
of organization and has full legal power and authority necessary to conduct its
business as it is now being conducted and to own or use the properties and
assets that it purports to own or use. To the Knowledge of the Company and the
Sellers, each Affiliated Entity is duly qualified to do business as a foreign
entity and is in good standing or the equivalent qualification under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification and where failure to qualify would reasonably be
expected to have a Material Adverse Effect on such Affiliated Entity. Sellers
have delivered to Buyer copies of the Organizational Documents of each
Affiliated Entity.
(d) Section 3.1(d) of the Disclosure Letter contains a complete and
accurate description of (i) the equity securities of each Affiliated Entity that
are authorized, issued and outstanding as of the date of this Agreement and (ii)
each such Affiliated Entity's direct equity owners. Except as set forth in
Section 3.1(d) of the Disclosure Letter, the Company is and will be on the
Closing Date the record and beneficial owner and holder of the equity securities
of each Affiliated Entity set forth opposite the name of the Company on Section
3.1(d) of the Disclosure Letter, free and clear of all Encumbrances and upon
consummation of the Contemplated Transactions the Company will have good, valid
and marketable title to such equity securities, free and clear of all
Encumbrances. Except as set forth in Section 3.1(d) of the Disclosure Letter,
the Company has no obligation to contribute any capital or property to any
Affiliated Entity and, to the Knowledge of Sellers and the Company, there are no
Contracts relating to the issuance, sale, or transfer of any equity securities
of any Affiliated Entity.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles. Upon the execution and delivery by
each Seller, as applicable, of the Master Escrow Agreement, the Sellers' and
Company Mutual Release, Sellers' endorsement of the certificates evidencing the
Shares (or the executed stock power accompanying such certificates) and each
other agreement, certificate or document executed by or on behalf of such Seller
and delivered to Buyer pursuant to this Agreement (collectively, the "SELLERS'
CLOSING DOCUMENTS"), the Sellers' Closing Documents to which such Seller is a
party will constitute the legal, valid, and binding obligations of such Seller,
enforceable against such Seller in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles. Each Seller has the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents to which such Seller is party and
to perform such Seller's obligations hereunder and thereunder.
(b) Except as set forth in Section 3.2(b) of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
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(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, (B) any provision
of the Organizational Documents of the Trust or (C) any resolution adopted by
the board of directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company or any Seller, or any of
the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Tax (other than future Tax owed as a
result of future operations of the Company following the Closing);
(v) cause any of the assets owned by the Company to be reassessed
or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance
other than Permitted Encumbrances upon or with respect to any of the assets
owned or used by the Company.
(c) Except as set forth in Section 3.2(c) of the Disclosure Letter,
neither Sellers nor the Company is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
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3.3 CAPITALIZATION.
(a) The authorized equity securities of the Company consist of
1,000,000 shares of common stock, $0.001 par value per share, of which 750,000
have been designated as Class A Voting Common Stock (the "CLASS A STOCK") and
250,000 have been designated as Class B Non-Voting Common Stock (the "CLASS B
STOCK"). 2,020 shares of Class A Stock and 1,010 shares of Class B Stock are
issued and outstanding and constitute the Shares. Except as set forth in Section
3.3(a) of the Disclosure Letter, Sellers are and will be on the Closing Date the
record and beneficial owners and holders of the Shares, free and clear of all
Encumbrances, the Shares constitute all of the issued and outstanding equity
securities of the Company and each Seller is the sole record and beneficial
owner of that portion of the Shares set forth after his name on Section 3.3(a)
to the Disclosure Letter as evidenced by the share certificates identified by
number as set forth in said Section 3.3(a). Except as set forth in Section
3.3(a) of the Disclosure Letter, no legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Neither the
issue nor sale of any equity securities of the Company violated the pre-emptive
rights of any Person. Except as set forth in Section 3.3(a) of the Disclosure
Letter, no Person has owned or held any equity securities of the Company at
anytime prior to the date hereof, other than Sellers. All of the Shares
heretofore owned by Sellers have been, or shall be at the Closing, duly endorsed
for transfer to Buyer or are, or shall be at the Closing, accompanied by duly
executed stock powers and, subject to payment by Buyer to Sellers of the
Purchase Price in accordance with the terms of this Agreement, upon delivery of
the Shares to Buyer on the Closing Date, Buyer will have good, valid and
marketable title to the Shares, free and clear of all Encumbrances.
(b) Sellers are not party to any voting trust, proxy or other
agreements or understandings with respect to the voting of any of the Shares.
Section 3.3(b) of the Disclosure Letter contains a complete and accurate list,
and Sellers have heretofore delivered or made available to Buyer a true and
complete copy of each power of attorney that is currently effective and
outstanding granted by Sellers with respect to any of the Shares. Except as set
forth in Section 3.3(b) of the Disclosure Letter, there are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act or any
other Legal Requirement. The Company is not a party to any Contract to acquire
any equity securities or other securities of any Person or any direct or
indirect equity or ownership interest in any other business. All dividends and
distributions by the Company have been made in compliance with the
Organizational Documents of the Company and all Legal Requirements.
(c) Each Seller is an "accredited investor" as that term is defined in
Rule 501 of Regulation D promulgated under the Securities Act. Each Seller has
carefully reviewed the terms and conditions of this Agreement, including without
limitation the representations and warranties of the Company and Buyer, the
Disclosure Letter and the Ancillary Agreements. Each Seller has had the
opportunity to ask questions and receive answers from the Company and Buyer with
respect to the Company, its business, assets, operations, financial condition
and prospects and the transactions contemplated by this Agreement.
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3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a) audited
balance sheets of the Company as of March 31, 2005 and the related audited
statements of income, changes in stockholders' equity, and cash flow for the
fiscal year then ended, together with the related notes and unqualified report
thereon of Xxxxxxxxxx & Xxxx, P.C., independent certified public accountants,
(b) reviewed balance sheets of the Company as of March 31 in each of the years
1999 through 2004, and the related reviewed statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
together with the related notes and unqualified report thereon of Xxxxxxxxxx &
Xxxx, P.C., independent certified public accountants, (c) an unaudited balance
sheet of the Company as at September 30, 2005 (including the notes thereto, the
"BALANCE SHEET"), and the related consolidated statements of income for the six
months then ended, and (d) an unaudited balance sheet of the Company as at March
31, 2006, and the related consolidated statements of income for the twelve
months then ended. A copy of the Balance Sheet is attached to Section 3.4 of the
Disclosure Letter. Except as set forth in Section 3.4 of the Disclosure Letter,
such financial statements and notes fairly present the financial condition and
the results of operations, changes in stockholders' equity, and cash flow of the
Company as of the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP. The audited and unaudited
financial statements described in this Section 3.4 are collectively referred to
as the "FINANCIAL STATEMENTS". Except as set forth in Section 3.4 of the
Disclosure Letter, the unaudited Financial Statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
Company's financial condition at September 30, 2005 and March 31, 2006 and the
results of operations for the six and twelve months then ended and at March 31
in each of the years 1999 through 2004 and the results of its operations for
each of the fiscal years then ended. Except as set forth in Section 3.4 of the
Disclosure Letter, no financial statements of any Person other than the Company
are required by GAAP to be included in the consolidated Financial Statements of
the Company. The Company maintains a system of internal controls over financial
reporting sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; and
(iii) access to assets is permitted only in accordance with management's general
or specific authorization. Except as set forth in Section 3.4 of the Disclosure
Letter, there are no off-balance sheet transactions, arrangements, obligations
(including contingent obligations), or any other relationships related to the
business of the Company with unconsolidated entities or other Persons that would
reasonably be expected to have a Material Adverse Effect on the Company.
3.5 BOOKS AND RECORDS. Except as set forth in Section 3.5 of the Disclosure
Letter, the stock record books of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices. The books of account and other records
of the Company, all of which have been made available to Buyer, are complete and
correct in all material respects and have been maintained in accordance with
sound business practices. The minute books of the Company, all of which have
been made available to Buyer, contain records of all meetings held of, and
corporate action taken by, the stockholders, the Boards of Directors, and
committees of the Boards of Directors of the Company and are accurate and
complete in all material respects, and no meeting of any such stockholders,
Board of Directors, or committee has been held for which minutes have not been
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prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Section 3.6(a) of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other interests therein
currently owned or leased by the Company. Sellers have delivered or made
available to Buyer copies of the deeds and other instruments (as recorded) by
which the Company acquired such real property and interests, and copies of all
title insurance policies, opinions, abstracts, and surveys in the possession of
Sellers or the Company and relating to such property or interests. The Company
owns (with good and marketable title in the case of real property, subject only
to the matters permitted by the following sentence) all of the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that it purports to own located in the facilities owned or operated by the
Company or reflected as owned in the books and records of the Company, including
all of the properties and assets reflected in the Financial Statements (except
for assets held under capitalized leases disclosed or not required to be
disclosed in Section 3.6 of the Disclosure Letter and personal property sold
since the date of the Balance Sheet, as the case may be, in the Ordinary Course
of Business), all such properties and assets are in good operating condition
(reasonable wear and tear excepted) and are suitable for their intended use, and
all of the properties and assets purchased or otherwise acquired by the Company
since the date of the Balance Sheet (except for personal property acquired and
sold since the date of the Balance Sheet in the Ordinary Course of Business and
consistent with past practice) which subsequently purchased or acquired
properties and assets (other than inventory and short-term investments) are
listed in Section 3.6(a) of the Disclosure Letter. Except as set forth in
Section 3.6(a) of the Disclosure Letter, all material properties and assets
reflected in the Financial Statements are free and clear of all Encumbrances
other than Permitted Encumbrances and are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except, with respect to all such
properties and assets, (i) mortgages or security interests shown on the Balance
Sheet as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (ii) mortgages or security interests incurred in connection
with the purchase of property or assets after the date of the Balance Sheet
(such mortgages and security interests being limited to the property or assets
so acquired), with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, and (iii) with
respect to real property, (x) minor imperfections of title, if any, none of
which is substantial in amount, materially detracts from the value or impairs
the use of the property subject thereto, or impairs the operations of the
Company, and (y) zoning laws and other land use restrictions that do not impair
the present or anticipated use of the property subject thereto.
(b) The Company has the right to use all customer-furnished tangible
and intangible personal property and assets used in the operation of the
Company's business as currently conducted. Section 3.6(b) of the Disclosure
Letter contains a list of all such customer-furnished property. All
customer-furnished tangible assets of the Company are, in the aggregate, in
working order, condition and repair, reasonable wear and tear excepted, and
reasonably suitable for the conduct of the Company's business as currently
conducted and, to the Knowledge of Sellers and the Company, there is no material
expenditure presently required to
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maintain such condition and state of repair or replace such tangible assets. The
Company is currently in possession of all customer-furnished tangible assets
provided to the Company by a customer, except such property that has been
returned to such customer or such property that is in the possession of a
qualified subcontractor. The Company will continue to have the right to use all
customer-furnished property set forth in Section 3.6(b) of the Disclosure Letter
immediately following the Closing, subject to the customer's right to revoke the
Company's right to use such customer-furnished property at any time.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. To the Company and the Sellers'
Knowledge, the buildings, plants, offices, structures, and equipment owned or
leased by the Company are structurally sound, are in good operating condition
and repair (reasonable wear and tear excepted), and are adequate for the uses to
which they are being put, and none of such buildings, plants, offices,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost or for which costs have been reserved on the Financial Statements. The
building, plants, offices, structures, and equipment of the Company are
reasonably sufficient for the continued conduct of the Company's businesses
after the Closing in substantially the same manner as conducted prior to the
Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the Financial Statements or on the accounting records of the
Company as of the Closing Date (collectively, the "ACCOUNTS RECEIVABLE")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on the
Financial Statements or on the accounting records of the Company as of the
Closing Date (which reserves are adequate and calculated consistent with past
practice and, in the case of the reserve as of the Closing Date, will not
represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within two hundred forty (240) days after the day on which it first becomes due
and payable. There is no contest, claim, or right of set-off, other than returns
in the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Section 3.8 of the Disclosure Letter contains a complete and
accurate list of all Accounts Receivable as of the date of the Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY. All inventory of the Company, whether or not reflected in
the Financial Statements, consists of a quality and quantity usable and salable
in the Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Financial Statements or on the accounting records of
the Company as of the Closing Date, as the case may be. The quantities of each
item of inventory (whether raw materials, work-in-process, or finished goods)
are not excessive, but are reasonable in the present circumstances of the
Company.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Section 3.10 of the
Disclosure Letter, the Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise), except for liabilities or obligations
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reflected or reserved against in the Balance Sheet and liabilities incurred in
the Ordinary Course of Business since the respective dates thereof.
3.11 TAXES.
(a) The Company has filed or caused to be filed (on a timely basis
since its inception) all Tax Returns that are or were required to be filed by or
with respect to the Company, pursuant to applicable Legal Requirements. Sellers
have delivered to Buyer copies of, and Section 3.11(a) of the Disclosure Letter
contains a complete and accurate list of, all such Tax Returns relating to
income or franchise taxes filed for the tax years since December 31, 2000. The
Company has paid, or made provision for the payment of, all Taxes that have or
may have become due pursuant to those Tax Returns or otherwise, or pursuant to
any assessment received by Sellers or the Company, except such Taxes, if any, as
are listed in Section 3.11(a) of the Disclosure Letter and are being contested
in good faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Financial Statements. No notice has been
received by the Company and, to the Knowledge of Sellers or the Company, no
claim has ever been made by a Governmental Authority in a jurisdiction where the
Company does not file Tax Returns that it may be subject to Taxes in that
jurisdiction. Except as described in Section 3.11(a) of the Disclosure Letter,
the Company is not a partner in any partnership and is not a party to any joint
ventures. Except as set forth in Section 3.11(a) of the Disclosure Letter, the
Company has not requested or received any legal or accounting opinions relating
to the Company's position on any Tax Return. Except as set forth in Section
3.11(a) of the Disclosure Letter, the Company has not requested or received a
revenue ruling, private letter ruling, or similar or related correspondence from
the IRS.
(b) The United States federal, state, local, and foreign income Tax
Returns of the Company subject to such Taxes have been audited by the IRS or
relevant state, local or foreign Tax authorities or are closed by the applicable
statute of limitations for all taxable years through the Company's tax year
ended December 31, 1999. Section 3.11(b) of the Disclosure Letter contains a
complete and accurate list of all audits of all such Tax Returns of the Company
since the Company's tax year ended December 31, 2000, including a reasonably
detailed description of the nature and outcome of each audit and a schedule of
all pending audits and contests of liability for Taxes. All deficiencies
proposed, assessed or determined as a result of such audits have been paid,
reserved against, settled, or, as described in Section 3.11(b) of the Disclosure
Letter, are being contested in good faith by appropriate proceedings. Section
3.11(b) of the Disclosure Letter describes all adjustments to the United States
federal, state, local and foreign Tax Returns filed by the Company for all
taxable years since the Company's tax year ended December 31, 2000, and the
resulting deficiencies proposed by the IRS and relevant state, local and foreign
Tax authorities. Except as described in Section 3.11(b) of the Disclosure
Letter, neither Sellers nor the Company have given or been requested to give
waivers or extensions (or is or would be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the payment of
Taxes of the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company are adequate (determined in accordance with
GAAP) and are at least equal to the Company's liability for Taxes. The Company
has received no written notice, and has
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no Knowledge, of a proposed tax assessment against the Company except as
disclosed in the Financial Statements or in Section 3.11(c) of the Disclosure
Letter. No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be acquired
by the Company.
(d) All Taxes that the Company is or was required by Legal
Requirements to withhold or collect has been duly withheld or collected and, to
the extent required, has been paid to the proper Governmental Body or other
Person, including, but not limited to, amounts paid to any employee or any
foreign person or entity, and any back-up withholding required under IRC Section
3406.
(e) All Tax Returns filed by the Company are true, correct, and
complete in all material respects. Except as provided in Section 3.11(e) of the
Disclosure Letter, there is no tax sharing agreement, including any agreement
for indemnification, that will require any payment by the Company after the date
of this Agreement, excluding agreements the primary purpose of which is not the
allocation of Tax liabilities and in which such provisions regarding Taxes are
typical of such agreements and the amount of Tax is not material in the
aggregate. For federal income tax purposes, the Company has been a validly
electing S corporation within the meaning of IRC Sections 1361 and 1362 at all
times since April 1, 1982, and the Company will be an S corporation up to and
including the Closing. The Company has conducted business pursuant to the rules
and regulations promulgated by the IRS with respect to S corporations,
including, but not limited to, maintaining a single class of stock (except for
different voting rights), issuing debt that would not be deemed a second class
of stock, issuing options, warrants or convertible notes that would not be
deemed a second class of stock, allocating income and distributions based on a
pro rata ownership basis, and maintaining only eligible shareholders. Neither
the Company nor any Seller is a party to any Contract relating to the transfer,
assignment or recontribution of any distributions made by the Company to any
Seller or the Former Shareholder.
(f) Section 3.11(f) of the Disclosure Letter lists those states in
which the Company has made valid state tax elections to be treated as an S
corporation or comparable pass-through entity and lists those states in which
the Company is not treated as a pass-through entity for state tax purposes.
(g) The Company will have no liability for Taxes under IRC Section
1374 in connection with the deemed sale of the Company's assets caused by the
Section 338(h)(10) Election. The Company has not in the past 10 years (i)
acquired assets from another corporation in a transaction in which the Company's
Tax basis for the acquired assets was determined, in whole or in part, by
reference to the Tax basis of the acquired assets (or any other property) in the
hands of the transferor or (ii) acquired the stock of any corporation which is a
qualified subchapter S subsidiary.
(h) The Company is not party to any agreement, contract or arrangement
that has resulted or would result in the payment of any "excess parachute
payment" within the meaning of IRC Section 280G.
(i) The Company has not participated, directly or indirectly, in any
transaction that would constitute a reportable transaction or listed transaction
both as defined in Treas. Reg.
-32-
1.6011-4, or in any transaction that is a tax shelter within the meaning of IRC
Section 6662(d)(2)(C)(ii).
3.12 NO MATERIAL ADVERSE CHANGE. Except as set forth in Section 3.12 of the
Disclosure Letter, since the date of the Balance Sheet, there has not been any
change in the business, operations, properties, prospects, assets, or financial
condition of the Company that would reasonably be expected to have a Material
Adverse Effect on the Company, and to the Knowledge of the Seller or the
Company, no event has occurred or circumstance exists that would reasonably be
expected to result in a Material Adverse Effect on the Company.
3.13 EMPLOYEE BENEFITS.
(a) Section 3.13(a) of the Disclosure Letter sets forth a true and
complete list of each Company Plan that is maintained or contributed to as of
the date of this Agreement, or that has within the last six years been
maintained or contributed to by the Company or any ERISA Affiliate or under
which the Company or any ERISA Affiliate has any liability.
(b) The Company has heretofore delivered to Buyer true, correct and
complete copies of each Company Plan and all related documents, including but
not limited to (i) the actuarial report for such Company Plan (if applicable)
for the last three years, (ii) the most recent determination letter from the IRS
(if applicable) for such Company Plan, (iii) the current summary plan
description and any summaries of material modification, (iv) all annual reports
(Form 5500 series) for each Company Plan filed for the preceding three plan
years, (v) all agreements with, and reports submitted by, fiduciaries and
service providers relating to each Company Plan, (vi) any related trust
documents, (vii) all current summaries and descriptions furnished to
participants regarding any Company Plan for which a summary plan description is
not required, (viii) all personnel manuals and policies and procedures, (ix) all
collective bargaining agreements pursuant to which contributions have been made
or obligations incurred (including both pension and welfare benefits) by the
Company and any ERISA Affiliate and all collective bargaining agreements
pursuant to which contributions are being made or obligations are owed by such
entities, (x) a written description of any Company Plan that is not in writing,
(xi) all insurance policies purchased by or to provide benefits under any
Company Plan, (xii) a sample form of notification provided to employees of their
rights under ERISA Section 601 et seq. and IRC Section 4980B, (xiii) all
notices, correspondence or other communications relating to any Company Plan
that were submitted to or received from the IRS, the Pension Benefit Guaranty
Corporation, the U.S. Department of Labor, the Securities and Exchange
Commission, or any other governmental agency within the three years preceding
the date of this Agreement.
(c) Section 3.13(c) of the Disclosure Letter sets forth (i) the
calculation of the liability of the Company for post-retirement benefits other
than pensions, made in accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether the Company is
required by Financial Accounting Statement 106 to disclose such information, and
(ii) the financial cost of all obligations owed under any Company Plan.
(d) Except as set forth at Section 3.13(d) of the Disclosure Letter:
(i) the Company has performed all of its respective obligations under each
Company Plan; (ii) the
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Company, with respect to each Company Plan, is, and each Company Plan is, in
compliance with ERISA, the IRC, and other applicable Legal Requirements, and
with any applicable collective bargaining agreement and (A) no non-exempt
transaction prohibited by ERISA Section 406 and no "prohibited transaction"
under IRC Section 4975(c) has occurred with respect to any Company Plan, (B)
neither Sellers nor the Company has any liability to the DOL or IRS with respect
to any Company Plan, (C) neither Sellers nor the Company has any liability to
the Pension Benefit Guaranty Corporation with respect to any Company Plan or has
any liability under XXXXX Xxxxxxx 000 xx Xxxxxxx 0000, (X) all filings required
by ERISA and the IRC as to each Company Plan have been timely filed, and all
notices and disclosures to participants required by either ERISA or the IRC have
been timely provided, (E) no amount, or any asset of any Company Plan, is
subject to tax as unrelated business taxable income; and (iii) each Company Plan
can be terminated within thirty (30) days, without payment of any additional
contribution or amount and without the vesting or acceleration of any benefits
promised by such Company Plan, except as otherwise required by the terms of a
Company Plan that is a tax-qualified retirement plan under IRC Section 401(a);
(e) Except as set forth at Section 3.13(e) of the Disclosure Letter:
(i) other than claims for benefits submitted by participants or beneficiaries,
no claim against, or legal proceeding involving, any Company Plan is pending or,
to the Knowledge of Sellers, is Threatened; (ii) each Qualified Plan of the
Company is qualified in form and operation under IRC Section 401(a), each trust
for each such Company Plan is exempt from federal income tax under IRC Section
501(a), and no event has occurred or circumstance exists that will or could give
rise to disqualification or loss of tax-exempt status of any such Company Plan
or trust; (iii) no Company Plan is, or has ever been, subject to Title IV of
ERISA, and neither the Company nor any ERISA Affiliate of the Company has ever
established, maintained, or contributed to or otherwise participated in, or had
an obligation to maintain, contribute to, or otherwise participate in, any
Multi-Employer Plan (as defined in ERISA Section 3(37)); (iv) neither the
Company nor any ERISA Affiliate of the Company has ceased operations at any
facility or withdrawn from any Title IV Plan in a manner that would subject it
or the Sellers to liability under ERISA Section 4062(e), Section 4063, or
Section 4064; (v) no amendment has been made, or is reasonably expected to be
made, to any Company Plan that has required or could require the provision of
security under ERISA Section 307 or IRC Section 401(a)(29); (vi) except to the
extent required under ERISA Section 601 et seq. and IRC Section 4980B, the
Company does not provide health or welfare benefits for any retired or former
employee nor is it obligated to provide health or welfare benefits to any active
employee following such employee's retirement or other termination of service;
(vii) the Company has the right to modify and terminate benefits to retirees
(other than pensions) with respect to both retired and active employees; and
(viii) Sellers and the Company and any ERISA Affiliate have complied with the
provisions of ERISA Section 601 et seq. and IRC Section 4980B.
(f) Except as set forth at Section 3.13(f) of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation of the
Contemplated Transactions (either alone or in conjunction with any other event)
will (i) restrict or prohibit the Company from amending any Company Plan, (ii)
result in any material payment (including, without limitation, severance,
unemployment compensation, "excess parachute payment" (within the meaning of
Section 280G of the IRC), forgiveness of indebtedness or otherwise) becoming due
to any director, officer or employee of the Company under any Company Plan or
otherwise or require the Company to "gross up" or otherwise compensate any such
person because of the imposition of any excise tax on a payment to such person,
(iii) materially increase any benefits
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otherwise payable under any Company Plan or (iv) result in any acceleration of
the time of payment or vesting of any benefits under any Company Plan or
otherwise.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in Section 3.14(a) of the Disclosure Letter:
(i) the Company is, and at all times since April 1, 2001 has
been, in compliance with each material Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
the Company of, or a failure on the part of the Company to comply with, any
material Legal Requirement, or (B) may give rise to any material obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature; and
(iii) the Company has not received, at any time since April 1,
2001, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature and the Company is not subject to any
material liability or obligation with respect to any remedial action resulting
from an event or notice which the Company received prior to April 1, 2001.
(b) Section 3.14(b) of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, the Company. Each Governmental Authorization listed or required to be listed
in Section 3.14(b) of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Section 3.14(b) of the Disclosure Letter:
(i) the Company is, and at all times since April 1, 2001 has
been, in compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Section 3.14(b) of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with
or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in Section
3.14(b) of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Section 3.14(b) of the Disclosure Letter;
(iii) the Company has not received, at any time since April 1,
2001, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual,
-35-
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization;
and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in Section
3.14(b) of the Disclosure Letter have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Section 3.14(b) of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the Company to lawfully conduct and operate its business in the manner
it currently conducts and operates such business and to permit the Company to
own and use its assets in the manner in which it currently owns and uses such
assets.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Section 3.15(a) of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
To the Knowledge of Sellers and the Company, (1) no such Proceeding has
been Threatened, and (2) no event has occurred or circumstance exists that may
give rise to or serve as a basis for the commencement of any such Proceeding.
Sellers have delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Section 3.15(a) of the
Disclosure Letter. The Proceedings listed in Section 3.15(a) of the Disclosure
Letter (excluding Items 1 and 2 listed in Section 3.15(a)) will not have a
Material Adverse Effect on the business, operations, assets, condition, or
prospects of the Company.
(b) Except as set forth in Section 3.15(b) of the Disclosure Letter:
(i) there is no Order to which the Company, or any of the assets
owned or used by the Company, is subject;
(ii) no Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director or employee of the Company or, to the
Knowledge of Sellers and the Company, any consultant, contractor or agent of the
Company is subject to any Order that prohibits such officer, director, employee,
consultant, contractor or agent from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
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(c) Except as set forth in Section 3.15(c) of the Disclosure Letter:
(i) the Company is, and at all times since April 1, 2001 has
been, in material compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received, at any time since April 1,
2001, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the assets owned or used by the
Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in Section
3.16 of the Disclosure Letter, since the date of the Balance Sheet, the Company
has conducted its business only in the Ordinary Course of Business and there has
not been any:
(a) change in the Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the Company;
grant of any phantom or similar rights which give any Person any interest in any
portion of the revenue or earnings of the Company; issuance of any security
convertible into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any stockholder, director, officer, or employee;
(d) retirement, resignation, or other termination of the employment of
any Key Employee nor any notice or notification regarding any intended
retirement, resignation, or other termination of the employment of any Key
Employee;
(e) except as required by applicable Legal Requirements or to maintain
qualification pursuant to the IRC, any adoption, amendment, renewal or
termination of any Plan or any agreement, arrangement, plan or policy between
the Company and one or more of its current or former stockholders, directors,
officers or employees, or any non-deductible contribution to any Plan;
-37-
(f) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of the
Company, taken as a whole;
(g) except for those Contracts that supersede prior Contracts, without
materially changing the terms thereof or materially increasing the dollar amount
of any commitment by or to the Company thereunder, entry into, termination of,
or receipt of formal or informal notice or advice of termination of (i) any
license, distributorship, dealer, sales representative, joint venture, credit,
or similar agreement, or (ii) any Contract or transaction involving a total
remaining commitment by or to the Company of at least $100,000;
(h) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any material asset or property of the
Company or mortgage, pledge, or imposition of any lien or other Encumbrance
other than Permitted Encumbrances on any material asset or property of the
Company, including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
(i) capital expenditure or any agreement to incur any liability or
obligation (whether absolute, accrued, asserted or unasserted, contingent or
otherwise) in excess of $100,000;
(j) loan, advance or capital contribution to, or investments in, any
other Person or acquisition or agreement to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any other Person;
(k) cancellation or waiver of any claims or rights with a value to the
Company in excess of $100,000;
(l) material change in the accounting methods used by the Company; or
(m) agreement, whether oral or written and whether formal or informal,
by the Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Other than with respect to prior Contracts that have been
superseded by current Contracts, Section 3.17(a) of the Disclosure Letter
contains a complete and accurate list, and Sellers have delivered or made
available to Buyer true and complete copies, of:
(i) each Government Contract and Government Subcontract that is
(a) currently active in performance or (b) has been active in the past and
performance has been completed but has not been closed prior to the date of this
Agreement;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount or value
in excess of $100,000;
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(iii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or value
in excess of $100,000;
(iv) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts by the
Company in excess of $50,000;
(v) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $50,000 and with terms of less than one
year);
(vi) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets excluding any license implied by the sale of a
product, perpetual, paid-up licenses for commonly available software programs
each with a license fee of less than $10,000 in which Company is licensee, and
any licenses granted by a Governmental Body to the Company under a Government
Contract listed in Section 3.17(a)(i) of the Disclosure Schedule to use
technical data and software furnished to the Company for the limited purpose of
performing services for such Governmental Body under and during the term of any
such Government Contract;
(vii) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(viii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(ix) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or any Affiliate of
the Company or limit the freedom of the Company or any Affiliate of the Company
to engage in any line of business or to compete with any Person;
(x) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods;
(xi) each power of attorney or any other agreement entered into
by the Company that grants authority to any Person to act on behalf of the
Company that is currently effective and outstanding;
(xii) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
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(xiii) each Applicable Contract for capital expenditures in
excess of $50,000; and
(xiv) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company.
In addition, Section 3.17(a) of the Disclosure Letter contains a
complete and accurate list of all outstanding Government Bids.
(b) Except as set forth in Section 3.17(b) of the Disclosure Letter:
(i) None of Sellers (and no Related Person of any Seller) has or
intends to acquire any rights under or has or intends to become subject to any
obligation or liability under, any Contract that relates to the business of, or
any of the assets owned or used by, the Company;
(ii) No Person is currently engaged by the Company as a
consultant or to provide any consulting services; and
(iii) No Seller and no other officer, director or employee of the
Company or, to the Knowledge of the Company and the Sellers, any consultant,
contractor or agent, of the Company, is bound by any Contract that purports to
limit the ability of such Seller, officer, director, employee, consultant,
contractor or agent to (A) engage in or continue any conduct, activity, or
practice relating to the business of the Company, or (B) assign to the Company
or to any other Person any rights to any invention, improvement, or discovery
relating to the business of the Company.
(c) Except as set forth in Section 3.17(c) of the Disclosure Letter,
each Contract identified or required to be identified in Section 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in Section 3.17(d) of the Disclosure Letter:
(i) the Company is, and at all times since the date of the
respective Contract (A) has been, in compliance with all applicable terms and
requirements of each Contract under which the Company has or had any obligation
or liability or by which the Company or any of the assets owned or used by the
Company is or was bound, (B) has complied in all respects with all Legal
Requirements pertaining to each Contract, and (C) any representations and
certifications executed, acknowledged or set forth in or pertaining to each
Contract were complete and correct in all material respects as of their
effective date;
(ii) to the Knowledge of Sellers and the Company, each other
Person that has or had any obligation or liability under any Contract under
which the Company has or had any rights is, and at all times since the inception
of such contract has been, in compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or
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give the Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) since the date of the respective Contract (including any
Contracts which have been superseded by the present Contracts), the Company has
not given to or received from any other Person, any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential violation or breach of, or default under, any Contract.
(e) Except as set forth in Section 3.17(e) of the Disclosure Letter,
there are no current renegotiations of, or to the Knowledge of Sellers and the
Company, outstanding rights to renegotiate or, to the Knowledge of Sellers and
the Company, attempts to renegotiate, any material amounts paid or payable to
the Company under current or completed Contracts with any Person and no such
Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement. The Company has not knowingly submitted or negotiated a bid or
proposal that the Company reasonably believed would result in the award of a
Contract that would cause the Company to perform said Contract at a loss or
without receipt of a fee.
(g) Except as set forth in Section 3.17(g) of the Disclosure Letter:
(i) (A) the Company has complied and is in compliance with all
terms and conditions of each Government Contract or Government Subcontract, (B)
the Company has complied in all respects with all requirements for all Legal
Requirements or agreements pertaining to each Government Contract or Government
Subcontract and (C) all representations certifications and statements executed,
acknowledged or set forth in or pertaining to each Government Contract or
Government Subcontract including but not limited to any statements made in
connection with the Procurement Integrity Law, 41 U.S.C. Section 423, the
Lobbying Disclosure Act of 1995, 2 U.S.C. Section 1601-1612, the Xxxx Amendment,
31 U.S.C. Section 1352, and their associated implementing regulations were
complete and correct in all respects as of their effective date and the Company
has complied in all respects with all such representations, certifications and
statements;
(ii) (A) neither the U.S. Government nor any prime contractor,
subcontractor or other Person has notified the Company, either in writing or
orally, that the Company has breached or violated any Legal Requirement,
certification, representation, clause, provision or other requirement of or
pertaining to any Government Contract or Government Subcontract, (B) no
termination for convenience, termination for default, cure notice or show cause
notice pertaining to any Government Contract or Government Subcontract (1) has
been in effect during the five (5) year period prior to the date of this
Agreement, (2) is currently in effect, or (3) is, to the Knowledge of Sellers
and the Company, Threatened, (C) no material cost incurred by the Company
pertaining to any Government Contract or Government Subcontract (1) has been
questioned or challenged by representatives of the Administrative Contracting
Officer
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or the Government Audit Agency, (2) has been disallowed by the U.S. Government,
or (3) has been or now is, the subject of any investigation, and (D) no amount
of money due to the Company, pertaining to any Government Contract or Government
Subcontract has been withheld or set off nor has any claim been made to withhold
or set off money, and the Company is entitled to all progress payments either
billed or received with respect thereto;
(iii) (A) neither the Company nor any of its directors, officers
or employees nor, to the Knowledge of the Company and the Sellers, any
consultant, contractor or agent of the Company, is or during the past five (5)
years has been under administrative, civil or criminal investigation or subject
to any indictment, subpoena, document request with respect to any
administrative, civil or criminal investigation or similar proceeding by any
Governmental Body with respect to any alleged or potential violation of any
contract requirement or Legal Requirement pertaining to any Government Contract
or Government Subcontract or any alleged noncompliance, misstatement or omission
arising under or relating to any Government Contract or Government Subcontract,
and (B) during the past five (5) years, the Company has not conducted or
initiated any internal investigation or made any written, or to the Knowledge of
Sellers and the Company, oral disclosure to any Governmental Body with respect
to any alleged or possible (1) violation of any contract requirement or
provision or any certification or representation, (2) violation of any Legal
Requirement or (3) noncompliance, misstatement or omission, in each case,
arising under or relating to a Government Contract or Government Subcontract;
(iv) there exist (A) no outstanding claims against the Company,
either by any Governmental Body or by any prime contractor, subcontractor,
vendor arising under or relating to any Government Contract or Government
Subcontract and (B) no material disputes between the Company and any
Governmental Body under any Government Contract or Government Subcontract, the
Contract Disputes Act or any other federal statute or regulation or between the
Company and any prime contractor, subcontractor or vendor arising under or
relating to any Government Contract or Government Subcontract;
(v) the Company has no interest in any pending or potential claim
against any Governmental Body or any prime contractor, subcontractor or vendor
arising under or relating to any Government Contract or Government Subcontract,
and Section 3.17(g) of the Disclosure Letter lists each Government Contract,
Government Subcontract or Government Bid which is currently under audit by any
Governmental Body or any other person that is a party to such Government
Contract, Government Subcontract or Government Bid;
(vi) neither the Company nor any of its directors, officers or
employees nor, to the Knowledge of the Company and the Sellers, any consultant,
contractor or agent of the Company, has been Threatened with or debarred,
suspended or excluded from participation in the award of Contracts with the DOD
or any other Governmental Body or (excluding for this purpose ineligibility to
bid on certain contracts due to generally applicable bidding requirements) for
any reason listed on the List of Parties Excluded from Federal Procurement and
Nonprocurement Programs and no debarment, suspension or exclusion proceeding has
been initiated against the Company or any of its directors, officers or
employees or, to the Knowledge of the Company and the Sellers, any consultant,
contractor or agent of the Company. There exist no facts or circumstances that
would warrant suspension or debarment or the finding of non-
-42-
responsibility or ineligibility on the part of the Company, no payment has been
made by the Company or by any Person on behalf of the Company in connection with
any Governmental Contract or Governmental Subcontract in violation of such
Government Contract or Government Subcontract or applicable procurement Legal
Requirements or in violation of, or requiring disclosure pursuant to, the
Foreign Corrupt Practices Act, and the Company's cost accounting and procurement
systems and the associated entries reflected in the Company's financial records
with respect to the Government Contracts and Government Subcontracts are in
compliance in all material respects with all Legal Requirements;
(vii) neither the Company nor any of its directors, officers or
employees of the Company nor, to the Knowledge of the Company and the Sellers,
any consultant, contractor or agent of the Company, have committed (or taken any
action to promote or conceal) any violation of any Legal Requirement relating to
procurement or in violation of the Foreign Corrupt Practices Act, 15 U.S.C.
Sections 78dd-1, 2, the Arms Export Control Act, the International Traffic in
Arms Regulations, as amended, the Atomic Energy Act of 1954, as amended,
Executive Order 12958 (April 17, 1995), Executive Order 12829 (January 6, 1993),
Executive Order 13292 (March 25, 2003), and directives and policies issued
pursuant thereto, including, but not limited to, the National Industrial
Security Program Operating Manual; and
(viii) the Company was eligible as a small business under 13
C.F.R. 121 at the time it was awarded all of the Government Contracts to which
it is a party on the basis of such eligibility (such Government Contracts are
set forth in Section 3.17(a) of the Disclosure Letter).
(h) The Company is not a party to any Contract with CAS Cares. There
is no Legal Requirement for the Company to contribute to CAS Cares or otherwise
to support its activities or operations in any manner.
3.18 INSURANCE.
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any director or
officer of the Company, is or has been covered at any time within the three (3)
years preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of the Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Section 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder; and
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(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company.
(c) Section 3.18(c) of the Disclosure Letter sets forth, by year, for
the current policy year and each of the three (3) preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance policy
for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant (except as prohibited by any
applicable Legal Requirement);
(B) a description of the policy by insurer, type of insurance,
and period of coverage; and
(C) the amount and a brief description of the claim.
(iii) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth in Section 3.18(d) of the Disclosure Letter:
(i) All policies to which the Company is a party or which the
Company pays the premium to provide coverage to Sellers, the Company, or any
director or officer of the Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) to the Knowledge of Sellers and the Company, taken together,
provide adequate insurance coverage for the assets and the
operations of the Company for all risks normally insured against
by the Company;
(D) are sufficient for compliance with all Legal Requirements and
Contracts to which the Company is a party or by which it is
bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the Company.
(ii) In the past five (5) years, neither Sellers nor the Company
has received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance
- 44 -
policy is no longer in full force or effect or will not be renewed or that the
issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) The Company has paid all premiums due, and has otherwise
performed all of its respective obligations, under each policy to which the
Company is a party or that provides coverage to the Company or director thereof.
(iv) To the Knowledge of Sellers and the Company, the Company has
given notice to the insurer of all claims that may be insured thereby.
(v) The Company has satisfied all obligations to third parties
with respect to the maintenance of insurance under Applicable Contracts
(including such obligations under leases and service agreements).
3.19 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.19 of the
Disclosure Letter and with respect to information disclosed in the Environmental
Phase I Study:
(a) To the Knowledge of Sellers and the Company, the Company is, and
at all times has been, in compliance with, and has not been and is not in
violation of or liable under, any Environmental Law. Neither any Seller nor the
Company has any reasonable basis to expect, nor has any of them received, any
actual or Threatened Order, notice, or other written communication that relates
to: (i) Hazardous Activity; (ii) Hazardous Materials; (iii) any alleged, actual
or potential violation or failure to comply with any Environmental Law; or (iv)
any alleged, actual, potential or Threatened obligation to undertake or bear the
cost of any Environmental, Health, and Safety Liabilities with respect to any of
the Facilities or any other properties or assets (whether real, personal, or
mixed) in which Sellers or the Company has had an interest, or with respect to
any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company, or any other Person for whose conduct they are responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received. To the Knowledge of Sellers and
the Company, no other person for whose conduct the Company is or may be held
responsible has received any such actual or Threatened Order, notice, citation,
inquiry, warning or other communication;
(b) To the Knowledge of Sellers and the Company, there are no
Encumbrances other than Permitted Encumbrances, pending claims or, to the
Knowledge of Sellers or the Company Threatened claims, or other restrictions of
any nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest or
presence;
(c) Neither Sellers nor the Company has any reasonable basis to
expect, nor has any of them received, any citation, directive, inquiry, notice,
Order, summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real,
-45-
personal, or mixed) in which Sellers or the Company had an interest, or with
respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by Sellers or
the Company, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received;
(d) Neither Sellers, nor the Company has any Environmental, Health,
and Safety Liabilities with respect to the Facilities or to the Knowledge of
Sellers and the Company with respect to any other properties and assets (whether
real, personal, or mixed) in which Sellers or the Company (or any predecessor),
has or had an interest, or at any property geologically or hydrologically
adjoining the Facilities or any such other property or assets;
(e) There are no Hazardous Materials present on or in the Environment
at the Facilities or, to the Knowledge of Sellers and the Company at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon, except such Hazardous Material which are
used and stored: (1) in the Ordinary Course of Business and (2) in compliance
with Environmental Laws, or 3) present in normal background levels. Neither
Sellers, nor the Company, nor any other Person for whose conduct they are or may
be held responsible, nor, to the Knowledge of Sellers, any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest
except in compliance with all applicable Environmental Laws;
(f) There has been no Release or Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where Hazardous
Materials were generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities, or, to the Knowledge of
Seller and the Company from or by any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest, or
any geologically or hydrologically adjoining property, whether by Sellers, the
Company, or any other Person except in compliance with Environmental Laws; and
(g) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed by
Sellers or the Company pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the Facilities, or concerning compliance by Sellers, the
Company, or any other Person for whose conduct they are or may be held
responsible, with Environmental Laws.
3.20 EMPLOYEES.
(a) Section 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Company as of March 21, 2006, including each employee on leave of absence or
layoff status: name; job title; current compensation paid or payable and any
change in compensation since March 22, 2004; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under each
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Company Plan. Section 3.20 of the Disclosure Letter separately identifies each
Key Employee of the Company.
(b) No director or employee of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("PROPRIETARY RIGHTS AGREEMENT") that in any way
adversely affects or will affect (i) the performance of his or her duties as an
employee or director of the Company as currently performed or as currently
contemplated by the Company to be performed, or (ii) the ability of the Company
to conduct its business as currently conducted or as currently contemplated by
the Company to be conducted, including any Proprietary Rights Agreement with
Sellers or the Company by any such employee or director. Except as set forth in
Section 3.20(b) of the Disclosure Letter, to the Knowledge of Sellers and the
Company, no director, officer, or other key employee of the Company intends to
terminate his or her employment with the Company.
(c) The Company and each officer and employee of the Company have the
security clearances required for the Company to conduct its business as
currently conducted or as presently contemplated to be conducted, and no fact or
circumstance has arisen that might adversely affect the security clearances of
the Company or, to the Knowledge of the Company, any officer or employee of the
Company, since the date of the Company's last Defense Security Service audit.
(d) Except as set forth in Section 3.20(d) of the Disclosure Letter,
all employees of the Company are employed by the Company on an "at will" basis
and may be terminated at any time without notice or payment of consideration or
penalty by the Company.
3.21 LABOR RELATIONS; COMPLIANCE. The Company has not been a party to any
collective bargaining or other labor Contract. There has not been, there is not
presently pending or existing, and to the Knowledge of Sellers and the Company
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting the Company
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting the Company
or its premises, or (c) any application for certification of a collective
bargaining agent. To the Knowledge of Sellers and the Company, no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. Except as set forth
in Section 3.21 of the Disclosure Letter, the Company has complied in all
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar Taxes, occupational
safety and health, and plant closing. The Company is not liable for the payment
of any compensation, damages, Taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
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3.22 INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets. The term "INTELLECTUAL PROPERTY
ASSETS" means:
(i) the name CAS, Inc., all fictitious business names, trade
names, registered and unregistered trademarks, service marks, and applications
to register any such unregistered trademarks or service marks (collectively,
"MARKS");
(ii) all patents and patent applications (collectively,
"PATENTS");
(iii) all copyrights in both published works and unpublished
works (collectively, "COPYRIGHTS");
(iv) all rights in mask works (collectively, "RIGHTS IN MASK
WORKS");
(v) all web sites, web pages, uniform resource locators
registered to the Company or currently used by the Company (collectively, "WEB
SITES");
(vi) all software, including associated computer programming code
(including, unless otherwise specified, both object code and Source Code
versions thereof), documentation (including, unless otherwise specified, user
manuals and other written materials that relate to particular code or
databases), materials useful for design, and other written materials or tangible
items (collectively, "SOFTWARE"); and
(vii) all proprietary and confidential information, know-how,
customer lists, technical and design information, data, processes, formulae,
methods, schematics, process technology, plans, drawings, blue prints,
inventions and discoveries (collectively, "TRADE SECRETS");
in each of the foregoing cases owned or licensed by the Company as licensee
or licensor or used by the Company in the operation of the Company's business as
it is currently conducted or as it is currently planned to be conducted.
(b) Agreements. Section 3.22(b) of the Disclosure Letter contains a
complete and accurate list, including any recurring or future royalties or
recurring or future license fees paid or received by the Company, of all
Contracts relating to the Intellectual Property Assets to which the Company is a
party or by which the Company is bound, except for: (i) any license implied by
the sale of a product, (ii) perpetual, paid-up licenses for commonly available
Software programs each with a license fee of less than $10,000 under which the
Company is the licensee; and (iii) any licenses granted by a Government Body to
the Company pursuant to a Government Contract set forth in Section 3.17(a)(i) of
the Disclosure Letter to use technical data and Software furnished to the
Company for the limited purpose of performing services for such Governmental
Body under and during the term of any such Government Contract. There are no
outstanding or, to the Knowledge of Sellers and the Company, Threatened
disputes, disagreements or Proceedings with respect to any such Contract. The
Company has fully complied with all material requirements in all license
agreements or other Contracts relating to any Intellectual Property Asset. The
Company has obtained the appropriate number of licenses for all computers
-48-
and workstations of the Company on which any third party Software is loaded or
used for the appropriate number of users and facilities.
(c) Intellectual Property Necessary for the Business:
(i) The Intellectual Property Assets are all those necessary for
the operation of the Company's business as it is currently conducted. The
Intellectual Property Assets owned by the Company are free and clear of all
liens, security interests, charges, Encumbrances other than Permitted
Encumbrances, equities, and other adverse claims, and the Company has the right
to use such owned Intellectual Property Assets without payment to a third party.
To the Knowledge of the Company and the Sellers, the Intellectual Property
Assets licensed by the Company are free and clear of all liens other than the
rights of the licensor of such licensed Intellectual Property Assets and rights
of third parties as they relate to such licensor. Except as set forth in Section
3.22(c) of the Disclosure Schedule, each of the Intellectual Property Assets
owned, used (excluding Third Party IP for which the license has been disclosed
in accordance with Section 3.22(b) or for which the Company is not obligated to
make such disclosure under the exceptions noted in Section 3.22(b)) or licensed
by the Company as licensor, were either: (i) conceived, created and developed by
current or former employees of the Company; (ii) created by independent
contractors who assigned their rights to the Company; or (iii) otherwise
assigned to the Company. The execution and delivery of this Agreement will not
result in the breach of, or create on behalf of any third party the right to
terminate or modify, any material license, sublicense or other agreement
relating to any Intellectual Property Assets. No third party has asserted
(whether in writing or orally) against the Company or the Sellers any claim that
the use of any of the Intellectual Property Assets by the Company infringes the
rights of such third party, or any claim for compensation for use by the Company
of any of the Intellectual Property Assets (excluding third party license fees,
maintenance and support fees for Third Party IP and registration and renewal
fees for other Intellectual Property Assets that have been disclosed in Section
3.22(b) of the Disclosure Letter).
(ii) Section 3.22(c) of the Disclosure Letter contains a complete
and accurate list of all former and current employees of the Company who have
executed written Contracts with the Company that assign to the Company all
rights to any inventions, improvements, discoveries, or information relating to
the business of the Company. The form or forms of such Contracts are included in
Section 3.22(c) of the Disclosure Letter. No employee of the Company has entered
into any Contract that restricts or limits in any way the scope or type of work
in which the employee is or has been engaged or requires the employee to
transfer, assign, or disclose information concerning his work for or on behalf
of the Company to anyone other than the Company.
(d) Patents
(i) Section 3.22(d) of the Disclosure Letter contains a complete
and accurate list of all Patents owned or expressly licensed to the Company and
all material Patents used by the Company (excluding Patents the use of which is
implied by the purchase of commercially available products.). The Company is the
owner of all right, title, and interest in and to, or otherwise has all rights
necessary for the operation of the Company's business as it is currently
conducted and as it is
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currently planned to be conducted with respect to, all Patents identified as
owned by the Company.
(ii) All of the issued Patents owned by the Company, and, to the
Knowledge of the Company and the Sellers, all of the issued Patents licensed to
or otherwise used by the Company, are currently in compliance with formal legal
requirements (including payment of filing, examination, and maintenance fees and
proofs of working or use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or office actions falling due within ninety days after
the Closing Date.
(iii) No Patent owned by the Company, and, to the Knowledge of
the Company and the Sellers, no Patents licensed to or otherwise used by the
Company, has been or is now involved in any interference, reissue,
reexamination, or opposition proceeding. There is no potentially interfering
patent or patent application of any third party.
(iv) No Patent owned by the Company, and, to the Knowledge of the
Company and the Sellers, no Patents licensed to or otherwise used by the
Company, is infringed or has been challenged or, to the Knowledge of Sellers and
the Company, Threatened in any way. None of the products manufactured and sold,
nor any process or know-how used, by the Company infringes or is alleged to
infringe any patent or other proprietary right of any other Person.
(v) All products made or sold under the Patents by the Company
have been marked with a proper patent notice.
(e) Trademarks.
(i) Section 3.22(e) of the Disclosure Letter contains a complete
and accurate list of all Marks, including the jurisdictions in which any
registration has been made by the Company. The Company is the owner of all
right, title, and interest in and to, or otherwise has all rights necessary for
the operation of the Company's business as it is currently conducted and as it
is currently planned to be conducted with respect to, each of the Marks in the
geographic locations in which the Company currently conducts or currently plans
to conduct its business.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office by the Company are currently in compliance with all
formal legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or office
actions falling due within ninety days after the Closing Date.
(iii) No Xxxx owned by the Company, and to the Company's and
Seller's Knowledge, no Xxxx licensed to or used by the Company, has been or is
now involved in any opposition, invalidation, or cancellation and no such action
is, to the Knowledge of Sellers and the Company, Threatened with the respect to
any of the Marks.
(iv) No Xxxx owned by the Company, and to the Company's and
Seller's Knowledge, no Xxxx licensed to or used by the Company, has been
challenged or
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infringed or, to the Knowledge of Sellers and the Company, Threatened in any
way. None of the Marks used by the Company infringes or is alleged to infringe
as used by the Company any trade name, trademark, or service xxxx of any third
party.
(v) All products and materials published by the Company
containing a federally registered Xxxx xxxx proper trademark or service xxxx
notice where permitted by law.
(f) Copyrights.
(i) Section 3.22(f) of the Disclosure Letter contains a complete
and accurate list and summary description of all material Copyrights and Rights
in Mask Works. Except as expressly provided in Section 3.22(f) of the Disclosure
Schedule, the Company is the owner of all right, title, and interest in and to
each of the Copyrights and Mask Works, free and clear of all liens, security
interests, charges, Encumbrances other than Permitted Encumbrances, equities,
and other adverse claims.
(ii) All the Copyrights and Mask Works that have been registered
by the Company are currently in compliance with formal legal requirements, are
valid and enforceable, and are not subject to any maintenance fees or taxes or
office actions falling due within ninety days after the date of Closing.
(iii) No Copyright or Mask Work owned by the Company has been
challenged or, to the Knowledge of the Sellers and the Company infringed or
Threatened in any way. None of the subject matter of any of the Copyrights or
Mask Works owned by the Company, and to the Knowledge of the Company and the
Sellers, none of the subject matter of any Copyright or Mask Work licensed to or
used by the Company, infringes or is alleged to infringe any copyright of any
third party or is a derivative work based on the work of a third party.
(g) Software.
(i) Section 3.22(g) of the Disclosure Letter contains a complete
and accurate list and summary description of all Software, excluding Software
for which the Company's license to use is granted by a Government Body to the
Company pursuant to a Government Contract set forth in Section 3.17(a)(i) of the
Disclosure Letter to use technical data and Software furnished to the Company
for the limited purpose of performing services for such Governmental Body under
and during the term of any such Government Contract. The Company is the owner of
all right, title, and interest in and to all Software identified in Section
3.22(g) of the Disclosure Letter as "licensed by the Company", free and clear of
all liens, security interests, charges, Encumbrances other than Permitted
Encumbrances, equities, and other adverse claims. The Company has in force valid
licenses of appropriate scope and duration for all Software identified in
Section 3.22(g) of the Disclosure Letter as "licensed to the Company".
(ii) To the Company's Knowledge, the eligibility of the Software
for protection under applicable copyright law has not been forfeited to the
public domain.
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(h) Trade Secrets.
(i) Section 3.22(h) of the Disclosure Letter contains a complete
and accurate list of all material Trade Secrets. The Company is the owner of all
right, title, and interest in and to such Trade Secrets, or otherwise has all
rights necessary to for the operation of the Company's business as it is
currently conducted and as it is currently planned to be conducted, free and
clear of all liens, security interests, charges, Encumbrances other than
Permitted Encumbrances, equities, and other adverse claims. With respect to each
material Trade Secret, the documentation relating to such Trade Secret is
current, accurate, and sufficient in detail and content to identify and explain
it and to allow its full and proper use by an individual reasonably skilled in
the subject matter to which it relates without reliance on the knowledge or
memory of any individual.
(ii) The Company has taken all commercially reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) The Company has an absolute (but not necessarily exclusive)
right to use the Trade Secrets. To the Knowledge of the Company and the Sellers,
the Trade Secrets are not part of the public knowledge or literature. The Trade
Secrets have not been used, divulged, or appropriated either for the benefit of
any Person (other than the Company) or to the detriment of the Company. No Trade
Secret owned by the Company is subject to any adverse claim or, to the Knowledge
of the Company and the Sellers, has been challenged or Threatened in any way. To
the Knowledge of the Company and the Sellers, no Trade Secret owned by a third
party and used by or licensed to the Company is subject to any adverse claim or
has been challenged or Threatened in any way.
(i) Web Sites. Section 3.22(i) of the Disclosure Letter contains a
complete and accurate list and summary description of all of the Web Sites
registered to the Company. The Company is the owner or registrant of all Web
Sites, as applicable, free and clear of all liens, security interests, claims,
Encumbrances other than Permitted Encumbrances or other adverse claims, and no
challenge or Proceeding has been commenced or, to the Knowledge of Sellers and
the Company, Threatened with respect to any of the Web Sites. The Company has
complied in all respects with the terms and conditions of its legal notices on
its Web Sites, including without limitation its privacy policies, if any. The
Company complies with its privacy policies both "on-line" and "off-line."
(j) Government Contracts. Section 3.22(j) of the Disclosure Letter
sets forth, with respect to any Government Contract and Government Subcontract
which relates to Intellectual Property Assets and which provides for rights in
technical data or computer software other than the standard rights required in
applicable acquisition regulations, (i) the nature and scope of rights,
including the rights of any third parties, provided for thereunder, and (ii) a
description of the Intellectual Property Assets to which such rights pertain.
3.23 BANKING ARRANGEMENTS. Section 3.23 of the Disclosure Letter contains a
complete and accurate list of (a) each bank, savings and loan or similar
financial institution in which the Company has an account or safe deposit box or
other custodial arrangement and the numbers of such accounts or safe deposit
boxes maintained by the Company; and (b) the names
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of all Persons authorized to draw on each such account or to have access to any
such safe deposit box facility.
3.24 CERTAIN PAYMENTS. Neither the Company nor any director, officer or
employee of the Company or, to the Knowledge of the Company and the Sellers, any
agent of the Company or any other Person associated with or acting for or on
behalf of the Company, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in money, property,
or services (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any Affiliate of the Company, or (iv) in violation of any Legal
Requirement, or (b) established or maintained any fund or asset for the purpose
of taking the actions listed in item (a) above that has not been recorded in the
books and records of the Company.
3.25 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in Section
3.25 of the Disclosure Letter, no Seller or any Related Person of any Seller or
of the Company has, or since the first day of the next to last completed fiscal
year of the Company has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Company's business. No Seller nor any Related Person of any Seller has or
may acquire any rights under, or has or may become subject to any obligation or
liability under, any Contract that relates to the business of, or any of the
assets owned or used by, the Company. Except as set forth in Section 3.25 of the
Disclosure Letter, no Seller or any Related Person of Sellers or of Company is,
or since the first day of the next to last completed fiscal year of the Company
has owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has (i) had business dealings or
a material financial interest in any transaction with the Company, or (ii)
engaged in competition with the Company with respect to any line of the products
or services of the Company (a "COMPETING BUSINESS") in any market presently
served by the Company. Except as set forth in Section 3.25 of the Disclosure
Letter, no Seller or any Related Person of any Seller or of the Company is a
party to any Contract with, or has any claim or right against, the Company.
3.26 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement other than professional fees payable to BB&T Capital Markets / Windsor
Group, Sellers' sole broker with respect to this Agreement and the Contemplated
Transactions ("SELLERS' BROKER"). Sellers are solely responsible for the payment
of any and all amounts due to Sellers' Broker, and any and all outstanding
amounts due to Sellers' Broker shall be paid by Sellers at or immediately prior
to the Closing.
3.27 BUSINESS RELATIONSHIPS. Section 3.27 of the Disclosure Letter contains
a complete and accurate list of each customer of the Company that accounted for
more than five percent (5%) of the total revenues of the Company in each of the
last three (3) fiscal years of the Company and in the last fiscal period
included in the Financial Statements, and sets forth the total revenues derived
from each such customer during each of such fiscal periods. Since the date of
the Balance Sheet, the Company has not suffered any loss of employees or,
suffered loss of good will or an adverse change in the relationship with any
suppliers, customers, creditors,
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agents or others having business relationships with the Company that materially
and adversely affects the business operations or prospects of the Company.
Except as set forth in Section 3.27 of the Disclosure Letter, the Company has
not been involved in any material controversy with any of its customers or
suppliers. The Company has not been advised by any of its customers or suppliers
that such customer or supplier was or is intending to terminate its relationship
with the Company or would not continue to purchase equipment, supplies or
services for future periods on account of any dissatisfaction with the Company's
performance or due to the transactions contemplated hereby. All Contracts
entered into by employees of the Company and relating to the business of the
Company have been entered into in the name of the Company, and all fees and
compensation on such Contracts have been paid or are payable to and are or will
be the property of the Company.
3.28 PRODUCT LIABILITY; PRODUCT WARRANTY. Except as set forth in Section
3.28 of the Disclosure Letter, there are no (a) outstanding product liability
claims or, to the Knowledge of Sellers or the Company, Threatened product
liability claims, that relate to any product manufactured, created, licensed,
distributed or sold by the Company on or prior to the Closing Date or (b)
outstanding claims or, to the Knowledge of Sellers or the Company, Threatened
claims, for the Breach or any express or implied warranty with respect to any
product manufactured, created, licensed, distributed or sold by the Company on
or prior to the Closing Date other than pursuant to standard warranty
obligations (to replace, repair or refund) incurred in the Ordinary Course of
Business of the Company.
3.29 INDEBTEDNESS BY RELATED PERSONS. Section 3.29 of the Disclosure Letter
contains a complete and accurate list of all indebtedness or any other liability
or obligation of: (a) the Company to any Seller or the Former Shareholder or any
Related Person of any of them (including any right to indemnification or
reimbursement from the Company, whether pursuant to the Company's Organizational
Documents, contract or otherwise); (b) any Seller or any Related Person of any
of them to the Company, (c) any Seller or any Related Person of any of them to
the Former Shareholder; or (d) any Seller to any other Seller (collectively,
"RELATED PARTY INDEBTEDNESS"). Any and all Related Party Indebtedness,
including, without limitation: (x) that certain Promissory Note dated December
31, 2004, in the principal amount of $4,066,000 payable by WHS and FHC to the
Former Shareholder; (y) that certain Promissory Note dated July 22, 2005, in the
principal amount of $1,951,680 payable by the Trust to WHS; and (z) the
obligation of the Company to provide health insurance and other benefits to the
Former Shareholder under the Former Shareholder Employment Agreement will be
repaid or otherwise satisfied and discharged in full on or prior to the Closing
Date and any security interest granted by the Company or any Seller in
connection with the foregoing will be released on or prior to the Closing and
neither Sellers nor the Company will have any obligation with respect thereto
after the Closing.
3.30 DISCLOSURE.
(a) No representation or warranty of Sellers in this Agreement and no
statement in the Disclosure Letter omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
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(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) To the Knowledge of Sellers, there is no fact that has specific
application to Sellers or the Company (other than general economic or industry
conditions) that would reasonably be expected to have a Material Adverse Effect
on the Company or, as far as Sellers can reasonably foresee, materially
threatens the assets, business, financial condition, or results of operations of
the Company that has not been set forth in this Agreement or the Disclosure
Letter.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers and the Company as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York,
with full corporate power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it purports to own
or use, and to perform all its obligations under this Agreement.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles. Upon the execution and delivery by
Buyer of the Master Escrow Agreement, the Share Restriction Agreements and the
Retention and Noncompetition Agreements (collectively, the "BUYER'S CLOSING
DOCUMENTS"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting creditors' rights generally and the exercise
of judicial discretion in accordance with general equitable principles. Buyer
has the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and the Buyer's Closing Documents and to perform its
obligations hereunder and thereunder.
(b) Except as set forth in Schedule 4.2(b), neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
and will not violate or conflict with Buyer's Organizational Documents or any
Laws of any Governmental Body to which Buyer is subject, or by which Buyer may
be bound.
(c) Except as set forth in Schedule 4.2(c), Buyer is not and will not
be required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
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(d) The Buyer Restricted Shares have been duly authorized and, upon
issuance in accordance with this Agreement, will be validly issued, fully paid
and nonassessable. Neither the issue nor sale of any Buyer Restricted Shares
will violate the pre-emptive rights of any Person.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the Knowledge of Buyer, no such Proceeding has
been Threatened.
4.5 PAYMENT OF PURCHASE PRICE. Buyer now has, or at the Closing Date will
have, available funds necessary to pay the Purchase Price.
4.6 BROKERS OR FINDERS. Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4.7 INVESTIGATION BY BUYER. Buyer acknowledges that, except for the
representations and warranties of Company and the Sellers contained in Section 3
of this Agreement, the Disclosure Letter hereto or in any other Ancillary
Agreements with respect to the Contemplated Transactions or schedules thereto,
(i) none of the Sellers or Company or any of its directors, officers, employees,
affiliates, controlling persons, agents, advisors or representatives, makes or
shall be deemed to have made any representation or warranty, either express or
implied, and (ii) none of the Sellers or Company or any of its directors,
officers, employees, affiliates, controlling persons, agents, advisors or
representatives, makes, or shall be deemed to have made, any representation or
warranty, express or implied, as to the accuracy or completeness of any of the
information or documents, financial or otherwise (including, without limitation,
any estimates, projections, forecasts, budgets or other forward-looking
information) provided or otherwise made available to Buyer or any of its
directors, officers, employees, affiliates, controlling persons, agents,
advisors or representatives (including, without limitation, in any management
presentations, information or offering memorandum, supplemental information or
other materials or information with respect to any of the above); provided that
such information or documents, financial or otherwise were prepared and
furnished in good faith. With respect to any such estimate, projection, budget
or forecast delivered by or on behalf of Company or any Sellers to Buyer, Buyer
acknowledges that (i) there are uncertainties inherent in attempting to make
such estimates, projections, budgets and forecasts, (ii) Buyer is aware that
actual results may differ materially and (iii) Buyer shall have no claim against
Company or Sellers with respect to any such estimate, projection, budget or
forecast; provided, that such estimate, projection, budget or forecast was
prepared based on reasonable assumptions in light of facts known to the Company
or Sellers at the time of preparation and furnished in good faith.
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5. COVENANTS OF SELLERS.
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
Closing Date, Sellers will, and will cause the Company and its Representatives
to, (a) afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "BUYER'S ADVISORS") reasonable access, during
normal business hours, upon the giving of reasonable prior written notice, to
the Company's personnel, properties (including subsurface testing), contracts,
books and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY. Between the date of this
Agreement and the Closing Date, Sellers will, and will cause the Company to:
(a) conduct the business of the Company only in the Ordinary Course of
Business;
(b) use their Best Efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANTS.
(a) Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, Sellers will not, and will
cause the Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
(b) Except for the Success Bonuses, prior to the third anniversary of
the Closing Date, Sellers shall not enter into any binding obligation or
commitment to pay to any director, officer, employee, consultant, contractor or
agent of the Company on the date of this Agreement any amounts from the Purchase
Price, or otherwise make payments or transfer value to or for the benefit of,
any member of the Company's work force, except for payments or transfers to
directors, officers, employees, consultants, contractors or agents who are
related within the second degree (by blood, marriage or adoption) to Sellers.
5.4 REQUIRED APPROVALS. As promptly as practicable after the date of this
Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between the
date of this Agreement and the Closing
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Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in Schedule 4.2
(including taking all actions requested by Buyer to cause early termination of
any applicable waiting period under the HSR Act).
5.5 NOTIFICATION. Between the date of this Agreement and the Closing Date,
each Seller will promptly notify Buyer in writing if such Seller or the Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Sellers' representations and warranties as of the date of this Agreement,
or if such Seller or the Company becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Letter if the Disclosure
Letter were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. Between the date of this Agreement and the
Closing Date, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Sellers in this Section 5 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 7 impossible
or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers will cause all Related Party Indebtedness to
be paid in full prior to Closing.
5.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause the Company
and each of their Representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of Business) of the Company, or any of the capital stock of
the Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.8 BEST EFFORTS. Between the date of this Agreement and the Closing Date,
Sellers will use their Best Efforts to cause the conditions in Sections 7 and 8
to be satisfied.
5.9 PROTECTION OF RELATIONSHIPS. Except as expressly set forth in this
Agreement, none of Sellers will at any time prior to, on, or after the Closing
Date take, and they and each of them will cause the Company not to take, any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier or other business associate of the Company
from establishing or maintaining business relationships with the Company.
5.10 FURTHER ASSURANCES. Sellers shall use Sellers' Best Efforts to
implement the provisions of this Agreement, and for such purpose Sellers, at the
request of Buyer and at no cost to Sellers, at or after the Closing, shall,
without further consideration, promptly execute and deliver, or cause to be
executed and delivered, to Buyer such documents and other instruments in
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addition to those required by this Agreement, in form and substance satisfactory
to Buyer, and take all such other actions, as Buyer may reasonably deem
necessary or desirable to implement any provision of this Agreement and/or to
consummate the Contemplated Transactions and obtain the benefit thereof for
Buyer. Sellers will take no action to terminate or limit existing or prior
insurance coverages as applicable to the pre-closing activities of the Company
or the Company's ability to make claims under those insurance coverages. The
Company and Sellers shall not revoke the Company's election to be taxed as an S
corporation within the meaning of IRC Sections 1361 and 1362, nor shall the
Company and Sellers take or allow any action to be taken that would result in
the termination of the Company's status as a validly electing S corporation
within the meaning of IRC Sections 1361 and 1362.
5.11 TAX ELECTION. The Company and each Seller (including solely for
purposes of signing the Section 338(h)(10) Election, all beneficial owners of
Shares) shall join with Buyer in making an election under IRC Section 338(h)(10)
(and any applicable corresponding election under state, local and foreign tax
law) with respect to the purchase and sale of the Shares hereunder
(collectively, a "SECTION 338(H)(10) ELECTION"). Company and Sellers shall
include any income, gain, loss, deduction, or other tax item resulting from the
Section 338(h)(10) Election on their respective tax returns to the extent
required by applicable law. Sellers shall also pay any Tax imposed on the
Company attributable to the making of the Section 338(h)(10) Election, including
(i) any Tax imposed under IRC Section 1374, (ii) any Tax imposed under
Regulation 1.338(h)(10)-1(d)(5), or (iii) any state, local or foreign Tax
imposed on the Company's gain, and Sellers shall indemnify Buyer and the Company
in accordance with the provisions of Section 10.12 of this Agreement against any
Adverse Consequences or Tax Loss as a result of any failure on the part of
Sellers to join in making a Section 338(h)(10) Election or to pay any such
Taxes. Buyer and Sellers shall jointly prepare and file IRS Form 8023. The
allocation of the Purchase Price to the assets of the Company shall be
determined in accordance with Section 11.1. Buyer and Sellers shall jointly
prepare and file IRS Form 8883 in a manner consistent with the allocation of the
Purchase Price to the assets of the Company as determined in accordance with
Section 11.1.
5.12 NONCOMPETITION. As an inducement for Buyer to enter into this
Agreement, each Seller agrees that:
(a) During the Noncompete Term, as defined below:
(i) No Seller will, anywhere in the world, either directly or
indirectly, whether as shareholder, owner, member, partner, director, officer,
employee, agent, consultant or contractor, engage or invest in, own, manage,
operate, finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with, or in any
manner connected with, lend such Seller's name or any similar name to, lend such
Seller's credit to, or render services or advice to, any Person whose products,
services or activities compete in whole or in part with the products, services
or activities offered, sold or conducted by the Company on or before the Closing
Date or actively planned to be offered, sold or conducted by the Company on or
before the Closing Date (collectively, the "COMPETING PRODUCTS AND SERVICES"),
including, but not limited to: providing professional, engineering and technical
services such as systems engineering services; system analysis, requirements and
performance analysis; system integration services; hardware engineering
services; data analysis, modeling and
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simulation services; software development; technical assessment services; test
and evaluation services; operation support services; foreign military sales
related services; program management services; logistic and supply support
services; training and exercise support services; acquisition support and
management services, including reliability and maintainability support services
and material and equipment tracking and support; prototyping and light
manufacturing services; information technology services and support, including
database development and maintenance, security, computer-based training,
interactive electronic technical manuals, interactive multimedia instruction
development, customer site evaluation, site installation and network help-desk
support; management consulting services; and financial management consulting
services, but only to the extent such products, services or activities are
offered, sold or conducted by the Company on or before the Closing Date or
actively planned to be offered, sold or conducted by the Company on or before
the Closing Date. Notwithstanding the foregoing, each Seller may purchase or
otherwise acquire up to (but not more than) 1% of any class of securities of any
enterprise (but without otherwise participating in the activities of such
enterprise) if such securities are listed on any national or regional securities
exchange or have been registered under section 12(g) of the Securities Exchange
Act of 1934. Each Seller agrees that this covenant is reasonable with respect to
its duration, geographical area, and scope.
(ii) No Seller will, directly or indirectly, either for such
Seller or any other Person, (A) induce or attempt to induce any employee of
Company to leave the employ of Company, (B) in any way interfere with the
relationship between Company and any employee of Company, (C) within one year of
the termination of their employment or other relationship with the Company,
employ, or otherwise engage as an employee, independent contractor, or
otherwise, any individual who is an employee of Company on the date of this
Agreement or becomes an Employee during the Noncompete Term, whether or not such
employment or engagement is solicited by such Seller, or (D) induce or attempt
to induce any customer, supplier, licensee, or business relation of Company to
cease doing, or decrease, business with the Company, or in any way interfere
with the relationship between the Company and any client or customer, supplier,
licensee, or business relation of Company, provided in the event that the
Company and/or its parent is acquired (whether by sale of stock, sale of all or
substantially all of its assets or by merger) by a third party, the obligations
of such Seller hereunder shall apply only with respect to the Competing Products
and Services and shall not be deemed by operation of such acquisition to include
other products and services of such third party that are not Competing Products
and Services. Nothing herein shall limit the right of such Seller or any other
Person to publish notices for or advertisements of available employment in
newspapers, on the internet or in other publications or media of general
circulation.
(iii) No Seller will, directly or indirectly, either for such
Seller or any other Person (other than the Company) accept the Competing
Products and Services business of any Person known to such Seller to be a client
or customer of Company or Buyer, whether or not such Seller had personal contact
with such Person.
(b) In the event of a breach by any Seller of any covenant set forth
in Section 5.12(a), the term of such covenant will be extended by the period of
the duration of such breach.
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(c) No Seller will, at any time during or after the Noncompete Term,
disparage Buyer or Company, or any of their shareholders, directors, officers,
employees, or agents in matters related to the Company or the business of the
Company.
(d) Each Seller will, during the Noncompete Term, within ten days
after accepting any employment, advise Buyer of the identity of any employer of
such Seller. Buyer or Company may serve notice upon each such employer that such
Seller is bound by this Agreement and furnish each such employer with a copy of
this Section 5.12.
(e) For purposes of this Agreement, the "NONCOMPETE TERM" shall mean,
with respect to each Seller, the period commencing on the date of this Agreement
and ending five (5) years thereafter.
5.13 CONFIDENTIALITY AGREEMENT OF SELLERS. Each Seller acknowledges and
agrees that all Confidential Information regarding the Company and the Buyer
known or obtained by such Seller, whether before or after the date hereof, is
the property, as appropriate, of the Company or Buyer. Therefore, each Seller
agrees that he will not, at any time, disclose or cause to be disclosed to any
unauthorized Persons or use or cause to be used for his own account or for the
benefit of any third party (other than the Company) any Confidential Information
regarding the Company and the Buyer, whether Seller has such information in
Seller's memory or embodied in writing or other physical form or any computer
readable format, without Buyer's written consent, unless and to the extent that
disclosure is required by law (in which event Seller shall give Buyer as much
notice of such disclosure as is practicable and permitted by law and shall
cooperate with Buyer to obtain appropriate protective orders). Each Seller
agrees to deliver to Buyer at the time of execution of this Agreement, and at
any other time Buyer may request, all documents, memoranda, notes, plans,
records, reports, summaries and other documentation, models, components,
devices, or computer software, whether embodied in a disk or in other form (and
all copies of all of the foregoing), relating to the businesses, operations, or
affairs of the Company and any other Confidential Information regarding the
Company and the Buyer that Seller may then possess or have under Seller's
control.
5.14 REMEDIES. Each Seller agrees that such Seller's violation of any of
the provisions of Sections 5.12 and 5.13 shall cause immediate and irreparable
harm to Buyer and the Company. In the event any Seller breaches or threatens to
breach any of said provisions, such Seller agrees that Buyer shall be entitled
to the entry of preliminary and permanent injunctive or other equitable relief
by a court of competent jurisdiction to restrain such Seller from any violation
or threatened violation of such provisions and compelling such Seller to comply
with such provisions, it being agreed that money damages alone would be
inadequate to compensate Buyer and the Company and would be an inadequate remedy
for such breach. This Section shall not affect or limit, and the injunctive
relief provided in this Section shall be in addition to, any other remedies
available to Buyer or the Company at law or in equity or in arbitration for any
such violation by any Seller, including the right to recover Damages as provided
in Section 10.
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6. COVENANTS OF BUYER.
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after the
date of this Agreement, Buyer will, and will cause each of its Related Persons
to, make all filings required by Legal Requirements to be made by them to
consummate the Contemplated Transactions (including all filings under the HSR
Act). Between the date of this Agreement and the Closing Date, Buyer will, and
will cause each Related Person to, cooperate with Sellers with respect to all
filings that Sellers are required by Legal Requirements to make in connection
with the Contemplated Transactions, and cooperate with Sellers in obtaining all
consents identified in Section 3.2 of the Disclosure Letter; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
6.2 BEST EFFORTS. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 NOTIFICATION. Between the date of this Agreement and the Closing Date,
Buyer will promptly notify Sellers and the Company in writing if Buyer becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Buyer's representations and warranties as of the date of this Agreement, or if
Buyer becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Buyer Schedules if the Buyer Schedules were dated the date of
the occurrence or discovery of any such fact or condition, Buyer will promptly
deliver to Sellers and the Company a supplement to the Buyer Schedules
specifying such change. Between the date of this Agreement and the Closing Date,
Buyer will promptly notify Sellers and the Company of the occurrence of any
Breach of any covenant of Buyer in this Section 6 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 8 impossible
or unlikely.
6.4 FURTHER ASSURANCES. Buyer shall use Buyer's Best Efforts to implement
the provisions of this Agreement, and for such purpose Buyer, at the request of
Sellers and at no cost to Buyer, at or after the Closing, shall promptly execute
and deliver, or cause to be executed and delivered, to Sellers such documents
and other instruments in addition to those required by this Agreement, in form
and substance satisfactory to Sellers, and take all such other actions, as
Sellers may reasonably deem necessary or desirable to implement any provision of
this Agreement and/or to consummate the Contemplated Transactions and obtain the
benefit thereof for Sellers.
6.5 TAX ELECTION. The Company and each Seller shall join with Buyer in
making the Section 338(h)(10) Election and filing IRS Form 8023. For the
avoidance of doubt, the parties hereto agree that the taxable year of Company,
as an S Corporation, shall terminate at the end of the Closing Date for federal
income Tax purposes (and to the extent applicable, for state and local Tax
purposes as well), and that all items of income, gain, deduction, or loss
recognized after the Closing Date shall be included by the Company and Buyer in
Buyer's consolidated
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federal income Tax Return (and to the extent applicable, in Buyer's Tax Return
for state and local tax purposes as well). Buyer covenants that it will not and
will not cause or permit the Company or any Affiliated Entity, Subsidiary or any
affiliate of Buyer to take any action on the Closing Date (i) other than in the
Ordinary Course of Business, including, without limitation, the distribution of
any dividend or the effectuation of any redemption, that could give rise to any
Tax liability or reduce any Tax Asset of the Company, any Affiliated Entity,
Subsidiary or Sellers, or give rise to any loss of Sellers, (ii) to make any
election or deemed election under IRC Section 338 other than the Section
338(h)(10) Election, or (iii) to make (other than the Section 338(h)(10)
Election) or change any Tax election, amend any Tax Return or take any Tax
position on any Tax Return, take any action, omit to take any action or enter
into any transaction, merger or restructuring that ipso facto results in any
increase in any Tax liability or any reduction of any Tax asset of the Company,
any Affiliated Entity, Subsidiary or Sellers.
6.6 DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE INDEMNIFICATION.
(a) Buyer agrees that it shall cause, for a period of six (6) years
after the Closing, all rights to indemnification existing immediately prior to
the Closing in favor of the current directors (both in their capacity as
directors and officers of the Company) of the Company and the officers of the
Company listed on Section 6.6 of the Disclosure Letter ("INDEMNIFIED EMPLOYEES")
as provided for in the Company's Organizational Documents as of the date hereof
to continue (without amendment or modification in any way unless required by law
or regulation) in full force. Subject to the foregoing, Buyer may, from and
after the Closing, cause the Company to merge, dissolve or reorganize.
(b) At or prior to the Closing, the Company will obtain a commitment
from Federal Insurance Company for continuation, for a period of six (6) years
after the Closing, of the Company's (i) fiduciary liability insurance, (ii)
directors and officers liability insurance and (iii) employment practices
insurance, in each case, with coverage for claims based on activities prior to
the Closing and the premiums for such coverage shall be paid in full by the
Company at or prior to Closing with such payment to be reflected either as a
reduction in cash or as a liability in the Closing Financial Statements.
(c) This Section 6.6 shall be binding on all successors and assigns of
the Company and Buyer. In the event that Buyer or the Company or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then and in each such case, proper
provision shall be made so that such successors and assigns shall assume all
obligations set forth in this Section 6.6. The provisions of this Section 6.6
are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Employee, his or her heirs, and his or her representatives or
assigns.
6.7 CONFIDENTIALITY AGREEMENT OF BUYER. Buyer acknowledges and agrees that
all Confidential Information regarding the Sellers known or obtained by Buyer,
whether before or after the date hereof, is the property, as appropriate, of
each Seller. Therefore, the Buyer on behalf of itself and the Company agrees
that it will not, at any time, disclose or cause to be disclosed to any
unauthorized Persons or use or cause to be used for its own account or for the
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benefit of any third party any Confidential Information regarding the Sellers,
whether Buyer has such information in Buyer's memory or embodied in writing or
other physical form or any computer readable format, without each applicable
Seller's written consent, unless and to the extent that disclosure is required
by law (in which event Buyer shall give such Seller as much notice of such
disclosure as is practicable and permitted by law and shall cooperate with Buyer
to obtain appropriate protective orders). Buyer agrees to deliver to each Seller
at the time of execution of this Agreement, and at any other time such Seller
may request, all documents, memoranda, notes, plans, records, reports, summaries
and other documentation, models, components, devices, or computer software,
whether embodied in a disk or in other form (and all copies of all of the
foregoing), relating to such Seller and any other Confidential Information
relating to such Seller that Buyer may then possess or have under Buyer's
control.
6.8 ACCOUNTS RECEIVABLE. If Sellers become liable to Buyer with respect to
any Accounts Receivable not collected in full within two hundred forty (240)
days after the day on which they first became due and payable, pursuant to
Sections 3.8 and 10.2, and Buyer later collects any such Accounts Receivable
from the account debtor within thirty-six (36) months of the Closing Date, then
(a) any application of the amount of such Accounts Receivable to the Basket
shall be reversed, dollar for dollar, upon collection by Buyer of such Accounts
Receivable, and (b) if such Account Receivable is collected within eighteen (18)
months of the Closing Date, then Buyer shall pay into the Escrow Fund, promptly
upon receipt, the amount previously paid to Buyer from the Escrow Fund with
respect to such newly collected Accounts Receivable, and if such Account
Receivable is collected eighteen (18) months or more after the Closing Date,
then Buyer shall pay to Sellers, in proportion to their respective ownership
percentages, promptly upon receipt, the amount previously paid to Buyer from the
Escrow Fund with respect to such newly collected Accounts Receivable.
6.9 SUCCESS BONUSES PAYMENT. On the Closing, in connection with the payment
by the Company of the Success Bonuses, Buyer shall pay $16,447,982.00 (as such
amount may be adjusted pursuant to this Section 6.9), to the Company on behalf
and at the direction of the Sellers as a portion of the Purchase Price, payable
$11,576,251.00 in cash and $4,871,731.00 by delivery of that number of Buyer
Restricted Shares equal to (i) $4,871,731.00, divided by (ii) the Buyer Common
Share Price. The cash payment shall be made by wire transfer of immediately
available funds to the Company and then paid by the Company to the individuals
and in the amounts specified on Exhibit 2.2 (Exh A) and Exhibit 2.2 (Exh B)
attached to Exhibit 2.2 hereof, and the Buyer Restricted Shares shall be
distributed in the amounts and to the individuals set forth on Exhibit 2.2(Exh
A) attached to Exhibit 2.2 hereof, in each case against delivery by each of the
individuals identified on Exhibit 2.2(Exh A) of a Share Restriction Agreement in
the form of Exhibit 2.2(Exh D) attached to Exhibit 2.2 hereof. Sellers may
change the amounts and remove individuals set forth on Exhibit 2.2(Exh A) and
Exhibit 2.2(Exh B) attached to Exhibit 2.2 hereof, by delivering to the Company
and Buyer an amended Exhibit 2.2(Exh A) or Exhibit 2.2(Exh B), as the case may
be, to be attached to Exhibit 2.2 hereof no later than five (5) days prior to
the Closing Date; provided that Sellers may not (i) add any individual to
Exhibit 2.2(Exh A) or Exhibit 2.2(Exh B), or (ii) remove any employee identified
on Schedule I attached hereto from Exhibit 2.2(Exh A) or eliminate or reduce the
amount of any Success Bonus payable to any such employee as set forth on Exhibit
2.2(Exh A), without the prior written consent of Buyer, such consent not to be
unreasonably withheld.
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6.10 RETENTION PAYMENT. Following the Closing, Buyer shall pay an aggregate
amount equal to $10,000,000 (the "RETENTION PAYMENT") to the employees of the
Company identified on Schedule III attached hereto pursuant to and in accordance
with the terms and provisions of the Retention and Noncompetition Agreements. In
the event that an employee listed on Schedule III does not execute and deliver
to Company a Retention and Noncompetition Agreement for any reason within ten
(10) days prior to the Closing Date, Seller may, prior to Closing, reallocate
the Retention Payment allocated to such employee to (i) other employees of
Company listed on Schedule III, without the consent of Buyer or (ii) other
employees of Company not listed on Schedule III with the prior written consent
of Buyer, such consent not to be unreasonably withheld.
6.11 MDDC CONTRACT. If the Company has not been presented with the task
order under the MDDC Contract with respect to the Company's anticipated
liability of $399,099 to the U.S. Army Space and Missile Defense Command by the
second anniversary of the Closing Date, then the Buyer shall pay to the Sellers,
pro rata in accordance with their current ownership of the Shares of the Company
as set forth on Schedule II attached hereto, $399,099 (or, if the Company was
presented with a task order for a lesser amount in connection with the MDDC
Contract, the difference between such lesser amount and $399,099) promptly after
the second anniversary of the Closing Date. If the U.S. Army Space and Missile
Defense Command thereafter submits one or more task orders with respect the
Company's anticipated liability of $399,099 under the MDDC Contract, then the
Sellers shall be liable, jointly and severally, to pay to the Company the amount
of such task orders.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Sellers' and the Company's
representations and warranties in this Agreement (considered collectively), and
each of such representations and warranties (considered individually), must have
been accurate in all respects as of the date of this Agreement, and must be
accurate in all material respects (or in all respects with regard to such
representations and warranties that are qualified by materiality) as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplements to the Disclosure Letter, except to the extent that any inaccuracies
in such representations and warranties, considered individually or collectively,
as of the Closing Date could not reasonably be expected to have a Material
Adverse Effect on the Company.
7.2 SELLERS' PERFORMANCE.
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
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(b) Each document required to be delivered pursuant to Sections 2.4
and 7.4 must have been delivered, and each of the other covenants and
obligations in Sections 5.4 and 5.8 must have been performed and complied with
in all material respects.
7.3 CONSENTS. Each of the Consents identified in Section 3.2(b) of the
Disclosure Letter, and each Consent identified in Schedule 4.2(c), must have
been obtained and must be in full force and effect, including any necessary
approval, or the termination or expiration of any waiting period, under the HSR
Act.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have been
delivered to Buyer:
(a) estoppel certificates executed on behalf of each lessor of real
property to the Company, dated as of a date not more than ten (10) Business Days
prior to the Closing Date, each substantially in the form of Exhibit 7.4(a)
attached hereto or as otherwise consented to by Buyer, such consent not to be
unreasonably withheld, delayed or conditioned;
(b) payoff letters for all indebtedness listed in Section 3.29 of the
Disclosure Letter and all other Debt to be repaid in full and discharged by the
Company on or prior to the Closing Date, which payoff letters shall indicate
that such lenders have agreed to release any Encumbrance in respect of such
indebtedness relating to the assets and properties of the Company and to
terminate all agreements entered into in connection with such indebtedness upon
receipt of the amounts indicated in the payoff letters and which payoff letters
and any related releases and terminations shall be in a form reasonably
acceptable to Buyer; and
(c) such other documents as Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any of Sellers' representations and
warranties, (ii) evidencing the performance by either Seller of, or the
compliance by either Seller with, any covenant or obligation required to be
performed or complied with by such Seller, (iii) evidencing the satisfaction of
any condition referred to in this Section 7, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
7.5 NO ACTION TO DEBAR OR SUSPEND. Since the date of this Agreement, there
must not have been any decision or any Proceeding commenced or, to the Knowledge
of Sellers or the Company, Threatened by the U.S. Government or any other
Governmental Body to debar or suspend the Company from participation in the
award of Contracts with the U.S. Government or any other Governmental Body.
7.6 VEHICLE LEASES. Each vehicle lease identified on Exhibit 7.6 attached
hereto shall have been terminated or assigned by Company so that Company has no
further liability thereunder, and Buyer shall have received satisfactory
evidence of such termination or assignment.
7.7 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have been any change in the business, operations, properties,
prospects, assets, or financial condition of the Company that would reasonably
be expected to have a Material Adverse Effect on the Company, and no event shall
have occurred or circumstance exists that would reasonably be expected to result
in such a Material Adverse Effect on the Company.
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7.8 NO INJUNCTION. There shall not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Shares by
Sellers to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
7.9 NO PROCEEDINGS. Since the date of this Agreement, there must not have
been commenced or, to the Knowledge of Sellers or the Company, Threatened
against Buyer, Sellers or the Company, or against any Person affiliated with
Buyer, Sellers or the Company, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.10 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
have been made or, to the Knowledge of Sellers or the Company, Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in the Company, or
(b) is entitled to all or any portion of the Purchase Price payable for the
Shares. Buyer acknowledges that the Former Shareholder Acknowledgement will
satisfy this condition with respect to the Former Shareholder; provided that
Sellers have delivered a fully executed copy of the Former Shareholder
Acknowledgement to Buyer on or prior to the Closing Date and the same shall be
in full force and effect on the Closing Date.
7.11 NO PROHIBITION. Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or the Company or any Person affiliated
with Buyer or the Company to suffer any Material Adverse Effect under, (a) any
applicable Legal Requirement or Order, or (b) any Legal Requirement or Order
that has been published, introduced, or otherwise proposed by or before any
Governmental Body.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all respects as of the date of this Agreement and must be accurate
in all material respects (or in all respects with regard to such representations
and warranties that are qualified by materiality) as of the Closing Date as if
made on the Closing Date, without giving effect to any supplements to the Buyer
Schedules, except to the extent that any inaccuracies in such representations
and warranties, considered individually or collectively, as of the Closing Date
could not reasonably be expected to have a Material Adverse Effect on Buyer.
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8.2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 and must have made the cash payments
required to be made by Buyer pursuant to Sections 2.4(b)(i) through 2.4(b)(iv)
and delivered the certificates for Buyer Restricted Shares pursuant to Section
2.4(b)(iii).
8.3 CONSENTS. Each of the Consents identified in Section 3.2(b) of the
Disclosure Letter must have been obtained and must be in full force and effect,
including any necessary approval, or the termination or expiration of any
waiting period, under the HSR Act.
8.4 ADDITIONAL DOCUMENTS. Buyer must have caused to be delivered to Sellers
such other documents as Sellers may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of Buyer, (ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iii)
evidencing the satisfaction of any condition referred to in this Section 8, or
(iv) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.5 NO INJUNCTION. There must not be in effect any Legal Requirement or any
injunction or other Order that (a) prohibits the sale of the Shares by Sellers
to Buyer, and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
8.6 NO PROCEEDINGS. Since the date of this Agreement, there must not have
been commenced or, to the Knowledge of Buyer, Threatened against Buyer, Sellers
or the Company, or against any Person affiliated with Buyer, Sellers or the
Company, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
8.7 NO PROHIBITION. Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Sellers or the Company or any Person
affiliated with Sellers or the Company to suffer any Material Adverse Effect
under, (a) any applicable Legal Requirement or Order, or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise proposed
by or before any Governmental Body.
9. TERMINATION.
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by mutual consent of Buyer and Sellers;
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(b) by either Buyer or Sellers if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
(c) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions in Section
8 has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(d) by Buyer if since the date of this Agreement there has been any
change in the business, operations, properties, assets, or financial condition
of the Company that would reasonably be expected to have a Material Adverse
Effect on the Company or any event has occurred or circumstance exists that
would reasonably be expected to result in such a Material Adverse Effect on the
Company;
(e) by either Buyer or Sellers if any Governmental Body has issued an
order, decree or ruling or taken any other action in each case permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Contemplated Transactions and such order, decree, ruling or other action has
become final and non-appealable; provided, that the right to terminate this
Agreement pursuant to this Section 9.1(e) shall not be available to any party
whose failure to fulfill any of its obligations contained in this Agreement has
been the cause of, or resulted in, the issuance of such order, decree or ruling;
or
(f) by either Buyer or Sellers if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before October 20,
2006, or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION. Each party's right of termination under Section
9.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 11.4 and 11.6 will survive; provided, however, that if
this Agreement is terminated by a party because of the intentional or willful
Breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's intentional or willful failure to
comply with its obligations under this Agreement, the terminating party's right
to pursue any and all remedies available under law or equity in accordance with
this Agreement survive such termination unimpaired.
9.3 EXPENSES.
(a) If Buyer terminates this Agreement pursuant to Sections 9.1(b) or
9.1(c)(i), then Sellers and the Company shall be liable, jointly and severally,
to pay or reimburse (as the
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case may be) to Buyer promptly, but in no event later than ten (10) Business
Days after the date of such termination, the reasonable out of pocket expenses
of Buyer in connection with the Contemplated Transactions, including without
limitation the fees and expenses incurred in enforcing this provision.
(b) If Sellers or the Company terminate this Agreement pursuant to
Sections 9.1(b) or 9.1(c)(ii), then Buyer shall promptly, but in no event later
than ten (10) Business Days after the date of such termination, pay or reimburse
(as the case may be) the reasonable out of pocket expenses of Sellers and the
Company in connection with the Contemplated Transactions (excluding any fees or
other payments which may be due to Sellers' Broker), including without
limitation the fees and expenses incurred in enforcing this provision.
(c) Sellers and Buyer acknowledge and agree that the provisions of
this Section 9.3 are an integral part of the transactions contemplated by this
Agreement and that but for this provision the parties would not enter into this
Agreement.
9.4 LIQUIDATED DAMAGES.
(a) If Buyer has satisfied the conditions to Closing in Section 8 of
this Agreement and Sellers have satisfied (or Buyer has waived) the conditions
to Closing in Section 7 of this Agreement, and thereafter Sellers or the Company
arbitrarily terminate this Agreement or otherwise fail to close on or before
October 20, 2006, or such later date as the parties may mutually agree upon,
then Buyer shall be entitled to receive, and Seller and the Company shall be
liable, jointly and severally, to pay to Buyer promptly, but in no event later
than ten (10) Business Days after the date of such termination or deadline for
Closing, as the case may be, the sum of Five Million Five Hundred Fifty Thousand
Dollars ($5,550,000) as liquidated damages and not as a penalty and which amount
shall be deemed to include all costs and expenses of Buyer incurred in
connection with the Contemplated Transactions, other than any fees and expenses
incurred in enforcing this provision.
(b) If Sellers have satisfied the conditions to Closing in Section 7
of this Agreement and Buyer has satisfied (or Sellers have waived) the
conditions to Closing in Section 8 of this Agreement, and thereafter Buyer
arbitrarily terminates this Agreement or otherwise fails to close on or before
October 20, 2006, or such later date as the parties may mutually agree upon,
then Sellers shall be entitled to receive, and Buyer shall promptly, but in no
event later than ten (10) Business Days after the date of such termination or
deadline for Closing, as the case may be, pay to Sellers the sum of Five Million
Five Hundred Fifty Thousand Dollars ($5,550,000) as liquidated damages and not
as a penalty and which amount shall be deemed to include all costs and expenses
of Sellers and the Company incurred in connection with the Contemplated
Transactions, other than any fees and expenses incurred in enforcing this
provision.
(c) The Company, Sellers and Buyer acknowledge and agree that if the
provisions of this Section 9.4 are applicable, then the provisions set forth in
the proviso to Section 9.2 and in Section 9.3 shall be inapplicable.
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10. INDEMNIFICATION; REMEDIES.
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. Subject
to Section 10.5 below, all representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, the certificates delivered pursuant to Sections 2.4(a)(xiv)
and 2.4(a)(xv), and any other certificate or document delivered pursuant to this
Agreement will survive the Closing. The right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations. For purposes of
determining any Breach hereunder, any qualification or limitation of a
representation or warranty by reference to materiality or Material Adverse
Effect shall be considered; provided that for purposes of determining Damages
hereunder in the event of any such Breach, any qualification or limitation of
such representation or warranty by reference to materiality or a Material
Adverse Effect shall be deemed to have been excluded from such representation or
warranty. Any payment made by a Seller to Buyer pursuant to this Section 10
shall be deemed, to the extent permitted by applicable law, to be a reduction in
the Purchase Price and shall not be deemed to be an item of income or expense,
and all parties hereto agree to prepare their tax returns consistent therewith.
Any payment made by Buyer to a Seller pursuant to this Section 10 shall be
deemed, to the extent permitted by applicable law, to be an increase in the
Purchase Price and shall not be deemed to be an item of income or expense, and
all parties hereto agree to prepare their tax returns consistent therewith.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS AND THE COMPANY.
(a) Sellers, jointly and severally, will indemnify and hold harmless
Buyer, the Company (in the event the Closing occurs), and their respective
Representatives, stockholders, controlling persons, affiliates, successors and
assigns (collectively, the "INDEMNIFIED PERSONS") for, and will pay to the
Indemnified Persons the amount of any Damages arising, directly or indirectly,
from or in connection with:
(i) any Breach of any representation or warranty made by Sellers
in this Agreement (without giving effect to any supplement to the Disclosure
Letter) or any other Sellers' Closing Documents, the Disclosure Letter, the
supplements to the Disclosure Letter, or any other certificate or document
delivered by Sellers pursuant to this Agreement;
(ii) any Breach of any representation or warranty made by Sellers
in this Agreement as if such representation or warranty were made on and as of
the Closing Date without giving effect to any supplement to the Disclosure
Letter;
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(iii) any Breach by Sellers of any covenant or obligation of such
Sellers in this Agreement or any of Sellers' Closing Documents or any other
agreement or document delivered by such Seller pursuant to this Agreement;
(iv) any claim by any Governmental Body with respect to the
status of any mentor-protege relationship on or prior to the Closing Date as a
qualified Section 8(A) contractor relationship under 13 C.F.R. 124;
(v) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or the Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions;
(vi) any claim or right of the Former Shareholder of the Company
against the Company or Buyer or any of its securities or otherwise arising in
connection with the Former Shareholder Employment Agreement, the Former
Shareholder Stock Purchase Agreement, the Former Shareholder Acknowledgement,
this Agreement or the consummation of the Contemplated Transactions;
(vii) the failure of Company to qualify to do business in any
jurisdiction in which the nature of its activities would require qualification
as a foreign corporation under the laws of such jurisdiction before the Closing
Date and where failure to qualify would reasonably be expected to have a
Material Adverse Effect on the Company;
(viii) any claim that, at the time of the consummation of the
Contemplated Transactions, any Person other than Sellers owns or holds, or has
any right, title or interest in or to, any equity securities of the Company;
(ix) any decision by the U.S. Government or any other
Governmental Body within two (2) years of the Closing to debar or suspend the
Company or Buyer from participation in the award of Contracts with the U.S.
Government or any other Governmental Body or any decision by the U.S. Government
or any other Governmental Body to impose money damages on or seek refunds from
the Company or Buyer which directly results from the Company's failure to
perform or comply with any of the terms and provisions of the MDDC Contract
prior to Closing;
(x) any failure by the Company to obtain any future Contract with
the U.S. Government or any other Governmental Body within two (2) years of the
Closing which is predominantly the result of the Company's failure to perform or
comply with any of the terms and provisions of the MDDC Contract prior to
Closing or any unsatisfactory performance assessment or rating issued to the
Company in connection with the MDDC Contract for acts or omissions of Company
which occurred prior to Closing; provided that Buyer shall have the burden of
proof as to whether the Company's failure to perform or comply with any of the
terms and provisions of the MDDC Contract or any unsatisfactory performance
assessment or rating issued to the Company thereunder is the predominant factor
in any decision by the U.S. Government or any other Governmental Body to not
award the Company such future Contract with the U.S. Government or any other
Governmental Body; or
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(xi) any Proceeding arising out of or related to any alleged
discrimination based on sex, retaliation or disability or for defamation and
referenced in Section 3.21(2) of the Disclosure Letter, without any application
of the Basket, but subject to the Cap.
(xii) any claim by any Person against the Company which is
asserted within two (2) years of the Closing (i) with respect to the creation,
development or ownership of the Pelorus Software or (ii) with respect to the
marketing, licensing, sublicensing, sale or use of the Pelorus Software by the
Company prior to the Closing, including, without limitation, any claim that the
marketing, licensing, sublicensing or use of the Pelorus Software infringes the
rights of any such Person, but excluding claims arising from a breach of the
Pelorus Software Agreement by the Company after the Closing or claims relating
to modifications of the Pelorus Software by or with the consent of the Company
after the Closing.
(b) In the event this Agreement is terminated by Buyer pursuant to
Section 9.1(b) or (c)(i) of the Agreement, Sellers and the Company, jointly and
severally, will indemnify and hold harmless Buyer and pay to Buyer the amount of
any Damages arising, directly or indirectly, from or in connection with (i) any
intentional or willful Breach of any representation or warranty made by Sellers
or the Company in this Agreement or in any certificate delivered to Buyer
pursuant to this Agreement, (ii) any intentional or willful Breach by Sellers or
the Company of any covenant or obligation of Sellers or the Company in this
Agreement or in any certificate delivered by Sellers or the Company pursuant to
this Agreement, or (iii) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Sellers or the Company (or any
Person acting on its behalf) in connection with any of the Contemplated
Transactions.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS--ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 10.2, Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the Company, and the other
Indemnified Persons for, and will pay to Buyer, the Company (in the event the
Closing occurs), and the other Indemnified Persons the amount of, any Damages
(including costs of Cleanup) arising, directly or indirectly, from or in
connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of
or relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the Closing Date of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Sellers or the Company has or had an interest or presence, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Closing Date; or (ii)
(A) any Hazardous Materials or other contaminants, wherever located, that were
generated, transported, stored, treated, Released, or otherwise handled by
Sellers or the Company or by any other Person for whose conduct they are or may
be held responsible at any time on or prior to the Closing Date, or (B) any
Hazardous Activities that were, conducted by Sellers or the Company or by any
other Person for whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of
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real property), or other damage of or to any Person, including any employee or
former employee of Sellers or the Company or any other Person for whose conduct
they are or may be held responsible, in any way arising from any Hazardous
Activity conducted with respect to the Facilities or the operation of the
Company prior to the Closing Date, or from Hazardous Material that was (i)
present on or before the Closing Date on or at the Facilities (or present on any
other property, if such Hazardous Material emanated or allegedly emanated from
any of the Facilities and was present on any of the Facilities on or prior to
the Closing Date) or (ii) Released by Sellers or the Company or any other Person
for whose conduct they are or may be held responsible, at any time on or prior
to the Closing Date.
With respect to Cleanup for which indemnity may be sought under this
Section 10.3, the following procedures shall apply to all claims for the cost of
Cleanup related to or arising out of Hazardous Materials present on, at or
emanating from any Facilities or Sellers' or the Company's operations on or
before the Closing Date:
(i) Buyer shall select one or more environmental engineers or
consultants, to plan, conduct, coordinate and supervise the Cleanup; provided
that, to the extent that Buyer selects environmental engineers or consultants
who are not nationally recognized, the Sellers' Representative shall approve the
selected engineer or consultant;
(ii) Buyer shall arrange for the environmental consultant to
prepare in compliance with Environmental Laws a plan and scope of work designed
to: (A) meet the requirements of the owner of the property upon which such
Hazardous Materials are present or emanating as well as the requirements of all
relevant governmental authorities; (b) achieve the Cleanup in compliance with
the Environmental Laws in a reasonably cost-effective and timely manner, and (C)
minimize the disruption of operations at the Facility ("CLEANUP PLAN");
(iii) Buyer shall give Sellers' Representative a reasonable
opportunity to review and comment upon the Cleanup Plan and Sellers'
Representative shall provide any comments in a timely manner. Buyer shall
reasonably address any timely received comments of Sellers' Representative;
(iv) Each party shall timely provide to one another any material
information or documents related to the Cleanup or any other information related
to the Cleanup requested by such other party in writing; and
(v) Sellers' Representative shall have the right to reasonably
monitor, at Sellers' expense and at Sellers' risk, any Cleanup.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER.
(a) Buyer will indemnify and hold harmless Sellers and their
respective heirs, legal representatives, successors and assigns, (collectively,
the "SELLER INDEMNIFIED PERSONS") for, and will pay to Seller Indemnified
Persons the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach by Buyer of any representation or warranty made
by Buyer in this Agreement or in any other Buyer's Closing Documents or in any
Schedule, certificate or document delivered by Buyer pursuant to this Agreement,
(b) any Breach of any representation or warranty made by Buyer in this Agreement
as if such representation or
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warranty were made on and as of the Closing Date, (c) any Breach by Buyer of any
covenant or obligation of Buyer in this Agreement or any other Buyer's Closing
Documents or any other agreement or document delivered by Buyer pursuant to this
Agreement, or (d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
(b) In the event this Agreement is terminated by Sellers pursuant to
Section 9.1(b) or (c)(ii) of the Agreement, Buyer will indemnify and hold
harmless Sellers and the Company and pay to Sellers or the Company, as the case
may be, the amount of any Damages arising, directly or indirectly, from or in
connection with (i) any intentional or willful Breach of any representation or
warranty made by Buyer in this Agreement or in any certificate delivered to
Sellers pursuant to this Agreement, (ii) any intentional or willful Breach by
Buyer of any covenant or obligation of Buyer in this Agreement or in any
certificate delivered by Buyer to Sellers or the Company pursuant to this
Agreement, or (iii) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.5 TIME LIMITATIONS.
(a) If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.1, 3.2, 3.3, 3.6, 3.11, 3.13, 3.19, 3.20,
3.21, 3.24 and 3.26 unless on or before eighteen (18) months from the Closing
Date Buyer notifies Sellers of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer. A claim with
respect to Sections 3.11, 3.13, 3.19, 3.20 and 3.21 may be made at any time
prior to the expiration of the applicable statute of limitations (including
extensions thereof as a result of timely filed waivers). A claim with respect to
Sections 3.1, 3.2, 3.3, 3.6, 3.24, and 3.26 or a claim for indemnification or
reimbursement not based upon any representation or warranty of Sellers or any
covenant or obligation of Sellers to be performed and complied with prior to the
Closing Date may be made at any time.
(b) If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before eighteen (18) months from the Closing Date Sellers
notify Buyer of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Sellers.
(c) The representations, warranties and covenants of the Company shall
not survive the Closing, and the Company will have no liability (for
indemnification, contribution or otherwise) thereafter with respect to any
representation or warranty or any covenant or obligation to be performed and
complied with prior to the Closing Date. Effective upon the Closing, Sellers
shall waive any and all rights to indemnification or contribution from the
Company and release the Company from any and all claims based on indemnification
or contribution with respect any claim for Damages by any Indemnified Person
arising, directly or indirectly, from or in
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connection with (a) any Breach of any representation or warranty made by the
Company in this Agreement or in any certificate delivered by Buyer pursuant to
this Agreement, (b) any Breach by the Company of any covenant or obligation of
the Company in this Agreement or in any certificate delivered by the Company
pursuant to this Agreement, (c) any product shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date or (d) any claim by
any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with the Company (or any Person acting on its behalf).
10.6 LIMITATIONS ON AMOUNTS - SELLERS. Sellers will have no liability (for
indemnification or otherwise) with respect to the matters described in Sections
10.2 and 10.3 until the total of all Damages for which an indemnification
payment is required by Sellers exceeds $500,000 (the "BASKET"), and then only
for the amount by which such Damages exceed the Basket; provided that, the
Basket shall not apply to Damages arising under Section 3.3, Section
10.2(a)(vi), Section 10.2(a)(ix), Section 10.2(a)(x) or with respect to fraud by
the Sellers (or the Company if the Closing does not occur). The aggregate
liability of Sellers with regard to matters described in Sections 10.2 and 10.3
shall not exceed $40,000,000 (the "CAP"); provided that, (a) the Cap shall not
apply to Damages arising under Section 3.3, Section 10.2(a)(vi) or with respect
to fraud by the Sellers (or the Company if the Closing does not occur), (b)
there shall be a special additional Cap of $40,000,000 (the "SPECIAL CAP") with
respect to Damages arising under Section 10.2(a)(ix) and Section 10.2(a)(x) and
(c) in no event shall the aggregate liability of Sellers with regard to matters
covered by the Cap and the Special Cap exceed $60,000,000 (the "OVERALL CAP").
Notwithstanding the foregoing, this Section 10.6 will not apply to any Breach of
Sellers' representations and warranties of which any Seller had Knowledge at the
date on which such representation and warranty is made or any intentional Breach
by any Seller of any covenant or obligation of the Sellers under this Agreement
and Sellers will be jointly and severally liable for all Damages with respect to
such Breaches.
10.7 LIMITATIONS ON AMOUNT -- BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
10.4 until the total of all Damages with respect to such matters exceeds the
Basket, and then only for the amount by which such Damages exceed the Basket,
provided that the aggregate liability of Buyer with regard to such matters shall
not exceed the Cap. However, this Section 10.7 will not apply to any Breach of
Buyer's representations and warranties of which Buyer had Knowledge at the date
on which such representation and warranty is made or any intentional Breach by
Buyer of any covenant or obligation of the Buyer under this Agreement, and Buyer
will be liable for all Damages with respect to such Breaches.
10.8 ESCROW. Buyer may assert a claim for indemnification under the Master
Escrow Agreement, by notice to Sellers' Representative and the Master Escrow
Agent specifying in reasonable detail the basis for such claim to the extent
then known by Buyer and the amount to which Buyer is entitled under this Section
10, all as more fully provided in the Master Escrow Agreement. Buyer is
authorized to recover from the Master Escrow Amount the entire amount of, or any
portion of, any claim against any Seller without regard to the amount
contributed or deemed to be contributed by such Seller. Sellers will settle
among themselves any right to contribution or indemnity with regard to amounts
paid to Buyer from the escrowed funds. The amount held in escrow, if and when
disbursed to Sellers, shall be treated on an installment sale
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basis and shall be taken into income by Sellers in the year in which it is
received. Neither the giving of notice of a claim under the Master Escrow
Agreement nor the failure to give such notice will constitute an election of
remedies or limit Buyer in any manner in the enforcement of any other remedies
that may be available to it.
10.9 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section 10.2,
10.4, or 10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnified party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnified party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.9(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to
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indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Sellers with respect to such a claim anywhere in the
world.
10.10 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
10.11 NOTICE TO SELLERS. Any notice to Sellers pursuant to this Section 10
shall be sent to the attention of the Sellers' Representative, and notice sent
to the Sellers' Representative shall be deemed sufficient notice to all Sellers
under this Section 10.
10.12 TAX INDEMNIFICATION; TAX BENEFIT.
(a) Indemnification for Direct Taxes. Notwithstanding any other
provision contained in this Agreement to the contrary, Sellers, jointly and
severally, shall indemnify the EDO Group, Buyer and the Company (each a "BUYER
TAX INDEMNITEE") for, and shall defend and hold each such Buyer Tax Indemnitee
harmless from, the full amount of any Taxes assessed against or collected from
each such Buyer Tax Indemnitee and any other Adverse Consequences arising
therefrom for all taxable periods ending on or before the Closing Date, and the
portion through the end of the Closing Date for any taxable period that includes
(but does not end on) the Closing Date including, without limiting the
generality of the foregoing, Taxes assessed or collected (i) as a result of
Company's failure to properly make a valid S corporation election or to maintain
eligibility for S corporation status within the meaning of IRC Sections 1361 and
1362, (ii) as a result of Company's failure to properly make a valid election to
be treated as an S corporation or achieve comparable pass-through tax treatment
under any state or local tax statute, or to maintain eligibility for such S
corporation or comparable pass-through tax treatment, (iii) any failure on the
part of Seller described in Section 5.11, pertaining to the making of a Section
338(h)(10) Election, (iv) as a result of the Company's failure to pay, collect
or withhold Taxes (each of (i), (ii), (iii), and (iv) a "DEFECTIVE ELECTION
EVENT"), (v) any and all Taxes of any person (other than the Company) imposed on
the Company as a transferee or successor, by contract or pursuant to any law,
rule, or regulation, which Taxes relate to an event or transaction occurring
before the Closing, or (vi) any and all Taxes of the Company for any period for
which an S corporation election was not in effect, or with respect to Taxes
other than federal income taxes, for any period or for any jurisdiction in which
pass-through treatment similar to S corporation treatment did not apply to the
Company.
(b) Indemnification for other Tax Loss. If for purposes of any Taxes,
any Buyer Tax Indemnitee shall lose the benefit of, or shall not have, or shall
not claim, or shall lose the
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right to claim, or shall suffer a deferral, reduction or disallowance of, or
shall be required to apply or recapture all or any portion of any amount
(including the loss of an increase in basis of any asset of the Company as a
result of a failure to be able to make an effective Section 338(h)(10) Election)
that could otherwise give rise to a deduction or other reduction of tax were the
Buyer Tax Indemnitee to have income sufficient to use such Tax benefit at any
time (any such loss, deferral, reduction, disallowance, application or recapture
hereinafter called a "BUYER TAX LOSS"), and such Buyer Tax Loss is suffered as a
result of a Defective Election Event, then, without limiting the generality of
any indemnification required under Section 10.2, Sellers, jointly and severally,
shall be obligated to pay to the Buyer Tax Indemnitee an amount in respect of
such Buyer Tax Loss (each a "BUYER TAX INDEMNITY PAYMENT") equal to an amount
which shall provide the Buyer Tax Indemnitee with an amount equal to the excess
of (A) all Tax, interest, penalties and additions to tax incurred for federal,
state and local income tax purposes, over (B) the amount of all Tax, interest,
penalties and additions to tax that would have been incurred for federal, state
and local income tax purposes but for the loss of such Tax attribute, in each
case assuming the Buyer Tax Indemnitee is subject to the highest marginal
combined federal, state and local income tax rate which could be applicable to
such Buyer Tax Indemnitee.
(c) Calculation and Payment. The amount of any Buyer Tax Indemnity
Payments under this Section 10.12 shall be calculated by the Buyer and such
calculation shall be provided to the Sellers. If Sellers object to the
calculation, they as the Objecting Party shall promptly notify Buyer of a
request for the Tax Objection Process, which shall govern the obligation.
(d) Indemnification for Direct Taxes. Notwithstanding any other
provision contained in this Agreement to the contrary, Buyer and Company,
jointly and severally, shall indemnify Sellers (each a "SELLER TAX INDEMNITEE")
for, and shall defend and hold each such Seller Tax Indemnitee harmless from,
the full amount of any Taxes assessed against or collected from each such Seller
Tax Indemnitee and any other Adverse Consequences arising therefrom for all
taxable periods ending after the Closing Date, and the portion after the end of
the Closing Date for any taxable period that includes (but does not end on) the
Closing Date including, without limiting the generality of the foregoing, Taxes
assessed or collected as a result of any and all Taxes of any person imposed on
any Seller as a transferee or successor, by contract or pursuant to any law,
rule, or regulation, which Taxes relate to an event or transaction occurring
after the Closing.
(e) Calculation and Payment. The amount of any Seller Tax Indemnity
payments under this Section 10.12 shall be calculated by the Seller and such
calculation shall be provided to the Buyer. If Buyer objects to the calculation,
it as the Objecting Party shall promptly notify Seller of a request for the Tax
Objection Process, which shall govern the obligation.
10.13 SUBROGATION. Upon making an indemnity payment pursuant to this
Agreement, the indemnifying party will, to the extent of such payment, be
subrogated to all rights of the indemnified party against any third party in
respect of the damages to which the payment related.
10.14 NO DOUBLE RECOVERY. Notwithstanding anything herein to the contrary,
no party shall be entitled to indemnification or reimbursement under any
provision of this Agreement for any amount to the extent such party or its
affiliate has been indemnified or reimbursed for such amount under any other
provision of this Agreement, the Exhibits, the Disclosure Letter or the
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Schedules attached hereto, or any document executed in connection with this
Agreement or otherwise.
10.15 TREATMENT OF INDEMNITY PAYMENTS BETWEEN THE PARTIES. Unless otherwise
required by applicable Law, all indemnification payments shall constitute
adjustments to the Purchase Price for all Tax purposes, and no party shall take
any position inconsistent with such characterization.
10.16 EXCLUSIVE REMEDIES. The remedies provided for in this Agreement shall
be the sole and exclusive remedies of the parties and their respective officers,
directors, employees, affiliates, agents, representatives, successors and
assigns for any breach of or inaccuracy in any representation, warranty or
covenant contained in this Agreement or any certificate delivered at Closing;
provided, however, that nothing herein is intended to waive any claims for fraud
or waive any equitable remedies to which a party may be entitled.
10.17 USE OF INSURANCE. In the event any Damages related to a claim by
Buyer under this Agreement are covered by insurance, Buyer agrees to use
commercially reasonable efforts (which shall not include the commencement of
litigation) to seek recovery under such insurance and the amount of Damages
incurred by Buyer for purposes of this Agreement shall be reduced by the amount
Buyer recovers from any insurer (net of any costs of collecting such insurance
payment, including the amount of any co-payment or deductible and less that
portion of any premium increase in the next policy period of the applicable
insurance policy or replacement insurance policy that results directly from the
assertion of such claim, as determined by correspondence from the insurance
carrier or insurance broker to Buyer, a copy which shall have been provided to
the Sellers) and Buyer shall refund amounts received from the Sellers up to the
amount of indemnification actually received for any such Damages; provided that
the filing of a claim with any insurer for such Damages shall not delay (or
prior to receipt of an amount from an insurer, reduce) any payment due to Buyer
under this Section 10.
10.18 MITIGATION. Each party agrees to use reasonable efforts to mitigate
any loss, liability or damage which forms the basis of a claim hereunder.
11. GENERAL PROVISIONS.
11.1 PURCHASE PRICE ALLOCATION. Buyer, the Company and Sellers agree that
the Purchase Price and the liabilities of the Company will be allocated to the
assets of the Company for all purposes (including Tax and financial accounting)
pursuant to the valuation report prepared by an independent third party
appraiser to be engaged by Buyer for such purpose following the Closing, as
adjusted by the Buyer in a manner consistent with IRC Sections 338 and 1060 and
the regulations thereunder. If Sellers object to the allocation so determined,
they as the Objecting Party shall promptly notify Buyer of a request for the Tax
Objection Process. Buyer, the Company and Sellers shall file all Tax Returns and
information reports, including without limitation IRS Form 8883, in a manner
consistent with the allocation determined under this Section 11.1. Sellers shall
have no liability for any adjustments to any tax returns of Buyer or the Company
attributable solely to a change in the allocation determined under this Section
11.1.
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11.2 TAX RETURNS. Buyer shall prepare or cause to be prepared, on a basis
consistent with the Company's past practice and custom, unless Sellers approve
otherwise, which approval shall not be unreasonably withheld, conditioned or
delayed, and file or cause to be filed all Tax Returns for the Company for all
periods ending on or prior to the Closing Date that are filed after the Closing
Date, except for the Company's Federal S Corporation Tax Returns and
corresponding state, local and foreign Tax Returns required to be filed for all
periods prior to Closing and the period ending with the Closing (including the
Federal S Corporation Tax Return and corresponding state, local and foreign Tax
Returns required to be filed due to the deemed asset sale under IRC Section
338(h)(10)), which shall be prepared by Sellers and approved by Buyer prior to
filing, which approval shall not be unreasonably withheld, conditioned or
delayed. Sellers shall provide Buyer with a schedule of all Tax Returns of the
Company to be filed for periods ending on or prior to the Closing Date, and a
list of Tax Returns for which extensions have been filed. Sellers shall complete
returns required hereunder not later than forty-five (45) days prior to the due
date therefore and provide them to Buyer for prompt review to permit timely
filing.
11.3 COOPERATION ON TAX MATTERS.
(a) Buyer, the Company and Sellers shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of Tax Returns and Tax refunds and any audit, litigation or other
proceeding with respect to Taxes; provided, that Sellers shall not file, or
cause to be filed, the Company's Federal S corporation Tax Returns and
corresponding state, local and foreign Tax Returns of the Company required to be
filed for all periods prior to Closing and the period ending with the Closing
(including the Federal S Corporation Tax Return and corresponding state, local
and foreign Tax Returns required to be filed due to the deemed asset sale under
IRC Section 338(h)(10)), without Buyer's prior approval, which approval shall
not be unreasonably withheld, conditioned or delayed; provided further, that
Sellers shall provide Buyer any of the aforementioned Tax Returns to Buyer not
less than forty-five (45) days prior to the due date (including properly filed
extensions) for filing such Tax Returns. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information reasonably relevant to any such audit, litigation, or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Buyer, the Company and Sellers agree (i) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing until the expiration of the statute
of limitations (and, to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (ii) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company or
Sellers, as the case may be, shall allow the other party to take possession of
such books and records.
(b) Buyer and Sellers further agree, upon request, to use reasonable
good faith efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including with respect to the
transactions contemplated hereby), provided that any costs and expenses incurred
in connection with such effort shall be paid by the requesting party.
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(c) The Company, Buyer, and Sellers agree that should any Governmental
Body determine, find, hold, or propose to determine, find or hold that the
Company's status as an S corporation, as defined in Section 1361 of the IRC, has
at any time been terminated as a result of an inadvertent invalid election or
inadvertent termination, each as defined in Section 1362(f) of the IRC, then the
Company, Buyer, and Sellers shall take such steps as are necessary or advisable
to obtain a waiver of the effects of such a termination (a "WAIVER"), including
but not limited to the filing of a ruling request with the IRS, and agreeing to
such terms and conditions as the IRS may impose as a condition of granting a
Waiver. Sellers shall bear all costs associated with obtaining a Waiver,
including but not limited to any fee imposed by the IRS associated with the
filing of a ruling request or the obtaining of a ruling.
(d) Except in connection with an audit resolved pursuant to Section
11.3(e) (including consistent correlative adjustments to Tax Returns for
non-audited taxable periods), no party may amend a Tax Return filed by any party
with respect to the Company or any Affiliated Entity or Subsidiary or file or
amend any Tax election of the Company or any Affiliated Entity, in each case,
for a taxable period beginning prior to the Closing Date, without the consent of
the other parties hereto, not to be unreasonably withheld or delayed. The EDO
Group shall, upon request by Sellers and at the sole expense of Sellers,
cooperate in the preparation of and submission to the proper Governmental Body
of any amended Tax Return that is required to cause such Tax Return to be
consistent with adjustments to the Tax Returns of the Company or any Affiliated
Entity for any other taxable period proposed by any Governmental Body, or to
give effect to an allowable loss carryback or carryover from a taxable period of
the Company or any Affiliated Entity or Subsidiary ending on or before the
Closing Date.
(e) Any party who receives any notice of a pending or threatened Tax
audit, assessment, or adjustment relating to the Company, or any Affiliated
Entity or Sellers with respect to the Company or any Affiliated Entity, which
may give rise to liability of another party hereto, shall promptly notify Buyer
and Sellers within ten (10) Business Days of the receipt of such notice. The
parties each agree to consult with and to keep the other parties hereto informed
on a regular basis regarding the status of any Tax audit or proceeding to the
extent that such audit or proceeding could affect a liability of such other
parties (including indemnity obligations hereunder). Sellers shall have the
right to represent the interest of the Company or any Affiliated Entity or
Subsidiary in any Tax audit or administrative or judicial proceeding and to
employ counsel of Seller's choice, but reasonably satisfactory to Buyer, at the
expense of Sellers, but only to the extent such audit or other proceeding
pertains solely to taxable periods ending on or before the Closing Date, with no
preclusive effect after the Closing Date in respect of any position taken by the
EDO Group. Buyer shall have the right to participate in such proceeding at its
own expense, and shall be entitled to control the disposition of any issue
involved in such proceeding that does not affect a potential liability of
Sellers. Buyer and Sellers shall be entitled to represent their own interests in
light of their responsibilities (including indemnity obligations) for the
related Taxes, at their own expense, in any audit or administrative or judicial
proceedings involving a taxable period that includes but does not end on the
Closing Date. Notwithstanding the foregoing, (i) Sellers shall not agree to any
settlement for any taxable period that would effect Tax liabilities of Buyer or
the Company or any Affiliated Entity or Subsidiary for any taxable period
beginning on or after the Closing Date without prior written consent of Buyer
and (ii) neither the Company nor Buyer shall agree to any settlement for any
taxable period that would effect Tax liabilities of Sellers or the Company or
any Affiliated Entity or Subsidiary for
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any taxable period beginning on or before the Closing Date without prior written
consent of Sellers. Nothing in this Section 11.3 shall be interpreted to
diminish in any fashion the liability of Sellers, if any, under Section 10.12.
11.4 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses related to
the preparation of any filings under the HSR Act and of such party's agents,
representatives, legal counsel, and accountants; provided, however, that Buyer
shall pay all filing fees related to compliance with the HSR Act in connection
with transactions contemplated hereby. At the Closing, Sellers will cause the
Company not to have any liability for out-of-pocket expenses in connection with
this Agreement and the Contemplated Transactions except as reflected in the
Closing Financial Statements. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party. All
estate, gift, transfer, documentary, sales, use, stamp, registration and other
such Taxes, and all conveyance fees, recording charges and other fees and
charges (including any penalties and interest) incurred in connection with the
consummation of the Contemplated Transactions shall be borne by Sellers to the
extent Sellers are liable for such Taxes, fees and charges, and borne by Buyer
to the extent that Buyer is liable for such Taxes, fees and charges.
11.5 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines; provided that
Buyer, except as may be otherwise required by applicable Legal Requirements,
shall consult with the Sellers' Representative with respect to the content of
any such public announcement. Unless consented to by Buyer in advance or
required by Legal Requirements except to the extent already disclosed by Buyer,
prior to the Closing Sellers shall, and shall cause the Company to, keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. Sellers and Buyer will consult with each other
concerning the means by which the Company employees, customers, and suppliers
and others having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication. Notwithstanding the foregoing, Buyer shall have the right to make
such disclosure as it deems necessary or advisable under the Federal securities
laws, in which event Buyer shall provide Sellers with a copy of such disclosure.
11.6 CONFIDENTIALITY. If the Contemplated Transactions are not consummated,
each party will return or destroy as much of such written Confidential
Information as the other party may reasonably request. Whether or not the
Closing takes place, Sellers waive, and will upon Buyer's request cause the
Company to waive, any cause of action, right, or claim arising out of the access
of Buyer or its representatives to any Confidential Information of the Company
except for the intentional competitive misuse by Buyer of such Confidential
information.
11.7 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested within one (1)
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Business Day thereafter, or (c) received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case to the appropriate addresses and facsimile numbers set forth in Schedule IV
attached hereto (or to such other addresses and facsimile numbers as a party may
designate by notice to the other parties); provided, that any notice which is
being given to Sellers shall be sent to the attention of the Sellers'
Representative, and any notice sent to the Sellers' Representative shall be
deemed notice to all Sellers; and provided, further, that if a party refuses to
accept delivery, such notice, consent, waiver or other communication shall be
deemed to have been given on the date of such refusal of delivery.
11.8 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
shall be brought solely and exclusively against any of the parties in the courts
of the State of New York, County of New York, or, if it has or can acquire
jurisdiction, in the United States District Court for the Southern District of
New York, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world.
11.9 FURTHER ASSURANCES. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as any other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.10 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.11 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated December 30,
2005) and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by each party to this Agreement.
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11.12 SELLERS' REPRESENTATIVE.
(a) Each Seller irrevocably appoints WHS and FHC (together, the
"SELLERS' REPRESENTATIVE") as his, her or its agent, proxy and attorney-in-fact
for all purposes under this Agreement, and each Seller authorizes the Sellers'
Representative to do any and all of the following for the Seller and in the
Seller's name and stead: (i) to execute, acknowledge, as appropriate, and
deliver to Buyer any certificate, document or agreement referred to herein or
contemplated hereby, including this Agreement, the Shares, and the Sellers'
Closing Documents; (ii) to accept, receipt for and deposit any funds or other
amounts owing to the Seller hereunder; (iii) to represent, negotiate on behalf
of and bind the Seller in connection with the determination of the Adjustment
Amount, any negotiations or agreements with Buyer with respect to the Adjustment
Amount, and any presentation to or discussions with the Independent Accountants
with respect thereto; (iv) to execute, acknowledge, as appropriate, and deliver
such modifications and amendments to this Agreement or any Exhibit, Schedule or
other attachment hereto or Sellers' Closing Documents as the Sellers'
Representative shall deem advisable in his discretion; and (v) to do any and all
other acts and things in connection with this Agreement as Sellers'
Representative shall deem advisable in his discretion. For so long as WHS and
FHC are acting jointly as the Sellers' Representative hereunder, any action to
be taken by the Sellers' Representative pursuant to this Section 11.12(a) shall
require their unanimous consent. The agency created hereby shall be deemed
irrevocable and coupled with an interest; Buyer shall be entitled to rely upon
the powers granted herein with respect to any matter relating to this Agreement;
and any question which may arise concerning the power or authority of the
Sellers' Representative to act for each Seller shall be interpreted and
construed in favor of the authority of the Sellers' Representative. Each Seller
appointing the Sellers' Representative hereby ratifies and confirms all that the
Sellers' Representative shall do or cause to be done by virtue of such Sellers'
Representative's appointment as Sellers' Representative of such Seller.
(b) Upon the resignation, death, disability or other inability of
either of the initial Sellers' Representatives to act, then the remaining
Sellers' Representative alone shall be deemed the "Sellers' Representative"
hereunder and shall have all of the rights, duties, power and authority set
forth in this Section. If at any time neither of the initial Sellers'
Representatives is ready, willing and able to act in such capacity, then Xxxxx
X. Xxxxxxxxxx shall be deemed the successor Sellers' Representative hereunder
and shall have all of the rights, duties, power and authority of the Sellers'
Representative set forth in this Section.
(c) The Sellers' Representative shall act for Sellers appointing the
Sellers' Representative on all of the matters set forth in this Agreement in the
manner the Sellers' Representative believes to be in the best interest of such
Sellers, but the Sellers' Representative shall not be responsible to any such
Sellers for any loss or damage any such Sellers may suffer by reason of the
performance by the Sellers' Representative of such Sellers' Representative's
duties under this Agreement, other than loss or damage arising from willful
misconduct in the performance of such Sellers' Representative's duties under
this Agreement.
11.13 DISCLOSURE LETTER.
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties in
(i) the Section of the Agreement to
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which they expressly relate and (ii) each Section of the Agreement expressly
cross referenced and not to any other representation or warranty in this
Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Letter, the Buyer Schedules
and any supplements thereto (other than an exception expressly set forth as such
in the Disclosure Letter, the Buyer Schedules and any supplements thereto with
respect to a specifically identified representation or warranty), the statements
in the body of this Agreement will control.
11.14 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties except that Buyer may assign any of its rights under this
Agreement to any Related Person of Buyer. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors, heirs, legal representatives and permitted assigns of
the parties. If Buyer assigns its rights hereunder to any Related Person of
Buyer without the prior written consent of the other parties, then Buyer shall
remain liable to the other parties for the obligations of Buyer hereunder.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement, the Indemnified Persons and any
Tax Indemnitee any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors, heirs, legal representatives
and permitted assigns, the Indemnified Persons and any Tax Indemnitee.
11.15 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.16 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.17 TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
11.18 GOVERNING LAW. This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
11.19 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
EDO CORPORATION
By:
-------------------------------------
Xxxxxxxx X. Xxxxxxx
Senior Vice President - Finance,
Treasurer and Chief Financial Officer
COMPANY:
CAS, INC.
By:
-------------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
President and Chief Executive Officer
SELLERS:
-----------------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Xxxxxxx X. Xxxxx
THE XXXXXXX X. XXXXXXX, XX.
ESTATE PRESERVATION TRUST
By:
------------------------------------
Xxxxxxxxx X. Xxxxx, Trustee
