STOCK PURCHASE AGREEMENT
Exhibit 2.1
THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of this 13th day
of September, 2010, by and among (i) Global Defense Technology & Systems, Inc., a Delaware
corporation (the “Buyer”), (ii) Zytel Corporation, a Florida corporation (the
“Company”) and (iii) Xxxxx X. Xxxxxxx (the “Stockholder”, and collectively with the
Company, the “Seller Parties”). The Buyer, the Company and the Stockholder are referred to
herein individually as a “Party” and collectively as the “Parties”. The
capitalized terms used herein and not otherwise defined herein have the meanings given to such
terms as set forth in Appendix A hereto.
RECITALS
WHEREAS, the Stockholder is the record and beneficial owner of all of the issued and
outstanding capital stock and other equity securities of the Company;
WHEREAS, upon the terms and subject to the conditions set forth herein, the Buyer desires to
purchase from the Stockholder, and the Stockholder desires to sell to the Buyer, all of the issued
and outstanding capital stock and other equity securities of the Company (the “Stock
Purchase”);
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material
inducement to the Buyer to enter into this Agreement, the Stockholder shall have entered into and
delivered to the Buyer a Consulting Agreement with the Buyer, substantially in the form attached
hereto as Exhibit A (the “Consulting Agreement”), to be effective as of the Closing
Date (as defined below);
WHEREAS, upon the consummation of the Stock Purchase and the other transactions contemplated
by this Agreement, each of the Key Employees shall enter into and deliver to the Buyer an Executive
Employee Agreement with the Buyer, substantially in the form attached hereto as Exhibit B
(the “Employee Agreements”), each to be effective as of the Closing Date; and
WHEREAS, promptly following the execution and delivery of this Agreement, the Company will
distribute to each employee of the Company a Bonus Award Letter, substantially in the form attached
hereto as Exhibit C (a “Bonus Award Letter”).
NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties and covenants herein contained, the Parties agree
as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
PURCHASE AND SALE OF SHARES
1.1 Stock Purchase. On the terms and subject to the conditions of this Agreement, for
the consideration specified in Section 1.2, the Buyer agrees to purchase from the Stockholder, and
the Stockholder agrees to sell, transfer, assign and deliver to the Buyer, the Shares, free and
clear of all Encumbrances, which Shares collectively constitute all of the issued and
outstanding shares of the capital stock of the Company.
1.2 Purchase Price; Payment at Closing.
(a) The aggregate purchase price to be paid in exchange for the acquisition by the Buyer of
all outstanding capital stock of the Company and any other equity securities of the Company
(including, without limitation, all outstanding unexpired and unexercised options, warrants or
other rights to acquire or receive any capital stock of the Company, or stock appreciation, phantom
stock, profit participation or other similar rights with respect thereto, whether vested or
unvested, if any) and the covenants of the Stockholder pursuant to ARTICLE X shall be Twenty-Six
Million Eight Hundred Thousand Dollars ($26,800,000.00) (as adjusted pursuant to Section 1.4
hereof, the “Purchase Price”).
(b) At the Closing, the Buyer shall pay to the Stockholder, by wire transfer of immediately
available funds to an account (domestic or international) designated by the Stockholder on the Flow
of Funds Memorandum, an amount (the “Closing Payment”) equal to (i) the Purchase Price (as
adjusted), less (ii) the sum of (A) the Escrow Deposit, (B) the Tax Escrow Deposit, (C) the
Transaction Bonus Amount, (D) the Non-Ordinary Course Liabilities (as set forth in the Estimated
Closing Statement), and (E) the Indebtedness for Borrowed Money as of immediately prior to the
Closing (as set forth in the Estimated Closing Statement). At least two (2) Business Days prior to
the Closing, the parties shall agree upon a flow of funds memorandum (the “Flow of Funds
Memorandum”) which shall set forth all payments required to be made by or on behalf of all
parties at the Closing, including for each such payment an identification of the payor, the payee,
the amount and the wire transfer information.
1.3 Escrows.
(a) On the Closing Date, the Buyer, the Stockholder and Branch Banking and Trust Company (the
“Escrow Agent”) shall enter into an Escrow Agreement in the form attached hereto as
Exhibit D (the “Escrow Agreement”). The Buyer shall withhold Two Million Six
Hundred Eighty Thousand Dollars ($2,680,000.00) (the “Escrow Deposit”) from the Purchase
Price and deposit such amount into escrow pursuant to the terms of the Escrow Agreement.
Notwithstanding any provisions of this Agreement to the contrary, the Escrowed Funds will secure
and be used for, to the extent necessary and subject to the terms and conditions contained in the
Escrow Agreement, the payment of the indemnity obligations of the Stockholder pursuant to
ARTICLE IX.
(b) On the Closing Date, the Buyer, the Stockholder and the Escrow Agent shall enter into a
Tax Escrow Agreement in the form attached hereto as Exhibit E (the “Tax Escrow
Agreement”). The Buyer shall withhold One Million Eight Hundred Fifty Thousand Dollars
($1,850,000.00) (the “Tax Escrow Deposit”) from the Purchase Price and deposit such amount
into escrow pursuant to the terms of the Tax Escrow Agreement. Notwithstanding any provisions of
this Agreement to the contrary, the Tax Escrowed Funds will be used, to the extent necessary and
subject to the terms and conditions contained in the Tax Escrow Agreement, solely for the payment
of the indemnity obligations of the Stockholder pursuant to Section 9.1(g) (Tax Losses).
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1.4 Purchase Price Adjustments.
(a) At least five (5) Business Days prior to the Closing, the Company and the Buyer shall
finalize an Estimated Closing Statement. If the amount of the Estimated Closing Working Capital
shown on the Estimated Closing Statement does not equal the Target Working Capital, then the
Purchase Price shall be reduced by the amount of the Estimated Working Capital Deficit, if any, or
increased by the amount of the Estimated Working Capital Surplus, if any. Such adjustments to the
Purchase Price pursuant to this Section 1.4(a) shall be referred to herein collectively as the
“Estimated Closing Adjustment.” The Estimated Closing Adjustment shall be determined
without regard to the limitations set forth in Section 9.4 and Section 9.5 hereof.
(b) Within ninety (90) days following the Closing Date, the Buyer shall cause the Company to
prepare and deliver to the Stockholder a Closing Statement, which shall set forth the Closing
Balance Sheet and the Closing Working Capital (the “Closing Statement”), and a schedule
based upon the Closing Statement setting forth any adjustments to the Estimated Closing Adjustment
(the aggregate amount of such adjustments, collectively, the “Closing Adjustment”). The
Stockholder shall assist the Buyer in the preparation of the Closing Statement if requested by the
Buyer.
(c) The Stockholder shall have a period of thirty (30) days after receipt of the Closing
Statement to notify the Buyer of the Stockholder’s election to accept or reject the Closing
Statement. During such period, the Buyer shall provide the Stockholder (and the Stockholder’s
Representatives) with reasonable access during normal business hours to the books, records and
other information relied upon by the Buyer in preparing the Closing Statement. In the event the
Stockholder rejects the Closing Statement as prepared by the Buyer, such rejection notice must
contain the reasons for such rejection in reasonable detail and must set forth the amount of the
requested adjustment. In the event no notice is received by the Buyer during such thirty (30)-day
period, the Closing Statement and any required adjustments resulting therefrom shall be deemed
accepted by the Stockholder and final and binding on the Parties hereto. In the event that the
Stockholder shall timely reject the Closing Statement, the Buyer and the Stockholder shall promptly
(and in any event within thirty (30) days following the date upon which the Buyer received notice
from the Stockholder rejecting the Closing Statement), attempt to make a joint determination of the
Closing Adjustment and such determination and any required adjustments resulting therefrom shall be
final and binding on the Parties hereto.
(d) In the event the Stockholder and the Buyer are unable to agree upon the Closing Adjustment
within one hundred fifty (150) days from the Closing Date, then within one hundred sixty (160) days
from the Closing Date, the Buyer and the Stockholder shall submit such dispute for resolution to
the Accounting Firm. The Buyer and the Stockholder shall request that the Accounting Firm render
its determination of the Closing Adjustment prior to the expiration of two hundred twenty (220)
days from the Closing Date and such determination and any required adjustments resulting therefrom
shall be final and binding on all the Parties hereto. The fees and expenses of the Accounting Firm
shall be allocated between and paid by the Buyer and/or the Stockholder, respectively, based upon
the percentage which the portion of the contested amount not awarded to each Party bears to the
amount actually contested by such Party, as determined by the Accounting Firm.
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(e) If the Closing Adjustment as finally determined in accordance with the provisions of this
Section 1.4 is in the Buyer’s favor, the amount thereof shall be paid as an adjustment to the
Purchase Price by the Stockholder to the Buyer by wire transfer in immediately available funds
within seven (7) days after such determination. If the Closing Adjustment as finally determined in
accordance with the provisions of this Section 1.4 is in the Stockholder’s favor, the amount
thereof shall be paid as an adjustment to the Purchase Price by the Buyer to the Stockholder by
wire transfer in immediately available funds within seven (7) days after such determination. If
the Stockholder does not so pay to the Buyer by the due date any amounts due under this Section
1.4, such amounts due to the Buyer shall be deemed Damages under ARTICLE IX hereof, which Damages
together with interest at a rate of nine percent (9%) per annum as of such due date shall be paid
in full without regard to the limitations set forth in Section 9.4 and Section 9.5 hereof. If the
Buyer does not pay any amount owed to the Stockholder under this Section 1.4 by the due date, then
such amount will begin to accrue interest at a rate of nine percent (9%) per annum as of such due
date.
1.5 Transaction Bonuses. Immediately prior to and contingent upon the Closing, the
Company shall pay to each employee selected by the Parties a bonus payment in an amount agreed upon
by the Parties, less applicable Taxes required to be withheld with respect to such payments, and
shall contribute to the Company’s SEP-XXX Plan on behalf of each such Person an amount equal to
twenty-five percent (25%) of such bonus payment (each amount paid to and contributed on behalf of a
Person, the “Bonus Payment”); provided that prior to receiving his or her Bonus Payment,
each such employee shall be required to deliver to the Company an executed Bonus Award Letter and
fully comply with the terms for payment set forth therein. The Seller Parties may, after
consultation with the Buyer, make changes to the Persons or amounts previously agreed upon by the
Parties prior to the Closing Date; provided that such changes shall not result in a Transaction
Bonus Amount (as defined below) of less than One Million Dollars ($1,000,000.00). The term
“Transaction Bonus Amount” shall mean the aggregate amount of all Bonus Payments paid and
contributed pursuant to this Section 1.5, plus all employee withholding Taxes and all employer
payroll Taxes thereon. Pursuant to the Flow of Funds Memorandum, the Company may direct the Buyer
to pay, on behalf of the Company, the Bonus Payments pursuant to this Section 1.5.
1.6 Stock Options and Warrants. The Company shall have terminated and canceled any
options to purchase Company Common Stock (the “Company Stock Options”) and any warrants to
purchase Company Common Stock (the “Company Warrants”). The Buyer shall not assume any
options or warrants and nothing in this Agreement requires the Buyer to replace any options or
warrants with comparable options or warrants. The Company shall have terminated all stock option
plans and other stock or equity-related plans of the Company, and neither the Buyer nor the Company
shall have any liability or obligation thereunder. No adjustment shall be made in the Purchase
Price paid in the Stock Purchase as a result of any cash proceeds received by the Company pursuant
to the exercise of options, warrants or other rights to acquire or receive Company Common Stock or
of stock appreciation, phantom stock, profit participation or other similar rights with respect
thereto.
1.7 Withholding of Tax. The Buyer and its Affiliates shall be entitled (but not
obligated) to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement such amounts as the Buyer (or any Affiliate thereof) shall determine in good faith
that they are required to deduct and withhold with respect to the making of such payment under
the Code or any provision of federal, state, local or foreign Tax Law. To the extent that amounts
are so withheld by the Buyer or any of its Affiliates, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the payee with respect to which such amount
was withheld.
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ARTICLE II
CLOSING
CLOSING
2.1 Time and Place of the Closing. The Closing shall take place at the offices of
Xxxxxxxx & Xxxxxxxx LLP, 0000 Xxxxxx Xxxxxxxxx, Xxxxx 000, XxXxxx, Xxxxxxxx, as soon as practicable
following the satisfaction or waiver of the conditions set forth in ARTICLE VII and ARTICLE VIII
hereof and in any event within three (3) Business Days thereafter, or on such other date or at such
other place as the Buyer and the Stockholder may mutually determine.
2.2 Deliveries. At the time of the Closing, (a) each of the Seller Parties shall
deliver to the Buyer the various certificates, instruments and documents referred to in Section 7.8
below and (b) the Buyer shall deliver to the Stockholder the Closing Payment as set forth in
Section 1.2(b) above and the certificates, instruments and documents referred to in Section 8.4
below).
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
As a material inducement to the Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company and the Stockholder represent and warrant to the
Buyer, as of the date hereof and as of the Closing Date, as follows:
3.1 Organization and Corporate Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida and the Company is
qualified or registered to do business and in good standing in each jurisdiction where the nature
of its activities makes such qualification or registration necessary. All such jurisdictions in
which the Company is qualified are set forth on Schedule 3.1. The Company has full
corporate power and authority necessary to own and operate its properties, to conduct its business
as now conducted and presently proposed to be conducted and to perform its obligations under the
Contracts to which it is a party or by which it is bound. The copies of the articles of
incorporation and bylaws of the Company, which have been delivered to the Buyer, reflect all
amendments made thereto at any time prior to the date of this Agreement and are correct and
complete. The books of account, stock records, minute books and other records of the Company are
accurate, up-to-date and complete, and have been maintained in accordance with all applicable Laws.
There have been no meetings or other proceedings or actions, resolutions or consents of the
shareholders of the Company or the board of directors of the Company that are not fully reflected
in such minutes or other records. The Company is not in default under or in violation of any
provision of its articles of incorporation or bylaws or any resolution adopted by the Company’s
shareholders or board of directors. The Company has not conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or
other name, other than the names in the jurisdictions set forth on Schedule 3.1.
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3.2 Authority for Agreement. The Company has full power, authority and legal right to
enter into and perform its obligations under this Agreement and the other documents contemplated
hereby to which the Company is or will be a party and to consummate the transactions contemplated
hereby and thereby. The board of directors of the Company has unanimously authorized the
execution, delivery and performance of this Agreement and the other documents contemplated hereby
and the consummation of the transactions contemplated hereby and thereby. No other corporate
proceedings on the part of the Company, or any shareholder of the Company, are, or will be,
necessary to approve and authorize the execution, delivery and performance of this Agreement and
the other documents contemplated hereby and the consummation of the transactions contemplated
hereby and thereby. This Agreement and the other documents contemplated hereby have been duly
executed and delivered by the Company and are legal, valid and binding obligations of the Company,
enforceable against it in accordance with their respective terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights in general and general principles of equity.
3.3 No Violation to Result. Except as set forth on Schedule 3.3, the
execution, delivery and performance by the Company of this Agreement and the other documents
contemplated hereby and the consummation by the Company of the transactions contemplated hereby and
thereby and the fulfillment by the Company of the terms hereof and thereof, do not and will not,
directly or indirectly (with or without notice or lapse of time, or both): (a) violate, breach,
conflict with, constitute a default under, accelerate or permit the acceleration of the performance
required by (i) any of the terms of the articles of incorporation or bylaws of the Company or any
resolution adopted by the board of directors of the Company or shareholders of the Company, or (ii)
any Contract to which the Company is a party or by which it or its assets are bound, or (iii) any
Law or other legal requirement of any Governmental Authority applicable to the Company; (b) give
any Person the right to declare a default or exercise any remedy or accelerate performance or
maturity under any Contract or cancel, terminate or modify any Contract; (c) give any Governmental
Authority or other Person the right to challenge any of the transactions contemplated by this
Agreement; (d) give any Governmental Authority the right to revoke, withdraw, suspend, cancel,
terminate or modify, any permit or license that is held by the Company or that otherwise is used
in, necessary for or relates to the Company’s business or to any of the assets owned or used by the
Company; or (e) result in the creation or imposition of any Encumbrance, possibility of
Encumbrance, or restriction in favor of any Person upon any of the Shares or any of the properties
or assets of the Company. Other than as set forth on Schedule 3.3, no notice to, filing
with, or consent of, any Person is necessary in connection with, and no “change of control”
provision in any Contract or otherwise is, or will be, triggered by, the authorization, approval,
execution, delivery or performance by the Company of this Agreement and the other documents
contemplated hereby or the consummation by the Company of the transactions contemplated hereby or
thereby. The Company has given all notices, made all filings and obtained all consents set forth
on Schedule 3.3 or will have done so prior to the Closing.
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3.4 Capitalization.
(a) The authorized capital stock of the Company consists of 1,000 shares of Company Common
Stock, of which 1,000 shares have been issued and are outstanding. There are no shares of capital
stock held in the Company’s treasury. The Stockholder is the sole record and beneficial owner of
the issued and outstanding shares of Company Common Stock. The Company’s only issuance of capital
stock or other equity securities was to the Stockholder, and the Company has never repurchased or
redeemed any shares of its capital stock or other equity securities.
(b) All of the issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and non-assessable. No restrictions on transfer,
repurchase option, right of redemption, preemptive rights, proxies, shareholder agreements, rights
of first refusal or other agreements or rights exist with respect to the shares of capital stock of
the Company, and no such rights arise by virtue of or in connection with the transactions
contemplated hereby; and to the extent permitted by Law, the Stockholder and the Company have
waived (or hereby waive) any and all such rights.
(c) There is no: (i) outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire or sell or issue, or otherwise relating to, any shares of the
capital stock of the Company; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock or other securities of
the Company; (iii) Contract under which the Company is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) condition or circumstance
that may give rise to or provide a basis for the assertion of a claim by any Person to the effect
that such Person is entitled to acquire or receive any shares of capital stock or other securities
of the Company. There are no outstanding stock appreciation, phantom stock, profit participation
or other similar rights with respect to the Company.
3.5 Financial Statements.
(a) Schedule 3.5(a) includes true, complete and correct copies of (i) the Year-End
Financials and (ii) the Interim Financials. Each of the Financial Statements (including in all
cases the notes thereto, if any) was prepared in accordance with the Company’s books and records
(which, in turn, are accurate and complete in all material respects), presents fairly the Company’s
financial condition and results of operations as of the times and for the periods referred to
therein, and has been prepared in accordance with GAAP consistently applied throughout and among
the periods indicated, except that the unaudited statements exclude the footnote disclosures and
other presentation items required by GAAP. During the periods covered by the Financial Statements
and since the Balance Sheet Date, there has been no material change in the Company’s accounting
policies. Except as disclosed therein or in Schedule 3.5(a), there are no special or
non-recurring items of income or expense during the periods covered by the Financial Statements and
the balance sheets included in the Financial Statements do not reflect any write-up or revaluation
increasing the book value of any assets. There have been no material transactions, individually or
in the aggregate, involving the business of the Company which properly should have been set forth
in the Financial Statements in accordance with GAAP and which have not been accurately so set
forth. Schedule 3.5(a) sets
forth a list of any off-balance sheet financing arrangements of the Company. Since December
31, 2007, the Company’s accounting firm has not informed the Company in writing that it has any
material questions, challenges or disagreements regarding or pertaining to the Company’s accounting
policies or practices. The Company has delivered to the Buyer copies of each management letter or
other letter delivered to the Company by its accounting firm in connection with the Financial
Statements or relating to any review by such accounting firm of the internal controls of the
Company.
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(b) Schedule 3.5(b)(i) provides an accurate and complete breakdown and aging of all
accounts receivable, notes receivable and other receivables of the Company as of the Balance Sheet
Date. Except as set forth on Schedule 3.5(b)(ii), (A) all existing accounts receivable of
the Company (including those accounts receivable reflected on the Balance Sheet that have not yet
been collected and those accounts receivable that have arisen since the Balance Sheet Date and have
not yet been collected) represent valid obligations of the customers of the Company arising from
bona fide transactions entered into in the ordinary course of business and (B) all such receivables
and all notes receivable and other receivables are current and are collectible in full according to
their respective terms, without any counterclaim or set off, when due (and in no event will be
collected later than one hundred twenty (120) days after the Closing Date). Except as disclosed on
Schedule 3.5(b)(iii), no Person has any Encumbrance on such receivables or any part
thereof, and no agreement for deduction, free goods, discount or other deferred price or quantity
adjustment shall have been made with respect to any such receivables.
(c) Schedule 3.5(c) identifies the revenues received from each customer of the Company
and from each other Person from whom the Company generated revenues in the fiscal year ended
December 31, 2009 and in the first six (6) months of 2010. Since the fiscal year ended December
31, 2009, there have not been any adverse changes in the business relationship of the Company with
any of its customers that, individually or in the aggregate, are material to the Company. Except
as set forth on Schedule 3.5(c), no customer of the Company has terminated or threatened to
terminate its relationship with the Company or has during the last twelve (12) months materially
decreased, limited or otherwise adversely changed the terms and conditions for the purchase of
goods or services from the Company, or threatened to do so, and no Seller Party knows of any
written or oral communication, fact, event or action that exists or has occurred that would
indicate that any customer of the Company would do so, whether as a result of the transactions
contemplated hereby or otherwise. To the knowledge of any Seller Party, no customer of the Company
is experiencing financial difficulties which could reasonably be expected to adversely affect full
and timely payment by any such customer under any Contract with the Company or of any amounts owed
to the Company.
(d) The Company maintains a system of accounting and internal controls and procedures as are
necessary to provide assurances that: (i) the financial records and financial statements are
complete and accurate in all material respects; (ii) transactions are executed with management’s
authorization; (iii) transactions are recorded as necessary to permit preparation of the financial
statements of the Company and to maintain accountability for the Company’s assets; (iv) access to
the Company’s assets is permitted only in accordance with management’s authorization; (v) the
reporting of the Company’s assets is compared with existing assets at regular intervals and
appropriate action is taken with respect to any differences; (vi) accounts, notes and other
receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and timely basis; and
(vii) material information regarding the operations of the Company and its financial condition is
accumulated and communicated to the Company’s management, including its principal executive and
financial officers. As of the date hereof and as of the Closing Date, there are no significant
deficiencies or material weaknesses in the design or operation of internal controls over financial
reporting that could reasonably be expected to adversely affect the Company’s ability to record,
process, summarize and report financial information, and there is no fraud that involves management
of the Company or the Stockholder.
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3.6 Liabilities. There are no Liabilities of the Company, other than: (a)
liabilities reflected on the Balance Sheet and not previously paid or discharged; (b) accounts
payable incurred after the Balance Sheet Date arising in the ordinary course of business and
consistent with past practice (none of which in either case results from, arises out of, relates
to, is in the nature of or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of Law); (c) liabilities that are listed on Schedule 3.6(a); (d)
future performance obligations under any Contracts; and (e) liabilities that in the aggregate do
not exceed Fifty Thousand Dollars ($50,000). The Company is not a guarantor or otherwise liable
for any Liabilities of any other Person other than endorsements for collection in the ordinary
course of business. Schedule 3.6(b) provides an accurate and complete breakdown and aging
as of the Balance Sheet Date of (x) all accounts payable of the Company, (y) all notes payable of
the Company and (z) all Indebtedness for Borrowed Money of the Company. The Company is not a party
to, and has no commitment to become a party to, (a) any Contract associated with off-balance sheet
financing, including any arrangement for the sale of receivables, (b) any hedging, derivatives or
similar Contract or arrangement or (c) any Contract pursuant to which the Company is obligated to
make any capital contribution or other investment in or loan to any Person.
3.7 Adverse Changes. Except as set forth on Schedule 3.7, since December 31,
2009, (a) the Company has operated its business in the ordinary course and consistent with past
practices and (b) the Company has not: (i) suffered a Material Adverse Effect or any effect, event
or change that individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect; (ii) become subject to any Liabilities, except Liabilities incurred in the ordinary
course of business of the Company; or (iii) taken any action, omitted any action or entered into
any agreement or understanding that, if taken, omitted or entered into during the period from the
date of this Agreement until the Closing Date, would constitute a breach of Section 6.2 hereof.
3.8 Employee Benefit Plans.
(a) A true, correct, and complete list of (i) each Benefit Plan is set forth on
Schedule 3.8(a)(i) and (ii) each ERISA Affiliate is set forth on
Schedule 3.8(a)(ii).
(b) There has been delivered to the Buyer, with respect to each Benefit Plan disclosed on
Schedule 3.8(a)(i), the following, to the extent applicable: (i) a copy of the annual
report (if required under ERISA) with respect to each such Benefit Plan for the last three (3)
years (including all schedules and attachments); (ii) a copy of the summary plan description,
together with each summary of material modification required under ERISA with respect to such
Benefit Plan; (iii) a true and complete copy of each written Benefit Plan and each written plan
document and all amendments thereto which have been adopted since the inception of such plan;
(iv) all trust agreements, insurance contracts, and similar instruments with respect to each funded
or insured Benefit Plan; and (v) any investment management agreements, administrative services
contracts or similar agreements that are in effect as of the date hereof relating to the ongoing
administration and investment of any Benefit Plan.
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(c) Each Benefit Plan (and each related trust, insurance contract or fund) has been maintained
and administered in accordance with its governing instruments and all applicable Laws in all
material respects, including, but not limited to, ERISA and the Code. All payments and
contributions by the Company, or any ERISA Affiliate thereof, required by any Benefit Plan, by any
collective bargaining agreement, or by applicable Law (including all employee and employer
contributions, insurance premiums, or intercompany charges) have been timely made when due in
amounts not in excess of the limits imposed by the terms of such Benefit Plan or applicable Law for
the relevant period to which such payments or contributions relate. All unpaid amounts
attributable to any such Benefit Plan for any period prior to the Closing Date are accrued on the
Company’s books and records in accordance with GAAP, and except for such accruals, the Company has
no Liability arising out of or in connection with the form or operation of the Benefit Plans or
benefits accrued thereunder on or prior to the Closing Date.
(d) Each Benefit Plan (i) intended to be qualified under Section 401(a) of the Code, has
received and is entitled to rely upon a favorable determination or opinion letter from the IRS
regarding its qualification thereunder, or (ii) intended to be qualified and exempt from tax under
Section 408(k) of the Code is either set forth in a prototype plan document as to which an IRS
opinion letter is available, or was adopted by completion of Form 5305-SEP for which no IRS opinion
letter is available, and, in each case, to the knowledge of any Seller Party, nothing has occurred
that could reasonably be expected to adversely affect such determination or opinion or cause such
Benefit Plan to lose its tax-exempt status. All amendments required to maintain each such Benefit
Plan’s compliance with applicable Law, including the Economic Growth and Tax Relief Reconciliation
Act of 2001 and subsequent legislation or administrative requirements which have subsequently
become effective through the date hereof, have been timely adopted and implemented, as applicable.
No such Benefit Plan currently holds or within the past five years has held securities of the
Company, or any ERISA Affiliate. No such Benefit Plan has ever been merged with or accepted Code
Section 414(l) transfers from another employee pension benefit plan (within the meaning of Section
3(2) of ERISA).
(e) With respect to each applicable Benefit Plan: (i) to the knowledge of any Seller Party, no
non-exempt “prohibited transaction,” within the meaning of Section 4975 of the Code or Section 406
of ERISA, has occurred; (ii) there are no actions, suits or claims pending, or, to the knowledge of
any Seller Party, threatened or anticipated (other than routine claims for benefits) against any
such Benefit Plan or fiduciary thereto or against the assets of any such Benefit Plan; (iii) there
are no audits, inquiries or proceedings pending or, to the knowledge of any Seller Party,
threatened by any Governmental Authority with respect to any such Benefit Plan; (iv) no matters are
currently pending with respect to any such Benefit Plan under the Employee Plans Compliance
Resolution System maintained by the IRS or any similar program maintained by any other Governmental
Authority; and (v) there has been no breach of fiduciary duty (including violations under Part 4 of
Title I of ERISA) which has resulted or could
reasonably be expected to result in a material liability to the Company, its ERISA Affiliates
or any of their respective employees.
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(f) Neither the Company nor any ERISA Affiliate has ever sponsored, maintained, administered,
contributed to, had any obligation to contribute to, or incurred any other liability under or with
respect to any Benefit Plan which provides health, life or other coverage for former directors,
officers or employees (or any spouse or former spouse or other dependent thereof), other than
benefits required by Section 4980B of the Code, Part 6 of Title I of ERISA, or similar provisions
of state law.
(g) Benefits under each Benefit Plan that is an “employee welfare benefit plan” (within the
meaning of Section 3(1) of ERISA), with the exception of any flexible spending arrangements subject
to Sections 125 and 105 of the Code, are provided exclusively through insurance contracts or
policies issued by an insurance company, health maintenance organization, or similar organization
unrelated to the Company, or any ERISA Affiliate, the premiums for which are paid directly by the
Company or any ERISA Affiliate thereof, from its general assets or partly from its general assets
and partly from contributions by its employees. No insurance policy or contract relating to any
such Benefit Plan requires or permits a retroactive increase in premiums or payments due
thereunder.
(h) Each Benefit Plan, to the extent applicable, is in compliance, in all material respects,
with the continuation coverage requirements of Section 4980B of the Code, Section 601 through 608
of ERISA, the Americans with Disabilities Act of 1990, as amended, and the regulations thereunder,
the Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations
thereunder (including, but not limited to, 45 CFR Parts 142, 160, 162 and 164), the Womens Health
and Cancer Rights Act of 1998, the Mental Health Parity Act of 1996, the Newborns’ and Mothers’
Health Protection Act of 1996 and the Family Medical Leave Act of 1993, as amended, and the
regulations thereunder, as such requirements affect the Company and any ERISA Affiliate thereof and
their respective employees. There are no outstanding, uncorrected violations under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, with respect to any of the
Benefit Plans, covered employees or qualified beneficiaries that would be reasonably likely to
result in a material Liability to the Company or any ERISA Affiliate thereof, or the Buyer.
(i) No Benefit Plan is, and neither the Company nor any ERISA Affiliate thereof currently
maintains, contributes to or participates in, nor does the Company or any ERISA Affiliate thereof
have any obligation to maintain, contribute to or otherwise participate in, or have any liability
or other obligation (whether accrued, absolute, contingent or otherwise) under, any (i)
“multiemployer plan” (within the meaning of Section 3(37) of ERISA), (ii) “multiple employer plan”
(within the meaning of Section 413(c) of the Code), (iii) “multiple employer welfare arrangement”
(within the meaning of Section 3(40) of ERISA), or (iv) plan that is subject to the provisions of
Title IV of ERISA or Section 412 of the Code. No Benefit Plan is maintained through a human
resources and benefits outsourcing entity, professional employer organization, or other similar
vendor or provider.
(j) All reports, forms and other documents required to be filed with any Governmental
Authority or furnished to employees with respect to any Benefit Plan (including,
without limitation, summary plan descriptions, Forms 5500 and summary annual reports) have
been timely filed or furnished and are accurate in all material respects.
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(k) Each Benefit Plan can be amended, terminated or otherwise discontinued after the Closing
Date in accordance with its terms, with no more than thirty (30) days advance notice without
liability to the Company, any ERISA Affiliate thereof or the Buyer (except for benefits protected
under Section 411(d) of the Code or Section 204(g) of ERISA and other than ordinary administration
expenses typically incurred in a termination event). None of the Benefit Plans will be subject to
any surrender fees, market value adjustment, deferred sales charges, commissions, or other fees or
charges upon termination other than the normal and reasonable administrative fees associated with
their amendment, transfer or termination.
(l) The execution and delivery by the Company of this Agreement and the other documents
contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, will
not conflict with or result in any violation of or default under (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation, modification or
acceleration of any obligation or loss of any benefit under any Benefit Plan, trust or loan that
will or may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee.
(m) Neither the Company nor any of its ERISA Affiliates has become obligated to make, or will
as a result of any event connected directly or indirectly with any transaction contemplated herein
become obligated to make, any “excess parachute payment” as defined in Section 280G of the Code
(without regard to Sections 280G(b)(4) and 280G(b)(5) thereof) nor any payment that would not be
deductible by reason of Section 162(m) of the Code. There is no written or unwritten agreement,
plan, arrangement or other contract by which the Company or any of its ERISA Affiliates are bound
to compensate any individual for excise Taxes paid pursuant to Section 4999 of the Code.
(n) Neither the Company nor any ERISA Affiliate thereof is, or on or after January 1, 2005 has
been, a party to, or otherwise obligated under any Benefit Plan, employment agreement, or other
contract, plan, program, agreement, or arrangement that is a “nonqualified deferred compensation
plan” (within the meaning of Section 409A(d)(1) of the Code and the regulations and other guidance
issued thereunder).
(o) Neither the Company nor any ERISA Affiliate thereof sponsors, maintains or contributes to,
or is obligated to contribute to, any material employment, severance or similar contract or
arrangement (whether or not written) or any material plan, policy, fund, program or arrangement or
contract, including multiemployer plan, retirement savings, superannuation, pension, severance,
employment, change-in-control, fringe benefit, bonus, incentive, deferred compensation and any
other employee benefit plan, agreement, program, policy or other arrangement that is maintained
outside the jurisdiction of the United States or covers any “nonresident aliens” within the meaning
of Section 4(b)(4) of ERISA.
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3.9 Employee Matters.
(a) Schedule 3.9(a)(i) contains a complete and correct list of all employees of the
Company (the “Company Employees”), their respective titles as of the date hereof, the 2009
and 2010 compensation paid or payable to each such employee (as of the date hereof), the date and
amount of each such employee’s most recent salary increase, the date of employment of each such
employee and the accrued vacation time and sick leave or other paid time off of each such employee.
Except as set forth on Schedule 3.9(a)(ii), (i) the terms of employment or engagement of
all directors, officers, Company Employees, agents, consultants and professional advisers of the
Company are such that their employment or engagement may be terminated at will with notice given at
any time and without Liability for payment of compensation or damages, (ii) the Company has paid
in full to all Company Employees all wages, salaries, commissions, bonuses and other compensation
due to such employees and there are no severance payments which are or could become payable by the
Company to any such Person under the terms of any oral or written agreement or commitment or any
Law, custom, trade or practice, (iii) there are no other agreements, contracts or commitments, oral
or written, between the Company and any such Person, (iv) as of the date hereof, to the knowledge
of any Seller Party, no executive officer or material number of management level or senior
technical employees of the Company have any plans to terminate his, her or their employment or
relationship with the Company, and (v) to the knowledge of any Seller Party, there are no
agreements between any Company Employee and any other Person which would restrict, in any manner,
such Person’s ability to perform services for the Company or the Buyer or the right of any of them
to compete with any Person or the right of any of them to sell to or purchase from any other
Person.
(b) The Company has not, nor has it ever been, bound by or subject to (and none of its assets
or properties are bound by or subject to) any arrangement with any labor union or other collective
bargaining representative. No employee of the Company is or has ever been represented by any labor
union or covered by any collective bargaining agreement while employed by the Company and no
informal or formal efforts or campaign to establish such representation is in progress. With
respect to the Company, there is no pending or, to the knowledge of any Seller Party, threatened
(i) strike, slowdown, picketing, work stoppage or employee grievance process, (ii) material charge,
grievance proceeding or other claim against or affecting the Company relating to the alleged
violation of any law 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 Authority, (iii) employee or union
organizational activity or other labor or employment dispute against or affecting the Company, or
(iv) application for certification of a collective bargaining agent.
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(c) Except as set forth on Schedule 3.9(c), the Company is and has been in material
compliance with all applicable Laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, including, without limitation, any such Laws
regarding employment documentation, equal employment opportunities, fair employment practices,
plant closings and mass layoffs, sexual harassment, discrimination based on sex, race, disability,
health status, pregnancy, religion, national origin, age or other tortious conduct, workers’
compensation, family and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and the Company has not engaged in any
unfair labor practice. The Company is not, nor has it ever been, 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. The Company is and has been in compliance with its
obligations under the Worker Adjustment and Retraining Notification Act and similar applicable
Laws, and all other notification and bargaining obligations arising under any applicable agreement,
statute, or otherwise. All Persons classified by the Company as non-employees, including but not
limited to independent contractors, consultants, or otherwise, do satisfy and have satisfied the
requirements of law to be so classified, and the Company has fully and accurately reported its
compensation on IRS Forms 1099 when required to do so. The Company has no direct or indirect
liability, whether absolute or contingent, with respect to any misclassification of any Person as
an independent contractor rather than as an employee, or with respect to any employee leased from
another employer. No individual who has performed services for or on behalf of the Company and who
has been treated by the Company as a non-employee, whether as an independent contractor, consultant
or otherwise, is classifiable as a “leased employee” within the meaning of Section 414(n)(2) of the
Code with respect to the Company.
(d) No third party has claimed, or to the knowledge of any Seller Party, has reason to claim
that any Person employed by or affiliated with the Company (i) has violated or may be violating any
of the terms or conditions of his employment, non-competition, non-solicitation or non-disclosure
agreement with such third party, (ii) has or may have disclosed or utilized any trade secret or
proprietary information or documentation of such third party, or (iii) has interfered or may be
interfering in the employment relationship between such third party and any of its present or
former employees. To the knowledge of any Seller Party, no Person employed by or affiliated with
the Company has employed or has proposed to employ any trade secret or any information or
documentation proprietary to any former employer or violated any confidential relationship which
such Person may have had with any third party, in connection with the development, manufacture or
sale of any Product or proposed Product or the development or sale of any service or proposed
service of the Company.
(e) Schedule 3.9(e) lists all the Company Employees who are currently on leave
relating to work-related injuries and/or receiving disability benefits under any Benefit Plan.
Schedule 3.9(e) also lists all Company Employees who are currently on a leave of absence
(whether paid or unpaid), the reasons for the leave of absence, the expected return date, and
whether reinstatement of each Company Employee on a leave of absence is guaranteed by contract or
applicable Laws (including, without limitation, the Family and Medical Leave Act).
3.10 Taxes.
(a) Except as set forth on Schedule 3.10(a), the Company has filed (or has had filed
on its behalf) on a timely basis all Tax Returns it is required to have filed, and all such Tax
Returns are correct and complete in all material respects (including in all cases, with respect to
any Tax consequences of reasonable reliance on the accuracy of information included in such returns
in preparing subsequent returns). Except as set forth on Schedule 3.10(a), the Company has
not requested or been granted any extension of time within which to file any Tax Return, which Tax
Return has not since been filed.
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(b) Except as set forth on Schedule 3.10(b), all Taxes required to have been paid by
the Company (whether or not shown on any Tax Return) have been paid on a timely basis. There are
no Encumbrances for Taxes on any of the assets of the Company, that arose in connection with any
failure (or alleged failure) timely to pay any Tax.
(c) The Company has withheld and paid over all Taxes required to have been withheld and paid
over, and complied with all information reporting and backup withholding requirements, including
maintenance of required records thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. All Persons who have provided services to
the Company and have been classified by the Company as independent contractors for the purposes of
Tax withholding laws and laws applicable to employee benefits were properly so classified. The
Company has complied in all material respects with all sales Tax resale certificate exemption
requirements.
(d) No claim has ever been made or can reasonably be expected to be made by a Taxing Authority
in a jurisdiction where the Company does not currently file Tax Returns that the Company is or may
be subject to taxation (including obligations to withhold amounts in respect of Tax) by that
jurisdiction. Except as set forth on Schedule 3.10(d), the Company has not conducted
activities in any jurisdiction that will require it to pay Taxes or file Tax Returns in such
jurisdiction of a type that it had not filed in the most recently ended preceding taxable period
(as reflected on Schedule 3.10(e)) for which Tax or a Tax Return of such type would be due.
(e) Schedule 3.10(e) identifies all Tax Returns that the Company has filed for taxable
periods ending after, or transactions occurring after, January 1, 2002 and the taxable period
covered by each such Tax Return, and identifies those Tax Returns or taxable periods that have been
audited or are currently the subject of an audit by a Taxing Authority, and all income Tax Returns
of the Company as to which the statute of limitations for assessment of additional Tax for the
taxable period covered thereby has not yet expired. The Company has delivered to the Buyer
complete and accurate copies of all of the following materials:
(i) all income Tax Returns filed by the Company that relate to taxable periods beginning on or
after January 1, 2006;
(ii) all examination reports relating to Taxes or Tax Returns of the Company issued since
January 1, 2006 as a result of audits, examinations or asserted failures to file Tax Returns or pay
Taxes;
(iii) all statements of Taxes assessed against or agreed to by the Company or any of its
shareholders with respect to the Company since January 1, 2006 that were not shown on Tax Returns
filed for the relevant taxable period by the Company or any of its shareholders with respect to the
Company before such assessment or agreement and all related correspondence;
(iv) all written rulings from, and written agreements with, any Taxing Authority relating to
Taxes of the Company or any of its shareholders with respect to the Company that were either
received since January 1, 2006 or would have continuing effect in the
determination of Tax for any taxable period for which a Tax Return has not yet been filed by
the Company or any of its shareholders with respect to the Company, and any request for issuance of
any ruling from a Taxing Authority on behalf of the Company since January 1, 2006 (regardless of
whether the requested ruling was issued);
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(v) all elections relating to Taxes of the Company that have been filed by or on behalf of the
Company with any Taxing Authority (other than elections that are included in or apparent from the
Tax Returns referred to in (i) above) that would have continuing effect in the determination of Tax
for any taxable period for which a Tax Return has not yet been filed by the Company;
(vi) all Tax opinions relating to and in the audit files of the Company relating to taxable
periods for which the statute of limitations on assessment has not yet expired; and
(vii) to the extent requested in writing by the Buyer, any other document relating to Taxes or
Tax Returns of the Company.
(f) Except as set forth on Schedule 3.10(e), there is no audit or other proceeding
presently pending or threatened with regard to any Tax Liability or Tax Return of the Company.
Except as set forth on Schedule 3.10(f), there are no existing circumstances (including
issues raised in audits of prior taxable periods by any Taxing Authority) that reasonably may be
expected to result in the assertion of any claim by any Taxing Authority with respect to any
taxable period for which Tax Returns are required to have been filed or Tax is required to have
been paid. Except as set forth on Schedule 3.10(f), no issue has been raised by any Taxing
Authority in writing (or to the knowledge of any Seller Party, otherwise) with respect to Taxes of
the Company in any prior examination that, by application of the same or similar principles, could
reasonably be expected to result in assertion of a Tax underpayment for any other taxable period of
the Company. Except as set forth on Schedule 3.10(f), neither the Company nor any Person
on behalf of the Company has waived any statute of limitations or agreed to any extension of time
that has continuing effect with respect to assessment or collection of any Tax for which the
Company may be held liable. Except as set forth on Schedule 3.10(f), there is not
currently in effect any power of attorney authorizing any Person to act on behalf of the Company,
or receive information relating to the Company, with respect to any Tax matter (other than
authorizations to contact Tax Return preparers included in Tax Returns provided pursuant to Section
3.10(e)).
(g) The Company has not been a beneficiary of or participated in any “reportable transaction”
within the meaning of Treasury Regulations Section 1.6011-4(b)(1) that was, is, or to the knowledge
of any Seller Party will ever be, required to be disclosed under Treasury Regulations Section
1.6011-4. No Tax Return filed by or on behalf of the Company has contained a disclosure statement
under Section 6662 of the Code (or any similar provision of Law), and no Tax Return has been filed
by or on behalf of the Company with respect to which the preparer of such Tax Return advised
consideration of inclusion of such a disclosure, which disclosure was not made.
- 16 -
(h) The Company is not (nor has it ever been) a party to any Tax sharing agreement, Tax
indemnity agreement or similar agreement, and the Company has never assumed the Tax Liability of
any other Person by Contract. The Company is not (nor has it ever been) a member of an affiliated
group (within the meaning of Section 1504(a) of the Code) or similar group of entities with which
the Company joined, or was or may be required to join, for any taxable period in making a
consolidated federal income Tax Return or other Tax Return in which Tax Liability was or would be
computed on a consolidated, combined, unitary or similar basis, and the Company does not have, nor
has it ever had, a relationship to any other Person that would cause it to be liable for Tax
Liability of such other Person, including, without limitation, Tax payable by reason of Contract,
assumption, transferee liability, operation of Law, or Treasury Regulations Section 1.1502-6(a) (or
any predecessor or successor thereof or any analogous or similar provision of Law).
(i) The Company has not been a United States real property holding corporation within the
meaning of Code Section 892(c)(2) at any time during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(j) The Company has not been either a “distributing corporation” or a “controlled corporation”
within the meaning of Section 355(a)(1)(A) of the Code in a distribution qualifying (or intended to
qualify) under Section 355 of the Code (or so much of Section 356 as relates to Section 355).
(k) The Company has not participated in an international boycott as defined in Code Section
999.
(l) Except as set forth on Schedule 3.10(l), the Company has not made or agreed to
make, and is not required to make, any change in method of accounting previously used by it in any
Tax Return filed by the Company, which change in method would require the Company to make a
positive adjustment to its income pursuant to Section 481(a) of the Code (or any similar provision)
on any Tax Return for any taxable period for which the Company has not yet filed a Tax Return; and
neither is there any application pending with any Taxing Authority requesting permission for the
Company to make any change in any accounting method that would require such an adjustment, nor has
the Company received any notice that a Taxing Authority proposes to require a change in method of
accounting used in any Tax Return previously filed by the Company that would require such an
adjustment.
(m) The Company has not taken any action not in accordance with past practice that would have
the effect of deferring a measure of Tax from a period (or portion thereof) ending on or before the
Closing Date to a period (or portion thereof) beginning after the Closing Date. The Company has no
deferred income or Liability for Taxes arising out of any transaction, except to the extent
adequately reserved for on the balance sheet included in the Interim Financials, including, without
limitation, any (i) disposition of any property in a transaction accounted for under the
installment method pursuant to Section 453 of the Code, (ii) use of the long-term contract method
of accounting, or (iii) receipt of any prepaid amount for goods or services on or before the
Closing Date.
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(n) The Company does not have a “permanent establishment” in any foreign country, as defined
in any applicable Tax treaty or convention between the United States of America and such foreign
country, and has not otherwise taken steps or conducted business operations that have exposed, or
will expose, it to the taxing jurisdiction of a foreign country. The Company is in compliance with
the terms and conditions of any applicable Tax exemptions, Tax agreements or Tax orders of any
Taxing Authority to which it may be subject or which it may have claimed, and the transactions
contemplated by this Agreement will not have any adverse effect on such compliance.
(o) No property owned by the Company is (i) property required to be treated as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of
1954, as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(ii) “tax-exempt use property” within the meaning of Section 168(h)(1) of the Code, (iii)
“tax-exempt bond financed property” within the meaning of Section 168(g) of the Code or (iv) used
predominately outside the United States within the meaning of Section 168(g)(1)(A) of the Code.
(p) The Company is not a party to any agreement under which it is treated as a lessor or
lessee of “limited use property” within the meaning of Rev. Proc. 2001-28.
(q) The Company has not, (i) acquired assets from another Person (and has not been treated or
required to be treated for Tax purposes as acquiring assets of a Person by reason of change in Tax
status of such Person) in a transaction in which the Company’s federal income Tax basis for the
acquired assets was required to have been determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of such transferring Person or
(ii) become a successor to any Person by reason of any acquisition of a substantial part of the
assets of another Person, whether by Contract or by operation of Law pursuant to a merger or
consolidation or similar transaction.
(r) The Company (i) has never been a party to any joint venture, partnership or other
agreement or arrangement that was or is treated or required to be treated as a partnership for
federal income Tax purposes and (ii) has never owned any interest in an entity that either was or
is treated or required to be treated as an entity disregarded as separate from its owner for
federal Tax purposes or is an entity as to which an election pursuant to Treasury Regulations
Section 301.7701-3 has been made.
3.11 Property.
(a) The Company owns no real property. Schedule 3.11(a) sets forth an accurate and
complete list of all real property leased by the Company or to which the Company may have any
leasehold rights (collectively, the “Facilities”). True, complete and correct copies of
all leases of real property listed on Schedule 3.11(a) have been delivered to the Buyer.
Except as otherwise disclosed on Schedule 3.11(a), no Person other than the owner of such
real property and the Company, as applicable, has any rights (including rights arising under an
installment contract, option to purchase, easement, right-of-way or otherwise) with respect to the
Facilities or any part thereof. All leases set forth on Schedule 3.11(a) are in full force
and effect and
constitute valid and binding agreements of the Company and the other party or parties thereto
in accordance with their respective terms.
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(b) Schedule 3.11(b) sets forth an accurate list of all owned and leased personal
property included on the Balance Sheet and all other personal property owned or leased by the
Company (i) as of the Balance Sheet Date, or (ii) acquired since the Balance Sheet Date, in each
case valued in excess of Five Thousand Dollars ($5,000), including an indication as to which assets
are currently owned, or were formerly owned, by any current or former shareholders or Affiliates of
the Company. True, complete and correct copies of all leases of personal property and equipment
listed on Schedule 3.11(b) have been delivered to the Buyer. All of the personal property
and equipment listed on Schedule 3.11(b) is in good working order and condition, ordinary
wear and tear excepted. All personal property and equipment used by the Company is either owned by
the Company or leased under an agreement listed on Schedule 3.11(b). All leases set forth
on Schedule 3.11(b) are in full force and effect and constitute valid and binding
agreements of the Company and the other party or parties thereto in accordance with their
respective terms.
(c) The Company has good and marketable title to all personal property, equipment, Contracts,
Intellectual Property rights and other rights, instruments, privileges and other assets, whether
personal, tangible or intangible, that the Company purports to own, including the assets listed on
Schedule 3.11(b), the assets reflected on the Balance Sheet, and the assets acquired by the
Company since the Balance Sheet Date, all of which are free and clear of any and all Encumbrances.
The Company’s assets, taken together, are adequate and sufficient for the operation of its business
as it is being currently conducted. There are no facts or conditions affecting the Company’s
assets which could, individually or in the aggregate, reasonably be expected to interfere in any
material respect with the use, occupancy or operation thereof as currently used, occupied or
operated by the Company, or their adequacy for such use.
(d) All inventory of the Company, whether or not reflected on the Balance Sheet, 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 on the Balance Sheet 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 relation to the present
circumstances of the Company or the requirements of its business.
3.12 Litigation. Except as set forth on Schedule 3.12, there is no Proceeding
pending or, to the knowledge of any Seller Party, threatened against or affecting the Company or
their assets before any court, agency, authority or arbitration tribunal. Except as set forth on
Schedule 3.12, the Company has not received any opinion or legal advice in writing to the
effect that it is exposed from a legal standpoint to any Liability or disadvantage that may be
material to the business of the Company as previously or presently conducted or as presently
proposed to be conducted. To the knowledge of any Seller Party and except as disclosed on
Schedule 3.12, there are no facts that would likely result in any such Proceeding. Neither
the Company nor any of its officers or other employees is subject to or in default with respect to
any notice, order, writ, injunction or decree of any Governmental Authority or arbitration
tribunal.
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3.13 Compliance with Laws. Except as set forth on Schedule 3.13(a), the
Company has complied in all material respects at all times and is in compliance in all material
respects with all Laws and other requirements and policies applicable to the Company and imposed by
any Governmental Authority, including, but not limited to, the False Claims Act, the anti-fraud
provisions of the Contract Disputes Act, the Anti-Kickback Act, the Federal Election Campaign Act,
the Xxxxxxx Act, the Xxxxxxx Act, the Truth in Negotiations Act, the Services Contract Act, the
Procurement Integrity Act, the Xxxx Amendment (31 U.S.C. § 1352), the Arms Export Control Act, the
Export Administration Act of 1979, as amended and implemented under the International Emergency
Economic Powers Act or otherwise, the Laws under the administration of the Office of Foreign Asset
Control, and any and all applicable privacy Laws. Neither the Company nor the Stockholder, nor any
of the employees, partners, principals, agents or assignees of the Company have committed (or taken
any action to promote or conceal) any violation of the Foreign Corrupt Practices Act, 15 U.S.C.
sections 78dd-1, -2, or any equivalent foreign Law or otherwise paid or made any bribe, illegal
rebate, payoff, influence payment, kickback or other unlawful payment. The Company has all
licenses, permits, approvals, qualifications or the like, from any Governmental Authority or any
Person used in, necessary for or related to the conduct of its business as currently conducted, all
such items are in full force and effect and the Company is and has at all times been in material
compliance with the terms thereof. Schedule 3.13(b)(i) sets forth all licenses and permits
held by the Company and designates such licenses and permits which terminate or become renewable at
any time prior to the first anniversary of the date of this Agreement. Except as set forth on
Schedule 3.13(b)(ii), to the knowledge of any Seller Party, there are no facts or
circumstances in existence which are reasonably likely to prevent the Company from renewing each
such license and permit. Except as set forth on Schedule 3.13(c), the Company has not
received any allegations from employees, consultants or independent contractors with respect to any
alleged act or omission arising under or relating to any noncompliance with Law, and has not
conducted or initiated any internal investigation or made a voluntary or involuntary disclosure to
any Governmental Authority with respect to any alleged act or omission arising under or relating to
any noncompliance with Law. No Seller Party has received any notice or citation for any actual or
potential noncompliance with any of the foregoing in this Section 3.13, and, to the knowledge of
any Seller Party and except as set forth on Schedule 3.13(a), there exists no condition,
situation or circumstance, nor has there existed such a condition, situation or circumstance,
which, after notice or lapse of time, or both, would constitute noncompliance with or give rise to
future Liability with regard to any of the foregoing in this Section 3.13.
- 20 -
3.14 Government Contracts and Bids.
(a) Schedule 3.14(a)(i) lists all: (i) Government Contracts the period of performance
of which has not yet expired or terminated and for which final payment has not yet been received
and there is a reasonable likelihood of payment or financial liability greater than Fifty Thousand
Dollars ($50,000) (the “Current Government Contracts”); (ii) quotations, bids and proposals
for awards of new Government Contracts made by the Company for which no award has been made and for
which the Company believes there is a reasonable prospect that such an award to the Company may yet
be made (the “Government Contract Bids”); and (iii) Government Contracts pursuant to which
the Company is currently experiencing or is reasonably likely to experience cost, schedule,
technical or quality problems that could result in
claims against the Company (or its successors in interest) in an amount of Fifty Thousand
Dollars ($50,000) or more by a Governmental Authority, a prime contractor or a higher-tier
subcontractor. With respect to each Current Government Contract, Schedule 3.14(a)(i)
accurately lists (A) the contract number, (B) the award date and (C) the contract end date.
Attached to Schedule 3.14(a)(i) is the “contract data sheet” for each Current Government
Contract listed on such Schedule 3.14(a)(i). With respect to each such Government Contract
Bid, Schedule 3.14(a)(i) accurately lists: (A) the request for proposal (RFP) number or,
if such Government Contract Bid is for a task order under a prime contract, the applicable prime
contract number; (B) the date of proposal submission; (C) the expected award date, if known;
(D) the estimated period of performance; and (E) the estimated value based on the proposal, if any.
The Company has delivered to the Buyer true and complete copies of all Current Government
Contracts and of all Government Contract Bids, including any and all amendments and other
modifications thereto, and has provided the Buyer with access to true and correct copies of all
documentation related thereto requested by the Buyer. Except as described in
Schedule 3.14(a)(ii), all of the Current Government Contracts were legally awarded, are
binding on the parties thereto, and are in full force and effect. Except as set forth on
Schedule 3.14(a)(iii), the Current Government Contracts (or, where applicable, the prime
Government Contracts under which the Current Government Contracts were awarded) are not currently
the subject of bid or award protest proceedings, and, to the knowledge of any Seller Party, no such
Current Government Contracts (or, where applicable, the prime Government Contracts under which the
Current Government Contracts were awarded) are reasonably likely to become the subject of bid or
award protest proceedings, and no Person has notified the Company in writing that any Governmental
Authority, prime contractor or higher-tier subcontractor under a Government Contract intends to
seek the Company’s agreement to lower rates under any of the Government Contracts or Government
Contract Bids, including, without limitation, any task order under any Government Contract Bids.
(b) Except as set forth on Schedule 3.14(b), (i) the Company has fully complied with
all terms and conditions of each Government Contract and Government Contract Bid to which it is a
party, and has performed in all material respects all obligations required to be performed by it
thereunder, (ii) the Company has complied with all statutory and regulatory requirements,
including, without limitation, the Armed Services Procurement Act, the Federal Procurement and
Administrative Services Act, the Federal Acquisition Regulation, any applicable agency-specific
acquisition regulation and related cost principles and the Cost Accounting Standards, where and as
applicable to each of the Current Government Contracts and the Government Contract Bids, and (iii)
the representations, certifications and warranties made by the Company with respect to the
Government Contracts or Government Contract Bids were accurate as of their effective dates, and the
Company has fully complied with all such certifications. Except as set forth on
Schedule 3.14(b), the Company has not received a substantially adverse or negative
government past performance evaluation or rating that could reasonably be expected to adversely
affect the evaluation by the Governmental Authority or other potential customer of the Company’s
bids or proposals for future Government Contracts.
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(c) Except as set forth on Schedule 3.14(c), with respect to the Current Government
Contracts, no Governmental Authority, prime contractor or higher-tier subcontractor under a
Government Contract or any other Person has notified the Company of any
actual or alleged violation or breach of any statute, regulation, representation,
certification, disclosure obligation, contract term, condition, clause, provision or specification,
including, without limitation, the Procurement Integrity Act, the Service Contract Act, the Trade
Agreements Act and the Buy American Act.
(d) Except as set forth on Schedule 3.14(d), none of the Government Contracts or
Government Contract Bids are premised upon the Company’s small business status, small disadvantaged
business status, protégé status, or other preferential status, nor did any Governmental Authority
and, to the knowledge of any Seller Party, prime contractor or higher-tier subcontractor under a
Government Contract rely upon the Company’s small business status, small disadvantaged business
status, protégé status, or other preferential status in evaluating any of the Company’s quotations,
bids or proposals, or in making award of any Government Contract to the Company. Each
representation and/or certification made by the Company that it was a small business concern and/or
was qualified for other preferential status in each of its Government Contracts and Government
Contract Bids was current and accurate as of its effective date.
(e) Schedule 3.14(e) lists the Company’s current project charge codes, and with
respect to each such charge code, Schedule 3.14(e) accurately lists: (i) the customer’s
contract number corresponding to the charge code; (ii) the customer’s order number; (iii) the
Company’s internal project charge code number; (iv) the corresponding project name; (v) the end
date; (vi) inception to June 30, 2010 funding; (vii) inception to June 30, 2010 revenue received;
and (viii) payments due as of thirty (30) days or less prior to the date of this Agreement for work
previously performed and billed. Schedule 3.14(e) also indicates the basis for billing
with respect to the charge codes that represent fixed price task orders.
(f) The Company has taken no action and is not party to any litigation that could reasonably
be expected to give rise to (i) liability under the False Claims Act, (ii) a claim for price
adjustment under the Truth in Negotiations Act or (iii) any other request for a reduction in the
price of any Government Contracts, including, without limitation, claims based on actual or alleged
defective pricing or actual or alleged violations of price reduction clauses or provisions. There
exists no basis for a claim of any Liability of the Company by any Governmental Authority as a
result of defective cost and pricing data submitted to any Governmental Authority. The Company has
not received any written allegations from employees, consultants or independent contractors with
respect to any alleged act or omission arising under or relating to (i) liability under the False
Claims Act, (ii) a claim for price adjustment under the Truth in Negotiations Act, or (iii) any
other request for a reduction in the price of any Government Contracts, including, without
limitation, to claims based on actual or alleged defective pricing. The Company has not conducted
or initiated any internal investigation or made a voluntary or involuntary disclosure to any
Governmental Authority with respect to (i) liability under the False Claims Act, (ii) a claim for
price adjustment under the Truth in Negotiations Act, or (iii) any other request for a reduction in
the price of any Government Contracts, including, without limitation, to claims based on actual or
alleged defective pricing.
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(g) Except as described in Schedule 3.14(g): (i) the Company has not received any
written or oral show cause, cure, deficiency, default or similar notice relating to the Current
Government Contracts; (ii) no termination for default, cure notice or show cause notice has been
issued or threatened and remains unresolved with respect to any Government Contract or
Government Contract Bid, and no event, condition or omission has occurred or exists that would
constitute grounds for such action; (iii) no past performance evaluation received by the Company
with respect to any such Government Contract has set forth a default or other failure to perform
thereunder or termination or default thereof; (iv) there has not been any material withholding or
setoff; (v) all invoices and claims (including, without limitation, requests for progress payments
and provisional costs payments) submitted under each Government Contract were current, accurate and
complete in all material respects as of their submission date; and (vi) none of the execution,
delivery or performance of this Agreement and the other documents contemplated hereby does or will
conflict with or result in a breach of or default under any Government Contract or cause a
termination of any Government Contract due to loss of preferential status. The Company has not
received any written or oral notice terminating any of the Current Government Contracts for
convenience or indicating an intent to terminate any of the Current Government Contracts for
convenience.
(h) Except as set forth on Schedule 3.14(h), the Company has not received any written
or oral notice of any outstanding claims or contract disputes (excluding claims for payment in the
ordinary course) to which the Company is a party (i) relating to the Government Contracts or
Government Contract Bids and involving a Governmental Authority or any prime contractor,
higher-tier subcontractor, vendor or other third party, or (ii) relating to the Government
Contracts under the Contract Disputes Act or any other federal statute.
(i) Except as set forth on Schedule 3.14(i), none of the Company, the Affiliates of
the Company, the Stockholder or their respective managers, trustees, directors, officers or
employees in connection with the performance of their duties for or on behalf of the Company or an
Affiliate of the Company has been debarred, suspended or proposed for suspension or debarment from
bidding on any Government Contract, declared nonresponsible or ineligible or otherwise excluded
from participation in the award of any Government Contract, or for any reason listed on the List of
Parties Excluded from Federal Procurement and Non-procurement Programs. No debarment, suspension
or exclusion proceeding has been initiated against the Company, any Affiliate of the Company, the
Stockholder or any of their respective managers, trustees, directors, officers or employees in
connection with the performance of their duties for or on behalf of the Company or any Affiliate of
the Company. To the knowledge of any Seller Party, no circumstances exist that would warrant the
institution of suspension or debarment proceedings against the Company, any Affiliate of the
Company, the Stockholder or any of their respective managers, trustees, directors, officers or
employees in connection with the performance of their duties for or on behalf of the Company or any
Affiliate of the Company.
(j) No negative determination of responsibility has been issued against the Company since its
inception with respect to any quotation, bid or proposal for a Government Contract.
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(k) Except as described in Schedule 3.14(k), (i) since its inception, the Company has
not undergone and is not currently undergoing any audit, review, inspection, investigation, survey
or examination of records relating to any Government Contracts, (ii) the Company has not received
written notice of, and the Company has not undergone, any investigation or review relating to any
Government Contract, (iii) no such audit, review,
inspection, investigation, survey or examination of records is threatened or pending, (iv) the
Company has not received any official notice that it is or was being specifically audited or
investigated by the Government Accountability Office, the Defense Contract Audit Agency of the
United States Government (the “DCAA”), the U.S. Congress, any state or federal agency
Inspector General, the contracting officer with respect to any Government Contract, or the
Department of Justice (including any United States Attorney), and (v) the Company has not received
any written notice or otherwise become aware that any audit, review, inspection, investigation,
survey or examination of records described in Schedule 3.14(k), has revealed any fact,
occurrence or practice that could reasonably be expected to adversely affect the Company.
(l) The Company has not conducted any internal investigation or audit in connection with which
the Company has used any legal counsel, auditor, accountant or investigator. The Company has not
made any disclosure to any Governmental Authority or other customer or any prime contractor or
higher-tier subcontractor related to any suspected, alleged or possible violation of a contract
requirement, any apparent or alleged irregularity, misstatement or omission arising under or
relating to a Government Contract or Government Contract Bid, or any violation of Law or
regulation.
(m) Except as described in Schedule 3.14(m), the Company performs no activities under
Current Government Contracts, and has no other relationships with any other Person, that could
result in an “organizational conflict of interest” as defined in Subpart 9.5 of the Federal
Acquisition Regulation and agency supplements thereto, or Section 207 of the Weapon Systems Reform
Act of 2009.
(n) Except as set forth on Schedule 3.14(n), neither the Company nor any Affiliate of
the Company has engaged in or been charged with, or received or been advised in writing or orally
of any charge, investigation, claim or assertion of, nor has the Company or any Affiliate of the
Company, or any of their respective trustees, directors, officers or employees in their capacities
as such, been subject to any criminal indictment, lawsuit, subpoena, civil investigative demand,
discovery request, administrative proceeding, voluntary disclosure, claim, dispute, mediation or
arbitration with regard to, any material violation of any requirement pertaining to a Current
Government Contract or Government Contract Bid, including, without limitation, material violations
of any statutory or regulatory requirements or violations of any Laws relating thereto.
(o) The Company is not participating in any pending claim, and to the knowledge of any Seller
Party there is no potential claim, under the Contract Disputes Act against the United States
Government or any prime contractor, subcontractor or vendor arising under or relating to any
Government Contract or Government Contract Bid.
(p) All Indirect Cost rates are being billed consistent with DCAA-approved rates or
provisional rate agreements, to the extent DCAA-approved rates are applicable or required.
(q) The Company is in compliance with all applicable national security obligations, including,
without limitation, those specified in the National Industrial Security
Program Operating Manual, DOD 5220.22-M (January 1995), and any supplements, amendments or
revised editions thereof.
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(r) Except as set forth on Schedule 3.14(r), there are no events or omissions that
could reasonably be expected to result in (i) a claim against the Company by a Governmental
Authority or any prime contractor, subcontractor, vendor or other third party arising under or
relating to any Government Contract or Government Contract Bid, or (ii) a dispute between the
Company and a Governmental Authority or any prime contractor, subcontractor, vendor or other third
party arising under or relating to any Government Contract or Government Contract Bid.
(s) Except as set forth on Schedule 3.14(s), based upon the Company’s current contract
staff and cost structure (i) no Government Contract has incurred or will incur losses or cost
overruns and (ii) no Government Contract Bid or other bid, offer or proposal, will, if accepted or
entered into, obligate the Company to process, manufacture or deliver products or perform services
that are reasonably expected to incur, or currently project, losses or cost overruns. No payment
has been made by the Company or by a Person acting on the Company’s behalf to any Person (other
than to any bona fide employee or agent of the Company, as defined in subpart 3.4 of the Federal
Acquisition Regulation), which is or was contingent upon the award of any Government Contract or
which would otherwise be in violation of any applicable procurement law or regulation or any other
Laws. The Company is not subject to any “forward pricing” regulations.
(t) Except as set forth on Schedule 3.14(t), the Company has not assigned or otherwise
conveyed or transferred, or agreed to assign or otherwise convey or transfer, to any Person any
Government Contract or any account receivable relating thereto, whether as a security interest or
otherwise.
(u) Except as set forth on Schedule 3.14(u), no personal property, equipment or
fixtures are loaned, bailed or otherwise furnished to the Company by or on behalf of the United
States Government.
(v) No written claims, or claims threatened in writing, exist against the Company with respect
to express warranties and guarantees contained in Government Contracts on products or services
provided by the Company; and no such claims have been made against the Company. No amendment has
been made to any written warranty or guarantee contained in any Government Contract that could
reasonably be expected to result in an adverse effect on the Company. The Company has not taken
any action which could reasonably be expected to give any Person a right to make a claim under any
written warranty or guarantee contained in any Government Contract.
(w) Except to the extent prohibited by applicable Law, Schedule 3.14(w) sets forth all
facility security clearances held by the Company.
(x) Neither the Company nor any of the employees, officers or agents of the Company have
violated any legal, administrative or contractual restriction concerning the employment of (or
discussions concerning possible employment with) current or former officials
or employees of a state, local or federal government (regardless of the branch of government),
including, without limitation, the so-called “revolving door” restrictions set forth at 18 U.S.C. §
207.
- 25 -
(y) Neither the Company nor any of the employees, officers or agents of the Company have
committed (or taken any action to promote or conceal) any violation of the Foreign Corrupt
Xxxxxxxxx Xxx, 00 X.X.X. § 00xx-0, -0.
(x) All costs (both Direct Costs and Indirect Costs) charged to the Company pursuant to any
existing subcontract agreements are allowable in accordance with applicable cost accounting
standards. No incurred Direct Costs and/or Indirect Costs shall be disallowed for any period of
time prior to the Closing Date (except to the extent of any reserves or liabilities for such items
on the Closing Balance Sheet). All costs (both Direct Costs and/or Indirect Costs) that have been,
prior to Closing, charged to any Government Contract shall be allowable in accordance with
applicable cost accounting standards (except for costs properly charged to a reserve account or for
liabilities for cost adjustments appearing on the Balance Sheet or the Closing Balance Sheet).
(aa) The Company is in compliance with the Federal Acquisition Regulation ethical rules and
suspension/debarment regulations that went into effect on December 12, 2008 (the “FAR Ethics
Rules”). Except as set forth on Schedule 3.14(aa), the Company has not violated the
FAR Ethics Rules. There exist no facts or circumstances that, with the passage of time or the
giving of notice or both, would constitute a violation of the FAR Ethics Rules.
(bb) With respect to the multiple award schedule Government Contracts identified on
Schedule 3.14(bb), the Company: (a) has not at any time charged the U.S. government a price
higher than its commercial customers with respect to each such multiple award schedule Government
Contract; (b) has complied in all material respects with the notice and pricing requirements of the
Price Reduction clause in each such multiple award schedule Government Contract and, there are no
facts or circumstances that would reasonably be expected to result in a demand by the U.S.
Government for a refund based upon the Company’s failure to comply with the Price Reductions
clause, and (c) has complied in all material respects with all payment requirements of the
Industrial Funding Fee in each such multiple award schedule Government Contract and there are no
facts or circumstances that would reasonably be expected to result in a demand by the U.S.
Government for additional payment(s) based upon the Company’s failure to comply with the Industrial
Funding Fee payments.
(cc) The Company, and, to the knowledge of any Seller Party, each of its employees, has
complied in all material respects with all timekeeping/time recordation requirements of the
applicable Government Contracts, and the Company has no knowledge of any facts or circumstances
that would reasonably be expected to result in an investigation by the U.S. Government based upon
the Company’s failure to comply with such applicable timekeeping/time recordation requirements.
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3.15 Material Contracts.
(a) Schedule 3.15(a)(i) sets forth an accurate and complete list of each Material
Contract. The Company has provided the Buyer with a true, correct and complete copy of each
Contract required to be disclosed on Schedule 3.15(a)(i). No Contract has been cancelled
or, to the knowledge of any Seller Party, breached by the other party, and, to the knowledge of any
Seller Party, there is no anticipated breach by any other party to any Contract (with or without
notice or lapse of time, or both). Except as set forth on Schedule 3.15(a)(ii), the
Company has performed all the material obligations required to be performed by it in connection
with the Contracts and is not in default under or in breach of any Contract, and, to the knowledge
of any Seller Party, no event has occurred which with the passage of time or the giving of notice
or both would: (i) result in a default or breach under any Contract; (ii) give any Person the right
to declare a default or exercise any remedy under any Contract; (iii) give any Person the right to
accelerate the maturity or performance of any Contract, or (iv) give any Person the right to
cancel, terminate or materially modify any Contract. The Company has not waived any of its
material rights under any Contract and has no present expectation or intention of not fully
performing any obligation pursuant to any Contract. Each Contract is legal, valid, binding,
enforceable and in full force and effect, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar law affecting the enforcement
of creditors’ rights in general and general principles of equity, and shall continue as such
immediately following the consummation of the transactions contemplated hereby. Except for
Government Contracts identified on Schedule 3.14(s), no Contract obligates the Company to
process, manufacture or deliver products or perform services that are reasonably expected to result
in a loss to the Company upon completion of performance. Schedule 3.15(a)(i) contains an
accurate and complete description of all material terms of all oral Material Contracts.
(b) To the knowledge of any Seller Party, no Person is currently renegotiating, or has the
right to renegotiate, any amount paid or payable to the Company under any Contract or any other
term or provision of any Contract (other than modifications in the ordinary course of business that
would not, individually or in the aggregate, be material to the Company).
3.16 Environmental and Safety Matters. The Company has conducted its business at all
times in compliance with all applicable Environmental Laws. None of the properties currently or,
to the knowledge of any Seller Party, formerly owned, leased or operated by the Company contain any
Hazardous Substance in amounts exceeding the levels permitted by applicable Environmental Laws. No
Seller Party has received any notices, demand letters or requests for information from any
Governmental Authority or other Person, which have not heretofore been resolved with such
Governmental Authority or other Person, indicating that the Company may be in violation of, or
liable under, any Environmental Law. There are no Proceedings pending or, to the knowledge of any
Seller Party, threatened against the Company relating to any violation, or alleged violation, of
any Environmental Law. No reports have been filed, or are required to be filed, by the Company
concerning the Release of any Hazardous Substance or the threatened or actual violation of any
Environmental Law that have not heretofore been resolved. No Hazardous Substance has been disposed
of, Released or transported in violation of any applicable Environmental Law from any properties
owned or operated, or formerly owned or operated, by the Company. No remediation or investigation
of Hazardous Substances is occurring at any property owned or operated, or formerly owned or
operated, by the Company. The Company and its properties are not subject to any Liabilities
relating to any Proceeding, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law or relating to a
violation or alleged violation of any Environmental Law by the Company or any Person.
- 27 -
3.17 Insurance. Schedule 3.17 lists each insurance policy maintained by, on
behalf of, for the benefit of or at the expense of the Company and any claims made thereunder. The
Company has provided copies to the Buyer of all such insurance policies. All such insurance
policies are in full force and effect, and the Company is not in default with respect to its
obligations under any such insurance policies. The Company has never been denied insurance
coverage. The Company is current in all of its premiums for its insurance policies. No Seller
Party has any knowledge of any threatened termination of, or material premium increase with respect
to, any such policies. No Seller Party has received any notice or other communication regarding
any actual or possible (a) cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy or (c) material adjustment in the
amount of the premiums payable with respect to any insurance policy. The Company has no
self-insurance or co-insurance programs. There exists no condition, situation or circumstance
which, with or without notice or lapse of time, or both, would give rise to or serve as a basis for
any claim under any policy mentioned in Schedule 3.17.
3.18 Intellectual Property.
(a) Schedule 3.18(a) sets forth a complete and accurate list of all United States and
foreign Company Registered Intellectual Property and material unregistered trademarks, trade names
and fictitious names, and, with respect to Company Registered Intellectual Property, in each case
enumerating specifically the applicable filing or registration number, title, jurisdiction in which
filing was made or from which registration issued, date of filing or issuance, names of all current
applicant(s) and registered owner(s), the current status of the application and the next steps
required to be taken in connection with such application and the deadlines therefore, as
applicable. The Company has delivered to the Buyer correct and complete copies of all registration
and applications for Company Registered Intellectual Property, as amended to date. All necessary
registration, maintenance and renewal fees in connection with each item of Company Registered
Intellectual Property have been paid and all necessary documents and certificates in connection
with such Company Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign jurisdictions, as the
case may be, for the purposes of maintaining such Company Registered Intellectual Property. There
are no actions that must be taken by the Company within one hundred eighty (180) days following the
Closing Date, including the payment of any registration, maintenance or renewal fees or the filing
of any responses to office actions, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting, preserving or renewing any Company Registered Intellectual
Property.
(b) Except as set forth on Schedule 3.18(b), the Company is the sole and exclusive
owner of all Company Intellectual Property (except the Company Licensed Intellectual Property),
free and clear of any Encumbrances. The Company has not permitted its rights in the Company Owned
Intellectual Property to lapse or enter the public domain. The Company Intellectual Property
constitutes all Intellectual Property necessary (i) to Exploit the products manufactured,
distributed, licensed or sold by the Company in the manner so done currently and
contemplated to be done by the Company, (ii) to Exploit the Internal Systems as they are
currently used and contemplated to be used by the Company, and (iii) otherwise to conduct the
business of the Company in all material respects in the manner currently conducted and contemplated
to be conducted.
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(c) Except as set forth on Schedule 3.18(c), the Company is not a party to any claim,
suit, action or proceeding, nor is any claim, suit, action or proceeding, to the knowledge of any
Seller Party, threatened, against the Company, which involves a claim of infringement, unauthorized
use or violation of any Company Intellectual Property, or challenging the ownership, right to use,
sell, distribute, license or sublicense, validity or enforceability of any Company Intellectual
Property. The operation of the business as it is currently conducted or as it is contemplated to
be conducted does not and will not, and will not when operated substantially in the same manner
following the Closing, infringe or misappropriate any Intellectual Property rights of any Person or
constitute unfair competition or trade practices under the laws of any jurisdiction, and the
Company has not received notice from any Person claiming that such operation infringes or
misappropriates any Intellectual Property rights of any Person or constitutes unfair competition or
trade practices under the laws of any jurisdiction (nor does any Seller Party have knowledge of any
basis therefor). To the knowledge of any Seller Party, no third party is infringing upon or
misappropriating, or has infringed upon or misappropriated, any Company Owned Intellectual Property
or any Company Licensed Intellectual Property which is exclusively licensed to the Company.
(d) Schedule 3.18(d) identifies: (i) each item of Company Licensed Intellectual
Property and the license or agreement pursuant to which the Company Exploits it (excluding
commercial off-the-shelf software licenses that are part of the Internal Systems with per-user
license fees of One Thousand Dollars ($1,000) or less); (ii) each agreement, contract, assignment
or other instrument pursuant to which the Company has obtained any joint or sole ownership interest
in or to each item of Company Owned Intellectual Property; and (iii) all such licenses, sublicenses
and other agreements that require the Company to license, assign or otherwise grant rights to
additions, modifications or improvements to Company Licensed Intellectual Property made by or for
the Company to any third party. The Company has delivered to the Buyer copies of all licenses,
sublicenses and other agreements identified above. The Company is in compliance with all material
terms and conditions of all such licenses, sublicenses, and other agreements. The Company is not a
party to any oral license, sublicense or other contract or understanding which, if reduced to
written form, would be required to be listed in Schedule 3.18(d) under the terms of Section
3.18(d). No third party inventions, methods, services, materials, processes or Software are
included in or required to Exploit any product manufactured, distributed, licensed or sold by the
Company, or Internal Systems, except as specifically set forth on Schedule 3.18(d). None
of the products manufactured, distributed, licensed or sold by the Company, or Internal Systems,
includes “shareware,” “freeware” or other Software or other material that was obtained by the
Company from third parties other than pursuant to the license agreements listed on Schedule
3.18(d).
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(e) Schedule 3.18(e) identifies each license, sublicense, covenant or other agreement
pursuant to which the Company has assigned, transferred, licensed, distributed or otherwise granted
any right or access to any person, or covenanted not to assert any right, with respect to any past,
existing or future Company Intellectual Property. The Company has
delivered to the Buyer accurate and complete copies of all licenses, sublicenses, covenants
and other agreements identified above, and the Company is in compliance with all material terms and
conditions of such licenses, sublicenses, covenants and other agreements. Except as described on
Schedule 3.18(e), the Company has not agreed to indemnify any person specifically against
any infringement, violation or misappropriation of any Intellectual Property rights with respect to
any product manufactured, distributed, licensed or sold by the Company or any third party
Intellectual Property rights.
(f) The Company has taken necessary security measures to protect and enforce their trade
secrets and otherwise safeguard and maintain the confidential and proprietary nature of all
confidential information or used by them in the conduct of the their business. The Company has
complied with all applicable contractual and legal requirements pertaining to information privacy
and security. No complaint relating to an improper use or disclosure of, or a breach in the
security of, any such information has been made or, to the knowledge of any Seller Party,
threatened against the Company. There has been no: (i) unauthorized disclosure of any third party
proprietary or confidential information in the possession, custody or control of the Company or
(ii) breach of the Company’s security procedures wherein confidential information has been
disclosed to a third person. All officers, employees, consultants and independent contractors of
the Company have executed and delivered to the Company valid and binding agreements (copies of
which have been provided to the Buyer) (A) requiring each such employee, consultant or independent
contractor to protect and preserve the confidentiality of the information and (B) expressly
assigning to the Company all Intellectual Property rights arising from the services performed for
the Company by such persons.
3.19 Related Party Transactions. The Company has not extended or maintained credit,
arranged for the extension of credit, or renewed an extension of credit, in the form of a personal
loan to or for any director or officer (or equivalent thereof) of the Company or to or for the
Stockholder. No officer or director of the Company nor the Stockholder has received, nor is
entitled to receive, any material compensation from any Person that has engaged in or is engaging
in any material transaction with the Company. Except as set forth on Schedule 3.19, the
Company is not a party to any Contract or other commitment or transaction with any Related Party,
nor do any Related Parties have any legal or beneficial interest in the assets or property owned or
used by the Company, in any Contracts to which the Company is a party, or in any other Person with
which the Company is or has been party to a Contract. Except as set forth on Schedule
3.19, there are no outstanding claims, accounts payable or receivable, intercompany loans,
indebtedness, or other Liabilities, between the Company, on the one hand, and the Stockholder or
any Related Parties, on the other hand, and all such Liabilities have been repaid in full. Any
such arrangement with a Related Party is referred to herein as a “Related Party
Arrangement”. The terms and conditions of any such Related Party Arrangement are no less
favorable to the Company than could have been obtained from an unrelated third party and such
Related Party Arrangement was negotiated and entered into on an arms-length, commercially
reasonable basis. Since December 31, 2009, there has been no change in any Related Party
Arrangements. Except as set forth on Schedule 3.19, neither the Stockholder nor any other
Related Party conducts any of the Company’s business, directly or indirectly, other than through
the Stockholder’s ownership of the Company, as applicable.
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3.20 Suppliers. Schedule 3.20 sets forth a list of the Company’s top ten (10)
suppliers (other than subcontractors of the Company under any Government Contract) of goods or
services in terms of aggregate purchases by the Company for the last completed fiscal year and for
the current fiscal year to date, showing the aggregate amount which the Company paid to each such
supplier during such periods. No such supplier has terminated, or threatened to terminate, its
relationship with the Company or has during the last twelve (12) months materially decreased or
limited, or changed the terms and conditions for, the supply of its goods or services to the
Company, or threatened to do so. Except as set forth on Schedule 3.20, no supplier for the
Company is a sole source of supply of any good or service to the Company.
3.21 Bank Accounts; Powers of Attorney. Schedule 3.21 sets forth a true,
correct and complete list of the names and locations of all banks and other financial institutions
at which the Company maintains an account or safe deposit box, the names of all Persons authorized
to access such accounts or deposit boxes and the names of all Persons holding powers of attorney or
other similar authorizations from the Company and a summary statement of the terms thereof.
3.22 Brokers. Except as set forth on Schedule 3.22, no Person has or will
have, as a result of the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Buyer, the Company or the Stockholder or any of their respective Affiliates for
any commission, fee or other compensation payable as a finder or broker because of any act or
omission by the Company.
3.23 Disclosure. To the knowledge of any Seller Party, no representation or warranty
by any Seller Party contained in this Agreement, and no representation, warranty or statement
contained in any list, certificate, schedule or other instrument, document, agreement or writing
furnished or to be furnished to, or made with, the Buyer pursuant hereto, contains or will contain
any untrue statement of a material fact or omits or will omit to state, when read in conjunction
with all of the information contained in this Agreement, the Disclosure Schedules and any other
document or instrument in connection with the transactions contemplated hereby, any material fact
necessary to make any statement herein or therein not misleading.
3.24 No Additional Representations. The Company and the Stockholder acknowledge that
neither the Buyer, nor any other Person acting on behalf of the Buyer, nor any Affiliate of the
Buyer, has made any representation or warranty, express or implied, regarding the Buyer, except as
expressly set forth in this Agreement, any certificate delivered pursuant hereto and the Disclosure
Schedules.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
As a material inducement to the Buyer to enter into this Agreement, and to consummate the
transactions contemplated hereby, the Stockholder represents and warrants to the Buyer as of the
date hereof and as of the Closing Date, as follows:
4.1 Authority for Agreement. The Stockholder has full power, authority and legal
right and capacity to enter into and perform the Stockholder’s obligations under this Agreement and
each other document contemplated hereby to which the Stockholder is or will be a party and
to consummate the transactions contemplated hereby and thereby. This Agreement and the other
documents contemplated hereby to which the Stockholder is a party have been duly executed and
delivered by the Stockholder and are legal, valid and binding obligations of the Stockholder,
enforceable against the Stockholder in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors’ rights in general and general principles
of equity.
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4.2 No Violation to Result. Except as set forth on Schedule 4.2, the
execution, delivery and performance by the Stockholder of this Agreement and the other documents
contemplated hereby and the consummation by the Stockholder of the transactions contemplated hereby
and thereby, do not and will not, directly or indirectly (with or without notice or lapse of time
or both): (a) (i) violate, breach, conflict with, constitute a default under, accelerate or permit
the acceleration of the performance required by any Contract to which the Stockholder is a party or
by which the Stockholder or the Stockholder’s assets are bound, or (ii) any Law or other legal
requirement of any Governmental Authority applicable to the Stockholder; (b) give any Governmental
Authority or other Person the right to challenge any of the transactions contemplated by this
Agreement; or (c) result in the creation or imposition of any Encumbrance, possibility of
Encumbrance, or restriction in favor of any Person upon any of the Shares or any of the properties
or assets of the Company. Other than as set forth on Schedule 4.2, no notice to, filing
with, or consent of, any Person is necessary in connection with, and no “change of control”
provision is, or will be, triggered by, the authorization, approval, execution, delivery or
performance by the Stockholder of this Agreement and the other documents contemplated hereby nor
the consummation by the Stockholder of the transactions contemplated hereby or thereby. The
Stockholder has given all notices, made all filings and obtained all consents set forth on
Schedule 4.2 or will have done so prior to Closing.
4.3 Ownership. The Stockholder is the sole holder of the issued and outstanding
shares of capital stock of the Company and the Stockholder holds of record and beneficially the
Shares, free and clear of any Encumbrance (other than restrictions imposed by federal and state
securities laws). There are no proxies, voting rights, shareholders agreements or other agreements
or understandings, to which the Stockholder is a party or by which the Stockholder is bound, with
respect to the voting or transfer of the capital stock of the Company.
4.4 Brokers. Except as set forth on Schedule 3.22, no Person has or will
have, as a result of the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Buyer, the Company or the Stockholder or any of their respective Affiliates for
any commission, fee or other compensation payable as a finder or broker because of any act or
omission by the Stockholder.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Stockholder, as of the date hereof and as of the
Closing, as follows:
5.1 Organization. The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do business and in good
standing in each jurisdiction where the character or location of its assets or properties owned,
leased or operated by it or the nature of its activities makes such qualification necessary. The
Buyer has full corporate power and authority and all material licenses, permits and authorizations
necessary to own and operate its properties and to conduct its business as conducted.
5.2 Authority for Agreement. The Buyer has full power, authority and legal right to
enter into and perform its obligations under this Agreement and the other documents contemplated
hereby to which the Buyer is or will be a party and to consummate the transactions contemplated
hereby and thereby. The board of directors of the Buyer has authorized the execution, delivery and
performance of this Agreement and the other documents contemplated hereby and the consummation of
the transactions contemplated hereby and thereby. No other corporate proceedings on the part of
the Buyer are necessary to approve and authorize the execution, delivery and performance of this
Agreement and the other documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby. This Agreement and the other documents contemplated hereby to
which the Buyer is a party have been duly executed and delivered by the Buyer and are legal, valid
and binding obligations of the Buyer, enforceable against the Buyer in accordance with their
respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights in
general and general principles of equity.
5.3 No Violation to Result. Except as set forth on Schedule 5.3, the
execution, delivery and performance by the Buyer of this Agreement and the other documents
contemplated hereby and the consummation by the Buyer of the transactions contemplated hereby and
thereby, do not and will not, directly or indirectly (with or without notice or lapse of time, or
both): (a) violate, breach, conflict with, constitute a default under or accelerate or permit the
acceleration of the performance required by (i) any of the terms of the articles of incorporation
or bylaws of the Buyer or any resolution adopted by the board of directors of the Buyer or
stockholders of the Buyer, (ii) any contract to which the Buyer is a party or by which it or its
assets are bound or (iii) any Law or other legal requirement of any Governmental Authority
applicable to the Buyer; (b) give any Governmental Authority or other Person the right to challenge
any of the transactions contemplated by this Agreement; or (c) result in the creation or imposition
of any Encumbrance, possibility of Encumbrance, or restriction in favor of any Person upon any of
the properties or assets of the Buyer. Other than as set forth on Schedule 5.3 or as
otherwise expressly set forth herein, no notice to, filing with, or consent of, any Person is
necessary in connection with the execution, delivery or performance by the Buyer of this Agreement
and the other documents contemplated hereby nor the consummation by the Buyer of the transactions
contemplated hereby or thereby.
5.4 No Additional Representations. The Buyer acknowledges that neither the Company,
the Stockholder or any other Person acting on behalf of the Company or the Stockholder, nor any
Affiliate of the Company or the Stockholder, has made any representation or warranty, express or
implied, regarding the Company or the Stockholder, except as expressly set forth in this Agreement,
any certificate delivered pursuant hereto and the Disclosure Schedules.
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5.5 Brokers. No Person has or will have, as a result of the transactions contemplated
by this Agreement, any right, interest or claim against or upon the Buyer, the Company or the
Stockholder or any of their respective Affiliates for any commission, fee or other compensation
payable as a finder or broker because of any act or omission by the Buyer.
5.6 Disclosure. To the Buyer’s knowledge, no representation or warranty by the Buyer
contained in this Agreement, and no representation, warranty or statement contained in any list,
certificate, schedule or other instrument, document, agreement or writing furnished or to be
furnished to, or made with, the Seller Parties pursuant hereto, contains or will contain any untrue
statement of a fact or omits or will omit to state, when read in conjunction with all of the
information contained in this Agreement, the Disclosure Schedules and any other document or
instrument in connection with the transactions contemplated hereby, any material fact necessary to
make any statement herein or therein not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
ADDITIONAL AGREEMENTS
6.1 Access to Properties and Records. The Seller Parties shall, and shall cause their
Representatives to, afford to the Buyer and its Representatives, reasonable access to all of the
assets, properties, books, records, employees and customers of the Company in order to afford the
Buyer and its Representatives as full an opportunity of review, examination and investigation of
the affairs of the Company as shall reasonably be requested by the Buyer, and the Buyer and its
Representatives shall be permitted to make extracts from, or take copies of, such books, records
(including the stock record and minute books) or other documentation as may be reasonably
necessary, all at the Buyer’s expense, provided that the Buyer shall keep confidential all of the
foregoing in accordance with Section 6.3(c). The Company shall furnish or cause to be furnished to
the Buyer such reasonable financial and operating data and other information about the Company, its
business as presently conducted, as conducted in the past and as presently proposed to be conducted
in the future, and properties and assets which the Buyer and its Representatives may reasonably
request.
6.2 Interim Covenants of the Seller Parties. From the date of this Agreement until
the Closing Date, except to the extent expressly permitted by this Agreement or otherwise consented
to by an instrument in writing signed by the Buyer or as otherwise set forth in Schedule
6.2, the Seller Parties shall (i) keep intact the Company and its business, as presently
conducted, as conducted in the past and as presently proposed to be conducted in the future, and
shall not take or permit to be taken or do or suffer to be done anything other than in the ordinary
course of the Company’s business as the same is presently being conducted; (ii) use commercially
reasonable efforts to keep available the services of the directors, officers, employees,
independent contractors and agents of the Company, maintain the Company’s insurance policies as
currently in effect, retain and maintain good relationships with the Company’s customers and
maintain the Company’s assets and the Facilities in good condition; (iii) perform their obligations
under the Contracts and comply with Laws; (iv) maintain the goodwill and reputation associated with
the Company; and (v) to the extent requested by the Buyer, take such action as may be required to
terminate any of the Benefit Plans effective as of immediately prior to the Closing Date. Without
limiting the generality of the foregoing, the Company shall not, and the Stockholder shall not
cause, authorize or permit the Company to:
(a) adopt or propose any change to the Company’s articles of incorporation, bylaws or other
organizational documents;
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(b) merge or consolidate the Company with any other Person or acquire a material amount of
stock or assets of any other Person or effect any business combination, recapitalization or similar
transaction;
(c) except as set forth on Schedule 6.2(c), sell, lease or dispose of or make any
contract for the sale, lease or disposition of, or make subject to a security interest or any other
Encumbrance, any of the Company’s properties or assets;
(d) grant any salary increase to, or increase the draw of, any of the officers, directors,
employees or agents of the Company, except for increases in salary, wages or the accrual for
payment of bonuses payable to employees in the ordinary course of business consistent with past
practice, or enter into any new, or amend or alter any existing, Benefit Plan, trust agreement or
other similar or dissimilar arrangement, or any employment or consulting agreement;
(e) incur any bank indebtedness or borrowings, whether or not in the ordinary course of its
business, or issue any commercial paper;
(f) enter into any leases of real property;
(g) enter into any leases of equipment and machinery except in the ordinary course of
business;
(h) enter into any Contract (i) which would be required to be listed on Schedule
3.14(a) or Schedule 3.15(a)(i) had it been entered into prior to the date hereof or
(ii) in which any Related Party has any beneficial interest; provided that, with respect to
clause (i), the Company may enter into Contracts (without the Buyer’s prior consent) for any of the
programs set forth on Schedule 6.2(h) at rates consistent with those under the Company’s
Current Government Contracts;
(i) amend or prematurely terminate, or waive any material right or remedy under, any Contract;
(j) write off as uncollectible, or establish any extraordinary reserve with respect to, any
account receivable or other receivable;
(k) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, convertible or exchangeable
securities, commitments, subscriptions, rights to purchase or otherwise) any shares of the
Company’s capital stock or any other securities;
(l) redeem, purchase or otherwise acquire, directly or indirectly, any shares of the Company’s
capital stock or debt securities or any option, warrant or other right to purchase or acquire any
such stock or securities, or declare, accrue, set aside or pay any dividend or other
distribution (whether in cash, stock or other property) with respect to such capital stock or
securities;
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(m) create, incur or assume any Liability, except in the ordinary course of business and
consistent with past practices; or postpone or defer the creation, incurrence or assumption of any
Liability that would otherwise be created, incurred or assumed in the ordinary course of business
absent the execution of this Agreement;
(n) pay or apply any of the Company’s assets to the direct or indirect payment, discharge,
satisfaction or reduction of any amount, directly or indirectly, to or for the benefit of the
Stockholder or any Affiliate thereof;
(o) change any of its methods of accounting or accounting practices in any respect;
(p) commence or settle any Proceeding;
(q) except as set forth on Schedule 6.2(q), make, amend or revoke any election with
respect to Taxes, amend any Tax Return, change any accounting method relating to Taxes, consent to
any waiver or extension of any statute of limitations with respect to Taxes or Tax Returns, or
settle or compromise any Tax Liability;
(r) take any action, fail to take any action or enter into any agreement or understanding that
causes any Seller Party to be in breach or violation of any of the representations or warranties
made in this Agreement or commit a breach of or amend or terminate any Material Contract or any
permit, license or other right; and
(s) agree or commit to do any of the foregoing.
6.3 Publicity and Disclosure.
(a) The Buyer shall determine the form and substance of any press release, publicity or other
public communication related to this Agreement or the transactions contemplated hereby. The Buyer
shall use reasonable effort to provide the Company with the opportunity to comment on the initial
press release announcing this Agreement and the transactions contemplated hereby. No Party shall
make any disclosure of this Agreement or the existence, terms and conditions hereof (whether or not
in response to an inquiry about the existence or subject matter of this Agreement), unless
previously approved by the Buyer. Notwithstanding the foregoing, nothing contained herein shall
prohibit the Buyer from making any disclosure which the Buyer in good faith believes is required
by, or advisable according to, applicable Laws, regulations or stock market rules.
(b) The Company and the Stockholder hereby agree that each shall hold, and shall use its best
efforts to cause its Representatives to hold, in strict confidence from any Person (other than such
Representatives), all Buyer Confidential Information, except to the extent: (i) compelled to
disclosure by judicial or administrative process or by other requirements of Law, (ii) previously
known by the Person receiving such Buyer Confidential Information, or (iii) in the public domain
through no fault of the receiving Person, in each case, subject to Section 10.2. In
the event the transactions contemplated hereby are not consummated, the Company and the
Stockholder shall, and shall cause their respective Representatives to promptly deliver to Buyer
all copies of Buyer Confidential Information and destroy all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon.
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(c) The Buyer hereby agrees that it shall hold, and shall use its best efforts to cause its
Representatives to hold, in strict confidence from any Person (other than such Representatives),
all Company Confidential Information, except to the extent: (i) compelled to disclosure by judicial
or administrative process or by other requirements of Law, (ii) previously known by the Person
receiving such Company Confidential Information, or (iii) in the public domain through no fault of
the receiving Person. In the event the transactions contemplated hereby are not consummated, the
Buyer shall, and shall cause its Representatives to, promptly deliver to the Company all copies of
Company Confidential Information and destroy all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon.
6.4 Notification of Certain Matters. The Seller Parties shall give prompt notice to
the Buyer of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of
which could reasonably be expected to cause any representation or warranty of any of the Seller
Parties contained herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any failure of any Seller Party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by any Seller Party hereunder. The delivery of any
notice pursuant to this Section 6.4 shall not, without the express written consent of the Buyer, be
deemed to (x) modify the representations or warranties hereunder of any Seller Party, (y) modify
the conditions set forth in ARTICLE VII or (z) limit or otherwise affect the remedies available
hereunder to the Buyer.
6.5 Tax Matters.
(a) Post-Closing Tax Returns.
(i) The Stockholder shall properly and accurately prepare (or cause to be prepared) and the
Company and the Buyer shall cooperate with the Stockholder in the preparation and timely filing of,
all income Tax Returns required to be filed by or on behalf of the Company after the Closing Date
for taxable periods ending on or prior to the Closing Date (each a “Seller Prepared
Return”), which for avoidance of doubt shall include state and federal income Tax Returns
required to be filed consistent with the final resolution of the IRS Adjustments. The cost of
preparation of Seller Prepared Returns shall be paid by the Company at the direction of the
Stockholder, but not in excess of the amount accrued as a liability for such costs on the
computation of Estimated Closing Working Capital, with any excess cost to be paid by the
Stockholder. Each Seller Prepared Return shall be prepared in a manner consistent with the prior
practice of the Company and Applicable Law, provided that the Parties acknowledge and agree that
the items set forth on Schedule 6.5(a)(i) are consistent with past practices and Applicable Law.
No later than fifteen (15) days before the required filing date for each such Seller Prepared
Return, the Stockholder shall cause to be delivered to the Buyer a draft of such Tax Return and the
Buyer shall have the right to review and approve each such Tax Return before filing, which approval
shall not be unreasonably withheld.
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(ii) Except as provided in Section 6.5(a)(i), the Buyer shall prepare (or cause to be
prepared) and file (or cause to be filed) each Tax Return required to be filed by the Company after
the Closing Date for a taxable period beginning before the Closing Date (each a “Buyer Prepared
Return”). To the extent any Tax shown as due on any Buyer Prepared Return is payable by the
Stockholder (taking into account indemnification obligations hereunder), (x) such Tax Return shall
be prepared in a manner consistent with the prior practice of the Company unless otherwise required
by applicable Tax Law or the change from prior practice would neither increase the amount of Tax
payable by the Company for which the Stockholder is obligated to indemnify the Buyer pursuant to
Section 9.1(f); (y) such Tax Return shall be provided to the Stockholder at least fifteen (15) days
before the due date for filing such return (or, if required to be filed within thirty (30) days
after the Closing or within thirty (30) days after the end of the taxable period to which such Tax
Return relates, as soon as reasonably practicable following the Closing); and (z) the Stockholder
shall have the right to review and comment on such Tax Return. The Buyer shall make such revisions
to such Tax Returns as are reasonably requested by the Stockholder and consented to by the Buyer,
which consent shall not be unreasonably withheld. For purposes of the foregoing, consent to a
Tax Return reporting position shall be considered reasonably withheld by the Buyer unless (w) there
is substantial authority for such position within the meaning of Section 6662 of the Code, (x) no
reserve for Tax liability would be required to be established pursuant to GAAP in the financial
statements relating to the Buyer or the Company as a result of potential Tax liability that is not
shown as due on such Tax Return, (y) such reporting position will not be binding on the Buyer or
the Company in the preparation of Tax Returns in any taxable period ending after the Closing Date
and (z) adequate security (determined within the sole reasonable discretion of the Buyer) is
available or provided to the Buyer to secure the indemnification obligations of the Stockholder
under Section 9.1 for Losses which could result from the failure to sustain such Tax Return
reporting position.
(iii) Not less than two (2) Business Days before the required payment date of the Taxes shown
on each Seller Prepared Return and Buyer Prepared Return, the Stockholder shall pay to the Company
in immediately available funds to an account designated by the Buyer an amount equal to the excess
of the amount of such Taxes shown as due on each such Tax Return (or if the Tax Return is not
completed before the required payment date of any Taxes to be shown thereon, such estimated amount
as is mutually determined by the Buyer and the Stockholder to be required to be paid) over the
amount of such Taxes included as a liability in computing the Closing Adjustment (or the amount in
respect of such Tax that is shown as a liability in the Estimated Closing Balance Sheet, in case
the Closing Adjustment has not been finally determined).
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(b) The Parties shall, unless prohibited by applicable Law, cause the taxable period of the
Company to end as of immediately following the Closing. It is acknowledged by the Parties that for
federal income Tax purposes, the taxable year of the Company shall close at the end of the Closing
Date pursuant to Treasury Regulations Section 1.1502-76(b)(1)(ii)(A)(1), and thereafter the Company
shall be a member of the federal income tax consolidated group (within the meaning of Treasury
Regulations Section 1.1502-1(h)) of which the Buyer is a member. For purposes of preparing the
federal income Tax Return of the Company for its taxable year ending on the Closing Date, the
Parties agree that no ratable allocations between the taxable year ending on the Closing Date and
the Company’s immediately following taxable year
shall be made pursuant to Treasury Regulations Section 1.1502-76(b)(2), unless such allocation
is consented to by both the Buyer and the Stockholder. For purposes of this Agreement, Company
Taxes incurred with respect to a taxable period that includes but does not end on the Closing Date,
shall be allocated to the portion of the period ending on the Closing Date (i) except as provided
in (ii) and (iii) below, to the extent feasible, on a specific identification basis, according to
the date of the event or transaction giving rise to the Tax, and (ii) except as provided in (iii)
below, with respect to periodically assessed ad valorem Taxes and Taxes not otherwise feasibly
allocable to specific transactions or events, in proportion to the number of days in such period
occurring through the Closing Date compared to the total number of days in such period, and (iii)
in the case of any Tax based upon or related to income or receipts, in an amount equal to the Tax
which would be payable if the relevant taxable period ended on the Closing Date. For the
elimination of doubt, Taxes incurred by reason of the transactions contemplated by this Agreement
shall be allocated to the portion of the period ending on the Closing Date. Any credits relating
to a taxable period that begins before and ends after the Closing Date shall be taken into account
as though the relevant taxable period ended on the Closing Date. All determinations necessary to
give effect to the foregoing allocations shall be made in a manner consistent with prior practices
of the Company.
(c) All Transfer Taxes incurred in connection with the transactions contemplated by this
Agreement shall be paid by the Stockholder when due. Notwithstanding Section 6.5(a)(ii), the
Stockholder shall, at his own expense, file all necessary Tax Returns and other documentation with
respect to all such Transfer Taxes. If required by applicable Law, the Buyer shall, and shall
cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.
(d) The Stockholder, the Company and the Buyer shall cooperate as and to the extent reasonably
requested by any other Party hereto in connection the preparation and filing of Tax Returns as
provided herein and any Proceeding with respect to Taxes. Such cooperation shall include the
provision of records and information which are reasonably relevant to any such Tax Return or
Proceeding with respect to Taxes and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided hereunder. The
Stockholder, the Buyer and the Company shall (i) retain all books and records with respect to
Company Taxes (including Tax Returns) relating to any taxable period beginning before the Closing
Date until ninety (90) days after the expiration of the applicable statute of limitations
(including waivers and extensions) for assessment of Taxes, and (ii) give the other Parties
reasonable written notice prior to transferring, destroying or discarding any such books and
records and, if another Party so requests, allow the other Party to take possession of or copy such
books and records.
(e) All obligations of the Company under all Tax sharing agreements or similar agreements
shall have been terminated on or before the Closing Date and, after the Closing Date, the Company
shall not be bound thereby or have any Liability thereunder.
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(f) Any Party who receives any notice of a pending or threatened Proceeding, assessment or
adjustment against or with respect to the Company with respect to Taxes that may give rise to
Liability of another Party hereto, shall promptly notify such other Party 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
Proceeding to the extent that such Proceeding could affect a Liability of such other Parties
(including indemnity obligations hereunder). The Stockholder shall have the right, but not the
obligation, (i) to control the conduct of all stages of all Tax Proceedings, whether pending or
threatened, against the Company that may give rise to an indemnification obligation on the part of
the Stockholder under Section 9.1(f) or Section 9.1(g) in respect of liabilities for Taxes for
taxable periods ending on or before the Closing Date, including, but not limited to, all
Proceedings from which Tax Losses may arise; and (ii) to employ counsel of the Stockholder’s
choosing but reasonably satisfactory to the Buyer, at the Stockholder’s expense, in connection
therewith. At the request of the Stockholder, the Buyer shall cause the Company to accept any
proposed adjustment or enter into any settlement or agreement in compromise regarding any Taxes for
which the Stockholder acknowledges an indemnification obligation under Section 9.1 and which
settlement will not result in any adverse Tax effect to the Buyer or its Affiliates (other than an
adverse Tax effect to the Buyer for which the Stockholder acknowledges indemnity liability under
Section 9.1), provided that there are then adequate unreserved Tax Escrowed Funds or Escrowed Funds
(as may be relevant) from which the resulting indemnity liability may be fully satisfied. In all
other cases, no Tax Proceeding shall be settled except with the consent of the Buyer, which consent
shall not be unreasonably withheld or delayed. The Buyer shall cause the Company to pay any Tax
liability for which it is indemnified under this Agreement, and all other indemnifiable costs and
expenses associated with such Tax Proceeding, promptly following Buyer’s receipt of disbursements
from the Tax Escrowed Funds or Escrowed Funds or payment from the Stockholder of the indemnity
amount to which it or the Company is entitled in respect thereof. If requested by the Stockholder,
the Buyer shall cause the Company to furnish powers of attorney and any other documentation or
authorization necessary or appropriate to enable the Stockholder (through appropriate
Representatives) to conduct such Tax Proceedings. Except as provided above (including any Tax
Proceeding that Stockholder is entitled hereunder to conduct but has failed to give notice to Buyer
of its intention to do so or thereafter fails to do so), the Buyer shall have the right to control
the conduct of all Tax Proceedings with respect to the Company and to accept any proposed
adjustment or enter into any settlement or agreement in compromise regarding any Taxes for which
the Stockholder may have an indemnification obligation under Section 9.1.
(g) Promptly following the receipt by the Company of any refund of an overpayment of federal
income taxes previously paid in respect of its taxable year ending on the Closing Date, or by
reason of a carryback of a loss from such taxable year to a preceding taxable year of the Company,
the Buyer shall promptly pay (or shall cause to be paid) to the Stockholder an amount equal to such
refunded amount and any interest actually received thereon (reduced by any Tax liability arising to
the Buyer or its Affiliates by reason of refund or crediting of such overpayment). Notwithstanding
the foregoing, if negotiation of any refunded Tax is reasonably determined by the Buyer to be
prohibited by Law, the Buyer shall notify the Stockholder of the receipt of such refund check and
the basis for its determination and authorize the Stockholder to communicate with the IRS on behalf
of the Company to confirm or re-determine the amount of the overpayment that the Company is
entitled to have refunded.
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(h) The Buyer shall, upon request by and at the expense of the Stockholder, cooperate in the
preparation of and submission to the relevant Taxing Authority of any amended
Tax Return for any taxable period of the Company ending on or before Closing Date that is
either (i) necessary to cause such Tax Return to be consistent with adjustments to a Tax Return of
the Company for any other taxable period as finally determined by the IRS, or (ii) required to
claim the benefit of an net operating loss carryback arising in the taxable year of the Company
ending on the Closing Date.
6.6 Litigation Support. In the event and for so long as any Party actively is
contesting or defending against any charge, complaint or other Proceeding by any Person not a Party
hereto in connection with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction on or prior to the Closing Date involving the Company, each
of the other Parties will cooperate with such Party or its counsel in the contest or defense, make
available its personnel, and provide such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, including entering into a joint defense
agreement or confidentiality agreement with respect thereto, all at the sole cost and expense of
the contesting or defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under ARTICLE IX below).
6.7 Reasonable Efforts.
(a) Each Party agrees to use all reasonable efforts promptly to take, or cause to be taken,
all actions and do or cause to be done all things necessary, proper or advisable under applicable
Laws and regulations to (i) obtain all consents, approvals or actions of, make all filings with and
give all notices to Governmental Authorities or any other public or private third parties required
to consummate the Stock Purchase and the other matters contemplated hereby, (ii) provide such other
information and communications to such Governmental Authorities or other public or private Persons
as the other Party or such Governmental Authorities or other public or private Persons may
reasonably request in connection therewith, and (iii) consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, the satisfaction of all
conditions hereto.
(b) In connection with and without limiting the foregoing, to the extent any of the following
have not been completed prior to the date hereof, then as soon as practicable after the date of
this Agreement, (1) the Company and the Buyer shall file with the Committee on Foreign Investment
in the United States (“CFIUS”) a joint voluntary notice pursuant to Exon-Xxxxxx with
respect to the transactions contemplated by this Agreement, and shall provide CFIUS with any
additional or supplemental information requested by CFIUS or its member agencies during the
Exon-Xxxxxx review process within three (3) Business Days of receipt of such request, or if the
Company and the Buyer mutually agree to seek an extension in relation thereto, such longer period
as CFIUS may allow, and, in cooperation with each other, shall take all commercially reasonable
steps advisable, necessary or desirable to finally and successfully complete the Exon-Xxxxxx review
process as promptly as practicable; (2) the Company shall prepare and submit to DSS and, to the
extent applicable, any other Governmental Authority, notification of the Stock Purchase and the
other matters contemplated hereby pursuant to the NISPOM and any other applicable national or
industrial security regulations; (3) the Company and the Buyer shall prepare and submit to the
United States Department of State Directorate of Defense Trade Controls notifications of the Stock
Purchase
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and the other matters contemplated hereby pursuant to the ITAR; (4) the Company and the Buyer shall make any other submissions
under Exon-Xxxxxx that are requested by CFIUS to be made or that the Company and the Buyer mutually
agree should be made in connection with the Stock Purchase and the other matters contemplated
hereby; and (5) the Seller Parties shall cooperate with the Buyer and provide reasonable assistance
in the Buyer’s submissions under any foreign ownership, control or influence (“FOCI”)
related requirements and similar requirements included in any Government Contract, or where any
FOCI may, in the opinion of any Governmental Authority, adversely impact security requirements, and
in the Buyer’s efforts to obtain customer approval pursuant to such requirements. The Company and
the Buyer shall provide to each other such assistance, information and cooperation as is reasonably
required to obtain any such actions, nonactions, waivers, consents, approvals, orders and
authorizations (including providing necessary information, assisting in responding to any inquiries
and attending joint meetings with either government or prime contractor customers advocating the
Stock Purchase and the other matters contemplated hereby) and, in connection therewith, shall
notify the other Person promptly following the receipt of any material comments from any
Governmental Authority and of any request by any Governmental Authority for amendments, supplements
or additional information in respect of any registration, declaration or filing with, or notice to,
such Governmental Authority, shall give the other Person the opportunity to attend and participate
in any meetings or conferences with CFIUS or DSS, or any other Governmental Authority and shall
supply the other Person with copies of all correspondence between such person or any of its
Representatives, on the one hand, and any Governmental Authority, on the other hand, in each case
regarding the Stock Purchase and the other matters contemplated hereby (except for correspondence
involving personal identifier information (as defined in the applicable Federal regulations) of the
Buyer). In furtherance of the foregoing, if, at the end of the initial thirty (30)-day review
period under Exon-Xxxxxx, CFIUS offers the Parties an opportunity to withdraw and resubmit their
joint notice regarding the Stock Purchase and the other matters contemplated hereby, and either
the Company or the Buyer opts to request withdrawal and resubmission in response to such offer by
CFIUS, then the other Party shall agree to join the request for withdrawal and resubmission and
promptly resubmit their joint notice regarding the Stock Purchase and the other matters
contemplated hereby.
6.8 Company Employees. Each of the Seller Parties agrees that promptly after the date
hereof it shall allow the Buyer to make a recruiting presentation to the Company Employees. Each
of the Seller Parties will encourage each of the Company Employees to make available their
employment services to the Company after the Closing and shall use commercially reasonable efforts
to have such employees execute and deliver a non-disclosure agreement with Buyer on Buyer’s
standard form. Prior to the Closing, the Buyer agrees to offer the Company Employees compensation
and benefits that are substantially similar to the benefits summarized in the 2010 Benefit
Overview, 2010 Employee Benefits Guide and other related benefits materials provided by the Buyer
to the Seller Parties prior to the date hereof.
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6.9 Termination of Benefit Plans. Effective immediately prior to the Closing, the
Company will take action to terminate any and all Benefit Plans intended to qualify as qualified
cash or deferred arrangements under Section 401(k) of the Code or as simplified employee pension
plans under Section 408(k) of the Code and, at the request of the Buyer, the Company will provide
the Buyer with evidence that such plans have been terminated effective immediately
prior to the Closing pursuant to resolutions duly adopted by the board of directors of the
Company or other duly-designated authority; provided, however, that the Company shall not be
required to take action to terminate any Benefit Plan intended to qualify as a simplified employee
pension plan under Section 408(k) of the Code until such time as all Bonus Payments have been paid
and included in any employee’s compensation for purposes of making a contribution to such plan, and
such annual contribution has been made to the plan. In addition, at the request of the Buyer, the
Company will terminate any one or more Benefit Plans providing welfare and fringe benefits,
including any group health, dental, severance, separation or salary continuation plans, programs or
arrangements, effective as of the date specified by the Buyer and, at the request of the Buyer, the
Company will provide the Buyer with evidence that such plans have been so terminated pursuant to
resolutions duly adopted by the board of directors of the Company or other duly-designated
authority. The Company also shall take such other actions in furtherance of terminating such
Benefit Plans as the Buyer may reasonably require.
6.10 Payment of Obligations. Prior to the Closing, the Stockholder and each of the
officers, directors, employees and Affiliates of the Company shall repay in full, in accordance
with their terms, all debts and other obligations, if any, owed to the Company.
6.11 No Solicitation; No Trading. No Seller Party shall, or shall authorize or
knowingly permit any Representative to, during the period commencing on the date of this Agreement
and ending on the earlier of the Closing or the termination of this Agreement, solicit or encourage
the initiation or submission of interest, offers, inquiries or proposals (or consider or entertain
any of the foregoing) from any Person (including, without limitation, by way of providing any
non-public information concerning the Company, its business or assets to any Person or otherwise),
initiate or participate in any negotiations or discussions, or enter into, accept or authorize any
agreement or agreement in principle, or announce any intention to do any of the foregoing, with
respect to any expression of interest, offer, proposal to acquire, purchase, license, or lease
(other than, in the case of licenses or leases, non-exclusive licenses or leases to end users on
customary terms in the ordinary course of business consistent with past practices
(“Non-Exclusive Licenses”)) (i) all or a substantial portion of the Company’s business or
assets (including, without limitation the Company Intellectual Property), or (ii) the Company’s
capital stock or other securities, in each case whether by stock purchase, merger, consolidation,
combination, reorganization, recapitalization, purchase of assets, tender offer, lease, license
(other than Non-Exclusive Licenses) or otherwise (any of the foregoing, a “Competing
Transaction”). The Company shall, and the Company shall cause its Representatives to,
immediately discontinue any ongoing discussions or negotiations (other than any ongoing discussions
with Parent) relating to a possible Competing Transaction, and shall promptly provide the Buyer
with an oral and a written notice of any expression of interest, proposal or offer relating to a
possible Competing Transaction that is received by the Company or by any of the Company’s
Representatives from any person, which notice shall contain the nature of the proposal proposed and
the material terms of the proposal and include copies of any such notice, inquiry or proposal. The
Company represents and warrants to the Buyer that (i) this Section 6.11 does not and will not
conflict with or violate any agreement, understanding or arrangement, whether written or oral, to
which the Company or the Company’s officers, employees, stockholders or agents are currently bound,
and (ii) no breach or violation of the Letter of Intent has occurred or is continuing.
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6.12 Further Assurances. The Stockholder and the Company shall execute such further
documents, deeds, bills of sale, assignments and assurances and take such further actions as may
reasonably be required by the Buyer to consummate the Stock Purchase, to vest the Buyer with full
title to all capital stock of the Company and all assets, properties, privileges, rights,
approvals, immunities and franchises of the Company and its business or to effect the other
purposes of this Agreement.
6.13 Security Clearances. The Seller Parties (i) shall reasonably cooperate with the
Buyer and provide reasonable assistance in connection with the Buyer’s efforts to obtain adequate
assurances that each of DSS and any other Governmental Authority responsible for the maintenance of
the Company’s facility security clearances will not terminate, suspend, revoke or in any way
materially change either the Government Contracts with the Company or the Company’s facility
security clearance with respect to such Government Contracts as a result of this Agreement or the
consummation of the transactions contemplated hereby, and (ii) shall use their commercially
reasonable efforts to cause each of the Seller Parties to retain, and to assist the Buyer (and its
officers, directors, employees and agents) in connection with the Buyer’s efforts to obtain, the
requisite facility and personnel security clearances for the Buyer to own and operate the Company
(and any successor thereto) and its business as currently conducted without delay or interruption.
6.14 Financial Statements. The Company shall take, or cause to be taken, all actions,
and do, or cause to be done, all things reasonably necessary, proper or advisable to provide the
Buyer with the Company’s audited statements of income and cash flows for the years ending December
31, 2009 and 2008 and balance sheets as of December 31, 2009 and 2008 (the “SEC Financial
Statements”) and a review of the Company’s financial information for any subsequent period
ended on or before the Closing Date and the corresponding interim period for the prior year,
including executing such management and other representation letters as shall be requested by an
independent auditor (the “Auditor”), so that Auditor is able to complete its audit and
review of the SEC Financial Statements. The SEC Financial Statements shall be prepared and audited
or reviewed, as applicable, in a manner meeting the requirements of Regulation S-X adopted under
the Securities Act and shall be suitable for inclusion in a Form 8-K filing with the Securities and
Exchange Commission. The Company shall, and shall cause each of its officers and employees to, (1)
provide to Auditor all information, documents and assistance reasonably requested by Auditor in
connection with the audit and review of the SEC Financial Statements and other financial
information, and (2) provide reasonable assistance to Buyer in preparing pro forma financial
statements that reflect the effect of the acquisition by the Buyer of the Company for such periods
required by Regulations S-X under the Securities Act. Notwithstanding anything to the contrary
contained herein, the Buyer shall pay all costs and expenses associated with the engagement of, and
the review and preparation of the SEC Financial Statements by, the Auditor.
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6.15 Accounts Receivable. With respect to any accounts receivable of the Company for
which the Buyer received payment pursuant to an indemnification claim under this Agreement, in the
event that the Buyer, at any time prior to the one (1) year anniversary of the Closing Date,
recovers such receivable from the account debtor (or any portion thereof), the Buyer or the Company
shall pay such amount into the Escrowed Funds to be held in accordance with the Escrow Agreement;
provided that any amount paid to the Escrowed Funds pursuant to
this Section 6.15 shall (i) not exceed the aggregate amount of the payment received by the
Buyer in respect of such receivable pursuant to an indemnification claim under this Agreement and
(ii) be reduced by the aggregate amount of the costs and expenses of the Buyer and the Company for
collection activities with respect to such receivable. Any payment from any such account debtor
shall be deemed to be a payment with respect to such uncollected receivables of such account debtor
if it can be matched to an invoice issued with respect to such uncollected receivables, or if no
such matching can be achieved, such payment shall be applied to the most current receivables or
outstanding invoice issued with respect to such account debtor.
6.16 Affirmative Action Plan. Promptly after the date hereof, the Company shall take
all steps as may reasonably be required to adopt an acceptable affirmative action plan that
complies with Executive Order 11246 (including, without limitation, engaging a third-party
consultant to assist with the requisite analysis and development of the plan), and (ii) file an
EEO-1 with the U.S. Equal Employment Opportunity Commission and a VETS-100 with the U.S. Department
of Labor.
ARTICLE VII
CONDITIONS TO THE BUYER’S OBLIGATIONS
CONDITIONS TO THE BUYER’S OBLIGATIONS
The obligations of the Buyer to consummate the transactions contemplated under this Agreement
are subject to the fulfillment and satisfaction, prior to or at the time of the Closing, of each of
the following conditions precedent, any one or more of which may be waived, in part or in full, by
the Buyer in writing.
7.1 Representations and Warranties True at the Closing Date. The representations and
warranties of each of the Seller Parties contained in this Agreement (and in any certificate
delivered by the Company or the Stockholder pursuant hereto) that are qualified by materiality
(including, without limitation, a Material Adverse Effect qualifier) and the representations and
warranties in Section 3.4 and Section 4.3 shall be true, correct and complete in all respects; and
the representations and warranties of each of the Seller Parties contained in this Agreement (and
in any certificate delivered by the Company or the Stockholder pursuant hereto), other than in
Section 3.4 and Section 4.3, that are not so qualified by materiality shall be true, correct and
complete in all material respects, in each case: (i) when made on and as of the date hereof and
(ii) on and as of the Closing, with the same effect as though such representations and warranties
had been made on and as of such date, except where all such breaches or failures of the above
clauses (i) and (ii) do not, and could not reasonably be expected to, individually or in the
aggregate, result in a Material Adverse Effect on the Company or Buyer. Each Seller Party shall
have executed and delivered to the Buyer a certificate as of the Closing to the effect set forth in
this Section 7.1.
7.2 Performance. All of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by any Seller Party on or before the Closing
Date shall have been duly complied with, performed or satisfied in all material respects on or
before such date and each Seller Party shall have executed and delivered to the Buyer a certificate
as of the Closing to such effect.
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7.3 No Litigation. No temporary restraining order, preliminary or permanent
injunction or other order or judgment issued by any court of competent jurisdiction or other legal
or regulatory restraint or provision challenging the transactions contemplated hereunder or
limiting or restricting the conduct or operation of the Company following the Closing shall be in
effect, nor shall any Proceeding seeking any of the foregoing be pending. There shall be no
Proceeding of any nature, pending or threatened, against any Seller Party, their respective
properties or any of their respective officers or directors that could have a Material Adverse
Effect on the Company.
7.4 No Material Adverse Effect. Since the date hereof, there shall have been (a) no
effect, event or change which, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect on the Company and (b) no resignations or terminations
of, or indications of an intention or plan to resign or terminate, employment by a material number
of employees.
7.5 Governmental, Regulatory and Other Consents and Approvals. All consents,
approvals, assignments and actions of, filings with and notices to any Governmental Authority or
any other public or private Persons required of any Seller Party to consummate the Closing and the
other matters contemplated hereby shall have been obtained, including, without limitation, the
expiration or termination without the objection of any of the relevant Governmental Authorities of
all applicable waiting periods (and any extensions thereof). The Buyer shall have received written
confirmation by CFIUS that it has completed its review (or, if applicable, investigation) under
Exon-Xxxxxx and determined that there are no unresolved national security concerns with respect to
the transactions contemplated by this Agreement. Notwithstanding anything to the contrary
contained herein, Buyer shall not be required to agree to sell, divest, dispose of or hold separate
any assets or businesses, or otherwise take or commit to take any action that could reasonably be
expected to limit its freedom of action with respect to, or ability to retain, one or more of the
Company’s businesses, product lines or assets.
7.6 SBA Waivers. If applicable, the Company shall have submitted to the Small
Business Administration (“SBA”) requests for waiver of termination under
13 C.F.R. § 124.515, Federal Acquisition Regulation 19.812, and 15 U.S.C. § 637(a)(21) with respect
to each active contract awarded to the Company pursuant to Section 8(a) of the Small Business Act
(15 U.S.C. § 637(a)), and the SBA shall have provided such waivers.
7.7 Consulting Agreement. The Consulting Agreement entered into concurrently with the
execution of this Agreement shall be in full force and effect, the Stockholder shall not have
attempted (whether formally or informally) to terminate, rescind or repudiate the Consulting
Agreement, and the Stockholder shall not have notified (whether formally or informally) the Company
of the Stockholder’s intention of terminating service to the Company or the Buyer following the
Closing.
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7.8 Closing Deliveries of the Stockholder and the Company. At the Closing, the
Company and the Stockholder, as appropriate, shall have performed and delivered the following,
subject to waiver, in part or in full, by the Buyer:
(a) the Stockholder shall have delivered the certificate(s) representing the Shares that he
owns, free and clear of any Encumbrance, all of which certificates delivered by the Stockholder
representing all of the issued and outstanding shares of capital stock of the Company, each such
certificate accompanied by a stock power duly endorsed in blank or accompanied by a duly executed
instrument of transfer;
(b) the Seller Parties shall have repaid or satisfied all of the Indebtedness for Borrowed
Money and all other Liabilities set forth or required to be set forth on the Estimated Closing
Balance Sheet; and the Company shall have delivered full releases of record, to the reasonable
satisfaction of the Buyer, of all Encumbrances securing any such Liabilities of the Company that
have been paid in full prior to or at the Closing, and shall deliver termination statements
relating to all financing statements covering such Liabilities;
(c) the Stockholder and the Escrow Agent shall have executed and delivered the Escrow
Agreement and the Tax Escrow Agreement;
(d) the Stockholder and each of the officers, directors, employees and Affiliates of the
Company shall have delivered evidence of repayment in full in accordance with their terms all debts
and other obligations, if any, owed by any of them to the Company;
(e) each director and officer of the Company shall have delivered to the Company his or her
respective resignation as a director and officer of the Company and his or her respective
revocation of any power of attorney, all of which shall be effective as of the Closing;
(f) the Company and the Stockholder shall have delivered to the Buyer the original stock
records of the Company, books of account, minute books, minutes and other records of all meetings
of the Company, the corporate seal of the Company and such other documents, records, keys and other
items as shall be necessary for the operation of the business of the Company;
(g) the Company shall have executed and delivered to the Buyer a certificate of its secretary,
setting forth the certified articles of incorporation, bylaws and resolutions of its board of
directors (or other evidence reasonably satisfactory to the Buyer) authorizing the execution,
delivery and performance of this Agreement and the other documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby, and certifying that (i) such
articles of incorporation, bylaws and resolutions have not been amended or rescinded and are in
full force and effect, (ii) its officers executing this Agreement and other documents delivered
pursuant to this Agreement are incumbent officers and the specimen signatures on the certificate
are their genuine signatures and (iii) the conditions specified in this ARTICLE VII have been
satisfied;
(h) the Company shall have delivered to the Buyer a good standing certificate from the
jurisdiction of its incorporation and from each state in which it is qualified to do business, each
dated as of a date reasonably close to the date hereof;
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(i) the Company shall have delivered to the Buyer all consents, licenses, permits and
approvals as set forth or required to be set forth on Schedule 3.3 and the Stockholder
shall have delivered to the Buyer such consents as set forth or required to be set forth on
Schedule 4.2;
(j) the Seller Parties shall have delivered to the Buyer an opinion of legal counsel in the
form attached hereto as Exhibit F;
(k) the Stockholder and the Company shall have executed and delivered an agreement, in form
and substance satisfactory to the Buyer in its sole discretion, pursuant to which all agreements
between the Company and any of its stockholders, or between or among any of the stockholders
relating to the Company, shall have been terminated and of no further force and effect;
(l) the Company shall have delivered to the Buyer Certificates of Insurance issued by the
insurers under the insurance policies listed on Schedule 7.8(l) certifying that (i) each
such insurance policy is in full force and effect on the Closing Date and (ii) the Buyer has been
added as an additional insured and such insurance coverage shall continue for all claims or
occurrences occurring on or prior to the Closing Date;
(m) the Stockholder shall have executed and delivered a FIRPTA certification, which (i) states
that the Stockholder is not a foreign Person, (ii) sets forth the Stockholder’s name, identifying
number and address, and (iii) is signed by the Stockholder under penalties of perjury, meeting the
requirement of Treasury Regulations Section 1.1445-2(b)(2);
(n) the Company shall have delivered to the Buyer copies of the waivers of termination
described in Section 7.6;
(o) the Company shall have delivered to the Buyer the SEC Financial Statements and a consent
of the Auditor to include such SEC Financial Statements in the Buyer’s Form 8-K filing with the
Securities and Exchange Commission;
(p) the Company shall have delivered to the Buyer copies of resolutions duly adopted by its
board of directors approving the termination of contributions to the Company’s SEP-XXX Plan,
effective as of the Closing; and
(q) each of the Key Employees shall have executed and delivered an Employee Agreement.
7.9 Termination of Contracts. All Related Party Arrangements shall be terminated
without further obligations to the Company or the Buyer.
7.10 Affirmative Action Plan. The Company shall have (i) adopted an acceptable
affirmative action plan that complies with Executive Order 11246, (ii) filed an EEO-1 with the U.S.
Equal Employment Opportunity Commission and a VETS-100 with the U.S. Department of Labor, and (iii)
shall have paid in full all fees, fines, and penalties associated with (i) and (ii) above.
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ARTICLE VIII
CONDITIONS TO THE COMPANY’S AND THE STOCKHOLDER’S OBLIGATIONS
CONDITIONS TO THE COMPANY’S AND THE STOCKHOLDER’S OBLIGATIONS
The obligations of the Company and the Stockholder to consummate the transactions contemplated
under this Agreement are subject to the fulfillment and satisfaction, prior to or at the time of
the Closing, of each of the following conditions precedent, any one or more of which may be waived,
in part or in full, by the Stockholder in writing.
8.1 Representations and Warranties True at the Closing Date. The representations and
warranties of the Buyer contained in this Agreement (and in any certificate delivered by the Buyer
pursuant hereto) that are qualified by materiality (including, without limitation, a Material
Adverse Effect qualifier) shall be true, correct and complete in all respects; and the
representations and warranties of the Buyer contained in this Agreement (and in any certificate
delivered by the Buyer pursuant hereto) that are not so qualified by materiality shall be true,
correct and complete in all material respects, in each case: (i) when made on and as of the date
hereof and (ii) on and as of the Closing, with the same effect as though such representations and
warranties had been made on and as of such date, except where all such breaches or failures of the
above clauses (i) and (ii) do not, and could not reasonably be expected to, individually or in the
aggregate, result in a Material Adverse Effect on the Buyer, and the Buyer shall have executed and
delivered to the Stockholder a certificate as of the Closing to the effect set forth in this
Section 8.1.
8.2 Performance. All of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by the Buyer on or before the Closing Date
shall have been duly complied with, performed or satisfied in all material respects on or before
such date and the Buyer shall have executed and delivered to the Stockholder a certificate as of
the Closing to such effect.
8.3 No Litigation. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other legal or
regulatory restraint or provision challenging the transactions contemplated hereunder shall be in
effect, nor shall any Proceeding seeking any of the foregoing be pending.
8.4 Closing Deliveries of the Buyer. At the Closing, the Buyer shall have performed
and delivered the following, subject to waiver, in part or in full, by the Stockholder:
(a) the Buyer shall have executed and delivered a certificate of its secretary, setting forth
the resolutions of its board of directors (or other evidence reasonably satisfactory to the
Stockholder) authorizing the execution and delivery of this Agreement and the documents
contemplated hereby and the consummation of the transactions contemplated hereby and thereby, and
certifying that such resolutions have not been amended or rescinded and are in full force and
effect;
(b) the Buyer and the Escrow Agent shall have executed and delivered the Escrow Agreement and
the Tax Escrow Agreement;
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(c) the Buyer shall have executed and delivered the Consulting Agreement to the Stockholder;
(d) the Buyer shall have executed and delivered an Employee Agreement with respect to each Key
Employee; and
(e) the Buyer shall have paid, if requested by the Company and set forth on the Flow of Funds
Memorandum, the Transaction Bonus Amount to the Company.
ARTICLE IX
INDEMNITY
INDEMNITY
9.1 General Indemnification. Subject to Section 9.5, the Stockholder covenants and
agrees to indemnify, defend, protect and hold harmless the Buyer Indemnified Parties from, against
and in respect of all Damages suffered, sustained, incurred or paid by any Buyer Indemnified Party,
in each case in connection with, resulting from or arising out of, directly or indirectly (whether
or not involving a third party claim): (a) the breach of any representation or warranty made by
any Seller Party set forth in this Agreement or in any other agreement or any certificate delivered
or provided in connection with or related to the consummation of the transactions contemplated by
this Agreement; (b) the breach of any covenant or agreement on the part of any Seller Party set
forth in this Agreement or in any agreement or certificate executed and delivered by any Seller
Party pursuant to this Agreement or in the transactions contemplated hereby; (c) any matter
described on Appendix B; (d) any Indebtedness for Borrowed Money or Non-Ordinary Course
Liabilities, other than as shown on the Estimated Closing Statement; (e) the Benefit Plans and any
and all benefits accrued under the Benefit Plans as of the Closing Date and any and all other
Liabilities arising out of, or in connection with, the form, operation or termination of the
Benefit Plans on or prior to the Closing Date; (f) any and all Liabilities for Taxes (excluding
Liabilities for Tax Losses) (i) in connection with or arising out of the Company’s activities or
business on or before the Closing Date (determined, with respect to taxable periods that begin
before and end after the Closing Date, in accordance with the allocation provisions of Section
6.5(b)), (ii) owing by any Person (other than the Company) for which the Company may be liable
where the liability of the Company for such Taxes is attributable to an event or transaction
occurring on or before the Closing Date, including, without limitation, (A) in respect of Taxes
payable by the Stockholder, (B) under Treasury Regulation Sections 1.1502-6 (or any predecessor or
successor thereof or any analogous or similar provision of Law ), (C) as a transferee or successor
or (D) by Contract, or (iii) resulting from a breach by any Seller Party of any provision of
Section 6.5, (g) any Tax Losses, and (h) enforcing the indemnification rights of the Buyer
Indemnified Parties hereunder.
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9.2 Indemnification Procedures.
(a) In the event that, subsequent to the Closing, any Buyer Indemnified Party receives notice
of the assertion of any claim or demand or the commencement of any Proceeding against such Buyer
Indemnified Party by any Person who is not a party to this Agreement (a “Third-Party
Claim”), and for which such Buyer Indemnified Party may be entitled to indemnification pursuant
to this ARTICLE IX, the Buyer Indemnified Party shall promptly give written notice thereof,
together with a statement of any available information regarding such
Third Party Claim, to the Stockholder; provided, however, any failure on the part of the Buyer
Indemnified Party to so notify the Stockholder shall not limit any of the obligations of the
Stockholder, or any of the rights of any Buyer Indemnified Party, under this ARTICLE IX (except to
the extent such failure materially adversely prejudices the defense of such claim, demand or
Proceeding). The Buyer Indemnified Party shall have the right, at its election and upon written
notice to the Stockholder (the “Defense Notice”) within fifteen (15) days after delivering
notice of the Third Party Claim to the Stockholder, to conduct the defense against such claim in
its own name, the Company’s name or, if necessary, in the name of the Stockholder; provided,
however, that the Buyer Indemnified Party may not settle or compromise any such claim, demand or
Proceeding without the consent of the Stockholder (which consent shall not be unreasonably
withheld, conditioned or delayed). The Buyer Indemnified Party shall consult with and keep the
Stockholder reasonably informed regarding the status of such Third-Party Claim. If the Buyer
Indemnified Party fails to timely give the Defense Notice, it will be deemed to have elected not to
conduct the defense of the subject claim, and in such event the Stockholder shall have the right,
at its own cost and expense, to conduct the defense in good faith with counsel reasonably
satisfactory to the Buyer Indemnified Party; provided, however, that the Stockholder shall consult
with and keep the Buyer Indemnified Party reasonably informed regarding the status of such
Third-Party Claim and may not settle or compromise any such claim, demand or Proceeding without the
prior written consent of the Buyer Indemnified Party (which consent shall not be unreasonably
withheld, conditioned or delayed).
(b) In the event that any Indemnified Party desires to seek indemnification under this ARTICLE
IX, the Indemnified Party shall promptly give written notice to the Indemnifying Party, which
written notice shall set forth in reasonable detail the facts constituting the basis for such claim
and the amount, to the extent known, of the claim; provided, however, any failure on the part of
the Indemnified Party to so notify the Indemnifying Party shall not limit any of the obligations of
the Indemnifying Party, or any of the rights of any Indemnified Party, under this ARTICLE IX
(except to the extent such failure materially adversely prejudices the Indemnifying Party). Upon
receipt of the written notice from the Indemnified Party of a claim, the Indemnifying Party shall
have fifteen (15) Business Days in which to investigate the claim. For the purposes of such
investigation, the Indemnified Party agrees to make available to the Indemnifying Party and its
authorized Representatives the material information relied upon by the Indemnified Party to
substantiate the claim. If the Indemnifying Party disputes the claim for indemnification or any
portion thereof, the Indemnifying Party shall notify the Indemnified Party in writing (which
writing shall set forth in reasonable detail the grounds for such objection) within such fifteen
(15) Business Day period, whereupon the Indemnified Party and the Indemnifying Party shall promptly
meet and attempt in good faith to resolve their differences with respect to such claim or any
portion of such claim for indemnification. If the dispute has not been resolved within thirty (30)
days after the Indemnifying Party’s notice of such dispute, either the Indemnifying Party or the
Indemnified Party may proceed with pursuing the remedies provided herein to resolve such dispute.
If the Indemnifying Party does not dispute such claim or any portion of such claim for
indemnification and (i) the Indemnified Party is a Buyer Indemnified Party, then the Buyer may
offset the amount thereof pursuant to Section 9.3 below, including, but not limited to, requiring
the Escrow Agent to promptly pay the Indemnified Party an amount in cash equal to the amount of
such claim, or (ii) the Indemnified Party is the Stockholder, then the Buyer shall promptly pay the
Indemnified Party an amount in cash equal to
the amount of such claim. In the event no written notice disputing or objecting to such claim
or any portion of such claim for indemnification is delivered by the Indemnifying Party prior to
the expiration of the fifteen (15) Business Days in which the Indemnifying Party may dispute such
claim for indemnification, the claim(s) stated by the Indemnified Party shall be conclusively
deemed to be approved by the Indemnifying Party.
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(c) Notwithstanding anything to the contrary, the Tax Escrowed Funds shall be used solely for
the purpose of satisfying any indemnification obligations of the Stockholder pursuant to
Section 9.1(g); provided, however, that in the event the Tax Escrowed Funds are
insufficient or unavailable to cover the full amount of such Damages relating to Tax Losses, the
Escrowed Funds may be used to cover any such deficiency. In the event that the indemnification
obligations of the Stockholder exceed the amounts available for such indemnification pursuant to
the terms of the Escrow Agreement and the Tax Escrow Agreement, the Stockholder shall promptly pay
such excess to the Buyer.
(d) Notwithstanding anything to the contrary contained in this Section 9.2 or elsewhere in
this Agreement, the provisions under Section 6.5(f) shall control the rights and procedures with
respect to all Tax Proceedings, whether pending or threatened, against the Company that may give
rise to an indemnification obligation on the part of the Stockholder under Section 9.1 in respect
of Liabilities for Taxes for taxable periods or portions thereof ending on or before the Closing
Date, including, but not limited to, the all Proceedings from which Tax Losses may arise.
9.3 Right of Offset. In the event that the Stockholder is obligated to indemnify any
Buyer Indemnified Party in accordance with this Agreement, the Buyer shall have the right to offset
the amount thereof against any portion of the Purchase Price owed to the Stockholder, including,
without limitation, the Escrowed Funds in accordance with the Escrow Agreement and the Tax Escrowed
Funds in accordance with the Tax Escrow Agreement, in each case subject to the limitations set
forth in Section 9.4 and Section 9.5 and in the Escrow Agreement and Tax Escrow Agreement,
respectively. If the Stockholder has disputed any claim for Damages by any Buyer Indemnified Party
in accordance herewith and such dispute has not been resolved, the Buyer shall have the right to
offset the amount of such Damages claimed by the Buyer Indemnified Party against any portion of the
Purchase Price owed to the Stockholder, including, without limitation, by requesting that the
Escrow Agent reserve the amount of such Damages claimed by the Buyer Indemnified Party from any
distribution of the Escrowed Funds in accordance with the Escrow Agreement or the Tax Escrowed
Funds in accordance with the Tax Escrow Agreement, as applicable, until such claim has been
resolved pursuant to (a) a written settlement agreement entered into by the Buyer and the
Stockholder or (b) a final decision, order or award issued in accordance with Section 12.9. No
exercise of, nor failure to exercise, the rights set forth in this Section 9.3 shall constitute an
election of remedies or limit such Buyer Indemnified Party’s other rights hereunder or otherwise.
Such remedy shall be in addition to and not in limitation of any injunctive relief or other rights
or remedies to which the Buyer or any Buyer Indemnified Party is or may be entitled at law or
equity or under this Agreement (including any exhibits hereto). The exercise of rights in good
faith hereunder, whether or not ultimately determined to be justified, shall not constitute a
breach of any covenant hereunder.
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9.4 Survival of Representations, Warranties and Covenants. All representations and
warranties contained in this Agreement and any certificate delivered pursuant hereto shall survive
the Closing for a period of eighteen (18) months after the Closing Date (the “Survival Period”),
and shall thereafter expire; provided, however, that the Survival Period for the following items
shall be as follows: (a) the representations and warranties set forth in Section 3.2 (Authority for
Agreement), Section 3.3 (No Violation to Result), Section 3.4 (Capitalization), Section 3.10
(Taxes), Section 3.22 (Brokers), Section 4.1 (Authority for Agreement), Section 4.2 (No Violation
to Result), Section 4.3 (Ownership) and Section 4.4 (Brokers) and the indemnity obligations under
Section 9.1(f) (Taxes) and Section 9.1(g) (Tax Losses) shall survive until ninety (90) days after
expiration of the applicable statute of limitations, including waivers and extensions thereof,
(b) the representations and warranties set forth in Section 3.14 (Government Contracts and Bids)
shall survive until the date three (3) years from the Closing Date and (c) claims based on criminal
matters, fraud or intentional misrepresentation, which shall survive without limitation. Each
covenant and agreement contained in this Agreement shall survive in accordance with its terms.
Except as provided herein, no claim for indemnification may be made under this ARTICLE IX
after the expiration of the applicable Survival Period. Any representation or warranty with
respect to which a claim has been duly made under this ARTICLE IX for breach thereof prior
to the end of the applicable Survival Period otherwise applicable to such representation or
warranty shall survive until such claim is resolved.
9.5 Limitations on Indemnification.
(a) The Stockholder shall have no liability for Damages for breaches of representations and
warranties set forth in ARTICLE III unless and until the aggregate amount of all Damages for all
claims asserted by the Buyer Indemnified Parties exceeds Two Hundred Thousand Dollars ($200,000);
provided, however, after such amount of Damages exceeds Two Hundred Thousand Dollars ($200,000),
all Damages, excluding the first One Hundred Thousand Dollars ($100,000), shall be recoverable by
the Buyer Indemnified Parties; provided, further, that the foregoing limitations shall not apply to
(i) the representations and warranties set forth in Section 3.2 (Authority for Agreement), Section
3.3 (No Violation to Result), Section 3.4 (Capitalization), Section 3.5(b) (Accounts Receivable),
Section 3.10 (Taxes) and Section 3.22 (Brokers) or (ii) claims based on criminal matters, fraud or
intentional misrepresentation, with respect to which, in each case, all Damages in connection
therewith shall be recoverable from the first dollar and shall not be counted in determining
whether the thresholds in this Section 9.5(a) have been exceeded. For the sole purpose of
determining the amount of any Damages with respect to any breach of any representation, warranty or
covenant for purposes of indemnification under this ARTICLE IX (and not for determining whether or
not any breaches of representations, warranties or covenants have occurred), any qualification or
limitation of a representation, warranty or covenant by reference to materiality of matters stated
therein or as to matters having or not having “Material Adverse Effect,” “materiality” or words of
similar effect, shall be disregarded. The indemnification obligations of the Stockholder and the
rights and remedies that may be exercised by a Buyer Indemnified Party shall not be limited or
otherwise affected by or as a result of any information furnished to, or any investigation made by
or knowledge of, any of the Buyer Indemnified Parties or any of their Representatives.
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(b) The indemnification obligations of the Stockholder for breaches of representations and
warranties set forth in ARTICLE III shall be limited to an amount equal to
Five Million Three Hundred Sixty Thousand Dollars ($5,360,000) (the “General Cap”);
provided, that the foregoing limitation shall not apply to (i) the representations and warranties
set forth in Section 3.2 (Authority for Agreement), Section 3.3 (No Violation to Result), Section
3.4 (Capitalization), Section 3.10 (Taxes) and Section 3.22 (Brokers), which shall be limited to an
amount equal to the proceeds paid or payable to the Stockholder as a result of the transactions
contemplated under this Agreement or (ii) claims based on criminal matters, fraud or intentional
misrepresentation, for which the indemnification obligations hereunder shall be unlimited. With
respect to any of the items so excluded from the General Cap pursuant to the preceding sentence
(other than with respect to Section 3.3 (No Violation to Result)), in each case, no Damages
incurred in connection with such items shall be counted in determining whether the General Cap in
this Section 9.5(b) has been exceeded.
9.6 Waiver, Release and Discharge. Except as expressly set forth in this Agreement,
the Stockholder, for himself and his Affiliates, hereby irrevocably waives, releases and discharges
the Company, the Buyer and their respective Affiliates, directors, officers and employees from any
and all Liabilities and obligations to the Stockholder of any kind or nature whatsoever, whether in
his capacity as the Stockholder hereunder, as a shareholder, officer, director or employee of the
Company or otherwise (including, without limitation, in respect of rights of contribution or
indemnification), in each case whether absolute or contingent, liquidated or unliquidated, known or
unknown, and whether arising hereunder or under any other agreement or understanding, at law or
equity, or otherwise and the Stockholder shall not seek to recover any amounts in connection
therewith or thereunder from the Company; provided that the foregoing release shall not apply to
the Stockholder’s (and the Stockholder’s Affiliate’s) rights (i) under this Agreement or any other
agreement made in connection herewith, including, but not limited to, the Consulting Agreement;
(ii) arising prior to the Closing for accrued salary; or (iii) under COBRA or for accrued vacation
and benefits under employee benefit plans disclosed on Schedule 3.8(a)(i). The Stockholder
waives, and acknowledges and agrees that the Stockholder shall not have and shall not exercise or
assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other
similar right or remedy against the Company or the Buyer in connection with any actual or alleged
breach of any representation, warranty or obligation of any Seller Party set forth in this
Agreement.
9.7 Indemnification by Buyer. The Buyer covenants and agrees to indemnify, defend,
protect and hold harmless the Stockholder from, against and in respect of all Damages suffered,
sustained, incurred or paid by the Stockholder, in each case in connection with, resulting from or
arising out of, directly or indirectly (whether or not involving a third party claim):
(a) the breach of the covenants of the Buyer set forth in Section 6.5, Section 6.6 or Section
6.15 of this Agreement; and
(b) enforcing the indemnification rights of the Stockholder hereunder.
Any claims for indemnification pursuant to this Section 9.7 shall be resolved in accordance with
the procedures set forth in Section 9.2(b).
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9.8 Exclusive Remedy. 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 or warranty contained in this Agreement or any certificate delivered at Closing
(as well as any breach of the indemnification obligation under Section 9.1(a) with respect
to any untrue representation or breach of warranty). The foregoing indemnification provisions in
this Section 9 do not (a) waive or affect any claims for fraud or relating to criminal
investigations or proceedings, or relieve or limit the liability of any party or any officer,
trustee or director of such party from any liability arising out of or resulting from criminal
investigations or proceedings or fraud in connection with the transactions contemplated by this
Agreement or in connection with the delivery of any of the documents referred to herein or
(b) waive or affect any equitable remedies to which a party may be entitled.
9.9 No Double Recovery; Use of Insurance. Notwithstanding anything herein to the
contrary, no Party shall be entitled to reimbursement under any provision of this Agreement for any
amount to the extent such Party has previously been reimbursed for such amount under any other
provision of this Agreement. Furthermore, in the event any Damages related to a claim by an
Indemnified Party are covered by insurance, the Indemnified Party shall not be entitled to recover
from the Indemnifying Party (and shall refund amounts received up to the amount of indemnification
actually received) with respect to such Damages (but only to the extent the Indemnified Party
actually receives an insurance payment with respect to such covered claim and except to the extent
any additional amounts become payable to the insurer through adjustments to past, present or future
premiums or other similar mechanisms within the three (3) year period following the date of the
claim giving rise to such adjustments; provided, however, that in no event shall
the Indemnifying Party be liable for such adjustments to past, present or future premiums as a
result of this sentence to the extent that such adjustments are greater than or equal to the amount
of the insured losses, liabilities or damages).
9.10 Mitigation. Each Party agrees to use commercially reasonable efforts to mitigate
any loss, liability or damage which forms the basis of a claim hereunder, to the extent to which
the Indemnifying Party has acknowledged that it is responsible for all Damages with respect to such
claim.
ARTICLE X
COVENANT NOT TO COMPETE
COVENANT NOT TO COMPETE
10.1 Prohibited Activities. For the period commencing with Closing and ending on the
fifth (5th) anniversary of the Closing, the Stockholder shall not, for any reason
whatsoever, directly or indirectly, for himself, or on behalf of or in conjunction with any other
Person:
(a) engage as a stockholder, owner, partner, joint venturer, or in a managerial capacity,
whether as a director, officer, employee, independent contractor, consultant or advisor, in any
Competing Business; provided, however, that neither the Stockholder nor any of the Stockholder’s
Affiliates shall be precluded from the ownership of securities of corporations that are listed on a
national securities exchange or traded in the national over-the-counter market in an amount that
shall not exceed one percent (1%) of the outstanding shares of any such corporation;
- 55 -
(b) employ, or call upon for the purpose or with the intent of enticing or soliciting away
from or out of the employ of the Company, the Buyer or the Buyer’s Affiliates, any person who is at
that time, or was within one (1) year prior to that time, an employee of the Company, the Buyer or
the Buyer’s Affiliates;
(c) other than on behalf of the Buyer or its Affiliates, (i) sell products or services to, or
call upon for the purpose of soliciting or selling products or services to, any Company Customer,
(ii) induce or attempt to induce any Company Customer to cease doing business, or reduce the amount
of business such Company Customer does, with the Company or (iii) interfere with or diminish the
relationship between any Company Customer and the Company; or
(d) publish any statement or make any statement (under any circumstances reasonably likely to
become public) maligning the reputation of the Buyer, the Company or any of the Buyer’s Affiliates.
The Parties intend that the covenants contained in this Section 10.1 shall be deemed to be a series
of separate covenants, one for each county in each state of the United States and, except for
geographic coverage, each such separate covenant shall be identical in terms to the covenant
contained in this Section 10.1.
10.2 Confidentiality.
(a) The Stockholder and each of the Stockholder’s Affiliates, (i) shall treat and hold as
confidential all information concerning this Agreement and the business and affairs of the Buyer,
the Company and the Buyer’s Affiliates that is not already generally available to the public (the
“Confidential Information”), (ii) shall not disclose, transfer, transmit or use any of the
Confidential Information except in connection with this Agreement and as authorized by the Buyer or
the Company and (iii) shall deliver promptly to the Buyer, at the request and option of the Buyer,
all tangible embodiments (and all copies) of the Confidential Information which are in his
possession or under his control. The Stockholder hereby acknowledges that such Confidential
Information constitutes proprietary and trade secret information of the Buyer or the Company, as
the case may be.
(b) In the event that the Stockholder is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, the Stockholder shall notify
the Buyer promptly of the request or requirement so that the Buyer may seek an appropriate
protective order or waive compliance with the provisions of this Section 10.2. If, in the absence
of a protective order or the receipt of a waiver hereunder, the Stockholder is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or other Governmental
Authority or any official or agency thereof, the Stockholder may disclose the Confidential
Information thereto; provided that the Stockholder shall use the Stockholder’s commercially
reasonable efforts to obtain, at the request and expense of the Buyer, an order or other assurance
that confidential treatment shall be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate.
- 56 -
10.3 Damages. Because of the difficulty of measuring economic losses to the Buyer and
its Affiliates as a result of a breach of the foregoing covenants in this ARTICLE X, and because of
the immediate and irreparable damage that could be caused to the Buyer and its Affiliates for which
it would have no other adequate remedy, the Stockholder agrees that the foregoing covenant may be
enforced by the Buyer in the event of breach or threatened breach by the Stockholder, in addition
to, but not in lieu of, any other available remedies (including, without limitation, monetary
Damages), by injunctions, restraining orders or other equitable remedies, without necessity of
posting an injunction bond.
10.4 Reasonable Restraint. It is agreed by the Parties that the foregoing covenants
in this ARTICLE X impose a reasonable restraint on the Stockholder in light of the activities and
business of the Buyer, the Company and the Buyer’s Affiliates on the date of the execution of this
Agreement and the current plans of the Company, the Buyer and its Affiliates. The Stockholder
agrees that the foregoing covenants in this ARTICLE X do not unreasonably restrict the
Stockholder’s ability to earn a livelihood.
10.5 Independent Covenant. Each of the covenants in this ARTICLE X shall be construed
as an agreement independent of any other provision in this Agreement, and the existence of any
claim or cause of action of the Stockholder against the Buyer, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the Buyer of any such covenant.
It is understood by the Parties that the covenants contained in this ARTICLE X are essential
elements of this Agreement and that, but for the agreement of the Stockholder to comply with such
covenants, the Buyer would not have agreed to enter into this Agreement. The Stockholder and the
Buyer have independently consulted with their respective counsel and have been advised concerning
the reasonableness and propriety of such covenants with specific regard to the nature of the
business conducted by the Buyer. The Stockholder hereby agrees that all covenants contained in
this ARTICLE X are material, reasonable and valid and waive all defenses to the strict enforcement
hereof by the Buyer. The covenants in this ARTICLE X are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any other covenant.
Moreover, in the event that any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth are unreasonable, then it is the intention of the
Parties that such restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed. The covenants contained in this ARTICLE X shall not
be affected by any breach of any other provision of this Agreement by any Party hereto and shall
have no effect if the transactions contemplated by this Agreement are not consummated.
ARTICLE XI
TERMINATION
TERMINATION
11.1 Termination.
(a) This Agreement may, by notice given on or prior to the Closing Date, in the manner
hereinafter provided, be terminated and abandoned at any time prior to the Closing Date:
(i) by the Stockholder if there has been a material misrepresentation or a material default or
breach by the Buyer with respect to its representations in this Agreement or in any ancillary
document or the due and timely performance by the Buyer of any of the Buyer’s covenants and
agreements contained in this Agreement or in any ancillary document, and such misrepresentation,
default or breach shall not have been cured within five (5) days after receipt by the Buyer of
notice specifying particularly such misrepresentation, default or breach;
- 57 -
(ii) by the Buyer if there has been a material misrepresentation or a material default or
breach by any Seller Party with respect to any of their respective representations in this
Agreement or in any ancillary document or the due and timely performance by any Seller Party of any
of their respective covenants and agreements contained in this Agreement or in any ancillary
document, and such misrepresentation, default or breach shall not have been cured within five (5)
days after receipt by any Seller Party of notice specifying particularly such misrepresentation,
default or breach;
(iii) by mutual written agreement of the Stockholder and the Buyer;
(iv) by either the Company or the Buyer if the Closing shall not have occurred on or before
November 16, 2010; provided, however, that the Party seeking to terminate this Agreement shall not
because of its (and in the case of the Company, the Stockholder’s) breach or violation of any
representation, warranty or covenant contained herein have caused the Closing not to have occurred;
(v) by the Buyer if there shall have occurred since the date hereof (i) an effect, event or
change which, individually or in the aggregate, has had or could reasonably be expected to have a
Material Adverse Effect on the Company or (ii) any resignation or termination of employment (or
indications of an intention or plan to resign) by a material number of Company Employees;
(vi) [Intentionally Omitted]; or
(vii) by the Stockholder, on the one hand, or by the Buyer, on the other hand, if there shall
be a final nonappealable order of a federal or state court in effect preventing the consummation of
the transactions contemplated by this Agreement; or there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the
transactions contemplated by this Agreement by any Governmental Authority which would make the
consummation of the transactions illegal.
(b) In the event of the termination of this Agreement pursuant to Section 11.1(a), (i) the
Stock Purchase shall be abandoned; (ii) the provisions of Section 6.3, ARTICLE IX, this ARTICLE XI
and ARTICLE XII shall remain in full force and effect and survive any termination of this
Agreement; and (iii) each Party shall remain liable for any breach of this Agreement prior to its
termination.
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ARTICLE XII
MISCELLANEOUS
MISCELLANEOUS
12.1 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the Seller Parties and the Buyer and their respective successors and permitted
assigns; provided, however, that no Party shall make any assignment of this Agreement or any
interest herein without the prior written consent of the other Parties, and any such purported
assignment without such prior written consent shall be void and of no force or effect.
12.2 Governing Law. This Agreement shall in all respects be interpreted, construed
and governed by and in accordance with the laws of the State of Delaware, without regard to its
conflicts of laws principles.
12.3 Specific Performance; Remedies. Each Party acknowledges that the other Parties
shall be irreparably harmed and that there shall be no adequate remedy at law for any violation by
any of them of any of the covenants or agreements contained in this Agreement. It is accordingly
agreed that, in addition to, but not in lieu of, any other remedies that may be available upon the
breach of any such covenants or agreements (including, without limitation, monetary Damages), each
Party shall have the right to obtain injunctive relief to restrain a breach or threatened breach
of, or otherwise to obtain specific performance of, the other Parties’ covenants and agreements
contained in this Agreement. All rights and remedies of the Parties under this Agreement shall be
cumulative, and the exercise of one or more rights or remedies shall not preclude the exercise of
any other right or remedy available under this Agreement or applicable Law.
12.4 Severability. Each section, subsection and lesser section of this Agreement
constitutes a separate and distinct undertaking, covenant and/or provision hereof. In the event
that any provision of this Agreement shall finally be determined to be unlawful, such provision
shall be deemed severed from this Agreement, but every other provision of this Agreement shall
remain in full force and effect; provided, however, that if such unlawful provision is so material
to the Party for whose benefit the provision was originally included so that such Party would not
have entered into this Agreement without such unlawful provision, the severability of such
provision shall be arbitrated pursuant to Section 12.9 hereof. The preceding sentence is in
addition to and not in place of the severability provisions in ARTICLE X.
12.5 Amendment. This Agreement may be amended, supplemented or modified only by
execution of a written instrument signed by the Buyer and the Stockholder.
12.6 Waiver. Either the Buyer, on the one hand, or any Seller Party, on the other
hand, may to the extent permitted by applicable Law (a) extend the time for the performance of any
of the obligations or other acts of the Seller Parties or the Buyer, as applicable, (b) waive any
inaccuracies in the representations and warranties of the Seller Parties or the Buyer, as
applicable, contained herein or in any document delivered pursuant hereto or (c) waive compliance
with any of the agreements of the Seller Parties or the Buyer, as applicable, contained herein. No
such extension or waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the Party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any Party of any term of this
Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the
same or any other term of this Agreement on any future occasion.
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12.7 Notices. All notices, requests, consents, waivers and other communications
required or permitted to be given hereunder shall be in writing and shall be deemed to have been
duly given (a) if personally delivered, upon delivery or refusal of delivery, (b) if mailed by
registered or certified United States mail, return receipt requested, postage prepaid, upon
delivery or refusal of delivery, or (c) if sent by a nationally recognized overnight delivery
service, upon delivery or refusal of delivery. All notices, consents, waivers or other
communications required or permitted to be given hereunder shall be addressed as follows:
| (a) | If to the Buyer: |
Global Defense Technology & Systems, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
| (b) | If to the Stockholder: |
Xxxxxx, Feinblatt, Rothman, Hoffberger & Xxxxxxxxx, LLC
000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address or addresses as the Party addressed may from time to time designate in
writing pursuant to notice given in accordance with this Section 12.7.
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12.8 Expenses. Except as otherwise provided in Section 6.14 and ARTICLE IX, all costs
and expenses of the Company and the Stockholder (including, without limitation, financial advisory
fees, legal fees and expenses, broker and finder fees, and fees and expenses of accountants)
incurred by the Company or the Stockholder in connection with the transactions contemplated hereby
shall be borne by the Stockholder, and all costs and expenses of the Buyer
(including, without limitation, financial advisory fees, legal fees and expenses, broker and
finder fees, and fees and expenses of accountants) incurred by the Buyer in connection with the
transactions contemplated hereby shall be borne by the Buyer, except to the extent such costs and
expenses represent Damages indemnifiable by an Indemnifying Party under this Agreement. The
Stockholder may direct the Buyer to satisfy any of the Stockholder’s obligations under this Section
12.8 at the Closing pursuant to the Flow of Funds Memorandum, in which case the Closing Payment
shall be reduced by a corresponding amount (provided that the Closing Payment has not already been
adjusted on account of the payment of such amounts).
12.9 Arbitration.
(a) Except as set forth in ARTICLE X, Section 12.3 and Section 12.9(c) hereof, any dispute,
difference, controversy or claim arising in connection with or related or incidental to, or
question occurring under, this Agreement or the subject matter hereof shall be finally settled
under the Commercial Arbitration Rules (the “Rules”) of the American Arbitration
Association (“AAA”), unless otherwise agreed, by an arbitral tribunal composed of three (3)
arbitrators, at least one (1) of whom shall be an attorney experienced in corporate transactions,
appointed by agreement of the Buyer and the Stockholder in accordance with said Rules. In the
event Buyer and the Stockholder fail to agree upon a panel of arbitrators from the first list of
potential arbitrators proposed by the AAA, the AAA will submit a second list in accordance with
such Rules. In the event Buyer and the Stockholder shall have failed to agree upon a full panel of
arbitrators from such second list, any remaining arbitrators to be selected shall be appointed by
the AAA in accordance with such Rules. If at the time of the arbitration Buyer and the Stockholder
agree in writing to submit the dispute to a single arbitrator, such single arbitrator shall be
appointed by agreement of Buyer and the Stockholder in connection with the foregoing procedure or
failing such agreement by the AAA in accordance with such Rules. All arbitrators shall be neutral
arbitrators and subject to Rule 19 of the Rules.
(b) The arbitrators shall apply the Laws of the State of Delaware, shall not have the
authority to add to, detract from, or modify any provision hereof and shall not award punitive
damages to any injured Party. A decision by a majority of the arbitrators shall be final,
conclusive and binding. The arbitrators shall deliver a written and reasoned award with respect to
the dispute to each of the parties to the dispute, difference, controversy or claim, who shall
promptly act in accordance therewith. Any arbitration proceeding shall be held in Fairfax County,
Virginia.
(c) The arbitration proceedings conducted pursuant hereto shall be confidential. No Party
shall disclose any information about the arbitration proceedings or the evidence adduced by the
other Parties in any arbitration proceeding or about documents provided by the other Parties in
connection with the proceeding except in the course of a judicial, regulatory or arbitration
proceeding or as may be requested by a Governmental Authority or as required or advisable under Law
or exchange rules. Before making any disclosure permitted by the preceding sentence, the Party
intending to make such disclosure shall give the other Parties reasonable written notice of the
intended disclosure. The arbitrator, expert witnesses and stenographic reporters shall be asked to
sign appropriate non-disclosure agreements in order to effectuate this Agreement of the parties as
to confidentiality.
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(d) The Parties hereby exclude any right of appeal to any court on the merits of the dispute.
The provisions of this Section 12.9 may be enforced in any court having jurisdiction over the award
or any of the Parties or any of their respective assets, and judgment on the award (including
without limitation equitable remedies) granted in any arbitration hereunder may be entered in any
such court. Nothing contained in this Section 12.9 shall prevent any Party from seeking injunctive
or other equitable relief from any court of competent jurisdiction, without the need to resort to
arbitration.
12.10 Complete Agreement. This Agreement, those documents expressly referred to
herein, including all appendices, exhibits and schedules hereto, and the other documents of even
date herewith, together with the Non-Disclosure Agreement, between the Buyer and the Company (which
shall terminate automatically at the Closing), embody the complete agreement and understanding
among the Parties and supersede and preempt any prior understandings, agreements or representations
by or among the Parties, written or oral, which may have related to the subject matter hereof.
Notwithstanding the right of the Buyer to investigate the assets, properties, books, records and
financial condition of the Company, and notwithstanding any knowledge obtained or obtainable by the
Buyer as a result of such investigation, the Buyer has the unqualified right to rely upon, and has
relied upon, each of the representations and warranties made by the Company and the Stockholder in
this Agreement or pursuant hereto. No information or knowledge obtained in any investigation by
the Buyer shall affect or be deemed to modify any representation or warranty of the Company or the
Stockholder contained herein (or in any list, certificate, schedule or other instrument, document,
agreement or writing furnished or to be furnished to or made with the Buyer pursuant hereto) or the
conditions to the obligations of the Parties to consummate the transactions contemplated by this
Agreement. Any claim by the Buyer in connection with this Agreement shall not be adversely
affected by any investigation by or opportunity to investigate afforded to the Buyer, nor shall
such a claim be adversely affected by the Buyer’s knowledge on or before the Closing Date of any
breach or of any state of facts that may give rise to such a breach. 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, shall not adversely affect the right to indemnification, payment
of Damages or other remedy based on such representations, warranties, covenants or obligations.
12.11 Absence of Third Party Beneficiary Rights. Except for ARTICLE IX (which shall
be for the benefit of the Indemnified Parties), no provision of this Agreement is intended, nor
will be interpreted, to provide or create any third party beneficiary rights or any other rights of
any kind in any client, customer, Affiliate, shareholder, employee or partner of any Party hereto
or any other Person.
12.12 Mutual Drafting. This Agreement is the mutual product of the Parties, and each
provision hereof has been subject to the mutual consultation, negotiation and agreement of each of
the Parties, and shall not be construed for or against any Party hereto, but according to the
application of the rules of interpretation of contracts.
12.13 Further Representations. Each Party acknowledges and represents that it has
been represented by its own legal counsel in connection with the transactions contemplated by this
Agreement, with the opportunity to seek advice as to its legal rights from such counsel. Each
Party further represents that it is being independently advised as to the Tax or securities
consequences of the transactions contemplated by this Agreement and is not relying on any
representations or statements made by any other Party as to such Tax and securities consequences.
- 62 -
12.14 Gender. Unless the context clearly indicates otherwise, where appropriate the
singular shall include the plural and the masculine shall include the feminine or neuter, and
vice versa, to the extent necessary to give the terms defined herein and/or the
terms otherwise used in this Agreement the proper meanings.
12.15 Headings. The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or interpretation of this Agreement.
12.16 Counterparts. This Agreement may be executed in two or more counterparts, each
of which when executed and delivered shall be deemed an original and all of which, taken together,
shall constitute the same agreement. This Agreement and any document or schedule required hereby
may be executed and delivered by facsimile or electronic mail of a “.pdf” data file, which shall be
considered legally binding for all purposes.
[Signatures appear on following page(s).]
- 63 -
IN WITNESS WHEREOF, each Party hereto has signed or has caused to be signed by its officer
thereunto duly authorized this Stock Purchase Agreement as of the date first above written.
| BUYER: Global Defense Technology & Systems, Inc. |
||||
| By: | /s/ Xxxx Xxxxxx | |||
| Name: | Xxxx Xxxxxx | |||
| Title: | President and Chief Executive Officer | |||
| COMPANY: Zytel Corporation |
||||
| By: | /s/ Xxxxx X. Xxxxxxx | |||
| Name: | Xxxxx X. Xxxxxxx | |||
| Title: | President | |||
| STOCKHOLDER: |
||||
| /s/ Xxxxx X. Xxxxxxx | ||||
| Xxxxx X. Xxxxxxx | ||||
APPENDICES
Appendix A
|
Defined Terms | |
Appendix B
|
Certain Matters |
EXHIBITS
Exhibit A
|
Consulting Agreement | |
Exhibit B
|
Employee Agreements | |
Exhibit C
|
Bonus Award Letter | |
Exhibit D
|
Escrow Agreement | |
Exhibit E
|
Tax Escrow Agreement | |
Exhibit F
|
Form of Opinion of Counsel |
APPENDIX A
DEFINED TERMS
(1) “AAA” has the meaning given to such term in Section 12.9(a).
(2) “Accounting Firm” means an accounting firm mutually satisfactory to the Buyer and
the Stockholder.
(3) “Affiliate” means as to any Party, any Person which directly or indirectly, is in
control of, is controlled by, or is under common control with, such Party, including any Person who
would be treated as a member of a controlled group under Section 414 of the Code and any officer or
director of such Party. For purposes of this definition, an entity shall be deemed to be
“controlled by” a Person if the Person possesses, directly or indirectly, power either to (a) vote
ten percent (10%) or more of the securities (including convertible securities) of such entity
having ordinary voting power or (b) direct or cause the direction of the management or policies of
such entity whether by contract or otherwise; and, as to a Party who is a natural person, such
person’s spouse, parents, siblings and lineal descendants. For the avoidance of doubt, from and
after the Closing, the Buyer’s Affiliates shall include, without limitation, the Company.
(4) “Agreement” has the meaning given to such term in the Preamble.
(5) “Auditor” has the meaning given to such term in Section 6.14.
(6) “Balance Sheet” means the unaudited balance sheets of the Company at June 30,
2010.
(7) “Balance Sheet Date” means June 30, 2010.
(8) “Benefit Plan” means each (a) Employee Benefit Plan, (b) current employment
agreement, including, but not limited to, any current individual benefit arrangement, policy or
practice with respect to any current or former employee or director of the Company, any subsidiary
or any ERISA Affiliate, and (c) other employee benefit, bonus, deferred, or other incentive
compensation, stock option, stock purchase, stock appreciation, fringe benefit, severance pay,
lay-off or reduction in force, change in control, sick pay, vacation pay, salary continuation,
retainer, leave of absence, educational assistance, service award, employee discount, fringe
benefit plan, arrangement, policy or practice, whether legally binding or not, which the Company,
any subsidiary or any ERISA Affiliate maintains or contributes to, or with respect to which the
Company, any subsidiary or any ERISA Affiliate has incurred any obligation or Liability in the past
six (6) years.
(9) “Bonus Award Letter” shall have the meaning given to such term in the Recitals.
(10) “Bonus Payment” shall have the meaning given to such term in Section 1.5.
(11) “Business Day” means any day other than a Saturday, a Sunday or a day on which
commercial banks in the Commonwealth of Virginia are closed.
(12) “Buyer” has the meaning given to such term in the Preamble.
(13) “Buyer Confidential Information” means all documents and information concerning
the Buyer or the Company or any their respective Representatives furnished in connection with this
Agreement or the transactions contemplated hereby (including, without limitation, any claim or
dispute arising out of or related to this Agreement or the transactions contemplated hereby, or the
interpretation, making, performance, breach or termination thereof).
(14) “Buyer Indemnified Party” means the Buyer and its officers, directors, employees,
stockholders, assigns, successors and Affiliates.
(15) “Buyer Prepared Return” has the meaning given to such term in Section 6.5(a)(ii).
(16) “Cash” means all cash on hand or in bank accounts, cash equivalents and
short-term investments.
(17) “CFIUS” has the meaning given to such term in Section 6.7(b).
(18) “Closing” means the closing of the transactions contemplated by this Agreement.
(19) “Closing Adjustment” has the meaning given to such term in Section 1.4(c).
(20) “Closing Balance Sheet” means a balance sheet of the Company prepared as of 11:59
p.m., Eastern Time, on the Closing Date in accordance with GAAP.
(21) “Closing Date” means the date on which the Closing occurs.
(22) “Closing Payment” has the meaning given to such term in Section 1.2(b).
(23) “Closing Statement” has the meaning give to such term in Section 1.4(b).
(24) “Closing Working Capital” means the book value of the total current assets of the
Company (including Cash, but excluding any Tax assets of the Company) less the book value
of the total current liabilities of the Company (excluding (i) any liabilities of the Company for
Tax Losses, (ii) Indebtedness for Borrowed Money, (iii) Non-Ordinary Course Liabilities and (iv)
the Transaction Bonus Amount, in each of case (ii), (iii) and (iv) above, to the
extent it reduces the Closing Payment pursuant to Section 1.2(b)), in each case determined as
of 11:59 p.m., Eastern Time, on the Closing Date in accordance with GAAP.
(25) “Code” shall mean the Internal Revenue Code of 1986, as amended.
(26) “Company” has the meaning given to such term in the Preamble.
(27) “Company Common Stock” means Common Stock, no par value per share, of the
Company.
(28) “Company Confidential Information” means all documents and information concerning
the Company and/or the Stockholder or any their respective Representatives or Affiliates furnished
in connection with this Agreement or the transactions contemplated hereby.
(29) “Company Customer” means any Person who is at that time, or has been within one
(1) year prior to that time, a customer or prospective customer of the Company.
(30) “Company Employees” has the meaning given to such term in Section 3.9(a).
(31) “Company Intellectual Property” means the Company Owned Intellectual Property and
the Company Licensed Intellectual Property.
(32) “Company Licensed Intellectual Property” means all Intellectual Property that is
licensed to the Company by any third party.
(33) “Company Owned Intellectual Property” means all Intellectual Property owned or
purported to be owned by the Company, in whole or in part.
(34) “Company Registered Intellectual Property” means United States and foreign Patent
Rights, registered Trademarks, registered copyrights and designs, mask work registrations and
applications for each of the foregoing that are registered or filed in the name of the Company,
alone or jointly with others.
(35) “Company Stock Options” has the meaning given to such term in Section 1.6.
(36) “Company Warrants” has the meaning given to such term in Section 1.6.
(37) “Competing Business” means any business selling any products or services in
competition with the Company (based on the business of the Company as of the Closing) or selling
any products or services to the National Security Agency, whether pursuant to a prime contract with
the National Security Agency, a subcontract with a prime contractor to the National Security Agency
or otherwise.
(38) “Competing Transaction” has the meaning given to such term in Section 6.11.
(39) “Confidential Information” has the meaning given to such term in Section 10.2(a).
(40) “Consulting Agreement” has the meaning given to such term in the Recitals.
(41) “Contract” means any note, bond, mortgage, debt instrument, security agreement,
contract, license, lease, sublease, covenant, commitment, power of attorney, proxy, indenture,
purchase and sale order, or other agreement or arrangement, oral or written, to which the Company
is currently a party or by which the Company or any of their assets or property are currently
bound, including any and all amendments, waivers or other changes thereto.
(42) “Current Government Contracts” has the meaning given to such term in Section
3.14(a).
(43) “Damages” means all Liabilities, losses, claims, damages, punitive damages,
causes of actions, lawsuits, administrative proceedings (including informal proceedings),
investigations, audits, demands, assessments, adjustments, judgments, settlement payments,
deficiencies, penalties, fines, Taxes, interest (including interest from the date of such damages)
and costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements
of every kind, nature and description).
(44) “DCAA” has the meaning given to such term in Section 3.14(k).
(45) “Direct Costs” has the meaning given to such term in 48 C.F.R. Section 2.101.
(46) “DSS” means the Defense Security Service of the United States Department of
Defense.
(47) “Employee Agreement” has the meaning given to such term in the Recitals.
(48) “Employee Benefit Plan” shall have the meaning specified in Section 3(3) of ERISA
and shall include both “employee pension benefit plans” within the meaning of Section 3(2)(A) of
ERISA (including, without limitation, any simplified employee pension plans subject to Section
408(k) of the Code) and “employee welfare benefit plans” within the meaning of Section 3(1) of
ERISA.
(49) “Encumbrance” means any claim, lien, pledge, assignment, option, charge,
easement, security interest, right-of-way, encumbrance, mortgage or other right (including
without limitation, with respect to any shares of Company Common Stock, any preemptive right,
right of first refusal, put, call or other restriction on transfer).
(50) “Environment” means navigable waters, waters of the contiguous zone, ocean
waters, natural resources, surface waters, ground water, drinking water supply, land surface,
subsurface strata, ambient air, both inside and outside of buildings and structures, man-made
buildings and structures, and plant and animal life on earth.
(51) “Environmental Laws” means all Laws, ordinances, regulations, codes, orders,
judgments, injunctions, awards or decrees relating to pollution, protection of the Environment,
public or worker health and safety, or the emission, discharge, release or threatened release of
pollutants, contaminants or industrial, medical, toxic or hazardous substances or wastes into the
Environment or otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants or industrial, medical, toxic
or hazardous substances or wastes, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 USC. Section 9601 et. seq., the Resource Conservation
and Recovery Act, 42 USC. Section 6901 et. seq., the Toxic Substances Control Act, 15 USC. Section
2601 et. seq., the Federal Water Pollution Control Act, 33 USC. Section 1151 et seq., the Clean Air
Act, 42 USC. Section 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 USC.
Section 111 et. seq., the Occupational Safety and Health Act, 29 USC. Section 651 et. seq., the
Asbestos Hazard Emergency Response Act, 15 USC. Section 2601 et. seq., the Safe Drinking Water Act,
42 USC. Section 300f et. seq., the Oil Pollution Act of 1990 and analogous state acts, and all such
laws, ordinances, regulations, codes, orders, judgments, injunctions, awards and decrees as are
applicable.
(52) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
(53) “ERISA Affiliate” means each Person which is or was required to be treated as a
single employer with the Company or their current or former subsidiaries under Section 414 of the
Code or Section 4001(b)(1) of ERISA.
(54) “Escrow Agent” has the meaning given to such term in Section 1.3(a).
(55) “Escrow Agreement” has the meaning given to such term in Section 1.3(a).
(56) “Escrow Deposit” has the meaning given to such term in Section 1.3(a).
(57) “Escrowed Funds” means the Escrow Deposit, plus the amount of any interest,
dividends and other income resulting from the investment of the Escrow Deposit and earnings thereon
and proceeds thereof.
(58) “Estimated Closing Adjustment” has the meaning given to such term in
Section 1.4(a).
(59) “Estimated Closing Balance Sheet” means an estimated balance sheet of the Company
prepared as of 11:59 p.m., Eastern Time, on the Closing Date in accordance with GAAP.
(60) “Estimated Closing Statement” means a statement setting forth (i) the Estimated
Closing Balance Sheet, (ii) the Indebtedness for Borrowed Money of the Company, (iii) the
Non-Ordinary Course Liabilities and (iv) the Estimated Closing Working Capital.
(61) “Estimated Closing Working Capital” means the estimated book value of the total
current assets of the Company (including Cash, but excluding any Tax assets of the Company)
less the estimated book value of the total current liabilities of the Company (excluding
(i) any liabilities of the Company for Tax Losses, (ii) Indebtedness for Borrowed Money, (iii)
Non-Ordinary Course Liabilities and (iv) the Transaction Bonus Amount, in each of case (ii), (iii)
and (iv) above, to the extent it reduces the Closing Payment pursuant to Section 1.2(b)), in each
case determined as of 11:59 p.m., Eastern Time, on the Closing Date in accordance with GAAP, as set
forth on the Estimated Closing Balance Sheet.
(62) “Estimated Working Capital Deficit” means the amount, if any, by which the Target
Working Capital exceeds the Estimated Closing Working Capital.
(63) “Estimated Working Capital Surplus” means the amount, if any, by which the
Estimated Closing Working Capital exceeds the Target Working Capital.
(64) “Examination Report” means the IRS examination report dated December 4, 2009,
concerning the Company’s taxable years ended December 31, 2006, through 2008.
(65) “Exon-Xxxxxx” shall mean the Exon-Xxxxxx Amendment to the Defense Production Act
of 1950, 50 U.S.C. app. § 2170, as amended.
(66) “Exploit” means develop, design, test, modify, make, use, sell, have made, used
and sold, import, reproduce, market, distribute, commercialize, support, maintain, correct and
create derivative works of.
(67) “Facilities” has the meaning given to such term in Section 3.11(a).
(68) “FAR Ethics Rules” has the meaning given to such term in Section 3.14(aa).
(69) “Financial Statements” means the Year-End Financials and the Interim Financials.
(70) “FIRPTA” means the Foreign Investment in Real Property Tax Act of 1980, as
amended.
(71) “Flow of Funds Memorandum” has the meaning given to such term in Section 1.2(b).
(72) “FOCI” has the meaning given to such term in Section 6.7(b).
(73) “GAAP” means United States generally accepted accounting principles, consistently
applied.
(74) “General Cap” has the meaning given to such term in Section 9.5(b).
(75) “Governmental Authority” means any nation or government, any state or other
instrumentality or political subdivision thereof (including any county or city), and any entity
exercising executive, legislative, judicial, military, regulatory or administrative functions of or
pertaining to government.
(76) “Government Contract” means any Contract, including an individual task order,
delivery order, purchase order or blanket purchase agreement, between the Company and the U.S.
Government or any other Governmental Authority, as well as any subcontract or other arrangement by
which (a) the Company has agreed to provide goods or services to a prime contractor, to a
Governmental Authority or to a higher-tier subcontractor or (b) a subcontractor or vendor has
agreed to provide goods or services to the Company, where, in either event, such goods or services
ultimately will benefit or be used by a Governmental Authority, including any closed Contract or
subcontract as to which the right of the U.S. Government or a higher-tier contractor to review,
audit or investigate has not expired.
(77) “Government Contract Bid” has the meaning given to such term in Section 3.14(a).
(78) “Hazardous Substance” means any toxic waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, industrial substance or waste, petroleum or
petroleum-derived substance or waste, radioactive substance or waste, or any constituent of any
such substance or waste, or any other substance regulated under or defined by any Environmental
Law.
(79) “Indebtedness for Borrowed Money” of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) any deficit balance in Cash, (c) all
Qualified Accounts Payable of such Person, (d) all obligations of such Person evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such Person is responsible
or liable, (e) all obligations of such Person issued or assumed for deferred purchase price
payments, (f) all obligations of such Person under leases required to be capitalized in accordance
with GAAP, as consistently applied by such Person, (g) all obligations of such Person for the
reimbursement of any obligor on any line or letter of credit, banker’s acceptance, guarantee or
similar credit transaction, in each case, that has been drawn or claimed against, (h) all interest
rate and currency swaps, caps, collars and similar agreements or hedging devices under which
payments are obligated to be made by such Person, whether periodically or
upon the happening of a contingency, (i) all obligations created or arising under any
conditional sale or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), (j) all obligations of such
Person or another Person secured by an Encumbrance on any asset of such first Person, whether or
not such obligation is assumed by such first Person, (k) any prepayment fees or other fees, costs
or expenses associated with payment of any Indebtedness for Borrowed Money and (l) any guaranty of
any Indebtedness for Borrowed Money of any other Person.
(80) “Indemnified Party” means the party claiming indemnification in accordance with
ARTICLE IX.
(81) “Indemnifying Party” means the party from whom indemnification is claimed in
accordance with ARTICLE IX.
(82) “Indirect Costs” has the meaning given to such term in 48 C.F.R. Section 2.101.
(83) “Intellectual Property” means the following subsisting throughout the world: (a)
Patent Rights; (b) Trademarks and all goodwill in the Trademarks; (c) copyrights, works of
authorship, copyrightable works (including, but not limited to, Software), designs, data and
database rights and registrations and applications for registration thereof, including moral rights
of authors; (d) inventions, invention disclosures, statutory invention registrations, trade secrets
and confidential business information, know-how, manufacturing and product processes and
techniques, research and development information, financial, marketing and business data, pricing
and cost information, business and marketing plans and customer and supplier lists and information,
whether patentable or nonpatentable, whether copyrightable or noncopyrightable and whether or not
reduced to practice; and (e) other intellectual property and proprietary rights relating to any of
the foregoing (including remedies against infringement thereof and rights of protection of interest
therein under the laws of all jurisdictions), including, but not limited to, rights to recover for
past, present and future violations thereof.
(84) “Interim Financials” means the Balance Sheet and the unaudited statements of
income, cash flows and retained earnings of the Company for the six (6)-month period ended June 30,
2010.
(85) “Internal Systems” shall mean the Software and documentation and the computer,
communications and network systems (both desktop and enterprise-wide), servers, hardware,
equipment, materials and apparatus used by the Company in its business or operations or to develop,
manufacture, fabricate, assemble, provide, distribute, support, maintain or test the products
manufactured, distributed, licensed or sold by the Company, whether located on the premises of the
Company or hosted at a third party site.
(86) “IRS” means the Internal Revenue Service or any successor agency thereto.
(87) “IRS Adjustments” means adjustments to the federal income and employment Tax
liabilities of the Company proposed by the IRS in the Examination Report or later asserted by the
IRS in any proceedings arising out of the Examination Report.
(88) “ITAR” means the International Traffic in Arms Regulations, set forth in Title
22, Chapter I, Subchapter M of the Code of Federal Regulations, and related rules and regulations
thereunder.
(89) “Key Employees” means Xxxx Xxxxxxxxx.
(90) “Laws” means all laws, statutes, ordinances, rules and regulations of any
Governmental Authority, including all orders, judgments, injunctions, awards, decisions or decrees
of any court having effect of law.
(91) “Letter of Intent” means the Letter of Intent, dated July 13, 2010 and confirmed
by the parties thereto on July 19, 2010, by and between the Buyer and the Company.
(92) “Liability” or “Liabilities” means, without limitation, any direct or
indirect liability, indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute, contingent, mature, unmatured or
otherwise and whether known or unknown, fixed or unfixed, xxxxxx or inchoate, liquidated or
unliquidated, secured or unsecured.
(93) “Material Adverse Effect” with respect to any Person means any effect, event,
change, circumstance, development or other matter which individually or in the aggregate, had, or
would reasonably be expected to have, or give rise to, a material adverse effect on, or material
adverse change to, (a) the assets, business, condition (financial or otherwise), operating results,
properties, Liabilities, reserves, earnings, technology or relations with customers, suppliers,
distributors, employees or regulators of such Person or (b) the right or ability of such Person to
consummate the transactions contemplated hereby.
(94) “Material Contract” means each Contract of the Company in effect as of the date
of this Agreement to which the Company is a party: (a) with a dealer, broker, sales agency,
advertising agency or other Person engaged in sales or promotional activities; (b) which could
require aggregate payments by or to the Company, or involve an unperformed commitment or services
having a value, in excess of Twenty-five Thousand Dollars ($25,000); (c) pursuant to which the
Company has made or will make loans or advances, or has incurred or will incur debts, or has become
a guarantor or surety or pledged its credit on or otherwise become responsible with respect to any
undertaking of another; (d) which is an indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of real property or personal property or agreement for
financing; (e) involving a partnership, joint venture, teaming arrangement or other cooperative
undertaking; (f) involving restrictions relating to the Company or its business with respect to the
geographical area of operations or scope or type of business of the Company or the Company’s right
to hire or solicit any Person as an employee, consultant or independent contractor; (g) which is a
power of attorney or agency agreement or written
arrangement with any Person pursuant to which such Person is granted the authority to act for
or on behalf of the Company or any Seller Party; (h) with respect to which the requirements for
performance extend beyond one (1) year from the date of this Agreement; (i) which contains
warranties with respect to the products manufactured and/or sold or licensed by the Company
(including any Products) or with respect to the services provided by the Company; (j) which
provides for the acquisition, directly or indirectly (by merger or otherwise), of material assets
(whether tangible or intangible) or the capital stock of another Person; (k) which is an
employment, consulting or professional advisor agreement; (l) which cannot be terminated without
penalty or payment on less than ninety (90) days’ notice; (m) which involves the sale, issuance or
repurchase of any capital stock or securities of the Company or the securities of any other Person;
(n) with any Governmental Authority; (o) which requires the consent of any other party thereto or
triggers a change-of-control provision therein, in each case in connection with the execution,
delivery or performance of this Agreement or the consummation of the transactions contemplated
hereby; (p) which is not made in the ordinary course of business and which is to be performed at or
after the date of this Agreement; (q) containing a most favored nation or similar price-related
provisions in favor of any customer or other counterparty; or (r) obligating the Company to
purchase or otherwise obtain any product or service exclusively from a single party or sell any
product or service exclusively to a single party.
(95) “NISPOM” means the National Industrial Security Program Operating Manual as
required by Executive Order 12829 and under the authority of Department of Defense Directive
5220.22, “National Industrial Security Program (NISP)” or subsequent Executive Orders, directives,
or regulations for the protection of classified information released or disclosed to industry in
connection with classified contracts under the NISP.
(96) “Non-Exclusive Licenses” shall have the meaning given to such term in Section
6.11.
(97) “Non-Ordinary Course Liabilities” of the Company means the amount of any
Liabilities of the Company not incurred in the ordinary course of business of the Company,
including, without limitation, (a) any Liability for severance or other compensation provided or
payable to employees or consultants of the Company (including in connection with the Stock Purchase
and the other transactions contemplated by this Agreement but excluding the Transaction Bonus
Amount) and, in each case, any employee withholding Taxes and any employer payroll Taxes thereon,
and (b) any transaction fees and expenses of the Company related to the Stock Purchase and the
other transactions contemplated hereby, including without limitation financial advisory fees, legal
fees and expenses, broker and finder fees and expenses of accountants and Transfer Taxes.
(98) “Party” and “Parties” have the meaning given to such terms in the
Preamble.
(99) “Patent Rights” means all patents, patent applications, utility models, design
registrations and certificates of invention and other governmental grants for the protection
of inventions or industrial designs (including all related continuations,
continuations-in-part, divisionals, renewals, extensions, provisionals, reissues and
reexaminations).
(100) “Person” means any person, limited liability company, partnership, trust,
unincorporated organization, corporation, association, joint stock company, business, group,
Governmental Authority or other entity.
(101) “Proceeding” means any action, arbitration, audit, claim, demand, hearing,
investigation, litigation, proceeding or suit, whether civil, criminal, administrative,
investigative, or informal and whether commenced, brought, conducted or heard by or before or
otherwise involving any Governmental Authority or arbitrator.
(102) “Product” means any software (including software provided for use as a service),
hardware, firmware or other product now or within the past four (4) years offered for sale or
license by the Company, together with all user documentation, data, scripts, macros, modules and
other files and information supplied, sold or licensed with such software, hardware, firmware or
other product.
(103) “Purchase Price” has the meaning given to such term in Section 1.2(a).
(104) “Qualified Accounts Payable” means any account payable of the Company not paid
at or before the Closing which has been outstanding for more than thirty (30) days or which is
overdue in accordance with the payment terms thereof.
(105) “Related Party” means any Seller Party, any trustee or other Affiliate of any
Seller Party, any officer, director, employee, shareholder or Affiliate of the Company, any
individual related by blood, marriage or adoption to any of the foregoing individuals or any entity
in which any such Person or individual owns any beneficial interest.
(106) “Related Party Arrangement” has the meaning given to such term in Section 3.19.
(107) “Release” means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into, onto or through the indoor or
outdoor Environment or into, through or out of any property, including the movement of Hazardous
Substances through or in the air, soil, surface water, ground water or property.
(108) “Representatives”, with respect to any Person, means the directors, officers,
employees, consultants, agents or other representatives thereof (including legal counsel,
accountants, financial advisors, investment bankers and brokers).
(109) “SBA” has the meaning given to such term in Section 7.6.
(110) “SEC Financial Statements” has the meaning given to such term in Section 6.14.
(111) “Seller Party” and “Seller Parties” have the meaning given to such terms
in the Preamble.
(112) “Seller Prepared Return” has the meaning given to such term in Section
6.5(a)(i).
(113) “Shares” means all of the issued and outstanding shares of the capital stock of
the Company.
(114) “Software” means computer software code, applications, utilities, development
tools, diagnostics, databases and embedded systems, whether in source code, interpreted code or
object code form.
(115) “Stockholder” has the meaning given to such term in the Preamble.
(116) “Stock Purchase” has the meaning given to such term in the Recitals.
(117) “Target Working Capital” means One Million Eight Hundred Thousand Dollars
($1,800,000).
(118) “Tax” or “Taxes” means any tax or duty or similar governmental fee,
levy, assessment or charge of any kind whatsoever imposed by a Governmental Authority, including,
without limitation, all income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, ad
valorem, value added, inventory, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, unclaimed property, escheat, sales,
use, transfer, registration, alternative or add-on minimum, or estimated tax, together with any
penalties, additions to tax or additional amounts arising with respect to the foregoing or the
obligation to file Tax Returns, and any interest on any of the foregoing.
(119) “Tax Escrow Agreement” has the meaning given to such term in Section 1.3(b).
(120) “Tax Escrow Deposit” has the meaning given to such term in Section 1.3(b).
(121) “Tax Escrowed Funds” means the Tax Escrow Deposit, plus the amount of any
interest, dividends and other income resulting from the investment of the Tax Escrow Deposit and
earnings thereon and proceeds thereof.
(122) “Taxing Authority” means any Governmental Authority responsible for the
assessment, determination, collection or administration of any Tax.
(123) “Tax Losses” means any and all net increases in Taxes payable by the Company or
other Liabilities that arise, directly or indirectly out of (a) the IRS Adjustments,
(b) application of any principles and arguments asserted by the IRS in the Examination Report or
proceedings related thereto to any other taxable year of the Company ending on or before the
Closing Date, (c) adjustment to the state and local Tax liabilities of the Company that are
correlative to or arise out of the federal Tax adjustments referred to in (a) and (b) above, and
(d) all professional and other expenses incurred by the Company in connection with any proceedings
relating to possible adjustments to Tax liabilities of the Company that are described in (a)
through (c) above. For purposes of the foregoing, the amount of net increase in Tax payable by the
Company shall be computed by taking into account any reduction in Tax payments required to be made
by the Buyer and its Affiliates by reason of allowance of a deduction for interest and state Taxes
payable by the Company in respect of Liabilities that constitute Tax Losses.
(124) “Tax Return” means any report, return, statement, claim for refund, election,
declaration or other information with respect to any Tax required to be filed or actually filed
with a Taxing Authority, including any schedule or attachment thereto, and including any amendment
thereof.
(125) “Trademarks” means all registered trademarks and service marks, logos, Internet
domain names, corporate names and doing business designations and all registrations and
applications for registration of the foregoing, common law trademarks and service marks and trade
dress.
(126) “Transaction Bonus Amount” shall have the meaning given to such term in Section
1.5.
(127) “Transfer Taxes” means any transfer, documentary, sales, use, stamp,
registration or other similar Taxes and fees.
(128) “Year-End Financials” means the audited balance sheets of the Company and the
audited statements of income, cash flows and retained earnings of the Company at and for the fiscal
years ended December 31, 2008 and 2009.
