EXECUTION COPY
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
DRS TECHNOLOGIES, INC.
AND
GENERAL ATRONICS CORPORATION
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"') dated as of June 12,
2000, is by and between DRS TECHNOLOGIES, INC, a Delaware corporation ("Buyer"),
and GENERAL ATRONICS CORPORATION, a Pennsylvania corporation ("Seller").
WITNESSETH
WHEREAS, Seller designs, engineers and manufactures proprietary,
technological products and systems for the defense and communications industry
(the "Defense Business");
WHEREAS, Seller retains a 51% partnership interest ("MSSC Interest",
and together with the Defense Business, the "Business") in a joint venture,
named MSSC Company ("MSSC"), with Signaal America Corporation, a wholly owned
subsidiary of Hollandse Signaalappaarten B.V., ("Signaal"); and
WHEREAS, Buyer wishes to purchase from Seller and Seller wishes to sell
to Buyer, the Acquired Assets and the Assumed Liabilities (each as defined
below) related to the conduct and operations of the Business (the
"Acquisition").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, shall have the following meanings:
"Acquisition" shall have the meaning set forth in the recitals hereto.
"Accepting Employees" shall have the meaning set forth in Section
8.2(c) hereof.
"Adjustment" shall have the meaning set forth in Section 2.7(c) hereof.
"Acquired Assets" shall have the meaning set forth in Section 2.1
hereof.
"Accounts Receivable" shall have the meaning set forth in Section
2.1(c) hereof.
"Affiliate" shall mean with respect to any Person, another Person that
directly or indirectly, controls, is controlled by, or is under common control
with such Person.
"Allocation Schedule" shall have the meaning set forth in Section
6.11(b) hereof.
"AMEX" shall have the meaning set forth in Section 2.6(c) hereof.
"Assumed Liabilities" shall have the meaning set forth in Section 2.3
hereof.
"Average Market Price" shall have the meaning set forth in Section
2.6(c) hereof.
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"Business" shall have the meaning set forth in the recitals hereto.
"Business Contracts" shall have the meaning set forth in Section 2.1(e)
hereof.
"Buyer Indemnified Parties" shall have the meaning set forth in Section
10.1 hereof.
"Buyer Material Adverse Effect" shall have the meaning set forth in
Section 4.1 hereof.
"Buyer's Proposed Calculations" shall have the meaning set forth in
Section 2.7(a) hereof
"Cash Consideration" shall have the meaning set forth in Section 2.6(c)
hereof.
"Claims" shall have the meaning set forth in Section 10.1 hereof.
"Closing" shall have the meaning set forth in Section 2.8 hereof.
"Closing Balance Sheet" shall have the meaning set forth in Section
2.7(a) hereof.
"Closing Date" shall have the meaning set forth in Section 2.8 hereof.
"Closing Net Assets" shall have the meaning set forth in Section 2.7(c)
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Common Stock" shall mean the common stock, par value $0.01 per share,
of Buyer.
"December Balance Sheet" shall have the meaning set forth in Section
2.5 hereof.
"Defense Business" shall have the meaning set forth in the recitals
hereto.
"Designated Employees" shall have the meaning set forth in Section
8.2(a).
"Designated Officer" shall have the meaning set forth in Section 6.1(d)
hereof.
"Dispute" shall have the meaning set forth in Section 12.12 (b) hereof.
"Employees" shall mean all current employees of the Defense Business.
Except where the context expressly indicates to the contrary the term
"Employees" shall include Inactive Employees.
"Encumbrance" shall mean all liens, security interests, pledges,
charges, mortgages, conditional sales agreements, title retention agreements and
other encumbrances.
"Equipment" shall have the meaning set forth in Section 2.1(b) hereof.
"ERISA" shall have the meaning set forth in Section 3.16(b) hereof.
"ERISA Affiliate" shall have the meaning set forth in Section 3.16(a)
hereof.
"Escrow Agreement" shall have the meaning set forth in Section 2.6(d)
hereof.
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"Escrowed Shares" shall have the meaning set forth in Section 2.6(d)
hereof.
"Estimated Balance Sheet" shall have the meaning set forth in Section
2.5(a) hereof.
"Excess Net Assets" shall have the meaning set forth in Section 2.5(c)
hereof.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"Excluded Assets" shall have the meaning set forth in Section 2.2
hereof.
"Excluded Environmental Liabilities" shall have the meaning set forth
in Section 2.4(g) hereof.
"Excluded Liabilities" shall have the meaning set forth in Section 2.4
hereof.
"Excluded Proceeds" shall have the meaning set forth in Section 2.2(h)
hereof.
"FAR" shall have the meaning set forth in Section 3.19(a) hereof.
"FCA" shall have the meaning set forth in Section 3.19(a) hereof.
"GAAP" shall have the meaning set forth in Section 2.5(a) hereof.
"GAC Material Adverse Effect" means any material adverse effect on the
general affairs, business, management, operations, revenues, earnings, assets
and liabilities or prospects of the Defense Business as conducted by Seller, or
the business of MSSC as conducted by MSSC, prior to the Closing.
"GARC" shall mean General Atronics Realty Corporation, a Pennsylvania
corporation formed to hold the real estate located at 1100 and 0000 Xxxx Xxxxxxx
Xxxx, Xxxxxxxx, Xxxxxxxxxxxx, and in which Seller retains a 79% interest.
"Governmental Entity" shall mean any government or any court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency, Federal, state, local, transnational or foreign.
"Hazardous Materials" shall mean all pollutants, contaminants, or
chemical, hazardous or toxic materials, substances, constituents or wastes,
including, without limitation, asbestos or asbestos-containing materials,
polychlorinated biphenyl's and petroleum, oil, or petroleum or oil derivatives
or constituents, including, without limitation, crude oil or any fraction
thereof.
"Inactive Employee Hire Date" shall have the meaning set forth in
Section 8.2(b) hereof.
"Inactive Employees" shall mean those Employees who, as of the Closing
Date, are on leave of absence, are on short or long term disability leave, or
are otherwise not actively at work and who are identified on Schedule 3.17(a)
hereto; provided, however, that Inactive Employees shall not include Employees
who are not actively at work on the Closing Date due to a vacation day, personal
day absence or occasional absence day or other similar short term leave for
reasons other than illness.
"Indemnified Party" shall have the meaning set forth in Section 10.4
hereof.
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"Indemnifying Party" shall have the meaning set forth in Section 10.4
hereof.
"Independent Accounting Firm" shall have the meaning set forth in
Section 2.7(b) hereof.
"Insurance Policy" shall have the meaning set forth in Section 6.14(a)
hereof.
"Inventories" shall have the meaning set forth in Section 2.1(d)
hereof.
"Joint Venture Agreement" shall mean the Limited Partnership Agreement,
dated as of June 22, 1984, by and between Signaal and Magnavox European Defense
Electronics Company ("MEDEC"), as assigned by MEDEC to Seller, and as amended by
Amendment No. 1, dated as of June 1, 1999, between Signaal and Seller.
"Key Shareholders" shall mean collectively Xxxxxx X. Xxxxxxx, Xxxxxx X.
Xxxxx, Xxxxxx X. Xxxxxxxx, and Xxxxxx X. Xxxxxx.
"Lease" shall have the meaning set forth in Section 6.13 hereof.
"License Agreement" shall have the meaning set forth in Section 3.14(e)
hereof.
"Magnavox" shall mean Magnavox Electronics Systems Company and any of
its successors.
"Magnavox Asset Purchase Agreement" shall mean the Asset Purchase and
Sale Agreement, dated as of October 28, 1991, by and among Magnavox Electronics
Systems Company, General Atronics Corporation (a subsidiary of Magnavox) and
Atronics Acquisition Corporation.
"Magnavox Indemnity" shall have the meaning set forth in Section
10.5(a) hereof.
"Market Value" shall have the meaning set forth in Section 2.6(b)
hereof.
"Maximum Indemnification Amount" shall have the meaning set forth in
Section 10.3(a).
"MSSC Interest" shall have the meaning set forth in the recitals
hereto.
"Net Assets Requirement" shall have the meaning set forth in Section
2.5(a) hereof
"Novation Agreement" shall have the meaning set forth in Section 6.3(a)
hereof.
"PADEP" shall have the meaning set forth in Section 6.14(b) hereof.
"Permitted Encumbrances" shall mean Encumbrances that (i) arise out of
Taxes not in default and payable without penalty or interest or the validity of
which is being contested in good faith by appropriate proceedings, (ii) are
mechanics', carriers', workers', repairmen's, or other similar liens that do
not, individually or in the aggregate, have a GAC Material Adverse Effect, (iii)
in connection with any agreement or instrument constituting part of the Acquired
Assets and specifically listed on Schedule 1 hereto; (iv) represent the rights
of customers, suppliers and subcontractors in the ordinary course of business
under contracts or under general principles of commercial law; or (v) that
individually or in the aggregate could not reasonably be expected to
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interfere with the use of the encumbered assets in the conduct of the normal
business operations of the Defense Business or of the business of MSSC.
"Person" shall mean any individual, corporation, limited liability
company, or general partnership, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plans" shall have the meaning set forth in Section 3.16(a) hereof.
"Property" shall have the meaning set forth in Section 6.13 hereof.
"Purchase Price" shall have the meaning set forth in Section 2.6(b)
hereof.
"Remaining Disputed Items" shall have the meaning set forth in Section
2.7(b) hereof.
"Restraints" shall have the meaning set forth in Section 9.1(a) hereof.
"Restricted Business" shall have the meaning set forth in Section 7.1
hereof.
"Securities Act" shall have the meaning set forth in Section 3.25
hereof.
"Seller Indemnified Parties" shall have the meaning set forth in
Section 10.2 hereof.
"Seller's Knowledge" shall mean the actual knowledge of any of the Key
Shareholders.
"Seller Plan" shall have the meaning set forth in Section 3.16(a)
hereof.
"Seller's Proposed Calculations" shall have the meaning set forth in
Section 2.7(b) hereof.
"Share Consideration" shall have the meaning set forth in Section
2.6(c) hereof.
"Solicit" shall have the meaning in Section 7.2(c) hereof.
"Split Period" shall mean a Taxable Year that begins on or before the
Closing Date and ends after the Closing Date.
"Tax" or "Taxes" shall mean all taxes, however denominated, including
any interest, penalties or additions to tax or other additional amounts that may
become payable in respect thereof, imposed by any federal, state, local or
foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all net or gross income taxes, payroll and employee taxes (including
withholding, payroll and employment taxes required to be withheld with respect
to income paid to employees), withholding taxes, unemployment insurance taxes,
social security (or similar) taxes, disability taxes, registration taxes, sales
and use taxes, excise taxes, franchise taxes, gross receipts taxes, occupation
taxes, premium taxes, windfall profits taxes, environmental taxes, real and
personal property taxes, ad valorem taxes, stamp taxes, value added taxes,
customs, duties, fees, assessments, charges or obligations of the same or of a
similar nature.
"Tax Returns" shall mean all returns, declarations, reports, estimates,
and information statements and returns required or permitted to be filed
relating to Taxes, including but not
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limited to, original returns and filings, amended returns, claims for refunds,
information returns, ruling requests, administrative or judicial filings,
accounting method change requests, responses to revenue agents' reports
(federal, state or local) and settlement documents, and any schedules or
attachments to any of the foregoing.
"Taxable Year" shall mean any taxable year or any other taxable period
with respect to which any Tax may be imposed under any applicable statute, rule
or regulation.
"Threshold" shall have the meaning set forth in Section 10.3(a) hereof.
"XXXX" shall have the meaning set forth in Section 3.19(a) hereof.
"Transferred Permits" shall have the meaning set forth in Section
2.1(i) hereof.
"Transfer Taxes" shall have the meaning set forth in Section 6.11(c)
hereof.
"Transaction Documents" shall mean, collectively, this Agreement, the
Escrow Agreement, the Lease referred to in Section 6.13 hereof, and the lock-up
agreement referred to in Section 9.2(h) hereof.
"Underground Tanks" shall have the meaning set forth in Section 2.4(f)
hereof.
"Valuations" shall have the meaning set forth in Section 6.11(c)
hereof.
ARTICLE II
SALE AND PURCHASE
2.1 Acquired Assets. Subject to the terms and conditions set
forth in this Agreement, at the Closing, Seller shall sell, assign, transfer and
deliver to Buyer, and Buyer shall purchase, acquire and take assignment and
delivery of, all of the assets (other than the Excluded Assets) of the Business
(all of which assets are hereinafter referred to collectively as the "Acquired
Assets"), including but not limited to the following assets of Seller:
(a) all of Seller's right, title and interest in and to the MSSC
Interest and in, to and under the Joint Venture Agreement;
(b) all of Seller's right, title and interest in and to all
machinery, equipment, computers (including the software embodied therein),
installations, fixtures, furniture, tools, supplies, booths, displays, materials
and other personal property used primarily in connection with the Defense
Business as described on Schedule 2.1(b) hereto, which Schedule shall clearly
identify the extent of Seller's interest in such property, with such additions
and deletions thereto as may arise, as a result of normal business operations
consistent with Seller's obligations under Article 5 hereof (the "Equipment");
(c) all of Seller's billed and unbilled accounts receivable,
other than the Excluded Accounts Receivable, relating primarily to the Defense
Business outstanding on the Closing Date ("Accounts Receivable");
(d) all of Seller's inventories held for use primarily in the
Defense Business, including raw materials, work in process (subject to the
customers' rights in the case of any
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government-funded work in process), supplies, samples, prototypes and finished
goods (the "Inventories"), to the extent not consumed in the operation of the
Defense Business prior to the Closing;
(e) all of Seller's rights under all contracts and agreements,
including without limitation joint venture agreements, teaming agreements,
distribution agreements, service agreements, supply agreements, license
agreements, sublicense agreements, personal property leases, and development
contracts, including, without limitation the Magnavox Asset Purchase Agreement
(subject to Section 10.5 hereof), entered into by a Seller primarily in
connection with the Defense Business, listed on Schedule 2.1(e) hereto, but
excluding Government Contracts (as defined in Section 3.19(x)(iv) hereof and
which are described below) and any such contracts that have been performed in
full by Seller prior to Closing (collectively the "Business Contracts");
(f) all of Seller's rights under all Government Contracts (as
defined in Section 3.19(x)(iv) hereof), excluding all such contracts that have
been performed in full by Seller prior to Closing;
(g) all of Seller's rights under purchase orders, in each case
to the extent outstanding on the Closing Date and relating primarily to the
Defense Business (collectively, the "Purchase Orders");
(h) all of Seller's right, title and interest in and to the
Intellectual Property (as defined in Section 3.14(k)) listed on Schedule 2.1(h)
hereto together with the good will of the Business;
(i) to the extent transferable and permitted by applicable laws
and regulations, all of Seller's rights with respect to any licenses, permits,
consents, concessions, orders, authorizations, approvals or registrations from,
of or with any Governmental Entity and relating primarily to the Defense
Business, listed on Schedule 2.1(i) hereto (collectively, "Transferred
Permits");
(j) all records of Seller relating primarily to the Defense
Business, including, without limitation, property records, shipping records,
supplier lists, production records, purchasing and sales records, customer
lists, proposals, credit records, accounting records and such other records as
Buyer may reasonably require to conduct the Defense Business subsequent to the
Closing;
(k) the payroll and personnel records of all the Accepting
Employees;
(l) all sales and promotional literature and other marketing and
sales-related materials owned or used by Seller primarily in connection with the
Defense Business;
(m) to the extent transferable and permitted by applicable laws
and regulations, other than the claims listed on Schedule 2.1(m) hereto, all
claims, causes of action, rights of recovery and rights of set off of any kind
against any third Persons, other than Seller and its Affiliates and Seller's
claims against the United States Navy relating to the Wireline Software
Licenses, and all rights under and pursuant to all warranties, representations
and guaranties made by suppliers of products, materials or equipment or
components thereof, pertaining to, arising out of, and inuring to the benefit of
Seller and relating primarily to the Defense Business; and
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(n) all of Seller's cash and marketable securities.
2.2 Excluded Assets.
Notwithstanding the foregoing, Seller is not selling and Buyer is not
purchasing pursuant to this Agreement, and the term "Acquired Assets" shall not
include any assets of Seller that are not specifically used in the Business,
including, without limitation, any of the following assets (the "Excluded
Assets"):
(a) any of Seller's right, title and interest in and to GARC;
(b) any of Seller's title to, interest in or rights with respect
to any real property other than to the extent set forth in the Lease;
(c) any computers not used primarily in the Defense Business, and
any software embodied in any such computers, any communication or data network
systems not used primarily in the Defense Business;
(d) any other assets of Seller not used primarily in the Defense
Business and not otherwise described in this Section 2.2, as listed on Schedule
2.2(d) hereto;
(e) all corporate records of Seller, all original copies of tax
records of Seller and all other records and files not relating primarily to the
Defense Business;
(f) any insurance policies of Seller or any Plans;
(g) Seller's claims against the United States Navy relating to
the Wireline Software Licenses;
(h) as set forth in Schedule 2.2(h) hereto, a percentage of the
proceeds paid by certain customers upon performance of the contracts listed on
such Schedule 2.2(h) hereto and such cash equal to the amount as determined in
accordance with Schedule 2.2(h), but if and only to the extent specified in
Section 2.5(c) hereof (collectively, the "Excluded Proceeds"); and
(i) all of Seller's right, title and interest to the securities
of Mikros Systems Corporation currently held by Seller.
2.3 Assumed Liabilities.
Anything in this Agreement to the contrary notwithstanding, Buyer shall
not assume, and shall not be deemed to have assumed, any liability or obligation
of any nature, fixed or contingent or known or unknown, of Seller or relating to
the MSSC Interest or the operation of the Defense Business prior to the Closing
(including without limitation the Excluded Environmental Liabilities referred to
below), except that, at the Closing, Buyer shall assume, and agree to pay,
perform, fulfill and discharge, the following obligations and liabilities of
Seller (collectively, the "Assumed Liabilities"):
(a) the liabilities of the Business included or reserved for in
the December Balance Sheet, but only to the extent included or reserved for in
the Closing Balance Sheet;
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(b) liabilities incurred by Seller since December 31, 1999 in the
ordinary course of the Business consistent with past practice and in accordance
with the provisions of this Agreement, but only to the extent included or
reserved for in the Closing Balance Sheet;
(c) liabilities in respect of the conduct of the Business or
ownership of the Acquired Assets subsequent to the Closing Date, including but
not limited to liabilities in respect of the Business Contracts and the
Government Contracts subsequent to the Closing Date, subject to (i) Seller's
receipt of the necessary approvals and/or consents as contemplated by Section
6.2 hereof to transfer, assign and convey such contracts and agreements to Buyer
hereunder and (ii) the novation of such contracts and agreements in accordance
with Section 6.3 hereof; and
(d) liabilities and obligations of Buyer relating to the
Accepting Employees to the extent specified in Section 8.3 hereof.
2.4 Excluded Liabilities.
Notwithstanding anything to the contrary set forth in this Agreement or
otherwise, all liabilities and obligations of any nature, fixed or contingent or
known or unknown, of Seller or relating to the MSSC Interest or the operation of
the Defense Business prior to the Closing, other than the Assumed Liabilities,
shall be retained by Seller, which are referred to herein as the "Excluded
Liabilities". The Excluded Liabilities shall include without limitation:
(a) all liabilities and obligations of Seller relating to or
incurred in connection with the Excluded Assets;
(b) all liabilities and obligations of Seller for Taxes
attributable to the conduct of the Defense Business and incurred with respect to
any Taxable Year on or before the Closing Date or that portion of any Split
Period ending on the Closing Date;
(c) any liabilities under any Tax sharing or allocation agreement
between Seller, MSCC or any Affiliate of Seller, on the one hand, and any other
Person, on the other hand;
(d) all liabilities and obligations of Seller arising in
connection with its operations unrelated to the Business;
(e) (i) with respect to Accepting Employees, all liabilities and
obligations of Seller (except for accrued vacation benefit days as specified in
Section 8.3(c)) relating to such Accepting Employees for the period on or before
the Closing Date (the Inactive Employee Hire Date in the case of an Inactive
Employee who is an Accepting Employee) and those liabilities and obligations in
the period following the Closing Date to the extent specified as being retained
by Seller in Section 8.2 and 8.3 hereof, and (ii) with respect to all other
Employees, all liabilities and obligations of Seller relating to such other
Employees;
(f) (i) any alleged or actual liability for the investigation,
cleanup or removal of any Hazardous Materials, or for death or injury to person
or property, as a result of the generation, transportation, disposal, storage,
release, emission or discharge of any Hazardous Materials onsite or offsite and
in, on, under, from or onto the Property, past or present, solely to the extent
that such liability arises out of any matter or circumstances that occurred or
existed on or before the Closing Date and (ii) any leak, discharge or release of
Hazardous Materials emanating from any underground storage tanks or their
appurtenant pipes, lines, fixtures and other related
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equipment located on the Property (collectively, the "Underground Tanks")
occurring before, on or after the Closing Date unless such leak, discharge or
release results from Buyer or any Affiliate of Buyer or any of their respective
employees, invitees, agents or contractors piercing or cracking an Underground
Tank or pressure testing it without Seller's prior written consent; and
(g) any alleged or actual liability and penalties for violations
of or noncompliance with Environmental Laws (as defined in Section
3.18(b)(iii)), to the extent that such liability arises out of any matter that
occurred or existed on or before the Closing Date and, with respect to the
Underground Tanks, on, before or after the Closing Date unless such leak,
discharge or release results from Buyer or any Affiliate of Buyer or any of
their respective employees, invitees, agents or contractors piercing or cracking
an Underground Tank or pressure testing it without Seller's prior written
consent (with the obligations and liabilities referred to in paragraph (f) above
and this paragraph collectively referred to as the "Excluded Environmental
Liabilities").
2.5 Estimated Balance Sheet and Net Assets.
(a) No later than two business days prior to the Closing Date,
Seller shall deliver to Buyer a pro forma balance sheet ("Estimated Balance
Sheet") that shall fairly present as of such date the Acquired Assets and
Assumed Liabilities of the Business being transferred to Buyer hereunder as of
the Closing Date. The Estimated Balance Sheet shall be prepared in accordance
with generally accepted accounting principles ("GAAP") subject to those specific
understandings set forth in Schedule 2.5 hereto, applied on a basis consistent
with Seller's December 31, 1999 audited consolidated balance sheet ("December
Balance Sheet"). In addition, there shall be no changes to the methodologies and
assumptions used to prepare the reserves and contract estimates reflected on the
Estimated Balance Sheet as compared to the methodologies and assumptions used to
prepare the December Balance Sheet.
(b) At Closing, the net assets of the Business as reflected on the
Estimated Balance Sheet shall be no less than Five Million One Hundred Thousand
Dollars ($5,100,000) ("Net Assets Requirement"). In addition, at Closing, the
amount of working capital of the Business shall be no less than the working
capital as reflected in Seller's balance sheet dated June 31, 1999.
(c) If the Estimated Balance Sheet reflects net assets in excess
of the Net Assets Requirement (the amount of such excess referred to herein as
the "Excess Net Assets"), the Excluded Proceeds (whose value shall not exceed
the value of the Excess Net Assets) shall be retained by Seller and shall
constitute Excluded Assets. Buyer shall collect, in the ordinary course of
business, all such Excluded Proceeds and, upon receipt, tender all such proceeds
promptly to Seller.
2.6 Purchase Price.
(a) In consideration of the sale, transfer and assignment by
Seller of the Acquired Assets and the agreements of Seller contained herein and
in the other Transaction Documents, Buyer shall pay and Seller shall receive
from Buyer the Purchase Price set forth in Section 2.6(b) hereof and calculated
in accordance with Section 2.6(c) hereof.
(b) The purchase price shall be Eleven Million Dollars
($11,000,000) (the "Purchase Price").
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(c) The Purchase Price shall be payable by (i) cash consideration
equal to Seven Million Dollars ($ 7,000,000) ("Cash Consideration") plus (ii)
subject to Section 2.6(d), shares of Common Stock the Market Value (as defined
below) of which is Four Million Dollars ($4,000,000) ("Share Consideration").
The "Market Value" of the Share Consideration shall be calculated by multiplying
the number of shares of Common Stock constituting the Share Consideration times
the Average Market Price. The "Average Market Price" shall mean, with respect to
one share of Common Stock, the average closing price for such share as reported
on the American Stock Exchange, Inc. ("AMEX") for the ten (10) most recent
trading days ending three (3) business days before the Closing Date.
(d) Of the Share Consideration, shares of Common Stock the Market
Value of which is One Million Dollars ($1,000,000) ("Escrowed Shares") shall be
held in escrow, pursuant to an agreement substantially in the form attached
hereto as Exhibit 2.6 (the "Escrow Agreement") which Buyer and Seller shall
enter into at the Closing. The Escrow Agreement shall provide, among other
things, that the Escrowed Shares shall be held in escrow for a period of
eighteen (18) months following the Closing and shall be subject to claims by
Buyer for any amounts owed to a Buyer Indemnified Party by Seller pursuant to
Section 10.1 hereof.
2.7 Purchase Price Adjustment.
(a) Within sixty (60) days after the Closing Date, Buyer shall
prepare and deliver to Seller a balance sheet of the Acquired Assets and Assumed
Liabilities of the Business as of the close of business on the Closing Date
("Closing Balance Sheet"). The Closing Balance Sheet shall be prepared in
accordance with GAAP applied on a basis consistent with the December Balance
Sheet. In addition, there shall be no changes to the methodologies and
assumptions used to prepare the reserves and contract estimates reflected on the
Closing Balance Sheet as compared to the methodologies and assumptions used to
prepare the December Balance Sheet. Buyer shall also prepare a proposed
statement of the net assets of the Business to be transferred to Buyer hereunder
using the procedures used in the preparation of the December Balance Sheet
("Buyer's Proposed Calculations").
(b) Within thirty (30) days after receipt of the Closing Balance
Sheet, Seller shall notify Buyer of its agreement or disagreement with the
Closing Balance Sheet and the accuracy of any of Buyer's Proposed Calculations;
provided, that Seller may only dispute the Closing Balance Sheet and Buyer's
Proposed Calculations to the extent that they are inaccurate or deviate from the
requirements of paragraph (a) above. During such period, Buyer shall afford
Seller and its representatives reasonable access to any of the Business' books,
records and work papers, personnel, facilities and accountants necessary to
enable Seller and its representatives to review the Closing Balance Sheet and
Buyer's Proposed Calculations. If Seller disputes any aspect of the Closing
Balance Sheet or the amount of any of the Buyer's Proposed Calculations, then
Seller shall have the right to direct its independent accountants, at Seller's
expense, to review and test the Closing Balance Sheet. Seller's representatives
or accountants shall complete their review and test within thirty (30) days
after the date Seller disputes Buyer's Proposed Calculations. If Seller and its
independent accountants, after such review and test, still disagree with Buyer's
Proposed Calculations, and Buyer does not accept Seller's proposed alternative
calculation (the "Seller's Proposed Calculations"), then, within thirty (30)
days after the date Buyer disputes Seller's Proposed Calculations, Seller and
Buyer shall select a third nationally recognized independent accounting firm
(the "Independent Accounting Firm") to resolve the remaining disputed items (the
"Remaining Disputed Items") by conducting its own review and test of the
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Closing Balance Sheet and thereafter selecting either Seller's Proposed
Calculation of the Remaining Disputed Items or Buyer's Proposed Calculation of
the Remaining Disputed Items or an amount in between the two. The Independent
Accounting Firm shall be instructed (i) that the scope of its review shall be
limited solely to the Remaining Disputed Items, (ii) that it shall accept the
Closing Balance Sheet and Buyer's Proposed Calculations except to the extent
that they are inaccurate or deviate from the requirements of paragraph (a)
above, and (iii) that it is to use every reasonable effort to complete such
assignment and deliver copies of such opinion and, if required, revised Closing
Balance Sheet to Buyer and Seller within thirty (30) days following the date
such Remaining Disputed Items are referred to it. Buyer and Seller agree that
they shall be bound by the determination of the Remaining Disputed Items by the
Independent Accounting Firm. The fees and expenses of the Independent Accounting
Firm shall be paid jointly by Buyer and Seller.
(c) Upon the determination pursuant to paragraph (b) above as to
the definitive Closing Balance Sheet and the net assets of the Business to be
transferred to Buyer hereunder as of the Closing Date ("Closing Net Assets"),
the Purchase Price shall be either (i) increased by the amount, if any, by which
the Closing Net Assets is greater than the Net Assets Requirement or (ii)
decreased by the amount, if any, by which the amount of the Closing Net Assets
is less than the Net Assets Requirement (the "Adjustment"); provided, however,
in no event will any upward Adjustment exceed Five Hundred Thousand Dollars
($500,000). If the Purchase Price is increased, Buyer shall pay such amount to
Seller, and if the Purchase Price is decreased, Seller shall pay such amount to
Buyer. Any such payment shall be made in cash or same day funds within ten (10)
days after the determination of the Adjustment pursuant to paragraph (b) above.
Any such payment shall bear interest from the Closing Date to the date preceding
payment at a rate equal to the "Prime Rate" as set forth from time to time in
The Wall Street Journal "Money Rates" column from the Closing Date to the date
preceding payment.
2.8 Closing.
The sale and purchase of the Acquired Assets hereunder shall occur at a
closing (the "Closing") to be held at the offices of Xxxxxx & Xxxxxx, at 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx on June 14, 2000 or at such other place and time
as the parties hereto may agree (the date of the Closing being referred to
herein as the "Closing Date").
2.9 Transactions at Closing.
(a) At the Closing, Seller shall deliver or shall cause to be
delivered to Buyer the following:
(i) all such bills of sale, certificates of title and other
instruments of assignment or transfer with respect to
the Acquired Assets as Buyer may reasonably request and
as may be necessary to vest in Buyer all of the
Seller's right, title and interest in and to the
Acquired Assets;
(ii) the Escrow Agreement;
(iii) the Lease;
(iv) the officer's certificate referred to in Section 9.2(f)
hereof;
(v) the legal opinion referred to in Section 9.2(g) hereof;
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(vi) the lock-up agreement referred to in Section 9.2(h)
hereof;
(vii) all third party consents required to consummate the
transactions contemplated hereby as referred to in
Section 9.2(d) hereof; and
(viii) any Schedules (supplemented as necessary) required to
be delivered by Seller to Buyer under the terms of
this Agreement.
(b) At the Closing, Buyer shall deliver or shall cause to be
delivered to Seller the following:
(i) the Cash Consideration by wire transfer to Seller to
an account designated by Seller two (2) business days
prior to the Closing Date;
(ii) the stock certificates representing the Share
Consideration less the Escrowed Shares, duly endorsed
in blank, free and clear of all Encumbrances;
(iii) the Escrow Agreement;
(iv) the Lease;
(v) the officer's certificate referred to in Section
9.3(f) hereof;
(vi) the legal opinion referred to in Section 9.3(g)
hereof;
(vii) all third party consents required to consummate the
transactions contemplated hereby as referred to in
Section 9.3(d);
(viii) any Schedules (supplemented as necessary) required to
be delivered by Buyer to Seller under the terms of
this Agreement; and
(ix) all such instruments of assumption with respect to the
Assumed Liabilities as Seller may reasonably request.
(c) At the Closing or as promptly as practicable thereafter and
subject to Buyer having met applicable security requirements under applicable
law, Seller shall deliver all such keys, locks, safe combinations, security
system codes and other similar items as Seller possesses for Buyer to obtain
full occupation and control of the Acquired Assets and access to the premises
subject to the Lease.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1 Organization and Qualification.
Each of Seller and MSSC is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation. Seller has all requisite
corporate power and authority and MSSC has all partnership authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except for such failures that could not reasonably be expected to
have, individually or in the aggregate, a GAC Material Adverse Effect. Each of
Seller and MSSC is duly qualified to conduct its business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated, or the nature of its activities, makes such qualification
necessary, except for such failures that could not reasonably be expected to
have, individually or in the aggregate, a GAC Material Adverse Effect. Neither
Seller nor MSSC is in violation of any of the provisions of its Certificate of
Incorporation (or other applicable charter document) or its By-Laws (or other
applicable organizational document).
3.2 Authority Relative to this Agreement.
Seller has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the Acquisition
and the other transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Seller, and no other corporate
proceedings on the part of Seller are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Seller and, assuming the due
authorization, execution and delivery hereof by Buyer, constitutes a valid and
binding agreement of Seller, enforceable against Seller in accordance with its
terms, except as such validity, binding effect or enforcement may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by equitable principles relating to the availability of remedies.
3.3 No Violations, etc.
(a) Other than the filings, permits, authorizations, consents and
approvals or waivers thereof that are identified in Section 3.3(b) below and
that have been duly made or obtained as contemplated herein, and except as
listed in Schedule 3.3 hereto, neither the execution and delivery of this
Agreement by Seller nor the consummation of the transactions contemplated hereby
nor compliance by Seller with any of the provisions hereof will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or suspension of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any of the
properties or assets of Seller or MSSC under, any of the terms, conditions or
provisions of (x) their respective charters or by-laws (or other applicable
organizational document), (y) any note, bond, mortgage, debenture, indenture or
deed of trust or (z) any license, lease, contract, agreement or other instrument
or obligation to which Seller or MSSC is a party or to which they or any of
their respective properties or assets
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may be subject; or (ii) violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Seller or MSSC or any of their
respective properties or assets, except, in the case of clause (i) above, for
any such violations, conflicts, breaches, defaults or other alterations or
occurrences that could not have, individually or in the aggregate, a GAC
Material Adverse Effect and would not, in any material respect, prevent or delay
or otherwise prevent Seller from performing its obligations hereunder.
(b) Except as set forth on Schedule 3.3 hereto, no filing or
registration with, no notification to and no permit, authorization, consent or
approval of any Governmental Entity is required of Seller in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except such other filings, registrations, notifications,
permits, authorizations, consents or approvals the failure of which to be
obtained, made or given would not, individually or in the aggregate, either have
a GAC Material Adverse Effect or materially impair or delay the ability of
Seller to consummate the transactions contemplated hereby.
(c) Seller and MSSC are not in violation of or default under,
except as set forth in Schedule 3.3 hereto, (i) any note, bond, mortgage,
debenture, indenture or deed of trust; or (ii) any license, lease, contract,
agreement or other instrument or obligation to which Seller or any of its
subsidiaries or MSSC is a party or to which they or any of their respective
properties or assets may be subject, except, in the case of clauses (i) and (ii)
above, for such violations or defaults that would not, individually or in the
aggregate, either reasonably be expected to have a GAC Material Adverse Effect
or materially impair the ability of Seller to consummate the transactions
contemplated hereby.
3.4 Absence of Changes or Events.
(a) Except as set forth on Schedule 3.4(a) hereto, since December
31, 1999, Seller and MSSC have conducted their respective businesses in the
ordinary course consistent with their past practices and have not incurred any
material liability, except in the ordinary course of their businesses consistent
with their past practices.
(b) Except as specifically described in Schedule 3.4(b) hereto
and other than the sale or distribution of Seller's interest in DGH (including
amounts owed to Seller by DGH), since December 31, 1999 there has not been (i)
any change, or any event involving a prospective change, in the business,
financial condition or results of operations of Seller or MSSC which has had, or
could have, individually or in the aggregate, a GAC Material Adverse Effect;
(ii) any damage, destruction or loss, whether covered by insurance or not, which
has had, or could have, individually or in the aggregate, a GAC Material Adverse
Effect; (iii) any entry into or termination of any material commitment,
contract, agreement or transaction (including, without limitation, any material
borrowing or capital expenditure or sale or other disposition of any material
asset or assets) of or involving Seller and MSSC, other than this Agreement or
in the ordinary course of business; (iv) any redemption, repurchase or other
acquisition for value of their respective capital stock by Seller, or any
issuance of capital stock of Seller or MSSC or of securities convertible into or
rights to acquire any such capital stock or any dividend or distribution
declared, set aside, or paid on capital stock of Seller or MSSC; (v) any
transfer of or right granted under any material lease, license, agreement or
Intellectual Property of Seller or MSSC or any liens or other security interests
in any Intellectual Property of Seller or MSSC; (vi) any sale or other
disposition of any asset of Seller or MSSC or any Encumbrance (or any
satisfaction and discharge thereof) on any
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asset of Seller or MSSC, other than in the ordinary course of business, or any
agreement relating to any of the foregoing; (vii) any default or breach by
Seller or MSSC in any material respect under any contract, license or permit;
(viii) any general wage or salary increase or any increase in compensation
payable or to become payable to any executive officers or management employees
of Seller or MSSC or any entry into any employment contract with any executive
officer or key salaried employee of Seller or MSSC; and (ix) any change in the
accounting methods of Seller or MSSC.
3.5 Accounts Receivable.
Except as specifically described in Schedule 3.5 hereto, all Accounts
Receivable reflected in the Estimated Balance Sheet will represent transactions
in the ordinary course of business (including without limitation recoverable
costs and accrued profits on progress completed but not billed under Government
Contracts (as defined in Section 3.19 below) or other contracts) and will be
current and collectible net of any reserves shown on such Estimated Balance
Sheet (which reserves will be adequate and will be calculated consistent with
past practice). Schedule 3.5 hereto sets forth as of May 31, 2000, a complete
and correct list of all the billed and unbilled Accounts Receivable, as well as
(i) the aging of each Accounts Receivable in excess of $25,000; (ii) each
Accounts Receivable in excess of $25,000; (iii) each Accounts Receivable in an
amount in excess of $25,000 that is more than ninety (90) days outstanding; and
(iv) each Accounts Receivable from a person or entity from whom the aggregate of
such receivables exceeds $25,000. Seller shall provide to Buyer two (2) business
days prior to the Closing, a revised Schedule 3.5 updated as of such date.
3.6 Litigation.
Except as set forth in Schedule 3.6 hereto, there is no (i) claim,
action, suit or proceeding pending or, to the best of Seller's Knowledge,
threatened against or relating to Seller or MSSC before any Government Entity;
or (ii) outstanding judgment, order, writ, injunction or decree, or application,
request or motion therefor, of any Government Entity in a proceeding, seeking
unspecified damages, damages in excess of $100,000 or any injunctive or other
equitable relief to which Seller or MSSC or any of their respective assets is a
party.
3.7 Compliance with Law.
(a) Except as set forth in Schedule 3.7 hereto, neither Seller
nor MSSC has violated or failed to comply with any applicable statute, law,
ordinance, regulation, rule or order (including without limitation any U.S.
export control statutes, regulations and Executive Orders) of any Governmental
Entity or any judgment, decree or order of any Government Entity, applicable to
the Defense Business or the business of MSSC or the operations thereof by Seller
or MSSC, as the case may be, except for such violations, if any, that could not
have, individually or in the aggregate, a GAC Material Adverse Effect.
(b) Seller and MSSC have all permits, licenses and franchises
from Governmental Entities required to conduct the Defense Business and the
business of MSSC as now conducted, except for any permits, licenses, franchises,
the absence of which could not have, individually or in the aggregate, a GAC
Material Adverse Effect.
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3.8 Title to Assets.
(a) Seller owns or has the right to transfer all of the Acquired
Assets. Seller has, and at and as of the Closing, Seller will convey to Buyer,
good and marketable title to the respective Acquired Assets owned by it, free
and clear of all Encumbrances except for Permitted Encumbrances.
(b) Except as set forth on Schedule 3.8 hereto, the Acquired
Assets constitute all of the assets and rights necessary and sufficient to
conduct the Defense Business as currently conducted, as of the Closing, other
than the Excluded Assets.
3.9 MSSC Interest and Joint Venture Agreement.
(a) Since acquiring its MSSC Interest and the rights under the
Joint Venture Agreement, Seller has not assigned, transferred or conveyed the
MSSC Interest or its rights under the Joint Venture Agreement, in whole or in
part, nor is the MSSC Interest or Seller's rights under the Joint Venture
Agreement subject to any Encumbrance.
(b) Seller has the right, and as of the date hereof shall have
all the necessary consents of third Persons, to sell, assign, transfer, and
deliver the MSSC Interest and all of Seller's rights under the Joint Venture
Agreement to Buyer without (i) violating any contract, agreement or arrangement
to which it is a party or by which it or its assets may be bound and (ii) the
imposition of any Encumbrances arising from such transfer on the MSSC Interest.
(c) The business of MSSC as currently conducted complies with the
terms of the Joint Venture Agreement.
3.10 Equipment and Property.
(a) Schedule 2.1(b) hereto contains a true and complete list of
all Equipment owned or leased by Seller in connection with the Business. With
respect to Equipment leased by Seller, as lessee, all leases, conditional sale
contracts, franchises or licenses pursuant to which Seller may hold or use (or
permit others to hold or use) such Equipment are as of the date of this
Agreement valid and in full force and effect, and there is not under any of such
instruments any existing default of Seller or, to Seller's Knowledge, of any
other party thereto, or event of default of Seller or, to Seller's Knowledge, of
any other party thereto or to Seller's Knowledge event which with notice or
lapse of time or both would constitute such a default, except for any defaults
that would not have a GAC Material Adverse Effect. Except as disclosed in
Schedule 2.1(b) hereto, Seller owns, leases or has the legal right to use the
Equipment, free and clear of all Encumbrances.
(b) The Equipment is in good working condition, ordinary wear and
tear excepted, have been properly maintained in all material respects, are
suitable in all material respects for the purposes for which they are used, and
conform in all material respects to the requirements of all laws, ordinances and
regulations applicable to their use and ownership or lease by Seller.
(c) The Property and the buildings and structures thereon to be
leased to Buyer pursuant to the Lease are suitable in all material respects and
properly zoned for the purpose for which they are currently used, have been
properly maintained, and there are no material
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outstanding work orders with respect to any maintenance, repair or alterations
to be performed thereon.
3.11 Inventories.
Schedule 3.11 hereto identifies all locations at which Inventories
having an aggregate value in excess of $100,000 are located as of the date
hereof. Except as set forth on such Schedule, there are no Encumbrances which
singly or in the aggregate would materially impair Buyer's use of its Inventory.
3.12 Business Contracts.
(a) Schedule 2.1(e) hereto lists all the Business Contracts to be
transferred to Buyer hereunder.
(b) Each of the Business Contracts was duly executed and
delivered by Seller and each constitutes valid and legally binding obligations
of Seller, and is enforceable by Seller in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency and by other
laws and regulation affecting creditor's rights or by general principles of
equity.
(c) Seller is in compliance in all material respects with the
terms and conditions of the applicable Business Contract and all laws, rules and
regulations applicable thereto. To the extent Seller is not in compliance with
any such law, rule or regulation such non-compliance has not resulted and will
not result in a GAC Material Adverse Effect.
(d) Except as set forth on Schedule 3.12(d) hereto, to Seller's
Knowledge, no event of default (or term of like intent) has occurred under any
Business Contract, and Seller has not received or sent formal written notice
that an event has occurred which, with the lapse of time or the giving of notice
or both, would constitute an event of default (or term of like intent) under the
terms of any Business Contract.
(e) Except as set forth on Schedule 3.12(e) hereto, Seller has
not received written notice from any Person that any Business Contract has been,
or is to be, terminated, or that any Business Contract has been, or is to be,
terminated prior to its stated term nor, to Seller's Knowledge, does there exist
any basis for a termination of any Business Contract.
(f) Except as set forth on Schedule 3.12(f) hereto, no consent of
any third Person is required to sell, assign and transfer any Business Contract
to Buyer hereunder.
3.13 Transferred Permits
Schedule 2.1(i) hereto lists all Transferred Permits used in connection
with the Defense Business and transferable to the Buyer hereunder. The
Transferred Permits are in full force and effect and no suspension or
cancellation of any such Transferred Permit has been threatened.
3.14 Intellectual Property.
(a) Schedule 2.1(h) hereto lists all of the Intellectual Property
to be transferred to Buyer hereunder.
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(b) Seller and MSSC, as the case may be, own or have the right to
use all Intellectual Property used in the conduct of the Defense Business and
the business of MSSC. To Seller's Knowledge, none of the Intellectual Property
used in the conduct of the Defense Business or the business of MSSC infringes or
violates the intellectual property rights of any third parties. Consummation of
the transactions contemplated hereby shall not impair any rights or impose any
obligations with respect to Intellectual Property used in the conduct of the
Defense Business and the businesses of MSSC.
(c) There is no pending or, to Seller's Knowledge, threatened (or
unasserted but considered probable of assertion) claim against Seller or MSSC,
nor has Seller or MSSC received any notice, (i) asserting that any of the
Intellectual Property, or that the past or present conduct of Seller's or MSSC's
business, infringes or violates the intellectual property rights of any third
parties; (ii) asserting that any third parties have any rights to use any of the
Intellectual Property except for Licensed Intellectual Property licensed to
Seller or MSSC on a nonexclusive basis; or (iii) which could, if adversely
determined against Seller or MSSC, adversely affect the ability of Seller or
MSSC to use any of the Intellectual Property upon consummation of the
transactions contemplated hereby or thereafter, and to Seller's Knowledge, there
is no basis for any claim of the foregoing types.
(d) Neither Seller nor MSSC has given notice to any third parties
asserting infringement by such third parties of any of the Intellectual
Property, and to Seller's Knowledge, there is no basis for any such claim
against a third party.
(e) All of the Licensed Intellectual Property is licensed
pursuant to valid written agreements (the "License Agreements"), enforceable in
accordance with their terms except as such enforceability may be limited by
bankruptcy, insolvency and other laws and regulations affecting creditors'
rights and by general principles of equity.
(f) Neither Seller nor MSSC is subject to any bars or other
restrictions with respect to its rights to utilize the Intellectual Property,
except for the terms and conditions of the License Agreements and, to Seller's
Knowledge, no bars or other restrictions on such rights will be created by the
consummation of the transactions contemplated herein.
(g) There is no pending or, to Seller's Knowledge, threatened
claim that Seller, MSSC or any licensor is in breach of any of the License
Agreements and, to Seller's Knowledge, no basis for any such claim exists.
(h) There is no pending or, to Seller's Knowledge, threatened
claim against Seller, MSSC or the licensor of any Licensed Intellectual Property
asserting that any of the Licensed Intellectual Property infringes or conflicts
with the rights of third parties, and to Seller's Knowledge, no basis for any
such claim exists.
(i) Each of Seller and MSSC has performed all of the obligations
required to be performed by it, and is not in default under any agreement
relating to any Intellectual Property.
(j) Schedule 3.14(j) hereto identifies each trade name,
fictitious business name, or other similar name under which Seller or MSSC has
conducted any part of its business during the five (5) years preceding the date
hereof.
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(k) For purposes of this Section 3.14 and Section 3.4 above:
(i) "Copyrights" shall mean all registered and unregistered
copyrights and applications for copyright registration
in every country of the world;
(ii) "Intellectual Property" shall mean Patents, Trademarks,
Copyrights and Know-How, including Licensed
Intellectual Property;
(iii) "Know-How" shall mean technical information, trade
secrets, inventions, processes, specifications,
manuals, reports, documents, drawings, procedures,
processes, devices, software and source code, software
documentation, flow charts, recording media, research
and development data, notebooks, marketing information,
customer lists, database rights, other tangible
embodiments of information and proprietary rights other
than Copyrights Patents, and Trademarks, in every
country of the world;
(iv) "Licensed Intellectual Property" shall mean all
intellectual property owned by third parties and
licensed to Seller or MSSC;
(v) "Patents" shall mean all utility and design patents and
patent applications (including any divisions,
continuations, continuations-in-part, reexaminations,
extensions, renewals or reissues thereof), design,
design registrations, utility models and any similar
rights and applications therefor, in every country of
the world; and
(vi) "Trademarks" shall mean all registered and unregistered
trademarks, service marks, trade dress, trade names,
fictitious business names or other similar names and
applications for registration of any of the foregoing,
in every country of the world.
3.15 Taxes.
Except as set forth in Schedule 3.15 hereto: (i) all Tax Returns
required to be filed by Seller, MSSC or any Affiliate of Seller have been or
will be timely filed; (ii) all Tax Returns are true, accurate, correct and
complete in all material respects; (iii) all Taxes due and payable (for Taxable
Years ending on or before the Closing Date and for that portion of any Split
Period ending on the Closing Date) by Seller, MSSC or any Affiliate of Seller
have been or will be paid in full on a timely basis, other than such Taxes as
are being contested in good faith by appropriate proceedings and/or are
adequately reserved for in accordance with generally accepted accounting
principles; (iv) none of Seller, MSSC or any Affiliate of Seller is currently
the beneficiary of any extension of time to file any Tax Return or pay any Tax;
(iv) none of Seller, MSSC or any Affiliate of Seller has received any written
notice of deficiency or assessment from any Federal, state, local or foreign
taxing authority with respect to liability for Taxes which has not been paid or
settled; (v) no examination, inquiry or investigation of Seller, MSSC or any
Affiliate of Seller is pending or, to Seller's Knowledge, threatened for any
amount of Tax by any taxing authority; (vi) no claim has been made by an
authority in a jurisdiction where any of Seller, MSSC or an Affiliate of Seller
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction; (vii) other than liens for Taxes not yet due, no Tax liens
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have been filed with respect to any Taxes; (viii) Seller and MSSC will not make
any voluntary adjustment by reason of a change in their accounting methods for
any period prior to the Closing that would affect the taxable income or
deductions of Seller or MSSC for any period ending after the Closing Date; (ix)
each of Seller, MSCC and any Affiliate of Seller has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any shareholder, employee, creditor, independent contractor or other third
party; (x) neither Seller nor MSCC has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency; (xi) none of Seller, MSCC or any Affiliate of Seller
has made any payments, is obligated to make any payments or is a party to any
agreement that could obligate it to make any payments that will not be
deductible by reason of Section 280G of the Code (or any corresponding provision
of any state, local or foreign income Tax law); (xii) none of the Acquired
Assets directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code; (xiii) none of the Acquired Assets
is "tax-exempt use property" within the meaning of Section 168(h) of the Code;
and (xiv) Seller and MSSC are not parties to any Tax sharing or Tax matters
agreement other than the Joint Venture Agreement.
3.16 Employee Benefit Plans.
(a) Schedule 3.16(a) hereto contains a true and complete list of
each material bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, vacation, worker's compensation, medical,
life or other material insurance, profit-sharing, or pension plan, program,
agreement or arrangement, and each other material employee benefit plan,
program, agreement or arrangement, sponsored, maintained or contributed to or
required to be contributed to by Seller or MSSC or by any trade or business,
whether or not incorporated, that together with Seller or MSSC would be deemed a
"single employer" under Section 414 of the Code (an "ERISA Affiliate") for the
benefit of any employee or director or former employee or former director of
Seller or MSSC whether formal or informal and whether legally binding or not
(the "Plans"). Schedule 3.16(a) hereto identifies each Plan that is sponsored,
maintained or contributed to or required to be contributed to by Seller or any
ERISA Affiliate thereof (each a "Seller Plan"). With respect to each Plan,
Schedule 3.16(a) hereto identifies each ERISA Affiliate that sponsors,
maintains, or contributes to the Plan and whether the Plan covers or provides
benefits to current or former employees or directors of any ERISA Affiliate (and
if so, the identity of each such ERISA Affiliate). Except as may be required by
law, neither Seller nor MSSC has any formal plan or commitment, whether legally
binding or not, to create any additional plan or modify or change any existing
Plan that would affect any employee or director or former employee or former
director of Seller or MSSC.
(b) With respect to each of the Plans, Seller has heretofore
delivered to Buyer true and complete copies of each of the following documents:
(i) the Plan and related documents (including all amendments thereto); (ii) the
two most recent annual reports, actuarial reports, and financial statements, if
any; (iii) the most recent Summary Plan Description, together with each Summary
of Material Modifications, required under The Employee Retirement Income
Security Act of 1974, as amended ("ERISA") with respect to such Plan, and all
material employee communications made within the last two (2) years relating to
such Plan; and (iv) the most recent determination letter received from the IRS
with respect to each Plan that is intended to be qualified under the Code and
all material communications to or from the IRS or any other governmental or
regulatory authority relating to each Plan.
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(c) Neither Seller, nor MSSC nor any ERISA Affiliate now
sponsors, maintains or contributes to, or is required to contribute to, nor has
any of them heretofore ever sponsored, maintained, contributed to, or been
required to contribute to, any Plan or other plan, program, agreement or
arrangement that is or was (i) subject to the provisions of Title IV of ERISA,
(ii) subject to the provisions of Section 412 of the Code, (iii) a
"multiemployer plan" (as defined in Section 3(37) of ERISA, (iv) a "multiple
employer welfare arrangement" (as defined in Section 3(40) of ERISA), or (v) a
single employer plan having two or more contributing sponsors, at least two of
whom are not under common control, within the meaning of Section 4063(a) of
ERISA.
(d) With respect to any Plan adopted by Buyer pursuant to Section
3.16(f)(ii) hereof, neither Seller nor MSSC nor any ERISA Affiliate nor any of
such Plans, any trust created thereunder, any trustee or administrator thereof
has engaged in a transaction in connection with which Seller or MSSC, any of
such Plans, any such trust, or any trustee or administrator thereof, could,
directly or indirectly, be subject to a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA, a tax imposed pursuant to Section 4975, 4976,
4980B or 4980D of the Code, or any other material liability.
(e) With respect to any Plan adopted by Buyer pursuant to Section
3.16(f)(ii) hereof, full payment has been made, or will be made in accordance
with Section 404(a)(6) of the Code, of all amounts that Seller, MSSC or any
ERISA Affiliate is required to pay under the terms of such Plans and the
applicable contracts of employment, and all such amounts properly accrued
through the Closing Date will be paid on or prior to the Closing Date or will be
properly recorded on Seller's financial statements.
(f) Except to the extent that (i) Buyer assumes responsibility
for accrued vacation benefit days not taken by, or otherwise not paid by Seller
to, an Accepting Employee prior to the Closing under Section 8.3(c) hereof, or
(ii) Buyer specifically acts on its own initiative to adopt or maintain one or
more of the Plans in its entirety (Seller acknowledges that, except to the
extent provided in Section 8.3(c) hereof, Buyer is under no obligation of any
kind whatsoever to adopt or maintain any of such Plans), and then except with
respect to the Plan or Plans so adopted or maintained, neither the consummation
of the transactions contemplated by this Agreement nor the engagement by Buyer
of any present or former employee or present of former director of Seller, MSSC
or any ERISA Affiliate will impose upon Buyer any liability of any nature with
respect to any Plan.
(g) With respect to any Plan adopted by Buyer pursuant to Section
3.16(f)(ii) hereof, each of such Plans that is intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified and a favorable
determination to that effect has been issued by the IRS with respect to each
such Plan. Each of the Plans that is intended to satisfy the requirements of
Section 125 or 501(c)(9) of the Code satisfies such requirements. Each of the
Plans has been operated and administered in all material respects in accordance
with its terms and all applicable laws, including but not limited to ERISA and
the Code.
(h) To Seller's Knowledge, each person who performs services for
Seller or MSSC has been, and is, properly classified by Seller or MSSC as an
employee or independent contractor.
(i) With respect to any Plan adopted by Buyer pursuant to Section
3.16(f)(ii) hereof, there are no material claims pending, or, to Seller's
Knowledge, threatened or anticipated
A-I-22
(other than routine claims for benefits) against any such Plan, the assets of
any such Plan or against Seller or MSSC or any ERISA Affiliate with respect to
any such Plan. There is no judgment, decree, injunction, rule or order of any
court, governmental body, commission, agency or arbitrator outstanding against
or in favor of any such Plan or any fiduciary thereof (other than rules of
general applicability). There are no pending or, to Seller's Knowledge,
threatened audits or investigations by any governmental body, commission or
agency involving any such Plan.
(j) Except as set forth in Schedule 3.16(j) hereto, no Plan
provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees or
directors after retirement or other termination of service (other than (i)
coverage mandated by applicable law; (ii) death benefit or retirement benefits
under any "employee pension plan," as that term is defined in Section 3(2) of
ERISA; (iii) deferred compensation benefits accrued as liabilities on the books
of Seller, MSSC or the ERISA Affiliates; or (iv) benefits, the full cost of
which is borne by the current or former employee or director (or his
beneficiary)).
(k) With respect to any Plan adopted by Buyer pursuant to Section
3.16(f)(ii) hereof, except as set forth in Schedule 3.16(k) hereto, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or director of Seller or MSSC to
severance pay, unemployment compensation, termination or any similar payment; or
(ii) accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such current or former employee or director; or (iii)
renew or extend the term of any agreement regarding compensation for any such
current or former employee or director.
3.17 Employees.
(a) Schedule 3.17(a) hereto sets forth a complete list of the
Employees as of the date hereof and the information required by Section 8.1 and
all such information is true and correct as of the date hereof. None of the
Employees is covered by any union, collective bargaining or similar agreement in
connection with his or her employment with Seller. MSSC does not have, nor has
it ever had or intend to have prior to the Closing, any employees.
(b) Except for the Employees listed on Schedule 3.17(b) hereto,
all Employees are employees "at will" whose employment is terminable without
liability to Seller therefor (other than for benefits under Seller's applicable
severance policy and other employee benefit plans and programs and benefits
required to be provided under applicable law) and there are no employment
contracts entered into between Seller and any of the Employees. All Employees
are authorized to work in accordance with the Immigration and Reform Control
Act.
(c) Except as disclosed on Schedule 3.17(c) hereto, no Employee
has received a written warning from Seller within the last twelve (12) months or
is under any internal, or to Seller's Knowledge, any external, investigation in
connection with their employment.
(d) Seller has complied in all material respects with the
requirements of Executive Order 11246.
(e) Except as set forth on Schedule 3.17(e) hereto, there are no
contracts, other agreements or offer letters providing Employees with stay
bonuses, sign on bonuses, commissions, compensation, special monetary or
vacation awards, non-compete provisions or agreements.
A-I-23
(f) Seller is in compliance in all material respects with all
applicable laws relating to employment and employment practices, terms and
conditions of employment and wages and hours. To Seller's Knowledge, there is no
labor strike, slowdown or work stoppage pending or threatened by the Employees
against or affecting the Defense Business or the business of MSSC. To Seller's
Knowledge, no petition for certification has been filed and is pending before
the National Labor Relations Board with respect to any Employees.
3.18 Environmental Matters.
(a) Except as set forth in Schedule 3.18 hereto:
(i) Seller and MSSC have obtained all material
Environmental Permits and all material licenses and
other authorizations and have made all registrations
and given all notifications that are required under any
applicable Environmental Law, except where such failure
could not, individually or in the aggregate, have a GAC
Material Adverse Effect.
(ii) There is no Environmental Claim pending against Seller,
GARC or MSSC under an Environmental Law.
(iii) Seller and MSSC are in compliance with all material
terms and conditions of their Environmental Permits,
and are in compliance with all applicable Environmental
Laws.
(iv) Seller and MSSC did not, in any material respect,
generate, treat, store, transport, discharge, dispose
of or release any Hazardous Materials on or from any
property now or previously owned, leased or used by
Seller or MSSC.
(v) Seller has disclosed to the insurer listed on Schedule
6.14 hereto prior to obtaining the Insurance Policy all
Hazardous Materials and any other environmental
conditions that affect or have the potential to affect
the Property, except to the extent that Seller's
failure to disclose any such facts would not provide
such insurer with any grounds to deny, exclude from or
defend against providing coverage or other benefits to
the insured under the Insurance Policy.
(b) For purposes of this Section 3.18:
(i) "Environment" shall mean any surface water, ground water,
or drinking water supply, land surface or subsurface strata, or ambient air and
includes, without limitation, any indoor location;
(ii) "Environmental Claim" means any written notice or
written claim by any person alleging potential liability (including, without
limitation, potential liability for investigator costs, cleanup costs,
governmental costs, or harm, injuries or damages to any person, property or
natural resources, and any fines or penalties) arising out of, based upon,
resulting from or relating to (1) the emission, discharge, disposal or other
release or threatened release in or into
A-I-24
the Environment of any Hazardous Materials or (2) circumstances forming the
basis of any violation, or alleged violation, of any applicable Environmental
Law;
(iii) "Environmental Laws" means any national, supranational,
federal, state, and local laws, codes, and regulations as now or previously in
effect relating to pollution, the protection of human health, the protection of
the Environment or the emission, discharge, disposal or other release or
threatened release of Hazardous Materials in or into the Environment; and
(iv) "Environmental Permit" shall mean a permit,
identification number, license or other written authorization required under any
applicable Environmental Law.
3.19 Government Contracts.
(a) Schedule 3.19 hereto constitutes a complete and accurate
record of (i) all of Seller's past and present Government Contracts that were in
force since June 30, 1999; (ii) all of Seller's Government Contracts currently
in force; (iii) all of Seller's outstanding quotations, bids and proposals for
Government Contracts; and (iv) to Seller's Knowledge, all of Seller's Government
Contracts as to which Seller is currently or is likely to experience substantial
cost, schedule, technical or quality problems that could result in a claim
against Seller (or its successors in interest) by the Government, a prime
contractor or a higher-tier subcontractor. Seller has made available to Buyer
true and complete copies of all Government Contracts listed in Schedule 3.19
hereto. Except as described in Schedule 3.19 hereto, all of Seller's Government
Contracts were legally awarded, are binding on Seller and to Seller's Knowledge
the other parties thereto, and are in full force and effect. Such Government
Contracts (or, to Seller's Knowledge, the applicable Prime Government Contracts
under which such Government Contracts were awarded) are not currently the
subject of bid protest or analogous proceedings in any agency, administrative or
judicial forum, and to Seller's Knowledge no such Government Contracts (or,
where applicable, the applicable Prime Government Contracts under which such
Government Contracts were awarded) are reasonably likely to become the subject
of bid protest or analogous proceedings.
(b) Seller has complied with all statutory and regulatory
requirements, including, but not limited to, the False Claims Act ("FCA"), the
Truth in Negotiations Act ("XXXX"), the Federal Acquisition Regulation ("FAR"),
the FAR Cost Principles and the Cost Accounting Standards, where and as
applicable to each of Seller's Government Contracts and each of Seller's
quotations, bids and proposals for Government Contracts.
(c) Seller has complied in all material respects with all terms,
conditions, clauses, provisions and specifications of Seller's Government
Contracts, whether incorporated expressly, by reference, or by operation of law.
(d) To Seller's Knowledge all facts set forth in or acknowledged
by any representations, certifications or disclosure schedules made or submitted
by or on behalf of Seller in connection with each of Seller's Government
Contracts and each of Seller's quotations, bids and proposals for Government
Contracts were current, accurate and complete as of the date of submission.
(e) Seller has complied in all material respects with all
applicable representations, certifications and disclosure requirements under
each of Seller's Government Contracts and each of Seller's quotations, bids and
proposals for Government Contracts.
A-I-25
(f) Seller has developed and implemented a government contracts
compliance program that includes corporate policies and procedures to ensure
compliance with applicable government procurement statutes, regulations and
contract requirements, except where the failure to do so could not reasonably be
expected to have a GAC Material Adverse Effect. Seller has delivered to Buyer a
true and complete copy of such compliance program.
(g) With respect to Seller's Government Contracts, neither the
Government nor any prime contractor or higher-tier subcontractor under a
Government Contract nor any other person has notified Seller, in writing or to
Seller's Knowledge, orally, of any actual or alleged violation or breach of any
statute, regulation, representation, certification or contract term, condition,
clause, provision or specification.
(h) To Seller's Knowledge, no facts exist which could give rise to
a claim for price adjustment under any of Seller's Government Contracts under
the XXXX or to any other request for a material reduction in the price of any of
Seller's Government Contracts.
(i) Except as described in Schedule 3.19(i) hereto, Seller has
received no show cause, cure, deficiency, default or similar notice relating to
its outstanding Government Contracts, and none of Seller's Government Contracts
has been terminated for default. Except as described in Schedule 3.19(i) hereto,
Seller has received no notice of an intent to terminate any of Seller's
contracts for convenience or of any consideration of such termination.
(j) Except as described in Schedule 3.19(j) hereto, there are no
outstanding disputes or claims against Seller relating to Seller's Government
Contracts and involving either the Government, any prime contractor, any
higher-tier subcontractor or any third party, and to Seller's Knowledge no facts
or allegations exist that could give rise to such a dispute or claim in the
future.
(k) Except as described in Schedule 3.19(k) hereto, there are no
outstanding disputes or claims against Seller relating to Seller's Government
Contracts which, if resolved unfavorably to Seller, would materially increase
Seller's cost to complete performance of such Government Contract above the
amounts set forth in the Estimates to Complete prepared by Seller and made
available to Buyer for each Government Contract. In addition, except as
described in Schedule 3.19(k) hereto, there are no known or reasonably
foreseeable expenditures which would increase the cost to complete performance
of Seller's Government Contracts above the amounts set forth in the Estimates to
Complete.
(l) Seller has not been and is not now blacklisted, suspended or
debarred, or proposed for suspension or debarment, from participation in the
award of Government Contracts. No facts exist which could give rise to such
suspension or debarment.
(m) No negative determination of responsibility has ever been
issued against Seller with respect to any quotation, bid or proposal for a
Government Contract.
(n) No audit, review, survey, inspection, investigation or
examination of records relating to Seller's Government Contracts has revealed
any occurrence or practice that could adversely affect the assets, business or
financial statements of Seller.
(o) Seller has not been and to Seller's Knowledge is not now under
any administrative, civil or criminal investigation or indictment involving
alleged false statements, false claims or other improprieties relating to
Seller's Government Contracts or quotations, bids and proposals for Government
Contracts. To Seller's Knowledge there is no basis for any such investigation or
indictment.
A-I-26
(p) Seller has not been and is not now a party to any
administrative or civil litigation involving alleged false statements, false
claims or other improprieties relating to Seller's Government Contracts or
quotations, bids and proposals for Government Contracts. To Seller's Knowledge
there is no basis for any such proceeding.
(q) Seller has made no payment, directly or indirectly, to any
person in violation of applicable Government procurement laws, including (but
not limited to) laws relating to bribes, gratuities, kickbacks, lobbying
expenditures, political contributions and contingent fee payments.
(r) Except as described in Schedule 3.19(r) hereto, neither the
Government nor any prime contractor or higher-tier subcontractor under a
Government Contract has withheld or set off, or attempted to withhold or set
off, monies due to Seller under any of Seller's Government Contracts.
(s) Seller's cost accounting, purchasing, inventory and quality
control systems are in compliance with all applicable Government procurement
statutes and regulations and with the requirements of all of Seller's Government
Contracts.
(t) Except as described in Schedule 3.19(t) hereto, neither the
Government nor any prime contractor or higher-tier subcontractor under a
Government Contract has disputed or disallowed any costs claimed by Seller under
Seller's outstanding Government Contracts. To Seller's Knowledge there is no
basis for disallowing any such costs.
(u) Except as described in Schedule 3.19(u) hereto, Seller has
made no assignments of Seller's Government Contracts or of any interests in
Seller's Government Contracts, and Seller has entered into no financing
arrangements with respect to the performance of any outstanding Government
Contract.
(v) Seller lists in Schedule 3.19(v) hereto all Government
property that has been provided to Seller pursuant to Seller's Government
Contracts.
(w) Seller has complied with all applicable requirements under
each of Seller's Government Contracts relating to the protection of classified
information, except as described in Schedule 3.19(w) hereto.
(x) For purposes of this Section 3.19 and, in the case of clauses
(i), (iii), (iv) and (v) only, for purposes of Section 6.3 hereof:
(i) The term "Government" means any agency, department,
ministry, division, subdivision or office of a
Government, including the officials, employees and
agents thereof; where a representation is elicited with
respect to compliance with regulations applicable to
United States Government Contracts, "Government" shall
mean the Government of the United States of America.
A-I-27
(ii) The term "Seller" means Seller and/or MSSC and, insofar
as they were acting on behalf of the foregoing, their
respective directors, officers, employees and agents;
provided, however, that when combined with the word
"Knowledge", "Seller" is limited to General Atronics
Corporation and the definition of "Seller's Knowledge"
as set forth in Article I hereof controls.
(iii) The term "Contract" means any prime contract,
subcontract, basic ordering agreement, letter contract,
purchase order or delivery order of any kind, including
all amendments, modifications and options thereunder or
relating thereto.
(iv) The term "Government Contract" means any prime Contract
with a Government and any subcontract with a prime
contractor or higher-tier subcontractor under a prime
contract with a Government.
(v) The term "Prime Government Contract" means any prime
Contract with a Government.
3.20 Financial Information
Seller has maintained its books of account in the usual, regular and
ordinary course. The December Balance Sheet (including the related notes and
schedules) and related statements of income, fairly present the financial
position of Seller as of its date and accurately reflect the income, results of
operations, retained earnings and changes in financial position, as the case may
be, of Seller, for the periods set forth therein, in each case in accordance
with GAAP consistently applied during the periods involved.
3.21 Customers.
(a) Schedule 3.21 hereto sets forth a list of each paying account
that represented more than $50,000 of gross sales in 1999 of the Defense
Business and the business of MSSC and the amount of sale attributable to such
customers during such period.
(b) As to each of Seller's and MSSC's customers, including those
listed on Schedule 3.21 hereto, the accounting, financial and other books and
records kept by Seller and MSSC are in all material respects complete and
accurate and have been maintained in the usual, regular and ordinary course of
business and in accordance with sound business practices with regard to the
maintenance of such book and records.
3.22 Disclosure.
All of the facts and circumstances not required to be disclosed as
exceptions under or to any of the foregoing representations and warranties made
by Seller in this Article 3 by reason of any minimum disclosure requirement in
any such representation and warranty would not, in the aggregate, have a GAC
Material Adverse Effect. The information contained in the Schedules (and any
updated Schedules) as it relates to the representations and warranties made by
Seller in this Article 3 does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements contained therein not misleading under
circumstances in which such statements were made.
A-I-28
3.23 Finders or Brokers.
Neither Seller nor MSSC nor any of their respective Affiliates,
officers, directors, employees or agents has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated hereby, except for the retention
of Xxxxxxxxx, Ball & Company by Seller to perform various investment banking
services in connection with the Acquisition and for legal, accounting and other
professional fees payable in connection with the transactions contemplated
hereby, all of which shall be paid by Seller.
3.24 Insurance.
Schedule 3.24 hereto contains a list of all insurance policies
maintained by Seller and MSSC for the benefit of or in connection with the
Defense Business or the business of MSSC. Neither Seller nor MSSC has received
any notice of cancellation, termination or reduction of coverage, nor has Seller
or MSSC received any notice of intention to cancel, terminate or reduce
coverage, relating thereto. Seller has given Buyer access to complete and
correct copies of all such policies together with all riders and amendments
thereto. Such policies are (i) in such amounts as are consistent with current
industry standards and practices, taking into account Seller's and MSSC's
properties, business and operations; and (ii) are in full force and effect, with
all premiums due thereon having been paid.
3.25 Access and Sophistication.
Seller acknowledges that all documents, books and records requested by
Seller pertaining to Buyer have been made available for inspection by Seller and
its agents and representatives; that Seller and its agents and representatives
have had a reasonable opportunity to ask questions of and receive answers from
Buyer or officers or employees acting on behalf of Buyer concerning the terms
and conditions of the transactions contemplated hereby, including without
limitation the issuance of the shares of Common Stock payable to Seller pursuant
to Section 2.6 hereof, and the business and prospects of Buyer. Seller and its
agents and representatives have such knowledge and experience in financial and
business matters as to enable them to utilize the information made available to
them in connection with the transactions contemplated hereby, to evaluate the
merits and risks of an investment in Buyer and to make an informed decision with
respect thereto and such an evaluation and informed decision have been made.
Seller is an "accredited investor" within the meaning of Regulation D of the
Securities Act of 1933, as amended (the "Securities Act").
3.26 Investment Representation.
Seller will acquire the shares of Common Stock payable to Seller
pursuant to Section 2.6 hereof for its own account for investment only and not
with a view to making a distribution thereof within the meaning of the
Securities Act. The parties acknowledge and agree that Seller may distribute the
Common Stock to its shareholders in compliance with the applicable securities
laws and the applicable exemptions from registration thereunder. Seller is aware
that the shares of Common Stock to be distributed to it under the terms of this
Agreement have not been registered under the Securities Act, and, as a result
thereof, are subject to substantial restrictions on transfer and shall bear a
legend in the form specified below restricting the transfer of such shares of
Common Stock. Seller further understands that Buyer has no obligation or
A-I-29
intention to register the shares of Common Stock to be distributed to Seller
hereunder, under any federal or state securities laws and, therefore, Seller may
be precluded from selling or otherwise transferring or disposing of any of such
shares of Common Stock or any portion thereof and will have to bear the economic
risk of Seller's investment.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAWS COVERING SUCH SECURITIES OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL (SATISFACTORY TO THE COMPANY
AND ITS COUNSEL), OR A "NO-ACTION" OR INTERPRETIVE LETTER FROM
THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION STATING
THAT SUCH SALE, TRANSFER OR ASSIGNMENT IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND ANY APPLICABLE STATE SECURITIES LAWS."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.1 Organization and Qualification.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Buyer is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except for failures to be so qualified or in
good standing which would not, individually or in the aggregate, have a material
adverse effect on the general affairs, management, business, operations,
condition (financial or otherwise) or prospects of Buyer and its subsidiaries
taken as a whole (an "Buyer Material Adverse Effect"). Except as set forth in
Schedule 4.1 hereto, Buyer is not in violation of any of the provisions of its
Certificate of Incorporation (or other applicable charter document) or By-Laws
(or other applicable organizational document).
4.2 Authority Relative to this Agreement.
Buyer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Buyer and no other corporate proceedings on the part of
Buyer are necessary to authorize this Agreement or to consummate the
transactions
A-I-30
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Buyer and, assuming the due authorization, execution and delivery
hereof by Seller, constitutes a valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms, except as such validity,
binding effect or enforcement may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally or by equitable principles
relating to the availability of remedies.
4.3 Capitalization.
The authorized capital stock of Buyer consists of 20,000,000 shares of
Common Stock, and 20,000,000 shares of undesignated preferred stock, no par
value per share. As of February 10, 2000, 9,716,833 shares of Common Stock are
issued and outstanding and no shares of preferred stock are issued and
outstanding. All of such issued and outstanding shares are validly issued, fully
paid and non-assessable and free of preemptive rights. As of February 10, 2000,
Buyer holds 440,939 shares of Common Stock in treasury. Except as set forth
above and except as disclosed in Schedule 4.3 hereto, there are not as of the
date hereof any shares of capital stock of Buyer issued or outstanding or any
subscriptions, options, warrants, calls, claims, rights (including without
limitation any stock appreciation or similar rights), convertible securities or
other agreements or commitments of any character obligating Buyer to issue,
transfer or sell any of its securities. Except as disclosed in Schedule 4.3
hereto, Buyer is not a party to any voting agreement, voting trust, proxy or
similar agreement, arrangement or understanding relating to its capital stock or
any agreement, arrangement or understanding relating to or providing for
registration rights with respect to its capital stock.
4.4 Subsidiaries.
The only direct or indirect subsidiaries of Buyer as of the date hereof
are those listed in Schedule 4.4 hereto. As of the date hereof, Buyer is
directly or indirectly the record (except for directors' qualifying shares) and
beneficial owner (including all qualifying shares owned by directors of such
subsidiaries as reflected in Schedule 4.4 hereto) of all of the outstanding
shares of capital stock of its subsidiaries, there are no proxies with respect
to such shares, and no equity securities of any of such subsidiaries are or may
be required to be issued by reason of any options, warrants, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any capital
stock of any such subsidiaries, and there are no contracts, commitments,
understandings or arrangements by which any such subsidiary is bound to issue
additional shares of its capital stock or securities convertible into or
exchangeable for such shares.
4.5 Valid Issuance of Securities.
The shares of Common Stock being issued to the Seller pursuant to
Section 2.6 hereof, when issued, sold and delivered in accordance with the terms
hereof for the consideration expressed herein, will be duly and validly issued,
fully paid and nonassessable. Subject to the accuracy of the representations of
Seller in this Agreement such shares of Common Stock will be issued in
compliance with all applicable federal and state securities laws.
4.6 No Violations, etc.
(a) Other than the filings, permits, authorizations, consents and
approvals or waivers thereof that are identified in Schedule 4.6(a) hereto and
that have been duly made or
A-I-31
obtained as contemplated herein, neither the execution and delivery of this
Agreement by Buyer nor the consummation transactions contemplated hereby nor
compliance by Buyer with any of the provisions hereof will (i) violate, conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or suspension of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Encumbrance upon any of the properties
or assets of Buyer under, any of the terms, conditions or provisions of (x) its
charter or by-laws or the applicable rules of the AMEX, the stock exchange on
which the Common Stock is publicly traded, (y) any note, bond, mortgage,
indenture or deed of trust or (z) any license, lease, contract, agreement or
other instrument or obligation, to which Buyer is a party or to which it or any
of its properties or assets may be subject; or (ii) subject to compliance with
the statutes and regulations referred to in the next paragraph, violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer or any of its properties or assets, except, in the case of
clauses (i) and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, suspensions, accelerations, rights of termination or acceleration
or creations of Encumbrances which would not, individually or in the aggregate,
either have an Buyer Material Adverse Effect or materially impair Buyer's
ability to consummate the transactions contemplated hereby.
(b) No filing or registration with, no notification to and no
permit, authorization, consent or approval of any Governmental Entity is
required of Buyer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
such filings, registrations, notifications, permits, authorizations, consents or
approvals the failure of which to be obtained, made or given would not,
individually or in the aggregate, either have an Buyer Material Adverse Effect
or materially impair Buyer's ability to consummate the transactions contemplated
hereby.
(c) Buyer is not in violation of or default under, except as set
forth in Schedule 4.6(c) hereto, (i) any note, bond, mortgage, indenture or deed
of trust; or (ii) any license, lease, contract, agreement or other instrument or
obligation to which Buyer is a party or to which it or any of its properties or
assets may be subject, except, in the case of clauses (i) and (ii) above, for
such violations or defaults which would not, individually or in the aggregate,
either have an Buyer Material Adverse Effect or materially impair Buyer's
ability to consummate the transactions contemplated hereby.
4.7 Litigation.
Except as set forth in Schedule 4.7 hereto, there is no (i) claim,
action, suit or proceeding pending or, to the best knowledge of Buyer,
threatened against or relating to Buyer before any court or governmental or
regulatory authority or body or arbitration tribunal; or (ii) outstanding
judgment, order, writ, injunction or decree, or application, request or motion
therefor, of any court, governmental agency or arbitration tribunal in a
proceeding to which Buyer is a party, except, in the case of clauses (i) and
(ii) above, such as would not, individually or in the aggregate, materially
impair Buyer's ability to consummate the transactions contemplated hereby.
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4.8 Absence of Changes or Events.
Except as set forth in Schedule 4.8 hereto, since March 31, 1999 to the
date hereof, Buyer and its subsidiaries have not incurred any material
liability, except in the ordinary course of their businesses consistent with
their past practices, and there has not been any change in the business,
financial condition or results of operations of Buyer and its subsidiaries taken
as a whole which has had, or could have, a Buyer Material Adverse Effect, and
Buyer and its subsidiaries taken as a whole have conducted their respective
business in the ordinary course consistent with their past practices.
4.9 Disclosure.
The information contained in Buyer's Form 10-K of the fiscal year ended
March 31, 1999, as filed with the SEC did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements contained therein not misleading
under the circumstances in which such statements were made. Buyer's Form 10-K,
when it was filed with the SEC, complied in all material respects with the
requirements of the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder. Buyer has made all required filings to be
made by it under the Exchange Act for the twelve (12) months prior to the date
hereof.
4.10 Finders or Brokers.
Neither Buyer nor any of its Affiliates, officers, directors, employees
or agents has employed any broker, finder or financial advisor or incurred any
liability for any fees or commissions in connection with the Acquisition or the
other transactions contemplated hereby.
ARTICLE V
CONDUCT OF BUSINESS OF SELLER
5.1 Conduct of Defense Business and Business of MSSC Pending the
Acquisition.
Except as contemplated by this Agreement, or as expressly agreed to in
writing by Buyer, during the period from the date of this Agreement to the
Closing Date, each of Seller and MSSC will conduct their respective operations
according to its ordinary course of business consistent with past practice, and
will use all commercially reasonable efforts to preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain satisfactory relationships with suppliers, distributors, customers
and others having business relationships with it and will take no action which
would materially adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement or have a GAC Material Adverse
Effect. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Closing Date,
Seller will not nor will it permit MSSC to, without the prior written consent of
Buyer, which consent shall not be unreasonably withheld:
(a) amend its certificate of incorporation, by-laws or other
organizational documents;
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(b) authorize for issuance, issue, sell, deliver, grant any
options for or otherwise agree or commit to issue, sell or deliver any shares of
any class of its capital stock or any securities convertible into shares of any
class of its capital stock;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock or
purchase, redeem or otherwise acquire any shares of its own capital stock or of
its subsidiary, except as otherwise expressly provided in this Agreement;
(d) (i) create, incur, assume, maintain or permit to exist any
debt for borrowed money other than under existing lines of credit in the
ordinary course of business consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in the
ordinary course of business and consistent with past practices; or (iii) make
any loans, advances or capital contributions to, or investments in, any other
person in an aggregate amount not to exceed $10,000;
(e) (i) increase in any manner the compensation of (x) any
employee except in the ordinary course of business consistent with past practice
or (y) any of its directors or officers; (ii) pay or agree to pay any pension,
retirement allowance, welfare benefit or other employee benefit not required, or
enter into or agree to enter into any agreement or arrangement with such
director or officer or employee, whether past or present, relating to any such
pension, retirement allowance, welfare benefit or other employee benefit, except
as required under currently existing agreements, plans or arrangements; (iii)
grant any severance or termination pay to, or enter into any employment or
severance agreement with, (x) any employee except in the ordinary course of
business consistent with past practice or (y) any of its directors or officers
except for honorarium payments to outside directors of Seller or MSSC in an
amount not to exceed $10,000 in the aggregate for each director; or (iv) except
as may be required to comply with applicable law, become obligated (other than
pursuant to any new or renewed collective bargaining agreement) under any new
pension plan, welfare plan, multi-employer plan, employee benefit plan, benefit
arrangement, or similar plan or arrangement, which was not in existence on the
date hereof, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, retirement or other benefit plan, agreement or arrangement, or employment
or consulting agreement with or for the benefit of any person, or amend any of
such plans or any of such agreements in existence on the date hereof; provided,
however, that this clause (iv) shall not prohibit Seller or MSSC from renewing
any such plan, agreement or arrangement already in existence on terms no more
favorable to the parties to such plan, agreement or arrangement;
(f) except as otherwise expressly contemplated by this Agreement,
enter into any other agreements, commitments or contracts, except agreements,
commitments or contracts for the purchase, sale or lease of goods or services
involving payments or receipts by Seller or MSSC in excess of $10,000, other
than (i) customer agreements; (ii) leases for rental space in an amount not to
exceed $10,000 for any lease; or (iii) developer agreements in an amount not to
exceed $10,000 for any agreement;
(g) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution, any
acquisition of a material amount of assets or securities, any sale, transfer,
lease, license, pledge, mortgage, or other disposition or encumbrance of a
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material amount of assets or securities or any material change in its
capitalization, or any entry into a material contract or any amendment or
modification of any material contract or any release or relinquishment of any
material contract rights;
(h) authorize or commit to make capital expenditures in excess of
$10,000 for any one order in Seller's service business (other than purchases by
Seller's or MSSC's systems business in the ordinary course of business
consistent with past practice);
(i) make any change in the accounting methods, accounting
practices or Tax policies or procedures followed by Seller or MSSC;
(j) settle any action, suit, claim, investigation or proceeding
(legal, administrative or arbitrative) in excess of $10,000 without the consent
of Buyer;
(k) make any election under the Code which would have a GAC
Material Adverse Effect; or
(l) agree, commit or state its intention to do any of the
foregoing.
5.2 Permitted Actions.
Anything in Section 5.1 hereof to the contrary notwithstanding, on or
prior to the Closing Date, Seller may distribute to its stockholders all rights
it has in connection with claims against the United States Navy relating to the
Wireline Software Licenses together with any funds received prior to Closing on
account of such claims and may make the distributions described in Schedule 5.2
hereto and specifically agreed to by Buyer.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 Additional Agreements; Cooperation.
(a) Subject to the terms and conditions herein provided, each of
the parties hereto agrees to use its best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, and to cooperate with each other in
connection with the foregoing, including using its best efforts (i) to obtain
all necessary waivers, consents and approvals from other parties to the Joint
Venture and the Business Contracts, the Government Contracts and any other
material agreements, leases and contracts related to the Defense Business; (ii)
to obtain all necessary consents, approvals and authorizations as are required
to be obtained under any federal, state or foreign law or regulations; (iii) to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby; (iv) to effect all necessary registrations, filings and submissions of
information requested by governmental authorities; and (v) to fulfill all
conditions to this Agreement.
(b) Seller shall use its best efforts to facilitate and assist
and cooperate with Buyer in, Buyer's conduct of on-site visits by
representatives of Buyer to representatives of customers of Seller and MSSC.
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(c) Each of the parties hereto agrees to furnish to the other
party hereto such necessary information and reasonable assistance as such other
party may request in connection with its preparation of necessary filings or
submissions to any regulatory or governmental agency or authority.
(d) For purposes of this Article VI, prior to the Closing, Seller
shall designate and authorize an officer of Seller (the "Designated Officer") to
act and sign all necessary documents on Seller's behalf in connection with all
of Seller's obligations contemplated in this Article VI.
6.2 Third Party Consents.
(a) To the extent that any agreement or contract constituting
part of the Acquired Assets is not capable of being transferred by Seller to
Buyer pursuant to this Agreement without the consent, approval or waiver of a
third Person, and such consent is not obtained prior to the Closing, or if such
transfer or attempted transfer would constitute a breach thereof or a violation
of any law, rule or regulation in the absence of obtaining such an approval,
nothing in this Agreement will constitute a transfer or an attempted transfer
thereof. Each of Buyer and Seller shall use commercially reasonable efforts at
Buyer's expense to obtain any such approvals.
(b) In the event that such consents, approvals and waivers
referred to in paragraph (a) are not obtained, then Seller and Buyer will each
use commercially reasonable efforts, at Buyer's expense and in compliance with
applicable laws and regulations, to (i) provide to Buyer the benefits and
burdens of any such agreement, (ii) cooperate in any reasonable and lawful
arrangement, including subcontracting, designed to provide such benefits and
burdens to Buyer without incurring any obligation to any other Person other than
to provide such benefits to Buyer, including without limitation the appointment
of Buyer as the agent of Seller for purposes of such agreement, and (iii)
enforce, at the request of Buyer for the account of Buyer, any rights of Seller
arising from any such agreement. With respect to any files and documentation
relating to any such contracts or agreements that are subject to third party
proprietary restrictions, Seller and Buyer will enter into arrangements as
described above to transition these materials to Buyer.
6.3 Novation of United States Government Contracts.
(a) As soon as practicable following the Closing, Buyer shall
prepare (with Seller's assistance), in accordance with FAR Part 42, (P) 42.12
and any applicable agency regulations or policies, a written request meeting the
requirements of the FAR Part 42, as reasonably interpreted by the Responsible
Contracting Officer (as such term is defined in FAR Part 42, (P) 42.1202(a)),
which shall be submitted by Seller to each Responsible Contracting Officer, for
the United States Government (i) to recognize Buyer as Seller's successor in
interest to all the Acquired Assets constituting a United States Government
Contract; and (ii) to enter into a novation agreement (a "Novation Agreement")
in form and substance reasonably satisfactory to Buyer and Seller and their
respective counsel, pursuant to which, subject to the requirements of the FAR
Part 42, all of Seller's right, title and interest in and to, and all of
Seller's obligations and liabilities under, each such United States Government
Contract shall be validly conveyed, transferred and assigned and novated to
Buyer by all parties thereto. Seller shall provide to Buyer promptly any
information regarding Seller required in connection with such request. Seller
and Buyer shall each use all reasonable efforts at Buyer's expense to obtain in
the most expeditious manner possible all licenses, consents, approvals and
waivers required for the purpose of processing, entering into and
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completing the Novation Agreements with regard to any of the United States
Government Contracts, including responding to any requests for information by
the United States Government with regard to such Novation Agreements. Until such
time as the Novation Agreements are completed, Buyer and Seller will operate
with respect to the applicable United States Government Contract to the extent
permitted and within the manner required by law. Seller shall, at Buyer's
expense, do each thing reasonably requested by Buyer to enable the performance
of the United States Government Contracts and to provide Buyer the benefits of
such United States Government Contracts (including, without limitation,
enforcement of Seller's rights against other parties to the United States
Government Contracts). Buyer agrees that pending novation it will perform, at
Buyer's expense, the terms of such United States Government Contracts as
Seller's agent.
(b) In connection with obtaining the consents contemplated in
paragraph (a) hereof, Seller shall not consent to any modification of any
Government Contract included in the Acquired Assets without the prior written
consent of Buyer, not to be unreasonably withheld or delayed.
(c) The parties agree that until all United States Government
Contracts have been novated in accordance with paragraphs (a) and (b) above,
Seller shall arrange for the deposit of all payments received by it with respect
to any United States Government Contract performed by Buyer and any of the
billed and unbilled accounts receivables included as part of the Acquired Assets
as provided above in a lock-box designated jointly by Seller and Buyer and
Seller shall instruct the Designated Officer to promptly endorse all payments to
Buyer.
6.4 Patent, Trademark and Copyright Filings.
Seller shall use its best commercial efforts, at Buyer's expense, to
assist and cooperate with Buyer in Buyer's preparation and filing of documents
relating to Seller's Patents, Trademarks and Copyrights with the United States
Patent and Trademark Office and the United States Copyright Office.
6.5 Schedules.
Seller and Buyer shall supplement the Schedules to this Agreement for
which it is responsible to reflect any material change to the information
contained therein; provided that no such supplement shall cure any
misrepresentation therein.
6.6 Full Access.
(a) To the extent permitted under U.S. export control laws and
regulations, other applicable law, Seller's security clearances and any third
party requirements or restrictions, Seller shall afford to Buyer and its
authorized representatives such access during normal business hours and upon no
less than 24 hours prior notice to all properties, books, records (including but
not limited to Tax records), contracts and documents of the Defense Business and
business of MSSC as Buyer shall reasonably request in connection with its review
of the Defense Business and business of MSSC, and Seller shall furnish or cause
to be furnished to Buyer and its authorized representatives all such information
with respect to the Defense Business and business of MSSC as Buyer may
reasonably request. Any such investigation shall be on reasonable prior notice
and shall be carried out in such a manner as to minimize any disruption of the
operations of the Defense Business and the business of MSSC.
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(b) Buyer will hold and will cause its consultants and advisors
to hold in strict confidence on the terms and conditions set forth in the
Confidentiality Agreement, dated June 4, 1999, between Buyer and Seller all
documents and information furnished to Buyer in connection with the transactions
contemplated by this Agreement as if each of the parties hereto and such
consultant or advisor was a party thereto, and this provision shall survive any
termination of this Agreement.
6.7 No Shopping.
Prior to any termination of this Agreement pursuant to Article 10
hereof, Seller shall not solicit or enter into any agreement with respect to (i)
the sale of any substantial portion of the Defense Business, the Acquired
Assets, or the business of MSSC, or (ii) any merger or other business
combination of Seller or MSSC, to or with any Person other than Buyer.
6.8 Notification of Certain Matters.
(a) Seller or Buyer, as the case may be, shall promptly notify
the other of (i) its obtaining of actual knowledge as to the matters set forth
in clauses (x) and (y) below; or (ii) the occurrence, or failure to occur, of
any event, which occurrence or failure to occur would be likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing Date, or (y) any material failure of Seller or Buyer, as the case may
be, or of any officer, director, employee or agent thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
(b) Seller shall advise Buyer in writing, promptly after becoming
aware thereof, of any material adverse change in the condition (financial or
otherwise), operations or assets of the Defense Business or the business of
MSSC.
6.9 Publicity.
Seller and Buyer agree to consult with each other in issuing any press
release and with respect to the general content of other public statements with
respect to the transactions contemplated hereby, and shall not issue any such
press release prior to such consultation, except as may be required by law.
6.10 Fees and Expenses.
Except as otherwise provided herein, whether or not the Acquisition and
other transactions contemplated hereby are consummated, Seller and Buyer shall
bear their respective expenses incurred in connection with the Acquisition and
other transactions contemplated hereby, including, without limitation, the
preparation, execution and performance of this Agreement and the transactions
contemplated hereby, and all fees and expenses of investment bankers, finders,
brokers, agents, representatives, counsel and accountants.
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6.11 Tax Matters.
(a) Pre-Closing Taxes. Seller shall remain responsible for all
Taxes of Seller payable in connection with the operation of the Defense Business
prior to and including the Closing Date. In this respect, Seller will reimburse
Buyer for any Taxes of or relating to the Business or MSSC paid by Buyer after
the Closing Date (i) with respect to any Taxable Year that ends on or before the
Closing Date or (ii) to the extent that any such Taxes are allocable to that
portion of any Split Period that ends on the Closing Date. For purposes of this
Agreement, in the case of any Taxes that are payable with respect to a Split
Period, the portion of such Taxes allocable to the portion of such Split Period
that ends on the Closing Date shall be determined on the basis of a deemed
closing on the Closing Date of the books and records of Seller and its
Affiliates. Seller shall also remain responsible for the filing of all related
Tax Returns relating to the Business and which are due before the Closing Date.
(b) Allocation of Purchase Price. The parties agree that the
Purchase Price shall be allocated among the Acquired Assets and Assumed
Liabilities (the "Allocation Schedule") as set forth on Schedule 6.11(b)
attached hereto, subject to such changes in the Acquired Assets and Assumed
Liabilities as occur prior to the Closing Date. The Parties agree to file all
Tax Returns and other statements for Tax purposes consistently with the
allocation set forth on the Allocation Schedule and in particular to report the
information required by Section 1060(b) of the Code (including the timely filing
of Internal Revenue Service Form 8594), Treasury Regulation Section 1.743-1(k),
Treasury Regulation Section 1.755-1 and /or Treasury Regulation Section 1.755-2T
in a manner consistent with such allocation which the parties agree complies
with those provisions. None of Buyer, Seller or any Affiliate of Buyer or Seller
shall take a position in any Tax proceeding, Tax audit, or otherwise that is
inconsistent with the allocation set forth on the Allocation Schedule; provided,
however, that (i) nothing contained herein shall require Buyer or Seller to
contest any challenge to such allocation, and (ii) nothing contained herein
shall prevent Buyer, Seller or any of their Affiliates from filing protective
amended Tax Returns or claims for refunds after a Tax authority has challenged
such allocation. Each of Buyer and Seller shall notify the other if it receives
notice that any Tax authority proposes any allocation different from the
Allocation Schedule.
(c) Transfer Taxes. Notwithstanding any other provisions of this
Agreement, Buyer and Seller shall each be responsible for one-half of all
applicable transfer, documentary, sales, use, stamp, registration, and other
such similar Taxes and related costs ("Transfer Taxes") incurred in connection
with the transactions contemplated by this Agreement. Each of the Parties hereby
agrees to pay all such Taxes and other related costs and to file all necessary
documentation as required under the applicable statutory provisions with respect
to all such Taxes in a timely manner. Following any such payment and filing by
any party hereto, or any of its Affiliates, such party shall be entitled to be
reimbursed by the other party for one-half of the amount paid. The Parties shall
take all reasonable actions to minimize the amount of such Transfer Taxes.
6.12 Interim Operating.
(a) With respect to any export licenses referred to in Schedule
9.2(d) or 9.3(d), Seller and Buyer will meet the appropriate government
officials as promptly as practicable in order to assure a rapid transition
process and Seller will cooperate with and provide reasonable assistance to
Buyer in connection with such transition process. During a reasonable transition
period but in
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any event only so long as it is permitted by applicable law, at Buyer's request
Seller will export products of Buyer under Seller's export licenses.
(b) Buyer agrees to reimburse Seller for any out-of-pocket costs
incurred in connection with the arrangements described in (a) above.
6.13 Lease of Property.
Buyer shall and Seller shall, and shall cause GARC to, enter into a
lease, substantially in the form attached hereto as Exhibit 6.13 (the "Lease"),
pursuant to which Buyer shall lease from GARC and GARC shall lease to Buyer for
a period of six (6) months commencing on the Closing Date the real property and
premises located at 1100 and 0000 Xxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxx
(collectively, the "Property") with options to renew the term for six (6)
additional consecutive two-month periods on terms and conditions to be agreed
upon by Buyer and Seller or GARC, as the case may be, at such time.
6.14 Environmental Matters
(a) It is a condition precedent to Buyer's obligation to close
that Seller purchase an environmental insurance policy for the benefit of Buyer
in the form of the policy endorsements previously agreed to by Buyer and Seller
(the "Insurance Policy"). Seller agrees to use its best efforts to obtain such
Insurance Policy; provided that the total premium required to be paid by Seller
shall not exceed $37,500.
(b) From the date hereof through the termination of the Lease (after giving
effect to all renewals thereof), Seller agrees to take all steps required under
the rules and regulations of the Pennsylvania Department of Environmental
Protection ("PADEP") to obtain Act II Clearance with respect to the Property.
ARTICLE VII
POST-CLOSING COVENANTS
7.1 Non-Compete
For a period of five (5) years following the Closing Date, neither the
Seller nor any of its affiliates directly or indirectly controlled by Seller nor
any Key Shareholder shall establish de novo or directly or indirectly purchase,
acquire, invest in or otherwise develop, hold or engage in, any business or
operations in the defense or communications industry that is in competition with
the Defense Business and/or the business of MSSC ("Restricted Business") in the
United States or the countries listed on Schedule 7.1 hereto where MSSC or
Seller currently conducts business; provided, however, that ownership by Seller,
its Affiliates or the Key Shareholders of less than five percent (5%) of the
outstanding stock of any publicly traded corporation that engages in any
Restricted Business in the United States shall not violate the foregoing
agreement not to compete.
7.2 Non-Solicitation
(a) For a period of three (3) years following the Closing Date,
the Seller and its Affiliates shall not Solicit any Accepting Employee in any
capacity.
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(b) For an additional (2) year period following the three (3)
year period referred to in paragraph (a) above, Seller shall not Solicit any
Accepting Employee in connection with any Restricted Business.
(c) For purposes of this Section 7.2, "Solicit" shall mean either
(i) rehiring any Accepting Employee or (ii) directly or indirectly soliciting
the employment of (whether as an employee, consultant or temporary employee) or
in any other manner persuading or attempting to persuade any Accepting Employee
to discontinue his or her relationship with Buyer.
7.3 Access to Files.
Until the expiration of any applicable statutes of limitations, or for
such longer period as may be required by Buyer's customary retention policies
but in no case for a period less than that called for by applicable law,
provided that all Employee records and personnel files shall be retained for ten
(10) years from the later of the Closing Date and the pendency of any claims
covering such Employees, Buyer will retain and grant Seller and its respective
representatives reasonable access to all books, records and other data included
in the Defense Business and the business of MSSC during regular business hours
upon reasonable prior notice if such access is reasonably required by Seller in
connection with its legal, Tax, regulatory or contractual matters (including as
may be necessary to enable Seller to prepare Tax Returns or reports for or on
behalf of Seller or MSSC or to prepare for or to respond to any Tax audit).
7.4 Further Assurances
If at any time after the Closing Date, any further action is necessary
or desirable to carry out the purposes of this Agreement and to vest Buyer with
full right, title and possession to the Acquired Assets, including but not
limited to, all of Seller's right, title and interest, in and to MSSC Interest
and in, to and under the Joint Venture Agreement, the officers of Seller are
fully authorized in the name of Seller or otherwise to take, and shall take, all
such further action.
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFITS
8.1 Employees and Employee Benefits.
Schedule 3.17(a) hereto is a complete and accurate list of the
Employees (and Inactive Employees) employed in the Defense Business, which list
contains the following information for each such Employee: name, position held,
retention or stay bonus, if any, in accordance with the stay bonus program, if
any, the Plans in which the Employee participates, current salary, anticipated
salary increase date if prior to or on December 31, 2000 and specified
anticipated amount of such increase, official title, 1999 annual bonus and/or
sales commission amounts, if any, 2000 annual guaranteed bonus and/or sales
commission targets and/or amounts (if any) and Seller's current intentions for
such bonuses for 2000, annual vacation entitlement and whether such vacation
entitlement is grandfathered, accrued but unused 2000 vacation, Fair Labor
Standards Act status, date of hire, current salary grade, whether Employee is
employed based upon an employer sponsored non-resident visa program, and social
security number and service date for employee benefit plan purposes. Such list
will indicate which Employees are Inactive Employees and, to the extent known,
the date on which each such Inactive Employee is expected to return to active
employment.
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8.2 Designated and Accepting Employees.
(a) Buyer shall offer employment to all Employees (collectively,
"Designated Employees") at a base salary or hourly rate of pay that is equal to
or in excess of such Employee's base salary or hourly rate of pay with respect
to employment by Seller immediately prior to the Closing, and as soon as
practicable thereafter will obtain either acceptances or rejections of such
offers of employment. Effective as of the Closing Date (the Inactive Employee
Hire Date, in the case of an Inactive Employee), no Accepting Employee shall be
an employee of Seller. Buyer does not assume and shall have no liability with
respect to any former or current employee of Seller arising out of or relating
to such employee's employment, or termination of employment, by Seller, other
than for accrued vacation benefit days to the extent specified in Section 8.3(c)
hereof.
(b) Buyer's employment of a Designated Employee is conditioned
upon the Closing taking place and compliance with all customary and appropriate
conditions established by Buyer, an offer of employment with Buyer and a written
response to such offer from the Designated Employee receiving the offer within
two days after the date of such offer. Any employment with Buyer pursuant to
such an offer of employment shall take effect as of the date following the
Closing Date; provided, however, to the extent Buyer offers employment to any
Inactive Employee, such employment shall be effective as of the date which is
the later of the date following the Closing Date and the date on which each such
Inactive Employee is able and willing to commence the performance of services on
a full time basis (such later date is the "Inactive Employee Hire Date");
provided, however, that such date occurs within thirteen (13) weeks after the
Closing Date. Such employment shall be upon Buyer's usual terms, conditions and
policies of employment, including without limitation, all of Buyer's policies
regarding modification of the terms of employees' employment.
(c) All Designated Employees who are employed by Seller on the
Closing Date, having accepted an offer of employment with Buyer, shall be
referred to herein as "Accepting Employees."
8.3 Benefits of Accepting Employees.
(a) Accepting Employees shall be eligible to participate as of
the effective date of their employment with Buyer in the employee benefit plans
and other fringe benefits of Buyer on the same basis as such plans and benefits
are offered to similarly situated employees of Buyer. Buyer will recognize any
prior service of any Accepting Employee with Seller as if it had been service
with Buyer for purposes of (i) eligibility for participation and vesting (but
not benefit accrual) under its 401(k) plan, (ii) eligibility to participate in
Buyer's medical, dental and other welfare plans, but not for purposes of
determining eligibility for any post-retirement medical, dental and other
similar benefits, (iii) accruing annual vacation under the appropriate schedule
applicable to Accepting Employees from time to time, and (iv) determining the
amount of severance due to any Accepting Employee on the termination of their
employment under Buyer's then existing severance program.
(b) Except to the extent provided in Section 8.3(c) hereof,
Seller and Seller Plans shall retain all liability, responsibility and
obligation for all employment and benefit related liabilities or obligations of
whatever nature, including without limitation under any Seller Plan, with
respect to all Accepting Employees arising from or relating to their employment
with Seller with respect to claims incurred or based on events, acts, omissions,
conduct or course of conduct,
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to the extent that such claims were incurred or such events, acts, omissions,
conduct or course of conduct occurred on or before the Closing Date (except that
in the case of Inactive Employees, the Inactive Employee Hire Date shall be
substituted for the Closing Date.) Buyer and Buyer's benefit plans shall have
all liability, responsibility and obligation for all employment related
liabilities or obligations with respect to any Accepting Employee, with respect
to claims incurred or based on events, acts, omissions, conduct or course of
conduct, to the extent that such claims were incurred or such events, acts,
omissions, conduct or course of conduct occurred after the Closing Date (except
that in the case of Inactive Employees, the Inactive Employee Hire Date shall be
substituted for the Closing Date), and relates to their employment with Buyer.
Notwithstanding the foregoing, Seller and the Seller Plans have all liability,
responsibility and obligation for any eligible health care or other eligible
welfare expenses and services incurred through the Closing Date (except that in
the case of an Inactive Employee, the Inactive Employee Hire Date shall be
substituted for the Closing Date). For purposes of the foregoing sentence, an
expense or service is deemed incurred when the medical or dental services are
performed (except in the case of hospital services and expenses, which are
deemed to be incurred on the date the covered person first enters the hospital),
or, with respect to welfare benefits other than medical and dental benefits,
when the latest event giving rise to such expense or benefit occurs.
(c) Buyer shall be responsible for accrued vacation benefit days
not taken by or otherwise not paid by Seller to an Accepting Employee prior to
the Closing, but only to the extent accrued for on the Closing Balance Sheet.
(d) Buyer agrees that any pre-existing condition exclusion in any
of Buyer's health insurance plans and policies shall not be applicable to each
Accepting Employee effective as of the effective date of such Accepting
Employee's employment with Buyer, except to the extent such exclusions actually
applied to limit, restrict or deny coverage to an Accepting Employee under the
corresponding Seller Plans that provided medical benefits to the Accepting
Employee on the day prior to the effective date of such Accepting Employee's
employment with Buyer. Buyer shall cause its health and other welfare benefit
plans and policies that provide medical and dental benefits to credit the
Accepting Employees with any deductible or maximum out-of-pocket payments made
by such Accepting Employees under Seller's health and other welfare benefit
plans and policies that provide medical and dental benefits so as to reduce the
amount of any deductible or maximum out-of-pocket payments payable by the
Accepting Employees under Buyer's health and other welfare benefit plans and
policies that provide medical and dental benefits; provided that the Accepting
Employees provide to such Buyer benefit plans and policies such information as
Buyer may specify to implement such credits. Seller shall make available to each
Accepting Employee within twenty (20) days after the Closing such information as
is reasonably necessary to permit the Accepting Employee to apply for such
credits.
(e) Effective as of the Closing Date, all Accepting Employees
shall be fully vested in their accrued benefit under any Seller Plan that is an
"employee pension plan" as that term is defined in Section 3(2) of ERISA.
(f) Prior to the Closing Date, Seller shall pay all bonus and
incentive compensation amounts payable or accrued with respect to any Accepting
Employee under any Seller Plan or otherwise (including any bonus or incentive
compensation of any kind whatsoever) with respect to any period that includes,
or ended on or prior to, the Closing Date (except that in the case of an
Inactive Employee, the Inactive Employee Hire Date shall be substituted for the
Closing Date in this Section 8.3(f)).
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(g) All wages, employee withholding taxes, commissions, employee
payroll deductions, employer matching and any profit sharing or other
contribution to any Seller Plan relating to the employment of any Accepting
Employee through the Closing Date shall be paid by Seller prior to the Closing
Date (except that in the case of an Inactive Employee, the Inactive Employee
Hire Date shall be substituted for the Closing Date in this Section 8.3(g)).
8.4 Retention of Employees.
Seller shall use commercially reasonable efforts (but shall not be
required to expend money, except as set forth herein) to retain the Designated
Employees during the period between the execution of this Agreement and through
and including the Closing Date and to encourage all such Designated Employees to
accept offers of employment from Buyer, including, but not limited to, the
following:
(a) maintaining all current compensation programs or benefits
programs that are intended to assist in retaining employees; and
(b) assisting Buyer in communicating with the Designated
Employees regarding offers of employment by Buyer.
Nothing contained in this Section 8.4 shall prohibit Seller from terminating or
disciplining any individual who Seller believes, in its sole discretion, should
be terminated or disciplined in a manner consistent with past practices,
policies and procedures.
8.5 Cooperation
Seller and Buyer agree to cooperate and take such further actions as
may be reasonably necessary to carry out the intent of this Article VIII,
including but not limited to (i) the conduct of meetings by Buyer, if it so
elects, with Employees during breaks outside of scheduled work or at such times
reasonably agreed to by Buyer and Seller prior to the Closing Date for purposes
including but not limited to employment interviews, enrollment of Accepting
Employees in Buyer's benefit plans and employee orientation for Accepting
Employees, and (ii) the exchange of such information as may be necessary to
administer Buyer's benefit plans and the Seller Plans. Seller agrees to permit,
at such times and places reasonably agreed to by Buyer and Seller and to the
extent permitted by applicable laws and subject to appropriate safeguards, Buyer
to review the Seller's personnel files and other employee-related records and
data.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Conditions to Each Party's Obligation.
The respective obligation of each party to effect the transactions
contemplated hereby is subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation entered, enacted, promulgated,
enforced or issued by any Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively,
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"Restraints") shall be in effect preventing the consummation of the transactions
contemplated hereby.
(b) Governmental Action. No action or proceeding shall be
instituted by any Governmental Entity seeking to prevent consummation of the
transactions contemplated hereby or seeking material damages in connection with
the transactions contemplated hereby which continues to be outstanding.
9.2 Conditions to Obligations of Buyer.
The obligation of Buyer to effect the transactions contemplated hereby
is further subject to satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller set forth herein shall be true and correct in all material
respects both when made and on and as of the Closing Date, as if made on and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date). Seller shall deliver to Buyer all Schedules
required to be delivered by it to Buyer hereunder, updated as of the Closing
Date.
(b) Performance of Obligations of Seller. Seller shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) No Material Adverse Change. At any time after the date
hereof, there shall not have occurred any material adverse change, in the
reasonable judgment of Buyer, in the Acquired Assets, the Defense Business or
the business of MSSC, taken individually or the general affairs, business,
management, operations, assets, condition (financial or otherwise), liabilities
or prospects of Seller and its subsidiaries taken as a whole.
(d) Consents. All necessary consents and approvals of any
Governmental Entity or any other third Person required for the consummation of
the transactions contemplated by this Agreement listed on Schedule 9.2(d) hereto
shall have been obtained, except for such consents and approvals the failure to
obtain which individually or in the aggregate would not have a material adverse
effect on the Defense Business, the Acquired Assets, or the business of MSSC or
materially impair the ability of Seller to fulfill its respective obligations
under this Agreement.
(e) Escrow Agreement and Lease. Seller shall execute and deliver
to Buyer the Escrow Agreement as contemplated in Section 2.6(d) hereof and the
Lease as contemplated in Section 6.13 hereof, substantially in the form attached
hereto as Exhibits 2.6 and 6.13, respectively, and made a part hereof.
(f) Officer's Certificate. Buyer shall have received, on and as
of the Closing Date, from Seller an officer's certificate, executed by Xxxxxx X.
Xxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx dated the Closing Date, as to
the satisfaction of the conditions in paragraphs (a) through (e) and (h) of this
Section 9.2.
(g) Legal Opinion. Buyer shall have received, on and as of the
Closing Date, an opinion of XxXxxxxxxx, Keen & Xxxxxxx, in the form attached
hereto as Exhibit 9.2(g).
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(h) Lock-up Agreement. Seller any shareholder of Seller to whom
Seller shall distribute the Share Consideration payable to Seller pursuant to
Section 2.6 hereof shall execute and deliver to Buyer a lock-up agreement, dated
as of the Closing Date, substantially in the form attached hereto as Exhibit
9.2(h) and made a part hereof.
(i) Insurance Policy. Seller shall have purchased the Insurance
Policy as provided in Section 6.14(a) hereof.
9.3 Conditions to Obligations of Seller.
The obligation of Seller to consummate the transactions contemplated
hereby is further subject to satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Buyer set forth herein shall be true and correct both when made
and on and as of the Closing Date, as if made on and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such date).
If applicable, Buyer shall deliver to Seller all Schedules required to be
delivered by it to Seller hereunder, updated as of the Closing Date.
(b) Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) No Material Adverse Change. At any time after the date
hereof, there shall not have occurred any material adverse change, in the
reasonable judgment of Seller, in the general affairs, management, business,
operations, assets, condition (financial or otherwise) liabilities or prospects
of Buyer and its subsidiaries taken as a whole.
(d) Consents. All necessary consents and approvals of any
Governmental Entity or any other third Person required for the consummation by
Buyer of the transactions contemplated by this Agreement listed on Schedule
9.3(d) hereto shall have been obtained except for such consents and approvals
the failure to obtain which, individually or in the aggregate, would not
materially impair the ability of Buyer to fulfill its obligations under this
Agreement.
(e) Escrow Agreement and Lease. Buyer shall have executed and
delivered the Escrow Agreement as contemplated by Section 2.6(d) hereof and the
Lease as contemplated by Section 6.13 hereof, substantially in the form attached
hereto as Exhibits 2.6 and 6.13, respectively, and made a part hereof.
(f) Officer's Certificate. Seller shall have received from Buyer,
on and as of the Closing Date, an officer's certificate, executed by the Chief
Executive Officer and the Chief Financial Officer of Seller (in their respective
capacities as such) dated the Closing Date, as to the satisfaction of the
conditions in paragraphs (a) through (e) of this Section 9.3.
(g) Legal Opinion. Seller shall have received, for the benefit of
the stockholders of Seller, on and as of the Closing Date, an opinion of Buyer's
General Counsel, in the form attached hereto as Exhibit 9.3(g).
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ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Seller.
From and after the Closing, Seller hereby agrees to indemnify, defend
and hold Buyer and its officers, directors, agents and employees (the "Buyer
Indemnified Parties"), harmless from, against and in respect of any and all
losses, claims, suits, actions, proceedings, awards, judgments, settlements,
fines, penalties, liabilities, obligations, damages, deficiencies, costs or
expenses (including, without limitation, reasonable expenses of investigation
and attorneys' fees) net of any insurance proceeds and tax benefits if, as and
when received, in either case to which such Buyer Indemnified Party is entitled
by virtue of any of the foregoing (collectively "Claims") arising out of or
resulting from:
(a) any breach of any warranty or misrepresentation by Seller or
the breach or nonperformance of any covenant, agreement or obligation to be
performed on the part of Seller under this Agreement, or in any closing
certificate contemplated hereby or in any Schedule hereto;
(b) the conduct of the Business prior to the Closing, except for
liabilities specifically assumed by Buyer herein and reserved for on the Closing
Balance Sheet;
(c) any liability for Taxes incurred with respect to any Taxable
Year ending on or before the Closing Date and that portion of any Split Period
ending on the Closing Date;
(d) the MSSC Interest or the Joint Venture Agreement on or prior
to the Closing;
(e) the Excluded Assets; and
(f) the Excluded Liabilities.
10.2 Indemnification by Buyer.
From and after the Closing, Buyer hereby agrees to indemnify,
defend and hold harmless Seller and its officers, directors, agents and
employees (the "Seller Indemnified Parties") from, against and in respect of any
and all Claims arising out of or resulting from (i) any breach of any warranty
or misrepresentation by Buyer or the breach or nonperformance of any covenant,
agreement or obligation to be performed on the part of Buyer under this
Agreement, or in any closing certificate contemplated hereby or in any Schedule
hereto; (ii) any Assumed Liabilities and (iii) except for the Excluded
Liabilities and the Excluded Assets, the MSSC Interest, operation of the Defense
Business and the use of the Acquired Assets in the operation thereof after the
Closing Date.
10.3 Limitations.
(a) Notwithstanding anything contained in this Agreement to the
contrary: (i) neither party shall be liable for any amounts for which an
Indemnified Party (as defined below) is otherwise entitled to indemnification in
connection with the breach or inaccuracy of any representation or warranty or
any breach of any covenant contained herein until the aggregate amount for which
such Indemnified Party is entitled to indemnification with respect to all such
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Claims for indemnification in the aggregate exceed Fifty Thousand Dollars
($50,000) (the "Threshold"), at which time such party shall be liable for any
such excess, and (ii) nor shall a party indemnifying another party hereto be
required to make indemnification in connection with the breach or inaccuracy of
any representation or warranty or any breach of any covenant contained herein to
the extent indemnification payments with respect to all such claims for
indemnification would exceed in the aggregate Eleven Million Dollars
($11,000,000) (the "Maximum Indemnification Amount"). In determining the
foregoing Threshold and in otherwise determining the amount to which the
Indemnified Party is entitled to assert a claim for indemnification pursuant to
this Article 10, only actual losses shall be considered. The Threshold and
Maximum Indemnification Amount shall not apply as to any Claims related to: (i)
the Excluded Assets; (ii) the Excluded Liabilities; and (iii) a final,
non-appealable judgment of a court of competent jurisdiction that either party
has committed fraud against the other with respect to the transactions
contemplated under this Agreement. The parties hereto waive as against each
other any claim to consequential, special, exemplary or punitive damages except
to the extent consequential, special, exemplary or punitive damages are awarded
to a third Person against an Indemnified Party in circumstances in which such
Indemnified Party is entitled to indemnification hereunder such consequential,
special, exemplary or punitive damages so awarded shall be payable to such
Indemnified Party hereunder.
(b) Indemnification Claims brought under Section 10.1 other than
those arising from the Excluded Assets or the Excluded Liabilities, shall be
satisfied exclusively by Seller first from the Escrowed Shares pursuant to the
Escrow Agreement and then, to the extent such Claims exceed the value of the
Escrowed Shares, or are made after the termination of the escrow established
pursuant to the Escrow Agreement, such excess shall be satisfied by the
remaining Cash Consideration and then the Share Consideration.
(c) The respective obligations of the parties to indemnify in
connection with the breach or inaccuracy of any representation or warranty or
any breach of a covenant contained herein shall expire: (i) eighteen (18) months
after the Closing Date as to Claims solely between the parties hereto which are
not brought within such time period, (ii) six (6) months following the
expiration of all appropriate statutes of limitations as to Claims involving the
representation and warranty referred to in Section 3.15 (Taxes) hereof and
Claims brought by third Persons (including Employees), and (iii) seven (7) years
after the Closing Date as to Claims involving the representation and warranty
referred to in Section 3.18 (Environmental Matters) hereof. Claims relating to
the representations and warranties referred to in Section 3.8 (Title to Assets)
hereof and Section 4.5 (Valid Issuance of Securities) hereof shall not expire.
Notwithstanding the foregoing, the respective indemnification obligations of the
parties hereunder shall not expire with respect to any Claim brought within such
specified time periods until the indemnification obligation, if any, with
respect to such Claim shall have been finally determined and paid.
10.4 Indemnification Procedure.
In any case under this Agreement where Seller has indemnified a Buyer
Indemnified Party or Buyer has indemnified a Seller Indemnified Party (the
indemnifying party hereinafter the "Indemnifying Party" and the party entitled
to indemnification hereinafter the "Indemnified Party") against any Claim,
indemnification shall be conditioned on compliance with the procedure and shall
be subject to the limitations outlined below:
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(a) Provided that prompt notice is given of a Claim for which
indemnification might be claimed under this Article 10, unless the failure to
provide such notice does not actually and materially prejudice the interests of
the Indemnifying Party, the Indemnifying Party promptly will defend, contest, or
otherwise protect against any such Claim at its own cost and expense. Such
notice shall describe the Claim in reasonable detail and shall indicate the
amount (estimated, if necessary) of the loss that has been or may be suffered by
an Indemnified Party.
(b) An Indemnified Party may, but will not be obligated to,
participate at its own expense in a defense thereof by counsel of its own
choosing, but the Indemnifying Party shall be entitled to control the defense
unless such Indemnified Party has relieved the Indemnifying Party from liability
with respect to the particular matter, provided that the Indemnifying Party may
only settle or compromise the matter subject to indemnification without the
consent of the Indemnified Party if such settlement includes a complete release
of all Indemnified Parties as to the matters in dispute and provided further
that such Indemnified Party will not unreasonably withhold consent to any
settlement or compromise that requires its consent.
(c) In the event the Indemnifying Party fails to timely defend,
contest, or otherwise protect against any such Claim, an Indemnified Party may,
but will not be obligated to, defend, contest, or otherwise protect against the
same, and make any reasonable compromise or settlement thereof and recover the
entire costs thereof from the Indemnifying Party, including reasonable
attorneys' fees, disbursements and all amounts paid as a result of such Claim or
the compromise or settlement thereof; provided, however, that if the
Indemnifying Party undertakes the defense of such matter, an Indemnified Party
shall not be entitled to recover from the Indemnifying Party for its costs
incurred in the defense thereof other than the reasonable costs of providing
assistance.
(d) The Indemnified Parties shall cooperate and provide such
assistance as the Indemnifying Party may reasonably request in connection with
the defense of the matter subject to indemnification and in connection with
recovering from any third parties amounts that the Indemnifying Party may pay or
be required to pay by way of indemnification hereunder. The Indemnified Parties
shall take commercially reasonable steps to protect its position with respect to
any matter that may be the subject of indemnification hereunder in the same
manner as it would any similar matter where no indemnification is available.
10.5 Magnavox Asset Purchase Agreement and Subrogation
(a) In the event that Buyer recovers losses from Seller pursuant
to this Article 10 and such losses come within the scope of, and are recoverable
by Buyer from Magnavox or General Atronics Corporation under, the
indemnification provisions contained in Section 10 of the Magnavox Asset
Purchase Agreement ("Magnavox Indemnity"), Seller shall be subrogated to the
indemnification rights of Buyer under the Magnavox Asset Purchase Agreement, as
transferred and assigned to Buyer hereunder, and may enforce and exercise such
rights against, and seek recovery from, Magnavox or General Atronics
Corporation, as the case may be, to the extent provided under Section 10 of the
Magnavox Asset Purchase Agreement.
(b) In the event that Seller (and not Buyer) becomes subject to
any Claim and such Claim comes within the scope of the Magnavox Indemnity, Buyer
agrees to assign to Seller its rights under the Magnavox Indemnity so that
Seller may seek redress directly from Magnavox under the terms of the Magnavox
Indemnity.
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ARTICLE XI
TERMINATION
11.1 Termination.
This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual written consent of Seller and Buyer;
(b) by either Seller or Buyer;
(i) if the Closing shall not have occurred by July 31,
2000;
(ii) if any Restraint having any of the effects set forth in
Section 9.1 shall be in effect and shall have become
final and non-appealable; or
(iii) if the value of the Acquired Assets prior to Closing is
less than Four Million Five Hundred Thousand Dollars
($4,500,000).
(c) by Seller, if Buyer shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement; or
(d) by Buyer, if Seller shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement.
11.2 Effect of Termination.
The termination of this Agreement shall become effective upon delivery
to the other party of written notice thereof. In the event of the termination of
this Agreement pursuant to Section 11.1, this Agreement shall become void and
have no effect, with no liability on the part of any party or its stockholders
or directors or officers in respect thereof except for agreements which survive
the termination of this Agreement and except for liability that Buyer or Seller
might have arising from a breach of this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Survival of Representations and Warranties.
The representations and warranties in this Agreement shall survive the
Closing for a period equal to the respective expiration periods under Section
10.3(c) hereof. The expenses provision of Section 6.10 hereof shall survive any
termination hereof. Notwithstanding anything to the contrary herein, this
Section shall in no way limit the survival of any covenant or agreement of the
parties set forth herein (except to the extent that covenants may be limited by
their terms) and neither Seller nor Buyer shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
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12.2 Waiver.
At any time prior to the Closing Date, any party hereto may (i) extend
the time for the performance of any of the obligations or other acts of any
other party hereto; (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto; and (iii) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing duly authorized by and
signed on behalf of such party.
12.3 Notices.
(a) Any notice or communication to any party hereto shall be duly
given if in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), facsimile or overnight air
courier guaranteeing next day delivery, to such other party's address.
(b) If to Buyer:
DRS Technologies, Inc.
0 Xxxxxx Xxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx Xxxx, Esq.
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Tata, Esq.
If to Seller:
General Atronics Corporation
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
XxXxxxxxxx, Keen & Xxxxxxx
000 Xxxxx Xxxxxx-Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Xx.
Facsimile No.: (000) 000-0000
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(c) All notices and communications will be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five (5)
business days after being deposited in the mail, if mailed; when sent, if sent
by facsimile; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
12.4 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
12.5 Interpretation.
The headings of articles and sections herein are for convenience of
reference, do not constitute a part of this Agreement, and shall not be deemed
to limit or affect any of the provisions hereof.
12.6 Amendment.
This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
12.7 No Third Party Beneficiaries.
Nothing in this Agreement shall confer any rights upon any person or
entity that is not a party or permitted assignee of a party to this Agreement.
12.8 Successors and Assigns.
The Agreement shall be binding upon and shall inure to the benefit of
the parties, their respective successors and assigns and their respective
shareholders to whom the assets of such party are distributed in the event of
dissolution, but only as to each shareholder to the extent of the assets
distributed to such shareholder; provided, however, that neither this Agreement
nor any rights hereunder may be assigned by any party without the consent of the
other party hereto; provided further, however, that Buyer shall, without
Seller's consent, have the right to designate prior to the Closing Date, any
other direct or indirect wholly-owned subsidiary of Seller that will, in lieu of
Buyer, purchase the Acquired Assets and the Assumed Liabilities and that such
designation shall not affect the obligations of Buyer hereunder.
12.9 Governing Law.
Except as the laws of the Commonwealth of Pennsylvania are by their
terms applicable, this Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware without regard to principles
of conflicts of laws.
12.10 Entire Agreement.
This Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
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12.11 Validity.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
12.12 Arbitration
(a) The parties shall use their best efforts to resolve any
Dispute (as defined in paragraph (b) below) through negotiation. If, and only
if, the parties fail to resolve the Dispute through such negotiations, either
party may initiate an arbitration proceeding in accordance with this Section
12.12.
(b) Subject to paragraph (a) above, any dispute, controversy,
claim or difference between the parties with respect to any matter related to or
arising out of this Agreement (each, a "Dispute"), including any question
regarding the existence, validity or termination hereof, shall be referred to
and finally resolved by arbitration administered by the American Arbitration
Association in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and the provisions of this Section 12.12. Any
arbitration proceeding (each, a "Proceeding") shall be held in New York, New
York.
(c) Each party shall appoint one arbitrator within thirty (30)
calendar days after the Proceeding has been initiated. If either party fails to
appoint an arbitrator within such time, such arbitrator shall be appointed by
the American Arbitration Association. The arbitrators so appointed shall appoint
a third arbitrator within thirty (30) calendar days after the appointment of the
second arbitrator. If they fail to do so within such time, the third arbitrator
shall be appointed by the American Arbitration Association within the next
twenty (20) calendar days. The third arbitrator shall act as chairman of the
arbitration. If any arbitrator is required to be replaced, the replacement
arbitrator shall be appointed.
(d) The arbitrators shall decide all Disputes by a majority vote
in accordance with this Agreement and the laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State. The
decision of the arbitrators shall be in writing and presented in separate
finding of fact and law. The award of the arbitrators shall be final and binding
on the parties from which no appeal may be taken, and an order confirming the
award or judgment upon the award may be entered in any court having
jurisdiction. The award of the arbitrators may include pre-award interest and
equitable relief to the extent the arbitrators deem appropriate. The parties
agree that the award of the arbitrators shall be the sole and exclusive remedy
between them regarding any Dispute presented to the arbitrators; that any
monetary award shall be made payable promptly and free of any deduction or
offset (except such amount, if any, as may be awarded by the arbitrators in
respect of counterclaims brought in the same proceedings); and that any costs or
fees incident to enforcing the award shall, to the maximum extent permitted by
law, be charged against the party resisting such enforcement.
(e) The arbitrators, in the award, may assess the fees and
expenses of the arbitrators and the Proceeding, and the witness and attorneys'
fees of the parties, or any part thereof, against either or both parties, taking
into account the circumstances of the case. Except as assessed by the
arbitrators in the award, the fees and expenses of each arbitrator appointed by
a
A-I-53
party shall be borne by such party and the fees and expenses of the Proceeding
and of the third arbitrator shall be divided equally between the parties.
(f) Prior to the appointment of the arbitrators, either party may
seek provisional remedies, including, without limitation, temporary restraining
orders and preliminary injunctions. After the appointment of the arbitrators,
the arbitrators shall have sole authority to grant such provisional remedies as
the arbitrators, in their sole discretion, deem necessary and appropriate.
(g) Notwithstanding anything to the contrary in this Section
12.12, the parties expressly agree that either party may seek provisional
relief, including without limitation to temporary restraining orders and
preliminary injunctions, in addition to the remedy of arbitration set forth
herein. Any such action for relief shall not constitute a waiver of the right to
arbitrate.
(h) In addition, notwithstanding the foregoing, if either party is
required to defend or prosecute third party claims in courts having jurisdiction
over such matters, neither party shall be precluded from fully exercising its
rights against the other party in such court with respect to such matters.
[Signatures begin on the next page]
A-I-54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers all as of the day and year
first above written.
DRS TECHNOLOGIES, INC.
By:
----------------------------------------
Name:
Title:
GENERAL ATRONICS CORPORATION
By:
----------------------------------------
Name:
Title:
Each of Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxxxxx and
Xxxxxx X. Xxxxxx by their execution below, hereby acknowledge receipt of a copy
of this Agreement and agree to comply with the Non-Compete covenant set forth in
Section 7.1 hereof.
By their execution below, each of Messrs. Huffman, Brown, Goutmann, and
Xxxxxx represent and warrant to Seller and Buyer that it has duly executed and
delivered this Agreement for purposes of the Non-Compete covenant in Section 7.1
hereof only and the Non-Compete covenant in Section 7.1 hereof constitutes a
valid, legal binding obligation of each Key Shareholder enforceable in
accordance with its terms.
By:
-------------------------
Name: Xxxxxx X. Xxxxxxx
Title:
By:
-------------------------
Name: Xxxxxx X. Xxxxx
Title:
By:
-------------------------
Name: Xxxxxx X. Xxxxxxxx
Title:
By:
-------------------------
Name: Xxxxxx X. Xxxxxx
Title:
A-I-55
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................................1
ARTICLE II SALE AND PURCHASE...................................................6
2.1 Acquired Assets..............................................6
2.2 Excluded Assets..............................................8
2.3 Assumed Liabilities..........................................8
2.4 Excluded Liabilities.........................................9
2.5 Estimated Balance Sheet and Net Assets......................10
2.6 Purchase Price..............................................10
2.7 Purchase Price Adjustment...................................11
2.8 Closing.....................................................12
2.9 Transactions at Closing.....................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..........................14
3.1 Organization and Qualification..............................14
3.2 Authority Relative to this Agreement........................14
3.3 No Violations, etc..........................................14
3.4 Absence of Changes or Events................................15
3.5 Accounts Receivable.........................................16
3.6 Litigation..................................................16
3.7 Compliance with Law.........................................16
3.8 Title to Assets.............................................17
3.9 MSSC Interest and Joint Venture Agreement...................17
3.10 Equipment and Property......................................17
3.11 Inventories.................................................18
3.12 Business Contracts..........................................18
3.13 Transferred Permits.........................................18
3.14 Intellectual Property.......................................18
3.15 Taxes.......................................................20
3.16 Employee Benefit Plans......................................21
3.17 Employees...................................................23
(i)
3.18 Environmental Matters.......................................24
3.19 Government Contracts........................................25
3.20 Financial Information.......................................28
3.21 Customers...................................................28
3.22 Disclosure..................................................28
3.23 Finders or Brokers..........................................29
3.24 Insurance...................................................29
3.25 Access and Sophistication...................................29
3.26 Investment Representation...................................29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................30
4.1 Organization and Qualification..............................30
4.2 Authority Relative to this Agreement........................30
4.3 Capitalization..............................................31
4.4 Subsidiaries................................................31
4.5 Valid Issuance of Securities................................31
4.6 No Violations, etc..........................................31
4.7 Litigation..................................................32
4.8 Absence of Changes or Events................................33
4.9 Disclosure..................................................33
4.10 Finders or Brokers..........................................33
ARTICLE V CONDUCT OF BUSINESS OF SELLER.......................................33
5.1 Conduct of Defense Business and Business of MSSC
Pending the Acquisition.....................................33
5.2 Permitted Actions...........................................35
ARTICLE VI COVENANTS AND AGREEMENTS...........................................35
6.1 Additional Agreements; Cooperation..........................35
6.2 Third Party Consents........................................36
6.3 Novation of United States Government Contracts..............36
6.4 Patent, Trademark and Copyright Filings.....................37
6.5 Schedules...................................................37
6.6 Full Access.................................................37
6.7 No Shopping.................................................38
6.8 Notification of Certain Matters.............................38
(ii)
6.9 Publicity...................................................38
6.10 Fees and Expenses...........................................38
6.11 Tax Matters.................................................39
6.12 Interim Operating...........................................39
6.13 Lease of Property...........................................40
6.14 Environmental Matters.......................................40
ARTICLE VII POST-CLOSING COVENANTS............................................40
7.1 Non-Compete.................................................40
7.2 Non-Solicitation............................................40
7.3 Access to Files.............................................41
7.4 Further Assurances..........................................41
ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFITS..................................41
8.1 Employees and Employee Benefits.............................41
8.2 Designated and Accepting Employees..........................42
8.3 Benefits of Accepting Employees.............................42
8.4 Retention of Employees......................................44
8.5 Cooperation.................................................44
ARTICLE IX CONDITIONS TO CLOSING..............................................44
9.1 Conditions to Each Party's Obligation.......................44
9.2 Conditions to Obligations of Buyer..........................45
9.3 Conditions to Obligations of Seller.........................46
ARTICLE X INDEMNIFICATION.....................................................47
10.1 Indemnification by Seller...................................47
10.2 Indemnification by Buyer....................................47
10.3 Limitations.................................................47
10.4 Indemnification Procedure...................................48
10.5 Magnavox Asset Purchase Agreement and Subrogation...........49
ARTICLE XI TERMINATION........................................................50
11.1 Termination.................................................50
11.2 Effect of Termination.......................................50
(iii)
ARTICLE XII MISCELLANEOUS.....................................................50
12.1 Survival of Representations and Warranties..................50
12.2 Waiver......................................................51
12.3 Notices.....................................................51
12.4 Counterparts................................................52
12.5 Interpretation..............................................52
12.6 Amendment...................................................52
12.7 No Third Party Beneficiaries................................52
12.8 Successors and Assigns......................................52
12.9 Governing Law...............................................52
12.10 Entire Agreement............................................52
12.11 Validity....................................................53
12.12 Arbitration.................................................53
Exhibits
Exhibit 2.6 Escrow Agreement
Exhibit 6.13 Lease
Exhibit 9.2(g) Opinion of XxXxxxxxxx, Keen & Xxxxxxx
Exhibit 9.2(h) Lock-up Agreement
Exhibit 9.3(g) Opinion of Buyer's General Counsel
Seller's Schedules
Schedule I Permitted Encumbrances
Schedule 2.1 Equipment
Schedule 2.1(e) Business Contracts
Schedule 2.1(h) Intellectual Property
Schedule 2.1(i) Transferred Permits
Schedule 2.1(m) Non-transferable claims
Schedule 3.3 Violations
Schedule 3.4 Material Changes
Schedule 3.5 Accounts Receivable
Schedule 3.6 Litigation
Schedule 3.7 Violations
Schedule 3.8 Assets other than Acquired Assets used in
Defense Business
Schedule 3.11 Location of Inventory
Schedule 3.12(d) Defaults under Business Contracts
Schedule 3.12(e) Notices of Termination of Business Contracts
Schedule 3.12(f) Consents to Sell, Assign, etc.
Schedule 3.14(j) Trade Names
Schedule 3.15 Tax Matters
Schedule 3.16 Employee Benefit Plans
(iv)
Schedule 3.16(j) Plans Providing Benefits after Retirement or
Termination of Service
Schedule 3.16(k) Plans Entitling Participants to Severance Pay,
etc.
Schedule 3.17 Employees
Schedule 3.17(b) Employees not "at will"
Schedule 3.17(c) Employees under Investigation
Schedule 3.17 (e) Employee Contracts
Schedule 3.18 Environmental Matters
Schedule 3.19 Government Contracts
Schedule 3.19(i) Show Cause, Cure or Deficiency Notice
Relating to Outstanding Government Contracts
Schedule 3.19(j) Outstanding Disputes or Claims under Government
Contracts
Schedule 3.19(k) Outstanding Disputes or Claims and Foreseeable
Expenditures Materially Increasing Cost of
Completes
Schedule 3.19(r) Government Contract Set-Offs
Schedule 3.19(t) Government Contract Disputes or Disallowances
Schedule 3.19(u) Assignments/Financings Arrangements
Schedule 3.19(v) Government Property
Schedule 3.19(w) Non-compliance with Government Contracts
Schedule 3.21 Customers Schedule 3.24 Insurance Policies
Schedule 5.2 Permitted Actions
Schedule 6.11(b) Allocation of Purchase Price
Schedule 9.2(d) Consents
Buyer's Schedules
Schedule 4.1 Violations of Organizational Documents
Schedule 4.3 Agreements Relating to Buyer's Capital Stock
Schedule 4.4 Subsidiaries
Schedule 4.6(a) Required Filings, Permits, Authorizations, etc.
Schedule 4.6(c) Violations or Defaults
Schedule 4.7 Litigation
Schedule 4.8 Absence of Changes or Events
Schedule 9.3(d) Consents
(v)
