Exhibit 2.4
STOCK PURCHASE AGREEMENT
AMONG
Federal Data Corporation
AND
Xxxx X. and Xxxxxxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxx,
Xxxxxx X. Xxxxxxx, Xx.,
Xxxxx X. Xxxxx,
Xxxxx X. Xxxxxxx and
Xxxxx X. Xxxxxxxxxx
AND
Xxxxxxx Management Systems Corporation
June 18, 1997
STOCK PURCHASE AGREEMENT
Agreement entered into as of June 18, 1997, by and among Federal Data
Corporation, a Delaware corporation (the "BUYER"), and Xxxx X. and Xxxxxxxx X.
Xxxxxx, Xxxxxxx X. Xxxxxx (together, the "MAJORITY HOLDERS"), Xxxxxx X. Xxxxxxx,
Xx., Xxxxx X. Xxxxx, Xxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxxxxx (together, the
"MINORITY HOLDERS" and collectively with the Majority Holders, the "SELLERS"),
and Xxxxxxx Management Systems Corporation, a Maryland corporation (the
"TARGET"). The Buyer, the Sellers and Target are referred to collectively herein
as the "PARTIES."
Sellers in the aggregate own all of the outstanding capital stock of
Target. Target is engaged in a business that consists primarily of providing
goods and services relating to computer hardware and software, systems
integration, network design, technical support and other areas of information
technology to agencies of the Government of the United States pursuant to
contracts with such agencies and subcontracts under prime contracts with such
agencies (the "BUSINESS").
This Agreement contemplates a transaction in which, on and subject to the
terms hereinafter set forth, Buyer will purchase from Sellers, and Sellers will
sell to the Buyer, all of the outstanding capital stock of Target, all as more
specifically set forth herein.
Now, therefore, in consideration of the premises and the mutual promises,
representations, warranties, and covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows.
1. DEFINITIONS.
"ADJUSTED NET INCOME" means the aggregate of the net income (loss) of
Target for the period from January 1, 1997 through June 30, 1997, determined in
accordance with GAAP pursuant to an audit by Coopers & Xxxxxxx, L.L.P.,
excluding, however, (a) any consideration of the Compensation Amount and any
related provisions for Income Taxes related thereto (but taking into
consideration any employment related taxes for which Target is liable with
respect thereto), and (b) any extraordinary gain or loss, together with any
related provisions for Income Taxes on such extraordinary gain or loss, and
after such audit, adjusted on a basis consistent with the Adjustments used to
prepare the unaudited pro forma balance sheet and income statement provided
pursuant to section 4(g)(iii) of this Agreement. Adjusted Net Income shall be
determined on a basis consistent with the information used in preparing the
Closing Net Asset Statement.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"APPLICABLE RATE" means the prime rate of interest published from time to
time in the Wall Street Journal plus 2% per annum.
"AFFILIATE" means, as to any Person, any corporation, partnership, limited
liability company or other entity which controls, is controlled by, or under
common control with, such Person, and as to any Person which is a corporation or
limited liability company, any director, managing member, officer or greater
than 10% shareholder of such Person.
"ANCILLARY AGREEMENTS" mean the Noncompetition Agreements executed by
TimeBridge Technologies, Inc., Xxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx, the
Management Agreement executed by Xxxx XxXxxxx, the Consulting Agreements
executed by Xxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx, and the Cooperation Agreement
executed by Target and TimeBridge Technologies, Inc., and the Escrow Agreement
among Buyer, the Sellers and a mutually satisfactory escrow agent, all in
connection with the transactions contemplated by this Agreement.
"ASSETS" means all of Target's right, title and interest in and to
properties, assets and rights of any kind, whether tangible or intangible, real
or personal, owned by Target, other than the Excluded Assets (collectively, not
including such Excluded Assets, the "ASSETS").
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BUSINESS" has the meaning set forth in the Preface.
"BOOKS AND RECORDS" means (a) all records and lists pertaining to Target,
the Assets, the Business, customers, suppliers or personnel of Target, (b) all
product, business and marketing plans of Target and (c) all books, ledgers,
files, reports, plans, drawings and operating records of every kind maintained
by Target and relating to Target, the Business or the Assets, except for any
records or reports relating solely to (x) the reports relating to valuation
described on Section 4(e) of the Disclosure Schedule, and (y) any agreement
between or among shareholders which will be terminated as of the Closing, with
no terms surviving thereafter (the "EXCLUDED BOOKS AND RECORDS").
"BUYER" has the meaning set forth in the preface above.
"CLAIM" means any claim for indemnification pursuant to Section 9 of this
Agreement.
"COMPENSATION AMOUNT" means one-time bonuses payable to certain Business
Employees immediately prior to the Closing, which bonuses shall, in the
aggregate, equal $2,830,000.
"CLOSING" has the meaning set forth in section 2(f) below.
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"CLOSING DATE" has the meaning set forth in section 2(f) below.
"CLOSING DATE NET ASSETS" has the meaning set forth in section 2(c)(i)
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the Target,
Business, or Assets or the businesses and affairs of Buyer, or their respective
Affiliates that is not already generally available to the public.
"CONTRACT" means any written agreement, contract, lease, purchase order,
memoranda of understanding or other binding contractual commitment of Target,
provided, however, that the term Contract shall not, for any purpose hereof,
include any Excluded Assets.
"DISCLOSURE SCHEDULE" has the meaning set forth in section 4 below.
"EBIT" means, for any period, the Adjusted Net Income for such period,
adjusted to deduct therefrom interest income and to add thereto the following,
to the extent deducted in calculating such Adjusted Net Income: (a) income tax
expense, (b) interest expense, and (c) any employment related taxes for which
Target is liable with respect to the Compensation Amount.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Section
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Section
3(1).
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, judgments, orders, codes, or
injunctions, which impose liability for or standards of conduct concerning the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of Hazardous Substances including, The
Resource Conservation and Recovery Act of 1976, as amended, The Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), The Toxic Substances Control Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, to the extent it relates to the
handling of and exposure to hazardous or toxic materials or similar substances,
and any other so-called "Superfund" or "Superlien" law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGREEMENT" means the Escrow Agreement among Buyer, Sellers and a
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mutually acceptable escrow agent, in the form to be agreed upon between Buyer
and the Seller Representative, relating to the holding of certain proceeds from
the prepayment of the Notes and the disbursement of such proceeds, as set forth
herein and therein.
"EXCLUDED ASSETS" notwithstanding any other provision of this Agreement,
shall mean the following assets of Target which are to be transferred by Target
prior to or simultaneously with the Closing hereunder, so that such assets will
not be owned by Target after consummation of the transactions contemplated
hereby:
(i) all receivables or notes payable from Affiliates of Target or
shareholders of Target;
(ii) all of Target's causes of action, choses in action, rights of
recovery and rights of set-off of any kind against any Person arising out of or
relating to the Excluded Assets or the Excluded Liabilities;
(iii) any refunds of Taxes for periods ending on or prior to the
Closing Date;
(iv) all assets set forth on section 5(d) of the Disclosure Schedule,
which will be held by TimeBridge Technologies, Inc. and/or Xxxx X. Xxxxxx or a
corporation controlled by him as of the Closing and additional assets acquired
after April 30, 1997, as set forth in a supplement to such section 5(d) to be
provided by Sellers at least two (2) Business Days prior to Closing and approved
by Buyer, such approval not to be unreasonably withheld; and
(v) all unbilled receivables arising from the assets included on
section 5(d) of the Disclosure Schedule.
"EXCLUDED LIABILITIES" notwithstanding any other provision of this
Agreement, shall mean the following liabilities and obligations of Target or
relating to the Business or the Assets, which are not intended to be borne by
Target or Buyer by reason of the purchase of the Target Shares pursuant to the
terms of this Agreement:
(a) all causes of action, choses in action, rights of recovery and rights
of set-off of any kind by any Person against Target arising out or relating to
any acts or omissions of Target, or any events occurring, prior to the Closing
Date;
(b) all liabilities and obligations for Taxes of Target relating to the
periods ending on or prior to the Closing Date except to the extent such
liabilities and obligations relate to current periods and have been accrued for
on the Closing Date Net Asset Statement;
(c) all liabilities and obligations incurred by or on behalf of the
Sellers, Target or Target's Affiliates in connection with (i) the transactions
contemplated by this Agreement, including any fees due to Quarterdeck Investment
Partners, Inc., Shaw, Pittman, Xxxxx & Xxxxxxxxxx or, except as expressly set
forth herein, Coopers & Xxxxxxx, L.L.P., or (ii) the transactions described in
section 5(d) below and the formation of TimeBridge Technologies, Inc., including
any fees due to Sack & Associates and Haronson, Fetridge & Xxxxxx;
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(d) all liabilities and obligations (other than accounts payable
constituting Retained Accounts) directly arising out of the Excluded Assets, as
set forth on section 5(d) of the Disclosure Schedule attached hereto or out of
the business operated with such Excluded Assets, or the business of TimeBridge
Technologies, Inc.;
(e) all liabilities and obligations to Affiliates of Target other than for
the provision of goods or services in the ordinary course of business on arm's
length terms;
(f) all other liabilities and obligations for which TimeBridge
Technologies, Inc. or any Seller has expressly assumed responsibility pursuant
to this Agreement or otherwise;
(g) all Pre-Closing Environmental Liabilities;
(h) all liabilities and obligations relating to former employees of Target
no longer employed by Target as of the close of business on the business day
prior to the Closing Date, including the employees designated on section 5(k) of
the Disclosure Schedule, except to the extent that Buyer has specifically agreed
that Target shall retain responsibility for such obligations in this Agreement;
(i) all obligations for any indebtedness for borrowed money; except to the
extent the same are reflected on the Closing Net Asset Statement;
(j) all other obligations and liabilities of Target accruing, or incurred
by Target, any time prior to the Closing except to the extent such obligations
and liabilities are accrued or noted on the Closing Net Asset Statement;
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in section 4(g) below.
"FIXTURES" means any fixtures, machinery, installations and building
equipment owned by Target and located at or on any Leased Real Property.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time, except to the extent deviations therefrom are applied
in making the Adjustments.
"GOVERNMENTAL AUTHORITY" means any Federal, state, municipal or local
government, governmental authority, regulatory or administrative agency,
governmental commission, department, board, bureau, court, tribunal, arbitrator
or arbitral body.
"GOVERNMENT CONTRACTS" means contracts or subcontracts held by Target in
which the ultimate contracting party is the United States government or any
agency or instrumentality thereof.
"GOVERNMENT-FURNISHED PROPERTY" means all machinery, equipment, tools,
dies, spare
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parts and all other personal property and fixtures loaned, bailed or otherwise
furnished by the United States Government to the Target pursuant to the
Government Contracts.
"XXXX-XXXXX-XXXXXX ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"HAZARDOUS SUBSTANCE" means any hazardous or toxic substance or waste,
pollutant or contaminant including petroleum products, asbestos, PCBs and
radioactive materials.
"INCOME TAX" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"INDEMNIFIED PARTY" has the meaning set forth in section 9(d)(i) below.
"INDEMNIFYING PARTY" has the meaning set forth in section 9(d)(i) below.
"INTELLECTUAL PROPERTY" means the following, to the extent related to the
Business (a) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"INVENTORY" means all inventory owned by Target or reflected on the Closing
Net Asset Statement and held for resale in the Business, wherever the same may
be located.
"KNOWLEDGE" means actual knowledge. Subject to the remaining provisions of
this definition, as to any corporation, limited liability company or
partnership, the knowledge of any executive officer of such corporation or the
managing member or managing director of such limited liability company or any
general partner of any such partnership shall constitute knowledge of the
entity. Any reference in this Agreement to "Knowledge of Majority Holders" or
"Knowledge of Target" or other similar phrase shall mean the Knowledge of Xxxx
Xxxxxx, Xxxxxxxx Xxxxxx and Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxx, Xxxx XxXxxxx,
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Xxxxxxxxxxx Xxxxx, Xxxx Xxxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxx and Xxxxx
Xxxxxxxxx. Any reference in this Agreement to "Knowledge of Buyer" or other
similar phrase shall mean the Knowledge of Xxxxx Xxxx, Xxxxx Xxxxx, Xxxx
Xxxxxxxxx, Xxx Xxxxx or Xxxxxxx Xxxxxxx.
"LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements situated in
or on the Leased Real Property used in the Business and owned by Target.
"LOSS CONTRACT" means any Contract for which Target has accrued a loss on
its financial statements or which Target reasonably expects, based on Target's
Knowledge as of the date of this Agreement and the Closing Date, to result in a
loss.
"MAJORITY HOLDERS" has the meaning set forth in the preface above.
"MATERIAL ADVERSE CHANGE" means any change relating to the Business or the
Assets which has a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means a material adverse affect on the business,
financial condition, operations, results of operations or future prospects (to
the extent reasonably foreseeable as of the date hereof or the date of Closing)
of the Business or the Assets taken as a whole.
"MINORITY HOLDER" has the meaning set forth in the preface above.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in section
4(g) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in section 4(g)
below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in section 4(g)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"PARTY" means Buyer and each Seller.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department agency, or political subdivision
thereof).
"PERSONAL PROPERTY" shall mean all of the personal property, whether
tangible or intangible, owned by Target, except for the personal property on
section 5(d) of the Disclosure Schedule.
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"PRE-CLOSING ENVIRONMENTAL LIABILITIES" means, in connection with the
Business or the Real Property, any written notice, claim, demand, action, suit,
complaint, proceeding or other communication by any Person or Government
Authority alleging liability or potential liability (including liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties) arising
out of, relating to, based on or resulting from circumstances which, as of the
Closing Date, exist and form the basis of any violation or alleged violation of
any Environmental Laws, including the presence, Release or threatened Release of
any Hazardous Substance.
"PURCHASE PRICE" has the meaning set forth in section 2(b) below.
"REAL PROPERTY" means all real property owned, leased, operated or occupied
by the Target as of the date of this Agreement, except for the real property
described in section 5(d) of the Disclosure Schedule (Excluded Assets), together
with all Leasehold Improvements or Fixtures located thereon.
"REFERENCE AMOUNT" means $3,270,000.
"RELEASE" means any spill, leak, discharge, disposal, pumping, pouring,
emitting, emptying, injecting, abandoning, leaching, dumping or allowing to
escape of any Hazardous Substance.
"RETAINED ACCOUNT" means all billed accounts receivable and trade accounts
payable arising from the assets described on section 5(d) of the Disclosure
Schedule, but retained by Target, but only to the extent such accounts are
reflected on the Closing Net Asset Statement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, OTHER THAN (a)(i) mechanic's, materialmen's, and
similar liens, and (ii) other statutory liens, which have been disclosed to
Buyer, with respect to amounts not yet due and payable or which are being
contested in good faith through appropriate proceedings, (b) liens for taxes not
yet due and payable or for taxes that the taxpayer is contesting in good faith
through appropriate proceedings which have been disclosed to Buyer, for which
adequate reserves are maintained and reflected on the Financial Statements, to
the extent required by GAAP (c) purchase money liens and liens securing rental
payments under capital lease arrangements which are reflected on the Closing Net
Asset Statement and which do not arise in whole or in part from indebtedness or
capital lease arrangements which constitute Excluded Assets, and (d) other
encumbrances disclosed in the Schedules to this Agreement.
"SELLER REPRESENTATIVE" means Xxxx X. Xxxxxx, or any other Seller hereafter
designated by a majority in interest of the Sellers to act in the capacity of
Seller Representative under this Agreement, which other Seller shall be
identified to Buyer by written notice in accordance with the terms hereof.
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"SUBSIDIARY" means any corporation, partnership, limited liability company,
joint venture or other entity in which Target, directly or indirectly, holds
more than fifty percent (50%) of the voting power of all equity securities or
other ownership interests of such entity, or possesses, directly or indirectly,
power to direct or cause the direction of management or policies (whether
through ownership of voting securities or otherwise).
"SELLER" has the meaning set forth in the preface above.
"TARGET" has the meaning set forth in the preface above.
"TARGET SHARE" means any share of the Common Stock, par value $1.00 per
share, of Target.
"TAX" or "TAXES" means any federal, state, local or foreign net or gross
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, (including taxes under Code Sec. 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax, governmental fee or like assessment or charge of any kind
whatsoever, together with any interest and penalties, whether as a primary
obligor or as a result of being a "transferor" (within the meaning of Section
6901 of the Code and any corresponding state and local law) of another person or
a member of an affiliated, consolidated or combined group.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TIMEBRIDGE TECHNOLOGIES" means TimeBridge Technologies, Inc. a Delaware
corporation, and any Affiliates thereof.
"THIRD PARTY CLAIM" has the meaning set forth in section 9(d) below.
Other Defined Terms. The following terms shall have the meanings defined
for such terms in the Section set forth below:
TERM SECTION REFERENCE
---- -----------------
Adjustments Section 4(g)
Assignment of Claims Act Section 4(c)
Assignment of Contracts Section 4(c)
Act Business Employees Section 5(k)
Buyer Indemnification Section 9(b)
Matter Buyer Parties Section 9(b)
Cash Consideration Section 2(b)
CERCLA Section 1
Closing Net Asset
Statement Section 2(c)
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Cooperation Agreement Section 6(c)(ii)
Coopers Section 2(d)
Determination Date Section 2(c)(i)
EBIT Objection Notice Section 2(d)(i)
EBIT Report Section 2(d)
June 30 EBIT Section 2(d)
Leased Real Property Section 4(m)(ii)
Material Contracts Section 4(p)(i)
Material Lease Section 4(m)(ii)
Material Intellectual
Property Section 4(o)(i)
Material Non-Owned
Intellectual Property Section 4(o)(ii)
Net Assets Section 2(c)(i)
Noncompetition Agreement Section 2(e)
Note Section 2(b)
Objection Notice Section 2(c)(ii)
Parties preface
Permit Section 4(r)
Post-Closing Adjustment Section 2(c)(ii)
Pre-Closing Default Section 11(a)
Product Warranties Section 6(d)
Projections Section 4(h)
Pro Rata Share Section 2(b)
Receivables and Unbilled
Costs Section 4(z)(iii)
Required Consents Section 5(g)
Retained Employees Section 5(k)
S Corporation Section 4(1)(vii)
Seller Indemnification
Matters Section 9(c)
Seller Parties Section 9(c)
Shareholder Agreements Section 3(b)(iv)
Termination Date Section 11(a)(iv)
TimeBridge Transfers Section 5(d)
2. PURCHASE AND SALE OF TARGET SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from each Seller, and each Seller agrees
to sell to the Buyer, all of such Seller's Target Shares, free and clear of all
restrictions, for the consideration specified below in this section 2.
(b) TOTAL CONSIDERATION AND TERMS. The aggregate consideration for the
Target Shares to be purchased by the Buyer hereunder (the "PURCHASE PRICE")
shall, subject to adjustment as provided in section 2(c) hereof, consist of (i)
Thirty-Three Million Three Hundred Forty Nine Thousand Five Hundred Seventy
Three Dollars ($33,349,573) in cash
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(the "CASH CONSIDERATION"); and (ii) promissory notes in the form attached
hereto as Exhibit A (collectively, the "NOTES"), made by Federal Data
Corporation, in the aggregate principal amount of Seven Million Dollars
($7,000,000), which aggregate principal amount shall be subject to increase as
set forth therein, and subject to the rights of set-off as provided in section
9(g) hereof. At the Closing, the Buyer shall pay to the Sellers by wire transfer
of immediately available funds to an account or accounts designated in writing
by the Sellers an amount equal to the Cash Consideration and issue and deliver
to the Sellers the Notes. The Purchase Price shall be paid to or as directed in
writing by each of the Sellers in proportion to their respective holdings of
Target Shares as set forth in section 3(b) of the Disclosure Schedule (their
respective "PRO RATA SHARES").
(c) NET ASSET ADJUSTMENT. Not later than ninety (90) days after the
Closing Date, the Majority Holders shall cause to be prepared and delivered to
Buyer an audited special purpose statement of the Net Assets (as defined below)
as of the Closing (the "CLOSING NET ASSET STATEMENT") which shall have been
audited by Coopers & Xxxxxxx L.L.P. in accordance with GAAP, applied on a basis
consistent with, and following the accounting principles, procedures, policies
and methods employed by Target in preparing Target's Most Recent Fiscal Year End
balance sheet (to the extent consistent with GAAP); provided, however, that
appropriate adjustments shall be made to exclude the Excluded Assets and
Excluded Liabilities. It is understood that the Closing Net Asset Statement will
reflect payment of, and any liability incurred for, payment of the Compensation
Amount. Buyer and Sellers each shall be responsible for one-half of the fees and
expenses charged by Coopers & Xxxxxxx for preparing such Closing Net Asset
Statement. Buyer and Sellers shall promptly provide the other Party hereto
access to, and copies of, all information reasonably requested by the other
Party or its representatives in connection with the preparation of the Closing
Net Asset Statement or to investigate the basis of any dispute therewith
(provided that Sellers shall not be required to provide any Excluded Books and
Records which would not reasonably be deemed material to the preparation of the
Closing Net Asset Statement).
(i) Buyer shall have a period of thirty (30) days after delivery to
it of the Closing Net Asset Statement to provide to the Seller
Representative notice setting forth with reasonable specificity any
objection thereto, which objection shall relate only to any matters which
affect the amount of Net Assets shown on the Closing Net Asset Statement
(an "OBJECTION NOTICE"). Failure to provide an Objection Notice within such
thirty-day period shall constitute Buyer's approval of the Closing Net
Asset Statement as so delivered. If Buyer timely provides an Objection
Notice, Buyer and the Seller Representative shall promptly commence good
faith discussions in an attempt to resolve any issues raised in the
Objection Notice. If Buyer and the Seller Representative are unable to
resolve such dispute within thirty (30) days after the delivery of the
Objection Notice, such dispute shall be resolved by a Big Six accounting
firm mutually acceptable to the Buyer and the Majority Holders or, in the
absence of agreement, by a Big Six accounting firm selected by lot after
eliminating Target's and Buyer's principal outside accountants and one
additional firm designated as objectionable by Buyer and the Seller
Representative. At or prior to the time such dispute is submitted to such
accounting firm for resolution, Buyer shall provide a specific proposed Net
Asset amount. The accounting firm so selected shall make its
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determination within thirty (30) days after delivery to it of the Objection
Notice which determination shall be final and binding upon the Parties with
respect to the Post-Closing Adjustment. The fees and expenses of such
accounting firm shall be paid by the Buyer and the Sellers pro rata in
accordance with each Party's asserted position relative to the accounting
firm's final determination. The amount of the Net Assets on the Closing
Net Assets Statement, as determined pursuant to this section, shall be the
"CLOSING DATE NET ASSETS." For purposes of this Agreement, "NET ASSETS"
means the book value of total Assets owned by Target as of the Closing,
less the book value of Target's liabilities as of the Closing, other than
all Excluded Liabilities, each as determined in accordance with GAAP,
applied on a basis consistent with, and following the accounting
principles, procedures, policies and methods employed by Sellers in
preparing Target's Most Recent Fiscal Year End balance sheet. The date on
which the Closing Date Net Assets is determined shall be the "DETERMINATION
DATE." The "POST-CLOSING ADJUSTMENT" shall be computed by subtracting the
Reference Amount from the Closing Date Net Assets.
(ii) If the Post-Closing Adjustment is a positive number, Buyer shall
pay to each of the Sellers his Pro Rata Share of such excess, in
immediately available funds, within ten (10) business days after the
Determination Date.
(iii) If the Post Closing Adjustment is a negative number, such
deficiency shall be disbursed to Buyer from the Escrow Account provided for
in the Escrow Agreement, (or, if no such Escrow Account has been
established, then by Sellers in accordance with their respective Pro Rata
Shares) in immediately available funds, within ten (l0) business days after
the Determination Date.
(d) ADJUSTMENT TO NOTE.
(i) Not later than ninety (90) days after the Closing Date, the EBIT
generated by the Business and the Assets for the period from January 1,
1997 through June 30, 1997 (the "June 30 EBIT") shall be determined by
Coopers & Xxxxxxx L.L.P. ("Coopers") in accordance with GAAP, applied on a
basis consistent with, and following the accounting principles, procedures,
policies and methods employed in preparing Target's Most Recent Fiscal Year
End balance sheet and the Closing Net Asset Statement, to the extent not
inconsistent with GAAP. Buyer shall timely provide Coopers & Xxxxxxx with
access to all necessary information and records required to make such
determination. Buyer and Sellers each shall be responsible for one-half of
the fees and expenses charged by Coopers Xxxxxxx for determining such EBIT.
Coopers shall deliver a report of the June 30 EBIT (the "EBIT Report")
within such ninety day period to Buyer and Seller's Representative.
(ii) Each of Buyer and the Seller Representative shall have a period
of thirty (30) days after delivery to it of the EBIT Report to provide the
other with a notice (the "EBIT Objection Notice") setting forth with
reasonable specificity any objection thereto, which objection shall relate
only to any matters which affect the amount of the June 30 EBIT. Failure of
either such party to provide an EBIT Objection Notice
12
within such thirty-day period shall constitute such party's acceptance of
the June 30 EBIT as shown on the EBIT Report. If either such party timely
provides an EBIT Objection Notice, Buyer and the Seller Representative
shall promptly commence good faith discussion in an attempt to resolve the
objection within thirty (30) days of delivery of the EBIT Objection Notice.
If Buyer and the Seller Representative are unable to resolve such dispute
within thirty (30) days after delivery of the EBIT Objection Notice, such
dispute shall be resolved by a Big Six accounting firm mutually acceptable
to the Buyer and the Seller Representative or, in the absence of agreement,
by a Big Six accounting firm selected by lot after eliminating Target's and
Buyer's principal outside accountants and one additional firm designated as
objectionable by Buyer and the Seller Representative. The accounting firm
so selected shall make its determination within thirty (30) days after
delivery to it of the EBIT Objection Notice which determination shall be
final and binding upon the Parties with respect to determination of the
June 30 EBIT. The fees and expenses of such accounting firm shall be paid
(i) by Buyer, if the June 30 EBIT is determined to be more than 5% greater
than the amount shown on the EBIT Report; or (ii) by Sellers, if the June
30 EBIT is determined to be more than 5% less than the amount shown on the
EBIT Report, or (iii) in equal shares by Buyer and Sellers if the June 30
EBIT is determined to be within 5% of the amount shown on the EBIT Report.
(iii) The principal amount of the Notes shall be increased, based
upon the June 30 EBIT, as finally determined in accordance with this
subsection (d), if and to the extent provided in section 6 of the Notes.
(e) NONCOMPETE. At the Closing, Sellers shall cause Timebridge
Technologies, Inc., Xxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx to enter into mutually
satisfactory noncompetition agreements with Buyer in the form of Exhibit E-l,
E-2 and E-3 hereto (the "NONCOMPETITION AGREEMENTS"). Buyer and Sellers agree
that the amount of the consideration allocable to such Noncompetition Agreements
shall be $300,000.
(f) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Xxxxxx & Xxxxxxx in
Washington, D.C., commencing at 9:00 am. local time on June 30, 1997 or on the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Buyer and the Sellers
may mutually determine (the "CLOSING DATE").
(g) DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in section 7(a) below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in section 7(b)
below, (iii) each of the Sellers will deliver to the Buyer stock certificates
representing all of such Seller's Target Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv) the Buyer will
deliver to each Seller the portions of the consideration specified in section
2(b)(i) and (ii) above .
13
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND SELLERS.
(a) REPRESENTATIONS AND WARRANTIES CONCERNING THE BUYER. The Buyer
represents and warrants to the Sellers that the statements contained in this
section 3(a) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this section 3(a)).
(i) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of
Delaware.
(ii) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions, except as
the enforceability hereof may be affected by bankruptcy, insolvency,
fraudulent transfer, reorganization and similar laws affecting the rights
of creditors generally, and by general principles of equity. The Buyer need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement, except for the
filing contemplated by section 5(b) below.
(iii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its Certificate of Incorporation or Bylaws.
(iv) BROKERS' FEES. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(b) REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLERS. Each of the
Sellers represents and warrants to the Buyer that the statements contained in
this section 3(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this section 3(b)) with respect to himself, except as set forth in
the Disclosure Schedule attached hereto.
(i) AUTHORIZATION OF TRANSACTION. Each Seller has full power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of each Seller, enforceable against such Seller in
accordance with its terms and conditions, except as
14
the enforceability hereof may be affected by bankruptcy, insolvency,
fraudulent transfer, reorganization, and similar laws affecting the rights
of creditors generally, and by general principles of equity. Except as
expressly set forth herein, no Seller is required to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency or any other Person in order to
consummate the transactions contemplated by this Agreement, except for the
filing contemplated by section 5(b) below and the filing of a notice with
the Small Business Administration with respect to the transfer of control
of a company qualified under section 8(a) of the Small Business Act.
(ii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any Seller is
subject. The Parties recognize that a certain proportion of the contracts
currently held by Target (as shown on section 4(ab) of the Disclosure
Schedule) have been awarded under Small Business Administration programs
which are subject to certain restrictions.
(iii) BROKERS' FEES. No Seller has any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could
become liable or obligated. The Parties acknowledge and agree that, as part
of the Closing, Sellers will pay to Quarterdeck Investment Partners a fee
pursuant to a separate agreement.
(iv) TARGET SHARES. Each Seller holds of record and owns beneficially
the number of Target Shares set forth next to his name in section 3(b) of
the Disclosure Schedule, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state securities
laws), taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands other than such
restrictions as may be contained in the agreements (the "SHAREHOLDER
AGREEMENTS") described in section 3(b) of the Disclosure Schedule, each of
which will be terminated and of no further force or effect as of the
Closing. No Seller is a party to any option, warrant, purchase right, or
other contract or commitment (other than the Shareholder Agreements and
this Agreement) that could require such Seller to sell, transfer, or
otherwise dispose of any capital stock of Target. No Seller is a party to
any voting trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of Target.
4. REPRESENTATIONS AND WARRANTIES CONCERNING TARGET. Each of Target and the
Majority Holders jointly and severally represent and warrant to the Buyer that
the statements contained in this section 4 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this section 4), except as set forth in the
disclosure schedule delivered by the Sellers to the Buyer on the date hereof and
initialed by the Parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule
will be
15
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this section 4.
(a) CORPORATE EXISTENCE AND CAPITALIZATION.
(i) Target is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Maryland. Target is duly
authorized to conduct business as a foreign corporation and is in good
standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a
Material Adverse Effect. Section 4(a) of the Disclosure Schedule contains
an accurate list of all jurisdictions in which Target is qualified to do
business as a foreign corporation
(ii) The authorized capital stock of Target consists solely of 1,000
shares of common stock, par value $1.00 per share, of which 1,000 shares
are issued and outstanding. All of the issued and outstanding shares of
such common stock have been duly authorized and validly issued and are
fully paid and nonassessable and are not subject to any preemptive rights.
To the knowledge of Target, each of the Sellers owns of record and
beneficially the number of shares of common stock set forth on section 3(b)
of the Disclosure Schedule with respect to such Seller, free and clear of
all restrictions on transfer (other than restrictions under the Securities
Act, state securities laws and the Shareholder Agreements, which
Shareholder Agreements shall be terminated on or before the Closing),
taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands, other than such restrictions as
may be contained in the Shareholder Agreements.
(iii) Target has not issued or granted any outstanding options,
warrants, rights or other securities convertible into or exchangeable or
exercisable for shares of the capital stock of Target, any other
commitments or agreements providing for the issuance of additional shares
of the capital stock of Target, the sale of treasury shares, or for the
repurchase or redemption of shares of Target's capital stock, or any
obligations arising from canceled stock. There are no agreements of any
kind which may obligate Target to issue, purchase, register for sale,
redeem or otherwise acquire any of its securities or interests. There are
no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to Target.
(iv) To the Knowledge of Target, except for the Shareholder
Agreements, there are no voting trusts, shareholder agreements, proxies or
other agreements in effect with respect to the voting or transfer of the
Target Shares.
(b) AUTHORIZATION OF TRANSACTION. Target has all requisite corporate
power and authority to own, lease and operate the properties owned by it, to
conduct its business as it is presently being conducted, to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement has been
duly executed and delivered by Target.
(c) NONCONTRAVENTION. Except as set forth in section 4(c) of the
Disclosure
16
Schedule, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Target or any of the Assets is subject or any provision of the
charter or bylaws of Target or (ii) conflict with, result in a material breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any Contract to which Target is a party or by which it is bound or
to which any of the Assets is subject (or result in the imposition of any
Security Interest upon any of the Assets), except where, prior to or
simultaneously with the Closing, such Contract is being terminated or the
consent of the other party thereto will have been obtained. Target does not need
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement, except
where the failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a Material Adverse Effect on the business,
financial condition, operations, results of operations, or future prospects of
the Business, or on the ability of the Parties to consummate the transactions
contemplated by this Agreement, and except for the filing contemplated by
section 5(b) below. Notwithstanding the foregoing, Target and the Majority
Holders make no representation as to the applicability of 41 U.S.C. section 15
(the "Assignment of Contracts Act"), 31 U.S.C. section 3727 (the "Assignment of
Claims Act"), or the assignability of any contracts subject to any restrictions
under Small Business Administration programs, as to each of which Buyer has made
its own independent analysis.
(d) TITLE TO ASSETS. Except as set forth in section 4(d) of the
Disclosure Schedule (and except for a portion of the partitions used in Target's
offices in Landover, Maryland, which are borrowed from Target's sublessor),
Target has good title to, or a valid leasehold interest in, or, as to
Intellectual Property, valid license of, the property and assets used by it, or
shown on the Most Recent Balance Sheet or acquired after the date thereof and
shown on the Closing Net Asset Statement, free and clear of any Security
Interests. Except as contemplated by this Agreement, the Assets are all of the
assets necessary for the conduct of the Business as currently conducted.
(e) BOOKS AND RECORDS. Target has made and kept (and given Buyer access
to) Books and Records and accounts, which, in reasonable detail, accurately and
fairly reflect in all material respects, Target's business. The minute books of
Target to which Buyer has been given access do not omit reference to any
corporate transaction of Target which will continue in effect or remain binding
on Target or any of the Assets after the Closing.
(f) SUBSIDIARIES. Target has no Subsidiaries.
(g) FINANCIAL STATEMENTS. Attached hereto as Exhibit B are the following
financial statements (collectively the "FINANCIAL STATEMENTS"): (i) audited
balance sheets and audited statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1996
(the "MOST RECENT FISCAL YEAR END"), December 31, 1995 and December 31, 1994 for
Target, (ii) unaudited pro forma balance sheets as of December
17
31, 1996, and unaudited pro forma income statements for the years ended December
31, 1996, 1995 and 1994, in each case for the Business, based upon internally
prepared adjustments (the "Adjustments") to the balance sheet and income
statements contained in the 1996, 1995 and 1994 audited financial statements,
relating to the Excluded Assets and Excluded Liabilities, and the revenues and
expenses associated therewith, as hereinafter described, including without
limitation certain operating results related to the business being transferred
in the TimeBridge Transfers and certain expenses for, and compensation paid to,
certain executive officers of Target as reflected in Exhibit B, and (iii)
unaudited consolidated balance sheets and statements of operations, (the "MOST
RECENT FINANCIAL STATEMENTS") as of and for the four months ended April 30, 1997
(the "MOST RECENT FISCAL MONTH END") for Target, as adjusted consistent with the
Adjustments. The historical Financial Statements described in clause (i) present
fairly the financial condition of Target as of such dates and the results of
operations of Target for such periods. The pro forma Financial Statements
described in clauses (ii) and (iii) present fairly the financial condition of
the Business, and of the Retained Accounts, as of such dates and the results of
operations of the Business for such periods. The Financial Statements (including
the notes thereto but not including the Adjustments described above in this
section 4(g)) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby; PROVIDED, HOWEVER, that the Most
Recent Financial Statements are subject to normal year-end adjustments (which
will not be material individually or in the aggregate) and lack footnotes and
other presentation items. The Adjustments have been prepared on a consistent
basis throughout the periods covered, and follow the accounting procedures,
policies and methods employed by Target in preparing its Most Recent Fiscal Year
End balance sheet.
(h) PROJECTIONS. Majority Holders have delivered to Buyer projected income
statements and balance sheets of the Business for the 1997 and 1998 fiscal years
(the "PROJECTIONS"), which are attached as Exhibit C hereto. The Projections
were prepared in good faith and represent management's current estimate, based
on Target's current Knowledge, of the financial position and results of
operations of the Business for the periods indicated. To Target's Knowledge as
of the date hereof and as of the Closing Date, the assumptions forming the basis
of such Projections are reasonable. Buyer recognizes that the basis for such
Projections assumes the "stand alone" operation of the Business.
(i) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any Material Adverse Change in
Target, subject to the Adjustments referred to in section 4(g) and to the
transfer of the Excluded Assets, or the Business, taken as a whole.
Specifically, without limiting the generality of the foregoing, since the Most
Recent Fiscal Year End, except as contemplated in this Agreement or as set forth
in the Disclosure Schedule, there has not been any:
(i) change in accounting methods, principles, or practices by Target,
except as required by law or by generally applicable changes instituted in
the accounting profession;
(ii) material damage, destruction or loss (whether or not covered by
insurance) adversely affecting the tangible Assets or the Business;
18
(iii) cancellation of any material indebtedness or waiver or release
of any material right or claim of Target;
(iv) increase in the rate of compensation payable or to become payable
to, any bonus, incentive compensation, service award or other like benefit
granted, made or accrued, contingently or otherwise, for or to the credit
of, any director, officer or other employee (other than a Retained
Employee), except as provided in any employment agreement (including any
union contract) between Target and any such persons or in any employee
plan, and except for any increases in the normal course of business;
(v) addition to or modification of the Employee Benefit Plans,
arrangements or practices affecting the officers, directors, or Business
Employees of Target other than (A) contributions made for 1996 in
accordance with the normal practices of the Target, (B) the extension of
coverage to such persons who became eligible after the Most Recent Fiscal
Year End, or (C) as set forth in the April 1, 1997 Employee Policy and
Procedure Manual, as provided to Buyer prior to the date hereof;
(vi) cancellation or termination of any material Contract or entry
into any Contract which is not in the ordinary course of the business of
Target;
(vii) sale, assignment or transfer of any material portion of the
Assets, other than in the ordinary course of business, except as approved
in writing in advance by Buyer and except for transfers of the Excluded
Assets;
(viii) capital expenditure or the execution of any lease or any
incurring of liability therefor by Target involving payments in excess of
$50,000 or $100,000 in the aggregate with respect to any such expenditure
or lease or otherwise not substantially in accordance with Target's past
practice;
(ix) any indebtedness incurred by Target for borrowed money or any
commitment to borrow money entered into by Target, or any loans made or
agreed to be made by Target except for loans constituting Excluded Assets
and indebtedness incurred in the ordinary course of business as part of
Target's inventory financing or under the existing working capital line of
credit;
(x) revaluation by Target of any of the Assets, including without
limitation writing off notes, or writing off accounts receivable except
with respect to accounts receivable written off in the ordinary course of
business;
(xi) payment or declaration of any dividends, distributions with
respect to any of the Target Shares, or redemption, repurchase or
acquisition by Target of any of the Target Shares except for dividends
substantially consistent with past practice to permit Sellers to pay
applicable income taxes related to the income or gain of Target taxed to
Sellers and except for the TimeBridge Transfers; or
19
(xii) agreement by Target or any of the Majority Holders to do any of
the things described in the preceding clauses (i) through (xi), other than
as expressly provided herein.
(j) UNDISCLOSED LIABILITIES. Target does not have any material liability
(whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due, including any
liability for Taxes), except for (i) liabilities set forth on the Most Recent
Financial Statements (or in any notes to the December 31, 1996 Financial
Statements), (ii) liabilities which have arisen after the Most Recent Fiscal
Month End in the ordinary course of business, and (iii) Excluded Liabilities.
(k) LEGAL COMPLIANCE. Target has complied in its operations in all
material respects with all applicable statutes and governmental rules,
regulations and Permits. No action, suit, proceeding, hearing, or, to Majority
Holders' Knowledge, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against Target alleging any failure so to comply,
nor, to the Knowledge of Majority Holders, are any such actions threatened.
(l) TAX MATTERS.
(i) Filing of Tax Returns. Target has timely filed with the
appropriate taxing authorities all returns (including without limitation
information returns and other material information) in respect of Taxes
required to be filed through the date hereof and will timely file any such
returns required to be filed on or prior to the Closing Date, in each case,
subject to any applicable extensions. The returns and other information
filed are complete and accurate in all material respects. Except with
respect to income tax returns for the calendar year 1996, Target has not
requested any extension of time within which to file returns (including
without limitation information returns) in respect of any Taxes.
(ii) PAYMENT OF TAXES. All Taxes that accrue or are payable by Target
in respect of taxable periods that end on or before the Closing Date and
for any taxable periods that begin before the Closing Date and end
thereafter to the extent such Taxes are attributable to the portion of such
period ending on the Closing Date (such period being referred to herein as
a "Pre-Closing Partial Period"), as determined under the closing of the
books method of allocation, have (or will have, on or before the Closing
Date) been timely paid, or an adequate reserve has been established
therefor, as set forth in Section 4(1) of the Disclosure Schedule or in the
Financial Statements. Target has no liability for Taxes in excess of the
amounts so paid or reserves so established.
(iii) AUDIT, INVESTIGATIONS OR CLAIMS. Except as set forth in
Section 4(1) of the Disclosure Schedule, there are no pending or to the
best of each Majority Holder's knowledge, threatened audits, investigations
or claims for or relating to any additional Tax liability, and there are no
matters under discussion with any
20
governmental authorities with respect to Taxes that in the reasonable
judgment of any Majority Holder is likely to result in a material
additional liability of Target for Taxes. Except as set forth in such
Section, neither Target nor any Majority Holder has been notified that any
taxing authority intends to audit a return for any period.
(iv) LIEN. There are no liens for Taxes (other than for current
Taxes not yet due and payable) on the Assets.
(v) SAFE HARBOR LEASE PROPERTY. None of the Assets is property that
is required to be treated as being owned by any other person pursuant to
the so-called safe harbor lease provisions of former Section 168(f)(8) of
the Code.
(vi) SECURITY FOR TAX-EXEMPT OBLIGATIONS. None of the Assets directly
or indirectly secures any debt the interest on which is tax-exempt under
Section 103(a) of the Code.
(vii) TAX EXEMPT USE PROPERTY. None of the Assets is "tax exempt use
property" within the meaning of Section I68(h) of the Code.
(viii) FOREIGN PERSON. Neither Target nor any Seller, is a person
other than a United States person within the meaning of the Code.
(ix) S CORPORATION. Target is an "S Corporation" as defined in
Section 1361(a) of the Code and has been an S Corporation for each taxable
year since April 1, 1988.
(x) WAGE WITHHOLDING. Target has withheld all Taxes required to have
been withheld and paid by them on their behalf in connection with amounts
paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party, and such withheld Taxes have either been
duly paid to the proper governmental authority or properly set aside in
accounts for such purpose.
(xi) DISCLOSURE STATEMENTS. Target has not filed with respect to any
item a disclosure statement pursuant to Code Section 6662 or any comparable
disclosure with respect to foreign, state and/or local statutes.
(xii) LIABILITY FOR TAXES OF OTHERS. Target (A) has not been a member
of any affiliated group filing a consolidated federal income tax return and
(B) has no liability for the Taxes of any person as defined in Section
7701(a)(1) of the Code under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(xiii) NO WITHHOLDING. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or
of Subchapter A of Chapter 3 of the Code or of any other provision of law.
21
(xiv) PARACHUTE PAYMENTS. Target has not made any payments, nor is
Target obligated to make any payments, and is not a party to any agreement
that could obligate it to make any payments that will not be deductible
under Section 280G of the Code.
(xv) CHANGES IN ACCOUNTING METHOD. Except as set forth in section
4(1) of the Disclosure Schedule, Target has not agreed to nor is it
required to make any adjustment pursuant to Section 481(a) of the Code by
reason of a change in accounting method initiated by Target, and neither
Target nor any Majority Holder has any knowledge that the IRS has proposed
any such adjustment or change in accounting method.
(xvi) SECTION 1374 ASSETS. Target would not recognize gain under
Section 1374 of the Code in the event that it sold the Assets to Buyer at
Closing in a transaction that constituted an actual sale of such Assets for
federal income tax purposes (instead of a deemed sale of such Assets under
Section 338(h)(10) of the Code).
(m) REAL PROPERTY.
(i) Target does not own any real property.
(ii) Section 5(m)(ii) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to Target [for use in the
Business] (the "Leased Real Property"). Target has made available to the
Buyer correct and complete copies of the leases and subleases listed in
section 5(m)(ii) of the Disclosure Schedule (as amended to date). With
respect to each lease and sublease listed in section 5(m)(ii) of the
Disclosure Schedule which relates to more than 2,000 square feet of net
rentable area (a "Material Lease"), the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect. Target has not
assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in any such leasehold or subleasehold. Target enjoys peaceful
and undisturbed possession of all Leased Real Property, and Target has
fulfilled in all material respects all the obligations required to be
performed by it through the date hereof with respect to such Material
Leases. Each Material Lease is transferable (upon receipt of necessary
landlord consents) in connection with the transactions contemplated hereby.
(iii) Target has received all required material approvals of
governmental authorities (including Permits and material certificates of
occupancy or other similar certificates permitting lawful occupancy)
required in connection with the present use of the space covered by the
Material Leases.
(iv) Target has not received notice of any special assessment
relating to any Real Property for which Target would be liable under any of
the Real Property Leases.
22
(n) TANGIBLE PERSONAL PROPERTY. All items of tangible Personal Property
having a gross book value equal to or greater than $1,000 constituting part of
the Assets are in good operating condition and repair (subject to normal wear
and tear) and are suitable for the purposes for which they are intended (taking
into account the constantly evolving nature of computer and other technological
equipment).
(o) INTELLECTUAL PROPERTY. To the Knowledge of Majority Holders, Target
has not interfered with, infringed upon, misappropriated, or violated any
Intellectual Property rights of third parties in any material respect, and
Target has not received, within the last two years any written charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of Target, no
third party has interfered with, infringed upon, misappropriated, or violated
any material Intellectual Property rights of Target constituting part of the
Assets.
(i) Section 4(o)(i) of the Disclosure Schedule identifies those items
of Intellectual Property owned by Target and used in the Business, the loss
of which could reasonably be expected to have a Material Adverse Effect
("Material Intellectual Property"), and identifies each license, agreement,
or other permission which Target has granted to any third party with
respect to any such Material Intellectual Property (together with any
exceptions). Copies of all documents of Material Intellectual Property have
been made available to Buyer. With respect to each item of Intellectual
Property required to be identified in section 4(o)(i) of the Disclosure
Schedule:
(A) the item is not subject to any adverse outstanding
injunction, judgment, order, decree, ruling, or charge; and
(B) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of Target,
threatened which challenges the legality, validity, enforceability, use, or
ownership of the item.
(ii) Section 4(o)(ii) of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that
Target uses in the Business pursuant to license, sublicense, agreement, or
permission ("Material Non-Owned Intellectual Property"). Copies of all
documents of Material Non-Owned Intellectual Property have been made
available to Buyer. With respect to each item of Intellectual Property
required to be identified in section 4(o)(ii) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect; provided, however, that no representation is made as to the
ownership of any Material Non-Owned Intellectual Property or as to the
right of the Target's licensor, sublicensor or grantor to grant any such
license, sublicense, agreement or permission;
(B) neither Target nor, to the Knowledge of Target, any other
party to the license, sublicense, agreement, or permission is in breach or
default which would permit termination, modification, or acceleration
thereunder; and
23
(C) Target has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(iii) Notwithstanding the foregoing, the parties acknowledge that the
names "Xxxxxxx" and "Syltech" are currently used by Affiliates of the
Majority Holders. Such use shall be discontinued at or before the Closing.
(iv) With respect to each software license or software sublicense to
which Seller is a party, Seller has not granted any sublicense or similar
right except in accordance with the terms and conditions thereof, including
the payment of all applicable royalties, and is not otherwise in material
violation of such license or sublicense agreement.
(p) CONTRACTS.
(i) Buyer has been given access to copies of the currently effective
Contracts (other than Contracts constituting Excluded Assets) described in
clauses (A) through (P) to which Target is a party (the "Material
Contracts"), which copies are true and correct in all material respects,
subject to ordinary course extensions, renewals, and similar changes.
Section 4(p) of the Disclosure Schedule lists:
(A) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting
the ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property, providing for payments in
excess of $50,000 per annum;
(B) any Contract (or group of related Contracts) (other than a
Government Contract) for the furnishing or receipt of services or delivery
of goods and/or materials, the performance of which will extend over a
period of more than one year after the date of this Agreement or under
which Target paid or received aggregate consideration in excess of $400,000
during the year ended December 31, 1996, or reasonably expects based upon
the operation of the Business as of the date hereof to pay or receive
aggregate consideration in excess of $400,000 during the year ending
December 31, 1997;
(C) any Government Contract, including any Government Contract
awarded pursuant to Section 8(a) of the Small Business Act (15 U.S.C.
Section 637(a)), each of which is denoted as a Section 8(a) contract on the
Disclosure Schedule;
(D) any Contract creating or governing a partnership, limited
liability company, joint venture or any teaming agreement or other Contract
(however named) which teaming agreement or other Contract involves a
sharing of profits, losses, costs, or liabilities by Target with any other
Person and involving a liability of Target in excess of $100,000 per annum;
(E) any note, debenture, guarantee, loan, letter of credit,
surety-bond
24
or other agreement, instrument or commitment (or group of related
agreements) in effect as of the date hereof, under which Target has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, including any agreement or commitment for future loans, credit or
financing or any capitalized lease obligation, in excess of $100,000 or
under which Target has imposed a Security Interest on any of the material
Assets, tangible or intangible;
(F) any agreement (other than a teaming agreement) imposing on
Target a restriction or obligation regarding confidentiality or
noncompetition (the "Confidentiality Agreements"); provided that Target and
Sellers shall not be required to include in such section 4(p) of the
Disclosure Schedule the identities of any parties who have entered into
confidentiality agreements in connection with the potential purchase of the
stock or assets of Target pursuant to the solicitation of offers undertaken
by Quarterdeck Investment Partners until the Closing has been completed;
(G) any Contract involving an obligation of Target to make any
payment to any Affiliate of Target, any Seller, or any of Target's
directors, officers or employees (not including salary or similar
compensation reflected on Target's payroll records);
(H) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
and employees (not including customary fringe benefits such as accrued
vacation or sick leave);
(I) any collective bargaining agreement or any other agreement
with any employee representative of a group of employees or labor union
relating to wages, hours or other conditions of employment;
(J) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis which is not terminable
at-will or which provides annual compensation in excess of $100,000 or
severance benefits;
(K) any agreement under which Target has advanced or loaned any
amount which remains outstanding, to any of its directors, officers, and
employees outside the ordinary course of business and which will not be
paid off at or prior to the Closing or will not constitute an Excluded
Asset;
(L) each power of attorney which is currently binding on Target
and which could reasonably be deemed to bind Assets with a value in excess
of $100,000 (except to the extent the same is included in any of the
Contracts to which Buyer has been provided access as set forth herein);
(M) each Contract requiring capital expenditures by Target in
connection with the Business or the Assets after the date hereof in an
amount in excess of $50,000 individually or $100,000 in the aggregate;
25
(N) each written warranty, guaranty or other similar undertaking
with respect to contractual performance extended by Target other than in
the ordinary course of business;
(O) each Loss Contract; and
(P) each amendment, supplement, and modification (whether written
or oral) in respect of any of the foregoing.
(ii) With respect to each such Material Contact, except as set forth
in section 4(p) of the Disclosure Schedule, (A) the Contract is legal,
valid, binding, enforceable, and in full force and effect in all material
respects; and (B) no party is in breach or default which would permit
termination, modification, or acceleration under the Contract.
(iii) Except as set forth on section 4(p) of the Disclosure Schedule,
Target is not engaged in any renegotiations of any amounts paid or payable
to Target under current or completed Contracts with any Person having the
contractual or statutory right to demand or require such renegotiation.
Target has not received any written demand for such renegotiation in
respect of any such Contract. Except as set forth on section 4(p) of the
Disclosure Schedule, no Person, including any government contracting
officer or prime contractor has given Target written notice that any
material adjustments are required to the terms of any Material Contracts.
(q) NOTES AND ACCOUNTS RECEIVABLE. The amount of all notes, accounts
receivable, unbilled invoices and other debts due or recorded in the Financial
Statements, except to the extent the same constitute Excluded Assets, (A) will
be, subject to the reserves reflected on the Closing Net Asset Statement, good
and collectible in full in the ordinary course of business and in any event not
later than one hundred eighty (180) days after the Closing Date, or after the
date billed, if later (assuming use by Buyer of billing and collection practices
which are customary in the industry), and (B) are not subject to any
counterclaim or setoff except to the extent of any such reserve.
(r) LICENSES, PERMITS AND AUTHORIZATIONS. Section 4(r) of the Disclosure
Schedules contains a list of all material licenses, approvals, consents,
franchises and other permits (including without limitation, all facility
security clearances) of or with any governmental regulatory or administrative
authority, whether foreign, federal, state or local, which are held by Seller
and necessary for the current conduct of the Business as it is now conducted
(each a "Permit"). All such Permits are in full force and effect and there are
no proceedings pending or, to Majority Holders' Knowledge, threatened that seek
the revocation, cancellation, suspension or adverse modification thereof. Such
Permits constitute all of the material licenses, approvals, consents, franchises
and permits necessary to permit Target to own, operate, use and maintain its
Assets in the manner in which they are now operated and maintained and to
conduct the Business substantially as currently conducted. All required filings
with respect to such Permits have been timely made and all required applications
for renewal thereof have been timely filed.
26
(s) INSURANCE. Section 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) held by Target:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage; and
(iv) the amount (including a description of how deductibles and
ceilings are calculated and operate) of coverage.
With respect to each such insurance policy, (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all material respects; (B)
no event has occurred which, with notice or the lapse of time, would permit
termination, modification, or acceleration, under the policy. Section 4(s) of
the Disclosure Schedule describes any material self-insurance arrangements
affecting Target. To Majority Holders' knowledge, Target is not a named insured
or otherwise the beneficiary of coverage under any insurance policy held by any
other Person.
(t) LITIGATION. Section 4(t) of the Disclosure Schedule sets forth each
instance in which Target (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or has received written
notice that it has been threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(u) PRODUCT WARRANTY. Substantially all of the products manufactured,
sold, leased, and delivered by Target have conformed in all material respects
with all applicable contractual commitments. Target has no material liability
for replacement or repair thereof or other damages in connection therewith,
subject only to (i) the express provisions of any of the Material Contracts, and
(ii) the reserve for product warranty claims set forth in the Financial
Statements, as adjusted for operations and transactions through the Closing Date
in accordance with the past custom and practice of Seller.
(v) EMPLOYEES. Except as set forth in section 4(v) of the Disclosure
Schedule, as of the date of this Agreement, no executive officer has given
Target written notice of plans to terminate employment with Target during the
next 12 months. Target is not a party to or bound by any collective bargaining
agreement. There are no complaints against Target pending before the National
Labor Relations Board or any similar state or local labor agency by or on behalf
of any employee of Target. Target has complied in all material respects with all
laws, rules and regulations relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment
27
of social security and similar taxes (hereinafter collectively referred to as
the "EMPLOYMENT LAWS"). Target is not liable for the payment of taxes, fines,
penalties or other amounts, however designated, for failure to comply with any
of the foregoing Employment Laws. There are no representation questions,
arbitration proceedings, labor strikes, slow downs or stoppages, grievances or
other labor disputes pending or, to Target's Knowledge, threatened with respect
to the Target's Employees.
(w) ENVIRONMENTAL MATTERS. Target owns no real estate, and each portion of
the Leased Real Property is part of a larger premises also subject to lease
agreements with other tenants. To Target's knowledge, (i) Target has complied
with and is not in violation of any Environmental Laws, (ii) Target is not
required to hold or obtain any environmental permits, certificates, consents or
other settlements agreements, licenses, approvals, registrations or
authorizations under any Environmental Laws, (iii) no notice, citation, summons
or order has been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or threatened by any
governmental or other entity relating to the Leased Real Property or Target's
operations with respect to any alleged violation by Target of any Environmental
Law or with respect to any use, possession, generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substances by or on
behalf of Target, (iv) there are no facts or circumstances related to
environmental matters concerning the Leased Real Property that could reasonably
be expected to lead to any future environmental claims against Target under
current Environmental Laws, and (v) there have been no environmental
inspections, investigations, studies, audits, tests, reviews or other analyses
conducted in relation to any Leased Real Property, Target or the Business which
have been provided or reported to Target.
(x) EMPLOYEE BENEFITS.
(i) Section 4(x) of the Disclosure Schedule lists each Employee
Benefit Plan that Target maintains or to which Target contributes.
(ii) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in all material respects with the
applicable requirements of ERISA, the Code, and other applicable laws.
(iii) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-l's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each such Employee Benefit Plan.
(iv) All contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such Employee Pension
Benefit Plan or accrued in accordance with the past custom and practice of
Target. All premiums or other payments for all periods ending on or before
the Closing Date have been paid with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(v) Each such Employee Benefit Plan which is an Employee Pension
Benefit
28
Plan meets the requirements of a "qualified plan" under Code section 401(a)
and has received a favorable determination letter from the Internal Revenue
Service.
(vi) Copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan have been made available to
Buyer.
(vii) With respect to each Employee Benefit Plan that Target maintains
or ever has maintained or to which it contributes, ever has contributed, or
ever has been required to contribute,Target has not incurred any material
liability to the PBGC (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal liability) or under the Code
with respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(viii) Target never has contributed to, or ever has been required to
contribute to, any Multiemployer Plan or has any material liability
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any withdrawal
liability, under any Multiemployer Plan.
(ix) Target does not maintain nor ever has maintained, or contribute,
ever has contributed, or ever has been required to contribute to any
Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code section 4980B).
(y) GUARANTIES. Target is not a guarantor or otherwise is responsible for
any liability or obligation (including indebtedness) of any other Person.
(z) GOVERNMENT CONTRACTS. With respect to each Government Contract:
(i) During the past five (5) years, no payment has been made by
Target, or by any Person authorized to act on Target's behalf, to any
Person in connection with any such Government Contracts, in violation of
applicable procurement laws or regulations or in violation of (or requiring
disclosure pursuant to) the Foreign Corrupt Practices Act.
(ii) Section 4(z) of the Disclosure Schedule sets forth all
outstanding or pending change orders which could reasonably be deemed to
involve an amount in excess of $100,000 and all claims, requests for
equitable adjustments, outstanding or pending subcontractor, supplier or
vendor claims, and all teaming agreements, joint venture arrangements and
agency agreements, with respect to such Government Contracts.
(iii) Target's accounts receivable, unbilled costs and accrued profits
(less cus-
29
tomer progress payments), notes receivable, contracts in progress, accounts
payable and notes payable (collectively the "RECEIVABLES AND UNBILLED
COSTS") as of the Closing shall be recorded on its books and records in the
ordinary course of business in accordance with GAAP applied on a consistent
basis with prior years, subject to the adjustments referred to in section
4(g) above.
(iv) With respect to each Government Contract, except as set forth in
section 4(z) of the Disclosure Schedule, (A) Target has complied with all
material terms and conditions of such Government Contract, including all
clauses, provisions and requirements incorporated expressly, by reference
or by operation of law therein, (B) Target has complied with all
requirements of applicable laws pertaining to such Government Contract, (C)
all representations and certifications executed, acknowledged or set forth
in such Government Contract were complete and correct in all material
respects as of their effective date, and Target has complied in all
material respects with all such representations and certifications, and (D)
neither the United States Government nor any prime contractor,
subcontractor or other Person has notified Seller in writing, that Target
has breached or violated any applicable law, or any material certification,
representation, clause, provision or requirement pertaining to such
Government Contract. Anything herein to the contrary notwithstanding, to
the extent any breach of this representation would also constitute a breach
of the representation made in section 4(u), such breach shall be subject to
the terms of section 6(d) below.
(v) Target is not currently, and has not been in the past five years,
debarred or suspended from doing business with any Federal government
agency, nor has any such suspension or debarment action been commenced. No
show cause notices, notices of termination for default or cure notices have
been issued against Target in the past five years, except, as to any such
cure notices, those with respect to which cure has been made in the
ordinary course of business.
(vi) Target is not currently and has not been in the past five years,
under administrative, civil or criminal indictment or, to Majority Holders'
Knowledge, investigation, with respect to any alleged irregularity,
misstatement or omission arising under or in any way relating to any of
such Government Contracts.
(vii) No security clearances are required to be held by Target for the
execution of its obligations under any such Government Contracts; Target
never has been denied a security clearance necessary to perform any such
Government Contract unless such clearance has later been granted.
(aa) BROKERS' FEES. Except for such fees as are due to Quarterdeck
Investment Partners for which Sellers shall be solely liable, Target has no
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(ab) BACKLOG. Section 4(ab) of the Disclosure Schedule identifies for each
Government
30
Contract constituting part of the Assets Target's reasonable estimate, based on
Target's past experience with such Government Contract and other experience in
the industry, of the amounts to be recognized under the term of such Government
Contract during the projected term thereof, assuming all option years are
exercised. The Parties recognize, however, that a number of such Government
Contracts (as indicated in the Disclosure Schedule) are IDIQ contracts, as to
which no specific quantities are designated, and that there can be no assurance
that the actual experience under any particular Government Contract will conform
to such estimates.
(ac) DISCLOSURE. The representations and warranties contained in this
section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this section 4 not misleading.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use his or its reasonable efforts to
cooperate with the other parties in order to consummate and make effective the
transactions contemplated by this Agreement.
(b) HSR AND GOVERNMENTAL CONSENTS. Each of Buyer and the Sellers consent
to give any notices to, make any filings with, and to use its reasonable efforts
to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in sections
3(a)(iii) and 3(b)(ii) and 4(c) above. Notwithstanding any other provision in
this Agreement, no Seller shall be required to agree to or execute, in
connection with any such authorization, consent or approval, any agreement
pursuant to which such Seller is required to guarantee, provide indemnification,
or otherwise protect, Buyer or any contracting party with respect to the
performance, after Closing, by Buyer, Target or any other party under any
Material Contract (as defined in section 4(p) above). Without limiting the
generality of the foregoing, each of the Parties will file any Notification and
Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Xxxx-Xxxxx-Xxxxxx Act. Any fee in connection
with such filing and any review or processing thereof shall be the
responsibility of Buyer. Each of Buyer and Sellers will use its reasonable
efforts to obtain a waiver from the applicable waiting period, and will make any
further filings pursuant to the Xxxx-Xxxxx-Xxxxxx Act that may be necessary in
connection therewith. Target and Majority Holders shall consult with Buyer prior
to the delivery of, and give Buyer the opportunity to comment on, any notice
which Target or Sellers are required to provide to the Small Business
Administration pursuant to the terms of Target's section 8(a) contracts or the
Small Business Act.
(c) OPERATION OF BUSINESS. From the date hereof to the Closing Date,
Target and Sellers shall not, and Sellers will not permit Target to, engage in
any practice, take any action, or enter into any transaction outside the
ordinary course of the Business (except as set forth in section 5(d) below with
respect to TimeBridge Technologies). Without limiting the
31
generality of the foregoing, except with the written consent of Buyer or with
respect solely to the Excluded Assets, Target shall not and Sellers will not
cause Target to:
(i) change or amend the Articles of Incorporation or Bylaws of Target;
(ii) enter into, extend, materially modify, terminate or renew any
Material Contract, except as described in section 5(c) of the Disclosure
Schedule with respect to a contract with TVA and except for the transfer,
to TimeBridge Technologies, Inc. of leases for space in Xxxxxx, Maryland,
New Jersey and Florida, which are part of the Excluded Assets;
(iii) sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any material Assets, or any interests
therein, except in the ordinary course of business and except for the
transfer, to TimeBridge Technologies, Inc. of leases for space in Xxxxxx,
Maryland, New Jersey and Florida, which are part of the Excluded Assets;
(iv) except as otherwise required by law, and except as otherwise
described in section 5(c) of the Disclosure Schedule, take any action
relating to Business Employees with respect to the grant of any bonus,
severance or termination pay (otherwise than pursuant to policies or
agreements of Target in effect on the date hereof and described in the
April 1, 1997 Employee Policy and Procedure Manual or in section 5(c) of
the Disclosure Schedule), or with respect to any increase of benefits
payable under its severance or termination pay policies or agreements in
effect on the date hereof or increase in any material respect the
compensation or fringe benefits of any employee or pay any benefit not
required by any existing Employee Plan, agreement or policy;
(v) make any change in the key management structure of Seller,
including, without limitation, the hiring of additional officers or the
termination of existing officers other than in the ordinary course of
business and other than in connection with the transactions relating to
TimeBridge Technologies described in section 5(d) below; provided, however,
that in no event shall TimeBridge Technologies hire any person who is an
employee of Target as of the date hereof, except for any Retained Employee;
(vi) adopt, enter into or amend any Employee Plan, agreement
(including, without limitation, any collective bargaining or employment
agreement), trust, fund or other arrangement for the benefit or welfare of
its employees;
(vii) acquire by merger or consolidation with, or merge or consolidate
with, or purchase substantially all of the assets of, or otherwise acquire
any material assets or business of any corporation, partnership,
association or other business organization or division thereof;
(viii) make any capital expenditures or commitments in excess of
$100,000 in
32
the aggregate, except any such expenditures disclosed to Buyer prior to the
date hereof;
(ix) make any material loans or advances to any Person;
(x) make any material tax election or settlement or compromise with
tax authorities which would affect the Assets or the Business after the
Closing hereunder, except as set forth in section 4(1) of the Disclosure
Schedule;
(xi) intentionally do any other act which would cause any
representation or warranty in this Agreement to be or become untrue in any
material respect;
(xii) fail to maintain the tangible Assets in their current state of
repair, excepting normal wear and tear or casualty, or fail to replace
consistent with Target's past practice inoperable, worn out, obsolete or
destroyed Assets;
(xiii) make any changes in accounting policies or practices except as
set forth- in section 5(c)(xiii) of the Disclosure Schedule; provided that
Sellers shall cause Target to report to Buyer promptly any additional such
changes Target proposes to make, and Buyer shall not withhold its consent
to any such change if the same would not reasonably be deemed to have an
adverse effect on Target or Buyer after the Closing; or
(xiv) declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase, or otherwise acquire
any of its capital stock, except for dividends substantially consistent
with past practice of Target, to permit Target's shareholders to pay any
applicable Income Taxes related to the income or gain of Target taxed to
Target's shareholders and any dividend or distribution of Excluded Assets;
or
(xv) enter into any agreement, or otherwise become obligated, to do
any action prohibited hereunder.
(d) PRESERVATION OF BUSINESS. Target will make reasonable efforts, and
Sellers will make all reasonable efforts to cause Target, to keep the Business
and Assets substantially intact, including its present operations, physical
facilities, and relationships with employees, lessors, licensors, suppliers and
customers, subject to customary commercial practice. Notwithstanding the
foregoing or any other provision of this Agreement, Buyer understands that
Target intends, prior to or simultaneously with Closing hereunder, to distribute
to the Sellers the contracts, employees, assets, and business and all related
liabilities, other than the Retained Accounts, as set forth in section 5(d) of
the Disclosure Schedule, which contracts, assets, employees, business and
liabilities are anticipated to be held after the Closing by TimeBridge
Technologies (the "TimeBridge Transfers"), and no actions taken to implement
such TimeBridge Transfers shall be deemed in violation of this subsection (d) or
any other provision of this Agreement. Buyer agrees to provide all reasonable
cooperation to Sellers and Target in the implementation of such transfer, at no
material expense to Buyer.
33
(e) FULL ACCESS. Sellers and Target will permit representatives of the
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of Target, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to the Business.
(f) CONFIDENTIALITY. Except (i) for any governmental filings required in
order to complete the Transactions, and (ii) as Buyer and Majority Holders may
agree or consent in writing, each of Buyer and each Seller will treat and hold
as such any Confidential Information it receives from the other Party or its
representatives (including Quarterdeck as a representative of Sellers), in the
course of the reviews contemplated by section 5(e) or otherwise, and will not
use any of the Confidential Information except in connection with this
Agreement; PROVIDED, HOWEVER, that any party hereto may disclose such
information to its legal and financial advisors, lenders, financing sources and
their respective legal advisors and representatives so long as such Persons
agree to maintain the confidentiality of such information in accordance with
this section 5(f). If this Agreement is terminated for any reason whatsoever,
each Party will return to the other Party or destroy all tangible embodiments
(and all copies of the Confidential Information, including all information
prepared by the receiving party or such receiving party's representatives, which
are in its possession or the possession of its representatives. Any provision
hereof to the contrary notwithstanding, information not so destroyed (or
returned) will remain subject to these confidentiality provisions
(notwithstanding any termination of this Agreement) until the second anniversary
of the date of this Agreement. The foregoing confidentiality provisions shall
not apply to such portions of the information received which (i) are or become
generally available to the public through no action by the receiving party or by
such party's representatives, (ii) are or become available to the receiving
party on a nonconfidential basis from a source, other than the disclosing party
or its representatives, which the receiving party believes, after reasonable
inquiry, is not prohibited from disclosure of such information by a contractual,
legal or fiduciary obligation, and shall not apply to any disclosure after the
Closing by Buyer of any information relating solely to Target (other than
information relating to TimeBridge Technologies or the Excluded Assets or
Excluded Liabilities).
(g) CONSENTS; REASONABLE EFFORT; COOPERATION. Target and Sellers will make
reasonable efforts to obtain in writing the consents of third parties, in
connection with the consummation of the Transactions, listed on Exhibit G
attached hereto, such consents to be substantially in the form set forth in such
Exhibit G (the "Required Consents"). Notwithstanding any other provision in this
Agreement, Sellers shall not be required to agree to or execute, in connection
with any such consent or any novation of any Contract, any agreement pursuant to
which any Seller is required to guarantee, provide indemnification, or otherwise
protect Buyer or any contracting party with respect to the performance, after
Closing, by Target or any other party under any Contract.
(h) NOTICE OF DEVELOPMENTS. Buyer will give written notice to the Seller
Representative of any development causing a breach of any of the representations
and warranties in section 3(a) which has not previously been disclosed to the
Seller Representative, with reasonable promptness after Buyer gains Knowledge
thereof. The Seller Representative will give written notice to Buyer of any
development causing a breach of any
34
of the representations and warranties in section 3(b) or 4 above relating to
Target, the Business, the Assets or the transactions contemplated hereby, which
has not previously been disclosed, with reasonable promptness after Target has
Knowledge thereof. Buyer will give the Seller Representative notice, as soon as
reasonably practicable after Buyer has Knowledge thereof, of any material
inaccuracy of the representations and warranties of Majority Holders with regard
to the Business or the Assets of which Buyer gains Knowledge from Buyer's or its
agents' due diligence investigation with regard to this Agreement.
(i) EXCLUSIVITY. Prior to the Closing or other termination of this
Agreement in accordance with the terms hereof, none of the Sellers will (and the
Sellers will not cause or permit Target to) accept an offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any portion of the Assets, of Target, other than in the ordinary course of
business (including any acquisition structured as a merger, consolidation, or
share exchange), other than the acquisition of Target Shares held by one Seller
by another Seller who is a Majority Holder and actions taken with respect to the
TimeBridge Transfers referred to in subsection (d) above. None of the Sellers
will vote their Target Shares in favor of any such nonpermitted acquisition
structured as a merger, consolidation, or share exchange.
(j) NO SOLICITATIONS. From the date hereof through the Closing Date or
termination of this Agreement in accordance with the terms hereof, neither
Target nor any Seller shall directly or through an agent (including Quarterdeck
Investment Partners acting as the agent of one or more Sellers) solicit,
participate in or initiate discussions or negotiations with any Person or group
of Persons (other than Buyer or any of its Affiliates) concerning any merger,
sale of assets, sale of shares of capital stock or similar transactions
involving Target or the Business.
(k) EMPLOYEE MATTERS. Upon the Closing, Buyer will cause Target to
continue the employment of each employee of Target ("BUSINESS EMPLOYEES") except
for such employees as are listed on section 5(k) of the Disclosure Schedule (the
"RETAINED EMPLOYEES") and except for such individuals as are designated on
section 4(v) of the Disclosure Schedule (together with the Retained Employees,
the "Excluded Employees") at a comparable level of salary and comparable
benefits as currently provided to such Business Employee by Target.
Notwithstanding the foregoing, Buyer shall not thereafter be restricted from any
modification in terms of employment or termination of the Business Employees in
the ordinary course of business. It is acknowledged and agreed that Buyer shall
have no obligation to pay, or cause Target after the Closing to pay, any
severance or termination payments (except to the extent any portion of the
Compensation Amount may be paid after Closing) to any Excluded Employee by
virtue of the termination of their employment with Target effective as of the
Closing.
(l) COOPERATION AGREEMENT. Buyer and TimeBridge Technologies, Inc. ("TTI")
will negotiate in good faith the terms of the Cooperation Agreement referred to
in section 6(c)(ii) below. The Cooperation Agreement will provide for
commercially reasonable terms under which TTI will have the right to utilize the
commercial vendor agreements of Target listed on Exhibit I attached hereto for
purposes of its business, at no cost or expense to
35
Target for a reasonable period, to permit TTI to negotiate and enter into its
own contracts with the vendors covered by such agreements. The Cooperation
Agreement will also provide for the following matters, among others, in each
case upon terms mutually acceptable to Buyer and TTI: (1) the ability of Target
to utilize the services of certain members of TTI's technical staff, (2) the
right of Target to have priority rights to the services of (or, if necessary, to
hire) certain members of TTI's technical staff for purposes of the U.S. Courts
contract currently being performed by Target; (3) a sublease by Target of a
portion of the space currently leased by Target in Lanham, Maryland, to the
extent requested by Target, and (4) subcontracting of certain tasks by Target to
TTI. The Cooperation Agreement will provide the terms upon which such
individuals may be rehired by TTI.
(m) UPDATED CONTRACT BACKLOG AND FINANCIAL STATEMENTS. Prior to the
Closing, (i) Target shall provide an updated estimate of the amounts anticipated
to be recognized during the remaining term of the Government Contracts, prepared
on the same basis as described in the representation set forth in section 4(ab)
of this Agreement, and (ii) Target shall deliver to Buyer on a timely basis any
interim financial statements prepared by Target in the ordinary course of
business.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the
period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will,
subject to the limitation set forth in section 5(g) above, take such further
action (including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole cost and
expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under section 8 below). The Parties acknowledge and
agree that from and after the Closing the Buyer will be entitled to possession
of the Books and Records (other than such Books and Records relating solely to
the Excluded Assets and Excluded Liabilities, as to which Buyer shall be
entitled to possession of a complete and accurate copy), but will provide copies
thereof to Sellers promptly upon request therefor. Buyer will provide all
reasonable cooperation with Sellers in connection with obtaining any information
reasonably necessary for preparation of financial statements and tax returns,
recognizing the S corporation status of Target.
(b) LITIGATION SUPPORT. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, circumstance,
condition, occurrence, event, incident, action, failure to act, or transaction
prior to the Closing Date directly involving the Business, each of the other
Parties will make all reasonable efforts to cooperate with him or it and his or
its counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under section
36
8 below).
(c) USE OF XXXXXXX NAME; CONTRACTUAL ARRANGEMENTS WITH TIMEBRIDGE
TECHNOLOGIES
(i) As soon as practicable after the Closing Date, but in no event
more than thirty (30) days thereafter, Majority Holders shall cause
Timebridge Technologies and its then-current Affiliates constituting
corporations or other entities controlled by either or both Majority
Holders, to make any necessary change to their names so as not to use or
include the tradename "Xxxxxxx," "Syltech," or any other name beginning
with "Syl..." or otherwise confusingly similar with Xxxxxxx, in connection
with the business of any TimeBridge Technologies entity, in any market or
location and to agree not to use any such tradename in connection with any
other business hereafter acquired or started by Majority Holders or any
such Affiliate. In the event Buyer or any of its Affiliates does not engage
in use of the name "Xxxxxxx" in commerce (rather than merely as a technical
legal name of a corporation) for a period of eighteen consecutive months,
Buyer agrees to cause all rights to such name to be transferred to Xxxx X.
Xxxxxx (or his heirs and assigns and his or their nominee) without further
consideration. Xxxx X. Xxxxxx is an intended third party beneficiary of
this subsection (i).
(ii) The Parties acknowledge that certain of the work under some of
the Contracts has been performed by persons who are, or will be following
the Closing Date, employees and officers of TimeBridge Technologies, Inc.
and that it may be mutually beneficial for Buyer and TimeBridge
Technologies, Inc. to cooperate on certain future Contracts. The Parties
intend that such Persons shall continue to perform the functions which they
have historically performed under the Contracts following the Closing Date.
Target and TimeBridge Technologies, Inc. shall enter into a mutually
satisfactory cooperation agreement (the "COOPERATION AGREEMENT") which
shall govern the terms and conditions of such relationship.
(iii) This subsection (c) shall survive the Closing for a period of
ten (10) years.
(d) The parties acknowledge that products sold and delivered by Target
under the Government Contracts prior to the Closing Date may be subject to
certain warranties, relating to the condition, suitability or conformity of such
products to specified requirements, contained in such Government Contracts (the
"Product Warranties"), even though Target has not manufactured any of such
products. Majority Holders shall indemnify Buyer against any liability for
breach of any such Product Warranties, pursuant to the provisions of section 10
below, solely to the extent such Product Warranties exceed the coverage of any
warranties or other protections provided by the manufacturer of such products,
and provided that Buyer makes a claim with respect to such breach within the
two-year period following the Closing. Prior to making any claim against
Majority Holders with respect to any claim or liability relating to such Product
Warranties, Buyer shall make reasonable efforts for a period of ninety (90) days
from the date Buyer obtains Knowledge of such warranty claim to (A) determine
whether the claimed defect or other problems with the product is covered by a
37
manufacturer's warranty or similar protection, and (B) obtain protection against
or reimbursement for any such claim or liability from the manufacturer of the
applicable product. Majority Holders shall provide all reasonable cooperation in
such efforts by Buyer.
(e) Majority Holders and Buyer agree as follows with respect to any
accounts receivable constituting Retained Accounts (the "Retained Receivables").
Buyer will cause Target to make commercially reasonable efforts to collect such
Retained Receivables. Notwithstanding the terms of items (A) and (B) of section
9(b), the indemnification provisions of section 9(b) shall apply to any
difference between the amount actually collected by or on behalf of Target
within 180 days after the Closing on any such Retained Receivable and the face
amount thereof, without regard to the minimum amount set forth in such item A
and without being subject to the aggregate cap for Buyer's right to
indemnification set forth in such item (B). Any Retained Receivable or portion
thereof not collected within such 180-day period shall be assigned by Target to
Majority Holders upon payment of such deficiency.
(f) Immediately after the Closing, Sellers shall reveal to Buyer the names
of the parties to the Confidentiality Agreements.
(g) ESCROW. The Notes shall be prepaid pursuant to section 1.4 of the
Notes. At the time of such prepayment (i) an aggregate of One Million Dollars
($1,000,000) of such prepayment amount shall be paid directly to the holders of
the Notes, and (ii) Three Million Dollars ($3,000,000) of such prepayment amount
shall be deposited by Buyer into the Escrow Account in accordance with the
Escrow Agreement and held and distributed as set forth in such Escrow Agreement.
Notwithstanding the foregoing, if, at the time of such prepayment, the
conditions set forth in the Escrow Agreement for distribution in full of the
Escrow Amount (as defined in the Escrow Agreement) have been satisfied, then the
full amount of such prepayment shall be paid directly to the holders of the
Notes.
(h) Except as otherwise set forth above, the terms of this Section 6 shall
survive the Closing for a period of two (2) years.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in sections 3(b) and
4 above shall be true and correct in all material respects at and as of the
Closing Date (except for those expressly relating to a different date);
(ii) Sellers shall have performed and complied in all material
respects with all of their covenants hereunder through the Closing;
(iii) no action, suit, or proceeding shall be pending before any court
or quasi-
38
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would prevent consummation of
any of the transactions contemplated by this Agreement or have a Material
Adverse Effect;
(iv) all applicable waiting periods (and any extensions thereof) under
the Xxxx-Xxxxx-Xxxxxx Act shall have expired or otherwise been terminated;
(v) the Buyer shall have received from counsel to the Sellers an
opinion substantially in the form set forth in Exhibit D-1 attached hereto,
addressed to the Buyer, reasonably satisfactory to Buyer and its counsel
and dated as of the Closing Date;
(vi) Buyer shall have received from Seller such certificates of its
duly authorized officers and others to evidence compliance with the
conditions set forth in this section 7(a) as may be reasonably requested by
Buyer;
(vii) Buyer shall have received the Required Consents;
(viii) Xxxx XxXxxxx shall have entered into an employment or
management agreement with Target in the form approved by Buyer and Xxxx
XxXxxxx and executed, subject to consummation of the transactions
contemplated hereby, as of the date of this Agreement, and Xxxx X. Xxxxxx
and Xxxxxxx X. Xxxxxx shall have entered into consulting agreements with
FDC Technologies, Inc. in the forms approved by Buyer and Xx. Xxxxxx and
Xx. Xxxxxx, respectively, and executed, subject to consummation of the
transactions contemplated hereby, as of the date of this Agreement;
(ix) TTI and Majority Holders shall have executed and delivered to
Buyer the Noncompetition Agreements to which TTI or the Majority Holders
are a party in the forms attached as exhibits hereto, and executed, subject
to consummation of the transactions contemplated hereby, as of the date of
this Agreement, each of the Sellers shall have executed the appropriate
acknowledgement at the end of the Note payable to such Seller, TTI shall
have executed and delivered to Buyer a mutually satisfactory Cooperation
Agreement and Sellers shall have executed and delivered to Buyer the Escrow
Agreement; and
(x) The TimeBridge Transfers shall have been consummated and all
proceedings with respect thereto shall be satisfactory to Buyer and its
counsel in their reasonable discretion, including without limitation
delivery of a reasonably satisfactory opinion of TTI's counsel.
The Buyer may waive any condition specified in this section 7(a) in writing, or
by consummating the transactions contemplated hereby.
(b) CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the Sellers
to consummate the transactions to be performed by them in connection with the
Closing is
39
subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in section 3(a) above
shall be true and correct in all material respects at and as of the Closing
Date (except for those expressly relating to a different date);
(ii) the Buyer shall have performed and complied in all material
respects with all of its covenants hereunder through the Closing;
(iii) no action, suit, or proceeding shall be pending before any court
or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would prevent
consummation of any of the transactions contemplated by this Agreement;
(iv) all applicable waiting periods (and any extensions thereof) under
the HartScott-Xxxxxx Act shall have expired or otherwise been terminated;
(v) the Sellers shall have received from counsel to the Buyer an
opinion substantially in the form set forth in Exhibit D-2 attached hereto,
addressed to the Sellers, reasonably satisfactory to Sellers and their
counsel, and dated as of the Closing Date;
(vi) Sellers shall have received from Buyer resolutions adopted by the
Board of Directors of Buyer approving this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby, certified
by Buyer's corporate secretary or assistant secretary;
(vii) FDC Technologies, Inc. and Buyer shall have executed and
delivered to TimeBridge Technologies, Inc. and any applicable Seller, as
applicable, the Ancillary Agreements to which TimeBridge Technologies, Inc.
or such Seller is a party in the forms attached as exhibits hereto or, with
respect to the Consulting Agreements of Majority Holders, in the forms
initialed by the parties for identification as of the date of this
Agreement, Buyer shall have executed and delivered to TimeBridge
Technologies, Inc. a mutually satisfactory Cooperation Agreement, and Buyer
shall have executed and delivered to the Seller Representative the Escrow
Agreement; and
(viii) Sellers shall have received from Buyer such certificates of its
duly authorized officers and others to evidence compliance with the
conditions set forth in this section 7(b) as may be reasonably requested by
Sellers.
The Majority Holders may waive any condition specified in this section 7(b) in
writing or by consummating the transactions contemplated hereby.
8. CONSENTS TO ASSIGNMENT OR NOVATION; RISK OF LOSS.
40
(a) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign or novate any Contract, or
any claim or right or any benefit arising thereunder or resulting therefrom, if
an attempted assignment or novation thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way adversely affect
the rights of Target thereunder. If such consent is not obtained, or if an
attempted assignment or novation thereof would be ineffective or would affect
the rights thereunder so that Target would not receive all such rights, Sellers
and Buyer will cooperate, in all reasonable respects but without material cost
to Sellers which is not promptly reimbursed by Buyer, to obtain such consent as
soon as practicable and, until such consent is obtained, to provide to Target
the benefits under any Contract to which such consent relates (with Target
responsible for all the liabilities and obligations thereunder). Recognizing
that any action taken by Sellers pursuant to this section 8(a) is at the request
of and for the benefit of Buyer, Buyer agrees to indemnify and hold harmless
Sellers from and against any claim, loss, liability, damages, cost or expense
(including reasonable attorneys' fees and expenses) arising from or related to
any breach or default under such contracts by Target following the Closing Date
or any action taken by Sellers pursuant to the terms of this section 8(a) at the
request of Buyer. No failure of a Contract to be transferred shall be deemed to
affect any amount payable to Sellers pursuant to any provision of section 2 of
this Agreement (subject to any set-off rights expressly provided for in this
Agreement), except to the extent such failure is the result of any breach by
Target or any Seller of any covenant, representation or warranty contained
herein.
(b) RISK OF LOSS. If any material portion of the tangible Assets is
destroyed or damaged by fire or any other cause prior to the Closing Date which
destruction or damage disables Target from carrying on, or materially impairs
Target's ability to carry on, a material part of the Business, the Seller
Representative shall give written notice to Buyer as soon as reasonably
practicable after, but in any event within five (5) business days of, Majority
Holders obtaining Knowledge thereof, including information as to the amount of
insurance, if any, believed to cover such destruction or damage. In such event,
prior to the Closing, Buyer shall have the option, which shall be exercised by
written notice to the Seller Representative within ten (10) days after receipt
of the Seller Representative's notice or, if there are not ten days prior to the
Closing Date, as soon as practicable prior to the Closing Date, of (i) closing
with such Assets in their destroyed or damaged condition, in which event Buyer
shall be entitled to the proceeds of any insurance or other proceeds payable
with respect to such loss and, subject to the limitations set forth in section 9
hereof, to indemnification for any uninsured portion of such loss to the extent
provided by such section 9, and the full purchase price shall be paid, (ii) if
agreed by the Seller Representative, excluding such Assets from the transaction
contemplated hereby, in which case the purchase price shall be reduced by the
amount allocated to such Assets, as mutually agreed between the Parties, and
Sellers shall be entitled to promptly receive any insurance or other proceeds
payable with respect to such loss, or (iii) after providing Target with a
reasonable opportunity to repair such destruction or damage, terminating this
Agreement in accordance with section 10.
9. SURVIVAL; INDEMNIFICATION.
41
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Parties contained in this Agreement shall survive the
Closing and continue in full force and effect for a period of two (2) years
thereafter except as otherwise expressly set forth herein and except that those
representations made with respect to the matters set forth in sections 4(a) (ii)
and (iii), 4(j), 4(1), 4(w), 4(x) and 4(z) and any claim with respect thereto
shall survive until ninety (90) days after the expiration of the applicable
statute of limitations (with extensions) with respect to the matters addressed
in those sections, or (ii) as otherwise expressly set forth herein. The
termination after Closing of the representations and warranties provided herein
shall not affect the rights of a party in respect of any claim made by such
party in a writing received by the other party prior to the expiration of the
applicable survival period provided herein.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER. In the event
Target or any Buyer suffers Adverse Consequences after the Closing as a result
of (i) the breach by Sellers or Target of any of their respective
representations and warranties contained in section 3(b) or 4 hereof or of any
covenant in section 2, 5 or 6 hereof, (ii) any third party claim with respect to
the operation of the Business or other actions of Target prior to the Closing
Date (except to the extent any such claim constitutes a liability included on
the Closing Net Asset Statement), (iii) any Excluded Liability or Pre-Closing
Environmental Liability, or (iv) any material breach or default by Target under
any of the Contracts prior to the Closing Date (each, a "BUYER INDEMNIFICATION
MATTER"), provided that the Buyer makes a written claim for indemnification
against Majority Holders pursuant to section 11(h) below within the survival
period described above, then the Majority Holders jointly and severally agree to
indemnify and hold harmless the Buyer and its Affiliates, and their respective
directors, officers, shareholders and employees (collectively, the "BUYER
PARTIES") from and against any Adverse Consequences the Buyer Parties may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Buyer Parties may suffer after the end of any
applicable survival period) directly resulting from or caused by such Buyer
Indemnification Matter (calculated as set forth in subsection (e) below);
provided, however, that (A) no Majority Holder shall have any obligation to
indemnify any of the Buyer Parties from or against any Adverse Consequences
resulting from any Buyer Indemnification Matter until the Buyer Parties have
suffered Adverse Consequences by reason of all such Buyer Indemnification
Matters in excess of $375,000 in the aggregate, after which point Majority
Holders will be obligated only to indemnify the Buyer Parties from and against
further such Adverse Consequences) and (B) there will be a $10,000,000 aggregate
ceiling on the aggregate obligation of Majority Holders under this section 9(b)
and any other sections of this Agreement providing for indemnification by
Majority Holders; provided, however, that the limitations set forth in items (A)
and (B) above shall not apply to (x) any breach of a covenant set forth in
section 2, 5 or 6, or of the representation set forth in section 4(1)(ix),
hereof, or (y) any indemnification for any Excluded Liability, except such
excluded Liabilities as are described in clause (a) of the definition thereof
and are not described in any other clause of such definition.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLERS. In the event (i)
the Buyer breaches any of its representations, warranties, and covenants
contained herein, or (ii) after the Closing, Target takes or fails to take any
action under any Contract which constitutes part
42
of the Assets, or fails fully and timely to perform its obligations with respect
to any liabilities existing as of the Closing and not constituting Excluded
Liabilities (each, a "SELLER INDEMNIFICATION MATTER"), and a claim is made
against any Seller or any of the Seller Parties (as defined below) with respect
thereto, provided that Seller or such Seller Party makes a written claim for
indemnification against the Buyer pursuant to section 11(h) below within the
survival period described above, then the Buyer agrees to indemnify, save, and
hold harmless such Seller and its Affiliates (including TimeBridge Technologies,
Inc.), and their respective directors, officers, shareholders and employees
(collectively, the "SELLER PARTIES") from and against any Adverse Consequences
such Seller Parties may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the such Seller Parties may
suffer after the end of any applicable survival period) resulting from or caused
by the Seller Indemnification Matter (calculated as set forth in subsection (e)
below; PROVIDED, HOWEVER, that (A) the Buyer shall not have any obligation to
indemnify the Sellers hereunder until the Sellers have suffered Adverse
Consequences by reason of all Seller Indemnification Matters in excess of
$375,000 in the aggregate, after which point the Sellers shall be entitled to
indemnification for all such Adverse Consequences in excess of such amount, and
(B) there will be a $10 million aggregate ceiling on the aggregate obligation of
the Buyer to indemnify the Sellers under this section 9(c) and further provided
that the limitations set forth in items (A) and (B) above shall not apply to
claims for breaches of any covenant set forth in section 2, 5 or 6 of this
Agreement.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM" which may give
rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this section 9, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing within ten
(10) days after the Indemnified Party has Knowledge thereof, provided,
however, that the Indemnified Party's failure timely to provide such notice
shall not bar the Indemnified Party's right to indemnification hereunder if
the Indemnified Party can establish that such failure has not materially
prejudiced the Indemnifying Party's ability to defend the claim or
proceeding.
(ii) Any Indemnifying Party will have the right, at its sole cost and
expense, to assume the defense of the Third Party Claim with counsel of his
or its choice reasonably satisfactory to the Indemnified Party at any time
within ten (10) business days after the Indemnified Party has given notice
of the Third Party Claim; PROVIDED, HOWEVER, that the Indemnifying Party
shall not have the right to control the defense of any such claim or
proceeding unless it has acknowledged in writing its obligation to
indemnify the Indemnified Party from liability arising from such claim or
proceeding pursuant to this section 9 (subject to any applicable
limitations set forth in items (A) and (B) of subsections 9(b) and 9(c)
above), and then, and periodically thereafter, provides the Indemnified
Party with reasonably sufficient evidence of the ability of the
Indemnifying Party to satisfy its obligations under this section 9 with
respect to such Third Party Claim. In the event that the Indemnifying Party
assumes the defense as set forth hereunder, the Indemnifying Party shall
conduct the defense of the Third
43
Party Claim with reasonable diligence thereafter. The Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim; provided that Indemnifying Party's
counsel will consult with such co-counsel, but shall remain in sole control
of such action.
(iii) So long as the Indemnifying Party has assumed and is conducting
the defense of the Third Party Claim in accordance with section 9(d)(ii)
above, (A) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be
withheld, conditioned or delayed unreasonably) unless the judgment or
proposed settlement involves only the payment of money damages by one or
more of the Indemnifying Parties and does not impose any material
injunction or other equitable relief upon the Indemnified Party and (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld, conditioned
or delayed unreasonably).
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third Party Claim in accordance with section
9(d)(ii) above, however, (A) the Indemnified Party may defend against the
Third Party Claim in any manner he or it reasonably may deem appropriate;
provided that the Indemnified Party shall conduct the defense of the Third
Party Claim with reasonable diligence and (B) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the extent provided in this section 9.
In such event (1) the Indemnifying Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the Third Party
Claim, and the Indemnified Party's counsel will consult with such
co-counsel but shall remain in sole control of such proceeding, and (2) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld, conditioned
or delayed unreasonably).
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall make
appropriate adjustments for tax consequences and insurance coverage and take
into account the time cost of money (using the Applicable Rate as the discount
rate from the later of the Closing Date or (x) the date of incurrence of such
Adverse Consequences, if not involving a Third Party Claim, or the date of such
Third Party Claim) in determining Adverse Consequences for purposes of this
section 9. All indemnification payments under this section 9 shall be deemed
adjustments to the Purchase Price.
(f) EXCLUSIVE REMEDY. The Buyer and Sellers acknowledge and agree that,
except (i) as otherwise set forth in this Agreement, (ii) with respect to actual
fraud, intentional misconduct and violations of law, and (iii) for claims
brought for breaches of or default under any Ancillary Agreement, the foregoing
indemnification provisions in this section 9, together with any other
indemnification provisions expressly set forth in this Agreement,
44
shall be the exclusive remedy of the Buyer and Sellers with respect to matters
relating to the Business and the Assets and the transactions contemplated by
this Agreement. Without limiting the foregoing, Buyer acknowledges that Target's
inclusion as a Party to this Agreement is not intended to, nor shall it have the
effect of, enlarging the liability of the Majority Holders beyond the
limitations set forth in this section 9.
(g) RIGHT OF SET-OFF. In addition to any other remedies, any Claims under
this section 9 are, at the option of the Buyer, subject to the following right
of set-off. The principal amount of the Notes (including the Notes held by the
Minority Holders, notwithstanding the fact that such Minority Holders are not
liable for indemnifying the Buyer Parties under this Section 9) is subject to
adjustment following the Closing for any amount finally determined to be payable
by or to Buyer or the Sellers pursuant to this section 9. Any such adjustment is
intended as, and shall be treated by the Parties as, an adjustment to the Total
Consideration. If the principal amount of the Note is adjusted pursuant to this
subsection (h), such adjustment shall be deemed to be made effective as of the
later of (i) Closing Date, or (ii) the date such Claim arose, and all interest
that may have accrued on the principal amount so canceled or added shall also be
deemed to be retroactively canceled or added, effective as of such date. Upon
any adjustment of the principal amount of the Note, Sellers shall, upon request
of Buyer, surrender the outstanding Note for a replacement Note reflecting the
adjusted principal amount, and Buyer shall, upon request of Sellers, execute and
deliver to Sellers such replacement Note.
10. TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters:
(a) The Majority Holders shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for Target for all periods ending on or prior
to the Closing Date which are filed after the Closing Date. All Tax Returns for
Target prepared by the Majority Holders shall be prepared in a manner consistent
with past practices, except as otherwise required by applicable law. Buyer
shall, and shall cause Target to, promptly provide and make available to the
Majority Holders all information they may request for the purpose of preparing
and filing any such return or working on any such audit. The Parties acknowledge
and agree that, by reason of Target's status as an S corporation, Target's
current taxable year will end as of the Closing.
(b) Any Tax refunds that are received by Buyer or by Target, and any
amounts credited against Tax to which Buyer or Target become entitled, that
relate to Tax periods ending on or before the Closing Date shall be for the
account of Sellers, and Buyer shall pay over to the Seller Representative, for
distribution to the Sellers pro rata, any such refund or the amount of any such
credit within fifteen (15) days after receipt or entitlement thereto. Buyer
shall, if Seller Representative so requests and at Sellers' expense, cause
Target to file for and obtain any refund to which Sellers are entitled under
this section 10(b); provided that the Seller Representative shall not file to
obtain any refund that would have the effect of increasing any Tax liability of
Target for any taxable period ending after the Closing Date without obtaining
Buyer's consent, which consent shall not unreasonably be withheld. Buyer shall
permit the Seller Representative to represent Target before the relevant taxing
authority
45
with respect to such refund claim, provided that the Seller Representative (i)
shall keep Buyer informed regarding the progress and substantive aspects of any
such refund claim, and (ii) shall not compromise or settle any such refund claim
if such compromise or settlement would have the effect of increasing any Tax
liability of Target for any taxable period ending after the Closing Date without
obtaining Buyer's consent, such consent not to be unreasonably withheld. In
addition, to the extent that a claim for refund or a proceeding results in a
payment or credit against Tax by a taxing authority to the Buyer or Target of
any amount accrued on the Closing Net Asset Statement, the Buyer shall pay such
amount to the Seller Representative, for distribution to Sellers, pro rata,
within fifteen (15) days after receipt or entitlement thereto. In the event that
any refund or credit of Taxes for which a payment has been made pursuant to this
section 10(b) is subsequently reduced or disallowed, the Majority Holders shall
indemnify and hold harmless Target for any Taxes assessed against Target (except
for any penalties that would otherwise be included as part of such Taxes, unless
such refund was sought at the request of the Seller Representative) by reason of
the reduction or disallowance.
(c) Buyer and Sellers shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of any
Tax Returns for Target and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
(d) Buyer and Sellers further agree, upon request, to use all reasonable
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(e) Buyer and Sellers further agree, upon request, to provide each other
party with all information that either party may be required to report pursuant
to section Section 6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
(f) Any transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the transactions contemplated hereby, shall
be paid by Buyer when due, and Buyer will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law.
(g) Sellers shall have no liability with respect to any Taxes of any kind
with respect to Target or its Assets or operations (i) with respect to all tax
periods beginning after the Closing Date, (ii) with respect to any tax period of
Target beginning before the Closing Date and ending after the Closing Date, but
only with respect to the portion thereof beginning after the Closing Date, or
(iii) with respect to any Pre-Closing Partial Period, but only to the extent
such Taxes were paid prior to Closing or are provided for on the Closing
46
Net Asset Statement. Except as set forth in subsection 10(f) above, Sellers
shall have sole liability for all Taxes that arise from the actual sale of the
Target Shares or any deemed sale of the Assets occurring as a result of the
Election.
(h) Buyer, Sellers and Target agree that the Compensation Amount shall be
claimed by Target as a deduction in the period ending on the Closing Date.
(i) CONTESTS. Sellers and Buyer agree to give prompt notice to each other
of any proposed adjustment to Taxes for periods of Target ending on or prior to
the Closing Date or any Pre-closing Partial Period. Sellers and Buyer shall
cooperate with each other in the conduct of any audit or other proceedings
involving Target for such periods and each party may participate at its own
expenses, provided that Target may only participate if the proposed adjustment
affects an item of Tax for any period that includes the day after the Closing or
if the proposed adjustment affects any taxable period beginning after the
Closing Date. Seller Representative shall have the right to control the conduct
of any such audit or proceeding for which Seller Representative agrees that any
resulting Tax allocable to any period prior to or including the Closing Date is
covered by the indemnity provided in Section 9 of this Agreement, (such audit or
other proceeding, a "Sellers' Contest"), provided that: (i) Seller
Representative shall keep Buyer informed regarding the progress and substantive
aspect of any Sellers' Contest and (ii) Seller Representative shall not
compromise or settle any Sellers' Contest without Buyer's consent, which consent
may not be unreasonably withheld. If Seller Representative chooses to direct a
Sellers' Contest, Buyer shall cause powers of attorney authorizing Seller
Representative to represent Target before the relevant taxing authority and such
other documents as are reasonably necessary for Seller Representative to control
the conduct of any Sellers' Contest.
(j) SECTION 338(h)(10) ELECTION AND ALLOCATION OF PURCHASE PRICE. (i) Each
Seller and Buyer shall jointly make the election provided for by Section
338(h)(10) of the Code and any corresponding elections under state, local or
foreign tax law (the "Election") with respect to the purchase and sale of Target
Shares. Seller Representative and Buyer shall provide to the other all necessary
information to permit the Election to be made. Seller Representative and Buyer
shall, as promptly as practicable following the Closing Date, take all actions
necessary and appropriate (including filing IRS from 8023-A and other such
forms, returns, elections, schedules, attachments and other documents as may be
required (the "Forms")) to effect and preserve a timely election.
(i) Buyer and the Majority Holders agree that the aggregate fair
market value of the Assets (the "Aggregate Fair Market Value") will be
appraised at Buyer's expense by Price Waterhouse or an appraisal firm of
Buyer's choosing acceptable to the Seller Representative in his reasonable
judgment (the "Appraisal"). The Appraisal shall be provided to the Seller
Representative simultaneously with Buyer.
(ii) In connection with the Election, Buyer and Seller Representative
shall mutually determine (i) the amount of the modified aggregated deemed
sales price ("MADSP") of the Target Shares (within the meaning of Treas.
Reg. Section 1.338(h)(10)-l(f)) and (ii) based on the Aggregate Fair Market
Value as determined in
47
the Appraisal, the proper allocation of the MADSP among the Assets in
accordance with Treas. Reg. Section 1.338(h)(10)-l(f). The allocations
referred to in the preceding sentence are referred to herein as the
"Allocations." Buyer and Seller Representative will calculate the gain or
loss, if any, in a manner consistent with the Allocations, and Buyer and
each Seller will not take any position inconsistent with the Allocations in
any Tax Return (subject to appropriate adjustments pursuant to Treas. Reg.
Section 1.338(h)(10)-l(f)(4)).
(iii) Buyer shall prepare IRS Form 8594 allocating the Purchase Price
(including any Adjustment Amount under Section 2.5 hereof) in accordance
with Section 1060 of the Code in light of the Aggregate Fair Market value
as found by the Appraisal and such other information as required by Form
8594 and shall forward it within one hundred twenty (120) days after
Closing to Seller Representative for his approval, which approval shall not
be unreasonably withheld. In accordance with Code Section 1060(e), Buyer
and each of the Majority Holders shall file with their respective federal
income tax returns for the tax year in which the Closing occurs, IRS Form
8594 containing the information agreed upon by the parties pursuant to the
immediately preceding sentence.
(iv) Buyer shall prepare, after consultation with Seller
Representative, each Form and shall within thirty (30) days prior to the
latest date for the filing of each Form, submit each such Form to Seller
Representative for Seller Representative's approval, which approval shall
not be unreasonably withheld.
11. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either Buyer or Majority Holders may
terminate this Agreement as provided below:
(i) Buyer and Majority Holders may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written notice to
the Seller Representative at any time prior to the Closing (A) in the event
any of the Sellers has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Buyer has
notified the Seller Representative of the breach, and the breach has
continued without cure for a period of 10 days after the notice of breach
or (B) if the Closing shall not have occurred on or before the Termination
Date (as defined below), by reason of the material failure of any condition
precedent under section 7(a) hereof (unless the breach of any
representation, warranty, or covenant of Buyer contained in this Agreement
is a material factor therein); or (C) if consummation of the transactions
contemplated by this Agreement is enjoined, prohibited or otherwise
restrained by the terms of a final, non-appealable order or judgment of a
court of competent jurisdiction, or (D) if such termination would be
authorized pursuant to section 8(b) hereof; and
48
(iii) Majority Holders may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event the
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Majority Holders have
notified the Buyer of the breach, and the breach has continued without cure
for a period of 10 days after the notice of breach or (B) if the Closing
shall not have occurred on or before the Termination Date, by reason of the
material failure of any condition precedent under section 7(b) hereof
(unless the breach of any representation, warranty, or covenant of Target
or any Seller contained in this Agreement is a material factor therein); or
(C) if consummation of the transactions contemplated by this Agreement is
enjoined, prohibited or otherwise restrained by the terms of a final,
non-appealable order or judgment of a court of competent jurisdiction.
(iv) "Termination Date" means July 3, 1997; provided that Buyer may
extend the Termination Date, by written notice to Seller Representative
prior to any termination of this Agreement, to a date not later than July
31, 1997 in order to obtain satisfaction of the closing conditions set
forth in Section 7(a)(vii) and/or Section 7(a)(x).
(v) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to section 11(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other
Party (except for any liability of any Party then in breach); PROVIDED,
HOWEVER, that (i) the confidentiality provisions contained in section 5(f)
above and in any letter agreement with Quarterdeck Investment Partners
previously executed by Buyer or its any of its Affiliates shall survive
termination, and (ii) the provisions of Article 12 shall apply.
12. BREACH OF AGREEMENT.
(a) BREACH AND OPPORTUNITY TO CURE. If any party shall breach the terms of
this Agreement or default in the performance of its obligations to be performed
hereunder prior to Closing, the nondefaulting party shall have the right to
provide the applicable Seller and Majority Holders, or Buyer, as applicable,
with notice specifying in reasonable detail the nature of such breach or
default. If such breach or default has not been cured within the time period
specified in section 10 above, or by two (2) business days prior to the Closing
Date, if earlier, then the party giving such notice may (i) terminate this
Agreement by giving written notice to the defaulting party hereunder, (ii)
extend the Closing Date for a period not in excess of ten (10) days, if such
default has not been cured by the Closing Date (but no such extension shall
constitute a waiver of such nondefaulting party's right to terminate as a result
of such default), (iii) exercise the remedies available to such party pursuant
to sections 12(b) or 12(c), as applicable, subject to the right of the other
party to contest such action through appropriate proceedings, and/or (iv)
proceed to Closing.
(b) SELLERS' REMEDIES FOR FAILURE OF BUYER TO CLOSE. Buyer recognizes that
if the transactions contemplated hereby are not consummated as a result of
Buyer's default, Sellers would incur damages, the extent of which is extremely
difficult and impractical to ascertain.
49
The parties, therefore, agree that if this Agreement is terminated or the
transactions contemplated are otherwise not consummated due to the material
default of Buyer, Buyer shall pay to the Sellers its costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby, up
to Five Hundred Thousand Dollars ($500,000), as liquidated damages, as Sellers'
sole and exclusive remedy in full settlement of any damages of such failure to
close. The parties agree that this sum shall be in lieu of any and all other
relief to which Sellers might otherwise be entitled due to such failure to
close.
(c) BUYER'S REMEDIES FOR FAILURE OF SELLERS TO CLOSE. Sellers agree that
the Target Shares represent unique property that cannot be readily obtained on
the open market and that Buyer would be irreparably injured if Sellers'
obligation to sell the Target Shares to Buyer pursuant to this Agreement is not
specifically enforced after default. Therefore, Buyer shall have the right to
specifically enforce Sellers' obligation to sell the Target Shares to Buyer
pursuant to this Agreement, and Sellers agree to waive the defense in any such
suit that Buyer has an adequate remedy at law and to interpose no opposition,
legal or otherwise, as to the propriety of specific performance as a remedy. In
addition, Buyer shall be entitled to obtain from Sellers court costs and
reasonable attorneys' fees incurred by Buyer in enforcing its rights under this
subsection (c). As a condition to seeking specific performance, Buyer shall not
be required to have tendered the Cash Consideration, but shall be ready, willing
and able to do so. In the event Buyer elects not to seek specific performance,
but instead to terminate this Agreement as a result of any PreClosing Default,
then Buyer shall be entitled to recover its costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby, up to
Five Hundred Thousand Dollars ($500,000), as liquidated damages, as Buyer's sole
and exclusive remedy in full settlement of any damages of such wrongful failure
of Sellers to close. If, upon the default of Sellers in their obligation to
close hereunder, Buyer seeks specific performance and does not prevail in its
attempt to obtain specific performance, then Buyer shall be entitled to recover
its costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, up to Five Hundred Thousand Dollars
($500,000), as liquidated damages, as Buyer's sole and exclusive remedy in full
settlement of any damages arising from such wrongful failure of Sellers to
close.
(d) PARTIES' REMEDIES FOR BREACH AFTER CLOSING. For the breach by any of
the Parties of any covenant or agreement of such Party to be performed after the
Closing, the nondefaulting Party shall have the rights provided for under
section 9 hereof, and all other rights and remedies available for breach of
contract at law and in equity.
13. Miscellaneous.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Buyer and the Seller
Representative; PROVIDED, HOWEVER, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will advise the other Parties prior to making the disclosure).
50
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; provided that Xxxx X. Xxxxxx is an intended
third party beneficiary of subsection 6(c) above, and the Buyer Parties and
Seller Parties are intended third party beneficiaries of section 9 hereof.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
(d) FURTHER ASSURANCES. Each Party to this Agreement shall execute such
documents and take, or cause Target to take, such further actions as may
reasonably be necessary to implement the provisions of this Agreement.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and Majority Holders; PROVIDED, HOWEVER, that the Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates or as collateral to its financing source and (ii) designate
one or more of its Affiliates to perform its obligations hereunder (in any or
all of which cases the original Buyer nonetheless shall remain fully responsible
for the performance of all obligations hereunder designated as the obligations
of Buyer); and (iii) after the Closing Date, assign its rights and obligations
under this Agreement to any Person in connection with a sale or other
disposition of substantially all of the Business or substantially all of
Target's assets, without the consent of Sellers.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given when personally
delivered against a signed receipt or delivered by recognized overnight courier
(and then at the time of delivery or when delivery is refused) or if it is sent
by certified mail, return receipt requested, postage prepaid (and then three
business days after deposited in such mail) and addressed to the intended
recipient as set forth below:
If to the Sellers: x/x Xxxx X. Xxxxxx
00000 Pleasant Prospect Road
51
Mitchellville, MD 20716
Copy to: Xxxxxx X. Xxxxxx, Esq.
Shaw, Pittman, Xxxxx & Xxxxxxxxxx
0000 X. Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
If to the Buyer: c/o The Carlyle Group
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000 Xxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxx, Xx.
Copy to: Xxxx X. Xxxxx, Esq.
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means, but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Maryland without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Maryland or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Maryland.
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Majority Holders, provided that each Seller must agree to any amendment or
modification of the representations and warranties of the individual Sellers in
section 3(b) hereof. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
52
(l) EXPENSES. Except as otherwise set forth herein, each of the Parties
will bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
* * * * *
53
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on [as
of] the date first above written.
FEDERAL DATA CORPORATION
By:/s/ Xxxxx X. Xxxxx
--------------------------
Title:_______________________
/s/ Xxxx X. Xxxxxx
-----------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------
Xxxxxx X. Xxxxxxx, Xx.
/s/ Authorized Signatory
-----------------------------
Xxxxx X. Xxxxx
/s/ Authorized Signatory
-----------------------------
Xxxxx X. Xxxxxxx
/s/ Authorized Signatory
-----------------------------
Xxxxx Xxxxxxxxxx
XXXXXXX MANAGEMENT SYSTEMS CORPORATION
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Title:_____________________________
S-1
