Exhibit 2.1
STOCK PURCHASE AGREEMENT
among
DYNAMICS RESEARCH CORPORATION
and
XXXXXXXX CORPORATION
and
XX. XXXXXXX X. XXXXXXXX
XX. XXXXX X. XXXXXXXX, XX.
XXXXXXXX MID-ATLANTIC P-1 HOLDINGS LIMITED PARTNERSHIP
and
R. JOHN CHAPEL, JR.
December 12, 2002
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION.......................1
1.1 Definitions.................................................1
1.2 Certain Interpretive Matters................................9
ARTICLE 2 SALE AND PURCHASE OF THE SHARES............................10
2.1 Sale and Purchase of the Shares............................10
2.2. Purchase Price; Closing Payment............................10
2.3 Payment of Indebtedness....................................11
2.4 Adjustment to Purchase Price...............................11
ARTICLE 3 THE CLOSING................................................13
3.1 Closing and Closing Date...................................13
3.2 Documents to be delivered to the Buyer by the
Seller Parties.............................................13
3.3 Documents To Be Delivered to the Seller Parties
by the Buyer...............................................15
3.4 Customer Visits............................................15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SELLERS................................................16
4.1 Authority; Binding Agreement...............................16
4.2 Title......................................................16
4.3 Organization and Qualifications of the Company.............16
4.4 Capitalization; Record Ownership of Shares
and Options................................................16
4.5 Actions and Authority; Enforceability......................17
4.6 Schedules; Delivery of Documents; Corporate
Records....................................................17
4.7 Consents and Approvals; No Violation.......................18
4.8 Financial Statements; No Undisclosed Liabilities...........18
4.9 Absence of Certain Changes.................................19
4.10 Brokers....................................................19
4.11 Employee Benefit Matters...................................19
4.12 Actions and Proceedings....................................22
4.13 Tax Matters................................................22
4.14 Compliance with Law; Licenses and Permits..................24
4.15 Intellectual Property......................................25
4.16 Real Property; Personal Property...........................26
4.17 Insurance..................................................27
4.18 Material Contracts.........................................27
4.19 Government Contracts.......................................28
4.20 Related Party Transactions.................................30
4.21 Liens......................................................30
4.22 Employee Relations.........................................30
4.23 Employees; Employment Agreements...........................31
4.24 Environmental Matters......................................31
4.25 Accounts Receivable and Accounts Payable...................32
4.26 Accounting Practices.......................................32
4.27 Banks; Powers of Attorney..................................32
4.28 Certain Business Practices.................................33
4.29 Complete Disclosure........................................33
4.30 Reliance on Advisors.......................................33
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER....................33
5.1 Organization...............................................33
5.2 Actions and Authority; Enforceability......................33
5.3 Consents and Approvals; No Violation.......................34
5.4 Brokers....................................................34
5.5 Solvency; Ability to Perform Agreement.....................34
5.6 Investment Intent..........................................35
5.7 Investigation by Buyer.....................................35
5.8 Reliance on Advisors.......................................35
ARTICLE 6 COVENANTS OF THE PARTIES...................................36
6.1 Conduct of Business of the Company.........................36
6.2 Access to Information......................................38
6.3 Commercially Eeasonable Efforts............................38
6.4 Notification of Certain Matters............................39
6.5 Public Announcements.......................................39
6.6 Acquisition Proposals......................................39
6.7 Preparation of Certain Financial Statements................40
6.8 Closing Period Tax Return..................................40
6.9 Professional Fees..........................................41
6.10 Continuation Pay...........................................41
ARTICLE 7 CONDITIONS TO CLOSING......................................41
7.1 Conditions to Obligations of the Seller Parties............41
7.2 Conditions to Obligations of the Buyer.....................42
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER..........................43
8.1 Termination................................................43
8.2 Effect of Termination......................................44
8.3 Expenses...................................................44
8.4 Amendment..................................................44
8.5 Waiver.....................................................44
ARTICLE 9 INDEMNIFICATION............................................44
9.1 Survival of Representations and Warranties.................44
9.2 Terms of Indemnification...................................45
9.3 Procedures.................................................46
9.4 Limitations on Indemnification; Additional
Indemnification Provisions.................................47
ARTICLE 10 GENERAL PROVISIONS.........................................48
10.1 Notices....................................................48
10.2 Severability...............................................50
10.3 Cooperation in Tax Matters.................................50
10.4 Entire Agreement; Assignment; Failure of
Certain Conditions.........................................51
10.5 Parties in Interest; Successors and Assigns................52
10.6 Legal Counsel..............................................52
10.7 Governing Law..............................................52
10.8 Shareholders' Representative...............................52
10.9 Arbitration................................................54
ii
10.10 Headings...................................................54
10.11 Counterparts...............................................54
10.12 Waiver of Trial by Jury....................................55
iii
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Schedule of Shareholders and Optionholders
Exhibit B Escrow Agreement
Exhibit C Promissory Note
Exhibit D Letter of Credit
Exhibit E Schedule of Pre-Closing Payments
SCHEDULES
Schedule 1.1(E) Employment Agreements
Schedule 2.2 Share Ownership
Schedule 4.1 Authority; Binding Agreement
Schedule 4.2 Title
Schedule 4.3 Organization and Qualification of the Company
Schedule 4.4 Capitalization
Schedule 4.7 Consents; Approvals
Schedule 4.8 Financial Statements; No Undisclosed Liabilities
Schedule 4.9 Absence of Certain Changes
Schedule 4.11(a) Employee Benefit Matters
Schedule 4.12 Actions and Proceedings
Schedule 4.13(a) Tax Matters
Schedule 4.13(c) Tax Returns
Schedule 4.14 Compliance with Law
Schedule 4.15(a) Intellectual Property
Schedule 4.15(b) Intellectual Property Exceptions
Schedule 4.16(b) List of all Leases, Subleases and other Agreements
Schedule 4.16(d) Tangible Personal Property; Liens
Schedule 4.17 Insurance
Schedule 4.18 Material Contracts
Schedule 4.19 Government Contracts
Schedule 4.20 Related Party Transactions
Schedule 4.21 Liens
Schedule 4.22(b) Employee Complaints, Charges and/or Claims
Schedule 4.23 Employment Agreements; Employees
Schedule 4.25(a) Accounts and Notes Receivable
Schedule 4.25(b) Accounts and Notes Payable
Schedule 4.25(c) Unbilled Receivables
Schedule 4.27 Banks; Powers of Attorney
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
December 12, 2002 by and among Dynamics Research Corporation, a Massachusetts
corporation (the "Buyer"), Xxxxxxxx Corporation, a Delaware corporation (the
"Company"), Xx. Xxxxxxx X. Xxxxxxxx, Xx. Xxxxx X. Xxxxxxxx, Xx., Xxxxxxxx
Mid-Atlantic P-1 Holdings Limited Partnership and R. John Chapel, Jr. (each
party, other than Buyer or the Company, individually, a "Seller" and
collectively, the "Sellers").
RECITALS
WHEREAS, the Sellers are the record and beneficial owners of 527,504
shares of voting common stock of the Company and 10,022,576 shares of non-voting
common stock of the Company (collectively, the "Shares");
WHEREAS, Exhibit A sets forth a list of all owners of options to
purchase shares of common stock ("Options") and all owners of shares of common
stock and the number of such options and shares owned by each such party. The
term "Shareholder," and collectively, "Shareholders" shall refer to all holders
or owners of voting and non-voting shares of common stock listed on Exhibit A,
which shall include the Sellers. The term "Optionholder," and collectively,
"Optionholders" shall refer to all holders or owners of record of the Options
listed on Exhibit A;
WHEREAS, the Optionholders own all of the outstanding options to
purchase shares of common stock of the Company and the Shareholders own all of
the issued and outstanding shares of capital stock of the Company;
WHEREAS, the Buyer desires to purchase from the Sellers, and the
Sellers desire to sell to the Buyer, the Shares upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, the mutual covenants,
agreements, representations, and warranties herein contained, and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms have
the meanings set forth below:
"Accounts Receivable" shall mean all of the billed and
unbilled, current and long term accounts receivable of the Company.
"Additional Escrow" shall mean the amount of $500,000 Dollars
placed into escrow by the Buyer from the Purchase price to cover the Giovanni
Matters.
"Affiliate" of a Person shall mean a Person that is a
stockholder, member, director or officer of that Person, or a Person that
directly or indirectly controls, is controlled by or is under common control
with that Person.
"Xxxxxxxx Family Seller" has the meaning set forth in Section
10.8 hereof.
"Breach" a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and the term
"Breach" means any such inaccuracy, breach, failure, occurrence, or
circumstance.
"Buyer" has the meaning set forth in the preamble to this
Agreement.
"Buyer Party" shall mean, prior to Closing, the Buyer (and its
directors, officers and employees), and from and after Closing shall mean each
of the Buyer and the Company (and their respective directors, officers, agents
and employees).
"Buyer's Accountant" has the meaning set forth in Section 6.7.
"Capital Lease Obligations" shall mean the obligations of the
Company that are required to be classified and accounted for as capital lease
obligations under GAAP, and the amount of such obligations at any date shall be
the capitalized amount of such obligations at such date determined in accordance
with GAAP together with all obligations to make termination payments under such
capitalized lease obligations.
"Claims Escrow" shall mean the amount of Two Million Dollars
($2,000,000) placed into escrow to cover any claims that arise out of Seller's
obligations under Section 9.2(a)(i).
"Closing" has the meaning set forth in Section 3.1.
"Closing Balance Sheet" shall mean a balance sheet of the
Company as of the Closing Date prepared in accordance with GAAP and, to the
extent consistent with GAAP, using the same methods and criteria employed by the
Company in connection with its preparation of the Financial Statements. For
clarification purposes and notwithstanding GAAP or Company's prior application
of GAAP, the parties have agreed to the following adjustments to the Closing
Balance Sheet:
(i) all amounts due pursuant to Employee Retention
Agreements after the Closing will not be accrued as expenses to the extent not
paid prior to Closing, to the extent that such post Closing amounts in the
aggregate do not exceed $85,000.
(ii) $84,000 shall be reflected as a reserve for Accounts
Receivable on the Closing Balance Sheet.
2
(iii) the federal and state tax assets calculated in
accordance with GAAP arising from operating losses which result from the
transactions listed below (the "Tax Assets") are to be reflected on the Closing
Balance Sheet. The transactions listed below are to be completed prior to
Closing. The transaction descriptions and their approximate amounts are:
------------------------------------------------------- -------------------
Approximate
Transaction Description Amount
----------------------- ------
----- ------------------------------------------------- -------------------
A Bonuses payable to former owners of PTI $480,000
----- ------------------------------------------------- -------------------
B Termination of Options $2,700,000
----- ------------------------------------------------- -------------------
C Retention agreement payment, Xxxxxxx Xxxxxx $35,000
----- ------------------------------------------------- -------------------
D Retention agreement payment, Xxxx Xxxxxx $50,000
----- ------------------------------------------------- -------------------
E Retention agreement payment, R. John Chapel $800,000
----- ------------------------------------------------- -------------------
F Consulting agreement payment, X. Xxxxxxxx, III $190,000
----- ------------------------------------------------- -------------------
(iv) 13 weeks of continuation pay, including Company paid
payroll taxes and benefits, in the amount of $15,500 for Xxxxxxxx Xxxxxxx, shall
be reflected as a reserve on the Closing Balance Sheet.
(v) No assets shall be reflected on the Closing Balance
Sheet which are receivable from any Seller Party.
(vi) Any tax assets, calculated in accordance with GAAP,
arising from transactions or payments by the Company prior to Closing, which
comply with Section 6.1 (including those listed on Exhibit E) shall be reflected
on the Closing Balance Sheet.
"Closing Date" has the meaning set forth in Section 3.1.
"Closing Payment" has the meaning set forth in Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986 and rules
and regulations promulgated pursuant thereto, each as amended and in effect from
time to time.
"Company Permits" has the meaning set forth in Section
4.14(a).
"Company Securities" has the meaning set forth in Section 4.4.
"Confidentiality Agreement" shall mean the Confidentiality and
Non-Disclosure Agreement, dated as of August 20, 2002, between the Buyer and the
Company.
"Costs" has the meaning set forth in Section 8.3.
"Damages" shall mean any and all losses, charges, claims,
damages, liabilities, Liens, obligations, judgments, settlements, fines,
penalties, awards, demands, offsets, reasonable out-of-pocket costs, expenses
and reasonable attorneys' fees (including any such reasonable
3
costs, expenses and attorneys' fees incurred in enforcing a party's right to
indemnification against any Indemnifying Party or with respect to any appeal).
"Discharges" has the meaning set forth in Section 2.3.
"DCAA" shall mean the Defense Contract Audit Agency of the
United States.
"Dispute" has the meaning set forth in Section 10.9(a).
"Employee Retention Agreements" shall mean the agreements
between the Company and each of R. John Chapel, Jr., Xxxx Xxxxxx and Xxxxxxx
Xxxxxx providing for certain payments by the Company to each of them upon and
following the Closing as described in Schedule 4.11(a).
"Employment Agreements" shall mean the Employment Agreements
between the Company and each of the employees listed on Schedule 1.1(E) attached
hereto.
"Environmental Laws" shall mean any federal, state or local
law, statute, ordinance, code, order, decree, common law, rule or regulation
relating to pollution or protection of the environment or public health and
safety including laws relating to the use, treatment, storage, transportation or
handling of Hazardous Materials or the release, discharge, spill, emission,
treatment, transportation or disposal of Hazardous Materials; or to exposure to
toxic, hazardous or other controlled, prohibited or regulated substances; and,
in particular, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601, et seq. ("CERCLA"), the Resource Conservation and
Recovery Act, 42 U.S.C. 6901, et seq. ("RCRA"), the Toxic Substances Control
Act, 15 U.S.C. 2601, et seq. ("TSCA"), the Occupational, Safety and Health Act,
29 U.S.C. 651, et seq., the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal
Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking Xxxxx
Xxx, 00 X.X.X. 000x, et seq., the Hazardous Materials Transportation act, 49
U.S.C. 1802 et seq. ("HMTA") and the Emergency Planning and Community Right to
Know Act, 42 U.S.C. 11001 et seq. ("EPCRA"), and other comparable state and
local laws and all rules, regulations and policy or guidance documents
promulgated pursuant thereto or published thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Escrow Agent" has the meaning set forth in Section 2.2(b).
"Escrow Agreement" has the meaning set forth in Section
2.2(b).
"Financial Statements" has the meaning set forth in Section
4.8.
"GAAP" shall mean United States generally accepted accounting
principles and to the extent consistent with such generally accepted accounting
principles, using the same methods and criteria employed by Company in
connection with its preparation of the Financial Statements.
"Giovanni Matter" shall have the meaning set forth in Section
9.2(a)(ii).
4
"Government Bid" shall mean any offer to sell made by the
Company prior to the Closing Date which, if accepted, would result in a
Government Contract.
"Government Contract" shall mean any prime contract,
subcontract, teaming agreement or arrangement, joint venture, basic ordering
agreement, pricing agreement, letter contract or other similar arrangement of
any kind, between the Company, on the one hand, and (i) any Governmental
Authority, (ii) any prime contractor of a Governmental Authority in its capacity
as a prime contractor, or (iii) any subcontractor with respect to any contract
of a type described in clauses (i) or (ii) above, on the other hand. A task,
purchase or delivery order under a Government Contract shall not constitute a
separate Government Contract, for purposes of this definition, but shall be part
of the Government Contract to which it relates.
"Governmental Authority" shall mean any foreign, Federal,
state or local governmental entity or subdivision of any of the foregoing
including any authority, department, commission, board, bureau, agency, court or
other instrumentality, in particular, and without limiting the foregoing, the
following Federal departments, office and agencies: Environmental Protection
Agency, Equal Employment Opportunity Commission, Defense Contract Management
Agency, Defense Contract Audit Agency, Defense Security Service, Department of
Defense/Office of Special Investigations, the General Accounting Office and the
General Services Administration.
"Hazardous Materials" shall mean each and every element,
compound, chemical mixture, contaminant, pollutant, material, waste or other
substance which is defined, determined or identified as hazardous or toxic under
Environmental Laws or the release of which is regulated under Environmental
Laws, or that poses a hazard to the health and safety of persons or the
environment. Without limiting the generality of the foregoing, the term
includes: "hazardous substances" as defined in CERCLA; "extremely hazardous
substances'' as defined in EPCRA; "hazardous waste" as defined in RCRA;
"hazardous materials" as defined in HMTA; "chemical substance or mixture" as
defined in TSCA; crude oil, petroleum products or any fraction thereof;
radioactive materials including source, byproduct or special nuclear materials;
asbestos or asbestos-containing materials; chlorinated fluorocarbons ("CFCs");
and radon.
"Indebtedness" shall mean with respect to the Company, at any
date, without duplication, (i) all obligations of the Company for borrowed
money, including, without limitation, all principal, interest, premiums, fees,
expenses, overdrafts and penalties with respect thereto, (ii) all obligations of
the Company evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of the Company to pay the deferred purchase price of the
property or services, except trade payables incurred in the ordinary course of
business, (iv) all obligations of the Company to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (v) all Capital Lease Obligations, (vi) all future bonuses provided
for by agreement with the principals of PTI and (vii) all Indebtedness of any
other Person of the type referred to in clauses (i) to (v) above directly or
indirectly guaranteed by the Company or secured by any assets of the Company
with the exception of the remaining PTI Non-Compete Payments.
"Indemnification Cap" has the meaning set forth in Section
9.4(a).
5
"Indemnification Threshold" has the meaning set forth in
Section 9.4(a).
"Indemnified Party" has the meaning set forth in Section 9.3.
"Indemnifying Party" has the meaning set forth in Section 9.3.
"Independent Accounting Firm" has the meaning set forth in
Section 2.4(b).
"Indirect Costs" shall mean any cost that is not directly
identified with a single final cost objective, but is identified with two or
more final cost objectives, or with at least one intermediate cost objective,
and includes, but is not limited to, labor, fringe benefits, facility and
occupancy costs, training, incentives outside purchased services and travel.
"Intellectual Property" shall mean: (i) all trademarks,
service marks, trade dress, logos, trademark registrations, service xxxx
registrations, trade names and applications for registration of trademarks and
service marks; (ii) all licenses which create rights in or to the trademark,
service xxxx or trade name properties described in clause (i) above; (iii) all
copyrights, copyright registrations and applications for registration of
copyrights; (iv) all renewals, modifications and extensions of any items
referred to in clauses (i) through (iii) above; (v) all patents, design patents,
utility patents and plant patents, all applications for grant of any such
patents pending as of the date hereof or as of the Closing or filed within five
years prior to the date hereof, and all reissues, divisions, continuations and
extensions thereof; (vi) all technical documentation, trade secrets, designs,
drawings, inventions, processes, rights in plant varieties, formulae, know-how,
operating manuals and guides, plans, new product development, technical and
marketing surveys, material specifications, product specifications, samples,
invention records, research records, labor routings, inspection processes,
equipment lists, engineering reports and drawing, architectural or engineering
plans, know-how agreements and all other confidential business information;
(vii) all marketing and licensing records, sales literature, customer lists,
trade lists, sales forces and distributor networks lists, advertising and
promotional materials, service and parts records, warranty records, maintenance
records and similar records; (viii) all rights arising under, and rights to
develop, use and sell under, any of the foregoing and all licenses with respect
thereto; (ix) all rights and incidents of interest in and to all noncompetition
or confidentiality agreements; and (x) any software or hardware used by the
Company in the conduct of its business.
"Knowledge" shall mean, (i) with respect to the Buyer, the
actual knowledge of any director, officer, or manager of the Buyer; (ii) with
respect to the Sellers and the Company, the actual knowledge of any of Xx.
Xxxxxxx X. Xxxxxxxx, X. Xxxx Chapel, Jr., Xxxxxxx Xxxxxx and the actual
knowledge of the following individuals, but solely with respect to Sections 4.19
and 4.22 hereof: Xxxx Xxxx, Xxx Xxxxxxx, Xxxx Xxxxx or Xxx Xxxxxxxxx. With
respect to the knowledge of any individual, "Knowledge" shall include such
knowledge that such individual would have acquired in performing his or her
essential duties as director, officer or manager, as the case may be.
"Letter of Credit" shall have the meaning set forth in Section
2.2.
"Lien" shall mean any mortgage, pledge, hypothecation,
collateral assignment, security interest, lease, sublease, occupancy agreement,
adverse claim or interest, easement,
6
covenant, encroachment, burden, option, lien (statutory or otherwise), right of
first refusal or other encumbrance or restriction of any kind whatsoever.
"Material Adverse Effect" shall mean a material adverse
effect on the business, operations, capitalization, condition (financial or
otherwise), results of operations, prospects, rights, assets or liabilities
(excluding general economic conditions or conditions affecting the Government
Contracting industry, provided, that such conditions do not effect the Company
disproportionately more than other companies in the Government Contracting
industry) of the Company as a whole or a material adverse effect on the ability
of the Company or the Sellers to consummate the transactions contemplated by
this Agreement. Adverse effects arising from the announcement or consummation of
the transactions contemplated by the Agreement shall not be deemed to be or have
caused or resulted in a Material Adverse Affect on the Company.
"Material Contracts" shall mean any and all written or oral
contracts, agreements, commitments, arrangements, leases (including with respect
to personal property), policies, instruments and understandings presently in
effect that have not been closed out and finally paid to which the Company is a
party or by which the Company or any of its assets or properties is bound (a)
which involves or could involve aggregate payments of more than $20,000
annually, or (b) which is or could reasonably be expected to be material to the
Company.
"Non-Competition Agreement" shall mean the Non-Competition
Agreement between the Buyer and Xx. Xxxxxxx X. Xxxxxxxx.
"Options" has the meaning set forth in the Recitals hereto.
"Optionholders" has the meaning set forth in the Recitals
hereto.
"PBGC" has the meaning set forth in Section 4.11(e).
"Person" shall mean any natural person, firm, partnership,
association, corporation, company, limited liability company, trust, business
trust, Governmental Authority or other entity.
"Plan" has the meaning set forth in Section 4.11(a).
"Pre-Closing Costs" has the meaning set forth in Section 8.3.
"Professional Fees Certificate" has the meaning set forth in
Section 6.9.
"Professional Fees" has the meaning set forth in Section 6.9.
"Promissory Note" has the meaning set forth in Section 2.2.
"PTI Non-Compete Payments" shall mean the annual payments due
from the Company to the former shareholders of Production Technology, Inc., a
Virginia corporation (the "PTI Shareholders") pursuant to Non-Compete and
Non-Disclosure Agreements between the Company and each of the PTI Shareholders.
7
"Purchase Price" has the meaning set forth in Section 2.2.
"Real Property" has the meaning set forth in Section 4.16(b).
"Real Property Leases" has the meaning set forth in Section
4.16(b).
"Resolution Period" has the meaning set forth in Section
2.4(c).
"Rules" has the meaning set forth in Section 10.9(a).
"SEC" shall mean the United States' Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933.
"Selected Accounting Firm" has the meaning set forth in
Section 2.4(a).
"Sellers" has the meaning set forth in the preamble to this
Agreement.
"Sellers' Accountants" has the meaning set forth in Section
6.7.
"Sellers' Counsel" has the meaning set forth in Section 7.2.
"Sellers' Investment Banker" has the meaning set forth in
Section 4.10.
"Seller Party" shall mean, prior to Closing, each of the
Sellers and the Company and from and after Closing shall mean each of the
Sellers.
"Shares" has the meaning set forth in the Recitals hereto.
"Shareholders" shall have the meaning set forth in the
Recitals hereto.
"Shareholders' Representative" shall have the meaning set
forth in Section 10.8.
"Tangible Assets" shall mean all assets of the Company listed
on the Closing Balance Sheet excluding any intangible assets such as goodwill,
non-competition agreements, patents or trademarks.
"Tangible Asset Value" has the meaning set forth in Section
2.4(a).
"Tangible Asset Escrow" shall mean the amount of Five Hundred
Thousand Dollars ($500,000) placed into escrow by the Buyer from the Purchase
Price pending the determination of Tangible Asset Value pursuant to Section 2.
"Tax" or "Taxes" shall mean, however denominated, all federal,
state, local, foreign and other taxes, levies, imposts, assessments, impositions
or other similar government charges, including, without limitation, all net
income, gross income, estimated income, gross receipts, business, occupation,
franchise, real property, payroll, personal property, sales, transfer, stamp,
use, employment, social security, unemployment, worker's compensation,
commercial rent, withholding, occupancy, premium, gross receipts, profits,
windfall profits, deemed profits,
8
license, lease, severance, capital, production, corporation, ad valorem, excise,
duty, escheat, built in gain pursuant to Code Section 1374 or similar tax under
state or local law or other taxes, including interest, penalties and additions
(to the extent applicable) thereto whether disputed or not.
"Tax Assets" shall have the meaning set forth in the
definition on the Closing Balance Sheet.
"Tax Return" shall mean any report, return, document,
declaration or other information or filing (including any amendments) required
to be supplied to any taxing authority or jurisdiction (foreign or domestic)
with respect to Taxes, including, without limitation, information returns, where
permitted or required, combined or consolidated returns for any group of
entities that includes the Company, any documents with respect to or
accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information.
"Transaction Documents" shall mean this Agreement, the Escrow
Agreement, the Promissory Note and all agreements, documents, certificates or
instruments being delivered pursuant to this Agreement.
"Unbilled Receivables" shall have the meaning set forth in
Section 4.25(c).
1.2 Certain Interpretive Matters. In this Agreement, unless the context
otherwise requires:
(a) words of the masculine or neuter gender shall include the
masculine and/or feminine gender, and words in the singular number or in the
plural number shall each include the singular number or the plural number;
(b) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity;
(c) reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof;
(d) any accounting term used and not otherwise defined in this
Agreement or any Transaction Document has the meaning assigned to such term in
accordance with GAAP;
(e) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding or
succeeding such term;
(f) relative to the determination of any period of time,
"from" means "from and including," "to" means "to but excluding" and "through"
means "through and including;"
9
(g) reference to any law (including statutes and ordinances)
means such law as amended, modified codified or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations promulgated
thereunder; and
(h) any agreement, instrument, insurance policy, statute,
regulation, rule or order defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument,
insurance policy, statute, regulation, rule or order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein.
The parties further acknowledge and agree that: (i) this Agreement is
the result of negotiations between the parties and shall not be deemed or
construed as having been drafted by any one party, (ii) each party and its
counsel have reviewed and negotiated the terms and provisions of this Agreement
(including any Exhibits and Schedules attached hereto) and have contributed to
its revision, (iii) the rule of construction to the effect that any ambiguities
are resolved against the drafting party shall not be employed in the
interpretation of this Agreement, and (iv) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto and not in favor of
or against any party, regardless of which party was generally responsible for
the preparation of this Agreement.
ARTICLE 2
SALE AND PURCHASE OF THE SHARES
2.1 Sale and Purchase of the Shares. Upon and subject to the terms and
provisions of this Agreement, the Buyer shall purchase and accept delivery from
the Sellers, and the Sellers shall sell, assign, transfer, and deliver to the
Buyer, at the Closing, all of the Shares, free and clear of all Liens.
2.2. Purchase Price; Closing Payment. The total purchase price for the
Shares will be Twenty Six Million Dollars ($26,000,000), subject to adjustment
pursuant to Section 2.4 hereof (the "Purchase Price"). The Purchase Price will
be paid by the Buyer to the Sellers, in the proportions set forth on Schedule
2.2 hereto as follows:
(a) At the Closing, the Buyer shall (i) deliver to the Sellers
Twenty-Six Million Dollars ($26,000,000), less (A) the aggregate amount of the
Tangible Asset Escrow, the Claims Escrow and the Additional Escrow (which
amounts total up to $3,000,000 (B) the amount of the Professional Fees and (C)
any Indebtedness pursuant to Section 2.3 below (the aggregate amount payable by
the Buyer to the Sellers at the Closing is sometimes referred to herein as the
"Closing Payment"), and (ii) deliver to the Escrow Agent, the Tangible Asset
Escrow, the Claims Escrow and the Additional Escrow, and to the parties listed
on the Professional Fees Certificate, the Professional Fees. With the exception
of certain amounts payable to Xxxxxxxx Family Sellers in amounts specified by
such Xxxxxxxx Family Sellers at least four (4) hours prior to Closing which
shall be paid pursuant to a promissory note in the form
10
attached hereto as Exhibit C ("Promissory Note") which shall be secured by an
irrevocable stand-by letter of credit in the form attached hereto as Exhibit D
("Letter of Credit"), all remaining payment to the Sellers will be via wire
transfer to the accounts of the Sellers that are designated by the Sellers in
writing at least three (3) days prior to the Closing, or if no account is
designated by a Seller, by cashier's check. The Professional Fees will be paid
to the parties listed on the Professional Fees Certificate in accordance with
the payment instructions set forth therein.
(b) The term, conditions and procedures by which the Tangible
Asset Escrow, the Claims Escrow and the Additional Escrow shall be disbursed
shall be set forth in an Escrow Agreement in the form attached hereto as Exhibit
B (the "Escrow Agreement") to be entered into between the Buyer, the Sellers,
the Company and a mutually agreed upon escrow agent (the "Escrow Agent").
2.3 Payment of Indebtedness. At or prior to the Closing, the Company
will pay or cause the payment of all Indebtedness of the Company (out of the
Purchase Price if at the Closing) in exchange for written releases, payoff
letters and UCC-3s from each payee, as appropriate, each to be in a form
reasonably acceptable to the Buyer (collectively, the "Discharges").
2.4 Adjustment to Purchase Price.
(a) As soon as reasonably practicable following Closing, the
Company shall prepare the Closing Balance Sheet and provide it to the Buyer and
the Sellers for review and comments. As soon as reasonably practical following
the Closing (but not later than May 15, 2003), one of the regional accounting
firms listed on Schedule 2.4 hereto, which Buyer and Sellers mutually agree to
jointly solicit and select immediately after Closing ("Selected Accounting
Firm"), such approval by either party not to be unreasonably withheld, shall
audit and deliver to the Shareholders' Representative and the Buyer (i) the
Closing Balance Sheet; and (ii) based on the Closing Balance Sheet, a
calculation of the dollar value of the Tangible Assets of the Company minus (A)
the total liabilities of the Company as shown on the Closing Balance Sheet,
excluding Indebtedness, and (B) $180,000 which is equal to one-half of the
remaining PTI non-compete payments and (C) one-half of the expenses incurred in
connection with the audit of the Closing Balance Sheet and (D) one-half of the
total amount of the Tax Assets and (E) any deferred tax asset arising from the
bonus to R. John Chapel, Jr. of the leased vehicle referred to on Exhibit E,
Item 19 (the "Tangible Asset Value"). The Selected Accounting Firm shall audit
the Closing Balance Sheet and shall provide an opinion whether or not the
Closing Balance Sheet has been determined in accordance with this Agreement and
GAAP and shall calculate the Tangible Asset Value in accordance with this
Agreement. The parties each agree to grant reasonable access to all records of
the Company, to each other and to the Selected Accounting Firm, for purposes of
this Section, and to follow such procedures and make such submissions to the
Selected Accounting Firm, as it may request in auditing the Closing Balance
Sheet. All documents prepared by the Selected Accounting Firm shall be provided
to the Buyer and Sellers and Buyer and Sellers may, at their option, participate
in all meetings and communications with the Selected Accounting Firm.
(b) The Closing Balance Sheet and the Tangible Asset Value
shall become final and binding upon the parties unless, within sixty (60) days
following delivery to the Sellers
11
and Buyer, either the Sellers notify the Buyer of their objection thereto or the
Buyer notifies the Sellers, which objection may only be that the Closing Balance
Sheet was not properly prepared or audited in accordance with this Section 2.4.
Any notice of objection shall specify in reasonable detail the reasons for
objection. If either party so notifies the other party of their objection to the
Closing Balance Sheet and/or the Tangible Asset Value, the Sellers and the Buyer
shall negotiate in good faith to resolve any differences and amounts. If within
thirty (30) days (the "Resolution Period") following the receipt of such notice
by the objecting party any of such differences and amounts have not been
resolved, the parties shall submit the dispute to PriceWaterhouseCoopers, or
another mutually agreed independent accounting firm selected by Buyer and
Sellers (the "Independent Accounting Firm"), for a determination resolving such
amounts and issues in dispute. The parties shall cause any amounts not in
dispute to be paid or released from escrow to Buyer or Sellers, as appropriate,
at the commencement of the Resolution Period. Buyer and Sellers each represent
and warrant that no party or its Affiliates has or has had any relationship with
the Independent Accounting Firm in any capacity including, without limitation,
as auditor, consultant or in a teaming relationship. The Independent Accounting
Firm will conduct its own review and evaluate those items or amounts in the
Closing Balance Sheet relevant to the calculation of the Tangible Asset Value
and shall determine only those items still in dispute at the end of the
Resolution Period and shall determine whether such items have been prepared in
accordance with the terms of this Agreement and with GAAP. The Independent
Accounting Firm will be granted reasonable access to all records of the Seller
Parties and the parties agree to follow such procedures and make such
submissions to the Independent Accounting Firm as it may request in conducting
its review and making its determination under this Section 2.4(c). Each party
agrees to execute, if requested by the Independent Accounting Firm, a reasonable
engagement letter. The Independent Accounting Firm's determination shall be made
within forty-five (45) days after its engagement (which engagement shall be made
no later than five (5) business days after the end of the Resolution Period), or
as soon thereafter as possible, shall be set forth in a written statement
delivered to the Sellers and Buyer and shall be final, conclusive,
non-appealable and binding for all purposes hereunder, provided that such
determination may be reviewed, corrected or set aside in an arbitration under
Section 10.9 of this Agreement, but only if the arbitrators find that the
Independent Accounting Firm committed manifest error with respect to its
determination. The determination of the Independent Accounting Firm shall not be
deemed an award subject to review under the Federal Arbitration Act or any other
statute. The fees and expenses of the Independent Accounting Firm in resolving
any differences pursuant shall be paid one-half by the Sellers and one-half by
the Buyer.
(c) In accordance with the terms of the Escrow Agreement, the
Purchase Price within ten (10) days of the final determination of the Closing
Balance Sheet and the Tangible Asset Value shall be further adjusted as follows:
(i) If the Tangible Asset Value is greater than or
equal to $5,000,000, the Buyer and Sellers shall instruct the Escrow
Agent (unless the procedures in Section 2.2(b) are employed and in that
case, the Independent Accounting Firm shall instruct the Escrow Agent)
to pay to the Sellers, the Tangible Asset Escrow and the Buyer shall
pay to the Sellers in cash in the proportions set forth on Schedule 2.2
an amount equal to the difference between the Tangible Asset Value and
$5,000,000;
12
(ii) If the Tangible Asset Value is less than
$5,000,000, but equal to or greater than $4,500,000, the Buyer and
Sellers shall instruct the Escrow Agent (unless the procedures in
Section 2.2(b) are employed and in that case, the Independent
Accounting Firm shall instruct the Escrow Agent) to pay to the Buyer
from the Tangible Asset Escrow the amount by which the Tangible Asset
Value is less than $5,000,000 and accordingly shall instruct the Escrow
Agent to pay any remaining balance of the Tangible Asset Escrow to the
Sellers in cash in the proportions set forth on Schedule 2.2; and
(iii) If the Tangible Asset Value is less than
$4,500,000, the Buyer and Sellers shall instruct the Escrow Agent
(unless the procedures in Section 2.2(b) are employed and in that case,
the Independent Accounting Firm shall instruct the Escrow Agent) to pay
to the Buyer the entire Tangible Asset Escrow, and the Sellers, shall
in the proportions set forth on Schedule 2.2 pay to the Buyer in cash
an amount equal to the difference between (y) $4,500,000 and (z) the
Tangible Asset Value.
ARTICLE 3
THE CLOSING
3.1 Closing and Closing Date. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned in
accordance with the provisions of Article 8 hereof, the Closing (the "Closing")
of the transactions contemplated by this Agreement shall take place at on or
before December 20, 2002 at 10:00 a.m. (Boston time) or on a date to be
designated by the Buyer and the Sellers as promptly as practical after all of
the conditions to the respective obligations of the parties set forth in Article
7 hereof shall have been satisfied or waived (such date and time on and at which
the Closing actually occurs being referred to herein as the "Closing Date"). The
parties will make all reasonable efforts to close on or before December 20,
2002. The Closing shall take place at the offices of the Seller's counsel,
Holland & Knight LLP, 0000 Xxxxxxxxxxxx Xxx., XX, Xxxxx 000, Xxxxxxxxxx, X.X.
00000.
3.2 Documents to be delivered to the Buyer by the Seller Parties. At
the Closing, the Seller Parties will deliver to the Buyer:
(a) Certificates representing 100% of the Shares, duly
endorsed for transfer in blank or accompanied by stock powers duly executed in
blank, in proper form for transfer by each Seller;
(b) A certificate, in form and substance reasonably acceptable
to the Buyer, executed by the Chief Executive Officer of the Company, and
attested to by the Secretary of the Company, dated the Closing Date, and
certifying that attached thereto are true and complete copies of: (i) the
Certificate of Incorporation of the Company, as in effect as of the Closing
Date; (ii) the By-laws of the Company, as amended and as in effect as of the
Closing Date; (iii) the resolutions duly adopted by the Board of Directors of
the Company authorizing the execution, delivery, and performance of this
Agreement and each Transaction Document to which the Company is a party, which
resolutions have not been modified, rescinded, or amended and are in full force
and effect as of the Closing Date;
13
(c) Certificates, in form and substance reasonably acceptable
to the Buyer, dated the Closing Date, executed by (i) the President of the
Company, certifying as to the accuracy of the Company's representations and
warranties at and as of the Closing and the performance by Sellers and the
Company of its covenants and agreements set forth in this Agreement and each
Transaction Document to which the Company is a party to be performed prior to
the Closing Date and (ii) by each of the Sellers certifying as to the accuracy
of his and the Company's representations and warranties at and as of the Closing
and the performance by such Seller and the Company of his and its covenants and
agreements set forth in this Agreement and each Transaction Document to be
performed prior to the Closing Date;
(d) Resignations of all of the directors and officers of the
Company;
(e) All of the Company's contracts, books, records, and other
data relating to the Company's operations, including the Company's minute and
stock record books;
(f) The Non-Competition Agreement duly executed by Xx. Xxxxxxx
X. Xxxxxxxx in a form reasonably satisfactory to the parties thereto.
(g) Each of the Employment Agreements duly executed by R. John
Chapel, Jr., Xxxxxx Xxxxxxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxxx,
Xxxxxx Xxxxxx and Xxxx Xxxxxx;
(h) Certificate of good standing of the Company from the
Secretary of State of the state of Delaware, and a certificate from the
Secretaries of State of the states of each jurisdiction in which the Company
owns or leases real property or otherwise does business evidencing the Company's
authorization to conduct business as a foreign corporation in such state, dated
not earlier than 10 days prior to the Closing Date;
(i) The opinion of counsel for the Seller Parties referred to
in Section 7.2(d) of this Agreement;
(j) Consents to transfer of all leases, licenses and other
contracts listed in Schedule 4.7 of this Agreement in form reasonably
satisfactory to Buyer;
(k) A duly executed Escrow Agreement;
(l) Such other certificates and documents as the Buyer or its
counsel may reasonably request;
(m) Final audited Financial Statements for the year ended
September 30, 2002, with amounts and disclosures not materially different than
the draft preliminary Financial Statements.
(n) The Discharges duly executed by each payee.
(o) An acknowledgement from the landlord of the Company's head
office on Shirlington Road that there is no overdue rent.
14
3.3 Documents and Items to be Delivered to the Seller Parties by the
Buyer. At the Closing, the Buyer will deliver to the Seller Parties:
(a) Against receipt of stock certificates for the Shares, in
accordance with Section 3.2(a) above, the Closing Payment, and all other amounts
required to be paid by Buyer to Sellers pursuant to Section 2.2 of this
Agreement;
(b) A certificate, in form and substance reasonably acceptable
to the Seller Parties, executed by an authorized officer of the Buyer, dated the
Closing Date, and certifying that attached thereto are true and complete copies
of (i) the Articles of Organization of the Buyer as in effect as of the Closing
Date; (ii) the By-Laws of the Buyer, as amended and as in effect as of the
Closing Date; and (iii) the votes duly adopted by the Board of Directors of the
Buyer authorizing the execution, delivery, and performance of this Agreement and
each Transaction Document to which it is a party, which votes have not been
modified, rescinded or amended and are in full force and effect;
(c) A certificate, in form and substance reasonably acceptable
to the Seller Parties, executed by an authorized officer of the Buyer, dated the
Closing Date, certifying as to the accuracy of the Buyer's representations and
warranties at and as of the Closing and the performance by the Buyer of its
covenants and agreements set forth in this Agreement and each Transaction
Document to which it is a party to be performed prior to the Closing Date;
(d) A duly executed Non-Competition Agreement referred to in
Section 3.2(f) of this Agreement;
(e) The duly executed Employment Agreements referred to in
Section 3.2(g) of this Agreement;
(f) The opinion of counsel for the Buyer referred to in
Section 7.1(d) of this Agreement;
(g) A duly executed Escrow Agreement;
(h) A duly executed Promissory Note;
(i) A duly executed Letter of Credit; and
(j) Such other certificates and documents as the Sellers or
their counsel may reasonably request.
3.4 Customer Visits. Prior to the Closing, the Company shall have
introduced, in person, Mr. Xxxxxx Xxxxx, Vice President and General Manager of
the Buyer, to the senior representative of these customers: Immigration and
Naturalization Service and the Office of Naval Research.
15
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SELLERS
Disclosure of any fact or item in any section of the Seller Parties'
disclosure schedules hereto referenced by a particular Article or Section in
this Agreement shall, should the existence of the fact or item or its contents
be relevant to any other Article or Section, be deemed to be disclosed with
respect to that other Article or Section whether or not an explicit cross
reference appears. The inclusion of an item on any section of the Seller
Parties' disclosure schedules shall not constitute an admission that such item
is material. The Company and the Sellers, jointly and severally (except that the
representations and warranties contained in Section 4.1 and 4.2 shall be several
and not joint), hereby represent and warrant to the Buyer as follows:
4.1 Authority; Binding Agreement.. Each Seller has all requisite power,
authority and legal capacity to execute and deliver this Agreement and each of
the Transaction Documents to which such Seller is a party, to perform such
Seller's obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. This Agreement and each Transaction Document to
which the Seller is a party have been duly and validly executed and delivered by
each Seller and, assuming such agreements constitute the legal, valid and
binding obligations of the Buyer, constitute the legal, valid and binding
agreements of the Sellers, enforceable against each of the Sellers in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and general principles of equity (whether considered in a proceeding in equity
or at law).
4.2 Title. Each Seller is the owner of Shares as set forth on Schedule
4.2. The Shares owned or held by such Seller are owned of record by such Seller
free and clear of all Liens of any kind or nature whatsoever, there is no Person
who has any beneficial interest in such Shares other than such Seller. With
respect to Shares owned by such Seller, delivery of the Certificates by such
Seller to the Buyer on the Closing Date as contemplated in Section 3.2(a) will
transfer to the Buyer good and marketable title thereto free and clear of all
Liens of any kind whatsoever.
4.3 Organization and Qualifications of the Company. The Company is a
duly organized and validly existing corporation in good standing under the laws
of the State of Delaware with all corporate power and authority to own or lease
all of its properties and assets and to conduct its business as currently
conducted, and is duly qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions listed on Schedule 4.3,
which are the only jurisdictions in which the character of the properties owned
or held under lease by it or the nature of the business transacted by it makes
such qualification necessary. The Company does not own or have the right or
obligation to acquire, directly or indirectly, any interest in or control over
any Person.
4.4 Capitalization; Record Ownership of Shares and Options. Schedule
4.4 sets forth the authorized, issued and outstanding shares of capital stock of
the Company. Except as set forth on Schedule 4.4, there are no outstanding (i)
shares of capital stock, voting securities or other ownership interests of the
Company, (ii) securities of the Company convertible into or
16
exchangeable for shares of capital stock, voting securities or other ownership
interests in the Company or (iii) options, warrants, rights or other agreements
or commitments to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or other ownership interests in, or
securities convertible into or exchangeable for capital stock or voting
securities or other ownership interests in, the Company, and no obligation of
the Company to grant, extend or enter into any subscription, warrant, option,
right, convertible or exchangeable security or other similar agreement or
commitment (the items in clauses (i), (ii) and (iii) being referred to herein
collectively as the "Company Securities"). None of the Company Securities were
issued in violation of the Securities Act or other applicable law, rule or
regulation. Except as set forth on Schedule 4.4, there are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
Company Securities. Except as set forth on Schedule 4.4, there are no voting
trusts, stockholders' agreements, or other agreements, contracts or
understandings relating to the ownership, voting or transfer of the Company
Securities to which the Company or any of the Sellers is a party. Except as set
forth on Schedule 4.4, there are no other agreements, contracts or
understandings with respect to the ownership, voting or transfer of capital
stock of the Company. Schedule 4.4 lists all holders of Company Securities and
the number and type of Company Securities held by each holder and as of the
Closing Date no Person other than the Sellers will own of record or beneficially
any Company Securities. The Shares are duly authorized, validly issued, fully
paid and non-assessable. The stock records of the Company indicate that the
Sellers are the owners of the Shares as set forth in Schedule 4.4. The Company
has not received any notice of Lien or other claim against any of the Shares.
4.5 Actions and Authority; Enforceability. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and each Transaction Document to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and each
Transaction Document to which the Company is a party by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Board of Directors of the Company
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and each Transaction Document to which the Company is a
party or to consummate the transactions so contemplated. This Agreement and each
Transaction Document to which the Company is a party has been duly and validly
executed and delivered by the Company and, assuming such agreements constitute
the legal, valid and binding obligations of the Buyer, constitute the legal,
valid and binding agreements of the Company, enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and general principles of equity (whether considered in a proceeding
in equity or at law).
4.6 Schedules; Delivery of Documents; Corporate Records. The Company
has delivered to the Buyer the originals or true and complete copies of all
documents, including without limitation all amendments, supplements or
modifications thereof or waivers currently in effect thereunder, requested by
the Buyer, referred to in the Schedules hereto or otherwise material to the
representations and warranties in this Agreement and has also delivered to the
Buyer copies of the Certificate of Organization and all amendments thereto and
the By-Laws, as amended, of the Company. The minute and stock record books of
the Company, which have
17
been made available to the Buyer for its inspection, contain complete and
correct copies of all charter documents and the records of all meetings and
consents in lieu of meeting of the Board of Directors (and any committees
thereof) and stockholders of the Company since the date of its incorporation.
4.7 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement and each Transaction Document to which any of the
Seller Parties is a party by the Seller Parties nor the performance by the
Seller Parties of their respective obligations hereunder and thereunder, nor the
consummation of the transactions contemplated hereby and thereby will (i)
conflict with or result in any breach of any provision of the Certificate of
Organization or By-Laws of the Company, (ii) except as set forth on Schedule
4.7, require any consent, waiver, approval, authorization, novation or permit
of, or filing with or notification to, any Governmental Authority, (iii) except
as set forth on Schedule 4.7, violate, breach, be in conflict with, require
notice under, or constitute a default under (with notice or lapse of time or
both) or result in, or permit the termination of the acceleration of the
maturity, or the performance of any obligation of the Company or the Sellers, or
any of them, or cause an indemnity payment to be made by the Company under, or
result in the creation or imposition of any lien upon any properties, assets or
business of the Company under, any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit authorization, license, contract, instrument or
other agreement or commitment or any order, judgment or decree to which the
Company or the Sellers, or any of them, is a party or by which the Company or
the Sellers or any of their respective assets or properties is bound or
encumbered, or give any Person the right to require the Company to purchase or
repurchase any notes, bonds or instruments of any kind, or (iv) violate any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
the Company or the Sellers, or any of them, or any of their respective
properties or assets.
4.8 Financial Statements; No Undisclosed Liabilities.
(a) The Company has delivered to the Buyer copies of (i)
audited consolidated financial statements of the Company as at and for the
fiscal years ended September 30, 2000 and 2001, together with all related
schedules and notes and a draft copy of the audited consolidated financial
statements of the Company as at and for the fiscal year ended September 30, 2002
(the "Financial Statements") and (ii) the unaudited financial statements of the
Company as at and for the one (1) month period ended October 31, 2002, together
will all related schedules and notes (the "Interim Financial Statements"). The
balance sheets (including where applicable, the related notes and schedules)
included in the Financial Statements fairly present the financial position of
the Company as of the date thereof, and the statements of income (or statements
of results of operations), stockholders' equity and cash flows (including the
related notes and schedules) included in the Financial Statements fairly present
the results of operations, stockholders' equity, and retained earnings and cash
flows, as the case may be, of the Company for the periods or as of the dates, as
the case may be, set forth therein, in each case in accordance with GAAP,
consistently applied by the Company, except in the case of the Interim Financial
Statements, the omission of footnote information and normal year-end audit
adjustments consistent with prior years. The Financial Statements reflect the
consistent application of accounting principles throughout the periods involved,
except as disclosed in the notes of such Financial Statements. The balance
sheets (including, where applicable, the related notes and schedules) included
in the Financial Statements fairly present the financial position of the
18
Company in accordance with GAAP consistently applied by the Company as of the
date thereof in all material respects, and the consolidated statements of
operations, consolidated statements of stockholders' equity and cash flows
(including the related notes and schedules) included in the Financial Statements
fairly present the results of operations, stockholders' equity, and retained
earnings and cash flows, as the case may be, of the Company for the periods
indicated in accordance with GAAP consistently applied by the Company, except as
stated therein or, where applicable, in the notes to the Financial Statements.
(b) Except as disclosed on Schedule 4.8 (and except as
disclosed on Schedules 4.16, 4.18 and 4.19 with respect to the stated terms of
the Leases, Material Contracts and Government Contracts, respectively listed
therein), as of September 30, 2002, there were no liabilities or obligations of
any nature (whether known or unknown, accrued, absolute, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) that
were not reflected or reserved against on such balance sheet as of September 30,
2002, included in the Financial Statements. Except as disclosed on Schedule
4.16, 4.18 and 4.19 and to the extent specifically reflected or reserved against
in the Financial Statements or otherwise disclosed in Schedule 4.8, as of
September 30, 2002 the Company did not have any liabilities or obligations of
any nature, whether absolute, accrued, contingent, matured or unmatured or
otherwise, and whether due or to become due (including, without limitation, any
liability for Taxes and interest, penalties and other charges payable with
respect to any such liability or obligation). Since September 30, 2002, the
Company has not incurred any liabilities which have not been disclosed pursuant
to the previous two sentences other than liabilities and which (i) have been
incurred in the ordinary and usual course of business consistent with past
practice and (ii) have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
4.9 Absence of Certain Changes. Except as set forth in Schedule 4.9,
since June 30, 2002, (i) the Company has conducted its business only in the
ordinary and usual course of business consistent with past practice, and (ii)
except for matters of general knowledge in the industry related to general
economic or industry conditions, there has not been any event, change,
circumstance or development (whether or not arising in the ordinary course of
business) which has had or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. Except as set forth in Schedule
4.9, since June 30, 2002, there has not been any material damage, destruction or
loss (whether or not covered by insurance) to any property of the Company nor
has there been any material adverse change in the condition (financial or
otherwise) operations, business or assets of the Company except as disclosed in
or contemplated by this Agreement.
4.10 Brokers. No investment banker, broker or finder, other than
Windsor Group, LLC (the "Sellers' Investment Banker") is entitled to receive any
brokerage, finder's or other payment, fee or commission in connection with this
Agreement or the transactions contemplated hereby based upon agreements made by
or on behalf of the Company or any of its officers, directors or employees or
the Sellers.
4.11 Employee Benefit Matters.
19
(a) Except as set forth on Schedule 4.11(a), the Company does
not maintain, sponsor or contribute to, or have any obligation to contribute to
or have any liability (including a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement) with respect to any plan,
program, policy, arrangement, agreement or commitment which is an employment,
consulting, severance pay, termination pay, change in control or deferred
compensation agreement, or an executive compensation, incentive bonus or other
bonus, employee pension, profit-sharing, savings, retirement, stock option,
stock purchase, stock appreciation rights, phantom stock, fringe benefit, life,
health, disability or accident insurance plan, or other employee benefit plan,
program, arrangement, agreement or commitment, including any "employee benefit
plan" as defined in Section 3(3) of ERISA (individually, a "Plan," or
collectively, the "Plans"). Each such Plan is identified on Schedule 4.11(a) to
the extent applicable, as one or both of the following: an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) or an "employee welfare
plan" (as defined in Section 3(l) of ERISA).
(b) The Company is not subject to any actual or contingent
liability under Title IV of ERISA, Section 302 of ERISA, Section 412 or 4971 of
the Code or any similar provision of foreign law or regulation, whether in
respect of any employee benefit plan maintained by the Company or by any other
employer or person or otherwise.
(c) No event has occurred, and no circumstance exists, in
connection with which the Company, or any Plan, directly or indirectly, could be
subject to any material liability under ERISA, the Code or any other law,
regulation or governmental order applicable to any Plan or under any agreement,
instrument, statute, rule of law or regulation pursuant to or under which the
Company has agreed to indemnify or is required to indemnify any Person against
liability incurred under, or for a violation or failure to satisfy the
requirements of ERISA, the Code or any other statute, regulation or order
applicable to any Plan.
(d) With respect to each Plan, (i) all payments due from the
Company to date have been timely made and all amounts properly accrued to date
or as of the Closing Date as liabilities of the Company which have not been paid
have been and will be properly recorded on the books of the Company; (ii) each
such Plan which is an "employee pension benefit plan" (as defined in Section
3(2) of ERISA) and intended to qualify under Section 401 of the Code has
received a favorable determination letter from the Internal Revenue Service (the
"IRS") with respect to such qualification, its related trust has been determined
to be exempt from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of such letter that has or is likely to, and the
consummation of the transactions contemplated hereby will not, adversely affect
such qualification or exemption; (iii) there are no actions, suits or claims
pending (other than routine claims for benefits) or, to the Knowledge of the
Seller Parties, threatened with respect to such Plan or against the assets of
such Plan; (iv) except as set forth on Schedule 4.11(a), such Plan can be
terminated within thirty (30) days, without payment of any additional
contribution or amount and without the vesting or acceleration of any benefits
promised by such plan; and (v) the Company has complied with, and such Plan
conforms in form and operation to, all applicable laws and regulations,
including ERISA and the Code, in all material respects.
(e) No Plan is under audit or is the subject of an
investigation by the IRS, the U.S. Department of Labor, the Pension Benefit
Guaranty Corporation ("PBGC") or any other
20
Governmental Authority. The Company has paid all amounts due to PBGC pursuant to
Section 4007 of ERISA.
(f) Except as set forth on Schedule 4.11(a), the consummation
of the transactions contemplated by this Agreement and each Transaction Document
(alone or together with any other event) will not (i) entitle any Person to any
benefit under any Plan, (ii) accelerate the time of payment or vesting, or
increase the amount, of any compensation or other benefit due to any Person
under any Plan, or (iii) result in the payment or series of payments by the
Company or any of its subsidiaries to any Person of an "excess parachute
payment" within the meaning of Section 280G of the Code, or any other payment
which is not deductible for federal income tax purposes under the Code, whether
or not such payment is considered to be reasonable compensation for services
rendered.
(g) Except as disclosed in the Financial Statements or in
Schedule 4.11(a), the Company has no material liability with respect to an
obligation to provide benefits, including death or medical benefits (whether or
not insured) with respect to any Person beyond their retirement or other
termination of service other than (i) coverage mandated by Part 6 of Title I of
ERISA or Section 4980B of the Code or state law, (ii) retirement or death
benefits under any employee pension plan, (iii) disability benefits under any
employee welfare plan that have been fully provided for by insurance or
otherwise, (iv) deferred compensation benefits accrued as liabilities on the
books of the Company, or (v) benefits in the nature of severance pay.
(h) The Company has delivered or made available to the Buyer,
with respect to each Plan for which the following exists:
(i) a copy of the three most recent Forms 5500 with
respect to each Plan;
(ii) a copy of the Summary Plan Description, together
with each Summary of Material Modifications, required under ERISA with
respect to such Plan in the past three years, all material employee
communications relating to such Plan, and, unless the Plan is embodied
entirely in an insurance policy to which the Company is a party, a true
and complete copy of such Plan;
(iii) if the Plan is funded through a trust or any third
party funding vehicle (other than an insurance policy), a copy of the
trust or other funding agreement; and
(iv) the most recent determination letter received from
the IRS with respect to each Plan that is intended to be a "qualified
plan" under Section 401 of the Code.
(i) With respect to each Plan for which financial statements
are required by ERISA, there has been no material adverse change in the
financial status of such Plan since the date of the most recent such statements
provided to the Buyer.
21
(j) The Company has no announced plan or legally binding
commitment to create any additional Plans or to amend or modify any existing
Plan, other than amendments required by law or those that would not materially
increase costs under any such Plan.
(k) The Company has complied in all material respects with the
provisions of Part 6 of Title I of ERISA and Sections 4980B, 9801 and 9802 of
the Code.
(l) The Company does not and has never sponsored, maintained,
contributed to, or incurred an obligation to contribute to any Defined Benefit
Plan, Multiemployer Plan or to a Multiple Employer Plan. For these purposes,
"Defined Benefit Plan" has the meaning set forth in Section 414 of the Code ,
"Multiemployer Plan" means a multiemployer plan as defined in Section 3(37) and
4001 (a) (3) of ERISA and "Multiple Employer Plan" means any plan sponsored by
more than one employer, within the meaning of Sections 4063 or 4064 of ERISA or
Section 413(c) of the Code.
(m) All employees of the Company are citizens of, or are
authorized in accordance with Federal immigration laws to be employed in the
United States.
(n) The Company has complied with and is in compliance with
the Fair Labor Standards Act 29 U.S.C. ss. 201, et seq., and all relevant state
wage and hour laws, and in particular has (i) properly classified employees as
either exempt or non-exempt for purposes of determining who is eligible for
receiving overtime pay and (ii) paid all non-exempt employees for any and all
overtime work they have performed for the Company.
(o) Any Person who has provided or is providing services to
the Company and who has not or will not receive an IRS W-2 form has been
classified as an independent contractor in full compliance with federal and
state wage and hour laws and the Company has fully and accurately reported such
independent contractors compensation on IRS Forms 1099 as and when required to
do so.
4.12 Actions and Proceedings. Except as set forth on Schedule 4.12,
there is no claim, litigation, suit, action, proceeding, audit, investigation or
inquiry (whether civil, criminal, administrative, investigative, or informal)
pending or, to the Knowledge of the Seller Parties, threatened, against or
relating to the Company or that in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated hereby. The
Company is not subject to any outstanding judgment, order, writ, injunction,
decree or ruling of any legal or administrative body or arbitrator. There are no
audits, investigations, inquiries or proceedings by any Governmental Authority
pending to which the Company or the Sellers are a party or of which any of their
respective property is the subject, and, to the Knowledge of the Seller Parties,
no such audits, investigations, inquiries or proceedings are threatened or
contemplated.
4.13 Tax Matters.
(a) Except as set forth on Schedule 4.13(a) (with paragraph
references corresponding to those set forth below):
(i) the Company has timely filed (taking into account all
available extensions) all Tax Returns required to be filed by
applicable law except where such
22
failure to timely file would have only an immaterial effect on the
Company and has paid or withheld (or caused to be paid or withheld) all
amounts due in respect of Taxes as actually shown on such Tax Returns);
all such Tax Returns are true, correct and complete in all material
respects and accurately set forth all items to the extent required to
be reflected or included in such Tax Returns by applicable federal,
state, local or foreign Tax laws, regulations or rules;
(ii) the Company has not executed any outstanding waivers
or comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns; and the period
during which any assessment against the Company may be made by the IRS
or other appropriate authority has expired without waiver or extension
of any such period for each such authority;
(iii) since January 1, 1997, no claim has been made, and,
to the Knowledge of the Seller Parties, prior to January 1, 1997, no
claim was made, by any authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction;
(iv) there are no liens with respect to any material
Taxes upon any of the assets or properties of the Company;
(v) the Company has paid in full or set up reserves in
accordance with GAAP consistently applied by the Company in respect of
all Taxes for the periods covered by such Tax Returns, as well as all
other Taxes, penalties, interest, fines, deficiencies, assessments and
governmental charges that have become due or payable (including,
without limitation, all Taxes that the Company is obligated to withhold
from amounts paid or payable to or benefits conferred upon employees,
creditors and third parties); as of the date hereof, there is no
proposed liability for any Tax to be imposed upon the Company for which
there is not an adequate reserve;
(vi) adequate provisions in accordance with GAAP
consistently applied to the Company have been made in the Financial
Statements for the payment of all Taxes for which the Company may be
liable for the periods covered thereby that were not yet due and
payable as of the date thereof, regardless of whether the liability for
such Taxes is disputed; and
(b) The Company is not liable for Taxes of any other Person,
whether pursuant to U.S. Treasury Regulation Section 1.1502-6 (or any comparable
provision of state or local law), and there is no contract, agreement or
intercompany account system in existence under which the Company has, or may at
any time in the future have, an obligation to contribute to the payment of any
portion of a Tax (or pay any amount calculated with reference to any portion of
a Tax) of any group of corporations of which the Company is or was a part.
(c) Set forth on Schedule 4.13(c) is a complete list of income
and other Tax Returns filed by the Company pursuant to the laws or regulations
of any federal, state, local or foreign Tax authority that have been examined or
audited by the IRS or other appropriate authority with respect to the past three
(3) fiscal years of the Company, and a list of all
23
adjustments resulting from each such examination or audit. Except as set forth
on Schedule 4.13(c), no such examination or audit is in progress. Except as set
forth on Schedule 4.13(c), all deficiencies proposed as a result of such
examinations or audits have been paid or finally settled and no issue has been
raised in any such examination or audit that, by application of similar
principles, reasonably can be expected to result in the assertion of a
deficiency for any other year not so examined or audited. Except for Taxes
payable with Tax Returns not yet due and filed, there are no grounds for any
further Tax liability, beyond amounts accrued with respect to the years that
have not been examined or audited.
(d) None of the assets owned by the Company is property that
is required to be treated as owned by any other Person pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, as amended, as in effect
immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(e) The Company has maintained the books and records required
to be maintained pursuant to Section 6001 of the Code and the rules and
regulations thereunder, and comparable laws, rules and regulations of the
countries, states, counties, provinces, localities and other political divisions
wherein it is required to file returns and reports relating to Taxes.
(f) No amount will be required to be withheld under Section
1445 of the Code in connection with any of the transactions contemplated by this
Agreement.
(g) The Company has not received or applied for a Tax ruling
or has entered into a closing agreement pursuant to Section 7121 of the Code,
any predecessor provision or similar provision of state or local law which
closing agreement is currently in effect.
(h) There are no outstanding adjustments for Tax purposes
applicable to the Company under Section 481 of the Code or similar provisions
under state or local law as a result of changes in methods of accounting that
would apply to, or have an effect on the Company subsequent to the date herein.
4.14 Compliance with Law; Licenses and Permits.
(a) Except as set forth on Schedule 4.14, the Company is not,
in any material respect, in conflict with, in default under or in violation of,
(i) any statute, constitution, law, ordinance, code, rule, regulation, order,
judgment or decree applicable to the Company or by which any property or asset
of the Company is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which any
property or asset of the Company is bound or affected. The Company has all
material permits, licenses, authorizations, security clearances, consents,
approvals, exemptions, variances and franchises from Governmental Authorities
necessary or required to conduct its business (the "Company Permits"). The
Company is in compliance with the terms of all Company Permits. No suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Seller Parties, threatened.
(b) Without limiting the generality of the foregoing, the
Company does not have any continuing liability or obligation resulting from (i)
any citations, notices of violations,
24
audits, written complaints, consent orders (or amendments to or modifications of
such orders), compliance schedules or other similar enforcement orders received
from any Governmental Authority thereof, or (ii) any notice or inquiry,
including inspection reports, received from any Governmental Authority or agency
thereof, which in any case would indicate that the Company was not then or is
not currently in compliance with all applicable statutes, constitutions, laws,
ordinances, codes, rules and regulations.
(c) No non-resident aliens or other non U.S. persons have had
any access to or export of any of the Seller's or its client's information,
which is in the Company's custody and control, any of which would be categorized
as Technical Data or hardware under ITAR sections 120.6 or 120.10 or under EAR
as controlled items of technical data or hardware as listed or defined under the
Commerce Control List items.
4.15 Intellectual Property.
(a) Schedule 4.15(a) sets forth a true, correct and complete
list of all patents, patents pending, registered trademarks, registered
copyrights, registered service marks and registered names owned or held by the
Company (or otherwise used in the business of the Company) on the date hereof
and identifies all license agreements in effect on the date hereof pursuant to
which any of the above is licensed to or by the Company, in each case, which are
material to the Company. Except as otherwise indicated on Schedule 4.15(a), (i)
the Company is as of the date hereof and will be at the Closing the sole and
exclusive owner or holder of the Intellectual Property listed on Schedule
4.15(a) free and clear of any royalty or other payment obligation, lien, charge
or other encumbrance, (ii) the Intellectual Property on Schedule 4.15(a) is
fully assignable and the Company has entered into no written or oral agreements
or understandings which restrict such assignment, and (iii) there are no
agreements which restrict or limit the use by the Company of such Intellectual
Property listed on Schedule 4.15(a).
(b) Except as set forth on Schedule 4.15(b): (i) (A) the
Intellectual Property disclosed on Schedule 4.15(a) is valid and enforceable,
(B) to the Knowledge of the Seller Parties, such Intellectual Property does not
violate any trade secret agreement and does not infringe on any patents,
trademarks, copyrights or any other intellectual property or proprietary rights
of any Person in any country, (C) all use of any Company software, the copyright
of which is owned by the Company by any other Person has been pursuant to the
terms of a written agreement with such Person or is otherwise lawful, (D) all
commercially reasonable action to maintain and protect the Intellectual Property
listed on Schedule 4.15(a) has been taken by the Company, (E) the Company has
required all professional and technical employees, and other employees having
access to valuable non-public information of the Company, to execute agreements
under which such employees are required to convey to the Company ownership of
all inventions and developments conceived or created by them in the course of
their employment and to maintain the confidentiality of all such information of
the Company, subject to customary limitations and exceptions and (F) all
maintenance and license fees, taxes, annuities and renewal fees have been paid
and all other necessary actions to maintain the registration of the Intellectual
Property listed on Schedule 4.15(a) have been taken through the date hereof and
will continue to be paid or taken by the Company through the Closing; (ii) to
the Knowledge of the Seller Parties, the Company has not interfered with,
infringed upon or misappropriated any legally enforceable Intellectual Property
rights of third parties, and the Company has not received any written notice
25
of claim that any of its material Intellectual Property rights have expired, or
that its Intellectual Property infringes upon, conflicts with or misappropriates
any trade secret, patent, trademark, service xxxx, copyright or trade name of
any third party, and no such claims or controversies currently exist; and (iii)
the Company has not given any notice of infringement to any third party with
respect to any of such Intellectual Property or has become aware of facts or
circumstances evidencing the infringement by any third party of any of such
Intellectual Property.
4.16 Real Property; Personal Property.
(a) The Company does not own any real property in fee or
otherwise (except for the leasehold interests referred to in this Section 4.16).
(b) Schedule 4.16(b) sets forth a true, correct and complete
list of all leases, subleases and other agreements under which the Company uses
or occupies or has the right to use or occupy any real property (the "Real
Property Leases" and the property governed by such Real Property Leases is
referred to herein as the "Real Property"). The Company has heretofore delivered
or made available to the Buyer true, correct and complete copies of all Real
Property Leases (including all written modifications, amendments, supplements,
waivers and side letters thereto). Each Real Property Lease is valid, binding
and in full force and effect, all rent and other sums and charges payable by the
Company as tenant thereunder are current, and no termination event or condition
or uncured default of a material nature on the part of the Company or, to the
Knowledge of the Seller Parties, on the part of any other party thereto exists
under any Real Property Lease. All such Real Property Leases will continue to be
valid, binding and enforceable in accordance with their respective terms and in
full force and effect immediately following the consummation of the transactions
contemplated hereby. The Company has a good and valid leasehold interest in each
parcel of Real Property leased by it, free and clear of all mortgages, pledges,
liens, encumbrances and security interests, except (i) those reflected or
reserved against in the balance sheet included in the Financial Statements, (ii)
Taxes and general and special assessments not in default and payable without
penalty and interest, and (iii) other liens, mortgages, pledges, encumbrances
and security interests which do not materially interfere with the Company's use
of such Real Property or materially detract from or diminish the value thereof.
(c) To the Knowledge of the Seller Parties the buildings and
improvements on the Real Property (i) are in good operating condition and repair
and are adequate and suitable for the purposes for which they are currently
being used; and (ii) to the Knowledge of the Seller Parties, have received all
approvals of Governmental Authorities (including licenses and permits) required
in connection with the operation thereof and have been operated and maintained
in accordance with applicable laws, rules and regulations.
(d) Schedule 4.16(d) sets forth a true, accurate and complete
list of each item of tangible personal property with an original cost in excess
of $3,000 used in connection with the Company's business. To the Knowledge of
Seller Parties all of the tangible personal property in excess of $3,000 used by
the Company in its business is either owned or leased by the Company. Except as
disclosed in Schedule 4.16(d), the Company is in possession of and has good
title to, or has valid leasehold interests in, all tangible personal property
used in the business of the Company. All such tangible personal property is
owned by the Company, free
26
and clear of all Liens other than those which do not materially interfere with
the current use of such property or materially detract from the value thereof,
or is leased under valid and subsisting leases, and in any case, is in good
working condition and is adequate and suitable for the purpose for which it is
currently being used.
4.17 Insurance. Set forth on Schedule 4.17 is a list of all insurance
policies maintained by the Company or in which the Company has an interest
(including the providers of such insurance policies) and all claims made under
such policies (including all outstanding claims) since December 31, 2000. All
such insurance policies have been issued by an insurer that is financially sound
and reputable, are legal, valid, binding, enforceable, and in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date hereof have been paid or accrued in appropriate month-end
financial statements, and the Company is not in default thereunder. The Company
has not received any notice of cancellation or termination with respect to any
such policy which was not replaced on substantially similar terms prior to the
date of such cancellation. The Company has previously provided or made available
the Buyer with copies of such policies. All claims thereunder have been filed in
a due and timely fashion in the manner required by the policy or binder.
4.18 Material Contracts.
(a) Set forth on Schedule 4.18, is a true, correct and
complete list of all Material Contracts (other than Government Contracts,
which are dealt with separately in Section 4.19 hereof, Leases which are dealt
with separately in Section 4.16) and the Company has made available to the
Buyer, true, correct and complete copies of all written Material Contracts
(including, but not limited to, with respect to each Material Contract all
correspondence, performance reports, at risk funding, adverse reports or
decisions, government property lists, pending or completed close-out
documentation, delays in deliverables, overrun of funding, and pending or
settled claims). Other than Material Contracts which have terminated or
expired in accordance with their terms, each of the Material Contracts
identified on Schedule 4.18 is valid, binding and enforceable in accordance
with its terms (subject to the effects of bankruptcy, insolvency and similar
laws affecting creditors' rights generally and general principles of equity
(whether considered in a proceeding in equity or at law)) and is in full force
and effect, and assuming all consents required by the terms thereof or
applicable law have been obtained, such Material Contracts will continue to be
valid, binding and enforceable in accordance with their respective terms and
in full force and effect immediately following the Closing.
(b) Except as described on Schedule 4.18, the Company is not,
nor has the Company received any notice that it is, nor to the Knowledge of the
Seller Parties is any other party in default in any material respect under any
Material Contract, and, to the Knowledge of the Seller Parties, there has not
occurred any event that with the lapse of time or the giving of notice or both
would constitute such a default since December 31, 2000. No party to any
Material Contract has (i) delivered to the Company a notice of its intention to
amend or terminate the contract of (ii) has made any claims against, or sought
indemnification from, the Company as to any matter arising under or with respect
to any Material Contract, and, to the Knowledge of the Seller Parties, neither
the Sellers, the Company nor any of its directors or officers has been advised
that any such claims may be asserted or initiated. Except for liens made in
accordance
27
with the Assignment of Claims Act, 31 U.S.C. ss. 3727, and the Assignment of
Contracts Act, 31 U.S.C. ss. 15, the Company has not assigned or otherwise
conveyed or transferred, or agreed to assign, to any person, any right, title or
interest in or to any of the Material Contracts, or any account receivable
relating thereto, whether as a security interest or otherwise.
(c) The Company has maintained, updated, managed, and
safeguarded all defense and intelligence security clearances covered in Section
4.19(h) required for facility, storage and personnel to be qualified to
participate in any outstanding bids, proposals, teaming arrangements or on-going
marketing activities. Company has received no written notification of violation,
lapse from any government or prime contractor that would adversely affect
Company's defense and intelligence security protection program in the two (2)
years preceding the date hereof. Except as disclosed on Schedule 4.18, to the
Knowledge of the Seller Parties there are no facts or circumstances which would
prevent the Company from obtaining, or have an adverse impact on the Company's
opportunity to obtain any outstanding bid or pending contract.
4.19 Government Contracts.
(a) A true and correct list of each Government Contract which is in
effect as of the date of this Agreement and each Government Bid to which the
Company is a party and for which an award has not been issued 30 days or more
prior to the date of this Agreement, is set forth in Schedule 4.19. Schedule
4.19 sets forth a true and correct list of each Government Contract which is in
effect as of the Closing Date.
(b) Except as set forth in Schedule 4.19, to the Knowledge of the
Seller Parties, (A) the Company has fully complied with all material terms and
conditions of each Government Contract and Government Bid to which it is a party
as required; (B) the Company has complied with all material requirements of any
statute, rule or regulation pertaining to such Government Contract or Government
Bid; (C) all representations and certifications made by the Company with respect
to such Government Contract or Government Bid were accurate in every material
respect as of their effective date and the Company has fully complied with all
such representations and certifications in all material respects; and (D) no
termination or default, cure notice or show cause notice has been issued and
remains unresolved.
(c) Except as set forth in Schedule 4.19: (A) to the Knowledge of the
Seller Parties, none of the Company's employees, consultants or agents is (or,
to the knowledge of the Seller Parties, during the last five years has been)
under administrative, civil or criminal investigation or indictment by any
Governmental Authority with respect to the conduct of the business of the
Company; (B) except for contract audits of a routine nature, there is no pending
audit and investigation of the Company or any of its officers, employees or
representatives nor within the last five years, nor has there been any audit or
investigation by the DCAA, General Accounting Office, Defense Criminal
Investigative Service, the Department of Justice or any United States Attorney
Office has such audit or investigation been threatened in writing, of the
Company or any of its officers, employees or representatives resulting in a
material adverse finding with respect to any material alleged irregularity,
misstatement or omission arising under or relating to any Government Contract or
Government Bid; and (C) during the last five years, the Company has not made any
voluntary disclosure in writing to the Government or any other Governmental
Authority with respect to any material alleged irregularity, misstatement or
omission arising
28
under or relating to a Government Contract or Government Bid. Except as set
forth in Schedule 4.19, the Company has not had any such irregularities,
misstatements or omissions arising under or relating to any such Government
Contract or Government Bid that has led to any of the consequences set forth in
clause (A) or (B) of the immediately preceding sentence or any other material
damage, penalty assessment, recoupment of payment or disallowance of cost.
(d) Except as set forth in Schedule 4.19, there are (A) no outstanding
written claims against the Company, either by the Governmental Authority or any
other Government or by any prime contractor, subcontractor, vendor or other
third party arising under or relating to any Government Contract or Government
Bid to which the Company is a party, and (B) no written outstanding disputes
between the Company, on the one hand, and the Government or any other
Governmental Authority, on the other hand, under the Contract Disputes Act or
any other Federal statute or between the Company, on the one hand, and any prime
contractor, subcontractor or vendor, on the other hand, arising under or
relating to any such Government Contract or Government Bid.
(e) Except as set forth in Schedule 4.19, none of the Company nor, to
the Knowledge of the Seller Parties, any of its employees, consultants or agents
is (or during the last five years has been) suspended or debarred from bidding
on contracts or subcontracts or doing business with the Government or any other
Governmental Authority or is (or during such period was) the subject of a
finding of non-responsibility or ineligibility for Government contracting.
Except as set forth in Schedule 4.19, to the Knowledge of the Seller Parties,
the Company has conducted its operations in all material respects in compliance
with all requirements of all Laws pertaining to all Government Contracts and
Government Bids. No suspension or debarment action with respect to Government
Contracts has been threatened in writing or commenced against the Company or any
of its officers or current employees. To the Knowledge of the Seller Parties,
there is no valid basis, nor current specific circumstances which with the
passage of time could become a basis for the Company's suspension or debarment
from biding on contracts or subcontracts for the Government.
(f) Except as set forth in Schedule 4.19, to the Knowledge of the
Seller Parties, the Company has not made any untrue statement of material fact,
or failed to state a material fact necessary to make the statements therein
contained, in light of the circumstances in which they are made, not misleading,
except for any untrue statement or failure to state a material fact that would
not result in any material liability to the Company as a result of such untrue
statement or failure to state a material fact in any statement, representation
or warranty in any Government Contract, any Government Bid or any exhibit
thereto or in any certificate, statement, list, schedule or other document
submitted or furnished to the Government or any other Governmental Authority in
connection with any Government Contract or Government Bid contained on the date
so furnished or submitted (or on any other date where such statement,
representation or warranty is deemed made or brought down as of a subsequent
date either under applicable Law or pursuant to the applicable Government
Contract or Government Bid or any exhibit thereto or in any written certificate,
statement, list, schedule or other document submitted or furnished to the
Government or any other Governmental Authority in connection with such
Government Contract or Government Bid).
(g) Except as set forth in Schedule 4.19, the final indirect rate
submissions, including
29
all support schedules, submitted to the Government with respect to Government
Contracts of the Company have been closed for all years prior to 2000.
(h) The Company is in compliance in all material respects with all
national security obligations, including, without limitation, those specified in
the National Industrial Security Program Operating Manual, DOD 5220.22-M
(January 1995).
(i) Except as set forth in Schedule 4.19, to the extent required by
Law, all Government Contracts have been awarded, and all Government Bids have
been submitted, under a full and open procurement process without preferential
treatment of any kind. None of the Government Contracts listed on Schedule 4.19
are subject to termination by a Governmental Authority solely as a result of the
consummation of the transactions contemplated by this Agreement.
(j) To the Knowledge of the Seller Parties, there exists no basis for a
claim of any material liability by Company or Seller by any Government Authority
as a result of defective cost and pricing data submitted to the Government,
including, without limitation, any such data relating to liabilities accrued on
Company's books or in its financial accounts for deferred compensation to any
Company employees. To the Knowledge of the Seller Parties and the Company, no
audit or review of any government contract or agreement will likely result in
the disallowance of, or claim for, any amount paid or payable to the Company
under such contract or agreement, whether as a result of excess payments, excess
profit recapture or otherwise.
4.20 Related Party Transactions. Except as set forth on Schedule 4.20,
since December 31, 2000, neither any of the Sellers nor any employee or
Affiliate of the Company (i) has borrowed any monies from or has outstanding any
indebtedness or other similar obligations to the Company; (ii) owns any direct
or indirect interest of any kind in, or is a director, officer, employee,
partner, affiliate or associate of, or consultant or lender to, or borrower
from, or has the right to participate in the management, operations or profits
of, any Person or entity which is (x) a competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company, (y) engaged in a
business related to the business of the Company or (z) participating in any
transaction to which the Company is a party; or (iii) otherwise is or has been a
party to any contract, arrangement, understanding or transaction with the
Company.
4.21 Liens. Except as set forth on Schedule 4.21, and other than Liens
which do not materially interfere with the Company's use of its property or
assets or materially diminish or detract from the value thereof, the Company has
not granted, created or suffered to exist with respect to any of its assets or
properties, any Lien or, provided any guarantee with respect to, or is otherwise
responsible for, any obligation of any third party.
4.22 Employee Relations.
(a) Since December 31, 2000, there has not occurred nor, to
the Knowledge of the Seller Parties, has the Company been threatened with any
strikes, slow downs, picketing, work stoppages, concerted refusals to work
overtime or other similar labor activities by employees of the Company. The
employees of the Company are not represented by any labor union or other labor
representative, and there are no collective bargaining agreements or other
30
arrangements in effect with respect to such employees. To the Knowledge of the
Seller Parties, there are no Persons attempting to represent or organize or
purporting to represent any employees of the Company. The Company has complied
and is complying in all material respects with all laws, rules and regulations
relating to the employment of labor, including the provisions relating to wages,
hours, collective bargaining, employee health, safety and welfare.
(b) Except as set forth on Schedule 4.22(b) there are no
complaints, charges or claims against the Company or, to the Knowledge of the
Seller Parties, threatened, based on, arising out of, in connection with or
otherwise relating to the employment (or termination of employment) by the
Company of any individual, including individuals classified as independent
contractors or "leased employees" (within the meaning of section 414 (n) of the
Code), or the failure to employ any individual, including any claim relating to
employment discrimination, equal pay, employee safety and health, sexual
harassment, immigration, wages and hours or workers' compensation.
4.23 Employees; Employment Agreements. Set forth on Schedule 4.23 is a
list of each employment, compensation, bonus or similar agreement, arrangement
or understanding (written or oral) between the Company and any employee, and the
Company has heretofore provided the Buyer with true and complete copies of all
such agreements. Except as set forth on Schedule 4.23, neither the execution of
this Agreement nor the consummation of the transactions set forth herein will
result in any payment being made or coming due from the Company to any employee
pursuant to any such agreement or arrangement. Schedule 4.23 also sets forth a
true and complete list of all employees of and consultants to the Company,
showing date of hire, hourly rate or salary or other basis of compensation, each
bonus, hourly rate increase and/or salary increase granted since December 31,
2001 (or committed to be granted in connection with the transactions
contemplated hereunder), amount of accrued vacation, sick time or other paid
time off, and job function. Each employee of the Company has all material
security clearances necessary or required for such employee to perform his or
her duties and responsibilities on behalf of the Company. All employees of the
Company are citizens of or are authorized in accordance with Federal immigration
laws to be employed in the United States.
4.24 Environmental Matters. The Company (i) except in compliance with
applicable law, has not engaged in or permitted any operation or activity at or
upon, or any use or occupancy of, any Real Property for the purposes of or in
any way involving the handling, use, treatment, disposal, dumping or storage of
any Hazardous Materials on, under, in or about any Real Property, or transported
any Hazardous Materials to, from or across any Real Property; (ii) is, and at
all times has been in compliance with any and all applicable Environmental Laws,
(iii) has received and is, and at all times has been, in compliance with all
permits, licenses or other approvals required under applicable Environmental
Laws for the conduct of its business, and (iv) has not received notice of any
actual or potential liability involving the handling, use, storage,
transportation, disposal or release of Hazardous Materials. There are no facts
or circumstances providing a basis for any material liability against the
Company involving the handling, use, storage, transportation, disposal or
release of Hazardous Materials. The Company has provided to Buyer copies of all
documents, records, and information available to the Company concerning any
environmental or health and safety matter relevant to the Company, whether
generated by the Company or others, including, without limitation, environmental
audits, environmental risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials,
31
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
4.25 Accounts Receivable and Accounts Payable.
(a) Attached hereto as Schedule 4.25(a) is a true, correct and
complete list, as of a date not more than ten (10) business days prior to the
date hereof, of the accounts and notes receivable of the Company, which includes
an aging of all accounts and notes receivable showing amounts due in 30-day
aging categories. To the Knowledge of the Seller Parties, all Accounts
Receivable and notes receivable of the Company (i) have arisen from sales
actually made or services actually performed only in the ordinary course of
business consistent with past practice, and (ii) are not subject to defenses,
set-offs or counterclaims. To the Knowledge of the Seller Parties, all billed
Accounts Receivable are generally due within thirty (30) days after being
accrued on the books of the Company and have been collected, or will be
collected, in the full aggregate recorded amounts thereof, less, in the case of
the Accounts Receivable reflected on the Closing Balance Sheet, the allowance
for doubtful accounts utilized in the preparation of the Closing Balance Sheet.
(b) Attached hereto as Schedule 4.25(b), is a true, correct
and complete list, as of a date not more than ten (10) business days prior to
the date hereof, of the accounts and notes payable and accrued expenses of the
Company specifying in each case the payee, the face amount of each payable, the
age of each payable regardless of classification on the balance sheet account
and any defenses, set-offs or counterclaims that may exist with respect thereto,
which includes an aging of all accounts and notes payable showing amounts owing
in thirty (30) day aging categories. All accounts and notes payable and accrued
expenses of the Company (collectively, the "Accounts Payable") have been
incurred or have arisen only in the ordinary course of business consistent with
past practice. Except as noted on Schedule 4.26(b), there is no dispute between
the Company or any payee with respect to any Account Payable.
(c) Attached hereto as Schedule 4.25(c), is a true, correct
and complete list of a date not more than ten (10) business days prior to the
date hereof, of the unbilled receivables of the Company (the "Unbilled
Receivables"). To the Knowledge of the Seller Parties, all Unbilled Receivables
have arisen only from sales actually made or services actually performed in the
ordinary course of business consistent with past practices, are collectible in
the ordinary course of business and are not subject to defenses, set-offs or
counterclaims. All Unbilled Receivables, once billed are generally due within
thirty (30) days after being accrued on the books of the Company.
4.26 Accounting Practices. The Company makes and keeps materially
accurate books and records reflecting its assets and maintains internal
accounting controls that provide reasonable assurance that (a) transactions are
executed in accordance with management's authorization and (b) transactions are
recorded as necessary to permit preparation of the Company's Financial
Statements and to maintain accountability for the assets of the Company.
4.27 Banks; Powers of Attorney. Attached hereto as Schedule 4.27 is a
true, correct and complete list setting forth the name of each bank in which the
Company has an account or
32
safe deposit box, the names of all persons authorized to draw thereon or to have
access thereto, and the names of any person holding a power of attorney from the
Company.
4.28 Certain Business Practices. Neither the Company nor, to the
Knowledge of the Seller Parties, any of the Company's directors, officers,
employees or agents has, in connection with or furtherance of the business of
the Company: (i) used any funds for unlawful contributions, gifts, entertainment
or other unlawful payments relating to political activity, (ii) made any
unlawful payment to any foreign or domestic government official or employee or
to any foreign or domestic political party or campaign or violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended, (iii) consummated any
transaction, made any payment, entered into any agreement or arrangement or
taken any other action in violation of Section 1128B(b) of the Social Security
Act, as amended, or (iv) made any other unlawful payment or other arrangement
which could cause the Company or its affiliates to be disqualified or debarred
from serving as a contractor, directly or indirectly, for any Governmental
Authority.
4.29 Complete Disclosure. No representation or warranty by the Company
or the Sellers in this Agreement, and no exhibit, certificate, or schedule
furnished or to be furnished to the Buyer pursuant to this Agreement, contains
or will contain any untrue statement of a material fact, omits or will omit to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading. To the Knowledge of the Seller Parties, there is no
fact, development or threatened development (excluding general economic factors
affecting business in general) which the Seller Parties have not disclosed to
the Buyer in writing which has a Material Adverse Effect or, so far as the
Seller Parties can reasonably foresee and may reasonably be expected to have a
Material Adverse Effect.
4.30 Reliance on Advisors. The Seller Parties have relied solely on
their own accountants, legal counsel, investment banker and other advisors in
negotiating and consummating the transactions contemplated by this Agreement. No
Seller Party is relying upon any representations, promises or agreements of any
of Buyer's accountants, legal counsel, investment banker or other advisors
excepts as specifically set forth in this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers as follows:
5.1 Organization. The Buyer is a duly organized and validly existing
corporation in good standing under the laws of The Commonwealth of Massachusetts
with all corporate power and authority to own or lease all of its properties and
assets and to conduct its business as presently conducted.
5.2 Actions and Authority; Enforceability. The Buyer has all requisite
corporate power and authority to execute and deliver this Agreement and each
Transaction Document to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and each
Transaction Document to which the Buyer is a party by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby and thereby
have been duly
33
and validly authorized by the Board of Directors of the Buyer and no other
corporate proceedings on the part of the Buyer are necessary to authorize this
Agreement and each Transaction Document to which the Buyer is a party or to
consummate such transactions. This Agreement and each Transaction Document to
which it is a party has been duly and validly executed and delivered by the
Buyer and, assuming such agreements constitute the legal, valid and binding
obligations of the Seller Parties, constitute the legal, valid and binding
agreements of the Buyer, enforceable against the Buyer in accordance with their
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and general
principles of equity (whether considered in a proceeding in equity or at law).
5.3 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement and each Transaction Document to which the Buyer is a
party by the Buyer nor the performance by the Buyer of its obligations hereunder
and thereunder, nor the consummation of the transactions contemplated hereby and
thereby will (i) conflict with or result in any breach of any provision of the
Articles or Organization or By-Laws of the Buyer, (ii) require any consent,
waiver, approval, authorization or permit of, or filing with or notification to
any Governmental Authority, (iii) violate, breach, be in conflict with or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or permit the termination of any provision
of, or result in the termination of, the acceleration of the maturity of, or the
acceleration of the performance of any obligation of the Buyer, or cause an
indemnity payment to be made by the Buyer under, or result in the creation or
imposition of any lien upon any properties, assets or business of the Buyer
under, any note, bond, indenture, mortgage, deed of trust, lease, franchise,
permit authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which the Buyer is a party or by
which the Buyer or any of its assets or properties is bound or encumbered, or
give any Person the right to require the Buyer to purchase or repurchase any
notes, bonds or instruments of any kind, or (iv) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Buyer or
any of its properties or assets, except in the case of clauses (ii) through (iv)
above, where failure to obtain such consent, approval, authorization or permit,
or failure to make such filing or notification, or where such violation, breach,
conflict or default, would not, individually or in the aggregate, cause a
material adverse effect on the Buyer's ability to perform its obligations
hereunder or thereunder or the ability of the parties hereto to consummate the
transactions contemplated hereby or thereby.
5.4 Brokers. No investment banker, agent, broker, Person or firm acting
on behalf of Buyer or its stockholders is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated herein.
5.5 Solvency; Ability to Perform Agreement. Buyer is solvent, now has,
or at the Closing Date will have, available funds necessary to pay the Purchase
Price without the need to obtain additional financing, and there is no
occurrence, event or condition with respect to it that would prevent it from
performing this Agreement in all material respects. Buyer will not become
insolvent as a result of consummating the transaction contemplated by this
Agreement.
34
5.6 Investment Intent. Buyer is acquiring the Shares for its own
account and not with a view to its distribution within the meaning of Section
2(11) of the Securities Act of 1933, as amended, and the rules and regulations
issued pursuant thereto.
5.7 Investigation by Buyer.
(a) Buyer acknowledges that, except for the representations
and warranties of Seller Parties contained in Section 4 of this Agreement, the
Schedules hereto or in any other Transaction Document or schedules thereto, none
of the Sellers or the Company or any of the Company's directors, officers,
employees, affiliates, controlling persons, agents, advisors or representatives,
makes or shall be deemed to have made any representation or warranty, either
express or implied, as to the accuracy or completeness of any of the information
(including, without limitation, any estimates, projections, forecasts or other
forward-looking information) provided or otherwise made available to Buyer or
any of its directors, officers, employees, affiliates, controlling persons,
agents, advisors or representatives (including, without limitation, in any
management presentations, information or offering memorandum, supplemental
information or other materials or information with respect to any of the above).
With respect to any such estimate, projection or forecast delivered by or on
behalf of the Company or any Sellers to Buyer, Buyer acknowledges that (i) there
are uncertainties inherent in attempting to make such projections and forecasts,
(ii) Buyer is aware that actual results may differ materially and (iii) Buyer
shall have no claim against Company or Sellers with respect to any such
projection or forecast, provided such projection or forecast was prepared and
furnished in good faith.
(b) Buyer agrees, to the fullest extent permitted by law, that
neither the Company nor any Sellers shall have any liability or responsibility
whatsoever to Buyer or any of its directors, officers, employees, affiliates,
controlling persons, agents, advisors or representatives on any basis other than
fraud or willful misconduct (including, without limitation, in contract or tort,
under federal or state securities laws or otherwise) based upon any information
provided or otherwise made available, or statements made (or omissions to so
provide, make available or state) to Buyer or any of its directors, officers,
employees, affiliates, controlling persons, agents, advisors or representatives,
including, without limitation, in respect of the representations and warranties
of Seller Parties set forth in Section 4 hereof, except as and only to the
extent set forth herein, with respect to such representations and warranties and
subject to the limitation and restrictions contained herein and in the Schedules
hereto.
5.8 Reliance on Advisors. The Buyer has relied solely on its own
accountants, legal counsel, investment banker and other advisors in negotiating
and consummating the transactions contemplated by this Agreement. Buyer is not
relying upon any representations, promises or agreements of any of the Sellers'
or the Company's accountants, legal counsel, investment banker or other advisors
excepts as specifically set forth in this Agreement.
35
ARTICLE 6
COVENANTS OF THE PARTIES
6.1 Conduct of Business of the Company.
(a) During the period from the date of this Agreement to the
Closing, the Company shall not enter into any transactions without the written
consent (including e-mail) of the Chief Financial Officer of the Buyer or of
other representatives of the Buyer who are authorized by the Buyer to provide
such consent, except for disbursements (other than payroll) in the ordinary
course of business in amounts less than $2,500, payroll disbursements to meet
currently existing obligations, non-monetary contract actions, and procurement
commitments individually less than $2,500. Transactions to which this provision
applies include, subject to the exceptions noted in the preceding sentence, all
disbursements, contracts, bid and proposal submissions, hiring, termination,
changes in employment status or compensation, procurement commitments, changes
related to the ownership of the Company, and incurrence of indebtedness. In
addition, during the period from the date of this Agreement to the Closing, the
Sellers shall cause the Company to conduct, and the Company shall conduct, its
operations according to its ordinary and usual course of business consistent
with past practice, and the Sellers shall cause the Company to use, and the
Company shall use its commercially reasonable efforts to preserve intact its
business organization, to keep available the services of its current officers
and employees and to preserve the goodwill of and maintain satisfactory
relationships with those Persons and entities having business relationships with
the Company, and the Sellers and the Company shall promptly advise the Buyer in
writing of any material adverse change in the Company's business, condition
(financial or otherwise), properties, major customer or supplier relationships,
assets, liabilities, prospects or results of operations. Notwithstanding the
above provisions of Section 6.1(a), Buyer consents to the payments and
transactions of the Company listed in subparagraph (iii) of the definition of
"Closing Balance Sheet" and in Exhibit E hereto. Without limiting the generality
of the foregoing and except as specified in the preceding sentence, during the
period specified in the first sentence of this subsection, without the prior
written consent of the Buyer, which for subsections (iv), (v), (xiii), (xiv),
(xvii) and (ix) of this Section 6.1 shall not be unreasonably withheld, the
Sellers shall cause the Company not to, and the Company shall not:
(i) issue, sell, grant options or rights to purchase,
pledge, or authorize or propose the issuance, sale, grant of options or
rights to purchase or pledge any Company Securities, or grant or
accelerate any right to convert or exchange any Company Securities;
(ii) acquire or redeem, directly or indirectly, or amend
the terms of any Company Securities;
(iii) split, combine or reclassify its capital stock or
declare, set aside, make or pay any dividend or distribution (whether
in cash, stock or property), on any shares of its capital stock.
36
(iv) (A) make or offer to make any acquisition, by means
of a merger or otherwise, of assets or securities, or, any sale, lease,
encumbrance or other disposition of assets or securities, or (B) enter
into any material contract, agreement, commitment, arrangement, lease
(including with respect to personal property), instrument or
understanding or amend or cause the termination of any Material
Contract, or grant any release or relinquishment of any rights under
any Material Contract;
(v) incur or assume any long-term debt or short-term debt
except by drawing on the Company's line of credit to enable the Company
to make any of the payments contemplated by subsections (iii) or (iv)
of the definition of Closing Balance Sheet or Exhibit E hereto, enter
into any financing arrangements or modify the terms of any existing
indebtedness or financing arrangements except as contemplated
hereunder;
(vi) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person;
(vii) make any loans, advances or capital contributions
to, or investments in, any other Person;
(viii) change any of the accounting principles or
practices used by it in a manner that would have a material effect;
(ix) make any tax election or settle or compromise any
material federal, state or local income tax liability;
(x) propose or adopt any amendments to its Certificate of
Incorporation or By-Laws;
(xi) grant any stock-related, performance or similar
awards or bonuses;
(xii) forgive any loans to employees, officers or
directors or any of their respective affiliates or associates;
(xiii) enter into any new or amend any existing Material
Contract;
(xiv) enter into any new, or amend any existing,
employment, severance, consulting or salary continuation agreements
with any officers, directors or employees, or make any changes in the
compensation or benefits payable to officers, directors or employees;
(xv) enter into any collective bargaining or other labor
agreement;
(xvi) adopt, materially amend or modify, or terminate any
Plan or other employee benefit plan or arrangement;
37
(xvii) adopt, amend, modify or terminate any plan
regarding the compensation of employees or consultants, including but
not limited to the compensation plan for sales department employees;
(xviii) hire or terminate any management level employees;
(xix) settle or agree to settle any suit, action, legal
claim, proceeding or investigation (including any suit, action, claim,
proceeding or investigation relating to this Agreement or the
transactions contemplated hereby); other than all or any portion of the
Giovanni Matter; or
(xx) agree to take any of the foregoing actions or any
action which would make any representation or warranty in this
Agreement untrue or incorrect as of the date when made or as of a
future date or which would result in any of the conditions set forth in
Article 7 hereof not being satisfied.
(b) The Sellers shall not (i) take any action specified in
Section 6.1 on behalf of or with respect to the Company or (ii) take any action
which would make any representation or warranty in this Agreement untrue or
incorrect as of the date when made or which would result in any of the
conditions set forth in Article 7 hereof not being satisfied.
6.2 Access to Information. From and after the date hereof, the Seller
Parties shall (i) afford the Buyer and the Buyer's commercial lenders and their
respective accountants, investment bankers, counsel and other authorized
representatives complete access (during regular business hours, upon reasonable
advance notice) to all employees, offices and other facilities and to all books,
contracts, commitments and records (including tax returns) of the Company and
cause the Company's independent public accountants to provide access to their
work papers and such other information as the Buyer may reasonably request, (ii)
permit the Buyer to make such inspections as the Buyer may require, and (iii)
cause the officers of the Company to furnish the Buyer with such financial and
operating data and other information with respect to the business, properties
and personnel of the Company as the Buyer may from time to time reasonably
request. Nothing herein contained shall affect the continuing applicability of
the Confidentiality Agreement. The access provided pursuant to this Section
shall be subject to such measures as may be reasonably required to minimize the
disruption to the Company's business including Sellers' having the right to be
present at any meeting or telephone call pursuant to this Section 6.2.
6.3 Commercially reasonable efforts.
(a) Subject to the terms and conditions herein provided for,
each of the parties hereto agrees to use commercially reasonable efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. In connection with
and without limiting the foregoing, the Seller Parties, and the Buyer, shall
cooperate with one another (i) in promptly determining whether any filings are
required to be or should be made, or any consents, approvals, permits or
authorizations are required to be or should be obtained under any federal,
38
state or local law or regulation or whether any consents, approvals or waivers
are required to be or should be obtained from other parties to loan agreements
or other contracts or instruments material to the business of the Company in
connection with the consummation of the transactions contemplated by this
Agreement and (ii) in promptly making any such filings, furnishing information
required in connection therewith and seeking to obtain timely any such consents,
permits, authorizations, approvals or waivers. In case at any time after Closing
any further action is necessary or desirable to carry out the purposes of this
Agreement, the parties to this Agreement (or as applicable, their officers and
directors) shall take all such necessary action as may be reasonable in the
context thereof.
(b) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated hereby is
commenced, whether before or after the Closing, the parties hereto agree to
cooperate and use commercially reasonable efforts to defend vigorously against
it.
6.4 Notification of Certain Matters. The Seller Parties shall give
prompt notice to the Buyer, and the Buyer shall give prompt notice to the Seller
Parties, of the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely (i) to cause any representation or warranty of
such party contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing, or (ii) to result in any material
failure of such party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.4 shall not limit or
otherwise affect the representations and warranties or any covenant, condition
or agreement or the remedies available hereunder to any of the parties receiving
such notice. Should any of the events for which notice is provided pursuant to
this Section 6.4 require a change to any of the disclosure schedules delivered
by the Seller Parties, the Seller Parties may deliver an amendment to the
relevant schedule specifying such change. Any such amendment shall not affect
the right of the Buyer to indemnification pursuant to Section 10 hereof.
6.5 Public Announcements. No party without the express written approval
of the other party, issue any press release or otherwise make any public
statement with respect to this Agreement or the sale of the Company or the
Shares, except as may be required by law or any listing agreement with any
securities exchange. Without limiting the foregoing, the Buyer and the Company
and the Sellers shall consult with each other with respect to issuing any press
release or otherwise making any public statements with respect to this Agreement
or the sale of the Company or the Shares. The Company shall not make a general
communication to its employees relating to the transactions contemplated hereby,
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld and the parties agree to cooperate with each other as to
the timing, manner and content of any public announcement.
6.6 Acquisition Proposals. After the date hereof, the Company shall not
(nor will it permit any of its Affiliates, employees or agents to), directly or
indirectly, (a) solicit, encourage, initiate or participate in any negotiations
or discussions with respect to any offer or proposal to acquire all or any
substantial part of the business and properties of the Company, or (b) except as
contemplated by this Agreement, disclose any information not customarily
disclosed to any Person concerning the business and properties of the Company,
afford to any Person access to
39
the properties, books or records of the Company or otherwise assist or encourage
any Person in connection with any of the activities referred to in clause (a)
above.
6.7 Preparation of Certain Financial Statements. After the Closing,
upon the request of the Buyer and at its expense, the Sellers shall reasonably
cooperate with and assist the Buyer and the Buyer's independent public
accountants ("Buyer's Accountants") in the compilation and preparation of all
financial statements and financial statement schedules of the Company (prepared
in accordance with GAAP) and reports of Xxxxxx & Xxxxxxxx, in its capacity as
the Company's independent public accountants ("Sellers' Accountants") prior to
the Closing, as may be necessary for the Buyer to comply in a timely manner with
SEC reporting and disclosure requirements. If requested by the Buyer, the
Sellers shall deliver to the Buyer's Accountants and/or the Sellers' Accountants
all engagement letters and management representation letters, as may be
reasonably requested by the Buyer or such accountants, which shall cover such
periods from the January 1, 2000 through the Closing Date. In connection with
the foregoing, the Sellers shall use commercially reasonable efforts to cause
the Sellers' Accountants to cooperate with and assist the Buyer and the Buyer's
Accountants in the preparation of the financial statements contemplated by this
Section 6.7.
6.8 Closing Period Tax Return. The Buyer shall cause Seller's
Accountant to prepare the Company's federal and state tax returns for the period
ending on the Closing Date based upon the close-the-books method and in a manner
consistent with the prior practice of the Company at Company's expense after the
Closing Date. The Buyer shall provide the Sellers with an opportunity to review
and comment upon such income tax returns at least fifteen (15) days prior to the
date that such returns are required to be filed (which includes any extensions
of time). In the event that there is a disagreement between Buyer and Sellers
regarding the Company's federal or state tax returns, the parties agree to
negotiate in good faith to resolve their differences and to execute and file
such tax returns when such returns are required to be filed. If such differences
are not resolved prior to the due date of the returns, then such tax returns
shall be executed and filed as prepared and the parties shall amend the returns
after a final resolution has been reached either through agreement of the
parties or as otherwise provided herein. In the event that such amended returns
result in a refund to the Company of an amount previously paid based upon the
returns as originally filed, such amount shall be paid to the Sellers in the
proportions set forth on Schedule 2.2. The parties shall submit any dispute with
respect to tax returns filed pursuant to this Section to the Selected Accounting
Firm, for a determination resolving such amounts and issues in dispute. The
Selected Accounting Firm will conduct its own review and evaluate those items or
amounts in dispute and shall determine whether the tax returns were prepared in
accordance with the Code. The Selected Accounting Firm will be granted
reasonable access to all records of the Seller Parties and the parties agree to
follow such procedures and make such submissions to the Selected Accounting Firm
as it may request in conducting its review and making its determination under
this Section 6.8. Each party agrees to execute, if requested by the Selected
Accounting Firm, a reasonable engagement letter. The Selected Accounting Firm's
determination shall be made within forty-five (45) days after its engagement
which engagement shall be made as soon as practicable, shall be set forth in a
written statement delivered to the Sellers and Buyer and shall be final,
conclusive, non-appealable and binding for all purposes hereunder, provided that
such determination may be reviewed, corrected or set aside in an arbitration
under Section 10.9 of this Agreement, but only if the arbitrators find that the
Selected Accounting Firm committed manifest error with respect to
40
its determination. The determination of the Selected Accounting Firm shall not
be deemed an award subject to review under the Federal Arbitration Act or any
other statute. The fees and expenses of the Selected Accounting Firm in
resolving any differences pursuant to this Section shall be paid one-half by the
Sellers and one-half by the Buyer.
6.9 Professional Fees. At least five (5) days prior to Closing, the
Sellers shall deliver to the Buyer a Certificate (the "Professional Fees
Certificate") certifying as to the commissions, fees and other charges and
expenses due to each of (i) Sellers' Investment Banker, (ii) Sellers'
Accountants and (iii) Sellers' Counsel in connection with the transactions
contemplated by this Agreement. The total amount due to such parties as
reflected on such Certificate is referred to herein as the "Professional Fees."
The Professional Fees Certificate shall include all charges incurred to the date
of such Certificate which have not been paid and a good faith projection of all
charges through and including the Closing and shall state that the Company has
no further payment obligations to the professionals listed on such Certificate
in connection with the transactions contemplated by this Agreement. The
Professional Fees Certificate shall include wire transfer or other payment
instructions for each of the professionals listed on the Certificate.
6.10 Continuation Pay. Buyer agrees to provide 13 weeks of continuation
pay to Xxxxxxxx Xxxxxxx if her employment with the Company is terminated for any
reason by Company or Xxxxxxxx Xxxxxxx.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of the Seller Parties. The obligations of
the Seller Parties to close the transaction contemplated hereby shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) The Buyer shall have performed or complied in all material
respects with its agreements and covenants contained in this Agreement required
to be performed or complied with at or prior to the Closing Date.
(b) The representations and warranties of the Buyer contained
in this Agreement shall be true and correct in all material respects when made
and on and as of the Closing Date with the same force and effect as if made on
and as of such date, except as expressly contemplated or otherwise expressly
permitted by this Agreement.
(c) Seller Parties shall have received the deliveries referred
to in Section 3.3.
(d) The Seller Parties shall have received an opinion
addressed to them and dated as of the Closing Date of Xxxxxxx X. Xxxxx, Vice
President and General Counsel of the Buyer, in a form reasonably satisfactory to
the Seller Parties.
(e) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any court or
Governmental Authority of competent jurisdiction which prohibits, restrains,
enjoins or restricts the consummation of the transactions contemplated
41
hereby; provided, however, that the parties shall use commercially reasonable
efforts to cause any such decree, ruling, injunction or other order to be
vacated or lifted.
(f) Sellers shall be released on all welfare and benefit
programs of the Company as trustees and from all fiduciary responsibilities
associated therewith.
(g) Buyer shall have provided the Seller Parties with a notice
from the Company stating that if the Closing Conditions of the Buyer set forth
in Section 7.2 hereof have been either fulfilled or waived (except for Section
7.2(h) for which Buyer will specify what remains to be obtained). Buyer shall
close the transaction without additional conditions, stipulations or
requirements of the Seller Parties two business days from the date of such
notice.
7.2 Conditions to Obligations of the Buyer. The obligations of the
Buyer to close the transaction contemplated hereby shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The Seller Parties shall have performed or complied in all
material respects with their agreements and covenants contained in this
Agreement required to be performed or complied with at or prior to the Closing
Date.
(b) The representations and warranties of the Seller Parties
contained in this Agreement shall be true and correct in all material respects,
when made and on and as of the Closing Date with the same force and effect as if
made on and as of such date, except as expressly contemplated or otherwise
expressly permitted by this Agreement.
(c) The Buyer shall have received the deliveries referred to
in Section 3.2.
(d) The Buyer shall have received an opinion of Holland &
Knight LLP, counsel to the Seller Parties ("Sellers' Counsel"), dated as of the
Closing Date and addressed to the Buyer, in a form reasonably satisfactory to
the Buyer.
(e) The Buyer shall have received such consents, approvals and
assurances set forth on Schedule 4.7 to ensure the effective continuation of all
schedule-based contracts and the continuation of the prime contracts and
subcontracts presented under such schedules.
(f) The Buyer shall have received the Professional Fees
Certificate signed by the Shareholders' Representative on behalf of the Sellers.
(g) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any court or
Governmental Authority of competent jurisdiction which prohibits, restrains,
enjoins or restricts the consummation of the transactions contemplated hereby;
provided, however, that the parties shall use commercially reasonable efforts to
cause any such decree, ruling, injunction or other order to be vacated or
lifted.
(h) All consents, approvals and waivers disclosed or required
to be disclosed on Schedule 4.7 hereto shall have been received. Any
notifications which do not require
42
consent, approval or waiver of the transactions contemplated hereby listed on
Schedule 4.7 required to be given to any third party shall be given at Closing.
(i) There shall be no outstanding Options of the Company.
Following the execution of this Agreement, the Company shall redeem or terminate
each of the Options. In additions, the Company shall have redeemed each of Xxxx
Xxxxxxxx'x shares of record of common stock in the Company and shall have
provided to the Buyer copies of the duly executed documents effecting the
foregoing transactions.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the transaction
contemplated hereby may be abandoned at any time prior to the Closing:
(a) By mutual written consent of the Buyer and the Seller
Parties;
(b) By the Buyer, or by the Seller Parties, if the Closing
shall not have occurred on or before December 20, 2002 (provided that the right
to terminate this Agreement under this Section 8.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the transaction to be consummated
on or before such date);
(c) By the Buyer, or by the Seller Parties, if any court or
other Governmental Authority of competent jurisdiction shall have issued a final
order, decree or ruling or taken any other final action restraining, enjoining
or otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action is or shall have become final and nonappealable;
(d) By the Seller Parties if prior to the Closing Date (i)
there shall have been a Breach of any of the representations or warranties on
the part of the Buyer contained in this Agreement which, individually or in the
aggregate, has had or would reasonably be expected to have a material adverse
effect on the ability of the Buyer to consummate the transactions contemplated
hereby, or (ii) there shall have been a Breach of any covenant or agreement on
the part of the Buyer contained in this Agreement which, individually or in the
aggregate has had or would reasonably be expected to have a material adverse
effect on the ability of the Buyer to consummate the transactions contemplated
hereby, in either case (i) or (ii) which Breach shall not have been cured prior
to five (5) days following notice thereof to the Buyer; or
(e) By the Buyer if prior to the Closing Date (i) there shall
have been a Breach of any of the representations or warranties on the part of
the Company and the Sellers contained in this Agreement which, individually or
in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect , or (ii) there shall have been a material breach of any covenant
or agreement on the part of the Seller Parties contained in this Agreement, in
either case (i) or (ii) which Breach shall not have been cured prior to five (5)
days following notice thereof to the Seller Parties, as applicable; or (iii)
there shall have occurred any event or circumstance that constitutes a Material
Adverse Effect.
43
8.2 Effect of Termination. If this Agreement is terminated in
accordance with Section 8.1 hereof, this Agreement shall become null and void
and of no further force and effect, except that (i) the terms and provisions of
the Confidentiality Agreement, Section 8.4, this Section 8.2, Section 8.3,
Section 10.1, Section 10.4, Section 10.6, Section 10.7 and Section 10.8 shall
remain in full force and effect and (ii) any termination of this Agreement shall
not relieve any party hereto from any liability for any Breach of its
obligations hereunder.
8.3 Expenses. Each of the Buyer and the Seller Parties shall bear its
own fees and expenses ("Costs") incurred in connection with this Agreement and
the transactions contemplated hereby (including, but not limited to, fees and
disbursements of attorneys and financial advisors). The Company shall bear the
Costs of the Sellers through the Closing Date (the "Pre-Closing Costs"),
provided that all such Pre-Closing Costs shall be either paid by the Company
before the Closing Date or paid out of the Purchase Price pursuant to Sections
2.2(a) and 6.9.
8.4 Amendment. This Agreement may not be amended except by an
instrument, specifically referring to this Agreement signed by the parties
hereto.
8.5 Waiver. At any time prior to the Closing Date, the Buyer with
respect to the Seller Parties and the Seller Parties with respect to the Buyer
may (a) extend the time for the performance of any of the obligations or other
acts provided herein or in any document delivered pursuant hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing specifically referring to this
Agreement signed by the party or parties to be bound thereby. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE 9
INDEMNIFICATION
9.1 Survival of Representations and Warranties.
(a) Except for the representations and warranties set forth in
Section 4.13 and Section 4.24 which shall survive Closing for the period for
which the applicable statute of limitations (including extensions thereof)
remains open and except for the representations and warranties set forth in
Sections 4.1, 4.2, 4.3, 4.4 and 4.5 which shall survive Closing indefinitely,
each representation and warranty in this Agreement, the Schedules and Exhibits
hereto, in any Transaction Document and in certificates delivered pursuant to
this Agreement or any Transaction Document, of any of the Seller Parties, shall
survive the Closing for a period of eighteen (18) months.
(b) Notwithstanding any investigation conducted or notice or
knowledge obtained by or on behalf of the Company or the Sellers, each
representation and warranty in this Agreement, the Exhibits and Schedules
hereto, in any Transaction Document and in certificates delivered pursuant to
this Agreement or any Transaction Document, of the Buyer shall survive the
Closing for a period of eighteen (18) months.
44
(c) Any claim for indemnification arising out of the Breach of
any representation or warranty contained herein, in the Exhibits or Schedules
hereto, in any Transaction Document or in the certificates delivered pursuant to
this Agreement or any Transaction Document to be fulfilled or complied with at
or before the Closing must be made prior to the termination of the applicable
time periods set forth under Section 9.1(a) and 9.1(b). The covenants contained
in Sections 6.1, 6.2, 6.3, 6.4 and 6.5 of this Agreement shall survive the
Closing for a period of eighteen (18) months and any other covenants shall
survive the Closing Date until the expiration of the applicable statute of
limitations.
9.2 Terms of Indemnification.
(a) By the Seller Parties. The Xxxxxxxx Family Sellers shall (jointly
among members of the Xxxxxxxx Family Sellers but severally with respect to R.
John Chapel, Jr.) and R. John Chapel, Jr., severally and not jointly, in
accordance with the proportions set forth on Schedule 2.2, protect, defend,
indemnify and hold harmless the Buyer Parties from and against any and all
Damages incurred by the Buyer Parties arising out of or resulting from:
(i) any Breach of any of their respective representations,
warranties, covenants and other agreements contained in this Agreement (without
giving effect to any amendment(s) to the Seller Parties' disclosure schedules
delivered pursuant to Section 8.2 hereof), in the Schedules and Exhibits hereto,
any Transaction Document or in certificates delivered pursuant to this Agreement
or any Transaction Document;
(ii) notwithstanding any disclosures made on any Schedules or
Exhibits attached hereto, the matter set forth on Schedule 4.12, Items 1 through
3 ("Giovanni Matter"), the matters set forth on Schedule 4.11(a), Item 2 (Form
5500 matter); provided however that (A) in connection with the Giovanni Matter,
the Sellers shall have the right, at their sole expense, to defend, contest or
otherwise protect against any such actions and potential liabilities with legal
counsel of its own selection, (B) any amounts recovered in connection with the
Giovanni Matter by the Buyer shall be paid to the Sellers in the proportions set
forth on Schedule 2.2 in immediately available funds within ten (10) days of the
Company's receipt of such amount; (C) any settlement entered into by the Company
in connection with the Giovanni Matter shall be subject to the consent of the
Sellers, not to be unreasonably withheld, conditioned or delayed; and (D) the
Additional Escrow may be applied to pay any final settlement or other final
resolution of the Giovanni Matter upon direction of Sellers; and
(iii) any claim that the Shareholders' Representative, acting
as an agent, attorney-in-fact or in any other representative capacity of the
Xxxxxxxx Family Sellers in connection with the transactions contemplated by this
Agreement, or any Transaction Document, lacks the authority to so act or is
acting or has acted in excess of such authority, or that any of such agreements,
or any actions taken in connection with the Closing of this Agreement, are not
binding on any Xxxxxxxx Family Seller or effective to consummate the
transactions contemplated by this Agreement as they relate to such Xxxxxxxx
Family Seller.
(b) By the Buyer Parties. The Buyer shall protect, defend, indemnify
and hold harmless the Seller Parties from and against:
45
(i) any and all Damages arising out of or resulting from any
Breach of any of the Buyer's representations, warranties, covenants or other
agreements contained in this Agreement, the Exhibits hereto, any Transaction
Document or in certificates delivered pursuant to this Agreement or any
Transaction Document; and
(ii) any and all Damages arising out of or resulting from acts
or omissions of the Company occurring after the Closing Date.
9.3 Procedures. The party claiming the indemnification (the
"Indemnified Party") shall give prompt notice to the party from whom the
indemnification is claimed (the "Indemnifying Party") of any claim whether
between the parties or brought by a third party against the Indemnified Party,
provided that failure of the Indemnified Party prompt notice as provided herein
shall not relieve the Indemnifying Party of any of its obligations hereunder
except to the extent that the Indemnifying Party is prejudiced thereby. The
notice from the Indemnified Parties shall specify (i) the factual basis for such
claim, and (ii) the amount of the claim. If a claim relates to an action, suit,
or proceeding filed by a third party against the Indemnified Party such notice
shall be given by the Indemnified Party to the Indemnifying Party promptly but
in any event within thirty (30) days after written notice of such action, suit,
or proceeding shall have been given to the Indemnified Party. Following receipt
of notice from the Indemnified Party of a claim (whether between the parties or
by a third party), the Indemnifying Party shall have thirty (30) days in which
to make such investigation of the claim as the Indemnifying Party shall deem
necessary or desirable. For the purposes of such investigation, the Indemnified
Party agrees to make available to the Indemnifying Party and/or its authorized
representative(s) the information relied upon by the Indemnified Party to
substantiate the claim. If the Indemnified Party and the Indemnifying Party
agree at or prior to the expiration of said thirty (30) day period (or any
agreed upon extension thereof) to the validity and amount of such claim, or if
the Indemnifying Party does not respond to such notice, the amount held in
escrow to secure Sellers' indemnification of Buyer shall be paid in satisfaction
of any claim payable by Sellers until that amount is exhausted (if it is) and
once the amount held in escrow is exhausted, the Indemnifying Party shall
immediately pay to the Indemnified Party the full amount of the claim. If the
Indemnifying Party and Indemnified Party are unable to agree upon the amount of
such claim, then only the amount the parties are able to agree upon shall be
released from escrow and the amount and claim in dispute shall be resolved in
accordance with Section 10.9 hereof. The Indemnifying Party shall have the
absolute right, in its sole discretion and expense, to elect to defend, contest
or otherwise protect against any such claim with legal counsel of its own
selection, as long as such defense does not cause a Material Adverse Effect on
the continuing conduct of the Company's business. The Indemnified Party shall
have the right, but not the obligation, to participate, at its own expense, in
the defense thereof through counsel of its own choice and shall have the right,
but not the obligation, to assert any and all crossclaims or counterclaims it
may have. The Indemnified Party shall, and shall cause its Affiliates (and their
respective directors, officers, agents and employees), to at all times cooperate
in all reasonable ways with, make their relevant files and records available for
inspection and copying by, or otherwise render reasonable assistance to, the
Indemnifying Party (i) in its defense of any action for which indemnity is
sought under this Article 9 and (ii) its prosecution under the last sentence of
this Section 9.3 of any related claim, cross-complaint, counterclaim or right of
subrogation. In the event the Indemnifying Party fails to timely defend, contest
or otherwise protect against any such suit, action, investigation, claim or
proceeding, the Indemnified Party shall have the right,
46
but not the obligation, to defend, contest, assert cross-claims or counterclaims
or otherwise protect against the same at the Indemnifying Party's expense. No
claim or action subject hereto may be settled unless the Indemnified Party and
the Indemnifying Party consent thereto, such consent not to be unreasonably
withheld. The Indemnifying Party shall be subrogated to the claims or rights of
an Indemnified Party with respect to any Damages paid by the Indemnifying Party
under this Article 9. Any indemnification obligations of Sellers shall be
satisfied from any amounts held by Escrow Agent pursuant to the Escrow Agreement
prior to Buyer exercising any other remedy or action to seek recovery of amounts
payable pursuant to Seller's obligations under this Section 9.
9.4 Limitations on Indemnification; Additional Indemnification
Provisions.
(a) Notwithstanding any other provision of this Agreement, but
subject to the last sentence of this Section 9.4(a) and Section 9.4(b) below,
(i) the maximum aggregate liability of the Sellers Parties, on the one hand, and
the Buyer Parties, on the other hand, for claims made pursuant to this Article 9
shall be limited to an amount (the "Indemnification Cap") equal to Five Million
Two Hundred Thousand Dollars ($5,200,000), (ii) no Buyer Party shall be entitled
to make any claim pursuant to this Article 9 unless and until the aggregate
amount of Damages with respect to all such claims that may be made by the Buyer
Parties pursuant to this Article 9 exceeds $150,000 (the "Indemnification
Threshold") after which the Seller Parties shall be liable for any amounts in
excess of the Indemnification Threshold not to exceed the Indemnification Cap,
and (iii) no Seller Party shall be entitled to make any claim pursuant to this
Article 9 unless and until the aggregate amount of Damages with respect to all
such claims that may be made by the Seller Parties pursuant to this Article 9
exceeds the Indemnification Threshold, after which the Buyer Parties shall be
liable for any amounts in excess of the Indemnification Threshold.
Notwithstanding anything to the contrary in this Agreement, claims relating to
matters set forth in Section 9.2(a) based on Breaches of the representations and
warranties contained in Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.10, 4.13, and
9.2(a)(ii) shall not be subject to the Indemnification Threshold or the
Indemnification Cap.
(b) The remedies provided for in this Agreement shall be the
sole and exclusive remedies of the parties and their respective officers,
directors, employees, Affiliates, agents, representatives, successors and
assigns for any breach of or inaccuracy in any representation or warranty
contained in this Agreement or any certificate delivered at Closing, provided,
however, that nothing herein is intended to waive or otherwise limit any claims
for Damages resulting or arising from fraudulent or willful misconduct or waive
any equitable remedies to which a party may be entitled.
(c) The right to indemnification, payment of Damages or other
remedy based on any representations, warranties, covenants, and obligations in
this Agreement or in the Exhibits or Schedules hereto will not be affected by
any investigation conducted with respect to, or any notice or knowledge acquired
(or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right
47
to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
(d) Notwithstanding anything to the contrary herein, upon
Closing, the Company shall cease to be a Seller Party and shall cease to have
any indemnification obligations as a Seller Party hereunder and shall be treated
as a Buyer Party, and the Seller Parties shall have no rights of recourse,
whether for contribution or otherwise, against the Company for any payments such
the Seller Party make, or are obligated to make, under this Article 9 or any
other section of this Agreement.
(e) Upon making an indemnity payment pursuant to this
Agreement, the Indemnifying Party will, to the extent of such payment, be
subrogated to all rights of the Indemnified Party against any third party in
respect of the damages to which the payment related. Without limiting the
generality of any other provision hereof, each such Indemnified Party and
Indemnifying Party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above described subrogation rights.
(f) Notwithstanding anything herein to the contrary, no party
shall be entitled to indemnification or reimbursement under any provision of
this Agreement for any amount to the extent such party or its Affiliate has been
indemnified or reimbursed for such amount under any other provision of this
Agreement the Exhibits or Schedules attached hereto, or any document executed in
connection with this Agreement or otherwise. Furthermore, in the event any
Damages related to a claim by Buyer are covered by insurance, Buyer agrees to
use commercially reasonable efforts to seek recovery under such insurance and
Buyer shall not be entitled to recovery from the Sellers (and shall refund
amounts received up to the amount of indemnification actually received) with
respect to such damages to the extent, and only to the extent, Buyer recovers
the insurance payment specified in the policy.
(g) Each party agrees to use reasonable efforts to mitigate
any Damages which form the basis of any claim hereunder.
(h) Unless otherwise required by applicable law, all
indemnification payments shall constitute adjustments to the Purchase Price for
all tax purposes and no party shall take any position inconsistent with such
characterization.
ARTICLE 10
GENERAL PROVISIONS
10.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy,
or by registered or certified mail (postage prepaid, return receipt requested)
or commercial overnight courier to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
48
If to the Buyer:
Dynamics Research Corporation
00 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attn: General Counsel
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
If to the Company or Sellers before Closing:
Xxxxxxxx Corporation
0000 Xxxxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. Xxxxxxxx, Chairman
with a copy to:
Holland & Knight LLP
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxx
If to the Sellers at or after Closing:
Xx. Xxxxxxx X. Xxxxxxxx
0000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
and
Xx. Xxxxx X. Xxxxxxxx, Xx.
0000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
and
Xx. X. Xxxx Chapel, Jr.
19966 Xxxxxx Classic Parkway
Xxxxxxx, Xxxxxxxx 00000
49
with a copy to:
Holland & Knight LLP
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxx
10.2 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
10.3 Cooperation in Tax Matters. The following provisions shall govern
the allocation of responsibility as between the Buyer and the Sellers for
certain tax matters after the Closing Date:
(a) In accordance with and subject to Section 6.8, the Buyer
shall cause Seller's Accountant to prepare and Buyer shall file or cause to be
filed the Company's federal and state tax returns for the period ending on the
Closing Date. The fees and expenses for preparing such Tax Returns shall be paid
by the Company prior to Closing and Sellers shall have no obligation for any
additional fees or expenses. The Buyer shall, at Buyer's expense, prepare or
cause to be prepared and file or cause to be filed any Tax Returns of the
Company for the tax periods which begin on or before the Closing Date and end
after the Closing Date. The Sellers shall jointly and severally pay to the Buyer
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such taxable period ending on the Closing Date to the extent such
Taxes exceed the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
included in the Closing Balance Sheet.
In the case of any Taxes that are imposed on a periodic basis
and are payable for a taxable period that includes (but does not end on) the
Closing Date, the portion of such Tax which relates to the portion of such Tax
period ending on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be the amount of
such Tax for the entire Tax period multiplied by a fraction the numerator of
which is the number of days in the Tax period ending on the Closing Date and the
denominator of which is the number of days in the entire Tax period, and (y) in
the case of any Tax based upon or related to income or receipts be deemed equal
to the amount which would be payable if the relevant Tax period ended on the
Closing Date. Any credits relating to a taxable period that begins before and
ends after the Closing Date shall be apportioned between the Buyer and the
Sellers using the same formulas as used to determine the Tax liability of the
Buyer and the
50
Sellers with respect to such periods. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Company. Sellers shall not be responsible for any
corporate level Taxes of the Company before or after Closing for Taxes due for
periods after Closing.
(b) The Buyer and the Seller Parties shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of tax returns pursuant to this Section 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. The Buyer and the Seller Parties agree (A) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any Tax
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Buyer or the Sellers, any
extensions thereof) of the respective Tax periods, and to abide by all record
retention agreements entered into with any taxing authority, and (B) to give the
other parties reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other parties so request, the
Buyer, the Company or the Sellers, as the case may be, shall allow the
requesting party to take possession of such books and records. The Buyer and the
Seller Parties further agree, upon request, to use commercially 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). The Buyer shall provide the
Shareholders' Representative and R. John Chapel, Jr. tax returns relating to
periods prior to the Closing Date at least 30 days prior to the due date of such
tax returns for the Shareholders' Representative and R. John Chapel, Jr. to
review and recommend such changes as reasonably requested by the Shareholders'
Representative and R. John Chapel, Jr.. In the event that there is a
disagreement between Buyer and Sellers regarding the Company's federal and state
tax returns, the parties agree to negotiate in good faith to resolve their
differences and to execute and file such tax returns when such returns are
required to be filed. If such differences are not resolved prior to the due date
of the returns, then such tax returns shall be executed and filed as prepared
and the parties shall amend the returns after a final resolution has been
reached either through agreement of the parties or as otherwise provided herein.
Any dispute with respect to such tax returns shall be resolved in the manner set
forth in Section 6.8.
(c) All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with the consummation of the transactions provided for in this
Agreement, shall be paid by the Buyer when due, and the Sellers will, at their
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, the Buyer will, and will
cause its Affiliates to, join in the execution of any such Tax Returns and other
documentation.
10.4 Entire Agreement; Assignment; Failure of Certain Conditions. This
Agreement including the Exhibits and Schedules thereto, together with the
Confidentiality Agreement, constitutes the entire agreement among the parties
with respect to the subject matter
51
hereof and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof. This Agreement shall not be assigned by any party hereto, by operation
of law or otherwise; provided, however, that the Buyer may assign any of its
respective rights and obligations to any Affiliate of the Buyer but no such
assignment shall relieve the Buyer of its obligations hereunder. Any attempted
assignment which does not comply with the provisions of this Section 10.4 shall
be null and void ab initio.
10.5 Parties in Interest; Successors and Assigns. This Agreement shall
be binding upon and inure solely to the benefit of each party hereto and their
respective permitted successors and assigns, and, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
10.6 Legal Counsel . Each party to this Agreement acknowledges and
represents that it has been represented by its own legal counsel in connection
with the transactions contemplated by this Agreement, with the opportunity to
seek advice as to its legal rights from such counsel. Each party further
represents that it is being independently advised as to the tax consequences of
the transactions contemplated by this Agreement.
10.7 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of The Commonwealth of Massachusetts without regard
to the choice or conflict of law principles thereof.
10.8 Shareholders' Representative.
(a) By the execution and delivery of this Agreement, including
counterparts hereof, each Seller with the exception of R. John Chapel, Jr.,
(collectively the "Xxxxxxxx Family Sellers") the hereby irrevocably constitutes
and appoints Xx. Xxxxxxx X. Xxxxxxxx as the true and lawful agent and
attorney-in-fact (the "Shareholders' Representative") of such Xxxxxxxx Family
Seller with full powers of substitution to act in the name, place and stead of
such Xxxxxxxx Family Seller with respect to the performance on behalf of such
Xxxxxxxx Family Seller under the terms and provisions of this Agreement, as the
same may be from time to time amended, and to do or refrain from doing all such
further acts and things, and to execute all such documents, instruments,
certificates and stock powers on such Xxxxxxxx Family Seller's behalf, as the
Shareholders' Representative shall deem necessary or appropriate in connection
with any of the transactions contemplated under this Agreement, including: (i)
to receive all payments made by the Buyer to the Xxxxxxxx Family Sellers under
this Agreement; (ii) to agree upon or compromise any matter related to the
calculation of any adjustments to the Purchase Price pursuant to Section 2.4 or
otherwise or other payments to be made; (iii) to act for the Xxxxxxxx Family
Sellers with respect to all indemnification matters referred to in this
Agreement, including the right to compromise on behalf of the Xxxxxxxx Family
Sellers any indemnification claim made by or against the Xxxxxxxx Family
Sellers; (iv) to terminate, amend, or waive any provision of this Agreement;
provided that any such action, if material to the rights and obligations of the
Xxxxxxxx Family Sellers in the reasonable judgment of the Shareholders'
Representative, shall be taken in the same manner with respect to all Xxxxxxxx
Family Sellers, unless otherwise agreed by each Xxxxxxxx Family Seller who is
subject to any disparate treatment of a potentially adverse nature; (v) to
employ and obtain the advice of legal counsel, accountants
52
and other professional advisors as the Shareholders' Representative, in his sole
discretion, deems necessary or advisable in the performance of his duties as the
Shareholders' Representative and to rely on their advice and counsel; (vi) to
incur and pay out of the Purchase Price expenses, including fees of brokers,
attorneys and accountants incurred pursuant to the transactions contemplated
hereby, and any other fees and expenses allocable or in any way relating to such
transaction or any indemnification claim, whether incurred prior or subsequent
to Closing; (vii) to retain a portion of the Purchase Price as a reserve against
the payment of expenses incurred in his capacity as Shareholders'
Representative; and (viii) to do or refrain from doing any further act or deed
on behalf of the Xxxxxxxx Family Sellers which the Shareholders' Representative
deems necessary or appropriate in his sole discretion relating to the subject
matter of this Agreement as fully and completely as any of the Xxxxxxxx Family
Sellers could do if personally present and acting.
(b) The appointment of the Shareholders' Representative shall
be deemed coupled with an interest and shall be irrevocable, and any other
person may conclusively and absolutely rely, without inquiry, upon any decisions
and actions of the Shareholders' Representative as the acts of the Xxxxxxxx
Family Sellers in all matters referred to in this Agreement. Each of the
Xxxxxxxx Family Sellers hereby ratifies and confirms all that the Shareholders'
Representative shall do or cause to be done by virtue of such Shareholders'
Representative's appointment as Shareholders' Representative of such Xxxxxxxx
Family Seller. The Shareholders' Representative shall act for the Xxxxxxxx
Family Sellers on all of the matters set forth in this Agreement in the manner
the Shareholders' Representative believes to be in the best interest of the
Xxxxxxxx Family Sellers, but the Shareholders' Representative shall not be
responsible to any Xxxxxxxx Family Sellers for any loss or damage any Xxxxxxxx
Family Sellers may suffer by reason of the performance by the Shareholders'
Representative of such Shareholders' Representative's duties under this
Agreement, other than loss or damage arising from willful misconduct in the
performance of such Shareholders' Representative's duties under this Agreement.
(c) Each of the Xxxxxxxx Family Sellers hereby expressly
acknowledges and agrees that the Shareholders' Representative is authorized to
act on behalf of such Xxxxxxxx Family Seller notwithstanding any dispute or
disagreement among the Xxxxxxxx Family Sellers, and that any person shall be
entitled to rely on any and all action taken by the Shareholders' Representative
under this Agreement without liability to, or obligation to inquire of, any of
the Xxxxxxxx Family Sellers. If the Shareholders' Representative resigns or
ceases to function in such capacity for any reason whatsoever, then the
successor Shareholders' Representative shall be the person among the Xxxxxxxx
Family Sellers which held a majority of the Stock at Closing appoint; provided,
however, that if for any reason no successor has been appointed within thirty
(30) days, then any Xxxxxxxx Family Seller shall have the right to petition a
court of competent jurisdiction for appointment of a successor Shareholders'
Representative. The Xxxxxxxx Family Sellers do hereby jointly and severally
agree to indemnify and hold the Shareholders' Representative harmless from and
against any and all liability, loss, cost, damage or expense (including without
limitation attorneys' fees) reasonably incurred or suffered as a result of the
performance of such Shareholders' Representative's duties under this Agreement
except for any such liability arising out of the willful misconduct of the
Shareholders' Representative.
53
(d) The provisions of this Section 10.8 are independent and
severable, are irrevocable and coupled with an interest and shall be enforceable
under all circumstances unless prohibited by law.
10.9 Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach, termination or invalidity thereof
(each a "Dispute") that the parties are not able to resolve after good faith
efforts over a period of fifteen (15) days shall be settled by arbitration
conducted in Washington, D.C., or Boston, Massachusetts and administered by the
American Arbitration Association (the "AAA"). Such arbitration shall be under
the Commercial Arbitration Rules of the AAA ("Rules"), except as otherwise set
forth in this Section 10.9, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(a) If any party asserts that there exists a Dispute, such
party shall select one arbitrator and the other party shall select one
arbitrator. If either party fails to make a selection, the AAA shall select one
arbitrator on behalf of such party. The two arbitrators so selected will choose
within twenty (20) days after their selection a third arbitrator (or, if they
fail to make a choice, the AAA shall choose a third arbitrator). All three
arbitrators shall be neutral arbitrators and subject to Rule 19 of the Rules.
(b) In making their determination, the arbitrators shall not
have the authority to modify any term or provision of this Agreement. The
decision of any two of the arbitrators shall be final, conclusive and binding on
the parties. The arbitrators shall award the costs and expenses of the
arbitration, including reasonable attorneys' fees, disbursements, arbitrators'
fees and fees payable to the AAA, to the prevailing party as they see fit. The
arbitrators shall deliver a written and reasoned award with respect to the
dispute to each of the parties, who promptly shall act in accordance therewith.
(c) Pre-hearing discovery shall be limited to exchange or
production of documents and other written information. The arbitrators shall
conduct the arbitration so that a final award is made or rendered as soon as
practicable, but in no event later than 120 days after the commencement of the
arbitration nor later than twenty (20) days following the completion of the
hearing, unless either period is reduced or extended by agreement of the
parties, or by the arbitrators for cause.
(d) In any arbitration hereunder, all Sellers shall be deemed,
for procedural purposes, to be a single party; the other party in the
arbitration shall be deemed, for procedural purposes, to be the Buyer. Each of
the Sellers and the Buyer, if given due notice of the proceedings, shall be
bound by the award in any arbitration hereunder, whether or not he or it chooses
to participate in the arbitration.
10.10 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
10.11 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be
54
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
10.12 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED HEREON, OR RISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY IN CONNECTION WITH SUCH
AGREEMENTS.
[Signature Page follows]
55
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed, as an instrument under seal, as of the date first above written.
DYNAMICS RESEARCH CORPORATION
By: /s/ Xxxxx Xxxxxxx
-------------------------------------------
Xxxxx Xxxxxxx
Vice President and Chief Financial Officer
XXXXXXXX CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------------
Xx. Xxxxxxx X. Xxxxxxxx, Chairman
SELLERS:
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------------
Xx. Xxxxxxx X. Xxxxxxxx
/s/ Xxxxx X. Xxxxxxxx, Xx.
-------------------------------------------
Xx. Xxxxx X. Xxxxxxxx, Xx.
/s/ R. John Chapel, Jr.
-------------------------------------------
R. John Chapel, Jr.
XXXXXXXX MID-ATLANTIC P-1 HOLDINGS
LIMITED PARTNERSHIP
By: XXXXXXXX CONTROL C-1 CORPORATION
Its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Xx. Xxxxx X. Xxxxxxxx, Xx., President
56
