EXHIBIT 2.1
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT, dated as of March 31, 1998 (this
"Agreement") by and among PARAVANT COMPUTER SYSTEMS, INC., a Florida corporation
(the "Purchaser"), ENGINEERING DEVELOPMENT LABORATORIES, INCORPORATED, an Ohio
corporation ("EDL"), SIGNAL TECHNOLOGY LABORATORIES, INC., an Ohio corporation
("STL") (EDL and STL collectively, the "Companies"), XXXXX X. XXXXXXXX
("Xxxxxxxx"), XXXXXX X. XXXXXXXX ("Xxxxxxxx"), and C. XXXXX XXXXXXXXXX
("Xxxxxxxxxx") as shareholders of EDL (Xxxxxxxx, Xxxxxxxx and Xxxxxxxxxx
collectively, the "EDL Shareholders"), and X. XXXXXX XXXXXXXX ("Xxxxxxxx"),
XXXXX XXXXXXXX ("Xxxxxxxx"), XXX X. XXXXXXXXX ("Torresani"), Xxxxxxxx, Xxxxxxxx
and Xxxxxxxxxx as shareholders of STL (Schooley, Oberbeck, Xxxxxxxxx, Xxxxxxxx,
Xxxxxxxx and Xxxxxxxxxx collectively, the "STL Shareholders") (each of the EDL
Shareholders and STL Shareholders individually, a "Shareholder" and all of the
EDL Shareholders and STL Shareholders collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, the EDL Shareholders are the holders of all of the issued and
outstanding shares of common stock, no par value per share, of EDL (the "EDL
Common Stock") and the STL Shareholders together with EDL are the holders of all
of the issued and outstanding shares of common stock, no par value per share, of
STL (the "STL Common Stock"); and
WHEREAS, immediately prior to the Closing (as hereinafter defined) EDL
will distribute its shares of STL to the EDL Shareholders, thereby resulting in
the shareholders of STL being Schooley, Oberbeck, Xxxxxxxxx, Xxxxxxxx, Xxxxxxxx
and Xxxxxxxxxx;
WHEREAS, the Purchaser and the Companies executed a letter of intent
dated February 13, 1998, subsequently amended through March 20, 1998
(collectively, the "LOI"), providing for the acquisition by the Purchaser from
the EDL Shareholders of all of the EDL Common Stock, the acquisition by the
Purchaser, directly or indirectly through its wholly owned subsidiary NewSTL,
from STL of substantially all of the assets and business of STL (hereinafter
defined as the "STL Purchased Assets") but not including certain specifically
excluded assets and business (hereinafter defined as the "STL Excluded Assets"),
and the acquisition by the Purchaser of non-competition agreements from
Xxxxxxxx, Xxxxxxxx and Torresani (hereinafter defined as the "STL Shareholder
Non-Competition Agreements") subject to the negotiation and execution of an
acquisition agreement setting forth the mutual rights and obligations of the
parties;
WHEREAS, this Agreement supersedes the LOI; and
WHEREAS, the Purchaser and the Companies together with the Shareholders
have negotiated mutually acceptable terms and conditions for the aforementioned
acquisitions by the Purchaser as hereinafter set forth;
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NOW, THEREFORE, in consideration of the mutual benefits to be derived
hereby and the representations, warranties, covenants and agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser, the Companies and
the Shareholders hereby agree as follows:
ARTICLE I
Acquisition of the EDL Common Stock, the STL Purchased
Assets and the STL Shareholder Non-Competition
Agreements.
Purchaser shall acquire the EDL Common Stock, the STL Purchased Assets
and the STL Shareholder Non-Competition Agreements as hereinafter provided in
this Article I.
1.1 Acquisition of the EDL Common Stock. Upon the terms and subject to
the conditions hereinafter set forth, at the "Closing" (as defined in Section
8.1) the EDL Shareholders shall sell, transfer and deliver to the Purchaser and
the Purchaser shall purchase and acquire from the EDL Shareholders all of the
shares of EDL Common Stock set forth on the List of Shareholders and Shares Held
which is attached hereto as Exhibit 1.1 which shall constitute all of the shares
of capital stock of EDL issued and outstanding at the Closing.
1.1.1 Consideration at Closing for the EDL Common Stock. As
consideration for the sale, transfer and delivery to the Purchaser of the EDL
Common Stock (the "EDL Common Stock Sale Consideration"), the Purchaser shall
pay to each EDL Shareholder a one-third individual share of the following:
(a) Four Million Six Hundred Fifty Thousand Dollars ($4,650,000)
in cash;
(b) Promissory notes made payable to each of the EDL
Shareholders, aggregating Three Million Two Hundred Thirty-Eight Thousand
Dollars ($3,238,000) (the"Xxxxxxxx Note," the "Xxxxxxxx Note" and the
"Xxxxxxxxxx Note," respectively) in the forms annexed hereto as a part of
Exhibit 1.1.1(b); and
(c) Two Million Six Hundred Forty Six Thousand Five Hundred
(2,646,500) shares of common stock, $0.015 par value per share, of the Purchaser
("Paravant Stock") which , at the option of each of the EDL Shareholders,
(exercised in their individual discretion), may be paid in its entirety at
Closing or may be paid in installments as set forth in Section 1.7, and which,
in either case, will be subject to the lock-up provisions set forth in Section
1.10.
1.2 Acquisition of the STL Purchased Assets and Assumption of Assumed
Liabilities; and Delivery of STL Shareholder Non-Competition Agreements. Upon
the terms and subject to the conditions hereinafter set forth, at the Closing
STL shall sell, transfer and deliver to the Purchaser and the Purchaser shall
purchase and acquire from STL all of the business and assets of STL which do not
consist of "Excluded Assets" (as hereinafter defined) including, but not limited
to, all of the
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business and assets listed as Purchased Assets (the "STL Purchased Assets") on
the List of Purchased Assets, Excluded Assets and Assumed Liabilities which is
annexed hereto as Exhibit 1.2A. Notwithstanding the above, STL shall retain all
of its existing contracts (the "Existing Contracts"), all work in process under
such Existing Contracts and cash, accounts receivable and other proceeds of such
Existing Contracts (all such assets and the other assets described as "Excluded
Assets" in Exhibit 1.2A, being hereinafter referred to as the "Excluded
Assets"). The STL Purchased Assets shall include all of the business and assets
of STL other than the Excluded Assets. Concurrently with the sale and transfer
of the Purchased Assets, STL shall assign and transfer to the Purchaser and the
Purchaser shall accept and assume the liabilities of STL and the STL
Shareholders specifically identified as Assumed Liabilities on Exhibit 1.2A (the
"Assumed Liabilities") and Xxxxxxxx, Torresani and Xxxxxxxx shall each deliver
to the Purchaser a non-competition agreement in the form attached hereto as
Exhibit 1.2B (an "STL Shareholder Non-Competition Agreement"). STL shall retain
(and Purchaser shall have no obligation with respect to) STL's liabilities and
obligations which are not specified as Assumed Liabilities.
1.2.1 Consideration for the STL Purchased Assets. As consideration for
the sale, transfer and delivery to the Purchaser of the STL Purchased Assets
(the "STL Purchased Assets Consideration"), the Purchaser shall:
(a) Assume the Assumed Liabilities;
(b) At the Closing, pay to STL One Million Seven Hundred Thousand
Dollars ($1,700,000) in cash; and
(c) Pay to STL the Cash Earn-Out provided for in Section 1.3 to
the extent, if any, such Cash Earn-Out is required to be paid to STL in
accordance therewith. STL's right to receive the Cash Earn-Out may be assigned
to the Shareholders individually, proportionate to their respective Ratable
Interests.
The STL Purchased Assets Consideration shall be in addition to the Cash
Earn-Out otherwise payable to the Shareholders.
1.2.2 Consideration for the STL Shareholder Non-Competition Agreements.
For the delivery to the Purchaser of the STL Shareholder Non-Competition
Agreements, as consideration therefor, the Purchaser shall pay to Xxxxxxxx,
Torresani and Xxxxxxxx the applicable consideration ("STL Shareholder
Non-Competition Agreement Consideration") provided for in each of Sections
1.2.2.1, 1.2.2.2, and 1.2.2.3.
1.2.2.1 The Xxxxxxxx STL Shareholder Non-Competition Agreement
Consideration. As consideration for Xxxxxxxx'x entering into his STL Shareholder
Non-Competition Agreement, the Purchaser shall pay at Closing to Xxxxxxxx:
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(a) One Million One Hundred Seventy Five Thousand Dollars
($1,175,000) in cash;
(b) A promissory note in the principal amount of Seven Hundred
Eighty-One Thousand Dollars ($781,000) (the "Xxxxxxxx Note") in the form annexed
hereto as a part of Exhibit 1.2.2.1(b); and
(c) Six Hundred Fifty One Thousand Seven Hundred Fifty (651,750)
shares of Paravant Stock which, at the option of Xxxxxxxx, may be paid in its
entirety at Closing or may be paid in installments as set forth in Section 1.7,
and which, in either case, will be subject to the lockup provisions set forth in
Section 1.10.
1.2.2.2 The Torresani STL Shareholder Non-Competition Agreement
Consideration. As consideration for Torresani's entering into his STL
Shareholder Non-Competition Agreement, the Purchaser shall pay at Closing to
Torresani:
(a) Five Hundred Eighty Seven Thousand Five Hundred Dollars
($587,500) in cash;
(b) A promissory note in the principal amount of Three Hundred
Ninety Thousand Five Hundred Dollars ($390,500) (the "Torresani Note") in the
form annexed hereto as a part of Exhibit 1.2.2.2(b); and
(c) Three Hundred Twenty Five Thousand Eight Hundred Seventy Five
(325,875) shares of Paravant Stock which, at the option of Torresani, may be
paid in its entirety at Closing or may be paid in installments as set forth in
Section 1.7, and which, in either case, will be subject to the lock-up
provisions set forth in Section 1.10.
1.2.2.3 The Xxxxxxxx STL Shareholder Non-Competition Agreement
Consideration. As consideration for Xxxxxxxx entering into his STL Shareholder
Non-Competition Agreement the Purchaser shall pay at closing to Xxxxxxxx:
(a) Five Hundred Eighty Seven Thousand Five Hundred Dollars
($587,500) in cash;
(b) A promissory note in the principal amount of Three Hundred
Ninety Thousand Five Hundred Dollars ($390,500) (the "Xxxxxxxx Note") in the
form annexed hereto as a part of Exhibit 1.2.2.3(b); and
(c) Three Hundred Twenty Five Thousand Eight Hundred Seventy Five
(325,875) shares of Paravant Stock which, at the option of Xxxxxxxx, may be paid
in its entirety at Closing or may be paid in installments as set forth in
Section 1.7, and which, in either case, will be subject to the lock-up
provisions set forth in Section 1.10.
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1.3 Cash Earn-Out. For each of the Periods ("Earn-Out Periods") shown in
the Table below (the "Table") the combined pre-tax earnings of EDL and "NewSTL"
(i.e., the corporation referred to in Section 5.2.5) (EDL and NewSTL
collectively, "EDL/NewSTL") will be distributed as indicated in the Table to (i)
the Purchaser (identified in the Table as "Paravant") and (ii) the Shareholders,
including the Shareholders' beneficial interests in STL, (collectively
identified in the Table as "Sellers") in accordance with their Ratable Interests
(such distributions hereinafter referred to as the "Cash Earn-Out"). For
purposes of calculating the Cash Earn-Out, the combined pre-tax earnings of
EDL/NewSTL will be calculated from operating results of EDL/NewSTL included in
the financial statements of the Purchaser prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") and Securities and Exchange Commission
Regulation S-X ("Regulation S-X"). However, EDL/STL past accounting practices
will not be modified except to the extent required to comply with GAAP and
Regulation S-X. Provided, however, that subsequent to completion of all
activities associated with the acquisition transactions contemplated by this
Agreement all outside administrative, accounting, legal and other costs related
to the Purchaser as a public company will be divided equally between the
Purchaser and EDL/NewSTL up to a maximum EDL/NewSTL portion of One Hundred Fifty
Thousand Dollars ($150,000). Such division between the Purchaser and EDL/NewSTL
will be redetermined if additional acquisitions are made. Outside audit fees and
fees related to the preparation of consolidated state and federal income tax
returns shall be charged to EDL/NewSTL based upon audit and tax requirements
applicable to EDL/NewSTL (but not more than one-half of the total audit and tax
expense incurred by the Purchaser) and all legal fees other than those related
to the Purchaser as a public company will be assigned based upon subject matter
and source of engagement.
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Distribution of Pre-Tax Earnings
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Cash Period Period Period Period Period
Recipient Closing- 10/1/99 - 10/1/00 - 10/1/01 - 10/1/02 -
9/30/99 9/30/00 9/30/01 9/30/02 9/30/03
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Paravant 100% First $7.5 First $7.5 First $6.8 First $8
Only Million Million Million Million
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Sellers None Next $2.5 Next $2.5 Next $1.7 Next $2
Only(1) Million Million Million Million
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Split Then Split Then Split Then Split Then Split
Paravant None 40% 40% 50% 50%
Sellers 60% 60% 50% 50%
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(1) The distribution, if any, to the Sellers shall be allocated so
that the amount up to the first Seven Hundred Fifty Thousand
Dollars ($750,000) thereof in each Earn-Out Period shall be made
as payment to STL for the STL Purchased Assets and the
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balance, if any of such distribution shall be made as a
performance bonus to the Shareholders in accordance with their
respective Ratable Interests. Such performance bonus, if any,
shall be treated as normal compensation and subject to standard
withholding for taxes, FICA, Medicare, etc., for which the
Shareholders shall be responsible.
1.4 Fundamental Event: Acceleration. Upon the happening of a Fundamental
Event (as hereinafter defined) the Cash Earn-Out shall be accelerated as if the
remaining Earn-Out Periods had been completed with pre-tax earnings for the year
in which such acceleration shall occur to be calculated as the greater of the
actual pretax earnings to the date of acceleration or Ten Million Dollars
($10,000,000). Thereafter for each other remaining uncompleted Earn-Out Period
the Earn- Out shall be calculated as if such Earn-Out Period had been completed
with pre-tax earnings of Ten Million Dollars ($10,000,000). In addition, any
shares of Paravant Stock which are "locked up" pursuant to the lock-up
provisions of Section 1.10 will be released from such lock-up as of the date of
such acceleration. For purposes of this provision, a "Fundamental Event" shall
be defined as an event in which (i) the Purchaser is sold or merged into another
entity in which Purchaser is not the surviving entity, (ii) the Purchaser is the
surviving company in a merger or consolidation but, immediately following such
merger or consolidation, the shareholders of Purchaser who were shareholders
immediately prior to such merger or consolidation (in their capacities as such)
control less than fifty percent (50%) of the voting securities of the merged or
consolidated company, (iii) the Purchaser disposes of, in the aggregate, more
than twenty percent (20%) of either EDL or NewSTL (based upon the fair market
value of entity disposed of determined as of the time immediately preceding any
such disposition), (iv) the Purchaser sells, to a single person or group, in a
single transaction or a series of transactions occurring within a period of one
hundred and eighty (180) days or less, shares of Paravant Stock which, following
such sale aggregate more than fifty percent (50%) of the then outstanding shares
of the Purchaser, or (v) UES, Inc. ("UES") and/or Xxxxxxx X. Xxxxx ("Xx. Xxxxx")
sell (or issue options or other obligations to sell) an aggregate of more than
Eight Hundred Thousand (800,000) shares of Paravant Stock prior to January 1,
2000 excluding the possible sale by UES to Xx. Xxxxx of all or any portion of
the Four Hundred Forty Five Thousand Eight Hundred Forty Eight (445,848) shares
of Paravant Stock (but not excluding any possible resale of such shares by Xx.
Xxxxx) which are subject to a presently outstanding option granted by UES, and
further excluding the possible sale by UES to other executive officers of the
Purchaser of all or any portion of the Four Hundred Forty Five Thousand Eight
Hundred Forty Eight (445,848) shares of Paravant Stock which are subject to
presently outstanding options granted by UES or any resale by any such other
optionee of any of such shares.
1.5 Cash Earn-Out Payable Date. Cash Earn-Out Consideration shall be
payable within one hundred five (105) days of the end of the applicable
Performance Year. Any Cash Earn-Out Consideration not paid when due shall bear
interest at eight percent (8%) per annum.
1.6 Ratable Interest. The term "Ratable Interest" used in this Agreement
with reference to any Shareholder's interest shall mean such Shareholder's
interest as determined in accordance with Exhibit 1.6 which is annexed hereto.
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1.7 Option to be Paid Consideration Consisting of Paravant Shares in
Installments. Sections 1.1.1(c), 1.2.2.1(c), 1.2.2.2(c) and 1.2.2.3(c), in each
case, grant the parties or party identified therein the option to be issued the
Paravant Stock described therein, either: (i) in its entirety at the Closing; or
(ii) in installments. If any party elects to be issued such Paravant Stock in
installments, then the aggregate amount of such stock to be issued to such party
and the date or dates on which such stock shall be issued shall be paid as
specified two (2) business days prior to Closing. In the event any party elects
to be issued such stock in installments, any stock certificate to be issued as
of the Closing Date may be delivered by the Purchaser to such party within
thirty (30) days after the Closing Date.
1.8 No Interest on Sale Consideration. Except as provided in the
Purchase Notes (the term "Purchase Notes" shall mean, collectively, the Xxxxxxxx
Note, the Xxxxxxxx Note, the Xxxxxxxxxx Note, the Xxxxxxxx Note, the Torresani
Note and the Xxxxxxxx Note), no interest shall accrue on or be payable with
respect to any payment due as a part of the sale consideration. However,
notwithstanding the foregoing, if any payments are not made when due, interest
shall accrue and be payable on demand on the overdue payments at a rate equal to
eight percent (8%) per annum, provided, however, that the acceptance of such
interest shall not constitute a waiver of the failure to make any other payment
as and when due.
1.9 Unregistered Paravant Stock; No Fractional Shares. The shares of
Paravant Stock which will be paid by the Purchaser to the parties as
consideration under this Agreement will be "restricted securities" which will
not have been registered under federal or state securities laws in reliance upon
exemptions from such registration based in part on investment representations
given by the STL and the Shareholders in Sections 2.29 and 3.21. As "restricted
securities" such shares of Paravant Stock will be subject to restrictions on
transferability imposed by the federal Securities Act of 1933, as amended (the
"33 Act"), including the restriction that such shares may not be sold,
transferred, or pledged unless they have been registered under the 33 Act or, in
the opinion of legal counsel to the Purchaser, an exemption from such
registration is then available. Such shares of Paravant Stock will also be
subject to the lock-up provisions of Section 1.10.
No fractional shares of Paravant Stock will be issued as
consideration under this Agreement. The amount of any fractional share interest
which would have otherwise been paid as a fractional share shall be paid in cash
by the Purchaser at a price per share equal to the average of the closing prices
of Paravant Stock reported by NASDAQ for the twenty (20) trading days prior to
the date such fractional share would have otherwise been paid. In computing the
amount of any payment to a Shareholder under the terms of this Agreement any
fractional cents will be rounded up to the nearest dollar.
Purchaser, at Purchaser's sole expense, agrees to register the
shares of Paravant Stock issued as consideration under this Agreement under the
33 Act within twelve (12) months after the Closing and in no event later than
the time the "lock-up" of such shares terminates pursuant to Section 1.4 or
1.10.
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1.10 "Lock-Up" Applicable to Paravant Stock. Except as otherwise
provided below in this Section 1.10, the shares of Paravant Stock paid at the
Closing or issued in installments pursuant to Section 1.7 will be locked up for
the period of eighteen (18) months from the Closing Date. During the period when
such shares are locked up such shares may not be sold, transferred,
hypothecated, pledged by the record holder thereof. Notwithstanding the
foregoing, the lock-up period shall terminate prior to eighteen (18) months from
the Closing Date and any securities held by Purchaser pending termination of
such lock-up period shall be distributed if such period is terminated pursuant
to Section 1.4. In the event the Purchaser changes its brokerage account to
increase marketability of its shares and, as a result, there is a need or desire
for the new broker to acquire shares from investors at a discount to pursue
stock strategies, then the Shareholders will be afforded an equal opportunity to
participate with other shareholders and any lock-up applicable to the shares
required for such participation will be released.
1.11 Value of Certain STL Assets; STL Tangible Assets and EDL Net Worth;
Built-In Gains Tax. In addition to each of the other representations, warranties
and covenants of the parties set forth in this Agreement, such parties make the
following representations, warranties and covenants which are acknowledged to be
material to the execution of this Agreement and the performance of their
respective obligations of the parties hereunder.
1.11.1 Cash and Receivables of STL. At the time of Closing, STL
shall transfer to NewSTL Eight Hundred Fifty Thousand Dollars ($850,000) in
aggregate amount of cash and valid receivables in addition to fixed assets,
inventory and intellectual property.
1.11.2 Closing Date EDL/STL Value. A determination of the Closing
Date fair market value of the tangible assets (including cash, accounts
receivable, fixed assets, and inventory) included among the STL Purchased Assets
combined with the net worth of EDL(the "Closing Date EDL/STL Value") will be
made within one hundred twenty (120) days after the Closing. Such Closing Date
EDL/STL Value shall be determined utilizing values applicable to an arm's length
transaction between independent third parties. If the Closing Date EDL/STL Value
aggregates less than Two Million Dollars ($2,000,000), then within one hundred
twenty (120) days following such determination, Xxxxxxxx will transfer to the
Purchaser such number of shares of Paravant Stock, at the agreed upon value of
$3.50 per share, as shall be required to make up the difference between the
Closing Date EDL/STL Value and Two Million Dollars ($2,000,000), provided,
however, the Purchaser shall grant to Xxxxxxxx the right for a period of two
years following the Closing Date to purchase, in a single transaction, from the
Purchaser at $3.50 per share (subject to customary adjustments for stock splits,
stock dividends and similar events) up to the same number of shares as Xxxxxxxx
shall have transferred to the Purchaser under this provision. For purposes of
the Closing Date EDL/STL Value calculation, the EDL net worth will not be
decreased for any contingent liabilities determined by an outside audit.
1.11.3 EDL Indebtedness for Shareholder Distribution. The maximum
amount of indebtedness existing at the Closing which shall have been incurred by
EDL for the purpose of paying the distribution to the EDL Shareholders referred
to in Section 5.1.4(v) shall not exceed Two
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Hundred Twenty-Five Thousand Dollars ($225,000). The amount of any such
indebtedness shall be included in the calculation of the EDL/STL Closing Date
Value.
1.11.4 Accrued Liability for Built In Gains Tax. EDL's accrued
liability for the built-in gains tax as a result of the distribution of the STL
shares to the EDL Shareholders referred to in Section 5.1.4(v) (the "BIG") is
agreed upon by the parties to this Agreement to be Six Hundred Thirty-Three
Thousand Eight Hundred Ninety-Seven Dollars ($633,897). The amount of the BIG
for purposes of the calculation of the EDL/STL Closing Date Value shall be Six
Hundred Thirty- Three Thousand Eight Hundred Ninety-Seven Dollars ($633,897)
less any estimates paid by EDL prior to the Closing for such tax. The accrued
liability for such tax is to be determined by taking the evaluation of the fifty
six percent (56%) interest of STL on January 1, 1995 of One Million Nine Hundred
and Fifty-Two Thousand Seven Hundred and Sixty-Four Dollars ($1,952,764) less
EDL's basis in STL of One Hundred Forty-One Thousand Six Hundred Thirty-One
Dollars ($141,231), or One Million Eight Hundred and Eleven Thousand One Hundred
and Thirty-Three Dollars ($1,811,133), multiplied by thirty-five percent (35%)
for a tax liability amount of Six Hundred Thirty-Three Thousand Eight Hundred
Ninety-Seven Dollars ($633,897) which will be accrued as a liability when the
STL stock is distributed.
1.11.5 Increase in BIG. In the event of any increase in the BIG
to more than Six Hundred Thirty-Three Thousand Eight Hundred Ninety-Seven
Dollars ($633,897), the Purchaser and the Shareholders shall each reimburse EDL
for fifty percent (50%) of such increase (the Shareholders according to their
Ratable Interests). The amount of any such increase to be borne by the
Shareholders shall be taken out of any Cash Earn-Out payable to them, applied
against the next such Cash Earn-Out payments payable to them, first out of the
bonus composite portion and then from the good-will/sale of assets portion, if
required.
1.12 Purchase Notes; Effect of Warrant Call. Notwithstanding any other
provision of this Agreement, the Purchaser shall have the right, as between the
parties to this Agreement, to call for redemption, cancellation, exercise or
conversion, any or all of outstanding warrants. If any of such warrants are
called by the Purchaser, unless prohibited under the terms of any applicable
warrant agreement or credit agreement, shall apply fifteen percent (15%) of the
net proceeds, if any, received by the Purchaser (after deduction of any directly
related expenses) (the "Warrant Proceeds" as a lump sum payment to reduce the
principal amount of the Purchase Notes. Any Warrant Proceeds shall be applied to
the Purchase Notes prorated based upon the principal amount of each such
Purchase Note. Any Warrant Proceeds received by the Purchaser prior to the
Closing shall be applied to reduce the original principal amount of the Purchase
Notes. Any Warrant Proceeds received after the Closing shall be applied to the
outstanding Purchase Notes first against any accrued interest and thereafter
against the unpaid principal beginning with the final principal installment to
become due.
ARTICLE II
Representations and Warranties
of the EDL Shareholders Regarding EDL
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Each of the EDL Shareholders severally (each as to his one-third
individual interest in the EDL Common Stock) makes the following representations
and warranties to the Purchaser, each of which shall be deemed material (and the
Purchaser, in executing, delivering and consummating this Agreement, has relied
and will rely upon the correctness and completeness of each of such
representations and warranties):
2.1 Valid Corporate Existence; Qualification. EDL is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. EDL has the corporate power to carry on its business as now conducted and
to own its assets. EDL is duly qualified to conduct business and is in good
standing as a foreign corporation in those jurisdictions set forth on the
Disclosure Schedule which has been furnished to, and agreed upon by the parties
to this Agreement (the "Disclosure Schedule") and to the best knowledge of each
EDL Shareholder: (i) such jurisdictions are the only jurisdictions in which EDL
is required to qualify in order to own its assets or properties or to carry on
its business as now conducted; and (ii) there has not been any claim by any
other jurisdiction to the effect that EDL is required to qualify or otherwise be
authorized to do business as a foreign corporation therein. The copies of the
good standing certificates or certificates of existence of EDL (issued by the
appropriate state authority), the Articles of Incorporation of EDL (certified by
the appropriate state authority) and By-Laws of EDL (certified by such Company's
Secretary), as amended to date, which constitute a part of the Disclosure
Schedule are true and complete copies of those documents as now in effect. The
minute books of EDL contain accurate records of all meetings of its Board of
Directors and shareholders since its incorporation, and accurately reflect all
transactions referred to therein.
2.2 Capitalization. The authorized capital stock of EDL consists of 750
shares of Common Stock, no par value per share, of which 492 shares are issued.
All of such outstanding shares of Common Stock of EDL are validly issued, fully
paid and nonassessable. There are no subscriptions, options, warrants, rights or
calls or other commitments or agreements to which EDL or any of the Shareholders
is a party or by which any of such parties are bound, calling for the issuance,
transfer, sale or other disposition of any class of securities of EDL. There are
no outstanding securities of EDL convertible or exchangeable, actually or
contingently, into shares of Common Stock, or any other securities of EDL.
2.3 No Subsidiaries. Except as set forth on the Disclosure Schedule,
there are no corporations, partnerships or other business entities controlled by
EDL (collectively, "EDL Subsidiaries"). As used herein, "controlled by" means
(i) the ownership of not less than fifty percent (50%) of the voting securities
or other interests of a corporation, partnership or other business entity, or
(ii) the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a corporation, partnership or other
business entity, whether through the ownership of voting shares, by contract or
otherwise. EDL has not made any investment in, or owns, any capital stock of, or
any other proprietary interest in, any other corporation, partnership or other
business entity that is not reflected on its books and records.
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2.4 Consents. Except as set forth on the Disclosure Schedule and to the
best knowledge of the EDL Shareholders, there are no consents of governmental or
other regulatory agencies, foreign or domestic or of other parties required to
be received by or on the part of EDL or any Shareholder to enable such persons
to enter into and carry out this Agreement in all material respects.
2.5 Corporate Authority; Binding Nature of Agreement; Title to the
Common Stock; etc. EDL and each of the Shareholders have the power to enter into
this Agreement and to carry out its or their obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors and shareholders of EDL and no other corporate proceeding on the part
of EDL or the Board of Directors or such shareholders of EDL is necessary to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby in accordance with the terms hereof. This
Agreement constitutes the valid and binding agreement of EDL and each of the
Shareholders and, assuming that this Agreement constitutes the legal, valid and
binding agreement of the other parties, is enforceable in accordance with its
terms subject to applicable bankruptcy, insolvency and similar laws affecting
the rights of creditors and subject to general principles of equity. Each EDL
Shareholder, severally but not jointly, represents and warrants with respect to
the shares set forth opposite such EDL Shareholder's name on the List of
Shareholders and Shares Held attached hereto as Exhibit 1.1, that (a) such EDL
Shareholder is and at the Closing will be the sole record and beneficial owner
of such shares free and clear of all manner of liens, charges, encumbrances and
claims; and (b) such EDL Shareholder has and at the Closing will have, good and
marketable title to such shares and the absolute and unqualified right to sell,
transfer and deliver such shares to the Purchaser.
2.6 Financial Statements. Except as set forth on the Disclosure
Schedule, to the best knowledge of the EDL Shareholders, the books of accounts
of EDL taken as a whole, fairly reflect its income, expenses, assets and
liabilities in all material respects. To the best knowledge of the EDL
Shareholders, the financial statements of EDL for the periods ended December 31,
1997 (the "Balance Sheet Date") and December 28, 1996 prepared by EDL, copies of
which are included in the Disclosure Schedule, fairly present the financial
position of EDL as of such dates and the results of their operations for such
fiscal years and fiscal periods, and; except as set forth therein, were prepared
in conformity with generally accepted accounting principles consistently applied
throughout the fiscal years and fiscal period covered thereby.
2.7 Liabilities. To the best knowledge of the EDL Shareholders, as at
the Balance Sheet Date, EDL did not have any material debt, liability or
obligation, contingent or absolute, that would normally be reflected on the
books of such Company, other than those debts, liabilities and obligations
reflected or reserved against in such Company's Balance Sheet at the Balance
Sheet Date (the "Balance Sheet") or as set forth on the Disclosure Schedule.
2.8 Actions Since Balance Sheet Date. Except as otherwise expressly
provided or set forth in, or required by, this Agreement, or as set forth in the
Disclosure Schedule, to the best knowledge of the EDL Shareholders, since the
Balance Sheet Date, EDL has not: (i) issued or sold,
11
or agreed to issue or sell any of its capital stock, options, warrants, rights
or calls to purchase such stock, any securities convertible or exchangeable into
such capital stock or other corporate securities, or effected any subdivision or
other recapitalization affecting its capital stock; (ii) incurred any material
obligation or liability, absolute or contingent, except those arising in the
ordinary and usual course of its business that would normally be reflected on
the books of such Company; (iii) discharged or satisfied any lien or
encumbrance, except in the ordinary and usual course of business, or paid or
satisfied any liability, absolute or contingent, other than liabilities as at
the Balance Sheet Date in the ordinary and usual course of business; (iv) made
any wage or salary increases or granted any bonuses other than wage and salary
increases and bonuses granted in accordance with its normal salary increase and
bonus policies; (v) mortgaged, pledged or subjected to any lien or other
encumbrance any of its properties or assets, or permitted any of its property or
assets to be subjected to any lien or other encumbrance, except in the ordinary
and usual course of business; (vi) sold, assigned or transferred any of its
properties or assets, except in the ordinary and usual course of business; (vii)
entered into any material transaction not in the ordinary and usual course of
business; (viii) waived any rights of substantial value, or canceled, modified
or waived any indebtedness for borrowed money held by it, except in the ordinary
and usual course of business; (ix) declared, paid or set aside any dividends or
other distributions or payments on its capital stock, or redeemed or
repurchased, or agreed to redeem or repurchase, any shares of its capital stock;
(x) made any loans or advances to any person, or assumed, guaranteed, or
otherwise become responsible for the obligations of any person; or (xi) incurred
any indebtedness for borrowed money (except for endorsement, for collection or
deposit of negotiable instruments received in the ordinary and usual course of
business).
2.9 Absence of Material Changes. To the best knowledge of the EDL
Shareholders, except as otherwise expressly provided or set forth in, or
required by, this Agreement, or as set forth in the Disclosure Schedule, since
the Balance Sheet Date, there has not been any material change, whether or not
adverse, in the assets, properties, operations or financial condition of EDL and
since the Balance Sheet Date and neither the Shareholders nor the Companies have
taken any action other than in the ordinary and usual course of business and as
set forth in such Disclosure Schedule, which could be reasonably expected to
have a material effect upon the business of EDL, and neither the management of
EDL nor any EDL Shareholder knows of any development or threatened development
of a nature that will have, or which could be reasonably expected to have, a
material effect upon the business of EDL or upon any of its assets, properties,
operations or financial condition, including, without limitation, the loss of
any licenses or permits, suppliers, customers or employees, which loss would be
of a material nature.
2.10 Taxes. EDL has delivered to the Purchaser true and complete copies
of its federal income tax returns on Form 1120 or 1120S as filed with the
Internal Revenue Service for each of the fiscal years ending December 31, 1996,
1995, and 1994, respectively. To the best knowledge of the EDL Shareholders,
each of such returns was prepared in conformity with information contained in
the books and records of such Company. Except as set forth in the Disclosure
Schedule, to the best knowledge of the EDL Shareholders, all taxes, including,
without limitation, income, property, sales, use, franchise, capital stock,
excise, added value, employees' income withholding,
12
social security and unemployment taxes imposed by the United States, any state
or any foreign country, or by any other taxing authority, which have become due
or payable by EDL and all interest and penalties thereon, whether disputed or
not, have been paid in full or are shown as accrued taxes payable on the Balance
Sheet; all deposits required by law to be made by EDL with respect to estimated
income, franchise and employees' withholding taxes have been duly made; and all
tax returns, including estimated tax returns, required to be filed have been
duly filed. To the best knowledge of the EDL Shareholders, no extension of time
for the assessment of deficiencies for any year is in effect. Except as set
forth in the Disclosure Schedule and on the Balance Sheet, no deficiency is
proposed, or to the knowledge of any Shareholder, is threatened against EDL.
Except as set forth in the Disclosure Schedule, to the best knowledge of the EDL
Shareholders, the federal and state income tax returns of EDL have never been
audited. The Disclosure Schedule also sets forth a list of those states in which
income, franchise or sales and use tax returns were filed by EDL for the fiscal
years ending December 31, 1996, 1995 and 1994, respectively.
2.11 Ownership of Assets; Trademarks, etc. Except as set forth in the
Disclosure Schedule, to the best knowledge of the EDL Shareholders, EDL owns
outright, and has good and marketable title to all of its assets, properties and
businesses (including all assets reflected in the Balance Sheet, except as the
same may have been disposed of in the ordinary course of business since the
Balance Sheet Date), free and clear of all liens, mortgages, pledges,
conditional sales agreements, restrictions on transfer or other encumbrances or
changes.
To the best knowledge of the EDL Shareholders: (a) the Disclosure
Schedule sets forth a true and complete list and brief description of all
patents, copyrights, trademarks, trade names of EDL and other similar intangible
assets which are either owned by EDL or in which it has an interest as owner or
licensee; (b) and except as set forth in said the Disclosure Schedule, no other
person, firm or corporation has any proprietary or other interest in any such
intangible assets; (c) such assets so owned or licensed are, in the reasonable
business judgment of management of EDL, sufficient to permit each of such
Companies to conduct its business as now conducted; (d) and except as set forth
in the Disclosure Schedule, EDL is not a party to or bound by any license or
agreement requiring the payment to any person, firm or corporation of any
royalty; (e) neither management of EDL nor any Shareholder knows, or has
reasonable grounds to know, of any violation by others of the trademark, trade
name or patent rights of EDL; and (f) EDL is not infringing upon any patent,
copyright, trade name or trademark or otherwise violating the rights of any
third party with respect thereto, and no proceedings have been instituted or are
threatened and no claim has been received by EDL or any Signing Shareholder
alleging any such violation.
2.12 Insurance. The Disclosure Schedule sets forth a list and brief
description of all policies of fire, liability and other forms of insurance held
by the Companies as of the date hereof. To the best knowledge of EDL and each
Shareholder, except as set forth in the Disclosure Schedule, such policies are
valid, outstanding and enforceable policies, as to which premiums have been paid
currently, are with reputable insurers believed by the management of EDL to be
financially sound and are consistent with the practices of similar concerns
engaged in substantially similar operations as those currently conducted by EDL
and are carried on an "occurrence basis." Except as set forth
13
in said Disclosure Schedule, neither EDL nor any EDL Shareholder knows of any
state of facts, or of the occurrence of any event which might reasonably (i)
form the basis for any damages against EDL not fully covered by insurance for
liability on account of any express or implied warranty or tortuous omission or
commission, or (ii) result in a material increase in insurance premiums of EDL
on a retroactive or prospective basis.
2.13 Litigation; Compliance with Laws. Except as set forth in the
Disclosure Schedule, to the best knowledge of the EDL Shareholders, there are no
actions, suits, proceedings or governmental investigations relating to EDL or to
EDL's properties, assets or businesses filed or commenced and pending or,
threatened, or any order, injunction, award or decree outstanding, against EDL
or against or relating to any of its properties, assets or businesses; and no
EDL Shareholder knows of any basis for any such action, suits or proceedings
within the past two (2) years which governmental investigations, orders,
injunctions or decrees could have a material adverse effect on the business,
financial condition or operations of EDL. To the best knowledge of the EDL
Shareholders, and except as set forth in the Disclosure Schedule, EDL is not in
violation of any law, regulation, ordinance, order, injunction, decree, award,
or other requirement of any governmental body, court or arbitrator relating to
its properties, assets or business.
2.14 Real Property. The Disclosure Schedule sets forth a brief
description of all real properties which are owned by, or leased to, EDL
including all material structures located thereon. To the best knowledge of the
EDL Shareholders, (a) EDL owns outright the fee simple title in and to the real
properties shown on said Disclosure Schedule as being owned by it, free and
clear of all claims, liens mortgages, charges, or encumbrances of any nature
whatsoever, except as otherwise described in the Disclosure Schedule; (b) the
real property leases described in the Disclosure Schedule that relate to the
leased properties described therein are now in full force and effect, and all
amounts payable thereunder have been paid; (c) and except as set forth in the
Disclosure Schedule, none of such leases could reasonably be expected to result
in material liability for restoration of premises; (d) all uses of such owned or
leased property by EDL conform, in all material respects, to all applicable
building and zoning ordinances, laws, and regulations (including, without
limitation, the Americans' with Disabilities Act) and, in the case of leased
property, to all terms of the leases relating thereto; and (e) except as
otherwise described in the Disclosure Schedule, all of the real properties owned
or leased by EDL or to be leased by EDL pursuant to the Leases referred in
Section 6.12 of this Agreement are in usable and operating condition without the
necessity of any major repairs, and all such real properties can be used for
their intended purposes.
2.15 Agreements and Obligations, Performance. To the best knowledge of
the EDL Shareholders, except as listed and briefly described in the Disclosure
Schedule or elsewhere in this Agreement or the Exhibits hereto (the "Listed
Agreements"), EDL is not a party to, or is bound by any: (i) written or oral
agreement or other contractual commitment, understanding or obligation which
involves aggregate payments in excess of One Hundred Thousand Dollars
($100,000); (ii) contract, arrangement, commitment or understanding which
involves aggregate payments in excess of One Hundred Thousand Dollars ($100,000)
that cannot be canceled on thirty (30) days or less notice without penalty or
premium or any continuing obligation or liability; (iii) contractual
14
obligation or contractual liability of any kind to any Shareholder other than
the Employment Agreements required by Section 6.10; (iv) contract, arrangement,
commitment or understanding with its customers or any shareholder or any
officer, employee, shareholder, director, representative or agent thereof for
the repurchase of products, sharing of fees, the rebating of charges to such
customers, bribes, kickbacks from such customers or other similar arrangements
that are not disclosed in accordance with GAAP; (v) contract for the purchase or
sale of any materials, products or supplies which commits or will commit it for
a fixed term; (vi) contract of employment with any officer or employee not
terminable at will without penalty or premium or any continuing obligation or
liability; (vii) deferred compensation bonus or incentive plan or agreement not
cancelable at will without penalty or premium or any continuing obligation or
liability; (viii) union or other collective bargaining agreement; (ix)
agreement, commitment or understanding relating to indebtedness for borrowed
money; (x) contract which, by its terms, requires the consent of any party
thereto to the consummation of the transactions contemplated hereby; (xi)
contract containing covenants limiting the freedom of the Companies to engage or
compete in any line of business or with any person in any geographical area;
(xii) contract or option relating to the acquisition or sale of any business;
(xiii) voting trust agreement or similar shareholders' agreement; (xiv) option
for the purchase of any asset, tangible or intangible; or (xv) other contract,
agreement, commitment or understanding which materially affects any of its
properties, assets or business, whether directly or indirectly, or which was
entered into other than in the ordinary course of business. Except as set forth
in said Disclosure Schedule, and with the exception of contracts, agreements or
commitments that are immaterial or do not subject the Companies to ongoing legal
obligation beyond the Closing Date, during the last twelve (12) months EDL has
not entered into any of the types of contracts, arrangements, commitments or
understandings with any of its suppliers or customers referred to in item (iv)
of this Section 2.15. A true and correct copy of each of the written Listed
Agreements has been delivered to the Purchaser. To the best knowledge of the EDL
Shareholders, except as set forth on the Disclosure Schedule, (a) EDL has in all
material respects performed all obligations required to be performed by it to
date under all of the Listed Agreements, is not in default in any material
respect under any of the Listed Agreements, and has received no notice of any
default or alleged default hereunder which has not heretofore been cured or
which notice has not heretofore been withdrawn; and (b) neither EDL nor any EDL
Shareholder knows of any material default under any of the Listed Agreements by
any other party thereto or by any other person, firm or corporation bound
thereunder.
2.16 Condition of Assets. To the best knowledge of the EDL Shareholders,
except for normal breakdowns and servicing requirements, all machinery and
equipment regularly used by EDL in the conduct of its business has been
maintained and repaired in accordance with EDL's maintenance standards, and the
inventories of EDL are and will be substantially in usable and saleable
condition.
2.17 Accounts and Notes Receivable. To the best knowledge of the EDL
Shareholders, except as set forth on the Disclosure Schedule, all of the
accounts and notes receivable reflected in the books of account of EDL arose in
the ordinary course of its business from the sale of services or goods, and
neither EDL nor any EDL Shareholder knows, or has a reason to know, of any valid
15
defense or right of set-off to the rights of EDL to collect such accounts
receivable in the full amounts shown on such books of account, subject, however,
to a reasonable reserve for bad debts.
2.18 Permits and Licenses; Motor Vehicles. To the best knowledge of the
EDL Shareholders, (a) the Disclosure Schedule sets forth all permits, licenses,
orders, franchises and approvals from all federal, state, local and foreign
governmental regulatory bodies held by EDL; (b) except as set forth on the
Disclosure Schedule, EDL has all permits, licenses, orders, franchises and
approvals of all federal, state, local and foreign governmental or regulatory
bodies required of it to carry on its business as presently conducted and such
permits, licenses, orders, franchises and approvals are in full force and
effect, no suspension or cancellation of any of such other permits, licenses,
etc. is threatened and EDL is in compliance in all material respects with all
requirements, standards and procedures of the federal, state, local and foreign
governmental bodies which have issued such permits, licenses, orders, franchises
and approvals; and (c) EDL does not own or lease any motor vehicles.
2.19 Banking Arrangements. The Disclosure Schedule sets forth the name
of each bank in or with which EDL has an account, credit line or safety deposit
box, and a brief description of each such account, credit line or safety deposit
box, including the names of all persons currently authorized to draw thereon or
having access thereto; and the names of all persons, if any, now holding powers
of attorney from EDL and a summary statement of the terms thereof.
2.20 Interest in Assets. To the best knowledge of the EDL Shareholders,
except as set forth in the Disclosure Schedule, neither any Shareholder nor any
affiliate of any Shareholder or of EDL owns any property or rights, tangible or
intangible, used in or related, directly or indirectly, to the business of EDL.
As used herein, "affiliate of any Shareholder or of EDL" means any person,
corporation or other entity which directly or indirectly controls, is controlled
by or is under common control with such Shareholder or EDL.
2.21 Salary Information. The Disclosure Schedule contains a list of the
names and current salary rates of, and bonus commitments to, all present
officers of EDL and the names and current annual salary rates of all other
persons employed by EDL whose annual salaries exceed Fifty Thousand Dollars
($50,000).
2.22 Employee Benefit Plans. Other than as set forth on the Disclosure
Schedule there are no "employee pension benefit plans" (within the meaning of
Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (collectively, the "Pension Plans") maintained by EDL and to
the best knowledge of the EDL Shareholders, there are no outstanding liabilities
or potential liabilities of EDL in connection therewith or of any actions, suits
or claims, pending or threatened against any of the Pension Plans nor does EDL
or any EDL Shareholder have any knowledge of any facts which could give rise to
any actions, suits or claims against any of the Pension Plans, or against either
of the Companies with respect to any thereof.
16
2.22.1 Welfare Plans; Claims. All of the "employee welfare
benefit plans" (within the meaning of Section 3(1) of ERISA) maintained by EDL
or to which it makes employer contributions with respect to its employees
(collectively, the "Welfare Plans") are listed in the Disclosure Schedule. To
the best knowledge of the EDL Shareholders, there are no outstanding liabilities
or potential liabilities of EDL in connection therewith or of any actions, suits
or claims, pending or threatened against any of the Welfare Plans nor are there
any facts which could give rise to any actions, suits or claims against any of
the Welfare Plans, or against EDL with respect to any thereof.
2.22.2 Pension Plans and Welfare Plans; Compliance. To the best
knowledge of the EDL Shareholders (i) EDL is in compliance in all material
respects with all reporting and disclosure requirements applicable to it under
the Internal Revenue Code of 1986, as amended (the "Code") and ERISA, and the
Department of Labor and Internal Revenue Service regulations promulgated
thereunder, with respect to all of the Pension Plans and Welfare Plans; (ii) no
civil or criminal action brought pursuant to the provisions of Title I, Subtitle
B, Part 5 of ERISA or any other federal or state law is pending or threatened
against any fiduciary of the Pension Plans or the Welfare Plans; and (iii) no
Pension Plan or Welfare Plan, or any fiduciary thereof, has been, or is
currently, the direct or indirect subject of an audit, investigation or
examination by any governmental or quasi-governmental agency.
2.22.3 Pension Plans and Welfare Plans; Prohibited Transactions.
To the best knowledge of the EDL Shareholders, none of the Pension Plans and
Welfare Plans, or any of their related trusts, or EDL or any trustee,
administrator or other "party in interest" or "disqualified person" (within the
meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Internal Revenue
Code of 1986, as amended (the "Code"), respectively) with respect to the Pension
Plans and Welfare Plans, has engaged in any "prohibited transaction" (within the
meaning of Section 406 of ERISA or Section 4975(c) of the Code, respectively)
with respect to the participation of EDL therein, which could subject any of the
Pension Plans or Welfare Plans or related trusts, or any trustee, administrator
or other fiduciary of any such Pension Plan or Welfare Plan, or EDL or the
Purchaser, or any other party dealing with the Pension Plans or Welfare Plans,
to the penalties or excise tax imposed on prohibited transactions by Sections
409 or 502 of ERISA or Section 4975 of the Code.
2.22.4 Compliance with Rules, Regulations, etc.. To the best
knowledge of the EDL Shareholders (i) all of the Pension Plans and Welfare Plans
maintained by EDL comply currently, and have complied in the past, both as to
form and operation, with their terms and with the provisions of ERISA and the
Code, and all other applicable laws, rules and regulations; (ii) all necessary
governmental approvals and determinations for the Pension Plans have been
obtained, including where applicable, a favorable determination (covering all
changes or amendments required by TEFRA, DEFRA and REA) as to the qualification
of such plans under Sections 401(a) and 501(a) of the Code; (iii) each of the
Pension Plans maintained by EDL has either obtained a favorable determination
(covering all changes or amendments required by TRA '86 and subsequent pension
legislation, regulations or rulings) from the Internal Revenue Service as to its
qualification under Sections 401(a) and 501(a) of the Code or is within the
remedial amendment period (as provided in
17
Section 401(b) of the Code) for making any required changes or amendments, and
nothing has occurred since the date of each such determination or recognition
letter that would adversely affect such qualification; and (iv) all amounts that
are currently owing to plan participants, or assets required to be contributed
to the Pension Plans and Welfare Plans maintained by EDL have been paid or
contributed.
2.22.5 COBRA. To the best knowledge of the EDL Shareholders, EDL
has complied with the continuation coverage requirements of group health plans
provided in Section 4980B of the Code and Sections 601 et. seq. of ERISA
("COBRA").
2.23 No Breach. To the best knowledge of the EDL Shareholders, neither
the execution and delivery of this Agreement nor compliance by EDL or any
Shareholder with any of the provisions hereof nor the consummation of the
transactions contemplated hereby, will:
(a) violate or conflict with any provision of the Articles of
Incorporation or By-laws of EDL;
(b) violate or, alone or with notice or the passage of time,
result in the material breach or termination of, or otherwise give any
contracting party the right to terminate, or declare a default under, the terms
of any agreement or, other document or undertaking, oral or written to which EDL
or any Shareholder is a party or by which either of them or any of their
respective properties or assets may be bound (except for such violations,
conflicts, breaches or defaults as to which required waivers or consents by
other parties have been, or will, prior to the Closing, be, obtained);
(c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of EDL or pursuant to
the terms of any such agreement or instrument;
(d) violate any judgment, order, injunction, decree or award
against, or binding upon, EDL or any Shareholder or upon their respective
properties or assets; or
(e) violate any law or regulation of any jurisdiction relating
to EDL or any of its securities, assets or properties.
2.24 Brokers. Except as described in the Disclosure Schedule, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on directly with the Purchaser by EDL and the Shareholders
without the intervention of any broker, finder, investment banker or other third
party. Except as described in the Disclosure Schedule, neither EDL nor any
Shareholder has engaged, consented to, or authorized any broker, finder,
investment banker or other third party to act on its or his behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement, and EDL and each of the Shareholders, jointly
and severally, agree to indemnify the Purchaser against, and to hold it harmless
from any claim for brokerage or similar commission or other compensation which
may be made against the Purchaser
18
by any third party in connection with any transactions contemplated hereby which
claim is based upon any action by EDL or any Shareholder.
2.25 Labor Discussions. Except with respect to the agreements listed in
the Disclosure Schedule pursuant to Section 2.15 (viii), and otherwise as set
forth in the Disclosure Schedule, EDL is not, and during the past five (5) years
has not been, involved in any labor discussions with any unit or group seeking
to become the bargaining unit for any of its employees. With respect to said
agreements, the Disclosure Schedule sets forth a description of the status
thereof, including any demands or proposals with respect to the renewal,
extension or replacement thereof.
2.26 Change of Name. EDL has not conducted business under any name
during the past five (5) years except those set forth on the Disclosure
Schedule.
2.27 Pollution and Other Regulations. Except as set forth on the
Disclosure Schedule, to the best knowledge of EDL and each Shareholder EDL: (i)
has complied in all material respects with all applicable federal, state and
local environmental laws to which it is subject, including without limitation,
the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"),
the Federal Water Pollution Control Act, as amended ("FWPCA"), the Federal Clean
Air Act, as amended ("FCAA"), and the Toxic Substance Control Act ("TSCA"), and
laws with respect to asbestos, and has no liability under, or have any knowledge
of any potential liability under any such environmental laws, nor has it
received a written request for information under, or written notice of potential
violation of, or liability under, CERCLA or any other environmental law or under
any public health or safety or welfare law, (ii) has obtained all permits,
licenses or other authorizations required for its operations under the foregoing
laws, and (iii) complies in all material respects with all laws and regulations
relating to equal employment opportunity and employee safety in all
jurisdictions in which it is doing business.
2.28 Untrue or Omitted Facts. To the best knowledge of the EDL
Shareholders, no representation, warranty or statement by EDL or any Shareholder
in this Agreement contains any untrue statement of a material fact, or omits or
will omit to state a fact necessary in order to make such representations,
warranties or statements not materially misleading.
2.29 Investment Representation. Each Shareholder hereby represents that
he is an "accredited investor" within the meaning of SEC Regulation D and has
provided written confirmation to the Purchaser of such status and that he
understands that the transaction contemplated by this Agreement may be initially
carried out as a transaction exempt from registration under the 33 Act and
accordingly, the shares of Paravant Stock will not have been registered under
the Act. Each such Shareholder understands that because such shares of Paravant
Stock will not have been registered under the Act, the shares will not be
transferable except upon the issuance to the Purchaser of a favorable opinion of
counsel or of the submission to the Purchaser of such other evidence as may be
satisfactory to counsel for the Purchaser, in either case, to the effect
19
that any such transfer, whether pursuant to Rule 144 of the Act or otherwise,
shall not be in violation of the Act, and any applicable state securities laws.
Unless and until registered under the 33 Act, the share certificates
representing such shares will be issued with a restrictive legend providing
notice of such restriction.
2.30 Access to Information. Each Shareholder represents and warrants to
the Purchaser that he has had an opportunity to ask questions of, and receive
answers from, appropriate officers and representatives of the Purchaser
concerning the terms and conditions of the issuance of the Paravant Stock and to
obtain any additional information concerning the Purchaser which the Shareholder
has requested. In addition, such Shareholder represents and warrants that the
Purchaser has made available for inspection by the Shareholder various documents
connected with the Purchaser's business and has not realized in any way to
permit the Shareholder to inspect any document requested to be inspected by the
Shareholder.
2.31 Limitation on Liability; Basket. The liability of each of the EDL
Shareholders for breaches of representations and warranties under this Article
II shall be limited to his one-third (1/3) share of the proceeds from sale of
the EDL Stock. To the extent that representations and warranties are made in
this Article II "to the best knowledge" of the EDL Shareholders, the EDL
Shareholders shall only have liability for claims arising pursuant to this
Article II if any EDL Shareholder knew that the representation was false. In
addition to the limitations on liability contained above, the EDL Shareholders
shall have liability for claims by the Purchaser arising pursuant to this
Article II only to the extent such claims (in the aggregate) involve cost to the
Purchaser in excess of Sixty Six Thousand Six Hundred Sixty Seven Dollars
($66,667).
ARTICLE III
Representations and Warranties
of STL and the Shareholders Regarding STL
STL and each Shareholder severally (and not jointly, and in the case of
each Shareholder, proportionally to his Ratable Interest) make the following
representations and warranties to the Purchaser, each of which shall be deemed
material (and the Purchaser, in executing, delivering and consummating this
Agreement, has relied and will rely upon the correctness and completeness of
each of such representations and warranties):
3.1 Valid Corporate Existence; Qualification. STL is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. STL has the corporate power to carry on its business as now conducted, to
own its assets, and to enter into and perform its obligations under this
Agreement. STL is duly qualified to conduct business and is in good standing as
a foreign corporation in those jurisdictions set forth on the Disclosure
Schedule and to the best knowledge of each STL Shareholder: (i) such
jurisdictions are the only jurisdictions in which STL is required to qualify in
order to own its assets or properties or to carry on its business as now
20
conducted; and (ii) there has not been any claim by any other jurisdiction to
the effect that STL is required to qualify or otherwise be authorized to do
business as a foreign corporation therein.. The copies of the good standing
certificates or certificates of existence of STL (issued by the appropriate
state authority), the Articles of Incorporation of STL (certified by the
appropriate state authority) and By-Laws of STL (certified by such Company's
Secretary), as amended to date, which constitute a part of the Disclosure
Schedule are true and complete copies of those documents as now in effect.
3.2 No Subsidiaries. Except as set forth on the Disclosure Schedule,
there are no corporations, partnerships or other business entities controlled by
STL (collectively, "STL Subsidiaries"). As used herein, "controlled by" means
(i) the ownership of not less than fifty percent (50%) of the voting securities
or other interests of a corporation, partnership or other business entity, or
(ii) the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a corporation, partnership or other
business entity, whether through the ownership of voting shares, by contract or
otherwise. STL has not made any investment in, or owns, any capital stock of, or
any other proprietary interest in, any other corporation, partnership or other
business entity that is not reflected on its books and records.
3.3 Consents. Except as set forth on the Disclosure Schedule and to the
best knowledge of the Shareholders, there are no consents of governmental or
other regulatory agencies, foreign or domestic or of other parties required to
be received by or on the part of STL or any Shareholder to enable such persons
to enter into and carry out this Agreement in all material respects.
3.4 Corporate Authority; Binding Nature of Agreement; Title to the
Common Stock; etc. STL and each of the Shareholders have the power to enter into
this Agreement and to carry out its or their obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors and shareholders of STL and no other corporate proceeding on the part
of STL, the Board of Directors or such shareholders of STL is necessary to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby in accordance with the terms hereof. This
Agreement constitutes the valid and binding agreement of STL and each of the
Shareholders and, assuming that this Agreement constitutes the legal, valid and
binding agreement of the other parties, is enforceable in accordance with its
terms subject to applicable bankruptcy, insolvency and similar laws affecting
the rights of creditors and subject to general principles of equity.
3.5 Financial Statements. Except as set forth on the Disclosure
Schedule, to the best knowledge of the Shareholders, the books of accounts of
STL taken as a whole, fairly reflect its income, expenses, assets and
liabilities in all material respects. To the best knowledge of the Shareholders,
the financial statements of STL for the periods ended December 31, 1997 (the
"Balance Sheet Date") and December 28, 1996 prepared by STL, copies of which are
included in the Disclosure Schedule, fairly present the financial position of
STL as of such dates and the results of their operations for such fiscal years
and fiscal periods, and; except as set forth therein, were
21
prepared in conformity with generally accepted accounting principles
consistently applied throughout the fiscal years and fiscal period covered
thereby.
3.6 Liabilities. To the best knowledge of the Shareholders, as at the
Balance Sheet Date, STL did not have any material debt, liability or obligation,
contingent or absolute, that would normally be reflected on the books of such
Company, other than those debts, liabilities and obligations reflected or
reserved against in such Company's Balance Sheet at the Balance Sheet Date (the
"Balance Sheet") or as set forth on the Disclosure Schedule.
3.7 Taxes. STL has delivered to the Purchaser true and complete copies
of its federal income tax returns on Form 1120 as filed with the Internal
Revenue Service for each of the fiscal years ending December 31, 1996, 1995, and
1994, respectively. To the best knowledge of the Shareholders, each of such
returns was prepared in conformity with information contained in the books and
records of such Company. Except as set forth in the Disclosure Schedule, all
taxes, including, without limitation, income, property, sales, use, franchise,
capital stock, excise, added value, employees' income withholding, social
security and unemployment taxes imposed by the United States, any state or any
foreign country, or by any other taxing authority, which have become due or
payable by STL and all interest and penalties thereon, whether disputed or not,
have been paid in full or are shown as accrued taxes payable on the Balance
Sheet; all deposits required by law to be made by STL with respect to estimated
income, franchise and employees' withholding taxes have been duly made; and all
tax returns, including estimated tax returns, required to be filed have been
duly filed. No extension of time for the assessment of deficiencies for any year
is in effect. Except as set forth in the Disclosure Schedule and on the Balance
Sheet, no deficiency is proposed, or to the knowledge of any Shareholder, is
threatened against STL. Except as set forth in the Disclosure Schedule, to the
best knowledge of the STL Shareholders, the federal and state income tax returns
of STL have never been audited. The Disclosure Schedule also sets forth a list
of those states in which income, franchise or sales and use tax returns were
filed by STL for the fiscal years ending December 31, 1996, 1995 and 1994,
respectively.
3.8 Ownership of STL Purchased Assets; Trademarks, etc. Except as set
forth in the Disclosure Schedule, to the best knowledge of the Shareholders, STL
owns outright, and has good and marketable title to all of its assets,
properties and businesses (including all of the STL Purchased Assets reflected
in the Balance Sheet, except as the same may have been disposed of in the
ordinary course of business since the Balance Sheet Date), free and clear of all
liens, mortgages, pledges, conditional sales agreements, restrictions on
transfer or other encumbrances or changes.
To the best knowledge of the Shareholders: (a) the Disclosure Schedule
sets forth a true and complete list and brief description of all patents,
copyrights, trademarks, trade names of STL and other similar intangible assets
which are either owned by STL or in which it has an interest as owner or
licensee; (b) and except as set forth in said the Disclosure Schedule, no other
person, firm or corporation has any proprietary or other interest in any such
intangible assets; (c) such assets so owned or licensed are, in the reasonable
business judgment of management of STL, sufficient to permit STL to conduct its
business as now conducted; (d) and except as set forth in the Xxxxxxxxxx
00
Xxxxxxxx, XXX is not a party to or bound by any license or agreement requiring
the payment to any person, firm or corporation of any royalty; (e) neither
management of STL nor any Shareholder knows, or has reasonable grounds to know,
of any violation by others of the trademark, trade name or patent rights of STL;
and (f) STL is not infringing upon any patent, copyright, trade name or
trademark or otherwise violating the rights of any third party with respect
thereto, and no proceedings have been instituted or are threatened and no claim
has been received by STL or any Signing Shareholder alleging any such violation.
3.9 Litigation. Except as set forth in the Disclosure Schedule, to the
best knowledge of the Shareholders, there are no actions, suits, proceedings or
governmental investigations relating to the STL Purchased Assets or to the
transactions contemplated by this Agreement.
3.10 Condition of Assets. To the best knowledge of the Shareholders,
except for normal breakdowns and servicing requirements, all machinery and
equipment included within the STL Purchased Assets regularly used by STL in the
conduct of its business has been maintained and repaired in accordance with
STL's maintenance standards, and the inventories of STL are and will be
substantially in usable and saleable condition.
3.11 Permits and Licenses; Motor Vehicles. To the best knowledge of the
Shareholders, (a) the Disclosure Schedule sets forth all permits, licenses,
orders, franchises and approvals from all federal, state, local and foreign
governmental regulatory bodies held by STL; (b) except as set forth on the
Disclosure Schedule, STL has all permits, licenses, orders, franchises and
approvals of all federal, state, local and foreign governmental or regulatory
bodies required of it to carry on its business as presently conducted and such
permits, licenses, orders, franchises and approvals are in full force and
effect, no suspension or cancellation of any of such other permits, licenses,
etc. is threatened and STL is in compliance in all material respects with all
requirements, standards and procedures of the federal, state, local and foreign
governmental bodies which have issued such permits, licenses, orders, franchises
and approvals; and (c) STL does not own or lease any motor vehicles.
3.12 Interest in Assets. To the best knowledge of the Shareholders,
except as set forth in the Disclosure Schedule, neither any Shareholder nor any
affiliate of any Shareholder or of STL owns any property or rights, tangible or
intangible, used in or related, directly or indirectly, to the business of STL.
As used herein, "affiliate of any Shareholder or of STL" means any person,
corporation or other entity which directly or indirectly controls, is controlled
by or is under common control with such Shareholder or STL.
3.13 Salary Information. The Disclosure Schedule contains a list of the
names and current salary rates of, and bonus commitments to, all present
officers of STL and the names and current annual salary rates of all other
persons employed by STL whose annual salaries exceed Fifty Thousand Dollars
($50,000).
23
3.14 Employee Benefit Plans. Other than as set forth on the Disclosure
Schedule, there are no "employee pension benefit plans" (within the meaning of
Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (collectively, the "Pension Plans") maintained by STL and to
the best knowledge of the Shareholders, there are no outstanding liabilities or
potential liabilities of STL in connection therewith or of any actions, suits or
claims, pending or threatened against any of the Pension Plans nor does STL or
any Shareholder have any knowledge of any facts which could give rise to any
actions, suits or claims against any of the Pension Plans, or against either of
the Companies with respect to any thereof.
3.14.1 Welfare Plans; Claims. All of the "employee welfare
benefit plans" (within the meaning of Section 3(1) of ERISA) maintained by STL
or to which it makes employer contributions with respect to its employees
(collectively, the "Welfare Plans") are listed in the Disclosure Schedule. To
the best knowledge of the Shareholders, there are no outstanding liabilities or
potential liabilities of STL in connection therewith or of any actions, suits or
claims, pending or threatened against any of the Welfare Plans nor are there any
facts which could give rise to any actions, suits or claims against any of the
Welfare Plans, or against STL with respect to any thereof.
3.14.2 Pension Plans and Welfare Plans; Compliance. To the best
knowledge of the Shareholders (i) STL is in compliance in all material respects
with all reporting and disclosure requirements applicable to it under the
Internal Revenue Code of 1986, as amended (the "Code") and ERISA, and the
Department of Labor and Internal Revenue Service regulations promulgated
thereunder, with respect to all of the Pension Plans and Welfare Plans; (ii) no
civil or criminal action brought pursuant to the provisions of Title I, Subtitle
B, Part 5 of ERISA or any other federal or state law is pending or threatened
against any fiduciary of the Pension Plans or the Welfare Plans; and (iii) no
Pension Plan or Welfare Plan, or any fiduciary thereof, has been, or is
currently, the direct or indirect subject of an audit, investigation or
examination by any governmental or quasi-governmental agency.
3.14.3 Pension Plans and Welfare Plans; Prohibited Transactions.
To the best knowledge of the Shareholders, none of the Pension Plans and Welfare
Plans, or any of their related trusts, or STL or any trustee, administrator or
other "party in interest" or "disqualified person" (within the meaning of
Section 3(14) of ERISA or Section 4975(e)(2) of the Internal Revenue Code of
1986, as amended (the "Code"), respectively) with respect to the Pension Plans
and Welfare Plans, has engaged in any "prohibited transaction" (within the
meaning of Section 406 of ERISA or Section 4975(c) of the Code, respectively)
with respect to the participation of STL therein, which could subject any of the
Pension Plans or Welfare Plans or related trusts, or any trustee, administrator
or other fiduciary of any such Pension Plan or Welfare Plan, or STL or the
Purchaser, or any other party dealing with the Pension Plans or Welfare Plans,
to the penalties or excise tax imposed on prohibited transactions by Sections
409 or 502 of ERISA or Section 4975 of the Code.
3.14.4 Compliance with Rules, Regulations, etc.. To the best
knowledge of the Shareholders (i) all of the Pension Plans and Welfare Plans
maintained by STL comply currently, and have complied in the past, both as to
form and operation, with their terms and with the
24
provisions of ERISA and the Code, and all other applicable laws, rules and
regulations; (ii) all necessary governmental approvals and determinations for
the Pension Plans have been obtained, including where applicable, a favorable
determination (covering all changes or amendments required by TEFRA, DEFRA and
REA) as to the qualification of such plans under Sections 401(a) and 501(a) of
the Code; (iii) each of the Pension Plans maintained by STL has either obtained
a favorable determination (covering all changes or amendments required by TRA
'86 and subsequent pension legislation, regulations or rulings) from the
Internal Revenue Service as to its qualification under Sections 401(a) and
501(a) of the Code or is within the remedial amendment period (as provided in
Section 401(b) of the Code) for making any required changes or amendments, and
nothing has occurred since the date of each such determination or recognition
letter that would adversely affect such qualification; and (iv) all amounts that
are currently owing to plan participants, or assets required to be contributed
to the Pension Plans and Welfare Plans maintained by STL have been paid or
contributed.
3.14.5 COBRA. To the best knowledge of the Shareholders, STL has
complied with the continuation coverage requirements of group health plans
provided in Section 4980B of the Code and Sections 601 et. seq. of ERISA
("COBRA").
3.15 No Breach. To the best knowledge of the Shareholders, neither the
execution and delivery of this Agreement nor compliance by STL or any
Shareholder with any of the provisions hereof nor the consummation of the
transactions contemplated hereby, will:
(a) violate or conflict with any provision of the Articles of
Incorporation or By-laws of STL;
(b) violate or, alone or with notice or the passage of time,
result in the material breach or termination of, or otherwise give any
contracting party the right to terminate, or declare a default under, the terms
of any agreement or, other document or undertaking, oral or written to which STL
or any Shareholder is a party or by which either of them or any of their
respective properties or assets may be bound (except for such violations,
conflicts, breaches or defaults as to which required waivers or consents by
other parties have been, or will, prior to the Closing, be, obtained);
(c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of STL or pursuant to
the terms of any such agreement or instrument;
(d) violate any judgment, order, injunction, decree or award
against, or binding upon, STL or any Shareholder or upon their respective
properties or assets; or
(e) violate any law or regulation of any jurisdiction relating
to STL or any of its securities, assets or properties.
25
3.16 Brokers. Except as described in the Disclosure Schedule, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on directly with the Purchaser by STL and the Shareholders
without the intervention of any outside broker, finder, investment banker or
other third party. Except as described in the Disclosure Schedule, neither STL
nor any Shareholder has engaged, consented to, or authorized any outside broker,
finder, investment banker or other third party to act on its or his behalf,
directly or indirectly, as a outside broker or finder in connection with the
transactions contemplated by this Agreement, and STL and each of the
Shareholders, jointly and severally, agree to indemnify the Purchaser against,
and to hold it harmless from any claim for brokerage or similar commission or
other compensation which may be made against the Purchaser by any third party in
connection with any transactions contemplated hereby which claim is based upon
any action by STL or any Shareholder.
3.17 Labor Discussions. Except as set forth on the Disclosure Schedule,
STL is not, and during the past five (5) years has not been, involved in any
labor discussions with any unit or group seeking to become the bargaining unit
for any of its employees.
3.18 Change of Name. STL has not conducted business under any name
during the past five (5) years except those set forth on the Disclosure
Schedule.
3.19 Pollution and Other Regulations. Except as set forth on the
Disclosure Schedule, to the best knowledge of STL and each Shareholder STL: (i)
has complied in all material respects with all applicable federal, state and
local environmental laws to which it is subject, including without limitation,
the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"),
the Federal Water Pollution Control Act, as amended ("FWPCA"), the Federal Clean
Air Act, as amended ("FCAA"), and the Toxic Substance Control Act ("TSCA"), and
laws with respect to asbestos, and has no liability under, or have any knowledge
of any potential liability under any such environmental laws, nor has it
received a written request for information under, or written notice of potential
violation of, or liability under, CERCLA or any other environmental law or under
any public health or safety or welfare law, (ii) has obtained all permits,
licenses or other authorizations required for its operations under the foregoing
laws, and (iii) complies in all material respects with all laws and regulations
relating to equal employment opportunity and employee safety in all
jurisdictions in which it is doing business.
3.20 Untrue or Omitted Facts. To the best knowledge of the Shareholders,
no representation, warranty or statement by STL or any Shareholder in this
Agreement contains any untrue statement of a material fact, or omits or will
omit to state a fact necessary in order to make such representations, warranties
or statements not materially misleading.
3.21 Investment Representation. Each Shareholder hereby represents that
he is an "accredited investor" within the meaning of SEC Regulation D and has
provided written confirmation to the Purchaser of such status and that he
understands that the transaction
26
contemplated by this Agreement may be initially carried out as a transaction
exempt from registration under the 33 Act and accordingly, the shares of
Paravant Stock will not have been registered under the Act. Each such
Shareholder understands that because such shares of Paravant Stock will not have
been registered under the Act, the shares will not be transferable except upon
the issuance to the Purchaser of a favorable opinion of counsel or of the
submission to the Purchaser of such other evidence as may be satisfactory to
counsel for the Purchaser, in either case, to the effect that any such transfer,
whether pursuant to Rule 144 of the Act or otherwise, shall not be in violation
of the Act, and any applicable state securities laws. Unless and until
registered under the 33 Act, the share certificates representing such shares
will be issued with a restrictive legend providing notice of such restriction.
3.22 Access to Information. Each Shareholder represents and warrants to
the Purchaser that he has had an opportunity to ask questions of, and receive
answers from, appropriate officers and representatives of the Purchaser
concerning the terms and conditions of the issuance of the Paravant Stock and to
obtain any additional information concerning the Purchaser which the Shareholder
has requested. In addition, such Shareholder represents and warrants that the
Purchaser has made available for inspection by the Shareholder various documents
connected with the Purchaser's business and has not realized in any way to
permit the Shareholder to inspect any document requested to be inspected by the
Shareholder.
3.23 Limitation on Liability; Basket. The liability of each of the
Shareholders for breaches of representations and warranties under this Article
III shall be limited to his Ratable Interest. To the extent that representations
and warranties are made in this Article III "to the best knowledge" of the
Shareholders, the Shareholders shall only have liability for claims arising
pursuant to this Article III if any Shareholder knew that the representation was
false. In addition to the limitations on liability contained above, the
Shareholders shall have liability for claims by the Purchaser arising pursuant
to this Article III only to the extent such claims (in the aggregate) involve
cost to the Purchaser in excess of Sixty Six Thousand Six Hundred Sixty Seven
Dollars ($66,667).
ARTICLE IV
Representations and Warranties of Purchaser
The Purchaser makes the following representations and warranties to STL
and the Shareholders, each of which shall be deemed material (and STL and each
Shareholder, in executing, delivering and consummating this Agreement, have
relied and will rely upon the correctness and completeness of each of such
representations and warranties):
4.1 Valid Corporate Existence; Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida. The Purchaser has the corporate power to carry on its
business as now conducted and to own its assets. The Purchaser is duly qualified
to conduct business and is in good standing as a foreign corporation
27
in those jurisdictions set forth on the Disclosure Schedule which are the only
jurisdictions in which it is required to qualify in order to own its assets or
properties or to carry on its business as now conducted, and there has not been
any claim by any other jurisdiction to the effect that the Purchaser is required
to qualify or otherwise be, authorized to do business as a foreign corporation
therein. The copies of the Purchaser's Articles of Incorporation (certified by
the Florida Secretary of State) and By-Laws (certified by the Purchaser's
Secretary), as amended to date which constitute a part of the Disclosure
Schedule are true and complete copies of those documents as now in effect. The
minute books of the Purchaser contain accurate records of meetings of its Board
of Directors, Executive Committee of the Board, if any, and shareholders since
its incorporation and accurately reflect all transactions referred to therein.
4.2 Capitalization. The Disclosure Schedule hereby contains a complete
and accurate capitalization table of Purchaser, including without limitation a
listing of shares owned beneficially or record by officers, directors and other
persons owning more than five percent (5%) of any class of Purchaser's equity
securities and a listing of all outstanding options, warrants and other rights
to acquire Purchaser's securities and the holders of such options, warrants and
other rights. This data shall be provided as of March 12, 1998. All of
outstanding shares of common stock are duly authorized and validly issued, fully
paid and nonassessable. Except as set forth on the Disclosure Schedule, there
are no subscriptions, options, warrants, rights or calls or other commitments or
agreements to which the Purchaser is a party or by which it is bound, calling
for the issuance, transfer, sale or other disposition of any of its common stock
or any other of its securities convertible or exchangeable, actually or
contingently, into shares of its common stock.
4.3 Corporate Authority; Shareholder Approval Required; Paravant Stock
Validly Issued; Binding Nature of Agreement. The Purchaser has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Purchaser's
Board of Directors subject to the approval of the Shareholders of the Purchaser
and, except for such approval by the Shareholders of the Purchaser, no other
corporate proceeding on the part of the Purchaser is necessary to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby in accordance with the terms hereof. The
Paravant Stock to be paid as consideration under this Agreement has been duly
authorized and when paid under the terms of this Agreement such Paravant Stock
issued shall be issued and outstanding, fully paid and nonassessable. This
Agreement constitutes the valid and binding agreement of the Purchaser and is
enforceable in accordance with its terms and, assuming that this Agreement
constitutes the legal, valid and binding agreement of the other parties, is
enforceable in accordance with its terms subject to applicable bankruptcy,
insolvency and similar laws affecting the rights of creditors and subject to
general principles of equity.
4.4 Consents. Except as set forth on the Disclosure Schedule, to the
best knowledge of the Purchaser, there are no consents of governmental or other
regulatory agencies, foreign or domestic or of other parties required to be
received by or on the part of the Purchaser to enable the Purchaser to enter
into and carry out this Agreement in all material respects.
28
4.5 No Breach. To the best knowledge of the Purchaser, neither the
extension and delivery of this Agreement nor compliance by the Purchaser with
any of the provisions hereof nor the consummation of the transactions
contemplated hereby, will:
(a) violate or conflict with any provisions of the Articles of
Incorporation or By-Laws of the Purchaser;
(b) violate or, alone or with the passage of time, result in the
material breach or termination of, or otherwise give any contracting party the
right to terminate, or declare a default under, the terms of any agreement or
other document or undertaking, oral or written to which the Purchaser is a party
or by which it or any of its properties or assets may be bound (except for such
violations, conflicts, breaches or defaults as to which required waivers or
consents by other parties have been, or will, prior to Closing, be, obtained);
(c) result in the creation of any lien, security Interest,
charge or encumbrance upon any of the properties or assets of the Purchaser or
pursuant to the terms of any such agreement or, instrument;
(d) violate any judgment, order, injunction, decree or award
against, or binding upon the Purchaser or upon its properties or assets; or
(e) violate any law or regulation of any jurisdiction relating
to the Purchaser or any of its securities, assets or properties.
4.6 Financial Statements. The Purchaser has furnished the Shareholder
with balance sheets of the Purchaser as of the fiscal year end in each of the
last three (3) years, up to and including the fiscal year ended September 30,
1997, and with the related statements of income, changes in shareholders'
equity, and statements of cash flows for the periods then ended, all such
financial statements as at the fiscal year end for each of the last three (3)
fiscal years, reported on by the Independent Auditors. To the best knowledge of
the Purchaser, such financial statements (including the notes thereto) are
correct and complete, are in accordance with the books and records of the
Purchaser and fairly present the balance sheets and related statements of
income, changes in stockholder's equity, and statements of cash flows of the
Purchaser as of and for the periods indicated, in each case in conformity with
GAAP consistently applied, except as otherwise indicated in such statements. To
the best knowledge of the Purchaser, the Purchaser's Report on Form 10-KSB for
the fiscal year ended September 30, 1997, and the Purchaser's Report on Form
10-QSB for the quarter ended December 31, 1997, true and correct copies of which
have been delivered to STL and the Shareholders, contain no untrue statement of
a material fact or omit to state any fact required to make any such document not
materially misleading and are in accordance with the books and records of the
Purchaser and fairly present the financial position and the results of the
operations, changes in shareholders' equity and changes in financial position of
the Purchaser as at and for the periods indicated, in each case in conformity
with generally accepted accounting principles consistently applied, except as
otherwise indicated in such statements.
29
4.7 Liabilities. To the best knowledge of the Purchaser, as of December
31, 1997, the date of the last periodic reporting date for periodic reports
required to be filed by the Purchaser with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, the Purchaser
did not have any material debt, liability or obligation, contingent or absolute,
that would normally be reflected on the books of the Purchaser, other than those
debts, liabilities, and obligations reflected or reserved against on the
Purchaser's financial statements as of such date or as set forth on the
Disclosure Schedule.
4.8 Absence of Material Adverse Changes. Since December 31, 1997, except
as set forth on the Disclosure Schedule, to the best knowledge of the Purchaser,
there have been no material adverse changes in the condition (financial or
otherwise), assets, liabilities, earnings or business of the Purchaser, and no
event has occurred, other than in the ordinary and usual course of business and
as set forth in such the Disclosure Schedule which could be reasonably expected
to have a material adverse effect upon the business of the Purchaser, and the
Purchaser knows of no development or threatened development of a nature that
will have, or which could reasonably be expected to have, a material adverse
effect upon the business of the Purchaser or upon any of its assets, properties
operations or financial condition, including, without limitation, the loss of
any licenses or permits, suppliers, customers or employees, which loss would be
of a material adverse nature.
4.9 Brokers. Except as described in the Disclosure Schedule, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on directly with each of the Companies and the Shareholders by
the Purchaser without the intervention of any broker, finder, investment banker
or other third party. Except as described in the Disclosure Schedule, the
Purchaser has not engaged, connected to, or authorized any broker, finder,
investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement, and the Purchaser agrees to indemnify each of
the Companies and the Shareholders against, and to hold them harmless from, any
claim for brokerage or similar commission or other compensation which may be
made against the Sale Consideration, either of the Companies or any Shareholder
by any third party in connection with the transactions contemplated hereby,
which claim is based upon any action of the Purchaser.
4.10 Litigation; Compliance with Laws. Except as set forth in the
Disclosure Schedule, to the best knowledge of the Purchaser, there are no
actions, suits, proceedings or governmental investigations relating to the
Purchaser or any of its properties, assets or businesses filed or commenced and
pending or threatened, or any order, injunction, award or decree outstanding
against the Purchaser or against or relating to any of its properties assets or
businesses which, if successful, would have a material adverse effect on the
business, financial condition or operation of the Purchaser; and the Purchaser
does not know of any basis for any such actions, suits or proceedings within the
past two (2) years, which governmental investigations, orders, injunctions or
decrees could have a material adverse effect on the business, financial
condition or operation of the Purchaser. To the best knowledge of the Purchaser,
except as set forth on the Disclosure Schedule, the Purchaser is not in
violation of any law, regulation, ordinance, order, injunction, deed, award,
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or other requirement of any governmental body, court or arbitrator relating to
its properties, assets or business.
4.11 Untrue or Omitted Facts. To the best knowledge of the Purchaser, no
representation warranty or statement by the Purchaser in this Agreement contains
any untrue statement of a material fact, or omits or will omit to state a fact
necessary in order to make such representations, warranties or statements not
materially misleading.
4.12 Real Property. The Disclosure Schedule sets forth a brief
description of all real properties which are owned by or leased to the Purchaser
including all material structures located thereon. To the best knowledge of the
Purchaser, (a) the Purchaser owns outright the fee simple title in and to the
real properties shown on said Disclosure Schedule as being owned by it, free and
clear of all claims, liens mortgages, charges, or encumbrances of any nature
whatsoever, except as otherwise described in the Disclosure Schedule; (b) the
real property leases described in the Disclosure Schedule that relate to the
leased properties described therein are now in full force and effect, and all
amounts payable thereunder have been paid; (c) and except as set forth in the
Disclosure Schedule, none of such leases could reasonably be expected to result
in material liability for restoration of premises; (d) all uses of such owned or
leased property by the Purchaser conform, in all material respects, to all
applicable building and zoning ordinances, laws, and regulations (including,
without limitation, the Americans' with Disabilities Act) and, in the case of
leased property, to all terms of the leases relating thereto; and (e) except as
otherwise described in the Disclosure Schedule, all of the real properties owned
or leased by the Purchaser are in usable and operating condition without the
necessity of any major repairs, and all such real properties can be used for
their intended purposes.
4.13 Condition of Assets. To the best knowledge of the Purchaser, except
for normal breakdowns and servicing requirements, all machinery and equipment
regularly used by the Purchaser in the conduct of its business has been
maintained and repaired in accordance with the Purchaser's maintenance
standards, and the inventories of the Purchaser are and will be substantially in
usable and saleable condition.
4.14 Accounts and Notes Receivable. To the best knowledge of the
Purchaser, except as set forth on the Disclosure Schedule, all of the accounts
and notes receivable reflected in the books of account of the Purchaser arose in
the ordinary course of its business, from the sale of services or goods, and the
Purchaser does not know, or have a reason to know, of any valid defense or right
of set-off to the rights of the Purchaser to collect such accounts receivable in
the full amounts shown on such books of account, subject, however, to a
reasonable reserve for bad debts.
4.15 Permits and Licenses; Motor Vehicles. To the best knowledge of the
Purchaser (a) the Purchaser has obtained and maintained as active all permits,
licenses, orders, franchises and approvals from all federal, state, local and
foreign governmental regulatory bodies held by the Purchaser; (b) the Purchaser
has all permits, licenses, orders, franchises and approvals of all federal,
state, local and foreign governmental or regulatory bodies required of it to
carry on its business as
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presently conducted and such permits, licenses, orders, franchises and approvals
are in full force and effect, no suspension or cancellation of any of such other
permits, licenses, etc. is threatened and the Purchaser is in compliance in all
material respects with all requirements, standards and procedures of the
federal, state, local and foreign governmental bodies which have issued such
permits, licenses, orders, franchises and approvals; and (c) the Disclosure
Schedule sets forth a brief description of all vans, automobiles, trucks or
other vehicles owned or leased by the Purchaser and the jurisdiction in which
such vehicle is titled.
4.16 Banking Arrangements. The Disclosure Schedule sets forth the name
of each bank in or with which the Purchaser has a deposit account or credit line
and a brief description of each such deposit account or credit line.
4.17 Interest in Assets. To the best knowledge of the Purchaser, except
as set forth in the Disclosure Schedule, neither the Purchaser nor any
affiliates of the Purchaser owns any property or rights, tangible or intangible,
used in or related, directly or indirectly, to the business of the Purchaser. As
used herein, "affiliate of the Purchaser" means any person, corporation or other
entity which directly or indirectly controls, is controlled by or is under
common control with the Purchaser.
4.18 Pollution and Other Regulations. Except as set forth on the
Disclosure Schedule, to the best knowledge of the Purchaser, the Purchaser: (i)
has complied in all material respects with all applicable federal, state and
local environmental laws to which it is subject, including without limitation,
the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"),
the Federal Water Pollution Control Act, as amended ("FWPCA"), the Federal Clean
Air Act, as amended ("FCAA"), and the Toxic Substance Control Act ("TSCA"), and
laws with respect to asbestos, and has no liability under, or have any knowledge
of any potential liability under any such environmental laws, nor has it
received a written request for information under, or written notice of potential
violation of, or liability under, CERCLA or any other environmental law or under
any public health or safety or welfare law, (ii) has obtained all permits,
licenses or other authorizations required for its operations under the foregoing
laws, and (iii) complies in all material respects with all laws and regulations
relating to equal employment opportunity and employee safety in all
jurisdictions in which it is doing business.
4.19 Compensation to Officers and Directors. The Disclosure Schedule
hereby sets forth a listing of all compensation payable to Purchaser's, officers
and directors including without limitation, a listing of salaries, bonus rights
and right to receive stock options or other compensation in the form of equity
securities (or rights to purchase equity securities).
4.20 Knowledge of the Purchaser. To the extent representations and
warranties are made in this Article IV "to the best knowledge" of the Purchaser,
the Purchaser shall only have liability for claims arising pursuant to this
Article IV if any of the current officers and directors of the Purchaser knew
that the representation was false.
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ARTICLE V
Covenants
5.1 Pre-Closing Covenants of the Companies and the Shareholders. Each of
the Companies and the Shareholders, severally, hereby covenants that, from and
after the date hereof and until the Closing or earlier termination of this
Agreement:
5.1.1 Access to Books, Records, Personnel and Properties;
Cooperation and Preparation of Financial Statements, Proxy Statement and
Required Filings. Each of the Companies shall afford, and the Shareholders shall
cause each of the Companies to afford to the officers, attorneys, accountants,
Independent Auditors, and other authorized representatives of the Purchaser free
and full access, during regular business hours or on reasonable notice, to all
of the books, records, personnel and properties of each of the Companies so that
the Purchaser may have full opportunity to make such review, examination and
investigation as it may desire of its business and affairs and to permit the
assimilation of financial and other information with respect to the Companies
for the preparation, filing and distribution to the Purchaser's shareholders of
a proxy statement and the preparation and/or filing of documentation related to
the acquisitions. The Companies will cause their employees, accountants and
attorneys to cooperate fully with said review, examination and investigation and
to make full disclosure to the Purchaser of all material facts affecting its
financial condition and business operations. Each of the Companies and the
Shareholders have been advised by the Purchaser that the consummation of the
acquisitions contemplated by this Agreement is, or may be, subject to the
requirements of the Xxxx-Xxxxx-Xxxxxx Anti-trust Improvements Act (the "HSR
Act") and each of the Companies and the Shareholders shall cooperate with the
Purchaser in assembling and preparing, at no cost to the Purchaser, the
information required with respect to the Companies and the Shareholders to be
included in such filing. However, each party shall be responsible for payment of
all filing fees which are necessary in connection with filings under the HSR
Act.
5.1.2 Conduct of Business. Except as hereinafter set forth in
this Section 5.1, each of the Companies shall conduct its business only in the
ordinary and usual course and make no material change in any of its policies
without the prior written consent of the Purchaser, which shall not be
unreasonably withheld or delayed.
5.1.3 Insurance. EDL shall maintain in force the insurance
policies listed in the Disclosure Schedule, except to the extent that they may
be replaced with equivalent policies at the same or lower rates. If, in the
Purchaser's opinion, additional coverage is necessary to keep adequately insured
the properties of EDL, EDL shall obtain (to the extent available) such
additional insurance, at the Purchaser's expense, from financially sound and
reputable insurers for a period ending no sooner than the close of business on
the Closing Date; provided that, if the Closing shall fail to occur, such
Company shall promptly cancel such policies for additional insurance and return
to the Purchaser any refunds of premiums paid by the Purchaser on account
thereof.
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5.1.4 Liabilities. Except as set forth elsewhere in this Section
5.1, EDL shall not incur any obligation or liability, absolute or contingent, of
in excess of One Hundred Fifty Thousand Dollars ($150,000) except for those
incurred in the ordinary and usual course of its business; nor shall it pay any
obligation or liability other than: (i) the foregoing obligations and
liabilities; (ii) debts, liabilities, and obligations set forth in the Balance
Sheet; (iii) debts, liabilities and obligations arising after the Balance Sheet
Date in the ordinary and usual course of its business; (iv) debts, liabilities
and obligations under the contracts, agreements, past practices, arrangements,
relationships, documents and instruments listed, described or contained in this
Agreement or in the Exhibits attached to this Agreement, or related to such
Company's performance of this Agreement; and (v) EDL may borrow up to Two
Hundred Twenty Five Thousand Dollars ($225,000) and distribute such proceeds to
distribute to the EDL Shareholders on account of a portion of EDL earnings which
have not prior to the Closing been distributed to them. Purchaser agrees that
following the Closing, Purchaser will assume and repay the indebtedness incurred
by EDL to make the foregoing distribution, without cost, tax or other expense to
EDL.
5.1.5 Preservation of Business. Each of the Companies and each
of the Shareholders will use its or his best efforts to preserve such Company's
business organization intact, to keep available the services of such Company's
present officers, employees and consultants (except as the Purchaser may
otherwise approve) and to preserve its goodwill.
5.1.6 No Breach. Each of the Companies and each Shareholder will
use its or his best efforts to assure that all of their representations and
warranties contained herein are true in all material respects as of the Closing
as if repeated at and as of such time, and that no material breach or default
shall occur with respect to any of its or their covenants, representations or
warranties contained herein that has not been cured by the Closing. Neither of
the Companies nor any Shareholder will voluntarily take any action or do
anything which will cause a material breach of or default respecting such
covenants, representations or warranties, and each of the Companies and the
Shareholders shall promptly notify the Purchaser of any event or fact which
represents or is likely to cause such a material breach or default.
5.1.7 No Negotiations. Neither of the Companies nor any of its
officers or directors nor any Shareholder shall enter into or conduct
negotiations, or enter into any agreement or understanding, for the possible
acquisition by any person or entity other than the Purchaser of any securities
of either of the Companies or the business or the assets of either of the
Companies unless the Closing shall not have occurred on or prior to July 31,
1998 (the "Latest Closing Date") unless a later date is required in order to
comply with regulatory requirements, including, but not limited to, the
provisions of the HSR Act if applicable, but in any such event, not later than
ninety (90) days after July 31, 1998 (the "Extended Latest Closing Date").
5.1.8 EDL Distribution of STL Common Stock. As of the Closing,
EDL shall not own any interest in the capital stock or assets of STL. Prior to
the Closing EDL shall distribute any such interest to the EDL Shareholders.
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5.1.9 STL Customer Consents. It is the intention of STL to
novate its existing Basic Ordering Agreement ("BOA") to NewSTL as of the
Closing. STL and the Shareholders agree to discuss the acquisition provided for
in this Agreement with all of its customers prior to the Closing and to attempt
to secure all reasonable commitments that the current and future business will
not be jeopardized by such acquisition. STL and the Shareholders will provide
the Purchaser with written assurances to the extent they can be obtained and
will advise the Purchaser in writing of the results of its discussions with its
customers and of the results of its attempts to secure commitments prior to
Closing.
5.2 Pre-Closing Covenants of the Purchaser. The Purchaser hereby
covenants that, from and after the date hereof and until the Closing or earlier
termination of this Agreement:
5.2.1 Access. The Purchaser shall afford to the officers,
attorneys, accountants and other authorized representatives of each of the
Companies and the Signing Shareholders free and full access, during regular
business hours and upon reasonable notice, to all of the books, records and
properties of the Purchaser so that each of the Companies and the Shareholders
may have full opportunity to make such review, examination, and investigation as
they desire of its business and affairs. The Purchaser will cause its employees,
accountants and attorneys to cooperate fully with said review, examination and
investigation and to make full disclosure to each of the Companies and the
Shareholders of all material facts affecting its financial condition and
business operations.
5.2.2 No Breach. The Purchaser will use its best efforts to
assure that all of its representations and warranties contained herein are true
in all material respects as of the Closing as if repeated at and as of such
time, and that no material breach or default shall occur with respect to any of
its covenants, representations or warranties contained herein that has not been
cured by the Closing. The Purchaser will not voluntarily take any action or do
anything which will cause a material breach of or default respecting such
covenants, representations and warranties and shall promptly notify each of the
Companies and the Shareholders of any event or fact which represents or is
likely to cause such material breach or default.
5.2.3 HSR Act Compliance. The Purchaser will use its best
efforts to cause its legal counsel to determine promptly after the execution of
the Agreement whether, in the opinion of such counsel, compliance with the HSR
Act is required in connection with the acquisition contemplated by this
Agreement. If in the opinion of such counsel such compliance is required, the
Purchaser will prepare and file the required compliance documents as promptly as
practicable after the execution of this Agreement and the determination by such
counsel that such compliance is required. The filing fee applicable to such
filing will be paid by the Purchaser.
5.2.4. Bulk Sale Filing. In the event the sale and purchase of
the STL Purchased Assets is subject to the provisions of any bulk sales law, the
parties to this Agreement hereby waive compliance therewith and agree to
indemnify one another for any damages or costs incurred by the other parties
hereto resulting from the failure of the indemnifying party to comply with any
such law.
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5.2.5 Organization of NewSTL. The Purchaser will cause the
incorporation of, or otherwise acquire and have available, a wholly-owned
subsidiary of the Purchaser ("NewSTL") for the purpose of receiving, upon
completion of the Closing, all of the STL Purchased Assets and, thereafter, to
carry on the business consisting of the STL Purchased Assets and carry out the
other post-closing covenants in this Agreement which are applicable to NewSTL.
5.2.6 Changes in Capitalization. Except as set forth on the
Disclosure Schedule, the Purchaser shall not issue stock, options, warrants or
take any other action which would result in changes in the capitalization table
contained in the Disclosure Schedule.
5.2.7 Changes in Compensation. Purchaser shall not make any
changes in the compensation of officers and directors set forth in the
Disclosure Schedule.
5.3 Post Closing Covenants of the Shareholders and STL.
5.3.1 Cooperation and Reasonable Efforts. The Shareholders and
STL will cooperate with the Purchaser and expend their reasonable efforts to
cause an orderly transfer and transition of the ownership of EDL to the
Purchaser and the assets and business of STL represented by the STL Purchased
Assets to NewSTL pursuant to the terms of this Agreement including, but not
limited to, their cooperation and reasonable efforts to:
(i) Transition existing customers of STL;
(ii) Consign of all work in progress of STL as required to
complete any business subcontracted to NewSTL after Closing;
(iii) Transfer existing inventory of STL including, but
not limited to, computer records, value, purchasing history, vendor history and
related items, except as may be necessary to complete work in progress as set
forth in Section 5.3.3.3 and open orders which constitute Excluded Assets;
(iv) Transfer of all sales and marketing information
including, but not limited to, customer data base, past customer correspondence,
customer files, promotional literature, data to produce marketing brochures, and
related items;
(v) Assist NewSTL in obtaining appropriate security
clearances;
(vi) Transition and retain employees;
(vii) Transition employee benefits including, but not
limited to, insurance plans and 401(k) plan, etc., and attendant obligations;
(viii) Transition accounting system and its functions;
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(ix) Transfer assets and technology including, but not
limited to, product specifications and documentation, computer software,
drawings, manufacturing processes, procedures and documentation (collectively,
"Intellectual Property"), test fixtures, office computers and the contents of
their hard drives, excluding: (i) any STL specific customer and contract
information related to STL contracts excluded as among the Excluded Assets; (ii)
and a retained license to utilize all such Intellectual Property as provided in
Section 5.3.3.3; and
(x) Attempt to secure new orders and contracts for NewSTL
within the scope of any employment relationship with NewSTL.
Without limiting the generality of the foregoing, the Shareholders and
STL, at the request of the Purchaser and at the Purchaser's sole cost, but
without additional consideration, will execute and deliver from time to time
such further instruments of assignment, conveyance and transfer, (ii) sign any
documents reasonably necessary or useful to ensure that all of the right, title
and interest in and to the EDL Common Stock and the business of EDL and the
business of STL represented by the STL Purchased Assets vests in the Purchaser,
(iii) cooperate in the conduct of litigation and the processing and collection
of insurance claims, and (iv) take such other actions as may reasonably be
required to convey and deliver more effectively to the Purchaser the Common
Stock and the business of EDL and the business of STL represented by the STL
Purchased Assets or to confirm and perfect the Purchaser's title thereto, as
contemplated by this Agreement.
5.3.2 Restrictions Applicable to Paravant Stock Issued as Sale
Consideration. Each Shareholder agrees to bound by the restrictions applicable
that restrict any sales of the Paravant Stock such Shareholder will have
received pursuant to this Agreement in accordance with the provisions of
Sections 1.9 and 1.10.
5.3.3 NewSTL and Related Matters .
5.3.3.1 Referral of New Business. After the Closing, STL
will not enter into any new contracts or accept any new orders to perform any
services which are similar to or competitive with the business of STL offered or
performed prior to the Closing. To the extent any such business becomes
available to the Shareholders or STL such business shall be referred to NewSTL.
Notwithstanding the foregoing, STL shall not be prohibited from entering into a
new contract or accepting a new order if, but only if, the customer has a
pre-Closing Date contractual right to require STL to accept such contract or
order and such contractual right does not permit such contract or order to be
referred to NewSTL.
5.3.3.2 Subcontracting of Existing Business. As of, and
after, the Closing, STL will place firm fixed price subcontracts with NewSTL to
complete the backlog of STL's business (the "Existing Business Backlog"). The
total value of such subcontracts shall be the revenue backlog minus a discount
of two percent (2%). NewSTL will also reimburse STL for documented expenses in
excess of two percent (2%).
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5.3.3.3 License to Complete Backlog ; Discontinuation of
STL. In connection with the acquisition by the Purchaser of the Intellectual
Property included among the STL Purchased Assets, NewSTL shall grant limited
license to utilize such Intellectual Property to the extent, but only to the
extent, required to complete any orders of STL in the period between sale of the
STL Purchased Assets and discontinuation, dissolution and liquidation of STL,
which will be undertaken as soon as practicable.
5.3.3.4 STL Subcontract for Backlog. The Disclosure
Schedule sets forth the subcontracting relationship to exist between STL and
NewSTL for completion of the backlog.
5.4 Post Closing Covenants of the Purchaser.
5.4.1 Payments to Shareholders. The Purchaser covenants and
agrees to the Cash Earn-Out to the extent it may be earned under the provisions
of Section 1.3 by distributing and paying the same in accordance with Section
1.5.
5.4.2 Appointments to Purchaser's Board of Directors. Upon the
Closing and as of the Closing Date the Board of Directors of the Purchaser shall
increase the number of directors constituting the Purchaser's Board of Directors
by three (3) directors, from five (5) directors to eight (8) directors, and
shall appoint Xxxxxxxx, Xxxxxxxx and Xxxxxxxx as directors to fill the vacancies
created by such increase. Such appointed directors shall be appointed as
directors to serve until the 1999 annual meeting of shareholders of the
Purchaser. The Board of Directors of the Purchaser shall establish the number of
directors constituting the Board of Directors to be elected at the 1999 annual
meeting of shareholders at eight (8) directors and shall designate Xxxxxxxx,
Xxxxxxxx and Xxxxxxxx as three of the management nominees for election as
directors at the 1999 annual meeting. Thereafter, the number of directors and
the persons nominated for election as directors shall be determined as provided
in the Articles of Incorporation and By-Laws of the Purchaser and the covenant
of the Purchaser set forth in this Section 5.4.2 shall be of no further force or
effect.
5.4.3 Voting Rights. Purchaser shall ensure that the EDL
Shareholders and the Shareholders shall be the record owners of the Paravant
stock paid to them at the Closing as of the issue date thereof (the "Record
Ownership Date"), which shall be within five (5) days after the Closing Date,
and that the Shareholders shall be entitled to enjoy the voting rights
associated with such shares as of the Record Ownership Date.
5.4.4 Health Insurance Coverage for Shareholders. As of the
Closing Date, and thereafter until such persons are eligible for coverage under
Medicare, the Purchaser shall permit EDL and NewSTL to provide health care
insurance to the Shareholders which is of equal value to the health insurance
provided to such persons as employees of the Companies prior to the acquisition
provided for in this Agreement and the cost such coverage to them shall be the
same as if they were employees of EDL and NewSTL.
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5.4.5 Participation by Employees of the Companies in Purchaser's
Employee Stock Option Plan. The management employees of the Companies listed on
the Disclosure Schedule shall be eligible to participate in the Purchaser's
Employee Stock Option Plan, subject to the terms of the Plan and to selection as
participants thereunder by the Plan's stock option plan committee, on the same
basis as other management employees of the Purchaser.
5.4.6 Autonomy and Management of EDL and NewSTL. The Purchaser
shall maintain each of EDL and NewSTL as a separate corporate entity until
completion of the last Earn- Out Period required for the calculations in Section
1.3. The parties agree that each of EDL and NewSTL shall report to the Chief
Executive Officer of the Purchaser (the "CEO") and the Purchaser's Board of
Directors (the "BOD") and that it is not the intention of the parties that the
CEO or BOD become involved in the day to day management, nor create a review and
approval process for other than annual business plans of EDL and NewSTL whereby
either EDL or NewSTL cannot conduct business in a meaningful way. Consistent
with legal, regulatory, administrative and contractual requirements applicable
to EDL and NewSTL, the CEO and BOD shall periodically review the business
activities and performance of EDL and NewSTL. The Purchaser shall make available
to EDL and NewSTL, solely for the use of EDL and NewSTL, an operating line of
credit in an aggregate total maximum amount of up to One Million Five Hundred
Thousand Dollars ($1,500,000), meaning that EDL and NewSTL would share their
liquidity positions as has been the past practice of EDL and STL. In the event
that EDL and NewSTL do not maintain an acceptable annual performance of a
minimum of Seven Million Dollars ($7,000,000) of pre-tax earnings per year or
fail to comply with, or cause EDL or NewSTL to fail to comply with, legal,
regulatory, administrative or contractual requirements applicable to EDL and
NewSTL, the CEO and BOD may direct the management of EDL and NewSTL to the
extent required so long as such deficiency in performance or non-compliance
shall continue and no provision of this Section 5.4.6 shall restrict the
authority of the BOD.
5.4.7 Companies' Existing Employee Benefit Plans. The Purchaser
shall permit EDL and NewSTL to retain the employee benefits plans which were
available to the employees of the Companies prior to the acquisition for a
minimum of three (3) years following the Closing.
5.4.8 Location of the Companies. For a period of five (5) years
from the Closing Date the Purchaser will not move the aggregate principal
operations of EDL or NewSTL to any location outside a twenty (20) mile radius
from the incorporated limits of Dayton, Ohio without the consent of a majority
of the Shareholders.
5.4.9 Distribution From and Continuation of Existing Executive
Deferred Compensation Plans. In connection with the acquisition contemplated by
this Agreement, the Purchaser shall authorize and permit each of the Companies
to distribute its existing funded non-qualified executive deferred compensation
plans and to permit EDL and NewSTL to establish similar plans after the Closing
and at no less favorable terms or economic value.
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5.4.10 Employees of STL. Purchaser agrees to employ (or cause
NewSTL to employ) the employees of STL at compensation levels no less than as
specified in the Disclosure Schedule and to give such employees credit for time
worked at STL for purposes of vacation and other "fringe benefits" as if such
employees had been employed by Purchaser (or New STL) during such time.
ARTICLE VI
Conditions Precedent to the
Obligation of the Purchaser to Close
The obligation of the Purchaser to enter into and complete the Closing
is subject to the fulfillment, prior to or on the Closing Date, of each of the
following conditions, any one or more of which may be waived by the Purchaser
(except when the fulfillment of such condition is a requirement of law).
6.1 Shareholder Approval. The Shareholders of the Purchaser, by the
affirmative vote of not less than a majority of the shares outstanding and
entitled to vote thereon, shall have approved the execution by the Purchaser of
this Agreement and the consummation by the Purchaser of transactions provided
for herein.
6.2 Financial Condition, Indebtedness and Net Worth at Closing. The
consolidated financial condition of the Companies as of the Closing shall be in
conformity with the provisions of Section 1.11.
6.3 Representations and Warranties. All representations and warranties
of the Companies and the Shareholders contained in this Agreement and in the
Disclosure Schedule and in any written statement, exhibit, certificate, schedule
or other document delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects as at the Closing Date, as if made at the Closing and as of the Closing
Date.
6.4 Covenants. Each of the Companies and the Shareholders shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by each
of them prior to or at the Closing.
6.5 No Actions. No action, suit, proceeding or investigation shall have
been instituted, and be continuing before a court or before or by a governmental
body or agency, or shall have been threatened and be unresolved, to restrain or
to prevent or to obtain damages in respect of, the carrying out of the
transactions contemplated hereby, or which, if successful, would materially
affect the right of the Purchaser to own the EDL Common Stock or to operate or
control the assets, properties and business of EDL or to control and utilize the
STL Purchased Assets after the Closing Date, or which, if successful, would have
a material adverse effect thereon.
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6.6 Consents, Licenses, Permits, and Transfer of Customer Relationships
. Each of the Companies and the Shareholders shall have obtained all consents,
licenses and permits of third parties necessary for the performance by each of
them of all of their respective obligations under this Agreement, and such other
consents, if any, to: (i) prevent any agreements of EDL or any of the other
agreements included among the STL Purchased Assets from terminating, the
termination of which, in the aggregate, would have a material adverse effect on
the business, financial condition or assets of EDL or upon the aggregate value
of the STL Purchase Assets; or (ii) prevent any material indebtedness of either
of the Companies from becoming due or being subject to becoming due with the
passage of time or on notice as a result of the performance of this Agreement;
any other provision of this Agreement to the contrary notwithstanding.
6.7 No Material Change. Except as set forth on the Disclosure Schedule,
there shall have been no material change, whether or not adverse, at the Closing
Date in the business, assets, properties, operations, financial status or
prospects of either of the Companies since the Balance Sheet Date.
6.8 Certificate. The Purchaser shall have received a certificate in the
form annexed hereto as Exhibit 6.8 dated the Closing Date, signed by the
President and Secretary of each of the Companies and by each of the Shareholders
as to the satisfaction of the conditions contained in Sections 6.2, 6.3, 6.4,
6.5, 6.6, and 6.7.
6.9 Opinion. The Purchaser shall have received the written opinion of
Xxxxx, Xxx, Sacks and Xxxxxxxxx, LLP, and/or Ohio counsel reasonably acceptable
to the Purchaser, as special counsel to the Companies and the Shareholders
("Counsel to the Companies and Shareholders"), dated the Closing Date, in form
and substance reasonably satisfactory to the Purchaser and its counsel with
respect to the matters set forth on Exhibit 6.9 hereto.
6.10 Employment Agreements. At the Closing each of the Shareholders
shall have executed his respective Employment Agreement annexed hereto as
Exhibit 6.10.
6.11 Non-Competition Agreements. At the Closing each of Xxxxxxxx,
Xxxxxxxx and Torresani shall have executed his respective Non-Competition
Agreement in the form annexed hereto as Exhibit 6.11.
6.12 Lease Agreements and Consents. At the Closing any lease agreements
or consent required to permit the real property lease with respect to any real
property leased by the Companies immediately prior to the Closing to remain in
effect on its present terms and conditions following the Closing shall have been
obtained by the Companies and/or the Shareholders.
6.13 Additional Documents. Each of the Companies and the Shareholders
shall have delivered all such other certificates and documents as the Purchaser
or its counsel, Xxxxxxx, Xxxxxxx & Xxxxx, P.A. ("Counsel to the Purchaser"), may
have reasonably requested.
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6.14 Approval of Counsel. All actions, proceedings, instruments and
documents required to carry out this Agreement, or under the conditions of the
Closing as provided in Section 8.3, and all other related legal matters shall
have been approved as to the form and substance by Counsel to the Purchaser,
which approval shall not be unreasonably withheld or delayed.
ARTICLE VII
Conditions Precedent to the Obligation of
the Companies and the Shareholders to Close
The obligation of each of the Companies and the Shareholders to enter
into and complete the Closing is subject to the fulfillment, prior to or on the
Closing Date, of each of the following conditions, any one or more of which may
be waived by the Companies and Shareholders' Representative (except when the
fulfillment of such condition is a requirement of law). It is understood that
the Shareholders shall acknowledge satisfaction of the conditions set forth in
this Article VII only after the Purchaser has first acknowledged satisfaction of
the conditions contained in Article VIII.
7.1 Representations and Warranties. All representations and warranties
of the Purchaser contained in this Agreement and in the Disclosure Schedule and
in any written statement, exhibit, certificate, schedule or other document
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be true and correct in all material respects as at the Closing
Date, as if made at the Closing and as of the Closing Date.
7.2 Covenants. The Purchaser shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied by it prior to or at the Closing.
7.3 No Actions. No action, suit, proceeding, or investigation shall have
been instituted, and be continuing, before a court or before or by a
governmental body or agency, or have been threatened, and be unresolved, by any
governmental body or agency to restrain or prevent, or obtain damages in respect
of, the carrying out of the transactions contemplated hereby, or which, if
successful, would materially affect the right of the Shareholders to own the
Paravant Stock or which, if successful, would have a material adverse effect on
the assets, properties and business of the Purchaser.
7.4 Consents. The Purchaser shall have obtained all consents, licenses
and permits of third parties necessary for the performance of all its respective
obligations under this Agreement.
7.5 No Material Adverse Change. Other than as set forth on the
Disclosure Schedule, there shall have been no material adverse change at the
Closing Date in the business, assets, properties, operations, financial status
or prospects of the Purchaser since December 31, 1997.
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7.6 Certificate. The Companies and the Shareholders shall have received
a certificate in the form annexed hereto as Exhibit 7.6 dated the Closing Date,
signed by the Chairman of the Board, the President, any Vice President, or the
Treasurer and Secretary or any Assistant Secretary of the Purchaser as to the
satisfaction of the conditions contained in Sections 7.1, 7.2, 7.3, 7.4, and
7.5.
7.7 Opinion. The Companies and the Shareholders shall have received the
written opinion of Xxxxxxx, Xxxxxxx & Xxxxx, P.A. as counsel to the Purchaser
("Counsel to the Purchaser") dated the Closing Date, in form and substance
satisfactory to the Companies and the Shareholders and their counsel
substantially to the effect set forth on Exhibit 7.7 hereto.
7.8 Execution of Other Agreements. Each of the Shareholders shall have
executed his respective Employment Agreement as required by Section 6.10 and
each of Xxxxxxxx, Xxxxxxxx and Torresani shall have executed his respective
Non-Competition Agreement as required by Section 6.11.
7.9 Additional Documents. The Purchaser shall have delivered all such
certified resolutions, certificates and documents with respect to the Purchaser
as the Companies or Counsel to the Companies and Shareholders may have
reasonably requested.
7.10 Approval of Counsel. All actions, proceedings, instruments and
documents required to carry out this Agreement or under the conditions of the
Closing as provided in Section 8.3 hereof, and all other related legal matters,
shall have been approved as to form and substance by Counsel to the Companies
and Shareholders, which approval shall not be unreasonably withheld or delayed.
7.11 Changes to Purchaser Capitalization and/or Officers and Directors
Compensation. Purchaser shall have certified to the Shareholders (in a manner
acceptable to Shareholders in their discretion) that there have been no material
or unusual changes in Purchaser's capitalization, and/or salaries, and/or
benefits of Purchaser's officers and directors from the date of this Agreement
until Closing.
ARTICLE VIII
Closing
8.1 The Closing. The closing of the acquisition of the Common Stock
contemplated by this Agreement (the "Closing") shall be deemed to occur upon the
satisfaction of all of the conditions precedent to the obligations of the
parties to close as set forth in Articles VI and VII and upon the delivery by
the parties of all of the items to be delivered by them pursuant to Sections 8.4
and 8.5 of this Article VIII. The date on which the Closing shall be deemed to
have occurred is referred to in this Agreement as the "Closing Date".
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8.2 Location, Time and Date. The location for the delivery of the items
to be delivered by the parties under the conditions of the Closing set forth in
Section 8.3 hereof shall be the offices of EDL at 0000 Xxxxxx-Xxxxx Xxxx,
Xxxxxx, Xxxx 00000, and the time and date for such delivery shall be 10:00
o'clock a.m. on July 1, 1998 or at such other time and place as may be actually
agreed to by the parties hereto, but in any event not later than the Latest
Closing Date or, if required, the Extended Latest Closing Date, in each case as
defined in Section 5.1.7.
8.3 Conditions of the Closing. The delivery to the Purchaser of the
items to be delivered by the Companies and the Shareholders as provided in
Section 8.4 and the delivery to STL and the Shareholders of the items to be
delivered by the Purchaser as provided in Section 8.5 shall constitute the
conditions of the Closing.
8.4 Items to be Delivered by the Companies and the Shareholders. At the
Closing, the Companies and the Shareholders will deliver or cause to be
delivered to the Purchaser:
(a) The certificates which represent one hundred per cent (100%)
of the outstanding shares of the EDL Common Stock;
(b) a general assignment and xxxx of sale with respect to the
STL Purchased Assets;
(c) The certificate required by Section 6.8;
(d) The opinion of counsel required by Section 6.9;
(e) The Employment Agreements required by Section 6.10;
(f) The Non-Competition Agreements required by Section 6.11;
(g) Any lease agreements and/or consents required by Section
6.12; and
(h) Such other certified resolutions, documents and certificates
as are required to be delivered by the Companies and the Shareholders pursuant
to the provisions of this Agreement.
8.5 Items to be Delivered by Purchaser. At the Closing, the Purchaser
will deliver to the Shareholders and STL:
(a) The EDL Common Stock Sale Consideration required by Section
1.1.1;
(b) The STL Purchased Assets Consideration required by Section
1.2.1;
(c) The STL Shareholder Non-Competition Agreements Consideration
required by Section 1.2.2;
44
(d) The certificate required by Section 7.6;
(e) The opinion of counsel required by Section 7.7;
(f) The Employment Agreements and Non-Competition Agreements
required by Section 7.8; and
(g) Such other certified resolutions, documents and certificates
as are required to be delivered by the Purchaser pursuant to the provisions of
this Agreement.
ARTICLE IX
Survival of Representations; Indemnification
9.1 Survival. Regardless of any investigation by the other party or
parties or its agents, all of the respective representations, warranties,
covenants and agreements of the parties contained in this Agreement shall
survive the Closing and continue thereafter for such period as is required to
give effect to the indemnification provisions set forth in this Article IX.
9.2 Indemnification.
9.2.1 Indemnity of Purchaser by the Shareholders and STL.
Subject to the terms, conditions and limitations of this Article IX, the
Shareholders severally (in proportion to their respective Ratable Interests)
agree to indemnify, defend and hold harmless the Purchaser and each of its
subsidiaries and each of its and their respective directors, officers,
employees, agents, successors and assigns (collectively, the "Purchaser
Indemnified Parties") from and against any and all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities (other than the
Assumed Liabilities), costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and expenses (collectively,
"Damages") asserted against, imposed upon or incurred by a Purchaser Indemnified
Party by reason of, resulting from or relating to any breach of any
representation, warranty, covenant or agreement of any such Shareholder or the
Companies contained in or made pursuant to this Agreement or any certificate
given by the Companies or the Shareholders at and as part of the Closing in
connection with this Agreement or in connection with any liability of STL which
is not among the Assumed Liabilities. It is understood that as to matters "to
the best knowledge" of the Shareholders the liability of the Shareholders shall
be limited in accordance with the provisions of Sections 2.31 and 3.23, as
applicable. In addition to the limitations contained elsewhere in this
Agreement, the indemnification of the Purchaser by the Shareholders and STL
provided for herein shall be limited as set forth below.
(i) With respect to any representation or warranty
applicable to the STL Purchased Assets, indemnification shall be limited to
Damages for which a Notice of Claim (as defined in Section 9.3(a)) shall have
been delivered by not later than one (1) year after the Closing Date and shall
not exceed an aggregate amount (exclusive of amounts paid pursuant to Section
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9.2.1(ii)), for all Shareholders as a group, of One Million Five Hundred
Thousand Dollars ($1,500,000).
(ii) With respect to all claims for indemnification other
than those limited by clause (i) of this Section 9.2.1, indemnification shall be
limited to Damages for which a Notice of Claim shall have been delivered by not
later than three (3) years after the Closing Dates and shall not exceed an
aggregate amount (exclusive of amounts paid pursuant to Section 9.2.1(i)), for
all Shareholders as a group, of One Million Five Hundred Thousand Dollars
($1,500,000) and shall be recoverable solely as a setoff against amounts
otherwise payable to the Shareholders or STL under the Cash Earn-Out or under
the Purchase Notes. In the case of claims by parties other than the parties to
this Agreement against either of the Companies or any of their officers,
directors or shareholders (the "Pre-Closing Parties")which claims also include a
claim against the Purchaser or EDL, the Purchaser will pay the first amount of
Damages attributable to such Pre-Closing Parties up to an aggregate of Two
Hundred Fifty Thousand Dollars ($250,000). With respect to representations and
warranties included in Article III, the indemnification of the Purchaser by the
Shareholders and STL shall be limited to claims for direct monetary Damages.
(iii) With respect to any claim against STL or any of the
Shareholders for failure to perform an obligation to consummate the Closing, the
liquidated damages provided for in Article XI shall be the sole and exclusive
remedy available to the Purchaser.
9.2.2 Indemnity of the Shareholders and STL by Purchaser.
Subject to the terms, conditions and limitations of this Article IX, the
Purchaser agrees to indemnify, defend and hold harmless the Shareholders, STL,
all officers, directors, employees and agents of STL and their respective heirs,
successors and assigns (collectively, the "Shareholder Indemnified Parties"),
from and against any and all Damages (as defined in Section 9.2.1) asserted
against, relating to, imposed upon or incurred by the Shareholder Indemnified
Parties by reason of, resulting from or relating to any breach of any
representation, warranty, covenant or agreement of the Purchaser contained in or
made pursuant to this Agreement or any certificate given by the Purchaser at and
as part of the Closing in connection with this Agreement. It is understood that
as to matters "to the best knowledge" of the Purchaser the liability of the
Purchaser shall be limited in accordance with the provisions of Section 4.20.
The indemnification of the Shareholder Indemnified Parties by the Purchaser
shall be limited to Damages for which a Notice of Claim shall have been
delivered by not later than three (3) years after the Closing Date and shall not
exceed an aggregate amount of Three Million Dollars ($3,000,000) for all Damages
for which a Notice of Claim shall have been delivered within one (1) year from
the Closing Date. Thereafter for the balance of the period until three (3) years
after the Closing Date, such limitation shall be reduced to an aggregate amount
of One Million Five Hundred Thousand Dollars ($1,500,000) less the amount of
Damages previously paid by the Purchaser hereunder. Provided, however, the
foregoing limitation shall not be applicable to the agreements of the Purchaser
to make payments pursuant to this Agreement, including without limitation, the
obligation to pay the Cash Earn-Out in accordance with Section 1.3.
Notwithstanding any other provision of this Section 9.2.2, with respect to any
claim against the Purchaser for failure to perform
46
an obligation to consummate the Closing, the liquidated damages provided for in
Article XI shall be the sole and exclusive remedy available to the Shareholders
and STL.
9.2.3 Insurance. The amount of any Damages for which
indemnification is provided under this Article IX shall be determined on an
after-tax basis and shall also be net of any amounts recovered or recoverable by
the Indemnified Party (as hereinafter defined) by reason of, or under insurance
policies and/or from third parties.
9.2.4 Definitions. For purposes of this Article IX: (i) the
party seeking indemnification pursuant to this Agreement is referred to herein
as the "Indemnified Party"; and (ii) the party against which indemnification is
sought pursuant to this Agreement is referred to as the "Indemnifying Party."
9.2.5 No Exhaustion of Remedies. The assertion of any single
claim for indemnification hereunder shall not bar a party from asserting any
other claim for indemnification hereunder. It is hereby agreed that no party
need exhaust any other remedy that may be available to it prior to seeking
indemnification hereunder, but shall proceed directly in accordance with the
provisions of this Agreement to resolve claims for Damages.
9.3 Procedure for Resolution of Indemnification Claims. Any and all
claims for indemnification made pursuant to this Agreement shall be made and
resolved as follows:
(a) Notice of Claim. The Indemnified Party shall deliver to the
Indemnifying Party a written notice (a "Notice of Claim") with respect to any
claim for Damages against which the Indemnified Party is seeking indemnification
under this Agreement, which notice shall set forth, to the extent such
information is reasonably available to the Indemnified Party: (i) an estimate of
the monetary liability associated with the alleged Damages; and (ii) a
description, in reasonable detail, of the circumstances giving rise to the
alleged Damages.
(b) Resolution of Claims. Claims for Damages received by the
Indemnifying Party pursuant to Section 9.3(a) above shall be resolved as
follows:
(i) In the event the Indemnifying Party does not give
written notice (a "Notice of Disputed Claim") to the Indemnified Party of the
Indemnifying Party's intention to contest a claim for Damages set forth in a
Notice of Claim within thirty (30) days of Indemnifying Party's receipt of such
Notice of Claim, the Indemnifying Party shall promptly pay to the Indemnified
Party the amount of the claim set forth in such Notice of Claim.
(ii) In the event the Indemnifying Party contests a claim
for Damages by giving a Notice of Disputed Claim, the parties will attempt to
resolve their dispute by mutual agreement, reasonably and in good faith. In the
event the disputed claim is solely between parties to this Agreement and such
disputed claim is not resolved within thirty (30) days after the Indemnifying
Party has given such Notice of Disputed Claim, at the written demand of either
party such disputed
47
claim shall be finally settled by binding arbitration. In the event the disputed
claim is a third party claim and such disputed claim is not resolved within
thirty (30) days after the later of the date on which the Indemnifying Party has
given such Notice of Disputed Claim or the date on which such third party claim
is adjudicated, settled, or otherwise terminated by the parties thereto or by
any court, agency, regulatory body, or other entity having jurisdiction over
such claim, at the written demand of either party such disputed claim shall be
finally settled by binding arbitration. The arbitration provided for herein
shall be held in Atlanta, Georgia, or such other place as the parties shall
mutually agree upon, under the rules of the American Arbitration Association by
an independent arbitrator selected in accordance with such rules. If such
arbitration results in a decision in the Indemnified Party's favor, the
Indemnifying Party shall promptly pay the amount awarded by such decision to the
Indemnified Party, with interest thereon, commencing on the date the Indemnified
Party was damaged, at 8% per annum.
(c) The parties acknowledge that the arbitration provided in
this Article IX is their exclusive forum for resolution of disputes related to
this Agreement or the transactions contemplated hereby and expressly waive their
rights to jury trial or other adjudication of any disputes.
9.4 Control of Actions and Proceedings. In the event that a third party
claim is instituted against an Indemnified Party for which such party may claim
indemnification under this Agreement, such Indemnified Party promptly shall
tender the defense of such claim to the Indemnifying Party by written notice
thereto. If the Indemnifying Party notifies the Indemnified Party within thirty
(30) days after receipt of such notice that the Indemnifying Party will defend
the third party claim, the Indemnifying Party shall defend the claim at its sole
cost and expense. If the Indemnifying Party refuses to accept the tender of the
defense or does not notify the Indemnified Party that the Indemnifying Party
will defend the claim within such thirty (30) day period, the Indemnified Party
shall reasonably defend the claim at the Indemnifying Party's sole cost and
expense. The party not controlling the defense may participate in the defense of
any matter at its own expense. The party which controls the defense of a third
party claim shall not settle or compromise such claim in a manner which may
result in liability to the other party without its written consent, which
consent shall not be unreasonably withheld. The Purchaser Indemnified Parties
and the Shareholder Indemnified Parties agree to cooperate with each other with
regard to the defense of third party claims.
9.5 Recovery; Set-Off. The Purchaser waives its right to set off any
Damages under this Article IX against any unpaid amounts payable to the
Shareholder Indemnified Parties, except to the extent that such set-off is (i)
for the collection of a claim which has been agreed upon by the parties, (ii)
for the collection of any claim with respect to which the Indemnifying Party
shall not have given a Notice of Disputed Claim within the time period
prescribed by Section 9.3(b)(i), (iii) to implement a final decision of an
arbitrator pursuant to this Article IX or (iv) to implement a final decision of
some other judicial or administrative body having jurisdiction over the
Purchaser or any subsidiary of the Purchaser with respect to the claim for which
indemnification is sought pursuant to Section 9.4.
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ARTICLE X
Termination and Waiver
10.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions provided
for herein abandoned at any time prior to the Closing:
(a) By mutual consent of the Purchaser, the Companies and all of
the Shareholders;
(b) By the Purchaser if any of the conditions set forth in
Article VI hereof shall not have been fulfilled on or prior to the Latest
Closing Date or, if applicable, the Extended Latest Closing Date, or shall
become incapable of fulfillment, and shall not have been waived;
(c) By the Companies and all of the Shareholders if any of the
conditions set forth in Article VII hereof shall not have been fulfilled on or
prior to the Latest Closing Date or, if applicable, the Extended Latest Closing
Date, or shall have become incapable of fulfillment, and shall not have been
waived;
(d) By the Purchaser or all of the Shareholders, if any legal
action or proceeding shall have been instituted or threatened seeking to
restrain, prohibit, invalidate or otherwise affect the consummation of the
transactions contemplated by this Agreement which makes it inadvisable, in the
judgment of the Purchaser or the all of the Shareholders, to consummate same.
In the event that this Agreement is terminated as described above, this
Agreement shall be void and of no force and effect, without any liability or
obligation on the part of any of the parties hereto except for any liability
which may arise pursuant to Section 12.2.
10.2 Waivers. Any condition to the performance of the Companies, the
Shareholders or the Purchaser which legally may be waived on or prior to the
Closing Date may be waived at any time by the party entitled to the benefit
thereof by action taken or authorized by an instrument in writing executed by
the relevant party or parties. The failure of any party at any time to require
performance of any provision hereof shall in no manner affect the right of such
party at a later time to enforce the same. No waiver by any part of the breach
of any term, covenant, representation or warranty contained in this Agreement as
a condition to such party's obligations hereunder shall release or affect any
liability resulting from such breach, and no waiver of any nature, whether by
conduct or otherwise, in any one or more instances, shall be deemed to be or
construed as a further or continuing waiver of any such condition or of any
breach of any other term, covenant, representation or warranty of this
Agreement.
ARTICLE XI
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LIQUIDATED DAMAGES
If the Shareholders or the Purchaser do not perform their respective
obligations to consummate the Closing as required by this Agreement, other than
as a result of a party exercising its right to terminate this Agreement under
the provisions of Section 10.1 or as permitted pursuant to a waiver granted
under the provisions of Section 10.2 solely within the discretion of the party
entitled to grant such waiver, and, as a result of such nonperformance the
Closing is not consummated, such nonperforming party shall be obligated to pay
the other party the liquidated damages provided for in this Article XI.
11.1 Liquidated Damages; Intention of the Parties. The parties have
agreed that, as of the date of this Agreement, it is not possible to readily
ascertain the damages consequent upon a failure to consummate the Closing and
the transactions contemplated hereby because of: (i) the inability to determine
the costs and expenses to be incurred by the parties in furtherance of this
Agreement between the date hereof and the date intended as the Closing Date;
(ii) the inability to predict the value on the intended Closing Date of the
Paravant Stock to be delivered as EDL Common Stock Sale Consideration and STL
Shareholder Non-Competition Agreement Consideration; and (iii) the inability to
predict the value on the intended Closing Date of the EDL Common Stock, the STL
Purchased Assets or the STL Non-Competition Agreements. Based upon the foregoing
and the aggregate current value of the consideration intended to be exchanged at
the Closing, the parties have agreed that the damages to Purchaser or the
Shareholders which might reasonably be expected to follow a failure to
consummate the Closing would be at least One Million Dollars ($1,000,000) and,
therefore, the parties have agreed and stipulated to that amount as liquidated
damages to be paid in the event the Closing is not consummated because of the
failure of one or more Shareholders or of the Purchaser to perform their
respective obligations to consummate the Closing. Liquidated Damages shall be
paid as set forth in Sections 11.2 and 11.3. The parties believe that the
foregoing amount is not disproportionate to the damages reasonably to be
expected from any such failure and agree that it is their mutual intention that
the payment of that amount shall be as liquidated damages and not as a penalty
assessed against the nonperforming party.
11.2 Shareholders as Nonperforming Parties. If one or more of the
Shareholders breach this Agreement (other than because of a reason which is not
within the reasonable control of such nonperforming Shareholder or Shareholders)
and the result of such breach is that the Closing is not consummated, then
liquidated damages in the aggregate amount of One Million Dollars ($1,000,000)
together with all reasonable collection fees, costs and expenses will be
payable, jointly and severally, by such non-performing Shareholder or
Shareholders to the Purchaser.
11.3 Purchaser as Nonperforming Party. If either (i) the Purchaser
breaches this Agreement (other than because of a reason which is not within the
reasonable control of the Purchaser) and the result of such breach is that the
Closing is not consummated, or (ii) if the transactions contemplated by this
Agreement shall not have been approved by the Shareholders of the Purchaser
pursuant to a vote of the Shareholders thereon and any of Xxxxxxx X. Xxxxx,
Xxxxxxx X. XxXxxxxx, Xxxxxxx X. Xxxxxx or UES, Inc.(or any of its subsidiaries)
shall not have voted all of its
50
shares for approval thereof, or any of such persons shall not have recommended
such approval to the shareholders, then liquidated damages in the aggregate
amount of One Million Dollars ($1,000,000) will be payable by the Purchaser to
the Shareholders by paying to each of five (5) of the Shareholders One Hundred
Sixty-Six Thousand Six Hundred Sixty-Six Dollars and 66/100 ($166,666.66) and
paying to the other Shareholder One Hundred Sixty-Six Thousand Six Hundred
Sixty-Six Dollars and 70/100 ($166,666.70). The Purchaser shall also pay all
reasonable collection fees, costs and expenses.
11.4 Payment Date. Any payment required under the terms of Sections 11.1
or 11.2 shall be deemed to be due as of the date which, but for the failure of
the nonperforming party to perform, would have been the Closing Date, and such
payment shall be paid by such nonperforming party by not later than sixty (60)
days thereafter.
11.5 Sole and Exclusive Remedy. Notwithstanding any other provision of
this Agreement, the liquidated damages provided for in this Article XI shall be
the sole and exclusive remedy any failure of the Shareholders or the Purchaser
to perform their respective obligation to consummate the Closing.
ARTICLE XII
Miscellaneous Provisions
12.1 Expenses. Except with respect to the amount in excess of Nineteen
Thousand Five Hundred Dollars ($19,500) of actual audit fees incurred by the
Companies for the preparation of the audited financial statements of the
Companies which will be paid on behalf of the Companies by the Purchaser, or
except as otherwise expressly provided or set forth in, or required by, this
Agreement, Purchaser, the Companies and the Shareholders shall each bear their
own expenses in connection with this Agreement and the transactions contemplated
hereby.
12.2 Confidential Information. Each party agrees that such party and its
representatives will hold in strict confidence all information and documents
received from the other parties and, if the transactions herein contemplated
shall not be consummated, each party will continue to hold such information and
documents in strict confidence and will return to such other parties all such
documents (including the exhibits attached to this Agreement) then in such
receiving party's possession without retaining copies thereof, provided,
however, that each party's obligations under this Section 12.2 to maintain such
confidentiality shall not apply to any information or documents that have been
placed by others in the public domain or that come in the public domain
thereafter through any means other than as a result of any act of the receiving
party or of its agents, officers, directors or Shareholders which constitutes a
breach of this Agreement, or that are required by applicable law to be
disclosed.
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12.3 Projections and Forward Looking Financial Data. During the course
of negotiations, the parties to this Agreement have provided to one another
projections, calculations and other similar forward looking financial data,
including without limitation, the possible tax effect and consequences of the
transactions contemplated by this Agreement. Each of the parties hereto
acknowledges that such party has relied on such party's own due diligence, tax,
and financial advisors and not on the projections, calculations and financial
data described above in determining whether to enter into this Agreement or
consummate the transaction contemplated hereby.
12.4 Disclosures. Any disclosures made by any of the parties to this
Agreement in any provision of this Agreement or in any Exhibit hereto shall be
deemed to qualify each representation and warranty set forth in this Agreement
as the context requires.
12.5 Modification, Termination or Waiver. This Agreement may be amended,
modified, superseded or terminated, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, but only by a
written instrument executed by the party waiving compliance. The failure of any
party at any time or times to require performance of any provision hereof shall
in no manner affect the right of such party at a later time to enforce the same.
12.6 Publicity. The parties agree that no publicity, release or other
public announcement concerning the transactions contemplated by this Agreement
shall be issued by either party without the advance approval of both the form
and substance of the same by the other party and its counsel, which approval, in
the case of any publicity, release or other public announcement required by
applicable law, shall not be unreasonably withheld or delayed.
12.7 Notices. Any notice or other communication required or which may be
given hereunder shall be in writing and either be delivered personally or be
mailed, certified or registered mail, postage prepaid, and shall be deemed given
when so delivered personally, or if mailed, two (2) days after the date of
mailing, as follows:
If to the Purchaser, to: Paravant Computer Systems, Inc.
0000X Xxxx Xxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Vice President,
CFO and Treasurer
With a copy to: Xxxxxxx, Xxxxxxx & Xxxxx, P.A.
Xxxx Xxxxxx Xxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
52
If to EDL or the EDL Shareholders to: Engineering Development Laboratories,
Incorporated
0000 Xxxxxx-Xxxxx Xxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
With a copy to: Xxxxx X. Xxxxxxxx
0000 Xxxxxx-Xxxxx Xxxx
Xxxxxx, Xxxx 00000
If to STL or the STL Shareholders, to: Signal Technology Laboratories, Inc.
0000 Xxxxxx-Xxxxx Xxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx
With a copy to: Xxxxxx X. Xxxxxxxx
0000 Xxxxxx-Xxxxx Xxxx
Xxxxxx, Xxxx 00000
The parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice of any such change in the
manner provided herein for giving notice.
12.8 Binding Effect and Assignment. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the parties hereto;
provided, however, that no assignment of any rights or delegation of any
obligations provided for herein may be made by any party without the express
written consent of the other parties, except as provided in Section 5.3.3.4.
12.9 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior negotiations, understandings and representations (if any) made by and
between such parties.
12.10 Exhibits and Other Documents. All Exhibits annexed hereto and the
documents and instruments referred to herein or required to be delivered
simultaneously herewith or at the Closing, including, but not limited to the
Disclosure Schedule are expressly made a part of this Agreement as fully as
though completely set forth herein, and all references to this Agreement herein
or in any of such Exhibits, documents or instruments shall be deemed to refer to
and include all such Exhibits, documents and instruments.
12.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida applicable to agreements
made and to be performed entirely within that State, excluding the choice of law
rules thereof.
53
12.12 Sections, Subsections and Headings. As used in this Agreement the
terms Section and subsection shall mean the Sections and subsections in this
Agreement. The headings of the Sections and subsections contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
12.13 Gender. Words of the masculine gender in this Agreement shall be
deemed and construed to include correlative words of the feminine and neuter
genders and words of the neuter gender shall be deemed and construed to include
correlative words of the masculine and feminine genders.
12.14 Severability. The invalidity or unenforceability of any term or
provision of this Agreement shall in no way impair or affect the balance
thereof, which shall remain in full force and effect.
12.15 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but which together shall constitute
one and the same instrument.
12.16 Recitals. The recitals set forth at the beginning of this
Agreement are true and correct and incorporated by reference into the body of
this Agreement.
[SIGNATURES OF THE PARTIES ARE SET FORTH ON THE FOLLOWING PAGES.]
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
54
IN WITNESS WHEREOF, the parties have executed this Agreement as of April
23, 1998, amending and restating, as of March 31, 1998, the previous Acquisition
Agreement dated March 31, 1998.
"PURCHASER"
Paravant Computer Systems, Inc.
Attest: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. XxXxxxxx
__________________________ _____________________________
Xxxxxxx X. XxXxxxxx, President
[Corporate Seal]
"THE COMPANIES"
ENGINEERING DEVELOPMENT
LABORATORIES, INCORPORATED
Attest: /s/ Xxxxxx X. Xxxxxxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
__________________________ _____________________________
SIGNAL TECHNOLOGY LABORATORIES, INC.
Attest: /s/ Xxxx Xxx XxXxxxxx By: /s/ X. Xxxxxx Xxxxxxxx
__________________________ _____________________________
[Corporate Seal]
Signed, Sealed and Delivered "SHAREHOLDERS"
in the Presence of Two Sub-
scribing Witnesses:
/s/ Xxxxx XxxXxxxx /s/ Xxxxx X. Xxxxxxxx
_____________________________ _____________________________
Witness Xxxxx X. Xxxxxxxx
/s/ Xxxxxxxxx X. XxXxxxxxxx
_____________________________ _____________________________
Witness
55
/s/ Xxxxxx X. Xxxxxxxxxxxxx /s/ Xxxxxx X. Xxxxxxxx
______________________________ _____________________________
Witness Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxxxx X. XxXxxxxxxx
______________________________
Witness
/s/ Xxxxxx X. Xxxxxxxxxxxxx /s/ C. Xxxxx Xxxxxxxxxx
______________________________ _____________________________
Witness C. Xxxxx Xxxxxxxxxx
/s/ Xxxxxxxxx X. XxXxxxxxxx
______________________________
Witness
/s/ Xxxx Xxx XxXxxxxx /s/ X. Xxxxxx Xxxxxxxx
______________________________ _____________________________
Witness X. Xxxxxx Xxxxxxxx
/s/ Xxxx X. Xxxxx
______________________________
Witness
/s/ Xxxx Xxx XxXxxxxx /s/ Xxxxx Xxxxxxxx
______________________________ _____________________________
Witness Xxxxx Xxxxxxxx
/s/ Xxxx X. Xxxxx
______________________________
Witness
/s/ Xxxxxxx X. Xxxxxx /s/ Xxx X. Xxxxxxxxx
______________________________ _____________________________
Witness Xxx X. Xxxxxxxxx
/s/ Xxxx X. Xxxxx
______________________________
Witness
56
List of Exhibits
----------------
1.1 List of Shareholders and Shares Held
1.1.1 Xxxxxxxx Note, Xxxxxxxx Note and Xxxxxxxxxx Note
1.2A STL Purchased Assets, Excluded Assets and Assumed Liabilities
1.2B STL Shareholder Non-Competition Agreements
1.2.2.1(b) Xxxxxxxx Note
1.2.2.2(b) Torresani Note
1.2.2.3(b) Xxxxxxxx Note
1.6 Ratable Interest
6.8 Certificate of Officers of the Companies and Shareholders
6.9 Opinion of Counsel to the Companies and Shareholders
6.10 Employment Agreements
6.11 Non-Competition Agreements
7.6 Certificate of Officers of Purchaser
7.7 Opinion of Counsel to Purchaser
57
EXHIBIT 1.1
LIST OF SHAREHOLDERS AND SHARES HELD AT CLOSING
Engineering Development Laboratories, Inc. (EDL):
Stockholder Name Company Shares Held
---------------- ------- -----------
Xxxxx X. Xxxxxxxx EDL 000
X. Xxxxx Xxxxxxxxxx XXX 000
Xxxxxx X. Xxxxxxxx EDL 164
Signal Technology Laboratories, Inc. (STL):
Stockholder Name Company Shares Held
---------------- ------- -----------
X. Xxxxxx Xxxxxxxx STL 300
Xxxxx X. Xxxxxxxx STL 150
Xxx X. Xxxxxxxxx STL 000
Xxxxx X. Xxxxxxxx XXX 000
X. Xxxxx Xxxxxxxxxx XXX 255
Xxxxxx X. Stafanko STL 255
58
EXHIBIT 1.1.1(b)
XXXXXXXX NOTE
SUBORDINATED NOTE
$1,079,333.33 ______, 1998
FOR VALUE RECEIVED, PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (the "Maker"), promises to pay to the order of XXXXX X. XXXXXXXX
(the "Payee"), in the manner hereinafter set forth, the principal sum of One
Million Seventy Nine Thousand Three Hundred Thirty Three and 33/100 Dollars
($1,079,333.33).
This Note is given as consideration for the purchase by the Maker from
the Payee of shares of common stock of Engineering Development Laboratories,
Incorporated, an Ohio corporation ("EDL") pursuant to that certain Acquisition
Agreement dated ______, 1998 (the "Acquisition Agreement") between the Maker,
EDL, Signal Technology Laboratories, Inc., an Ohio corporation ("STL"), the
shareholders of EDL, including the Payee, and the shareholders of STL. Payments
to be made under this Note shall be made to the order of the Payee at
_____________________________, or at such other place as the Payee may designate
to the Maker in writing.
In addition to the aforementioned principal amount, the Maker shall pay
to the Payee interest on the unpaid principal amount from time to time
outstanding under this Note interest at the rate of eight percent (8%) per annum
determined on the basis of a three hundred and sixty five (365) day year.
This Note shall be payable in twelve (12) quarterly payments as follows:
(i) eleven (11) payments in the principal amount of Eighty Nine Thousand Nine
Hundred Forty Four and 44/100 Dollars ($89,944.44) together with accrued
interest on the unpaid principal amount and (ii) one payment in the principal
amount of Eighty Nine Thousand Nine Hundred Forty Four and 49/100 Dollars
($89,944.49) together with accrued interest on the unpaid principal amount. The
first such quarterly payment shall be due and payable on October 1, 1998 and
successive quarterly payments shall be due and payable on January 1, 1999 April
1,1999, and July 1, 1999 and on each October 1, April 1, July 1 and October 1
thereafter until July 1, 2001, when the entire principal sum and all accrued but
unpaid interest, if not sooner paid as aforesaid, shall be due and payable in
full. In the event the Maker calls all or any of its outstanding warrants for
redemption, cancellation, exercise or conversion, the Maker will be required to
apply a portion of the proceeds therefrom to reduce the indebtedness this Note
as required, and subject to the limitations set forth in, the Acquisition
Agreement.
The Maker shall have the right to prepay this Note in whole or in part
at any time without penalty. The Maker shall also have the right to set-off
against any payment or payments due under this Note any amount or amounts due to
the Maker from the Payee as indemnification under the Acquisition Agreement or
as damages under the Covenant Not to Compete or the Xxx-Xxxxxxxxxx
00
provisions, paragraphs 6 and 7, respectively (but only such provisions), of the
Employment Agreement between the Payee and the Maker dated as of the date of
this Note and given as a condition of the Closing under the Acquisition
Agreement. Any such prepayment or set-off shall be applied first to accrued but
unpaid interest, and then to the principal sums next maturing hereunder.
All payments required hereby shall be made in lawful money of the United
States of America.
By acceptance of this Note the Payee has agreed that the right of the
holder of this Note to obtain payment from the Maker is subordinate to the
rights of National City Bank (the "Senior Creditor") in respect of any
indebtedness of the Maker for borrowed money payable to the Senior Creditor
("Senior Debt"). This Note shall not be subordinate to any other indebtedness of
the Maker.
Any failure of the Maker to make any payment required hereunder by not
later than ten (10) days after the same shall be due shall constitute an Event
of Default. Upon the occurrence of any Event of Default, the holder hereof shall
have the right, after written notice to the Maker of such Event of Default, and
the failure of the Maker to cure such Event of Default within thirty (30) days
after Maker's receipt of such notice, to declare a Default under this Note and
to accelerate all principal and interest due hereunder. Following the occurrence
of any Default, the holder hereof also shall have the right to exercise any
remedies that it may have hereunder. If it becomes necessary for the holder
hereof to enforce this Note, the Maker shall pay the holder any and all costs,
expenses and reasonable attorneys's and paralegals' fees and expenses incurred
by such holder in connection with such proceedings and any associated
administrative, appellate or bankruptcy proceedings. During any Default or any
period permitted for the curing of any Event of Default interest will continue
to accrue for the benefit of the Payee at the rate of eight percent (8%) per
annum determined as hereinbefore provided.
The Maker hereby waives presentment for payment, demand, protest, notice
of protest and notice of dishonor and expressly agrees to remain and continue
bound for the payment of the principal and interest provided for by the terms of
this Note, notwithstanding any extension or extensions of time of, or for the
payment of said principal or interest.
This Note shall be governed and construed in accordance with the laws of
the State of Florida. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed under
seal and delivered by its duly authorized officer as of the date first above
written.
"MAKER"
PARAVANT COMPUTER SYSTEMS, INC.
By:_______________________________________
Name:_____________________________________
60
Title: ___________________________________
61
EXHIBIT 1.1.1(b)
XXXXXXXX NOTE
SUBORDINATED NOTE
$1,079,333.34 ______, 1998
FOR VALUE RECEIVED, PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (the "Maker"), promises to pay to the order of XXXXXX X. XXXXXXXX
(the "Payee"), in the manner hereinafter set forth, the principal sum of One
Million Seventy Nine Thousand Three Hundred Thirty Three and 34/100 Dollars
($1,079,333.34).
This Note is given as consideration for the purchase by the Maker from
the Payee of shares of common stock of Engineering Development Laboratories,
Incorporated, an Ohio corporation ("EDL") pursuant to that certain Acquisition
Agreement dated ______, 1998 (the "Acquisition Agreement") between the Maker,
EDL, Signal Technology Laboratories, Inc., an Ohio corporation ("STL"), the
shareholders of EDL, including the Payee, and the shareholders of STL. Payments
to be made under this Note shall be made to the order of the Payee at
_____________________________, or at such other place as the Payee may designate
to the Maker in writing.
In addition to the aforementioned principal amount, the Maker shall pay
to the Payee interest on the unpaid principal amount from time to time
outstanding under this Note interest at the rate of eight percent (8%) per annum
determined on the basis of a three hundred and sixty five (365) day year.
This Note shall be payable in twelve (12) quarterly payments as follows:
(i) eleven (11) payments in the principal amount of Eighty Nine Thousand Nine
Hundred Forty Four and 44/100 Dollars ($89,944.44) together with accrued
interest on the unpaid principal amount and (ii) one payment in the principal
amount of Eighty Nine Thousand Nine Hundred Forty Four and 50/100 Dollars
($89,944.50) together with accrued interest on the unpaid principal amount. The
first such quarterly payment shall be due and payable on October 1, 1998 and
successive quarterly payments shall be due and payable on January 1, 1999 April
1,1999, and July 1, 1999 and on each October 1, April 1, July 1 and October 1
thereafter until July 1, 2001, when the entire principal sum and all accrued but
unpaid interest, if not sooner paid as aforesaid, shall be due and payable in
full. In the event the Maker calls all or any of its outstanding warrants for
redemption, cancellation, exercise or conversion, the Maker will be required to
apply a portion of the proceeds therefrom to reduce the indebtedness this Note
as required, and subject to the limitations set forth in, the Acquisition
Agreement.
The Maker shall have the right to prepay this Note in whole or in part
at any time without penalty. The Maker shall also have the right to set-off
against any payment or payments due under this Note any amount or amounts due to
the Maker from the Payee as indemnification under the Acquisition Agreement or
as damages under the Covenant Not to Compete or the Xxx-Xxxxxxxxxx
00
provisions, paragraphs 6 and 7, respectively (but only such provisions), of the
Employment Agreement between the Payee and the Maker dated as of the date of
this Note and given as a condition of the Closing under the Acquisition
Agreement. Any such prepayment or set-off shall be applied first to accrued but
unpaid interest, and then to the principal sums next maturing hereunder.
All payments required hereby shall be made in lawful money of the United
States of America.
By acceptance of this Note the Payee has agreed that the right of the
holder of this Note to obtain payment from the Maker is subordinate to the
rights of National City Bank (the "Senior Creditor") in respect of any
indebtedness of the Maker for borrowed money payable to the Senior Creditor
("Senior Debt"). This Note shall not be subordinate to any other indebtedness of
the Maker.
Any failure of the Maker to make any payment required hereunder by not
later than ten (10) days after the same shall be due shall constitute an Event
of Default. Upon the occurrence of any Event of Default, the holder hereof shall
have the right, after written notice to the Maker of such Event of Default, and
the failure of the Maker to cure such Event of Default within thirty (30) days
after Maker's receipt of such notice, to declare a Default under this Note and
to accelerate all principal and interest due hereunder. Following the occurrence
of any Default, the holder hereof also shall have the right to exercise any
remedies that it may have hereunder. If it becomes necessary for the holder
hereof to enforce this Note, the Maker shall pay the holder any and all costs,
expenses and reasonable attorneys's and paralegals' fees and expenses incurred
by such holder in connection with such proceedings and any associated
administrative, appellate or bankruptcy proceedings. During any Default or any
period permitted for the curing of any Event of Default interest will continue
to accrue for the benefit of the Payee at the rate of eight percent (8%) per
annum determined as hereinbefore provided.
The Maker hereby waives presentment for payment, demand, protest, notice
of protest and notice of dishonor and expressly agrees to remain and continue
bound for the payment of the principal and interest provided for by the terms of
this Note, notwithstanding any extension or extensions of time of, or for the
payment of said principal or interest.
This Note shall be governed and construed in accordance with the laws of
the State of Florida. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed under
seal and delivered by its duly authorized officer as of the date first above
written.
"MAKER"
PARAVANT COMPUTER SYSTEMS, INC.
By:_______________________________________
Name:_____________________________________
63
Title: ___________________________________
64
EXHIBIT 1.1.1(b)
XXXXXXXXXX NOTE
SUBORDINATED NOTE
$1,079,333.33 ______, 1998
FOR VALUE RECEIVED, PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (the "Maker"), promises to pay to the order of C. XXXXX XXXXXXXXXX
(the "Payee"), in the manner hereinafter set forth, the principal sum of One
Million Seventy Nine Thousand Three Hundred Thirty Three and 33/100 Dollars
($1,079,333.33).
This Note is given as consideration for the purchase by the Maker from
the Payee of shares of common stock of Engineering Development Laboratories,
Incorporated, an Ohio corporation ("EDL") pursuant to that certain Acquisition
Agreement dated ______, 1998 (the "Acquisition Agreement") between the Maker,
EDL, Signal Technology Laboratories, Inc., an Ohio corporation ("STL"), the
shareholders of EDL, including the Payee, and the shareholders of STL. Payments
to be made under this Note shall be made to the order of the Payee at
_____________________________, or at such other place as the Payee may designate
to the Maker in writing.
In addition to the aforementioned principal amount, the Maker shall pay
to the Payee interest on the unpaid principal amount from time to time
outstanding under this Note interest at the rate of eight percent (8%) per annum
determined on the basis of a three hundred and sixty five (365) day year.
This Note shall be payable in twelve (12) quarterly payments as follows:
(i) eleven (11) payments in the principal amount of Eighty Nine Thousand Nine
Hundred Forty Four and 44/100 Dollars ($89,944.44) together with accrued
interest on the unpaid principal amount and (ii) one payment in the principal
amount of Eighty Nine Thousand Nine Hundred Forty Four and 49/100 Dollars
($89,944.49) together with accrued interest on the unpaid principal amount. The
first such quarterly payment shall be due and payable on October 1, 1998 and
successive quarterly payments shall be due and payable on January 1, 1999 April
1,1999, and July 1, 1999 and on each October 1, April 1, July 1 and October 1
thereafter until July 1, 2001, when the entire principal sum and all accrued but
unpaid interest, if not sooner paid as aforesaid, shall be due and payable in
full. In the event the Maker calls all or any of its outstanding warrants for
redemption, cancellation, exercise or conversion, the Maker will be required to
apply a portion of the proceeds therefrom to reduce the indebtedness this Note
as required, and subject to the limitations set forth in, the Acquisition
Agreement.
The Maker shall have the right to prepay this Note in whole or in part
at any time without penalty. The Maker shall also have the right to set-off
against any payment or payments due under this Note any amount or amounts due to
the Maker from the Payee as indemnification under the Acquisition Agreement or
as damages under the Covenant Not to Compete or the Xxx-Xxxxxxxxxx
00
provisions, paragraphs 6 and 7, respectively (but only such provisions), of the
Employment Agreement between the Payee and the Maker dated as of the date of
this Note and given as a condition of the Closing under the Acquisition
Agreement. Any such prepayment or set-off shall be applied first to accrued but
unpaid interest, and then to the principal sums next maturing hereunder.
All payments required hereby shall be made in lawful money of the United
States of America.
By acceptance of this Note the Payee has agreed that the right of the
holder of this Note to obtain payment from the Maker is subordinate to the
rights of National City Bank (the "Senior Creditor") in respect of any
indebtedness of the Maker for borrowed money payable to the Senior Creditor
("Senior Debt"). This Note shall not be subordinate to any other indebtedness of
the Maker.
Any failure of the Maker to make any payment required hereunder by not
later than ten (10) days after the same shall be due shall constitute an Event
of Default. Upon the occurrence of any Event of Default, the holder hereof shall
have the right, after written notice to the Maker of such Event of Default, and
the failure of the Maker to cure such Event of Default within thirty (30) days
after Maker's receipt of such notice, to declare a Default under this Note and
to accelerate all principal and interest due hereunder. Following the occurrence
of any Default, the holder hereof also shall have the right to exercise any
remedies that it may have hereunder. If it becomes necessary for the holder
hereof to enforce this Note, the Maker shall pay the holder any and all costs,
expenses and reasonable attorneys's and paralegals' fees and expenses incurred
by such holder in connection with such proceedings and any associated
administrative, appellate or bankruptcy proceedings. During any Default or any
period permitted for the curing of any Event of Default interest will continue
to accrue for the benefit of the Payee at the rate of eight percent (8%) per
annum determined as hereinbefore provided.
The Maker hereby waives presentment for payment, demand, protest, notice
of protest and notice of dishonor and expressly agrees to remain and continue
bound for the payment of the principal and interest provided for by the terms of
this Note, notwithstanding any extension or extensions of time of, or for the
payment of said principal or interest.
This Note shall be governed and construed in accordance with the laws of
the State of Florida. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed under
seal and delivered by its duly authorized officer as of the date first above
written.
"MAKER"
PARAVANT COMPUTER SYSTEMS, INC.
By:_______________________________________
Name:_____________________________________
66
Title: ___________________________________
67
EXHIBIT 1.2A
STL PURCHASED ASSETS, EXCLUDED ASSETS AND ASSUMED LIABILITIES
A. STL Assets and Business Sold/Transferred
1. Fixed assets at fair market value.
2. Inventory at closing.
3. Intellectual property and goodwill consisting but not limited to
customer lists, drawings and technical data.
4. Accounts receivable and/or cash of $850,000.
5. Commitment to subcontract work in process at lcosing IAW section
5.3.3.4 - no stated value.
B. STL Assumption of Assumed Liabilities Transferred
1. Subcontract performance by new STL per section 5.3.3.4
2. Outstanding purchase orders and all leases.
C. STL Assets excluded (Not Sold or Transferred)
1. Cash, excluding any under A.4 above.
2. Deferred compensation funded as of closing date.
3. Contract backlog
4. Receivables, excluding any under A.4 above.
5. Other income
D. STL Accrued Employee Benefits Liability - Old STL agrees to pay the new
STL the accrued employee benefits liability on the balance sheet as of
the closing date. This is subject to Buyers audit if required. Benefit
liabilities to be stated on the balance sheet in accordance with past
STL accounting practice. Payment to be made when amount has been
determined and accepted by Buyer.
68
EXHIBIT 1.2B
STL Shareholder Non-Competition Agreements are included in Exhibit 6.11.
69
EXHIBIT 1.2.2.1(b)
XXXXXXXX NOTE
SUBORDINATED NOTE
$781,000.00 ______, 1998
FOR VALUE RECEIVED, PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (the "Maker"), promises to pay to the order of XXXXXX XXXXXXXX (the
"Payee"), in the manner hereinafter set forth, the principal sum of Seven
Hundred Eighty One Thousand Dollars ($781,000.00).
This Note is given as consideration by the Maker for the non-competition
agreement between the Payee and the Maker pursuant to that certain Acquisition
Agreement dated ______, 1998 (the "Acquisition Agreement") between the Maker,
Engineering Development Laboratories, Incorporated, an Ohio corporation ("EDL"),
Signal Technology Laboratories, Inc., an Ohio corporation ("STL") and the
shareholders of EDL and STL, including the Payee. Payments to be made under this
Note shall be made to the order of the Payee at _____________________________,
or at such other place as the Payee may designate to the Maker in writing.
In addition to the aforementioned principal amount, the Maker shall pay
to the Payee interest on the unpaid principal amount from time to time
outstanding under this Note interest at the rate of eight percent (8%) per annum
determined on the basis of a three hundred and sixty five (365) day year.
This Note shall be payable in twelve (12) quarterly payments as follows:
(i) eleven (11) payments in the principal amount of Sixty Five Thousand Eighty
Three and 33/100 Dollars ($65,083.33) together with accrued interest on the
unpaid principal amount and (ii) one payment in the principal amount of Sixty
Five Thousand Eighty Three and 34/100 Dollars ($65,083.34) together with accrued
interest on the unpaid principal amount. The first such quarterly payment shall
be due and payable on January 31, 1999 and successive quarterly payments to be
due and payable on each April 30,1999, July 31, 1999 and October 31, 1999 and on
each January 31, April 30, July 31 and October 31 thereafter until October 31,
2001, when the entire principal sum and all accrued but unpaid interest, if not
sooner paid as aforesaid, shall be due and payable in full. In the event the
Maker calls all or any of its outstanding warrants for redemption, cancellation,
exercise or conversion, the Maker will be required to apply a portion of the
proceeds therefrom to reduce the indebtedness this Note as required, and subject
to the limitations set forth in, the Acquisition Agreement.
The Maker shall have the right to prepay this Note in whole or in part
at any time without penalty. The Maker shall also have the right to set-off
against any payment or payments due under this Note any amount or amounts due to
the Maker from the Payee as indemnification under the Acquisition Agreement or
as damages under the non-competition agreement or the employment agreement
between the Payee and the Maker dated as of the date of this Note and given as a
condition
70
of the closing under the Acquisition Agreement. Any such prepayment or set-off
shall be applied first to accrued but unpaid interest, and then to the principal
sums next maturing hereunder.
All payments required hereby shall be made in lawful money of the United
States of America.
By acceptance of this Note the Payee has agreed that the right of the
holder of this Note to obtain payment from the Maker is subordinate to the
rights of National City Bank (the "Senior Creditor") in respect of any
indebtedness of the Maker for borrowed money payable to the Senior Creditor
("Senior Debt"). This Note shall not be subordinate to any other indebtedness of
the Maker.
Any failure of the Maker to make any payment required hereunder by not
later than ten (10) days after the same shall be due shall constitute an Event
of Default. Upon the occurrence of any Event of Default, the holder hereof shall
have the right, after written notice to the Maker of such Event of Default, and
the failure of the Maker to cure such Event of Default within thirty (30) days
after Maker's receipt of such notice, to declare a Default under this Note and
to accelerate all principal and interest due hereunder. Following the occurrence
of any Default, the holder hereof also shall have the right to exercise any
remedies that it may have hereunder. If it becomes necessary for the holder
hereof to enforce this Note, the Maker shall pay the holder any and all costs,
expenses and reasonable attorneys's and paralegals' fees and expenses incurred
by such holder in connection with such proceedings and any associated
administrative, appellate or bankruptcy proceedings. During any Default or any
period permitted for the curing of any Event of Default interest will continue
to accrue for the benefit of the Payee at the rate of eight percent (8%) per
annum determined as hereinbefore provided.
The Maker hereby waives presentment for payment, demand, protest, notice
of protest and notice of dishonor and expressly agrees to remain and continue
bound for the payment of the principal and interest provided for by the terms of
this Note, notwithstanding any extension or extensions of time of, or for the
payment of said principal or interest.
This Note shall be governed and construed in accordance with the laws of
the State of Florida. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed under
seal and delivered by its duly authorized officer as of the date first above
written.
"MAKER"
PARAVANT COMPUTER SYSTEMS, INC.
By:_______________________________________
Name:_____________________________________
Title: ___________________________________
71
EXHIBIT 1.2.2.2(b)
TORRESANI NOTE
SUBORDINATED NOTE
$390,500.00 ______, 1998
FOR VALUE RECEIVED, PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (the "Maker"), promises to pay to the order of XXX X. XXXXXXXXX (the
"Payee"), in the manner hereinafter set forth, the principal sum of Three
Hundred Ninety Thousand Five Hundred Dollars ($390,500.00).
This Note is given as consideration by the Maker for the non-competition
agreement between the Payee and the Maker pursuant to that certain Acquisition
Agreement dated ______, 1998 (the "Acquisition Agreement") between the Maker,
Engineering Development Laboratories, Incorporated, an Ohio corporation ("EDL"),
Signal Technology Laboratories, Inc., an Ohio corporation ("STL") and the
shareholders of EDL and STL, including the Payee. Payments to be made under this
Note shall be made to the order of the Payee at _____________________________,
or at such other place as the Payee may designate to the Maker in writing.
In addition to the aforementioned principal amount, the Maker shall pay
to the Payee interest on the unpaid principal amount from time to time
outstanding under this Note interest at the rate of eight percent (8%) per annum
determined on the basis of a three hundred and sixty five (365) day year.
This Note shall be payable in twelve (12) quarterly payments as follows:
(i) eleven (11) payments in the principal amount of Thirty Two Thousand Five
Hundred Forty One and 66/100 Dollars ($32,541.66) together with accrued interest
on the unpaid principal amount and (ii) one payment in the principal amount of
Thirty Two Thousand Five Hundred Forty One and 74/100 Dollars ($32,541.74)
together with accrued interest on the unpaid principal amount. The first such
quarterly payment shall be due and payable on October 1, 1998 and successive
quarterly payments shall be due and payable on January 1, 1999 April 1,1999, and
July 1, 1999 and on each October 1, April 1, July 1 and October 1 thereafter
until July 1, 2001, when the entire principal sum and all accrued but unpaid
interest, if not sooner paid as aforesaid, shall be due and payable in full. In
the event the Maker calls all or any of its outstanding warrants for redemption,
cancellation, exercise or conversion, the Maker will be required to apply a
portion of the proceeds therefrom to reduce the indebtedness this Note as
required, and subject to the limitations set forth in, the Acquisition
Agreement.
The Maker shall have the right to prepay this Note in whole or in part
at any time without penalty. The Maker shall also have the right to set-off
against any payment or payments due under this Note any amount or amounts due to
the Maker from the Payee as damages under the Acquisition Agreement, the
Non-Competition Agreement, or the Covenant Not to Compete or the Non- Disclosure
provisions, paragraphs 6 and 7, respectively (but only such provisions), of the
72
Employment Agreement between the Payee and the Maker, each such agreement dated
as of the date of this Note and given as a condition of the Closing under the
Acquisition Agreement. Any such prepayment or set-off shall be applied first to
accrued but unpaid interest, and then to the principal sums next maturing
hereunder.
All payments required hereby shall be made in lawful money of the United
States of America.
By acceptance of this Note the Payee has agreed that the right of the
holder of this Note to obtain payment from the Maker is subordinate to the
rights of National City Bank (the "Senior Creditor") in respect of any
indebtedness of the Maker for borrowed money payable to the Senior Creditor
("Senior Debt"). This Note shall not be subordinate to any other indebtedness of
the Maker.
Any failure of the Maker to make any payment required hereunder by not
later than ten (10) days after the same shall be due shall constitute an Event
of Default. Upon the occurrence of any Event of Default, the holder hereof shall
have the right, after written notice to the Maker of such Event of Default, and
the failure of the Maker to cure such Event of Default within thirty (30) days
after Maker's receipt of such notice, to declare a Default under this Note and
to accelerate all principal and interest due hereunder. Following the occurrence
of any Default, the holder hereof also shall have the right to exercise any
remedies that it may have hereunder. If it becomes necessary for the holder
hereof to enforce this Note, the Maker shall pay the holder any and all costs,
expenses and reasonable attorneys's and paralegals' fees and expenses incurred
by such holder in connection with such proceedings and any associated
administrative, appellate or bankruptcy proceedings. During any Default or any
period permitted for the curing of any Event of Default interest will continue
to accrue for the benefit of the Payee at the rate of eight percent (8%) per
annum determined as hereinbefore provided.
The Maker hereby waives presentment for payment, demand, protest, notice
of protest and notice of dishonor and expressly agrees to remain and continue
bound for the payment of the principal and interest provided for by the terms of
this Note, notwithstanding any extension or extensions of time of, or for the
payment of said principal or interest.
This Note shall be governed and construed in accordance with the laws of
the State of Florida. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed under
seal and delivered by its duly authorized officer as of the date first above
written.
"MAKER"
PARAVANT COMPUTER SYSTEMS, INC.
By:_______________________________________
Name:_____________________________________
73
Title: ___________________________________
74
EXHIBIT 1.2.2.3(b)
XXXXXXXX NOTE
SUBORDINATED NOTE
$390,500.00 ______, 1998
FOR VALUE RECEIVED, PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (the "Maker"), promises to pay to the order of XXXXX XXXXXXXX (the
"Payee"), in the manner hereinafter set forth, the principal sum of Three
Hundred Ninety Thousand Five Hundred Dollars ($390,500.00).
This Note is given as consideration by the Maker for the non-competition
agreement between the Payee and the Maker pursuant to that certain Acquisition
Agreement dated ______, 1998 (the "Acquisition Agreement") between the Maker,
Engineering Development Laboratories, Incorporated, an Ohio corporation ("EDL"),
Signal Technology Laboratories, Inc., an Ohio corporation ("STL") and the
shareholders of EDL and STL, including the Payee. Payments to be made under this
Note shall be made to the order of the Payee at _____________________________,
or at such other place as the Payee may designate to the Maker in writing.
In addition to the aforementioned principal amount, the Maker shall pay
to the Payee interest on the unpaid principal amount from time to time
outstanding under this Note interest at the rate of eight percent (8%) per annum
determined on the basis of a three hundred and sixty five (365) day year.
This Note shall be payable in twelve (12) quarterly payments as follows:
(i) eleven (11) payments in the principal amount of Thirty Two Thousand Five
Hundred Forty One and 66/100 Dollars ($32,541.66) together with accrued interest
on the unpaid principal amount and (ii) one payment in the principal amount of
Thirty Two Thousand Five Hundred Forty One and 74/100 Dollars ($32,541.74)
together with accrued interest on the unpaid principal amount. The first such
quarterly payment shall be due and payable on January 31, 1999 and successive
quarterly payments to be due and payable on each April 30,1999, July 31, 1999
and October 31, 1999 and on each January 31, April 30, July 31 and October 31
thereafter until October 31, 2001, when the entire principal sum and all accrued
but unpaid interest, if not sooner paid as aforesaid, shall be due and payable
in full. In the event the Maker calls all or any of its outstanding warrants for
redemption, cancellation, exercise or conversion, the Maker will be required to
apply a portion of the proceeds therefrom to reduce the indebtedness this Note
as required, and subject to the limitations set forth in, the Acquisition
Agreement.
The Maker shall have the right to prepay this Note in whole or in part
at any time without penalty. The Maker shall also have the right to set-off
against any payment or payments due under this Note any amount or amounts due to
the Maker from the Payee as indemnification under the Acquisition Agreement or
as damages under the non-competition agreement or the employment agreement
between the Payee and the Maker dated as of the date of this Note and given as a
condition
75
of the closing under the Acquisition Agreement. Any such prepayment or set-off
shall be applied first to accrued but unpaid interest, and then to the principal
sums next maturing hereunder.
All payments required hereby shall be made in lawful money of the United
States of America.
By acceptance of this Note the Payee has agreed that the right of the
holder of this Note to obtain payment from the Maker is subordinate to the
rights of National City Bank (the "Senior Creditor") in respect of any
indebtedness of the Maker for borrowed money payable to the Senior Creditor
("Senior Debt"). This Note shall not be subordinate to any other indebtedness of
the Maker.
Any failure of the Maker to make any payment required hereunder by not
later than ten (10) days after the same shall be due shall constitute an Event
of Default. Upon the occurrence of any Event of Default, the holder hereof shall
have the right, after written notice to the Maker of such Event of Default, and
the failure of the Maker to cure such Event of Default within thirty (30) days
after Maker's receipt of such notice, to declare a Default under this Note and
to accelerate all principal and interest due hereunder. Following the occurrence
of any Default, the holder hereof also shall have the right to exercise any
remedies that it may have hereunder. If it becomes necessary for the holder
hereof to enforce this Note, the Maker shall pay the holder any and all costs,
expenses and reasonable attorneys's and paralegals' fees and expenses incurred
by such holder in connection with such proceedings and any associated
administrative, appellate or bankruptcy proceedings. During any Default or any
period permitted for the curing of any Event of Default interest will continue
to accrue for the benefit of the Payee at the rate of eight percent (8%) per
annum determined as hereinbefore provided.
The Maker hereby waives presentment for payment, demand, protest, notice
of protest and notice of dishonor and expressly agrees to remain and continue
bound for the payment of the principal and interest provided for by the terms of
this Note, notwithstanding any extension or extensions of time of, or for the
payment of said principal or interest.
This Note shall be governed and construed in accordance with the laws of
the State of Florida. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed under
seal and delivered by its duly authorized officer as of the date first above
written.
"MAKER"
PARAVANT COMPUTER SYSTEMS, INC.
By:_______________________________________
Name:_____________________________________
Title: ___________________________________
76
EXHIBIT 1.6
RATABLE INTERESTS - FOR EACH SHAREHOLDER AND
FOR ANY STL BENEFICIAL INTEREST HELD
Xxxxx X. Xxxxxxxx 11%
Xxx X. Xxxxxxxxx 11%
X. Xxxxxx Xxxxxxxx 22%
Xxxxx X. Xxxxxxxx 18 2/3%
C. Xxxxx Xxxxxxxxxx 18 2/3%
Xxxxxx X. Xxxxxxxx 18 2/3%
77
EXHIBIT 6.8
CERTIFICATE OF OFFICERS OF THE COMPANIES AND SHAREHOLDERS
CERTIFICATE PURSUANT TO SECTION 6.8
OF ACQUISITION AGREEMENT
Pursuant to Section 6.8 of the Acquisition Agreement dated as of
__________,1998 (the "Acquisition Agreement") by and among Paravant Computer
Systems, Inc. (the "Purchaser"), Engineering Development Laboratories, Inc.
("EDL"), Signal Technology Laboratories, Inc. ("STL")(EDL and STL collectively,
the "Companies") and Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx, C. Xxxxx Xxxxxxxxxx,
X. Xxxxxx Xxxxxxxx, Xxxxx Xxxxxxxx and Xxx X. Xxxxxxxxx (each, a "Shareholder"
and collectively, the "Shareholders") each of the undersigned in each of the
capacities indicated below, i.e., in the capacity an officer and on behalf of,
and with respect to, EDL or STL, or in the capacity of an individual
Shareholder, hereby certifies that, as of the date hereof, (i) the financial
condition, indebtedness and net worth of the Companies as of the date hereof is
as set forth in Section 6.2 of the Acquisition Agreement, (ii) all of the
representations and warranties of the Companies and the Shareholders referred to
in Section 6.3 of the Acquisition Agreement are true and correct in all material
respects as of this date as if made given or made on this date, (iii) each of
the Companies and each of the Shareholders has performed and complied in all
material respects with all covenants and agreements referred to in Section 6.4
of the Acquisition Agreement to be complied with by them prior to or at the
Closing, (iv) no action, suit, proceeding or investigation of the type referred
to in Section 6.5 of the Acquisition Agreement has been instituted and is
continuing, (v) the Companies and the Shareholders have each obtained all of the
consents, licenses and permits of the type referred to in Section 6.6 of the
Acquisition Agreement and all of such consents, licenses and permits are
presently in effect, and (vi) there has been no change in the business, assets,
properties, operations, financial status or prospects of EDL or STL of the type
referred to in Section 6.7 of the Acquisition Agreement.
IN WITNESS WHEREOF, each of the undersigned has executed this
Certificate this ____ day ___________, 1998.
EDL: STL:
ENGINEERING DEVELOPMENT SIGNAL TECHNOLOGY
LABORATORIES, INCORPORATED LABORATORIES, INC.
By:__________________________ By:__________________________
__________________, President __________________, President
By:__________________________ By:__________________________
_________________, Secretary __________________, Secretary
(Signatures of Shareholders on following page.)
(Certificate Pursuant to Section 5.8 continued from previous page)
78
(Signatures of Shareholders.)
SHAREHOLDERS:
_________________________
Xxxxx X. Xxxxxxxx
_________________________
Xxxxxx. X. Xxxxxxxx
_________________________
C. Xxxxx Xxxxxxxxxx
_________________________
X. Xxxxxx Xxxxxxxx
_________________________
Xxxxx Xxxxxxxx
_________________________
Xxx X. Xxxxxxxxx
79
EXHIBIT 6.9
OPINION OF COUNSEL TO THE COMPANIES AND SHAREHOLDERS
[Letterhead of Counsel to Companies and Shareholders]
_____________, 1998
Paravant Computer Systems, Inc.
______________________________
______________________________
Attn:__________________
RE: Acquisition Agreement dated as of ______,1998 (the "Acquisition
Agreement") by and among Paravant Computer Systems, Inc. (the
"Purchaser"), Engineering Development Laboratories, Incorporated
("EDL"), Signal Technology Laboratories, Inc. ("STL")(EDL and
STL collectively, the "Companies") and Xxxxx X. Xxxxxxxx, Xxxxxx
X. Xxxxxxxx, C. Xxxxx Xxxxxxxxxx, X. Xxxxxx Xxxxxxxx, Xxxxx
Xxxxxxxx and Xxx X. Xxxxxxxxx (each, a "Shareholder" and
collectively, the "Shareholders")
Gentlemen:
This opinion is furnished to you in accordance with the provisions of
Section 6.9 of the above referenced Acquisition Agreement. We have acted as
counsel to the Companies and the Shareholders, in connection with the
Acquisition Agreement and the related Employment Agreements and Noncompetition
Agreements to which any of the Companies or Shareholders is a party
(collectively, the Related Agreements"). All capitalized terms used but not
defined herein which are defined in the Acquisition Agreement and the Related
Agreements shall have the same meaning herein as therein defined unless the
context hereof otherwise requires.
As counsel to the Companies and the Shareholders, we have (i) conferred
with the officers of the Companies and the Shareholders; (ii) examined the
Acquisition Agreement and the Related Agreements, the stock record books of the
Companies and such other corporate documents, records and certificates of the
Companies, federal and state laws, rules and regulations; and (iii) made such
other investigations as we have deemed necessary or appropriate for the purposes
of rendering this opinion. In all such examinations and investigations, we have
assumed the genuineness of all signatures on original or certified copies of all
copies submitted to us as conformed or reproduction copies. As to various
questions of fact relevant to such opinions, we have relied upon the
representations and warranties set forth in the Acquisition Agreement and the
Related Agreements and statements or certificates of public officials and of the
Companies and the Shareholders.
Based on such examinations and investigations, it is our opinion that:
80
1. Each of the Companies is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Ohio, with the
corporate power to carry on its business as now conducted, to own its assets,
and to enter into and perform its obligations under the Acquisition Agreement
and the Related Agreements to which it is a party;
2. EDL is duly qualified to conduct business in which it is engaged and
is in good standing as a foreign corporation in the state(s) of ______________.
To the best of our knowledge EDL is not qualified to do business in any other
foreign jurisdiction nor to the best of our knowledge is such qualification
required;
3. STL is duly qualified to transact the business in which it is engaged
and is in good standing as a foreign corporation in the state(s) of
______________. To the best of our knowledge STL is not qualified to do business
in any other foreign jurisdiction nor to the best of our knowledge is such
qualification required;
4. The authorized and outstanding capital stock of EDL is set forth in
Exhibit 1.1 to the Acquisition Agreement, and all of such outstanding shares of
capital stock of EDL are validly authorized and issued, fully paid and
nonassessable;
5. To the best knowledge of the undersigned after due inquiry: (i) the
EDL Shareholders are the shareholders of record of EDL of the shares of Common
Stock of EDL set forth opposite their names on Exhibit 1.1 to the Acquisition
Agreement; (ii) the title of the EDL Shareholders in such shares is free and
clear of all manner of liens, charges, encumbrances and claims; (iii) nothing
has come to our attention that would lead us to believe that any of the EDL
Shareholders do not have the legal capacity and the absolute and unqualified
right to sell transfer and deliver such shares to the Purchaser; and, (iv) the
Acquisition Agreement and Related Agreements, as a whole, are legally sufficient
to sell and transfer the right, title and interest of the EDL Shareholders in
such shares to the Purchaser;
6. Assuming the Acquisition Agreement and the Related Agreements
constitute the legal, valid and binding Agreement of the other parties, the
Acquisition Agreement and Related Agreements (with the exception of the
Non-Competition Agreements and the Covenant Not to Compete and Non-Disclosure
provisions of the Employment Agreements, as to which we express not opinion)
constitute the legal, valid and binding obligation of each of the Shareholders
and are enforceable against each of the Shareholders in accordance with their
terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the rights of creditors generally and subject to general principles of
equity;
7. Each of the Companies has the corporate power and authority to
execute, deliver and perform the Acquisition Agreement and the execution,
delivery and performance of the Acquisition Agreement has been validly
authorized by each of the Companies by all necessary corporate action, and
assuming the Acquisition Agreement constitutes the legal, valid and binding
Agreement of the other parties, the Acquisition Agreement constitutes the legal,
valid and binding obligation of each
81
of the Companies and is enforceable against each of the Companies in accordance
with its terms, subject to applicable bankruptcy, insolvency and other similar
laws affecting the rights of creditors generally and subject to general
principles of equity;
8. The execution, delivery and performance of the Acquisition Agreement
by each of the Companies will not violate or result in a breach of any term of
the Articles of Incorporation or Bylaws of either of the Companies;
9. Except to the extent set forth in the Acquisition Agreement, neither
the execution nor delivery by either of the Companies or any of the Shareholders
of the Acquisition Agreement and the Related Agreements nor compliance with the
terms and provisions thereof by each of the Companies and the Shareholders has
violated or will violate any law, statute, rule, regulation, or, to the best
knowledge of the undersigned after due inquiry, any injunction, order, or decree
of any governmental agency or authority, or of any court;
10. Except with respect to litigation or other matters set forth in the
Exhibits to the Acquisition Agreement and as otherwise set forth in the
Acquisition Agreement, to the best knowledge of the undersigned after due
inquiry, neither of the Companies nor any of the Shareholders is a party to any
material legal or administrative action or other proceeding, nor to the best
knowledge of the undersigned after due inquiry, has (except as set forth in such
Exhibits) any of them been charged with any presently pending violation of any
federal, state, local or foreign law or administrative regulation which might
materially and adversely affect or impair the business or condition, financial
or otherwise, or the earnings of either of the Companies; and,
11. To the best knowledge of the undersigned after due inquiry, no
authorizations, approvals or consents of any federal, state or local agencies
and authorities are required to be obtained by either of the Companies or any of
the Shareholders in order to permit consummation of the transactions
contemplated by the Acquisition Agreement and the Related Agreements, except for
such approvals and consents as have been obtained.
[Customary exceptions and qualifications may be added to this opinion.]
This opinion is rendered as of the date hereof and does not purport to
analyze, evaluate or consider the legal effect of any event subsequent to the
date hereof which may alter the validity of any opinion expressed herein.
The opinions expressed herein are solely for your benefit and may not be
relied upon in any manner or for any purpose by any other person.
Very truly yours,
(Firm Name)
By:____________________________
82
EXHIBIT 6.10
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of ______________,1998, by and
between Paravant Computer Systems, Inc., a Florida corporation (the "Company"),
and X. Xxxxxx Xxxxxxxx (the "Employee").
The parties hereto, in consideration of the premises and the mutual covenants
herein contained, hereby agree as follows:
1. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company agrees to employ the Employee for a period of forty-two (42)
months. The Employee commits to be employed for a period commencing on the date
hereof and ending no earlier than December 31, 2000. Upon completion of forty
two (42) months of employment the Company and Employee may extend the term of
employment for an additional year by mutual agreement. Notwithstanding the
foregoing, the Employee shall be entitled to terminate his employment at any
time after the date hereof if: (i) the Employee recommends an individual
qualified to perform the Employee's job responsibilities (the "Qualified
Replacement") and (ii) the prior EDL and STL shareholders, who are currently
employees, first approve and then the Company approves of the Qualified
Replacement, said approval not to be unreasonably withheld. If such consent is
unreasonably withheld, then damages are limited to zero; however, the Employee
would be entitled to any Earn-Out ("Earn-Out") provided for in Section 1.3 of
the Acquisition Agreement dated March __, 1998 between the Company, Engineering
Development Laboratories, Incorporated ("EDL"), Signal Technology Laboratories,
Inc. ("STL") and the shareholders of EDL and STL, including the Employee, which
should have been paid as performance bonus or additional compensation.
2. Forfeiture of Earn-Out. If the Employee terminates his employment prior to
December 31,2000 without the approval of the Company he will forfeit his share
of Earn-Out to be paid for any Earn-Out Period ending after the date on which he
terminates his employment. The Company is not entitled to any further damages
caused as a result of the Employee's termination of his employment. If the
employment of the Employee is terminated by death or disability, as defined in
paragraph 5, then he or his beneficiary is still entitled to his share of the
Earn-Out and his share of the Earn-Out is not subject to forfeiture.
3. Scope of Employment. During the term of employment, the Employee shall be
employed as the President of Signal Technology Laboratories, Inc., an Ohio
corporation, and a subsidiary of the Company headquartered in Dayton, Ohio. The
Employee shall render such services which are in accordance with his utmost
abilities and shall use his best efforts to promote the interests of the Company
and its subsidiaries. The Employee will not engage in any capacity or activity
which is,
83
or may be considered contrary to the welfare, interest or benefit of the
business now or hereafter conducted by the Company and its subsidiaries.
Employee's duties and/or position may be modified by mutual agreement of the
Company and the Employee. The Company shall not relocate the Employee either
temporarily or permanently from Dayton, Ohio without Employee's consent during
the term of this Agreement.
4. Compensation and Benefits. (Attached)
5. Payments on Death or Disability. In the event that the Employee shall die or
become disabled while employed under this Agreement, the Company shall pay
twelve (12) months compensation at the monthly compensation rate, including all
benefits, then in effect for the Employee (the "Compensation") to his heir(s),
in the cause of his death, or to him or his guardian(s), in case of his
disability, (i) in a lump sum payment or (ii) in twelve equal monthly
installments, which lump sum or installment payment method shall be at the
discretion of the Employee or his or her heir(s) or guardian(s). In case of
disability, the twelve (12) month period would begin as of the date on which the
Employee's employment hereunder is terminated because of disability as
hereinafter provided. Employee's employment hereunder shall be terminated
because of disability if (a) the Employee shall become physically or mentally
incapable of properly performing his services to the Company as provided
hereunder, excluding infrequent and temporary absences due to ordinary
illnesses, (b) such incapacity shall exist or be reasonably expected to exist
for more than one hundred fifty (150) days in the aggregate during any twelve
(12) consecutive months covered hereunder, and (c) either the Employee or the
Company shall have given the other thirty (30) days written notice of his or its
intention to terminate the Employee's employment hereunder due to such
disability. For purposes of this Agreement, the Employee may provide the Company
with a written list of heirs in order of preference regarding death payment
benefits hereunder. The list may be altered and changed from time to time by the
Employee by giving written notice of such changes or new list thereof to the
Company as provided herein. In the event of death, if no list has been provided
by the Employee, then all compensation provided for in this paragraph 5 is
payable to the estate of the Employee.
6. Covenant Not to Compete. During the Term of Employment and for a period of
five (5) years thereafter, the Employee shall not (except on behalf of the
Company or a subsidiary of the Company while the Employee is employed by either
the Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent) engage, directly or indirectly, in any business which
competes in any manner within the United States of America (the "Geographic
Area"), with the Company's business of design, manufacture, repair and sale of
rugged and customized computer systems and medical computer assemblies or in any
other business of design, development, manufacturing, sales or service engaged
in or acquired by the Company or any subsidiary of the Company as of the date of
this Agreement or in which the Company employs the Employee during his
employment under this Agreement. For purposes of this Agreement, the Employee
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business. The
84
Employee shall not, for purposes of this paragraph, be deemed a stockholder if
he holds less than five percent (5%) of the outstanding shares of any
publicly-owned corporation. In addition, the Employee shall not at any time,
during or after the termination of this Agreement, engage in any business which
uses as its name, in whole or in part, "Paravant Computer Systems, Inc.", "PCS"
or any other name then used by the Company or any of its affiliates or
subsidiaries.
7. Non-Disclosure. Except as may be required by law or on behalf of the Company
or a subsidiary of the Company while the Employee is employed by either the
Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent, the Employee will not at any time, directly or
indirectly, disclose or furnish to any other person, firm or corporation; (a)
the methods of conducting the business of the Company or its subsidiaries or
affiliates; (b) a description of any of the methods of obtaining business, or
manufacturing or advertising products, or of obtaining customers thereof; (c)
any technology, design drawings, software, or other intellectual property or
property rights of the Company or its subsidiaries or affiliates owned by the
Company or any of its subsidiaries as of the date of this Agreement or acquired
by the Company or any of its subsidiaries during the Employee's employment under
this Agreement; or (d) any confidential information acquired by him during the
course of his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limitation, the generality of the foregoing, the
names of any new customers or prospective customers of, or any person, firm or
corporation, who or which have, or shall have, traded or dealt with (whether
such customers have been obtained by the Employee or otherwise) the Company, its
predecessors, subsidiaries or affiliates.
8. Intellectual Property. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment with the Company
or any subsidiary of the Company or the business markets of the Company or any
subsidiary of the Company under this Agreement will be the sole and absolute
property of the Company and its subsidiaries for any and all purposes whatsoever
in perpetuity, whether or not conceived, discovered and/or developed during
regular working hours. The Employee will not have, and will not claim to have,
under this Agreement or otherwise, any right, title or interest of any kind or
nature whatsoever in or to any such products, processes, discoveries, material
ideas, creations, inventions and properties which are related to the Company's
business markets.
9. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Ohio pursuant to the rules of
the American Arbitration Association then in effect. The decision of the
arbitrator(s) is binding on both the Company and the Employee.
10. Termination for Convenience. The Company may terminate Employee's employment
under this Agreement for convenience at any time. In the event of such
termination the Company shall make lump sum payments equal to the value of the
compensation (1 and 2 attached) and benefits (3 of attached as would have been
normally paid if the employment continued), including but not
85
limited to non-qualified deferred compensation and health insurance, for
forty-two (42) months less the amount which has previously been paid or used.
11. Termination for Cause. The Company may terminate this Employee's employment
under this Agreement for "cause" without any liability to the Company other than
to pay the compensation benefits provided for in this Agreement for services
rendered prior to the date of such termination. The following shall constitute
grounds for termination of the Employee for cause: (i) willful or gross neglect
by the Employee of his duties of employment under, or any willful misconduct of
the Employee in connection with the performance of his duties under this
Agreement; (ii) conviction of the Employee of any felony, or of any lesser crime
or offense materially and adversely affecting the property, reputation or
goodwill of the Company, any subsidiary of the Company or any successor or
assignee of the Company or any subsidiary of the Company; or (iii) any material
breach by the Employee of the terms of this Agreement.
12. Equitable Remedies and Remedies at Law. The parties recognize that, because
of the nature of the subject matter of this Agreement it would be impracticable
and extremely difficult to determine actual damages for a breach of certain of
the provisions of this Agreement, specifically those provisions of paragraphs 6
and 7. Accordingly, in the event of a violation or threatened violation or any
provisions of this Agreement, specifically including those provisions of
paragraphs 6 and 7, all legal and equitable remedies, including without
limitation, injunctive relief, both preliminary and permanent, shall be
available and the posting of a surety bond shall not be required in connection
therewith and money damages for any loss suffered as a consequence of violation
of such provisions shall also be available.
13. Severability. The invalidity or unenforceability of any term or provision of
this Agreement or the nonapplicability of any such term or provision to any
person or circumstances shall not impair or affect the remainder of this
Agreement, and the remaining terms and provisions hereof shall not be
invalidated, but shall remain in full force and effect and shall be construed as
if such invalid, unenforceable or nonapplicable provisions were omitted.
Further, if any of the covenants contained in paragraphs 6 or 7 of this
Agreement, or any part thereof, are held to be unenforceable because of the
duration of such provisions or the area covered thereby, or the scope of the
activities sought to be restricted, the parties hereto agree that the arbitrator
or court making such determination shall have the power to reform such
provisions of this Agreement to the maximum time, geographic limitations, or
time permitted by applicable law.
14. Governing Law. All of the provisions of this Agreement other than those set
forth in paragraphs 2, 6, and 7 shall be governed by, construed and enforced in
all respects in accordance with the laws of the State of Ohio. The provisions of
paragraphs 2, 6, and 7 shall be governed by, construed and enforced in all
respects in accordance with the laws of the State of Florida.
15. Captions. Titles or captions of paragraphs contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or prescribe the scope of this Agreement or the intent of
any provision hereof.
86
16. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute one and the same Agreement.
17. Construction. The parties acknowledge that they have had the opportunity to
participate equally in the drafting of this Agreement and that in the event of a
dispute, no party shall be treated, for any purpose, as the author of this
Agreement or have any ambiguity resolved against such party on account thereof.
In witness whereof, the parties hereto have executed this Agreement, as of the
day and year first above written.
Paravant Computer Systems, Inc.
By: _______________________________
Xxxxxxx X. Xxxxx,
Chairman of the Board and CEO
________________________________
X. Xxxxxx Xxxxxxxx, Employee
87
COMPENSATION AND BENEFITS OF X. Xxxxxx Xxxxxxxx
POSITION: President of STL
1. An annual salary of $154,474
2. A non-qualified deferred compensation (funded) of 40% of No.1 $61,789 based
on plan (attached).
3. Standard EDL/STL benefits package attached, modified as follows:
a. 2x (twice) All Employee Incentive Program payment percentage.
b. 7 hours of personal leave per payroll period.
c. Life insurance of $154,474
d. Continuation of Health Care coverage for employee and spouse until
each is eligible for Medicare coverage under existing plan benefits and
at a cost no greater than current plan (see attached). This benefit
continues after retirement or separation. This provision will be
interpreted based upon laws and other benefits that were in effect as of
March 30, 1998.
Note: The plans referred to above as attached have been furnished to the
parties to the Acquisition Agreement.
88
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of ______________,1998, by and
between Paravant Computer Systems, Inc., a Florida corporation (the "Company"),
and Xxx X. Xxxxxxxxx (the "Employee").
The parties hereto, in consideration of the premises and the mutual covenants
herein contained, hereby agree as follows:
1. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company agrees to employ the Employee for a period of forty-two (42)
months. The Employee commits to be employed for a period commencing on the date
hereof and ending no earlier than December 31, 2000. Upon completion of forty
two (42) months of employment the Company and Employee may extend the term of
employment for an additional year by mutual agreement. Notwithstanding the
foregoing, the Employee shall be entitled to terminate his employment at any
time after the date hereof if: (i) the Employee recommends an individual
qualified to perform the Employee's job responsibilities (the "Qualified
Replacement") and (ii) the prior EDL and STL shareholders, who are currently
employees, first approve and then the Company approves of the Qualified
Replacement, said approval not to be unreasonably withheld. If such consent is
unreasonably withheld, then damages are limited to zero; however, the Employee
would be entitled to any Earn-Out ("Earn-Out") provided for in Section 1.3 of
the Acquisition Agreement dated March __, 1998 between the Company, Engineering
Development Laboratories, Incorporated ("EDL"), Signal Technology Laboratories,
Inc. ("STL") and the shareholders of EDL and STL, including the Employee, which
should have been paid as performance bonus or additional compensation.
2. Forfeiture of Earn-Out. If the Employee terminates his employment prior to
December 31,2000 without the approval of the Company he will forfeit his share
of Earn-Out to be paid for any Earn-Out Period ending after the date on which he
terminates his employment. The Company is not entitled to any further damages
caused as a result of the Employee's termination of his employment. If the
employment of the Employee is terminated by death or disability, as defined in
paragraph 5, then he or his beneficiary is still entitled to his share of the
Earn-Out and his share of the Earn-Out is not subject to forfeiture.
3. Scope of Employment. During the term of employment, the Employee shall be
employed as the Vice President of Business Development of Signal Technology
Laboratories, Inc., an Ohio corporation, and a subsidiary of the Company
headquartered in Dayton, Ohio. The Employee shall render such services which are
in accordance with his utmost abilities and shall use his best efforts to
promote the interests of the Company and its subsidiaries. The Employee will not
engage in any capacity or activity which is, or may be considered contrary to
the welfare, interest or benefit of the business now or hereafter conducted by
the Company and its subsidiaries. Employee's duties and/or position may be
modified by mutual agreement of the Company and the
89
Employee. The Company shall not relocate the Employee either temporarily or
permanently from Dayton, Ohio without Employee's consent during the term of this
Agreement.
4. Compensation and Benefits. (Attached)
5. Payments on Death or Disability. In the event that the Employee shall die or
become disabled while employed under this Agreement, the Company shall pay
twelve (12) months compensation at the monthly compensation rate, including all
benefits, then in effect for the Employee (the "Compensation") to his heir(s),
in the cause of his death, or to him or his guardian(s), in case of his
disability, (i) in a lump sum payment or (ii) in twelve equal monthly
installments, which lump sum or installment payment method shall be at the
discretion of the Employee or his or her heir(s) or guardian(s). In case of
disability, the twelve (12) month period would begin as of the date on which the
Employee's employment hereunder is terminated because of disability as
hereinafter provided. Employee's employment hereunder shall be terminated
because of disability if (a) the Employee shall become physically or mentally
incapable of properly performing his services to the Company as provided
hereunder, excluding infrequent and temporary absences due to ordinary
illnesses, (b) such incapacity shall exist or be reasonably expected to exist
for more than one hundred fifty (150) days in the aggregate during any twelve
(12) consecutive months covered hereunder, and (c) either the Employee or the
Company shall have given the other thirty (30) days written notice of his or its
intention to terminate the Employee's employment hereunder due to such
disability. For purposes of this Agreement, the Employee may provide the Company
with a written list of heirs in order of preference regarding death payment
benefits hereunder. The list may be altered and changed from time to time by the
Employee by giving written notice of such changes or new list thereof to the
Company as provided herein. In the event of death, if no list has been provided
by the Employee, then all compensation provided for in this paragraph 5 is
payable to the estate of the Employee.
6. Covenant Not to Compete. During the Term of Employment and for a period of
five (5) years thereafter, the Employee shall not (except on behalf of the
Company or a subsidiary of the Company while the Employee is employed by either
the Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent) engage, directly or indirectly, in any business which
competes in any manner within the United States of America (the "Geographic
Area"), with the Company's business of design, manufacture, repair and sale of
rugged and customized computer systems and medical computer assemblies or in any
other business of design, development, manufacturing, sales or service engaged
in or acquired by the Company or any subsidiary of the Company as of the date of
this Agreement or in which the Company employs the Employee during his
employment under this Agreement. For purposes of this Agreement, the Employee
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business. The Employee shall not, for purposes of this paragraph,
be deemed a stockholder if he holds less than five percent (5%) of the
outstanding shares of any publicly-owned corporation. In addition, the Employee
shall not at any time, during or after the termination of this Agreement, engage
in any
90
business which uses as its name, in whole or in part, "Paravant Computer
Systems, Inc.", "PCS" or any other name then used by the Company or any of its
affiliates or subsidiaries.
7. Non-Disclosure. Except as may be required by law or on behalf of the Company
or a subsidiary of the Company while the Employee is employed by either the
Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent, the Employee will not at any time, directly or
indirectly, disclose or furnish to any other person, firm or corporation; (a)
the methods of conducting the business of the Company or its subsidiaries or
affiliates; (b) a description of any of the methods of obtaining business, or
manufacturing or advertising products, or of obtaining customers thereof; (c)
any technology, design drawings, software, or other intellectual property or
property rights of the Company or its subsidiaries or affiliates owned by the
Company or any of its subsidiaries as of the date of this Agreement or acquired
by the Company or any of its subsidiaries during the Employee's employment under
this Agreement; or (d) any confidential information acquired by him during the
course of his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limitation, the generality of the foregoing, the
names of any new customers or prospective customers of, or any person, firm or
corporation, who or which have, or shall have, traded or dealt with (whether
such customers have been obtained by the Employee or otherwise) the Company, its
predecessors, subsidiaries or affiliates.
8. Intellectual Property. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment with the Company
or any subsidiary of the Company or the business markets of the Company or any
subsidiary of the Company under this Agreement will be the sole and absolute
property of the Company and its subsidiaries for any and all purposes whatsoever
in perpetuity, whether or not conceived, discovered and/or developed during
regular working hours. The Employee will not have, and will not claim to have,
under this Agreement or otherwise, any right, title or interest of any kind or
nature whatsoever in or to any such products, processes, discoveries, material
ideas, creations, inventions and properties which are related to the Company's
business markets.
9. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Ohio pursuant to the rules of
the American Arbitration Association then in effect. The decision of the
arbitrator(s) is binding on both the Company and the Employee.
10. Termination for Convenience. The Company may terminate Employee's employment
under this Agreement for convenience at any time. In the event of such
termination the Company shall make lump sum payments equal to the value of the
compensation (1 and 2 attached) and benefits (3 of attached as would have been
normally paid if the employment continued), including but not limited to
non-qualified deferred compensation and health insurance, for forty-two (42)
months less the amount which has previously been paid or used.
91
11. Termination for Cause. The Company may terminate this Employee's employment
under this Agreement for "cause" without any liability to the Company other than
to pay the compensation benefits provided for in this Agreement for services
rendered prior to the date of such termination. The following shall constitute
grounds for termination of the Employee for cause: (i) willful or gross neglect
by the Employee of his duties of employment under, or any willful misconduct of
the Employee in connection with the performance of his duties under this
Agreement; (ii) conviction of the Employee of any felony, or of any lesser crime
or offense materially and adversely affecting the property, reputation or
goodwill of the Company, any subsidiary of the Company or any successor or
assignee of the Company or any subsidiary of the Company; or (iii) any material
breach by the Employee of the terms of this Agreement.
12. Equitable Remedies and Remedies at Law. The parties recognize that, because
of the nature of the subject matter of this Agreement it would be impracticable
and extremely difficult to determine actual damages for a breach of certain of
the provisions of this Agreement, specifically those provisions of paragraphs 6
and 7. Accordingly, in the event of a violation or threatened violation or any
provisions of this Agreement, specifically including those provisions of
paragraphs 6 and 7, all legal and equitable remedies, including without
limitation, injunctive relief, both preliminary and permanent, shall be
available and the posting of a surety bond shall not be required in connection
therewith and money damages for any loss suffered as a consequence of violation
of such provisions shall also be available.
13. Severability. The invalidity or unenforceability of any term or provision of
this Agreement or the nonapplicability of any such term or provision to any
person or circumstances shall not impair or affect the remainder of this
Agreement, and the remaining terms and provisions hereof shall not be
invalidated, but shall remain in full force and effect and shall be construed as
if such invalid, unenforceable or nonapplicable provisions were omitted.
Further, if any of the covenants contained in paragraphs 6 or 7 of this
Agreement, or any part thereof, are held to be unenforceable because of the
duration of such provisions or the area covered thereby, or the scope of the
activities sought to be restricted, the parties hereto agree that the arbitrator
or court making such determination shall have the power to reform such
provisions of this Agreement to the maximum time, geographic limitations, or
time permitted by applicable law.
14. Governing Law. All of the provisions of this Agreement other than those set
forth in paragraphs 2, 6, and 7 shall be governed by, construed and enforced in
all respects in accordance with the laws of the State of Ohio. The provisions of
paragraphs 2, 6, and 7 shall be governed by, construed and enforced in all
respects in accordance with the laws of the State of Florida.
15. Captions. Titles or captions of paragraphs contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or prescribe the scope of this Agreement or the intent of
any provision hereof.
16. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute one and the same Agreement.
92
17. Construction. The parties acknowledge that they have had the opportunity to
participate equally in the drafting of this Agreement and that in the event of a
dispute, no party shall be treated, for any purpose, as the author of this
Agreement or have any ambiguity resolved against such party on account thereof.
In witness whereof, the parties hereto have executed this Agreement, as of the
day and year first above written.
Paravant Computer Systems, Inc.
By: _______________________________
Xxxxxxx X. Xxxxx,
Chairman of the Board and CEO
________________________________
Xxx X. Xxxxxxxxx, Employee
93
COMPENSATION AND BENEFITS OF Xxx X. Xxxxxxxxx
POSITION: Vice President of Business Development of STL
1. An annual salary of $154,474
2. A non-qualified deferred compensation (funded) of 40% of No. 1 $61,789 based
on plan (attached).
3. Standard EDL/STL benefits package attached, modified as follows:
a. 2x (twice) All Employee Incentive Program payment percentage.
b. 7 hours of personal leave per payroll period.
c. Life insurance of $154,474
d. Continuation of Health Care coverage for employee and spouse until
each is eligible for Medicare coverage under existing plan benefits and
at a cost no greater than current plan (see attached). This benefit
continues after retirement or separation. This provision will be
interpreted based upon laws and other benefits that were in effect as of
March 30, 1998.
Note: The plans referred to above as attached have been furnished to the
parties to the Acquisition Agreement.
94
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of ______________,1998, by and
between Paravant Computer Systems, Inc., a Florida corporation (the "Company"),
and C. Xxxxx Xxxxxxxxxx (the "Employee").
The parties hereto, in consideration of the premises and the mutual covenants
herein contained, hereby agree as follows:
1. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company agrees to employ the Employee for a period of forty-two (42)
months. The Employee commits to be employed for a period commencing on the date
hereof and ending no earlier than December 31, 2000. Upon completion of forty
two (42) months of employment the Company and Employee may extend the term of
employment for an additional year by mutual agreement. Notwithstanding the
foregoing, the Employee shall be entitled to terminate his employment at any
time after the date hereof if: (i) the Employee recommends an individual
qualified to perform the Employee's job responsibilities (the "Qualified
Replacement") and (ii) the prior EDL and STL shareholders, who are currently
employees, first approve and then the Company approves of the Qualified
Replacement, said approval not to be unreasonably withheld. If such consent is
unreasonably withheld, then damages are limited to zero; however, the Employee
would be entitled to any Earn-Out ("Earn-Out") provided for in Section 1.3 of
the Acquisition Agreement dated March __, 1998 between the Company, Engineering
Development Laboratories, Incorporated ("EDL"), Signal Technology Laboratories,
Inc. ("STL") and the shareholders of EDL and STL, including the Employee, which
should have been paid as performance bonus or additional compensation.
2. Forfeiture of Earn-Out. If the Employee terminates his employment prior to
December 31,2000 without the approval of the Company he will forfeit his share
of Earn-Out to be paid for any Earn-Out Period ending after the date on which he
terminates his employment. The Company is not entitled to any further damages
caused as a result of the Employee's termination of his employment. If the
employment of the Employee is terminated by death or disability, as defined in
paragraph 5, then he or his beneficiary is still entitled to his share of the
Earn-Out and his share of the Earn-Out is not subject to forfeiture.
3. Scope of Employment. During the term of employment, the Employee shall be
employed as the Senior Vice President, Engineering of Engineering Development
Laboratories, Incorporated, an Ohio corporation, and a subsidiary of the Company
headquartered in Dayton, Ohio. The Employee shall render such services which are
in accordance with his utmost abilities and shall use his best efforts to
promote the interests of the Company and its subsidiaries. The Employee will not
engage in any capacity or activity which is, or may be considered contrary to
the welfare, interest or benefit of the business now or hereafter conducted by
the Company and its subsidiaries. Employee's duties and/or position may be
modified by mutual agreement of the
95
Company and the Employee. The Company shall not relocate the Employee either
temporarily or permanently from Dayton, Ohio without Employee's consent during
the term of this Agreement.
4. Compensation and Benefits. (Attached)
5. Payments on Death or Disability. In the event that the Employee shall die or
become disabled while employed under this Agreement, the Company shall pay
twelve (12) months compensation at the monthly compensation rate, including all
benefits, then in effect for the Employee (the "Compensation") to his heir(s),
in the cause of his death, or to him or his guardian(s), in case of his
disability, (i) in a lump sum payment or (ii) in twelve equal monthly
installments, which lump sum or installment payment method shall be at the
discretion of the Employee or his or her heir(s) or guardian(s). In case of
disability, the twelve (12) month period would begin as of the date on which the
Employee's employment hereunder is terminated because of disability as
hereinafter provided. Employee's employment hereunder shall be terminated
because of disability if (a) the Employee shall become physically or mentally
incapable of properly performing his services to the Company as provided
hereunder, excluding infrequent and temporary absences due to ordinary
illnesses, (b) such incapacity shall exist or be reasonably expected to exist
for more than one hundred fifty (150) days in the aggregate during any twelve
(12) consecutive months covered hereunder, and (c) either the Employee or the
Company shall have given the other thirty (30) days written notice of his or its
intention to terminate the Employee's employment hereunder due to such
disability. For purposes of this Agreement, the Employee may provide the Company
with a written list of heirs in order of preference regarding death payment
benefits hereunder. The list may be altered and changed from time to time by the
Employee by giving written notice of such changes or new list thereof to the
Company as provided herein. In the event of death, if no list has been provided
by the Employee, then all compensation provided for in this paragraph 5 is
payable to the estate of the Employee.
6. Covenant Not to Compete. During the Term of Employment and for a period of
five (5) years thereafter, the Employee shall not (except on behalf of the
Company or a subsidiary of the Company while the Employee is employed by either
the Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent) engage, directly or indirectly, in any business which
competes in any manner within the United States of America (the "Geographic
Area"), with the Company's business of design, manufacture, repair and sale of
rugged and customized computer systems and medical computer assemblies or in any
other business of design, development, manufacturing, sales or service engaged
in or acquired by the Company or any subsidiary of the Company as of the date of
this Agreement or in which the Company employs the Employee during his
employment under this Agreement. For purposes of this Agreement, the Employee
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business. The Employee shall not, for purposes of this paragraph,
be deemed a stockholder if he holds less than five percent (5%) of the
outstanding shares of any publicly-owned corporation. In addition, the Employee
shall not at any time, during or after the termination of this Agreement, engage
in any
96
business which uses as its name, in whole or in part, "Paravant Computer
Systems, Inc.", "PCS" or any other name then used by the Company or any of its
affiliates or subsidiaries.
7. Non-Disclosure. Except as may be required by law or on behalf of the Company
or a subsidiary of the Company while the Employee is employed by either the
Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent, the Employee will not at any time, directly or
indirectly, disclose or furnish to any other person, firm or corporation; (a)
the methods of conducting the business of the Company or its subsidiaries or
affiliates; (b) a description of any of the methods of obtaining business, or
manufacturing or advertising products, or of obtaining customers thereof; (c)
any technology, design drawings, software, or other intellectual property or
property rights of the Company or its subsidiaries or affiliates owned by the
Company or any of its subsidiaries as of the date of this Agreement or acquired
by the Company or any of its subsidiaries during the Employee's employment under
this Agreement; or (d) any confidential information acquired by him during the
course of his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limitation, the generality of the foregoing, the
names of any new customers or prospective customers of, or any person, firm or
corporation, who or which have, or shall have, traded or dealt with (whether
such customers have been obtained by the Employee or otherwise) the Company, its
predecessors, subsidiaries or affiliates.
8. Intellectual Property. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment with the Company
or any subsidiary of the Company or the business markets of the Company or any
subsidiary of the Company under this Agreement will be the sole and absolute
property of the Company and its subsidiaries for any and all purposes whatsoever
in perpetuity, whether or not conceived, discovered and/or developed during
regular working hours. The Employee will not have, and will not claim to have,
under this Agreement or otherwise, any right, title or interest of any kind or
nature whatsoever in or to any such products, processes, discoveries, material
ideas, creations, inventions and properties which are related to the Company's
business markets.
9. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Ohio pursuant to the rules of
the American Arbitration Association then in effect. The decision of the
arbitrator(s) is binding on both the Company and the Employee.
10. Termination for Convenience. The Company may terminate Employee's employment
under this Agreement for convenience at any time. In the event of such
termination the Company shall make lump sum payments equal to the value of the
compensation (1 and 2 attached) and benefits (3 of attached as would have been
normally paid if the employment continued), including but not limited to
non-qualified deferred compensation and health insurance, for forty-two (42)
months less the amount which has previously been paid or used.
97
11. Termination for Cause. The Company may terminate this Employee's employment
under this Agreement for "cause" without any liability to the Company other than
to pay the compensation benefits provided for in this Agreement for services
rendered prior to the date of such termination. The following shall constitute
grounds for termination of the Employee for cause: (i) willful or gross neglect
by the Employee of his duties of employment under, or any willful misconduct of
the Employee in connection with the performance of his duties under this
Agreement; (ii) conviction of the Employee of any felony, or of any lesser crime
or offense materially and adversely affecting the property, reputation or
goodwill of the Company, any subsidiary of the Company or any successor or
assignee of the Company or any subsidiary of the Company; or (iii) any material
breach by the Employee of the terms of this Agreement.
12. Equitable Remedies and Remedies at Law. The parties recognize that, because
of the nature of the subject matter of this Agreement it would be impracticable
and extremely difficult to determine actual damages for a breach of certain of
the provisions of this Agreement, specifically those provisions of paragraphs 6
and 7. Accordingly, in the event of a violation or threatened violation or any
provisions of this Agreement, specifically including those provisions of
paragraphs 6 and 7, all legal and equitable remedies, including without
limitation, injunctive relief, both preliminary and permanent, shall be
available and the posting of a surety bond shall not be required in connection
therewith and money damages for any loss suffered as a consequence of violation
of such provisions shall also be available.
13. Severability. The invalidity or unenforceability of any term or provision of
this Agreement or the nonapplicability of any such term or provision to any
person or circumstances shall not impair or affect the remainder of this
Agreement, and the remaining terms and provisions hereof shall not be
invalidated, but shall remain in full force and effect and shall be construed as
if such invalid, unenforceable or nonapplicable provisions were omitted.
Further, if any of the covenants contained in paragraphs 6 or 7 of this
Agreement, or any part thereof, are held to be unenforceable because of the
duration of such provisions or the area covered thereby, or the scope of the
activities sought to be restricted, the parties hereto agree that the arbitrator
or court making such determination shall have the power to reform such
provisions of this Agreement to the maximum time, geographic limitations, or
time permitted by applicable law.
14. Governing Law. All of the provisions of this Agreement other than those set
forth in paragraphs 2, 6, and 7 shall be governed by, construed and enforced in
all respects in accordance with the laws of the State of Ohio. The provisions of
paragraphs 2, 6, and 7 shall be governed by, construed and enforced in all
respects in accordance with the laws of the State of Florida.
15. Captions. Titles or captions of paragraphs contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or prescribe the scope of this Agreement or the intent of
any provision hereof.
16. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute one and the same Agreement.
98
17. Construction. The parties acknowledge that they have had the opportunity to
participate equally in the drafting of this Agreement and that in the event of a
dispute, no party shall be treated, for any purpose, as the author of this
Agreement or have any ambiguity resolved against such party on account thereof.
In witness whereof, the parties hereto have executed this Agreement, as of the
day and year first above written.
Paravant Computer Systems, Inc.
By: _______________________________
Xxxxxxx X. Xxxxx,
Chairman of the Board and CEO
________________________________
C. Xxxxx Xxxxxxxxxx, Employee
99
COMPENSATION AND BENEFITS OF C. Xxxxx Xxxxxxxxxx
POSITION: Senior Vice President, Engineering of EDL
1. An annual salary of $169,300
2. A non-qualified deferred compensation (funded) of 40% of No. 1 $67,720 based
on plan (attached).
3. Standard EDL/STL benefits package attached, modified as follows:
a. 2x (twice) All Employee Incentive Program payment percentage.
b. 16 hours of personal leave per payroll period.
c. Life insurance of $169,300
d. Continuation of Health Care coverage for employee and spouse until
each is eligible for Medicare coverage under existing plan benefits and
at a cost no greater than current plan (see attached). This benefit
continues after retirement or separation. This provision will be
interpreted based upon laws and other benefits that were in effect as of
March 30, 1998.
Note: The plans referred to above as attached have been furnished to the
parties to the Acquisition Agreement.
100
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of ______________,1998, by and
between Paravant Computer Systems, Inc., a Florida corporation (the "Company"),
and Xxxxx X. Xxxxxxxx (the "Employee").
The parties hereto, in consideration of the premises and the mutual covenants
herein contained, hereby agree as follows:
1. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company agrees to employ the Employee for a period of forty-two (42)
months. The Employee commits to be employed for a period commencing on the date
hereof and ending no earlier than December 31, 2000. Upon completion of forty
two (42) months of employment the Company and Employee may extend the term of
employment for an additional year by mutual agreement. Notwithstanding the
foregoing, the Employee shall be entitled to terminate his employment at any
time after the date hereof if: (i) the Employee recommends an individual
qualified to perform the Employee's job responsibilities (the "Qualified
Replacement") and (ii) the prior EDL and STL shareholders, who are currently
employees, first approve and then the Company approves of the Qualified
Replacement, said approval not to be unreasonably withheld. If such consent is
unreasonably withheld, then damages are limited to zero; however, the Employee
would be entitled to any Earn-Out ("Earn-Out") provided for in Section 1.3 of
the Acquisition Agreement dated March __, 1998 between the Company, Engineering
Development Laboratories, Incorporated ("EDL"), Signal Technology Laboratories,
Inc. ("STL") and the shareholders of EDL and STL, including the Employee, which
should have been paid as performance bonus or additional compensation.
2. Forfeiture of Earn-Out. If the Employee terminates his employment prior to
December 31,2000 without the approval of the Company he will forfeit his share
of Earn-Out to be paid for any Earn-Out Period ending after the date on which he
terminates his employment. The Company is not entitled to any further damages
caused as a result of the Employee's termination of his employment. If the
employment of the Employee is terminated by death or disability, as defined in
paragraph 5, then he or his beneficiary is still entitled to his share of the
Earn-Out and his share of the Earn-Out is not subject to forfeiture.
3. Scope of Employment. During the term of employment, the Employee shall be
employed as the Executive Vice President, Secretary/Treasurer and Chief
Operating Officer of Signal Technology Laboratories, Inc., an Ohio corporation,
and a subsidiary of the Company headquartered in Dayton, Ohio. The Employee
shall render such services which are in accordance with his utmost abilities and
shall use his best efforts to promote the interests of the Company and its
subsidiaries. The Employee will not engage in any capacity or activity which is,
or may be considered contrary to the welfare, interest or benefit of the
business now or hereafter conducted by the Company and its subsidiaries.
Employee's duties and/or position may be modified by
101
mutual agreement of the Company and the Employee. The Company shall not relocate
the Employee either temporarily or permanently from Dayton, Ohio without
Employee's consent during the term of this Agreement.
4. Compensation and Benefits. (Attached)
5. Payments on Death or Disability. In the event that the Employee shall die or
become disabled while employed under this Agreement, the Company shall pay
twelve (12) months compensation at the monthly compensation rate, including all
benefits, then in effect for the Employee (the "Compensation") to his heir(s),
in the cause of his death, or to him or his guardian(s), in case of his
disability, (i) in a lump sum payment or (ii) in twelve equal monthly
installments, which lump sum or installment payment method shall be at the
discretion of the Employee or his or her heir(s) or guardian(s). In case of
disability, the twelve (12) month period would begin as of the date on which the
Employee's employment hereunder is terminated because of disability as
hereinafter provided. Employee's employment hereunder shall be terminated
because of disability if (a) the Employee shall become physically or mentally
incapable of properly performing his services to the Company as provided
hereunder, excluding infrequent and temporary absences due to ordinary
illnesses, (b) such incapacity shall exist or be reasonably expected to exist
for more than one hundred fifty (150) days in the aggregate during any twelve
(12) consecutive months covered hereunder, and (c) either the Employee or the
Company shall have given the other thirty (30) days written notice of his or its
intention to terminate the Employee's employment hereunder due to such
disability. For purposes of this Agreement, the Employee may provide the Company
with a written list of heirs in order of preference regarding death payment
benefits hereunder. The list may be altered and changed from time to time by the
Employee by giving written notice of such changes or new list thereof to the
Company as provided herein. In the event of death, if no list has been provided
by the Employee, then all compensation provided for in this paragraph 5 is
payable to the estate of the Employee.
6. Covenant Not to Compete. During the Term of Employment and for a period of
five (5) years thereafter, the Employee shall not (except on behalf of the
Company or a subsidiary of the Company while the Employee is employed by either
the Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent) engage, directly or indirectly, in any business which
competes in any manner within the United States of America (the "Geographic
Area"), with the Company's business of design, manufacture, repair and sale of
rugged and customized computer systems and medical computer assemblies or in any
other business of design, development, manufacturing, sales or service engaged
in or acquired by the Company or any subsidiary of the Company as of the date of
this Agreement or in which the Company employs the Employee during his
employment under this Agreement. For purposes of this Agreement, the Employee
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business. The Employee shall not, for purposes of this paragraph,
be deemed a stockholder if he holds less than five percent (5%) of the
outstanding shares of any publicly-owned corporation. In addition, the
102
Employee shall not at any time, during or after the termination of this
Agreement, engage in any business which uses as its name, in whole or in part,
"Paravant Computer Systems, Inc.", "PCS" or any other name then used by the
Company or any of its affiliates or subsidiaries.
7. Non-Disclosure. Except as may be required by law or on behalf of the Company
or a subsidiary of the Company while the Employee is employed by either the
Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent, the Employee will not at any time, directly or
indirectly, disclose or furnish to any other person, firm or corporation; (a)
the methods of conducting the business of the Company or its subsidiaries or
affiliates; (b) a description of any of the methods of obtaining business, or
manufacturing or advertising products, or of obtaining customers thereof; (c)
any technology, design drawings, software, or other intellectual property or
property rights of the Company or its subsidiaries or affiliates owned by the
Company or any of its subsidiaries as of the date of this Agreement or acquired
by the Company or any of its subsidiaries during the Employee's employment under
this Agreement; or (d) any confidential information acquired by him during the
course of his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limitation, the generality of the foregoing, the
names of any new customers or prospective customers of, or any person, firm or
corporation, who or which have, or shall have, traded or dealt with (whether
such customers have been obtained by the Employee or otherwise) the Company, its
predecessors, subsidiaries or affiliates.
8. Intellectual Property. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment with the Company
or any subsidiary of the Company or the business markets of the Company or any
subsidiary of the Company under this Agreement will be the sole and absolute
property of the Company and its subsidiaries for any and all purposes whatsoever
in perpetuity, whether or not conceived, discovered and/or developed during
regular working hours. The Employee will not have, and will not claim to have,
under this Agreement or otherwise, any right, title or interest of any kind or
nature whatsoever in or to any such products, processes, discoveries, material
ideas, creations, inventions and properties which are related to the Company's
business markets.
9. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Ohio pursuant to the rules of
the American Arbitration Association then in effect. The decision of the
arbitrator(s) is binding on both the Company and the Employee.
10. Termination for Convenience. The Company may terminate Employee's employment
under this Agreement for convenience at any time. In the event of such
termination the Company shall make lump sum payments equal to the value of the
compensation (1 and 2 attached) and benefits (3 of attached as would have been
normally paid if the employment continued), including but not limited to
non-qualified deferred compensation and health insurance, for forty-two (42)
months less the amount which has previously been paid or used.
103
11. Termination for Cause. The Company may terminate this Employee's employment
under this Agreement for "cause" without any liability to the Company other than
to pay the compensation benefits provided for in this Agreement for services
rendered prior to the date of such termination. The following shall constitute
grounds for termination of the Employee for cause: (i) willful or gross neglect
by the Employee of his duties of employment under, or any willful misconduct of
the Employee in connection with the performance of his duties under this
Agreement; (ii) conviction of the Employee of any felony, or of any lesser crime
or offense materially and adversely affecting the property, reputation or
goodwill of the Company, any subsidiary of the Company or any successor or
assignee of the Company or any subsidiary of the Company; or (iii) any material
breach by the Employee of the terms of this Agreement.
12. Equitable Remedies and Remedies at Law. The parties recognize that, because
of the nature of the subject matter of this Agreement it would be impracticable
and extremely difficult to determine actual damages for a breach of certain of
the provisions of this Agreement, specifically those provisions of paragraphs 6
and 7. Accordingly, in the event of a violation or threatened violation or any
provisions of this Agreement, specifically including those provisions of
paragraphs 6 and 7, all legal and equitable remedies, including without
limitation, injunctive relief, both preliminary and permanent, shall be
available and the posting of a surety bond shall not be required in connection
therewith and money damages for any loss suffered as a consequence of violation
of such provisions shall also be available.
13. Severability. The invalidity or unenforceability of any term or provision of
this Agreement or the nonapplicability of any such term or provision to any
person or circumstances shall not impair or affect the remainder of this
Agreement, and the remaining terms and provisions hereof shall not be
invalidated, but shall remain in full force and effect and shall be construed as
if such invalid, unenforceable or nonapplicable provisions were omitted.
Further, if any of the covenants contained in paragraphs 6 or 7 of this
Agreement, or any part thereof, are held to be unenforceable because of the
duration of such provisions or the area covered thereby, or the scope of the
activities sought to be restricted, the parties hereto agree that the arbitrator
or court making such determination shall have the power to reform such
provisions of this Agreement to the maximum time, geographic limitations, or
time permitted by applicable law.
14. Governing Law. All of the provisions of this Agreement other than those set
forth in paragraphs 2, 6, and 7 shall be governed by, construed and enforced in
all respects in accordance with the laws of the State of Ohio. The provisions of
paragraphs 2, 6, and 7 shall be governed by, construed and enforced in all
respects in accordance with the laws of the State of Florida.
15. Captions. Titles or captions of paragraphs contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or prescribe the scope of this Agreement or the intent of
any provision hereof.
16. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute one and the same Agreement.
104
17. Construction. The parties acknowledge that they have had the opportunity to
participate equally in the drafting of this Agreement and that in the event of a
dispute, no party shall be treated, for any purpose, as the author of this
Agreement or have any ambiguity resolved against such party on account thereof.
In witness whereof, the parties hereto have executed this Agreement, as of the
day and year first above written.
Paravant Computer Systems, Inc.
By: _______________________________
Xxxxxxx X. Xxxxx,
Chairman of the Board and CEO
________________________________
Xxxxx X. Xxxxxxxx, Employee
105
COMPENSATION AND BENEFITS OF Xxxxx X. Xxxxxxxx
POSITION: Executive Vice President, Secretary/Treasurer & Chief Operating
Officer of STL
1. An annual salary of $169,300
2. A non-qualified deferred compensation (funded) of 40% f No. 1 $67,720 based
on plan (attached).
3. Standard EDL/STL benefits package attached, modified as follows:
a. 2x (twice) All Employee Incentive Program payment percentage.
b. 16 hours of personal leave per payroll period.
c. Life insurance of $169,300.
d. Continuation of Health Care coverage for employee and spouse until
each is eligible for Medicare coverage under existing plan benefits and
at a cost no greater than current plan (see attached). This benefit
continues after retirement or separation. This provision will be
interpreted based upon laws and other benefits that were in effect as of
March 30, 1998.
Note: The plans referred to above as attached have been furnished to the
parties to the Acquisition Agreement.
106
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of ______________,1998, by and
between Paravant Computer Systems, Inc., a Florida corporation (the "Company"),
and Xxxxxx X. Xxxxxxxx (the "Employee").
The parties hereto, in consideration of the premises and the mutual covenants
herein contained, hereby agree as follows:
1. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company agrees to employ the Employee for a period of forty-two (42)
months. The Employee commits to be employed for a period commencing on the date
hereof and ending no earlier than December 31, 2000. Upon completion of forty
two (42) months of employment the Company and Employee may extend the term of
employment for an additional year by mutual agreement. Notwithstanding the
foregoing, the Employee shall be entitled to terminate his employment at any
time after the date hereof if: (i) the Employee recommends an individual
qualified to perform the Employee's job responsibilities (the "Qualified
Replacement") and (ii) the prior EDL and STL shareholders, who are currently
employees, first approve and then the Company approves of the Qualified
Replacement, said approval not to be unreasonably withheld. If such consent is
unreasonably withheld, then damages are limited to zero; however, the Employee
would be entitled to any Earn-Out ("Earn-Out") provided for in Section 1.3 of
the Acquisition Agreement dated March __, 1998 between the Company, Engineering
Development Laboratories, Incorporated ("EDL"), Signal Technology Laboratories,
Inc. ("STL") and the shareholders of EDL and STL, including the Employee, which
should have been paid as performance bonus or additional compensation.
2. Forfeiture of Earn-Out. If the Employee terminates his employment prior to
December 31,2000 without the approval of the Company he will forfeit his share
of Earn-Out to be paid for any Earn-Out Period ending after the date on which he
terminates his employment. The Company is not entitled to any further damages
caused as a result of the Employee's termination of his employment. If the
employment of the Employee is terminated by death or disability, as defined in
paragraph 5, then he or his beneficiary is still entitled to his share of the
Earn-Out and his share of the Earn-Out is not subject to forfeiture.
3. Scope of Employment. During the term of employment, the Employee shall be
employed as the President and Chief Executive Officer (CEO) of Engineering
Development Laboratories, Incorporated, an Ohio corporation, and a subsidiary of
the Company headquartered in Dayton, Ohio. The Employee shall render such
services which are in accordance with his utmost abilities and shall use his
best efforts to promote the interests of the Company and its subsidiaries. The
Employee will not engage in any capacity or activity which is, or may be
considered contrary to the welfare, interest or benefit of the business now or
hereafter conducted by the Company and its
107
subsidiaries. Employee's duties and/or position may be modified by mutual
agreement of the Company and the Employee. The Company shall not relocate the
Employee either temporarily or permanently from Dayton, Ohio without Employee's
consent during the term of this Agreement.
4. Compensation and Benefits. (Attached)
5. Payments on Death or Disability. In the event that the Employee shall die or
become disabled while employed under this Agreement, the Company shall pay
twelve (12) months compensation at the monthly compensation rate, including all
benefits, then in effect for the Employee (the "Compensation") to his heir(s),
in the cause of his death, or to him or his guardian(s), in case of his
disability, (i) in a lump sum payment or (ii) in twelve equal monthly
installments, which lump sum or installment payment method shall be at the
discretion of the Employee or his or her heir(s) or guardian(s). In case of
disability, the twelve (12) month period would begin as of the date on which the
Employee's employment hereunder is terminated because of disability as
hereinafter provided. Employee's employment hereunder shall be terminated
because of disability if (a) the Employee shall become physically or mentally
incapable of properly performing his services to the Company as provided
hereunder, excluding infrequent and temporary absences due to ordinary
illnesses, (b) such incapacity shall exist or be reasonably expected to exist
for more than one hundred fifty (150) days in the aggregate during any twelve
(12) consecutive months covered hereunder, and (c) either the Employee or the
Company shall have given the other thirty (30) days written notice of his or its
intention to terminate the Employee's employment hereunder due to such
disability. For purposes of this Agreement, the Employee may provide the Company
with a written list of heirs in order of preference regarding death payment
benefits hereunder. The list may be altered and changed from time to time by the
Employee by giving written notice of such changes or new list thereof to the
Company as provided herein. In the event of death, if no list has been provided
by the Employee, then all compensation provided for in this paragraph 5 is
payable to the estate of the Employee.
6. Covenant Not to Compete. During the Term of Employment and for a period of
five (5) years thereafter, the Employee shall not (except on behalf of the
Company or a subsidiary of the Company while the Employee is employed by either
the Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent) engage, directly or indirectly, in any business which
competes in any manner within the United States of America (the "Geographic
Area"), with the Company's business of design, manufacture, repair and sale of
rugged and customized computer systems and medical computer assemblies or in any
other business of design, development, manufacturing, sales or service engaged
in or acquired by the Company or any subsidiary of the Company as of the date of
this Agreement or in which the Company employs the Employee during his
employment under this Agreement. For purposes of this Agreement, the Employee
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business. The Employee shall not, for purposes of this paragraph,
be deemed a stockholder if he holds less than
108
five percent (5%) of the outstanding shares of any publicly-owned corporation.
In addition, the Employee shall not at any time, during or after the termination
of this Agreement, engage in any business which uses as its name, in whole or in
part, "Paravant Computer Systems, Inc.", "PCS" or any other name then used by
the Company or any of its affiliates or subsidiaries.
7. Non-Disclosure. Except as may be required by law or on behalf of the Company
or a subsidiary of the Company while the Employee is employed by either the
Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent, the Employee will not at any time, directly or
indirectly, disclose or furnish to any other person, firm or corporation; (a)
the methods of conducting the business of the Company or its subsidiaries or
affiliates; (b) a description of any of the methods of obtaining business, or
manufacturing or advertising products, or of obtaining customers thereof; (c)
any technology, design drawings, software, or other intellectual property or
property rights of the Company or its subsidiaries or affiliates owned by the
Company or any of its subsidiaries as of the date of this Agreement or acquired
by the Company or any of its subsidiaries during the Employee's employment under
this Agreement; or (d) any confidential information acquired by him during the
course of his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limitation, the generality of the foregoing, the
names of any new customers or prospective customers of, or any person, firm or
corporation, who or which have, or shall have, traded or dealt with (whether
such customers have been obtained by the Employee or otherwise) the Company, its
predecessors, subsidiaries or affiliates.
8. Intellectual Property. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment with the Company
or any subsidiary of the Company or the business markets of the Company or any
subsidiary of the Company under this Agreement will be the sole and absolute
property of the Company and its subsidiaries for any and all purposes whatsoever
in perpetuity, whether or not conceived, discovered and/or developed during
regular working hours. The Employee will not have, and will not claim to have,
under this Agreement or otherwise, any right, title or interest of any kind or
nature whatsoever in or to any such products, processes, discoveries, material
ideas, creations, inventions and properties which are related to the Company's
business markets.
9. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Ohio pursuant to the rules of
the American Arbitration Association then in effect. The decision of the
arbitrator(s) is binding on both the Company and the Employee.
10. Termination for Convenience. The Company may terminate Employee's employment
under this Agreement for convenience at any time. In the event of such
termination the Company shall make lump sum payments equal to the value of the
compensation (1 and 2 attached) and benefits (3 of attached as would have been
normally paid if the employment continued), including but not
109
limited to non-qualified deferred compensation and health insurance, for
forty-two (42) months less the amount which has previously been paid or used.
11. Termination for Cause. The Company may terminate this Employee's employment
under this Agreement for "cause" without any liability to the Company other than
to pay the compensation benefits provided for in this Agreement for services
rendered prior to the date of such termination. The following shall constitute
grounds for termination of the Employee for cause: (i) willful or gross neglect
by the Employee of his duties of employment under, or any willful misconduct of
the Employee in connection with the performance of his duties under this
Agreement; (ii) conviction of the Employee of any felony, or of any lesser crime
or offense materially and adversely affecting the property, reputation or
goodwill of the Company, any subsidiary of the Company or any successor or
assignee of the Company or any subsidiary of the Company; or (iii) any material
breach by the Employee of the terms of this Agreement.
12. Equitable Remedies and Remedies at Law. The parties recognize that, because
of the nature of the subject matter of this Agreement it would be impracticable
and extremely difficult to determine actual damages for a breach of certain of
the provisions of this Agreement, specifically those provisions of paragraphs 6
and 7. Accordingly, in the event of a violation or threatened violation or any
provisions of this Agreement, specifically including those provisions of
paragraphs 6 and 7, all legal and equitable remedies, including without
limitation, injunctive relief, both preliminary and permanent, shall be
available and the posting of a surety bond shall not be required in connection
therewith and money damages for any loss suffered as a consequence of violation
of such provisions shall also be available.
13. Severability. The invalidity or unenforceability of any term or provision of
this Agreement or the nonapplicability of any such term or provision to any
person or circumstances shall not impair or affect the remainder of this
Agreement, and the remaining terms and provisions hereof shall not be
invalidated, but shall remain in full force and effect and shall be construed as
if such invalid, unenforceable or nonapplicable provisions were omitted.
Further, if any of the covenants contained in paragraphs 6 or 7 of this
Agreement, or any part thereof, are held to be unenforceable because of the
duration of such provisions or the area covered thereby, or the scope of the
activities sought to be restricted, the parties hereto agree that the arbitrator
or court making such determination shall have the power to reform such
provisions of this Agreement to the maximum time, geographic limitations, or
time permitted by applicable law.
14. Governing Law. All of the provisions of this Agreement other than those set
forth in paragraphs 2, 6, and 7 shall be governed by, construed and enforced in
all respects in accordance with the laws of the State of Ohio. The provisions of
paragraphs 2, 6, and 7 shall be governed by, construed and enforced in all
respects in accordance with the laws of the State of Florida.
110
15. Captions. Titles or captions of paragraphs contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or prescribe the scope of this Agreement or the intent of
any provision hereof.
16. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute one and the same Agreement.
17. Construction. The parties acknowledge that they have had the opportunity to
participate equally in the drafting of this Agreement and that in the event of a
dispute, no party shall be treated, for any purpose, as the author of this
Agreement or have any ambiguity resolved against such party on account thereof.
In witness whereof, the parties hereto have executed this Agreement, as of the
day and year first above written.
Paravant Computer Systems, Inc.
By: _______________________________
Xxxxxxx X. Xxxxx,
Chairman of the Board and CEO
________________________________
Xxxxxx X. Xxxxxxxx, Employee
111
COMPENSATION AND BENEFITS OF Xxxxxx X. Xxxxxxxx
POSITION: President and Chief Executive Officer (CEO) of EDL
1. An annual salary of $169,300
2. A non-qualified deferred compensation (funded) of 40% of No. 1 $67,720
based on plan (attached).
3. Standard EDL/STL benefits package attached, modified as follows:
a. 2x (twice) All Employee Incentive Program payment percentage.
b. 16 hours of personal leave per payroll period.
c. Life insurance of $169,300.
d. Continuation of Health Care coverage for employee and spouse until
each is eligible for Medicare coverage under existing plan benefits and
at a cost no greater than current plan (see attached). This benefit
continues after retirement or separation. This provision will be
interpreted based upon laws and other benefits that were in effect as of
March 30, 1998.
Note: The plans referred to above as attached have been furnished to the
parties to the Acquisition Agreement.
112
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of ______________,1998, by and
between Paravant Computer Systems, Inc., a Florida corporation (the "Company"),
and Xxxxx X. Xxxxxxxx (the "Employee").
The parties hereto, in consideration of the premises and the mutual covenants
herein contained, hereby agree as follows:
1. Term of Employment. Subject to the terms and conditions hereinafter set
forth, the Company agrees to employ the Employee for a period of forty-two (42)
months. The Employee commits to be employed for a period commencing on the date
hereof and ending no earlier than December 31, 2000. Upon completion of forty
two (42) months of employment the Company and Employee may extend the term of
employment for an additional year by mutual agreement. Notwithstanding the
foregoing, the Employee shall be entitled to terminate his employment at any
time after the date hereof if: (i) the Employee recommends an individual
qualified to perform the Employee's job responsibilities (the "Qualified
Replacement") and (ii) the prior EDL and STL shareholders, who are currently
employees, first approve and then the Company approves of the Qualified
Replacement, said approval not to be unreasonably withheld. If such consent is
unreasonably withheld, then damages are limited to zero; however, the Employee
would be entitled to any Earn-Out ("Earn-Out") provided for in Section 1.3 of
the Acquisition Agreement dated March __, 1998 between the Company, Engineering
Development Laboratories, Incorporated ("EDL"), Signal Technology Laboratories,
Inc. ("STL") and the shareholders of EDL and STL, including the Employee, which
should have been paid as performance bonus or additional compensation.
2. Forfeiture of Earn-Out. If the Employee terminates his employment prior to
December 31,2000 without the approval of the Company he will forfeit his share
of Earn-Out to be paid for any Earn-Out Period ending after the date on which he
terminates his employment. The Company is not entitled to any further damages
caused as a result of the Employee's termination of his employment. If the
employment of the Employee is terminated by death or disability, as defined in
paragraph 5, then he or his beneficiary is still entitled to his share of the
Earn-Out and his share of the Earn-Out is not subject to forfeiture.
3. Scope of Employment. During the term of employment, the Employee shall be
employed as the Vice President of Technology of Signal Technology Laboratories,
Inc., an Ohio corporation, and a subsidiary of the Company headquartered in
Dayton, Ohio. The Employee shall render such services which are in accordance
with his utmost abilities and shall use his best efforts to promote the
interests of the Company and its subsidiaries. The Employee will not engage in
any capacity or activity which is, or may be considered contrary to the welfare,
interest or benefit of the business now or hereafter conducted by the Company
and its subsidiaries. Employee's duties
113
and/or position may be modified by mutual agreement of the Company and the
Employee. The Company shall not relocate the Employee either temporarily or
permanently from Dayton, Ohio without Employee's consent during the term of this
Agreement.
4. Compensation and Benefits. (Attached)
5. Payments on Death or Disability. In the event that the Employee shall die or
become disabled while employed under this Agreement, the Company shall pay
twelve (12) months compensation at the monthly compensation rate, including all
benefits, then in effect for the Employee (the "Compensation") to his heir(s),
in the cause of his death, or to him or his guardian(s), in case of his
disability, (i) in a lump sum payment or (ii) in twelve equal monthly
installments, which lump sum or installment payment method shall be at the
discretion of the Employee or his or her heir(s) or guardian(s). In case of
disability, the twelve (12) month period would begin as of the date on which the
Employee's employment hereunder is terminated because of disability as
hereinafter provided. Employee's employment hereunder shall be terminated
because of disability if (a) the Employee shall become physically or mentally
incapable of properly performing his services to the Company as provided
hereunder, excluding infrequent and temporary absences due to ordinary
illnesses, (b) such incapacity shall exist or be reasonably expected to exist
for more than one hundred fifty (150) days in the aggregate during any twelve
(12) consecutive months covered hereunder, and (c) either the Employee or the
Company shall have given the other thirty (30) days written notice of his or its
intention to terminate the Employee's employment hereunder due to such
disability. For purposes of this Agreement, the Employee may provide the Company
with a written list of heirs in order of preference regarding death payment
benefits hereunder. The list may be altered and changed from time to time by the
Employee by giving written notice of such changes or new list thereof to the
Company as provided herein. In the event of death, if no list has been provided
by the Employee, then all compensation provided for in this paragraph 5 is
payable to the estate of the Employee.
6. Covenant Not to Compete. During the Term of Employment and for a period of
five (5) years thereafter, the Employee shall not (except on behalf of the
Company or a subsidiary of the Company while the Employee is employed by either
the Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent) engage, directly or indirectly, in any business which
competes in any manner within the United States of America (the "Geographic
Area"), with the Company's business of design, manufacture, repair and sale of
rugged and customized computer systems and medical computer assemblies or in any
other business of design, development, manufacturing, sales or service engaged
in or acquired by the Company or any subsidiary of the Company as of the date of
this Agreement or in which the Company employs the Employee during his
employment under this Agreement. For purposes of this Agreement, the Employee
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business. The Employee shall not, for purposes of this paragraph,
be deemed a stockholder if he holds less than
114
five percent (5%) of the outstanding shares of any publicly-owned corporation.
In addition, the Employee shall not at any time, during or after the termination
of this Agreement, engage in any business which uses as its name, in whole or in
part, "Paravant Computer Systems, Inc.", "PCS" or any other name then used by
the Company or any of its affiliates or subsidiaries.
7. Non-Disclosure. Except as may be required by law or on behalf of the Company
or a subsidiary of the Company while the Employee is employed by either the
Company or a subsidiary of the Company or otherwise in accordance with the
Company's written consent, the Employee will not at any time, directly or
indirectly, disclose or furnish to any other person, firm or corporation; (a)
the methods of conducting the business of the Company or its subsidiaries or
affiliates; (b) a description of any of the methods of obtaining business, or
manufacturing or advertising products, or of obtaining customers thereof; (c)
any technology, design drawings, software, or other intellectual property or
property rights of the Company or its subsidiaries or affiliates owned by the
Company or any of its subsidiaries as of the date of this Agreement or acquired
by the Company or any of its subsidiaries during the Employee's employment under
this Agreement; or (d) any confidential information acquired by him during the
course of his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limitation, the generality of the foregoing, the
names of any new customers or prospective customers of, or any person, firm or
corporation, who or which have, or shall have, traded or dealt with (whether
such customers have been obtained by the Employee or otherwise) the Company, its
predecessors, subsidiaries or affiliates.
8. Intellectual Property. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment with the Company
or any subsidiary of the Company or the business markets of the Company or any
subsidiary of the Company under this Agreement will be the sole and absolute
property of the Company and its subsidiaries for any and all purposes whatsoever
in perpetuity, whether or not conceived, discovered and/or developed during
regular working hours. The Employee will not have, and will not claim to have,
under this Agreement or otherwise, any right, title or interest of any kind or
nature whatsoever in or to any such products, processes, discoveries, material
ideas, creations, inventions and properties which are related to the Company's
business markets.
9. Arbitration. Any controversy arising out of or relating to this Agreement
shall be resolved by arbitration in the State of Ohio pursuant to the rules of
the American Arbitration Association then in effect. The decision of the
arbitrator(s) is binding on both the Company and the Employee.
10. Termination for Convenience. The Company may terminate Employee's employment
under this Agreement for convenience at any time. In the event of such
termination the Company shall make lump sum payments equal to the value of the
compensation (1 and 2 attached) and benefits (3 of attached as would have been
normally paid if the employment continued), including but not
115
limited to non-qualified deferred compensation and health insurance, for
forty-two (42) months less the amount which has previously been paid or used.
11. Termination for Cause. The Company may terminate this Employee's employment
under this Agreement for "cause" without any liability to the Company other than
to pay the compensation benefits provided for in this Agreement for services
rendered prior to the date of such termination. The following shall constitute
grounds for termination of the Employee for cause: (i) willful or gross neglect
by the Employee of his duties of employment under, or any willful misconduct of
the Employee in connection with the performance of his duties under this
Agreement; (ii) conviction of the Employee of any felony, or of any lesser crime
or offense materially and adversely affecting the property, reputation or
goodwill of the Company, any subsidiary of the Company or any successor or
assignee of the Company or any subsidiary of the Company; or (iii) any material
breach by the Employee of the terms of this Agreement.
12. Equitable Remedies and Remedies at Law. The parties recognize that, because
of the nature of the subject matter of this Agreement it would be impracticable
and extremely difficult to determine actual damages for a breach of certain of
the provisions of this Agreement, specifically those provisions of paragraphs 6
and 7. Accordingly, in the event of a violation or threatened violation or any
provisions of this Agreement, specifically including those provisions of
paragraphs 6 and 7, all legal and equitable remedies, including without
limitation, injunctive relief, both preliminary and permanent, shall be
available and the posting of a surety bond shall not be required in connection
therewith and money damages for any loss suffered as a consequence of violation
of such provisions shall also be available.
13. Severability. The invalidity or unenforceability of any term or provision of
this Agreement or the nonapplicability of any such term or provision to any
person or circumstances shall not impair or affect the remainder of this
Agreement, and the remaining terms and provisions hereof shall not be
invalidated, but shall remain in full force and effect and shall be construed as
if such invalid, unenforceable or nonapplicable provisions were omitted.
Further, if any of the covenants contained in paragraphs 6 or 7 of this
Agreement, or any part thereof, are held to be unenforceable because of the
duration of such provisions or the area covered thereby, or the scope of the
activities sought to be restricted, the parties hereto agree that the arbitrator
or court making such determination shall have the power to reform such
provisions of this Agreement to the maximum time, geographic limitations, or
time permitted by applicable law.
14. Governing Law. All of the provisions of this Agreement other than those set
forth in paragraphs 2, 6, and 7 shall be governed by, construed and enforced in
all respects in accordance with the laws of the State of Ohio. The provisions of
paragraphs 2, 6, and 7 shall be governed by, construed and enforced in all
respects in accordance with the laws of the State of Florida.
116
15. Captions. Titles or captions of paragraphs contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or prescribe the scope of this Agreement or the intent of
any provision hereof.
16. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute one and the same Agreement.
17. Construction. The parties acknowledge that they have had the opportunity to
participate equally in the drafting of this Agreement and that in the event of a
dispute, no party shall be treated, for any purpose, as the author of this
Agreement or have any ambiguity resolved against such party on account thereof.
In witness whereof, the parties hereto have executed this Agreement, as of the
day and year first above written.
Paravant Computer Systems, Inc.
By: _______________________________
Xxxxxxx X. Xxxxx,
Chairman of the Board and CEO
________________________________
Xxxxx X. Xxxxxxxx, Employee
117
COMPENSATION AND BENEFITS OF Xxxxx X. Xxxxxxxx
POSITION: Vice President of Technology of STL
1. An annual salary of $126,700
2. A non-qualified deferred compensation (funded) of 40% of No. 1 $50,680
based on plan (attached).
3. Standard EDL/STL benefits package attached, modified as follows:
a. 2x (twice) All Employee Incentive Program payment percentage.
b. 16 hours of personal leave per payroll period.
c. Life insurance of $126,700.
d. Continuation of Health Care coverage for employee and spouse until
each is eligible for Medicare coverage under existing plan benefits and
at a cost no greater than current plan (see attached). This benefit
continues after retirement or separation. This provision will be
interpreted based upon laws and other benefits that were in effect as of
March 30, 1998.
Note: The plans referred to above as attached have been furnished to the
parties to the Acquisition Agreement.
118
EXHIBIT 6.11
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement"), is made this ____ day
of _______, 1998, by and between PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (hereinafter referred to as the "Purchaser"), and X. Xxxxxx Xxxxxxxx
(hereinafter referred to as the "Selling Shareholder").
W I T N E S S E T H:
WHEREAS, the Purchaser, ENGINEERING DEVELOPMENT LABORATORIES,
INCORPORATED, an Ohio corporation ("EDL"), SIGNAL TECHNOLOGY LABORATORIES, INC.,
an Ohio corporation ("STL"), and the Shareholders of both of EDL and STL,
including the Selling Shareholder are parties to an Acquisition Agreement dated
March ____, 1998 (the "Acquisition Agreement") providing for the acquisition by
the Purchaser from the EDL as shareholders of all of the EDL common stock, the
acquisition by the Purchaser, directly or indirectly through its wholly-owned
subsidiary NewSTL, from STL of the STL Purchased Assets and the acquisition by
the Purchaser of non-competition agreements from certain of the shareholders of
STL, including the Selling Shareholder;
WHEREAS, it is a condition precedent to the obligation of the Purchaser
to complete the Closing contemplated by the Purchase Agreement (the "Closing")
that the Purchaser shall have received this Agreement from the Selling
Shareholder;
WHEREAS, Selling Shareholder desires to induce the Purchaser to enter
into and complete the Closing and to consummate the transaction contemplated by
the Acquisition Agreement; and
WHEREAS, all capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Acquisition Agreement.
NOW, THEREFORE, in consideration of the foregoing, Selling Shareholder
hereby agrees with the Purchaser as follows:
1. Recitals. The recitals set forth at the beginning of this Agreement
are true and correct and by this reference are incorporated by reference into
the body of this Agreement.
2. Representations and Warranties. Selling Shareholder does hereby
represent and warrant to the Purchaser:
119
(a) That the delivery of this Agreement to the Purchaser by
Selling Shareholder is ancillary to the main business purpose of the Acquisition
Agreement and is executed by Selling Shareholder to protect the legitimate
interests of the Purchaser with respect to its acquisition of EDL and the STL
Purchased Assets;
(b) That the Non-competition Period (as hereinafter defined) and
the Geographic Area (as hereinafter defined), as described in Section 3 of this
Agreement, is appropriate and reasonable in all respects in light of the nature
of the business conducted by the Purchaser, EDL and NewSTL and the legitimate
need of the Purchaser to protect the investment by the Purchaser in EDL and
NewSTL following the acquisition; and
(c) That the execution and delivery of this Agreement, the
performance by Selling Shareholder of the covenants and agreements contained
herein, and the enforcement by the Purchaser of the provisions contained herein,
will cause no undue hardship on Selling Shareholder.
3. Non-competition. During the period commencing with the date of this
Agreement and continuing until fifteen (15) years thereafter, Selling
Shareholder agrees that, except on behalf of the Purchaser or a subsidiary of
the Purchaser while employed by the Purchaser or a subsidiary of the Purchaser,
and except to the extent set forth in Section 5 of this Agreement, he shall not
engage, directly or indirectly, in any business which competes in any manner
within the United States of America or its possessions or territories or
elsewhere throughout the world (the "Geographic Area") with the Purchaser's
business of design, manufacture, repair and sale of rugged and customized
computer systems and medical computer assemblies, EDL's business of the design,
development, modification and marketing of avionics equipment for use on or with
military airborne systems or the business of the design, development,
production, modification and marketing of digital signal processing equipment
for government intelligence and related applications, which was included in the
STL Purchased Assets. For purposes of this Agreement, the Selling Shareholder
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business.
4. Confidentiality of information, etc. Selling Shareholder shall not
divulge, communicate, use to the detriment of the Purchaser, or for the benefit
of any other business, firm, person, partnership or corporation, or otherwise
misuse, any "Confidential Information", data or trade secrets, including secret
processes, formulas or other technical data, production methods, customer lists,
or personnel or proprietary information, pertaining to the STL Purchased Assets,
the Purchaser, NewSTL or other subsidiaries of the Purchaser, or their
respective businesses. Selling Shareholder acknowledges that any such
information or data he may have acquired was either part of the STL Purchased
Assets which were conveyed to the Purchaser pursuant to the Acquisition
Agreement or was received in confidence and as a fiduciary of the Purchaser or
NewSTL. "Confidential Information" shall be defined as: trade secrets, customer
names, addresses, or particular desires or needs; the market regions or
territories; prices charged for services or products and the methods and
120
formulas related to pricing; information concerning product development,
manufacturing processes and research and development projects; formulas,
inventions and compilations of such information; information concerning future
product or market developments; financial information; information regarding
suppliers and costs for raw materials and other supplies; financing programs;
business plans; and information regarding personnel, overhead, distribution and
other expenses. The parties stipulate that Confidential Information and all
elements of it are important, material, confidential and gravely affect the
successful conduct of the business of the Purchaser and NewSTL. Upon termination
of his employment with the Purchaser and its subsidiaries for any reason and at
any other time the Purchaser or New STL may request, Selling Shareholder agrees
to deliver to the Purchaser, all memoranda, notes, plans, records, reports,
information and other documentation (and copies thereof), however recorded,
relating to the business of the Purchaser or NewSTL, or which contain
Confidential Information which he may possess or have under his control.
Confidential Information, data or trade secrets shall not include any
information which: (a) at the time of disclosure is within the public domain;
(b) after disclosure becomes a part of the public domain or generally known
within the industry through no fault, act or failure to act, error, effort or
breach of this Agreement by Selling Shareholder; (c) is known to the recipient
at the time of disclosure; (d) is subsequently discovered by Selling Shareholder
independently of any disclosure by the Purchaser, STL or NewSTL; (e) is required
by order, statute or regulation, of any governmental authority to be disclosed
to any federal or state agency, court or other body; or (f) is obtained from a
third party who has acquired a legal right to possess and disclose such
information.
5. Exceptions and Exclusions. With respect to the restrictions and
prohibitions set forth in Sections 3 and 4, such restrictions and prohibitions
shall not:
(a) Restrict or prohibit the Selling Shareholder from engaging
in the activities required, but only to the extent required, to permit STL to
enter into a new contract or accept a new order, to subcontract with NewSTL, or
to complete any backlog order in accordance with the provisions of Section 5.3.3
of the Acquisition Agreement; and
(b) Nothing herein contained shall be deemed to prevent or limit
the right of Selling Shareholder to own capital stock or other securities of any
corporation which are publicly owned or regularly traded in the over-the-counter
market or on any securities exchange; provided, however, such investment does
not exceed five percent 5% of the issuer's outstanding securities of that class.
6. Equitable Remedies and Remedies at Law. The parties recognize that,
because of the nature of the subject matter of this Agreement, it would be
impracticable and extremely difficult to determine actual damages to the
Purchaser or NewSTL or in the event of a breach of this Agreement by Selling
Shareholder. Accordingly, if Selling Shareholder commits a breach, or threatens
to commit a breach of any of the provisions of this Agreement, the Purchaser or
NewSTL shall be entitled to all available legal and equitable remedies,
including without limitation, injunctive relief, both preliminary and permanent,
and none of such parties shall be required to post a surety
121
bond in connection therewith and each of such parties will also be entitled to
money damages for any loss suffered or to be suffered as a consequence of
Selling Shareholder's breach of this Agreement.
7. Severability. If any of the covenants contained in Section 3, or any
part thereof, are held to be unenforceable because of the duration of such
provisions or the area covered thereby, or ever be deemed to exceed the scope of
business, the undersigned agrees that the court making such determination shall
have the power to reform the provisions of this Agreement to the maximum scope,
time or geographic limitations permitted by applicable law.
8. Reasonableness. The Purchaser and Selling Shareholder agree that the
covenants of Selling Shareholder set forth in this Agreement are appropriate and
reasonable when considered in light of the nature and extent of the business
acquired by the Purchaser as the STL Purchased Assets and the business conducted
by the Purchaser and the business to be conducted by NewSTL.
9. Exclusive Jurisdiction. The parties hereto intend to and hereby
confer jurisdiction to enforce the covenants contained in Section 3 upon the
courts of any state within the geographical scope of such covenants. In the
event that the courts of any one or more of such states shall hold such
covenants wholly unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Purchaser's right to the relief provided above in
the courts or any other state within the geographical scope of such covenants as
to any subsequent breach, as to breaches of such covenants in such other
respective jurisdictions, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent covenants.
10. Governing Law. Except as otherwise provided in Section 9, this
Agreement shall be construed, and the legal relations between the parties hereto
determined, in accordance with the laws of the State of Florida applicable to
agreements made and to be performed entirely within the State of Florida,
without giving effect to its conflicts of laws provisions.
11. Attorneys' Fees. In the event any party hereto institutes litigation
to enforce its rights or remedies under this Agreement, the party prevailing in
such litigation shall be entitled to receive an award from the non-prevailing
party of the prevailing party's reasonable attorneys' fees and costs incurred in
connection with such litigation. The foregoing shall include reasonable
attorneys' fees and costs (including paralegals' fees) incurred at trial, on any
appeal and in any proceeding in bankruptcy. The agreement of the parties
represented by this Agreement is in addition to, and not in lieu of, any other
agreement or obligation of the parties contained in this Agreement or in the
Acquisition Agreement.
12. Enforcement. The covenants of Selling Shareholder under this
Agreement shall be independent of any other contractual relationship between the
Purchaser and Selling Shareholder. Consequently, the existence of any claim or
cause of action of Selling Shareholder against the Purchaser shall not
constitute a defense to the enforcement by the Purchaser of this Agreement.
122
13. Assignability and Parties in Interest. This Agreement shall inure to
the benefit of and be binding upon (i) the Purchaser and NewSTL and their
respective successors and assigns, including, but not limited to, any
corporation which may acquire all or substantially all of the assets and
business of the Purchaser or NewSTL and any corporation with and into which any
of the Purchaser or NewSTL may be consolidated or merged, or any corporation
that is the successor corporation of any of them in an exchange of stock; and
(ii) Selling Shareholder, his heirs, guardians and personal and legal
representatives. Selling Shareholder may not assign any of his rights or
delegate any of its obligations hereunder without the prior written consent of
the Purchaser. This Agreement shall inure to the benefit of the Purchaser and
NewSTL, notwithstanding the fact that NewSTL is not a party hereto. All
references in this Agreement to the Purchaser shall be deemed to include NewSTL.
14. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered will be deemed to be an original and all of
which counterparts taken together will constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed by all the parties
hereto.
15. Waiver. The failure of any party to insist upon strict performance
of any of the terms or conditions of this Agreement will not constitute a waiver
of any of its rights hereunder.
16. Complete Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein
and the subject matter hereof and, except as provided herein, supersedes all
previous oral and written and all contemporaneous oral negotiations,
commitments, writings and understandings relating to the subject matter hereof.
17. Modifications, Amendments and Waivers. All modifications or
amendments to this Agreement shall be in writing and signed by both parties
hereto.
18. Interpretation. The headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
19. Gender, Number. Words of gender may be read as masculine, feminine,
or neuter, as required by context. Words of number may be read as singular or
plural, as required by context. All terms such as "herein," "hereby" or
"hereunder" refer to this Agreement as a whole.
123
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
"PURCHASER"
PARAVANT COMPUTER SYSTEMS, INC.
a Florida corporation
Attest:______________________________ By:_________________________________
Xxxxxxx X. Xxxxxx, Secretary
[Corporate Seal]
Signed, Sealed and Delivered in "SELLING SHAREHOLDER"
the Presence of Two Subscribing
Witnesses:
___________________________________ ____________________________________
Witness X. Xxxxxx Xxxxxxxx
___________________________________
Witness
124
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement"), is made this ____ day
of _______, 1998, by and between PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (hereinafter referred to as the "Purchaser"), and Xxxxx X. Xxxxxxxx
(hereinafter referred to as the "Selling Shareholder").
W I T N E S S E T H:
WHEREAS, the Purchaser, ENGINEERING DEVELOPMENT LABORATORIES,
INCORPORATED, an Ohio corporation ("EDL"), SIGNAL TECHNOLOGY LABORATORIES, INC.,
an Ohio corporation ("STL"), and the Shareholders of both of EDL and STL,
including the Selling Shareholder are parties to an Acquisition Agreement dated
March ____, 1998 (the "Acquisition Agreement") providing for the acquisition by
the Purchaser from the EDL as shareholders of all of the EDL common stock, the
acquisition by the Purchaser, directly or indirectly through its wholly-owned
subsidiary NewSTL, from STL of the STL Purchased Assets and the acquisition by
the Purchaser of non-competition agreements from certain of the shareholders of
STL, including the Selling Shareholder;
WHEREAS, it is a condition precedent to the obligation of the Purchaser
to complete the Closing contemplated by the Purchase Agreement (the "Closing")
that the Purchaser shall have received this Agreement from the Selling
Shareholder;
WHEREAS, Selling Shareholder desires to induce the Purchaser to enter
into and complete the Closing and to consummate the transaction contemplated by
the Acquisition Agreement; and
WHEREAS, all capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Acquisition Agreement.
NOW, THEREFORE, in consideration of the foregoing, Selling Shareholder
hereby agrees with the Purchaser as follows:
1. Recitals. The recitals set forth at the beginning of this Agreement
are true and correct and by this reference are incorporated by reference into
the body of this Agreement.
2. Representations and Warranties. Selling Shareholder does hereby
represent and warrant to the Purchaser:
(a) That the delivery of this Agreement to the Purchaser by
Selling Shareholder is ancillary to the main business purpose of the Acquisition
Agreement and is executed by Selling
125
Shareholder to protect the legitimate interests of the Purchaser with respect to
its acquisition of EDL and the STL Purchased Assets;
(b) That the Non-competition Period (as hereinafter defined) and
the Geographic Area (as hereinafter defined), as described in Section 3 of this
Agreement, is appropriate and reasonable in all respects in light of the nature
of the business conducted by the Purchaser, EDL and NewSTL and the legitimate
need of the Purchaser to protect the investment by the Purchaser in EDL and
NewSTL following the acquisition; and
(c) That the execution and delivery of this Agreement, the
performance by Selling Shareholder of the covenants and agreements contained
herein, and the enforcement by the Purchaser of the provisions contained herein,
will cause no undue hardship on Selling Shareholder.
3. Non-competition. During the period commencing with the date of this
Agreement and continuing until fifteen (15) years thereafter, Selling
Shareholder agrees that, except on behalf of the Purchaser or a subsidiary of
the Purchaser while employed by the Purchaser or a subsidiary of the Purchaser,
and except to the extent set forth in Section 5 of this Agreement, he shall not
engage, directly or indirectly, in any business which competes in any manner
within the United States of America or its possessions or territories or
elsewhere throughout the world (the "Geographic Area") with the Purchaser's
business of design, manufacture, repair and sale of rugged and customized
computer systems and medical computer assemblies, EDL's business of the design,
development, modification and marketing of avionics equipment for use on or with
military airborne systems or the business of the design, development,
production, modification and marketing of digital signal processing equipment
for government intelligence and related applications, which was included in the
STL Purchased Assets. For purposes of this Agreement, the Selling Shareholder
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business.
4. Confidentiality of information, etc. Selling Shareholder shall not
divulge, communicate, use to the detriment of the Purchaser, or for the benefit
of any other business, firm, person, partnership or corporation, or otherwise
misuse, any "Confidential Information", data or trade secrets, including secret
processes, formulas or other technical data, production methods, customer lists,
or personnel or proprietary information, pertaining to the STL Purchased Assets,
the Purchaser, NewSTL or other subsidiaries of the Purchaser, or their
respective businesses. Selling Shareholder acknowledges that any such
information or data he may have acquired was either part of the STL Purchased
Assets which were conveyed to the Purchaser pursuant to the Acquisition
Agreement or was received in confidence and as a fiduciary of the Purchaser or
NewSTL. "Confidential Information" shall be defined as: trade secrets, customer
names, addresses, or particular desires or needs; the market regions or
territories; prices charged for services or products and the methods and
formulas related to pricing; information concerning product development,
manufacturing processes and research and development projects; formulas,
inventions and compilations of such information;
126
information concerning future product or market developments; financial
information; information regarding suppliers and costs for raw materials and
other supplies; financing programs; business plans; and information regarding
personnel, overhead, distribution and other expenses. The parties stipulate that
Confidential Information and all elements of it are important, material,
confidential and gravely affect the successful conduct of the business of the
Purchaser and NewSTL. Upon termination of his employment with the Purchaser and
its subsidiaries for any reason and at any other time the Purchaser or New STL
may request, Selling Shareholder agrees to deliver to the Purchaser, all
memoranda, notes, plans, records, reports, information and other documentation
(and copies thereof), however recorded, relating to the business of the
Purchaser or NewSTL, or which contain Confidential Information which he may
possess or have under his control. Confidential Information, data or trade
secrets shall not include any information which: (a) at the time of disclosure
is within the public domain; (b) after disclosure becomes a part of the public
domain or generally known within the industry through no fault, act or failure
to act, error, effort or breach of this Agreement by Selling Shareholder; (c) is
known to the recipient at the time of disclosure; (d) is subsequently discovered
by Selling Shareholder independently of any disclosure by the Purchaser, STL or
NewSTL; (e) is required by order, statute or regulation, of any governmental
authority to be disclosed to any federal or state agency, court or other body;
or (f) is obtained from a third party who has acquired a legal right to possess
and disclose such information.
5. Exceptions and Exclusions. With respect to the restrictions and
prohibitions set forth in Sections 3 and 4, such restrictions and prohibitions
shall not:
(a) Restrict or prohibit the Selling Shareholder from engaging
in the activities required, but only to the extent required, to permit STL to
enter into a new contract or accept a new order, to subcontract with NewSTL, or
to complete any backlog order in accordance with the provisions of Section 5.3.3
of the Acquisition Agreement; and
(b) Nothing herein contained shall be deemed to prevent or limit
the right of Selling Shareholder to own capital stock or other securities of any
corporation which are publicly owned or regularly traded in the over-the-counter
market or on any securities exchange; provided, however, such investment does
not exceed five percent 5% of the issuer's outstanding securities of that class.
6. Equitable Remedies and Remedies at Law. The parties recognize that,
because of the nature of the subject matter of this Agreement, it would be
impracticable and extremely difficult to determine actual damages to the
Purchaser or NewSTL or in the event of a breach of this Agreement by Selling
Shareholder. Accordingly, if Selling Shareholder commits a breach, or threatens
to commit a breach of any of the provisions of this Agreement, the Purchaser or
NewSTL shall be entitled to all available legal and equitable remedies,
including without limitation, injunctive relief, both preliminary and permanent,
and none of such parties shall be required to post a surety bond in connection
therewith and each of such parties will also be entitled to money damages for
any loss suffered or to be suffered as a consequence of Selling Shareholder's
breach of this Agreement.
127
7. Severability. If any of the covenants contained in Section 3, or any
part thereof, are held to be unenforceable because of the duration of such
provisions or the area covered thereby, or ever be deemed to exceed the scope of
business, the undersigned agrees that the court making such determination shall
have the power to reform the provisions of this Agreement to the maximum scope,
time or geographic limitations permitted by applicable law.
8. Reasonableness. The Purchaser and Selling Shareholder agree that the
covenants of Selling Shareholder set forth in this Agreement are appropriate and
reasonable when considered in light of the nature and extent of the business
acquired by the Purchaser as the STL Purchased Assets and the business conducted
by the Purchaser and the business to be conducted by NewSTL.
9. Exclusive Jurisdiction. The parties hereto intend to and hereby
confer jurisdiction to enforce the covenants contained in Section 3 upon the
courts of any state within the geographical scope of such covenants. In the
event that the courts of any one or more of such states shall hold such
covenants wholly unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Purchaser's right to the relief provided above in
the courts or any other state within the geographical scope of such covenants as
to any subsequent breach, as to breaches of such covenants in such other
respective jurisdictions, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent covenants.
10. Governing Law. Except as otherwise provided in Section 9, this
Agreement shall be construed, and the legal relations between the parties hereto
determined, in accordance with the laws of the State of Florida applicable to
agreements made and to be performed entirely within the State of Florida,
without giving effect to its conflicts of laws provisions.
11. Attorneys' Fees. In the event any party hereto institutes litigation
to enforce its rights or remedies under this Agreement, the party prevailing in
such litigation shall be entitled to receive an award from the non-prevailing
party of the prevailing party's reasonable attorneys' fees and costs incurred in
connection with such litigation. The foregoing shall include reasonable
attorneys' fees and costs (including paralegals' fees) incurred at trial, on any
appeal and in any proceeding in bankruptcy. The agreement of the parties
represented by this Agreement is in addition to, and not in lieu of, any other
agreement or obligation of the parties contained in this Agreement or in the
Acquisition Agreement.
12. Enforcement. The covenants of Selling Shareholder under this
Agreement shall be independent of any other contractual relationship between the
Purchaser and Selling Shareholder. Consequently, the existence of any claim or
cause of action of Selling Shareholder against the Purchaser shall not
constitute a defense to the enforcement by the Purchaser of this Agreement.
13. Assignability and Parties in Interest. This Agreement shall inure to
the benefit of and be binding upon (i) the Purchaser and NewSTL and their
respective successors and assigns, including,
128
but not limited to, any corporation which may acquire all or substantially all
of the assets and business of the Purchaser or NewSTL and any corporation with
and into which any of the Purchaser or NewSTL may be consolidated or merged, or
any corporation that is the successor corporation of any of them in an exchange
of stock; and (ii) Selling Shareholder, his heirs, guardians and personal and
legal representatives. Selling Shareholder may not assign any of his rights or
delegate any of its obligations hereunder without the prior written consent of
the Purchaser. This Agreement shall inure to the benefit of the Purchaser and
NewSTL, notwithstanding the fact that NewSTL is not a party hereto. All
references in this Agreement to the Purchaser shall be deemed to include NewSTL.
14. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered will be deemed to be an original and all of
which counterparts taken together will constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed by all the parties
hereto.
15. Waiver. The failure of any party to insist upon strict performance
of any of the terms or conditions of this Agreement will not constitute a waiver
of any of its rights hereunder.
16. Complete Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein
and the subject matter hereof and, except as provided herein, supersedes all
previous oral and written and all contemporaneous oral negotiations,
commitments, writings and understandings relating to the subject matter hereof.
17. Modifications, Amendments and Waivers. All modifications or
amendments to this Agreement shall be in writing and signed by both parties
hereto.
18. Interpretation. The headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
19. Gender, Number. Words of gender may be read as masculine, feminine,
or neuter, as required by context. Words of number may be read as singular or
plural, as required by context. All terms such as "herein," "hereby" or
"hereunder" refer to this Agreement as a whole.
129
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
"PURCHASER"
PARAVANT COMPUTER SYSTEMS, INC.
a Florida corporation
Attest:______________________________ By:_________________________________
Xxxxxxx X. Xxxxxx, Secretary
[Corporate Seal]
Signed, Sealed and Delivered in "SELLING SHAREHOLDER"
the Presence of Two Subscribing
Witnesses:
___________________________________ ____________________________________
Witness Xxxxx X. Xxxxxxxx
___________________________________
Witness
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NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement"), is made this ____ day
of _______, 1998, by and between PARAVANT COMPUTER SYSTEMS, INC., a Florida
corporation (hereinafter referred to as the "Purchaser"), and Xxx X. Xxxxxxxxx
(hereinafter referred to as the "Selling Shareholder").
W I T N E S S E T H:
WHEREAS, the Purchaser, ENGINEERING DEVELOPMENT LABORATORIES,
INCORPORATED, an Ohio corporation ("EDL"), SIGNAL TECHNOLOGY LABORATORIES, INC.,
an Ohio corporation ("STL"), and the Shareholders of both of EDL and STL,
including the Selling Shareholder are parties to an Acquisition Agreement dated
March ____, 1998 (the "Acquisition Agreement") providing for the acquisition by
the Purchaser from the EDL as shareholders of all of the EDL common stock, the
acquisition by the Purchaser, directly or indirectly through its wholly-owned
subsidiary NewSTL, from STL of the STL Purchased Assets and the acquisition by
the Purchaser of non-competition agreements from certain of the shareholders of
STL, including the Selling Shareholder;
WHEREAS, it is a condition precedent to the obligation of the Purchaser
to complete the Closing contemplated by the Purchase Agreement (the "Closing")
that the Purchaser shall have received this Agreement from the Selling
Shareholder;
WHEREAS, Selling Shareholder desires to induce the Purchaser to enter
into and complete the Closing and to consummate the transaction contemplated by
the Acquisition Agreement; and
WHEREAS, all capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Acquisition Agreement.
NOW, THEREFORE, in consideration of the foregoing, Selling Shareholder
hereby agrees with the Purchaser as follows:
1. Recitals. The recitals set forth at the beginning of this Agreement
are true and correct and by this reference are incorporated by reference into
the body of this Agreement.
2. Representations and Warranties. Selling Shareholder does hereby
represent and warrant to the Purchaser:
(a) That the delivery of this Agreement to the Purchaser by
Selling Shareholder is ancillary to the main business purpose of the Acquisition
Agreement and is executed by Selling
131
Shareholder to protect the legitimate interests of the Purchaser with respect to
its acquisition of EDL and the STL Purchased Assets;
(b) That the Non-competition Period (as hereinafter defined) and
the Geographic Area (as hereinafter defined), as described in Section 3 of this
Agreement, is appropriate and reasonable in all respects in light of the nature
of the business conducted by the Purchaser, EDL and NewSTL and the legitimate
need of the Purchaser to protect the investment by the Purchaser in EDL and
NewSTL following the acquisition; and
(c) That the execution and delivery of this Agreement, the
performance by Selling Shareholder of the covenants and agreements contained
herein, and the enforcement by the Purchaser of the provisions contained herein,
will cause no undue hardship on Selling Shareholder.
3. Non-competition. During the period commencing with the date of this
Agreement and continuing until fifteen (15) years thereafter, Selling
Shareholder agrees that, except on behalf of the Purchaser or a subsidiary of
the Purchaser while employed by the Purchaser or a subsidiary of the Purchaser,
and except to the extent set forth in Section 5 of this Agreement, he shall not
engage, directly or indirectly, in any business which competes in any manner
within the United States of America or its possessions or territories or
elsewhere throughout the world (the "Geographic Area") with the Purchaser's
business of design, manufacture, repair and sale of rugged and customized
computer systems and medical computer assemblies, EDL's business of the design,
development, modification and marketing of avionics equipment for use on or with
military airborne systems or the business of the design, development,
production, modification and marketing of digital signal processing equipment
for government intelligence and related applications, which was included in the
STL Purchased Assets. For purposes of this Agreement, the Selling Shareholder
will be deemed to be engaged in a business if he participates in such business,
directly or indirectly, as a stockholder, partner, owner, investor, principal or
agent, employee, officer, director, creditor, consultant, or otherwise in any
manner in such business.
4. Confidentiality of information, etc. Selling Shareholder shall not
divulge, communicate, use to the detriment of the Purchaser, or for the benefit
of any other business, firm, person, partnership or corporation, or otherwise
misuse, any "Confidential Information", data or trade secrets, including secret
processes, formulas or other technical data, production methods, customer lists,
or personnel or proprietary information, pertaining to the STL Purchased Assets,
the Purchaser, NewSTL or other subsidiaries of the Purchaser, or their
respective businesses. Selling Shareholder acknowledges that any such
information or data he may have acquired was either part of the STL Purchased
Assets which were conveyed to the Purchaser pursuant to the Acquisition
Agreement or was received in confidence and as a fiduciary of the Purchaser or
NewSTL. "Confidential Information" shall be defined as: trade secrets, customer
names, addresses, or particular desires or needs; the market regions or
territories; prices charged for services or products and the methods and
formulas related to pricing; information concerning product development,
manufacturing processes and research and development projects; formulas,
inventions and compilations of such information;
132
information concerning future product or market developments; financial
information; information regarding suppliers and costs for raw materials and
other supplies; financing programs; business plans; and information regarding
personnel, overhead, distribution and other expenses. The parties stipulate that
Confidential Information and all elements of it are important, material,
confidential and gravely affect the successful conduct of the business of the
Purchaser and NewSTL. Upon termination of his employment with the Purchaser and
its subsidiaries for any reason and at any other time the Purchaser or New STL
may request, Selling Shareholder agrees to deliver to the Purchaser, all
memoranda, notes, plans, records, reports, information and other documentation
(and copies thereof), however recorded, relating to the business of the
Purchaser or NewSTL, or which contain Confidential Information which he may
possess or have under his control. Confidential Information, data or trade
secrets shall not include any information which: (a) at the time of disclosure
is within the public domain; (b) after disclosure becomes a part of the public
domain or generally known within the industry through no fault, act or failure
to act, error, effort or breach of this Agreement by Selling Shareholder; (c) is
known to the recipient at the time of disclosure; (d) is subsequently discovered
by Selling Shareholder independently of any disclosure by the Purchaser, STL or
NewSTL; (e) is required by order, statute or regulation, of any governmental
authority to be disclosed to any federal or state agency, court or other body;
or (f) is obtained from a third party who has acquired a legal right to possess
and disclose such information.
5. Exceptions and Exclusions. With respect to the restrictions and
prohibitions set forth in Sections 3 and 4, such restrictions and prohibitions
shall not:
(a) Restrict or prohibit the Selling Shareholder from engaging
in the activities required, but only to the extent required, to permit STL to
enter into a new contract or accept a new order, to subcontract with NewSTL, or
to complete any backlog order in accordance with the provisions of Section 5.3.3
of the Acquisition Agreement; and
(b) Nothing herein contained shall be deemed to prevent or limit
the right of Selling Shareholder to own capital stock or other securities of any
corporation which are publicly owned or regularly traded in the over-the-counter
market or on any securities exchange; provided, however, such investment does
not exceed five percent 5% of the issuer's outstanding securities of that class.
6. Equitable Remedies and Remedies at Law. The parties recognize that,
because of the nature of the subject matter of this Agreement, it would be
impracticable and extremely difficult to determine actual damages to the
Purchaser or NewSTL or in the event of a breach of this Agreement by Selling
Shareholder. Accordingly, if Selling Shareholder commits a breach, or threatens
to commit a breach of any of the provisions of this Agreement, the Purchaser or
NewSTL shall be entitled to all available legal and equitable remedies,
including without limitation, injunctive relief, both preliminary and permanent,
and none of such parties shall be required to post a surety bond in connection
therewith and each of such parties will also be entitled to money damages for
any loss suffered or to be suffered as a consequence of Selling Shareholder's
breach of this Agreement.
133
7. Severability. If any of the covenants contained in Section 3, or any
part thereof, are held to be unenforceable because of the duration of such
provisions or the area covered thereby, or ever be deemed to exceed the scope of
business, the undersigned agrees that the court making such determination shall
have the power to reform the provisions of this Agreement to the maximum scope,
time or geographic limitations permitted by applicable law.
8. Reasonableness. The Purchaser and Selling Shareholder agree that the
covenants of Selling Shareholder set forth in this Agreement are appropriate and
reasonable when considered in light of the nature and extent of the business
acquired by the Purchaser as the STL Purchased Assets and the business conducted
by the Purchaser and the business to be conducted by NewSTL.
9. Exclusive Jurisdiction. The parties hereto intend to and hereby
confer jurisdiction to enforce the covenants contained in Section 3 upon the
courts of any state within the geographical scope of such covenants. In the
event that the courts of any one or more of such states shall hold such
covenants wholly unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Purchaser's right to the relief provided above in
the courts or any other state within the geographical scope of such covenants as
to any subsequent breach, as to breaches of such covenants in such other
respective jurisdictions, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent covenants.
10. Governing Law. Except as otherwise provided in Section 9, this
Agreement shall be construed, and the legal relations between the parties hereto
determined, in accordance with the laws of the State of Florida applicable to
agreements made and to be performed entirely within the State of Florida,
without giving effect to its conflicts of laws provisions.
11. Attorneys' Fees. In the event any party hereto institutes litigation
to enforce its rights or remedies under this Agreement, the party prevailing in
such litigation shall be entitled to receive an award from the non-prevailing
party of the prevailing party's reasonable attorneys' fees and costs incurred in
connection with such litigation. The foregoing shall include reasonable
attorneys' fees and costs (including paralegals' fees) incurred at trial, on any
appeal and in any proceeding in bankruptcy. The agreement of the parties
represented by this Agreement is in addition to, and not in lieu of, any other
agreement or obligation of the parties contained in this Agreement or in the
Acquisition Agreement.
12. Enforcement. The covenants of Selling Shareholder under this
Agreement shall be independent of any other contractual relationship between the
Purchaser and Selling Shareholder. Consequently, the existence of any claim or
cause of action of Selling Shareholder against the Purchaser shall not
constitute a defense to the enforcement by the Purchaser of this Agreement.
13. Assignability and Parties in Interest. This Agreement shall inure to
the benefit of and be binding upon (i) the Purchaser and NewSTL and their
respective successors and assigns, including,
134
but not limited to, any corporation which may acquire all or substantially all
of the assets and business of the Purchaser or NewSTL and any corporation with
and into which any of the Purchaser or NewSTL may be consolidated or merged, or
any corporation that is the successor corporation of any of them in an exchange
of stock; and (ii) Selling Shareholder, his heirs, guardians and personal and
legal representatives. Selling Shareholder may not assign any of his rights or
delegate any of its obligations hereunder without the prior written consent of
the Purchaser. This Agreement shall inure to the benefit of the Purchaser and
NewSTL, notwithstanding the fact that NewSTL is not a party hereto. All
references in this Agreement to the Purchaser shall be deemed to include NewSTL.
14. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered will be deemed to be an original and all of
which counterparts taken together will constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed by all the parties
hereto.
15. Waiver. The failure of any party to insist upon strict performance
of any of the terms or conditions of this Agreement will not constitute a waiver
of any of its rights hereunder.
16. Complete Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein
and the subject matter hereof and, except as provided herein, supersedes all
previous oral and written and all contemporaneous oral negotiations,
commitments, writings and understandings relating to the subject matter hereof.
17. Modifications, Amendments and Waivers. All modifications or
amendments to this Agreement shall be in writing and signed by both parties
hereto.
18. Interpretation. The headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
19. Gender, Number. Words of gender may be read as masculine, feminine,
or neuter, as required by context. Words of number may be read as singular or
plural, as required by context. All terms such as "herein," "hereby" or
"hereunder" refer to this Agreement as a whole.
135
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
"PURCHASER"
PARAVANT COMPUTER SYSTEMS, INC.
a Florida corporation
Attest:______________________________ By:_________________________________
Xxxxxxx X. Xxxxxx, Secretary
[Corporate Seal]
Signed, Sealed and Delivered in "SELLING SHAREHOLDER"
the Presence of Two Subscribing
Witnesses:
_____________________________ _____________________________________
Witness Xxx X. Xxxxxxxxx
_____________________________
Witness
136
EXHIBIT 7.6
CERTIFICATE OF OFFICERS OF THE PURCHASER
CERTIFICATE PURSUANT TO SECTION 7.6
OF ACQUISITION AGREEMENT
Pursuant to Section 7.6 of the Acquisition Agreement dated as of
__________,1998 (the "Acquisition Agreement") by and among Paravant Computer
Systems, Inc. (the "Purchaser"), Engineering Development Laboratories, Inc.
("EDL"), Signal Technology Laboratories, Inc. ("STL")(EDL and STL collectively,
the "Companies") and Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx, C. Xxxxx Xxxxxxxxxx,
X. Xxxxxx Xxxxxxxx, Xxxxx Xxxxxxxx and Xxx X. Xxxxxxxxx (each, a "Shareholder"
and collectively, the "Shareholders") each of the undersigned, in his capacity
indicated below as an officer of the Purchaser, hereby certifies that, as of the
date hereof, (i) the shareholders of the Purchaser have given approval to the
acquisition transaction contemplated by the Acquisition Agreement, (ii) all of
the representations and warranties of the Purchaser referred to in Section 7.1
of the Acquisition Agreement are true and correct in all material respects as of
this date as if made given or made on this date, (iii) the Purchaser has
performed and complied in all material respects with all covenants and
agreements referred to in Section 7.2 of the Acquisition Agreement to be
complied with by the Purchaser prior to or at the Closing, (iv) no action, suit,
proceeding or investigation of the type referred to in Section 7.3 of the
Acquisition Agreement has been instituted and is continuing, (v) the Purchaser
has obtained all of the consents, licenses and permits of the type referred to
in Section 7.4 of the Acquisition Agreement and all of such consents, licenses
and permits are presently in effect, and (vi) there has been no change in the
business, assets, properties, operations, financial status or prospects of the
Purchaser of the type referred to in Section 7.5 of the Acquisition Agreement.
IN WITNESS WHEREOF, each of the undersigned has executed this
Certificate this ____ day ___________, 1998.
PURCHASER:
PARAVANT COMPUTER SYSTEMS, INC
By:________________________
________________, President
By:________________________
_______________, Secretary
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EXHIBIT 7.7
OPINION OF COUNSEL TO PURCHASER
[Letterhead of Xxxxxxx, Xxxxxxx & Xxxxx, P.A.]
__________, 199_
Engineering Development Laboratories, Incorporated
Signal Technology Laboratories, Inc.
c/o__________________________
______________________________
______________________________
Attn:_________________________
RE: Acquisition Agreement dated as of __________,1998 (the
"Acquisition Agreement") by and among Paravant Computer Systems,
Inc. (the "Purchaser"), Engineering Development Laboratories,
Incorporated ("EDL"), Signal Technology Laboratories, Inc.
("STL")(EDL and STL collectively, the "Companies") and Xxxxx X.
Xxxxxxxx, Xxxxxx X. Xxxxxxxx, C. Xxxxx Xxxxxxxxxx, X. Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx and Xxx X. Xxxxxxxxx (each, a
"Shareholder" and collectively, the "Shareholders")
Gentlemen:
This opinion is furnished to you in accordance with the provisions of
Section 7.7 of the above referenced Acquisition Agreement. We have acted as
counsel to the Purchaser in connection with the Acquisition Agreement and the
related Employment Agreements and Non-Competition Agreements to which it is a
party referred to therein (collectively, the "Related Agreements"). All
capitalized terms used but not defined herein which are defined in the
Acquisition Agreement and the Related Agreements shall have the same meaning
herein as therein defined unless the context hereof otherwise requires.
As counsel to the Purchaser, we have (i) conferred with the officers of
the Purchase; (ii) examined the Acquisition Agreement and the Related
Agreements, the stock record books of the Purchaser and such other corporate
documents, records and certificates of the Purchase, federal and state laws,
rules and regulations; and (iii) made such other investigations as we have
deemed necessary or appropriate for the purposes of rendering this opinion. In
all such examinations and investigations, we have assumed the genuineness of all
signatures on original or certified copies of all copies submitted to us as
conformed or reproduction copies. As to various questions of fact relevant to
such opinions, we have relied upon the representations and warranties set forth
in the Acquisition Agreement and the Related Agreements and statements or
certificates of public officials and of the Purchaser.
138
This opinion has been prepared and is to be construed in accordance with
the Report on Standards for Florida Opinions dated April 8, 1991, issued by the
Business Law Section of The Florida Bar, which is incorporated by reference into
this opinion.
Based on such examinations and investigations, it is our opinion that:
1. The Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida, and the Purchaser has
all requisite corporate power and authority to own, lease and operate its
properties and to transact the business in which it is now engaged;
2. The shares of Paravant Stock to be delivered as EDL Common Stock Sale
Consideration and as STL Shareholder Non-Competition Agreement Consideration
when issued as provided in the Acquisition Agreement will be, validly authorized
and issued, fully paid and nonassessable and will be free and clear of all
manner of liens, charges, encumbrances and claims other than (i) a possible
claim against the shares to be issued to Xxxxx X. Xxxxxxxx as a result of a
deficiency in the Closing Date EDL/STL Value under the provisions of Section
1.11.2 of the Acquisition Agreement and (ii) the restrictions on transferability
under the Sections 1.9 and 1.10 of the Acquisition Agreement;
3. The Purchaser has corporate power and authority to execute, deliver
and perform the Acquisition Agreement and the Related Agreements and the
execution, performance, and delivery of the Acquisition Agreement and each of
the Related Agreements has been duly authorized by the Purchaser by all
necessary corporate action, and the Acquisition Agreement and the Related
Agreements, assuming such agreements constitute the legal, valid and binding
agreements of the other parties, constitute the legal, valid and binding
obligation of the Purchaser, and are enforceable against the Purchaser in
accordance with their terms, subject to the limitations in our opinion
hereinafter set forth;
4. The execution, delivery and performance of the Acquisition Agreement
and the Related Agreements by the Purchaser has not violated and will not
violate or result in a breach of any term of the Purchaser's Articles of
Incorporation or of its Bylaws;
5. The execution, delivery and performance of the Acquisition Agreement
and the Related Agreements by the Purchaser, has not violated and will not
violate any law, statute, rule, regulation, or to the best knowledge of the
undersigned, any injunction, order, or decree of any governmental agency or
authority, or any court; and,
6. To the best of our knowledge, after due inquiry, no authorization,
approval or consent of any federal, state or local agencies and authorities is
required to be obtained by the Purchaser nor to permit consummation of the
transactions contemplated by the Acquisition Agreement, except for such
approvals and consents as have been obtained.
139
Our opinion concerning the validity, binding effect and enforceability
of the Acquisition Agreement and the Related Agreements means that each of the
Acquisition Agreement and the Related Agreements (i) constitutes an effective
contract under applicable law, (ii) is not invalid in its entirety because of a
specific statutory prohibition or public policy and is not subject in its
entirety to a contractual defense, and (iii) subject to the last sentence of
this paragraph, some remedy is available if the Purchaser is in material default
thereunder. This opinion does not mean that (i) any particular remedy is
available upon a material default, or (ii) every provision of thereof will be
upheld or enforced in any or each circumstance by a court. Furthermore, the
validity, binding effect and enforceability of the Acquisition Agreement and
each of the Related Agreements may be limited or otherwise affected by (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar statutes, rules, regulations or other laws affecting the
enforcement of creditors' rights and remedies generally and (ii) the
unavailability of, or limitation on the availability of, a particular right or
remedy (whether in a proceeding in equity or at law) because of an equitable
principle or a requirement as to commercial reasonableness, conscionability or
good faith.
Our opinion set forth herein is limited to matters of Florida and
federal law and we do not express any opinion with respect to the laws of any
other jurisdiction. You should note that among the Related Agreements, Certain
of the Employment Agreements in their entirety, and others of the Employment
Agreements as to certain of their provisions, are to be governed by the laws of
Ohio. With respect to such Employment Agreements and provisions of Employment
Agreements as are to be governed by Ohio law, we do not express any opinion.
The qualification of any opinion or statement herein by the use of the
words "to the best of our knowledge," "to our knowledge," or "we are not aware
of" or words of similar import (unless otherwise stated) means that during the
course of our representation of the Purchaser no information has come to our
attention which gives us actual knowledge of the existence of such matters,
documents or facts, and no inference as to our knowledge thereof shall be drawn
from the fact of our representation of any party or otherwise. Except as
expressly set forth herein, we have not undertaken any independent investigation
to determine the existence or absence of such facts (and have not caused to be
made any review of any court file or indices) and no inference as to our
knowledge concerning such facts should be drawn from the fact that such
representation has been undertaken by us.
This opinion is rendered as of the date hereof as counsel to the
Purchaser, is rendered solely in connection with the transaction to which this
opinion relates. This opinion may be relied upon only by an entity or person to
whom it is addressed and only in connection with this transaction and may not be
relied upon by any other person or under any other circumstance without our
prior written consent.
140
This opinion is rendered as of the date hereof and does not purport to
analyze, evaluate or consider the legal effect of any event subsequent to the
date hereof which may alter the validity of any opinion expressed herein.
Very truly yours,
MAGUIRE, VOORHIS, & XXXXX, P.A.
By:____________________________
Xxxxxx X. Xxxxxxxxx
141
