EXHIBIT 2.1
EXECUTION COPY
EQUITY PURCHASE AGREEMENT
AMONG
DYNAMICS RESEARCH CORPORATION
AND
IMPACT INNOVATIONS GROUP LLC
AND
J3 TECHNOLOGY SERVICES CORP.
AUGUST 2, 2004
TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION.......................................................... 1
1.1. Definitions.................................................................................... 1
1.2. Certain Interpretive Matters................................................................... 10
ARTICLE 2 PURCHASE AND SALE OF THE INTERESTS............................................................. 12
2.1. Purchase and Sale of the Interests............................................................. 12
2.2. Purchase Price and Payment..................................................................... 12
2.3. Payment of Indebtedness........................................................................ 12
2.4. Adjustment to Purchase Price................................................................... 13
2.5. Allocation..................................................................................... 14
ARTICLE 3 THE CLOSING.................................................................................... 15
3.1. Closing and Closing Date....................................................................... 15
3.2. Documents and Items to Be Delivered to Buyer by Seller Parties................................. 15
3.3. Documents and Items to Be Delivered to Seller by Buyer......................................... 17
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES............................................... 18
4.1. Organization and Qualification of the Company.................................................. 18
4.2. Subsidiaries................................................................................... 18
4.3. Capitalization................................................................................. 18
4.4. Authority of the Company....................................................................... 18
4.5. Organization and Authority of Seller........................................................... 19
4.6. Enforceability................................................................................. 19
4.7. Issuance of the Interests; Seller's Title to the Interests..................................... 19
4.8. No Violation or Conflict; Consents............................................................. 19
4.9. Delivery of Documents; Books and Records....................................................... 20
4.10. Financial Statements........................................................................... 20
4.11. Undisclosed Liabilities........................................................................ 21
4.12. Accounting Practices........................................................................... 21
4.13. Absence of Certain Changes..................................................................... 21
4.14. Compliance with Law; Necessary Permits......................................................... 21
4.15. Litigation..................................................................................... 22
4.16. Owned and Leased Real Property................................................................. 22
4.17. Tangible Personal Property..................................................................... 23
4.18. Intellectual Property.......................................................................... 23
4.19. Accounts Receivable............................................................................ 24
4.20. Accounts Payable............................................................................... 24
4.21. Liens.......................................................................................... 25
4.22. Insurance...................................................................................... 25
4.23. Material Contracts............................................................................. 25
4.24. Government Contracts........................................................................... 28
4.25. Related Party Transactions..................................................................... 30
4.26. Customers and Suppliers........................................................................ 30
4.27. Employees; Employment Agreements............................................................... 31
4.28. Employee Relations............................................................................. 31
4.29. Employee Benefit Matters....................................................................... 32
4.30. Tax Matters.................................................................................... 35
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4.31. Environmental Matters.......................................................................... 36
4.32. Banks; Powers of Attorney...................................................................... 37
4.33. Brokers........................................................................................ 37
4.34. Certain Business Practices..................................................................... 37
4.35. Personally Identifiable Information and Privacy................................................ 37
4.36. Complete Disclosure............................................................................ 38
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER........................................................ 38
5.1. Organization................................................................................... 38
5.2. Authority of Buyer............................................................................. 38
5.3. Enforceability................................................................................. 38
5.4. No Violation or Conflict; Consents............................................................. 38
5.5. Brokers........................................................................................ 39
5.6. Investment Intent.............................................................................. 39
5.7. Financing...................................................................................... 39
5.8. Litigation..................................................................................... 40
ARTICLE 6 COVENANTS OF THE PARTIES....................................................................... 40
6.1. Conduct of Business of the Company............................................................. 40
6.2. Access to Information; Customer Visits......................................................... 42
6.3. Reasonable Best Efforts; Compliance with Antitrust Laws........................................ 42
6.4. Notification of Certain Matters................................................................ 43
6.5. Public Announcements........................................................................... 44
6.6. Confidential Business Information.............................................................. 44
6.7. Exclusive Dealing; Acquisition Proposals....................................................... 44
6.8. Preparation of Certain Financial Statements.................................................... 44
6.9. Transition..................................................................................... 45
6.10. Certain Taxes.................................................................................. 45
6.11. Non-Competition; Non-Interference.............................................................. 45
6.12. Trademark License.............................................................................. 46
6.13. 280G Covenant.................................................................................. 46
6.14. Transition Services............................................................................ 46
6.15. GSA Schedule Rates............................................................................. 47
6.16. Certain Contracts.............................................................................. 47
ARTICLE 7 CONDITIONS TO CLOSING.......................................................................... 47
7.1. Conditions to Obligations of Seller Parties.................................................... 47
7.2. Conditions to Obligations of Buyer............................................................. 48
ARTICLE 8 TERMINATION.................................................................................... 49
8.1. Termination.................................................................................... 49
8.2. Effect of Termination.......................................................................... 49
ARTICLE 9 INDEMNIFICATION................................................................................ 50
9.1. Survival....................................................................................... 50
9.2. Terms of Indemnification....................................................................... 50
9.3. Procedures with Respect to Third-Party Claims.................................................. 51
9.4. Indemnification Cap and Threshold.............................................................. 51
9.5. Additional Indemnification Provisions.......................................................... 52
9.6. Exclusive Remedy............................................................................... 53
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ARTICLE 10 GENERAL PROVISIONS............................................................................. 54
10.1. Parties in Interest; Successors and Assigns; No Third Party Rights............................. 54
10.2. Assignment..................................................................................... 54
10.3. Notices........................................................................................ 54
10.4. Entire Agreement............................................................................... 56
10.5. Counterparts and Facsimile Signature........................................................... 56
10.6. Severability................................................................................... 56
10.7. Amendment...................................................................................... 56
10.8. Waiver......................................................................................... 56
10.9. Further Assurances............................................................................. 57
10.10. Legal Counsel.................................................................................. 57
10.11. Expenses....................................................................................... 57
10.12. Governing Law.................................................................................. 57
10.13 Resolution of Conflicts; Arbitration........................................................... 57
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EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Confidentiality and Non-Solicitation Agreement
Exhibit C Trademark License Agreement
Exhibit D Transition Services Agreement
SCHEDULES
Schedule Description
-------- -----------
1.1 Offers and Acceptance Letters
2.5 Selected Accounting Firms
4.1 Jurisdictions
4.3 Capitalization
4.7 Seller Title Exceptions
4.8 No Violation or Conflicts; Consents
4.13 Absence of Certain Changes
4.15 Litigation
4.16(b) Leased Real Property
4.17 Tangible Personal Property
4.18(a) Intellectual Property
4.19 Accounts Receivable
4.20 Accounts Payable
4.21 Liens
4.22 Insurance
4.23 Material Contracts
4.24 Government Contracts and Government Bids
4.25 Related Party Transactions
4.26 Customers
4.27 Employees and Consultants
4.28 Employee Litigation
4.29(a) Employee Benefit Plans
4.29(c) Plans That Cannot Be Terminated Within 30 Days
4.29(e) Effect of Transaction
4.30(c) Tax Matters
4.32 Banks; Powers of Attorney
4.33 Brokers
6.2(b) Customer Visits
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EQUITY PURCHASE AGREEMENT
THIS EQUITY PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of August 2, 2004, by and among Dynamics Research Corporation, a
Massachusetts corporation ("BUYER"), Impact Innovations Group LLC, a Delaware
limited liability company (the "COMPANY") and J3 Technology Services Corp., a
Georgia corporation ("SELLER").
RECITALS
WHEREAS, Seller is the owner of all of the outstanding units of interest
of the Company (the "INTERESTS"); and
WHEREAS, Buyer desires to purchase the Interests from Seller, and Seller
desires to sell the Interests to Buyer, all upon the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
1.1. DEFINITIONS. As used in this Agreement, the following terms have the
meanings set forth below:
"ACCOUNTS PAYABLE" has the meaning set forth in SECTION 4.20.
"ACCOUNTS RECEIVABLE" means all of the billed and net unbilled,
current and long term accounts receivable of the Company.
"AFFILIATE" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
the first Person on or after the date of this Agreement. For the purposes of
this definition, "CONTROL", when used with respect to any Person, means the
possession, directly or indirectly, of the power to (i) vote 25% or more of the
voting securities of such Person or (ii) direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
"AGREEMENT" has the meaning set forth in the introduction to this
Agreement.
"AUDITED FINANCIAL STATEMENTS" has the meaning set forth in SECTION
4.10.
"BREACH" means (a) any inaccuracy in, or breach or violation of, or
default under, or failure to perform or comply with, any representation,
warranty, covenant, obligation or other
provision of this Agreement or any of the other Transaction Documents; or (b)
any claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with any such representation, warranty, covenant, obligation or
other provision.
"BUYER" has the meaning set forth in the introduction to this
Agreement.
"BUYER PARTY" means (a) prior to the Closing, each of Buyer, its
Affiliates and their respective stockholders, directors, officers, employees,
agents, advisors and other representatives, including legal counsel, accountants
and financial advisors; and (b) from and after Closing, each of Buyer and its
Affiliates, the Company and its Affiliates and their respective stockholders,
directors, officers, employees, agents, advisors and other representatives,
including legal counsel, accountants and financial advisors.
"BUYER'S ACCOUNTANTS" has the meaning set forth in SECTION 6.8.
"BUYER'S COUNSEL" has the meaning set forth in SECTION 3.1.
"CLAIMS" has the meaning set forth in SECTION 10.13(a).
"CLOSING" has the meaning set forth in SECTION 3.1.
"CLOSING BALANCE SHEET" means, as finally determined pursuant to
SECTION 2.5, an unaudited balance sheet of the Company as of the close of
business on the Closing Date immediately prior to giving effect to the Closing,
prepared in accordance with GAAP and, to the extent consistent with GAAP, using
the same methods and criteria employed by the Company in connection with its
preparation of the Financial Statements.
"CLOSING DATE" has the meaning set forth in SECTION 3.1.
"CLOSING PAYMENT" has the meaning set forth in SECTION 2.2(b).
"CLOSING TANGIBLE ASSET VALUE" means the dollar value of the
tangible assets of the Company (excluding cash) minus the total liabilities of
the Company, excluding Indebtedness, deferred tax assets and liabilities,
accrued 401(k) match (to be paid by Seller at Closing), and accrued medical
payable, as shown on the Closing Balance Sheet and as calculated pursuant to
SECTION 2.5.
"CODE" means the Internal Revenue Code of 1986, as amended, and
rules and regulations promulgated pursuant thereto.
"COMMITMENT LETTER" has the meaning set forth in SECTION 5.7.
"COMPANY" has the meaning set forth in the introduction to this
Agreement.
"COMPANY ACQUISITION" has the meaning set forth in SECTION 6.7.
"COMPANY INTELLECTUAL PROPERTY" has the meaning set forth in SECTION
4.18(a).
"COMPANY SECURITIES" has the meaning set forth in SECTION 4.3.
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"COMPANY'S ACCOUNTANTS" means Deloitte & Touche LLP.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement,
dated as of June 8, 2004, executed by Buyer and Seller.
"CONSENT" means any consent, approval, license, ratification,
waiver, novation, award or other authorization, including any Permit.
"CONTRACT" means any agreement, contract, instrument, obligation,
commitment, covenant, understanding, promise, promissory note, bond, indenture,
insurance policy, deed, lease, license, franchise, invoice, quotation, purchase
order, sales order or other obligation, undertaking or arrangement (whether
written or oral and whether express or implied) that is legally binding.
"DAMAGES" means any and all losses, charges, claims, damages,
liabilities, obligations, judgments, settlements, taxes, fines, penalties,
awards, demands, offsets, costs, deficiencies and expenses including reasonable
attorney and expert fees, whether absolute, accrued, conditional or otherwise
and whether or not resulting from third-party claims and including all amounts
paid in investigation, defense or settlement of the foregoing.
"DISCHARGES" has the meaning set forth in SECTION 2.3.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in SECTION
4.27(b).
"ENVIRONMENTAL, HEALTH AND SAFETY LAW" means (a) any Law relating to
pollution or protection of the environment, public health or safety, worker
health and safety or natural resources, including laws relating to the use,
treatment, storage, cleanup, transportation or handling of Hazardous Materials
or the release, discharge, spill, emission, treatment, transportation or
disposal of Hazardous Materials; or (b) any Law relating to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances; and (c)
without limiting the generality of clauses (a) and (b) of this definition, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq. ("RCRA"), the Toxic Substances Control Act, 15
U.S.C. Sections 2601 et seq. ("TSCA"), the Occupational, Safety and Health Act,
29 U.S.C. Sections 651 et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et
seq., the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 et seq.,
the Safe Drinking Water Act, 42 U.S.C. Sections 300f et seq., the Hazardous
Materials Transportation act, 49 U.S.C. Sections 1802 et seq. ("HMTA"), the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Sections 11001 et
seq. ("EPCRA"), the Federal Food, Drug and Cosmetic Act, 21 U.S.C. Sections 301
et seq., and other comparable Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" means any member of a group of trades or
businesses under common control (as defined in Sections 4001(a)(14) or
4001(b)(1) of ERISA) with that entity, or that is required to be considered a
single employer with that entity pursuant to Sections 414(b), (c), (m) or (o) of
the Code.
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"ESCROW AGENT" has the meaning set forth in SECTION 2.2(c).
"ESCROW AGREEMENT" has the meaning set forth in SECTION 2.2(c).
"ESCROW AMOUNT" means the amount of Two Million Five Hundred
Thousand Dollars ($2,500,000) placed into escrow by Buyer from the Purchase
Price, $500,000 of which comprises the Tangible Assets Escrow.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and the
rules and regulations promulgated pursuant thereto.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.10.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL AUTHORITY" means: (a) any nation, state, county, city,
town, xxxxxxxxxxxx, xxxxxxx, xxxxxxxx, xxxxxxxxx or other jurisdiction of any
nature; (b) any federal, state, municipal or local governmental or
quasi-governmental entity or authority of any nature; (c) any court or tribunal
exercising or entitled to exercise judicial authority or power of any nature;
(d) any multinational organization or body; and (e) any department or
subdivision of any of the foregoing, including any commission, branch, board,
bureau, agency, official or other instrumentality exercising or entitled to
exercise any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power of any nature.
"GOVERNMENT BID" means any offer, proposal or quote made by the
Company prior to the Closing Date which is outstanding and which, if accepted,
would result in a Government Contract.
"GOVERNMENT CONTRACT" means any contract, subcontract, teaming
agreement or arrangement, joint venture, basic ordering agreement, blanket
purchasing agreement, Federal Supply Schedule contract, pricing agreement,
CRADA, letter agreement, grant or other similar Contract of any kind, between
the Company, on the one hand, and (a) any Governmental Authority, (b) any prime
contractor of a Governmental Authority in its capacity as a prime contractor, or
(c) any subcontractor with respect to any Contract of a type described in
clauses (a) or (b) of this definition, on the other hand. A task, purchase or
delivery order under a Government Contract shall not constitute a separate
Government Contract, for purposes of this definition, but shall be part of the
Government Contract to which it relates.
"HAZARDOUS MATERIALS" means each and every element, compound,
chemical mixture, contaminant, pollutant, material, waste or other substance
which is defined, determined or identified as hazardous or toxic under any
Environmental, Health and Safety Law, or the release of which is regulated under
any Environmental, Health and Safety Law, or that poses a hazard to the health
and safety of persons or the environment. Without limiting the generality of the
foregoing, the term includes: "hazardous substances" as defined in CERCLA;
"extremely hazardous substances" as defined in EPCRA; "hazardous waste" as
defined in RCRA; "hazardous materials" as defined in HMTA; "chemical substance
or mixture" as defined in TSCA; crude oil, petroleum products or any fraction
thereof; radioactive materials including
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source, byproduct or special nuclear materials; asbestos or asbestos-containing
materials; chlorinated fluorocarbons; and radon.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976.
"HIPAA" means the Health Insurance Portability and Accountability
Act of 1996, including, the Standards for Electronic Transactions, Privacy and
Security promulgated by the Department of Health and Human Services under 45 CFR
parts 160, 162 and 164.
"INDEBTEDNESS" means with respect to the Company, at any date,
without duplication: (a) all obligations of the Company for borrowed money,
whether current, short-term or long-term, secured or unsecured, including all
principal, interest, premiums, fees, expenses, overdrafts and pre-payment and
other penalties with respect thereto; (b) all obligations of the Company
evidenced by bonds, debentures, notes or other similar instruments; (c) all
obligations of the Company to pay the deferred purchase price of property or
services, except trade payables incurred in the Ordinary Course of Business; (d)
all obligations of the Company to reimburse any bank or other Person in respect
of amounts paid under a letter of credit, banker's acceptance or similar
instrument; (e) all capital lease obligations; (f) any Liability of the Company
with respect to interest rate swaps, collars, caps and similar hedging
obligations; and (g) all Indebtedness of any other Person of the type referred
to in clauses (a) through (f) above directly or indirectly guaranteed by the
Company or secured by any assets of the Company. For purposes of this
definition, "CAPITAL LEASE OBLIGATIONS" means the obligations of the Company
that are required to be classified and accounted for as capital lease
obligations under GAAP, and the amount of such obligations at any date shall be
the capitalized amount of such obligations at such date determined in accordance
with GAAP together with all obligations to make termination payments under such
capital lease obligations.
"INDEMNIFICATION CAP" has the meaning set forth in SECTION 9.4(a).
"INDEMNIFICATION THRESHOLD" has the meaning set forth in SECTION
9.4(b).
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 9.3.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 9.3.
"INDEMNITY ESCROW" means the amount of Two Million Dollars
($2,000,000) placed into escrow by Buyer as a subescrow within the Escrow Amount
to cover any claims that arise out of Seller's obligations under SECTION 9.2.
"INDEPENDENT ACCOUNTING FIRM" has the meaning set forth in SECTION
2.5(b).
"INFORMATION PRACTICES" has the meaning set forth in SECTION 4.35.
"INTELLECTUAL PROPERTY" means any or all of the following, and all
rights in, arising out of, or associated therewith:
(a) (i) all patents, including design patents and utility patents;
(ii) all applications for grant of any such patents pending as of the date of
this Agreement or as of the
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Closing Date or filed within five years prior to the date hereof; (iii) all
registrations and recordings thereof, including applications, registrations and
recordings with the United States Patent and Trademark Office or any similar
office, agency or authority of the United States, any state thereof, the
European Union, any nation or political subdivision thereof or any other
Governmental Authority; and (iv) all reissues, divisions, extensions,
continuations or renewals thereof (collectively, the "PATENTS");
(b) (i) all trademarks, service marks, trade names, corporate names,
business names, logos, trade styles, trade dress, slogans and other source or
business identifiers and other similar general intangibles, whether registered
or unregistered; (ii) all applications therefor and registrations or recordings
thereof, including applications, registrations and recordings with the United
States Patent and Trademark Office or any similar office, agency or authority of
the United States, any state thereof, the European Union, any nation or
political subdivision thereof or any other Governmental Authority; (iii) all
reissues, extensions or renewals thereof; and (iv) with respect to any Person,
the goodwill of such Person and its business, products and services appurtenant
thereto, associated therewith or symbolized thereby (collectively, the
"TRADEMARKS");
(c) (i) all copyrights and mask work rights arising under the Laws
of the United States, any state thereof, the European Union, any nation or
political subdivision thereof or any other Governmental Authority, whether
registered or unregistered and whether published or unpublished; (ii) all
applications therefor and registrations and recordings thereof, including
applications, registrations and recordings with any such Governmental Authority;
and (iii) all reissues, extensions and renewals thereof (collectively, the
"COPYRIGHTS");
(d) all domain names as Internet URLs and all registrations thereof
(collectively, the "DOMAIN NAMES");
(e) all technical documentation, data, trade secrets, designs,
drawings, inventions, processes, formulas, know-how, operating manuals and
guides, plans, new product development, technical and marketing surveys,
material specifications, product specifications, samples, invention records,
research records, labor routings, inspection processes, equipment lists,
engineering reports and drawings, architectural or engineering plans, and all
other confidential business information;
(f) all marketing and licensing records, sales literature, customer
and client lists and information, supplier lists, trade lists, sales forces and
distributor networks lists, databases and data collections, pricing and cost
information, advertising and promotional materials, service and parts records,
warranty records, maintenance records and similar records;
(g) all computer software (including source code and executable
code) (collectively, the "COMPUTER SOFTWARE");
(h) all rights and incidents of interest in and to all
noncompetition, non-solicitation or confidentiality agreements or similar
Contracts;
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(i) all rights arising under, and rights to develop, use, sell,
license and distribute under, any and all licenses and other Contracts which
create rights in or to any of the foregoing; and
(j) all rights to xxx for past infringement of any of the foregoing.
"INTERESTS" has the meaning set forth in the Recitals to this
Agreement.
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth in SECTION
4.10.
"IRS" means the United States Internal Revenue Service.
"KNOWLEDGE" means (a) with respect to the Company or Seller, the
actual knowledge of Xxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxx, Xx Xxxxxx, Xxxxx
Xxxxxx, Xxxxx Xxxx, Xxxxx Xxxxxx, and Xxxx Xxxxxx and (b) with respect to Buyer,
the actual knowledge of any director or officer of Buyer. For SECTION 4.23,
"Knowledge" of the Company shall also include the actual Knowledge of Xxxx
Xxxxxxxx.
"LAW" means (a) any constitution, statute, code, ordinance,
regulation, treaty, rule, common law, policy, interpretation or guidance
document enacted, published or promulgated by any Governmental Authority; and
(b) with respect to a particular Person, the terms of any Order binding upon
such Person or its assets or properties.
"LEASED REAL PROPERTY" has the meaning set forth in SECTION 4.16(b).
"LIABILITY" means any liability, Indebtedness or other obligation,
whether known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated.
"LIEN" means any charge, claim, mortgage, lease, sublease, occupancy
agreement or similar Contract, tenancy, right-of-way, easement, collateral
assignment, restrictive covenant, encroachment, burden, condition, Order,
community property interest, equitable interest, security interest, lien
(statutory or otherwise), pledge, hypothecation, option, right of first refusal
or other restriction, limitation, exception or encumbrance of any kind,
including any restriction on use, voting, transfer, receipt of income or
exercise of any other attribute of ownership.
"LICENSED TRADEMARKS" has the meaning set forth in SECTION 6.12.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations, condition (financial or otherwise), results of operations,
rights, assets (including intangible assets) or liabilities of the Company or a
material adverse effect on the ability of the Company or Seller to consummate
and perform in a timely manner the transaction contemplated by this Agreement.
"MATERIAL ADVERSE EVENT" means any one or more events, changes,
circumstances, conditions, violations or developments (whether or not arising in
the Ordinary Course of Business), which has had or have had or could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
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"MATERIAL CONTRACTS" has the meaning set forth in SECTION 4.23(a).
"OFFER AND ACCEPTANCE LETTERS" means the letters described on
Schedule 1.1 hereto between Buyer and certain officers of the Company describing
such officers' terms of employment with Buyer following the Closing.
"ORDER" means any order, injunction (whether temporary, preliminary
or permanent), ruling, decree (including any consent decree), writ, subpoena,
verdict, charge, assessment, Consent or other decision entered, issued, made or
rendered by any court or other Governmental Authority or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means, with respect to a particular
Person, an action taken by, or the conduct of, such Person that is:
(a) consistent with the past practices of such Person in timing,
frequency, amount and otherwise and taken in the ordinary course of the normal
day-to-day operations of such Person;
(b) not required to be authorized by the board of directors of such
Person (or by any Person or group of Persons exercising similar authority); and
(c) similar in nature and magnitude to actions customarily taken by,
or the conduct of, such Person, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar authority),
in the ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" means, with respect to a particular
Person, (a) if such Person is a corporation, its certificate or articles of
incorporation, organization or formation and its by-laws; (b) if such Person is
a general partnership, its partnership agreement and any statement of
partnership; (c) if such Person is a limited partnership, its certificate of
limited partnership and its limited partnership agreement; (d) if such Person is
a limited liability company, its certificate or articles of formation or
organization and limited liability company or operating agreement; (e) any other
charter or similar document adopted or filed in connection with the creation,
formation or organization of such Person; and (f) any amendment to any of the
foregoing.
"OWNED INTELLECTUAL PROPERTY" has the meaning set forth in SECTION
4.18(a).
"PBGC" has the meaning set forth in SECTION 4.29(d).
"PERMIT" means any permit, license, Consent, exemption, variance,
registration, security clearance or other authorization issued or granted by any
Governmental Authority.
"PERMITTED LIENS" means any: (a) Liens for current Taxes not yet due
(other than Taxes arising out of the transactions contemplated by this
Agreement); (b) Liens of carriers, laborers, materialmen, mechanics, repairmen
or warehousemen, and other similar Liens imposed by Law and arising in the
Ordinary Course of Business for Liabilities not yet due; and (c) Liens of record
or other minor defects of title that do not and could not interfere with the use
of such real property or materially diminish the value thereof.
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"PERSON" means any individual, firm, company, general partnership,
limited partnership, limited liability partnership, joint venture, association,
corporation, limited liability company, trust, business trust, estate,
Governmental Authority or other entity.
"PLAN" or "PLANS" has the meaning set forth in SECTION 4.29(a).
"PROCEEDING" means any action, claim, complaint, charge,
arbitration, audit, hearing, investigation, inquiry, suit, litigation or other
proceeding (whether civil, criminal, administrative, investigative or informal)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority or arbitrator.
"PURCHASE PRICE" has the meaning set forth in SECTION 2.2(a).
"REAL PROPERTY LEASES" has the meaning set forth in SECTION 4.16(b).
"REFERENCE TANGIBLE ASSET VALUE" means Six Million Six Hundred
Thousand Dollars ($6,600,000).
"REGISTERED INTELLECTUAL PROPERTY" has the meaning set forth in
SECTION 4.18(a).
"RESOLUTION PERIOD" has the meaning set forth in SECTION 2.5(b).
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933 and the rules and
regulations promulgated pursuant thereto.
"SELECTED ACCOUNTING FIRM" has the meaning set forth in SECTION
2.5(a).
"SELLER PARTY" means (a) prior to Closing, Seller and the Company,
and (b) from and after Closing, Seller.
"SELLER" has the meaning set forth in the introduction to this
Agreement.
"SELLER'S COUNSEL" has the meaning set forth in SECTION 3.2(xi).
"SELLER'S INVESTMENT BANKER" has the meaning set forth in SECTION
4.33.
"SUBSIDIARY" means with respect to any specified Person, any other
Person (a) whose board of directors or similar governing body, or a majority
thereof, may presently be directly or indirectly elected or appointed by such
specified Person, (b) whose management decisions and corporate actions are
directly or indirectly subject to the present control of such specified Person,
or (c) whose voting securities or equity securities are more than fifty percent
(50%) owned, directly or indirectly, by such specified Person.
"TANGIBLE ASSETS ESCROW" means the amount of Five Hundred Thousand
Dollars ($500,000) placed into escrow by Buyer as a subescrow within the Escrow
Amount pending determination of the Closing Tangible Asset Value.
9
"TAX" or "TAXES" means, however denominated, all federal, state,
local, territorial, foreign and other taxes, levies, fees, deficiencies,
imposts, assessments, impositions or other government charges of whatever
nature, including all net income, gross income, estimated income, gross
receipts, business, occupation, franchise, real property, payroll, personal
property, sales, transfer, stamp, use, employment, social security,
unemployment, worker's compensation, commercial rent, withholding, occupancy,
premium, gross receipts, profits, windfall profits, deemed profits, recapture,
license, lease, severance, capital, production, corporation, ad valorem, excise,
custom, duty, escheat, built in gain pursuant to Code Section 1374 or similar
tax, including any interest, fines, penalties and additions (to the extent
applicable) thereon or thereto, whether disputed or not, and any obligations
with respect to such amounts arising as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period or under any
Contract with any other Person, and including any Liability for taxes of a
predecessor.
"TAX RETURN" means any report, return, amended return, statement,
document, form, claim, declaration or other information or filing (including any
schedules or attachments thereto and any amendments thereof) required to be
supplied to any taxing authority or jurisdiction (foreign or domestic) with
respect to Taxes, including information returns, where permitted or required,
combined or consolidated returns for any group of entities that includes the
Company, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
"TERM SHEET" has the meaning set forth in SECTION 5.7.
"THIRD PARTY INTELLECTUAL PROPERTY" has the meaning set forth in
SECTION 4.18(a).
"TRANSACTION DOCUMENTS" means this Agreement and all other
agreements, certificates, instruments and other documents being delivered
pursuant to this Agreement or pursuant to such other agreements, certificates,
instruments and other documents.
"TRANSITION SERVICES AGREEMENTS" has the meaning set forth in
SECTION 6.14.
1.2. CERTAIN INTERPRETIVE MATTERS.
(a) GENERAL RULES OF CONSTRUCTION. In this Agreement, unless
the context otherwise requires:
(i) words of the masculine or neuter gender shall include the
masculine and/or feminine gender, and words in the singular number or in
the plural number shall each include the singular number or the plural
number;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity;
(iii) reference to any agreement (including this Agreement) or
other Contract or any document means such agreement, Contract or document
as amended or
10
modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof;
(iv) any accounting term used and not otherwise defined in
this Agreement or any other Transaction Document has the meaning assigned
to such term in accordance with GAAP;
(v) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding or
succeeding such term;
(vi) relative to the determination of any period of time,
"from" means "from and including," "to" means "to but excluding" and
"through" means "through and including;"
(vii) "hereto", "herein", "hereof", "hereinafter" and similar
expressions refer to this Agreement in its entirety, and not to any
particular Article, Section, paragraph or other part of this Agreement;
(viii) reference to any "Article" or "Section" means the
corresponding Article(s) or Section(s) of this Agreement;
(ix) the descriptive headings of Articles, Sections,
paragraphs and other parts of this Agreement are included for convenience
of reference only and shall not affect in any way the meaning or
interpretation of this Agreement or any of the terms or provisions hereof;
(x) references to dollars or "$" in this Agreement shall mean
United States Dollars;
(xi) reference to any Law or Order, means (A) such Law or
Order as amended, modified, codified, supplemented or reenacted, in whole
or in part, and in effect from time to time; and (B) any comparable
successor Laws or Orders; and
(xii) any Contract, instrument, insurance policy, certificate
or other document defined or referred to in this Agreement or in any other
Transaction Document means such Contract, instrument, insurance policy,
certificate or other document as from time to time amended, modified or
supplemented, including (in the case of Contracts or instruments) by
waiver or Consent and all attachments thereto and instruments and other
documents incorporated therein.
(b) ACKNOWLEDGMENT REGARDING NEGOTIATION AND PREPARATION OF
AGREEMENT. The parties hereto further acknowledge and agree that (i) this
Agreement is the result of negotiations between the parties hereto and shall not
be deemed or construed as having been drafted by any one party, (ii) each of the
parties hereto and its counsel have reviewed and negotiated the terms and
provisions of this Agreement (including any exhibits and schedules attached
hereto) and have contributed to its preparation, (iii) the rule of construction
to the effect that any ambiguities are resolved against the drafting party shall
not be employed in the
11
interpretation of this Agreement, and (iv) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto and not in favor of
or against any party, regardless of which party was generally responsible for
the preparation of this Agreement.
ARTICLE 2
PURCHASE AND SALE OF THE INTERESTS
2.1. PURCHASE AND SALE OF THE INTERESTS. Upon and subject to the terms and
provisions of this Agreement, at the Closing, Buyer shall purchase and accept
delivery of all of the Interests from Seller, and Seller shall sell, assign,
transfer and deliver all of the Interests to Buyer, free and clear of all Liens.
2.2. PURCHASE PRICE AND PAYMENT.
(a) PURCHASE PRICE. The total purchase price for the Interests will
be Fifty-Three Million Four Hundred Thousand Dollars ($53,400,000) subject to
adjustment following the Closing pursuant to SECTION 2.4 (the "PURCHASE PRICE").
(b) PAYMENT. At the Closing, Buyer shall:
(i) pay to Seller the Purchase Price minus the Escrow Amount
(such net amount payable by Buyer to Seller at the Closing is sometimes
referred to herein as the "CLOSING PAYMENT"); and
(ii) deliver to the Escrow Agent the Escrow Amount.
The Closing Payment will be paid to Seller by wire transfer to the account of
Seller, which account shall be designated by Seller in writing at least five (5)
days prior to the Closing.
(c) ESCROW. The terms, conditions and procedures by which the Escrow
Amount shall be delivered to and disbursed by the Escrow Agent shall be set
forth in an Escrow Agreement in the form attached hereto as Exhibit A (the
"ESCROW AGREEMENT") to be entered into among Buyer, Seller, the Company and a
mutually agreed upon escrow agent (the "ESCROW AGENT").
2.3. PAYMENT OF INDEBTEDNESS. At or prior to the Closing, the Company will
pay or cause the payment of all Indebtedness of the Company (out of the Purchase
Price if at the Closing) in exchange for written releases, payoff letters and
UCC-3s from each payee, as appropriate, each to be in a form reasonably
acceptable to Buyer (collectively, the "DISCHARGES"); provided, however, that
with respect to Indebtedness of Seller directly or indirectly guaranteed by the
Company or secured by the Interests or any assets of the Company, the Company
shall cause all such guarantees or security interests to be cancelled or
released pursuant to Discharges without obligating Seller to pay off all such
Indebtedness at Closing.
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2.4. ADJUSTMENT TO PURCHASE PRICE.
(a) CLOSING BALANCE SHEET. As soon as reasonably practicable, but
not later than forty-five (45) days following Closing, Buyer shall prepare a
draft of the Closing Balance Sheet and deliver it to Seller for review and
comment. As soon as reasonably practical following the preparation and delivery
of the draft Closing Balance Sheet by Buyer (but not later than thirty (30) days
following such delivery), one of the regional accounting firms listed on
Schedule 2.5 hereto, which Buyer and Seller mutually agree to jointly solicit
and select immediately after Closing (the "SELECTED ACCOUNTING FIRM"), shall
audit and deliver to Buyer and Seller (i) the Closing Balance Sheet; and (ii)
based on the Closing Balance Sheet, a calculation of the dollar value of the
Closing Tangible Asset Value. The Selected Accounting Firm shall audit the draft
Closing Balance Sheet prepared by Buyer and shall provide an opinion whether or
not such Closing Balance Sheet has been determined in accordance with this
Agreement and GAAP and shall calculate the Closing Tangible Asset Value in
accordance with this Agreement. The parties each agree to grant reasonable
access to all records of the Company, to each other and to the Selected
Accounting Firm, for purposes of this Section, and to follow such procedures and
make such submissions to the Selected Accounting Firm, as it may request in
auditing the draft Closing Balance Sheet. All documents prepared by the Selected
Accounting Firm shall be provided to Buyer and Seller and Buyer and Seller may,
at their option, participate in all meetings and communications with the
Selected Accounting Firm.
(b) OBJECTIONS TO CLOSING BALANCE SHEET. The Closing Balance Sheet
and the Closing Tangible Asset Value as determined by the Selected Accounting
Firm shall become final and binding upon the parties unless, within sixty (60)
days following delivery to Seller and Buyer, either Seller notifies Buyer of its
objection thereto or Buyer notifies Seller, which objection, in each case, may
only be that the Closing Balance Sheet was not properly prepared or audited in
accordance with this SECTION 2.4. Any notice of objection shall specify in
reasonable detail the reasons for objection on a line item basis. If either
party so notifies the other party of its objection to the Closing Balance Sheet
and/or the Closing Tangible Asset Value, Seller and Buyer shall negotiate in
good faith to resolve any differences and amounts. If within thirty (30) days
(the "RESOLUTION PERIOD") following the receipt of such notice by the objecting
party any of such differences and amounts have not been resolved, the parties
shall submit the dispute to Pricewaterhouse Coopers LLP, or another mutually
agreed independent accounting firm selected by Buyer and Seller (the
"INDEPENDENT ACCOUNTING FIRM"), for a determination resolving such amounts and
issues in dispute. To the extent that the amount of the Closing Tangible Asset
Value is not in dispute, the parties shall, at the commencement of the
Resolution Period, cause appropriate amounts to be paid or released from the
Tangible Assets Escrow to Buyer or Seller, as appropriate. Buyer and Seller each
represent and warrant that no party or its Affiliates has or has had any
relationship with the Independent Accounting Firm in any capacity including, as
auditor, consultant or in a teaming relationship. The Independent Accounting
Firm will conduct its own review and evaluate those items or amounts in the
Closing Balance Sheet relevant to the calculation of the Tangible Asset Value
and shall determine only those items still in dispute at the end of the
Resolution Period and shall determine whether such items have been prepared in
accordance with the terms of this Agreement and with GAAP. The Independent
Accounting Firm will be granted reasonable access to all records of Seller
Parties and the parties agree to follow such procedures and make such
submissions to the Independent Accounting Firm as it may request in conducting
its review and making its determination under this SECTION 2.4(b).
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Each party agrees to execute, if requested by the Independent Accounting Firm, a
reasonable engagement letter. The Independent Accounting Firm's determination
shall be made within forty-five (45) days after its engagement (which engagement
shall be made no later than five (5) business days after the end of the
Resolution Period), or as soon thereafter as possible, shall be set forth in a
written statement delivered to Seller and Buyer and shall be final, conclusive,
non-appealable and binding for all purposes hereunder, provided that such
determination may be reviewed, corrected or set aside in an arbitration under
SECTION 10.13, but only if the arbitrators find that the Independent Accounting
Firm committed manifest error with respect to its determination. The
determination of the Independent Accounting Firm shall not be deemed an award
subject to review under the Federal Arbitration Act or any other statute. The
fees and expenses of the Independent Accounting Firm shall be shared by Buyer
and Seller in inverse proportion to the amount in dispute for which each of them
is successful.
(c) PURCHASE PRICE ADJUSTMENT, PAYMENTS. Within ten (10) days of the
final determination of the Closing Balance Sheet and the Closing Tangible Asset
Value the Purchase Price shall be adjusted and, in accordance with this
Agreement and the Escrow Agreement, payments shall be made as follows:
(i) If the Closing Tangible Asset Value is greater than or
equal to the Reference Tangible Asset Value, Buyer and Seller shall
instruct the Escrow Agent to pay to Seller the Tangible Asset Escrow, and
Buyer shall pay to Seller in cash an amount equal to the difference
between the Closing Tangible Asset Value and the Reference Tangible Asset
Value;
(ii) If the Closing Tangible Asset Value is not more than
$500,000 less than the Reference Tangible Asset Value, Buyer and Seller
shall instruct the Escrow Agent to pay to Buyer from the Tangible Asset
Escrow the amount by which the Closing Tangible Asset Value is less than
the Reference Tangible Asset Value and accordingly, shall instruct the
Escrow Agent to pay any remaining balance of the Tangible Asset Escrow to
Seller; and
(iii) If the Closing Tangible Asset Value is more than
$500,000 less than the Reference Tangible Asset Value, Buyer and Seller
shall instruct the Escrow Agent to pay to Buyer the entire Tangible Asset
Escrow, and Seller shall pay to Buyer in cash the remaining amount by
which the Closing Tangible Asset Value is less than the Reference Tangible
Asset Value.
2.5. ALLOCATION. Buyer shall prepare an allocation of the Purchase Price
(and all other capitalized costs) among the Company's assets in accordance with
Code Section 1060 and the Treasury regulations promulgated thereunder (and any
similar provision of state, local or foreign law, as appropriate). Buyer shall
deliver such allocation to Seller within sixty (60) days after the final
resolution of the Closing Tangible Asset Value as described in SECTION 2.4. Such
allocation shall become final and binding on the parties hereto fifteen (15)
days after Buyer provides such allocation to Seller, unless Seller objects in
writing to Buyer, specifying the basis for its objection and preparing an
alternative allocation. If Seller does object, Seller and Buyer shall in good
faith attempt to resolve the dispute within fifteen (15) days of written notice
to Buyer of Seller's objection. Any such resolution shall be final and binding
on the parties hereto. Any
14
unresolved disputes shall be promptly submitted to the Independent Accounting
Firm for determination, with such determination being final and binding on the
parties hereto. Seller and Buyer will each pay one-half of the fees and expenses
of the Independent Accounting Firm related to any dispute arising from this
SECTION 2.5. Buyer, Seller, and the Company and their Affiliates shall report,
act, and file Tax Returns (including, but not limited to Internal Revenue
Service Form 8594) in all respects and for all purposes consistent with such
allocation agreed to by Buyer and Seller. Seller shall timely and properly
prepare, execute, file and deliver all such documents, forms and other
information as Buyer may reasonably request to prepare such allocation. Neither
Buyer nor Seller shall take any position (whether in audits, tax returns or
otherwise) which is inconsistent with such allocation unless required to do so
by applicable law. The parties hereto will revise the final allocation schedule
to the extent necessary to reflect any post-Closing payment made pursuant to or
in connection with this Agreement. In the case of any payment referred to in the
preceding sentence, Buyer shall propose a revised allocation schedule, and the
parties hereto shall follow the procedures outlined above with respect to
review, dispute and resolution in respect of such revision.
ARTICLE 3
THE CLOSING
3.1. CLOSING AND CLOSING DATE. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned in
accordance with the terms and provisions of ARTICLE 8, the purchase and sale of
the Interests (the "CLOSING") shall take place at 10:00 a.m. (Boston time) on a
date to be designated by Buyer and Seller as promptly as practical after all of
the conditions to the respective obligations of the parties set forth in ARTICLE
7 shall have been satisfied or waived and, if applicable, the expiration of the
waiting period under the HSR Act (such date and time on and at which the Closing
actually occurs being referred to herein as the "CLOSING DATE"). The Closing
shall take place at the offices of Buyer's counsel, Xxxxx Xxxxxxx LLP, 000
Xxxxxx Xxxxxx, Xxxxxx, XX 00000 ("BUYER'S COUNSEL").
3.2. DOCUMENTS AND ITEMS TO BE DELIVERED TO BUYER BY SELLER PARTIES. At
the Closing, Seller Parties will deliver to Buyer:
(i) Certificates or other documents representing the Interests, duly
endorsed for transfer in blank or accompanied by transfer powers duly executed
in blank, in proper form for transfer by Seller;
(ii) A certificate in form and substance reasonably acceptable to
Buyer, dated the Closing Date, executed by the President of the Company, and
attested to by the Secretary of the Company, and certifying: (i) that attached
thereto is a true, correct and complete copy of the Organizational Documents of
the Company, including all amendments thereto, as in effect on the Closing Date;
(ii) that attached thereto is a true and complete copy of the resolutions duly
adopted by the managers of the Company authorizing the execution and delivery of
this Agreement and each of the other Transaction Documents to which the Company
is a party, and that such resolutions have not been modified, rescinded or
amended and are in full force and
15
effect as of the Closing Date; and (iii) as to the incumbency of the Company's
managers and officers and their signatures;
(iii) A certificate in form and substance reasonably acceptable to
Buyer, dated the Closing Date, executed by the President of Seller, and attested
to by the Secretary of Seller, and certifying: (i) that attached thereto is a
true, correct and complete copy of the Organizational Documents of Seller,
including all amendments thereto, as in effect on the Closing Date; (ii) that
attached thereto is a true and complete copy of the resolutions duly adopted by
the stockholders and directors of Seller authorizing the execution and delivery
of this Agreement and each of the other Transaction Documents to which Seller is
a party, and that such resolutions have not been modified, rescinded or amended
and are in full force and effect as of the Closing Date; and (iii) as to the
incumbency of Seller's officers and their signatures;
(iv) A certificate, in form and substance reasonably acceptable to
Buyer, dated the Closing Date, executed by the President of the Company,
certifying that (i) the representations and warranties of the Company set forth
in this Agreement were true, correct and complete at and as of the date hereof
and the Closing Date (provided that representations and warranties which are
confined to a specific date shall speak only as of such date); and (ii) that the
Company has performed in accordance with the terms thereof each of its
agreements and obligations set forth in this Agreement and each of the other
Transaction Documents to which the Company is a party to be performed prior to
the Closing;
(v) A certificate, in form and substance reasonably acceptable to
Buyer, dated the Closing Date, executed by the President of Seller, certifying
that (i) the representations and warranties of Seller and the Company set forth
in this Agreement were true, accurate and complete at and as of the date hereof
and the Closing Date (provided that representations and warranties which are
confined to a specific date shall speak only as of such date); and (ii) each of
Seller and the Company performed its respective or joint agreements and
obligations set forth in this Agreement and each of the other Transaction
Documents to which Seller or the Company is a party to be performed prior to the
Closing;
(vi) Resignations of such managers and officers of the Company as
Buyer may request at least five (5) days prior to Closing;
(vii) Certificates of good standing of the Company from the
Secretary of State of the State of Delaware and from the Secretaries of State of
each jurisdiction listed on Schedule 4.1 in which the Company is authorized to
conduct business as a foreign corporation, each dated not earlier than ten (10)
days prior to the Closing Date;
(viii) A Certificate of Good Standing of Seller from the Secretary
of State of the State of Georgia;
(ix) All Permits and other Consents listed or required to be listed
on Schedule 4.8, in form and substance reasonably acceptable to Buyer;
(x) the Discharges duly executed by each payee;
16
(xi) An opinion of Xxxxxx & Bird LLP, counsel to Seller Parties
("SELLER'S COUNSEL"), dated as of the Closing Date and addressed to Buyer, in a
form reasonably satisfactory to Buyer;
(xii) The Escrow Agreement, duly executed by an authorized officer
of each of Seller and the Company;
(xiii) A Confidentiality and Non-Solicitation Agreement in the form
of Exhibit B attached hereto duly executed by Xxxxx X. Childs;
(xiv) The Transition Services Agreements duly executed by an
authorized officer of Seller; and
(xv) Such other certificates and documents as Buyer or Buyer's
Counsel may reasonably request.
3.3. DOCUMENTS AND ITEMS TO BE DELIVERED TO SELLER BY BUYER. At the
Closing, Buyer will deliver to Seller:
(i) Against receipt of certificates or other documents representing
the Interests in accordance with SECTION 3.2(a), the Closing Payment and all
other amounts required to be paid by Buyer to Seller or the Escrow Agent
pursuant to SECTION 2.2;
(ii) A certificate, in form and substance reasonably acceptable to
Seller, executed by an authorized officer of Buyer, dated the Closing Date, and
certifying (i) that attached thereto are true and complete copies of the
Organizational Documents of Buyer, including all amendments thereto, as in
effect on the Closing Date; (ii) that attached thereto are the By-Laws of Buyer,
as amended and in effect on the Closing Date; (iii) that attached thereto are
the votes duly adopted by the Board of Directors of Buyer authorizing the
execution, delivery and performance of this Agreement and each of the other
Transaction Documents to which it is a party, and that such votes have not been
modified, rescinded or amended and are in full force and effect as of the
Closing Date; and (iv) as to the incumbency of Buyer's officers and their
signatures;
(iii) A certificate, in form and substance reasonably acceptable to
Seller, executed by an authorized officer of Buyer, dated the Closing Date, and
certifying as to the accuracy of Buyer's representations and warranties at and
as of the Closing and the performance by Buyer of its agreements and obligations
set forth in this Agreement and each of the other Transaction Documents to which
it is a party to be performed prior to the Closing;
(iv) An opinion of Buyer's Counsel, dated as of the Closing Date and
addressed to Seller, in a form reasonably satisfactory to Seller Parties;
(v) The Escrow Agreement, duly executed by an authorized officer of
Buyer; and
(vi) Such other certificates and documents as Seller or Seller's
Counsel may reasonably request.
17
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES
Seller Parties, jointly and severally, hereby represent and warrant to
Buyer as follows:
4.1. ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware with all power and authority to own or
lease all of its properties and assets and to conduct its business as presently
conducted, and is duly qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions listed on Schedule 4.1,
which are the only jurisdictions in which the character of the properties owned
or held under lease by it or the nature of the business transacted by it makes
such qualification necessary. The Company is not an "investment company" as
defined in the Investment Company Act of 1940.
4.2. SUBSIDIARIES. The Company (a) does not have any Subsidiaries and (b)
does not own, nor does it have the right or obligation to acquire, directly or
indirectly, any interest in or control over any Person.
4.3. CAPITALIZATION. Except as set forth on Schedule 4.3, there are no
outstanding (a) membership or other ownership interests of the Company; (b)
securities of the Company convertible into or exchangeable for membership or
other ownership interests of the Company; or (c) subscriptions, options,
warrants, rights or other Contracts to acquire from the Company, and no
obligation of the Company to issue, any (i) membership or other ownership
interests of the Company, or (ii) securities convertible into or exchangeable
for membership or other ownership interests of the Company, and no obligation of
the Company to grant, extend or enter into any subscription, warrant, option,
right, convertible or exchangeable security or other similar Contract. The
ownership interests in the Company of the types described in clauses (a), (b)
and (c) of this SECTION 4.3, whether or not authorized, issued or outstanding,
are hereinafter sometimes referred to, collectively, as "COMPANY SECURITIES." No
Company Securities were issued in violation of the Securities Act or other
applicable Law. There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any Company Securities. Except as
disclosed on Schedule 4.3, there are no voting trusts, agreements or other
Contracts relating to the ownership, voting or transfer of membership interests
of the Company to which the Company or Seller is a party. No Person other than
Seller owns of record or beneficially any Company Securities. Except for the
Liens set forth on Schedule 4.21 covering a security interest in the assets of
the Company and the Interests, all of which shall be satisfied and discharged
prior to Closing, the Company has not received any notice of any Lien or any
other claim or Proceeding against any Company Securities.
4.4. AUTHORITY OF THE COMPANY. The Company has all requisite power and
authority to execute and deliver this Agreement and each of the other
Transaction Documents to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by the Company of this Agreement and
each of the other Transaction Documents to which it is a party, the performance
by the Company of its obligations hereunder and thereunder and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by
18
the Managers of the Company and by the Board of Directors of Seller and except
for those conditions described in Sections 7.1(vi) and 7.1(vii), no other
proceedings on the part of the Company or Seller are necessary to authorize this
Agreement and each of the other Transaction Documents to which the Company is a
party, the performance of such obligations or the consummation of such
transactions.
4.5. ORGANIZATION AND AUTHORITY OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia with all corporate power and authority to own or lease all of its
properties and assets and to conduct its business as currently conducted. Seller
has all requisite corporate power and authority to execute and deliver this
Agreement and each of the other Transaction Documents to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Seller of this Agreement and each of the other Transaction Documents to which it
is a party, the performance of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of Seller and except for the
approval of the transactions contemplated by this Agreement by the shareholders
and lender of Seller, no other corporate proceedings on the part of Seller are
necessary to authorize this Agreement and each of the other Transaction
Documents to which Seller is a party, the performance of such obligations or the
consummation of such transactions.
4.6. ENFORCEABILITY. This Agreement has been and each of the other
Transaction Documents to which the Company is a party has been (or will be at
Closing) duly and validly executed and delivered by the Company and (assuming
such agreements constitute a legal, valid and binding obligation of Buyer)
constitutes (or will constitute upon Closing following execution thereof) the
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms. This Agreement and each of the other
Transaction Documents to which Seller is a party has been (or will be at
Closing) duly and validly executed and delivered by Seller and (assuming such
agreements constitute a legal, valid and binding obligation of Buyer)
constitutes (or will constitute upon Closing following execution thereof) the
legal, valid and binding agreement of Seller, enforceable against Seller in
accordance with its terms.
4.7. ISSUANCE OF THE INTERESTS; SELLER'S TITLE TO THE INTERESTS. The
Interests are duly authorized, validly issued, fully paid and non-assessable.
Except as set forth on Schedule 4.7, Seller has good title to and is the lawful,
legal, record and beneficial owner of the Interests, free and clear of all Liens
and Buyer, at the Closing and upon payment of the Closing Payment, will receive
good title to the Interests, free and clear of all Liens.
4.8. NO VIOLATION OR CONFLICT; CONSENTS. Except as disclosed on Schedule
4.8, neither the execution and delivery by Seller Parties of this Agreement, or
any of the other Transaction Documents to which any of Seller Parties is a
party, nor the performance by any of Seller Parties of their respective
obligations hereunder and thereunder, nor the consummation of the transactions
contemplated hereby and thereby will, directly or indirectly (with or without
notice or lapse of time, or both):
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(i) violate, contravene, conflict with or breach any term or
provision of the Organizational Documents of the Company or Seller or any
resolution or vote adopted by the Board of Directors, stockholders, managers or
members of the Company or Seller;
(ii) violate, contravene, conflict with, breach, constitute a
default under, require any notice under, or give any Person the right to cancel,
modify or terminate, or accelerate the maturity or performance of, any
obligation or other Contract or Consent to which any Seller Party is a party or
by which any of their respective assets or properties is bound;
(iii) give any Person the right to cause an indemnity payment to be
made by the Company under, or result in the creation or imposition of any Lien
upon any property or assets of the Company under, any Contract, Permit, Consent,
Law or Order to which any of Seller Parties is a party or by which any of Seller
Parties has any rights or Liabilities or any of their respective assets or
properties is subject, bound or encumbered;
(iv) give any Person the right to require the Company to purchase or
repurchase, redeem or acquire any Liabilities or Contracts of any kind;
(v) violate, contravene or conflict with any of the terms,
conditions or requirements of, or require any notice to or filing with any
Governmental Authority or other Person under, any Permit, Law or Order
applicable to any of Seller Parties, or any of their respective assets or
properties;
(vi) give any Governmental Authority the right to revoke, withdraw,
suspend, cancel, modify, or terminate any Permit held by the Company; or
(vii) require any Permit or other Consent of, or filing with or
notification to, any Governmental Authority or other Person.
4.9. DELIVERY OF DOCUMENTS; BOOKS AND RECORDS. The Company has delivered
or made available to Buyer the originals or true, correct and complete copies of
all Contracts, instruments and other documents, including all amendments,
supplements or modifications thereof and waivers currently in effect thereunder,
requested by Buyer, referred to in the schedules hereto or otherwise material to
the representations and warranties in this Agreement. The books of account,
minute books and other records of the Company, which have been made available to
Buyer for its inspection, are true, complete and correct. The minute books of
the Company contain true, accurate and complete copies of all Organizational
Documents of the Company and true, accurate and complete records of all meetings
and consents in lieu of meeting of the managers and members of the Company since
the date of its organization. At the Closing, all books of account, minute books
and other records of the Company shall be in the possession of the Company.
4.10. FINANCIAL STATEMENTS. The Company has delivered to Buyer copies of
(a) the audited financial statements of the Company as and for the fiscal year
ended December 31, 2003, together with all related schedules and notes and
accompanied by the report thereon of the Company's Accountants (the "AUDITED
FINANCIAL STATEMENTS"); and (b) the unaudited financial statements of the
Company as of and for the six (6) month period ended June 30, 2004, together
with all related schedules and notes (the "INTERIM FINANCIAL STATEMENTS" and,
together with the
20
Audited Financial Statements, the "FINANCIAL STATEMENTS"). The balance sheets
(including, where applicable, the related notes and schedules) included in the
Financial Statements fairly present the financial position of the Company as of
the date thereof, and the statements of income (or statements of results of
operations), stockholders' equity and cash flows (including the related notes
and schedules) included in the Financial Statements fairly present the results
of operations, stockholders' equity, and retained earnings and cash flows, as
the case may be, of the Company for the periods or as of the dates, as the case
may be, set forth therein, in each case in accordance with GAAP, including all
accruals and recognition of contract gains and losses in accordance with the
Company's estimates, except, in the case of the Interim Financial Statements,
the omission of footnote information. The Financial Statements reflect the
consistent application of accounting principles throughout the periods involved,
except as disclosed in the notes of such Financial Statements. No financial
statements of any Person other than the Company are required by GAAP to be
included in the Financial Statements.
4.11. UNDISCLOSED LIABILITIES. To the Knowledge of the Company, the
Company has no Liabilities that were not reflected or reserved against on the
balance sheet included in the Interim Financial Statements or are not required
by GAAP to be reflected on the Interim Financial Statements. Since the date of
the Interim Financial Statements, the Company has not incurred any Liabilities
other than current Liabilities which (a) have been incurred in the Ordinary
Course of Business and (b) have not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
4.12. ACCOUNTING PRACTICES. The Company makes and keeps accurate books and
records in accordance with sound business practices reflecting its assets and
maintains proper and adequate internal accounting controls that provide
reasonable assurance that (a) transactions are executed in accordance with
management's authorization and (b) transactions are recorded as necessary to
permit preparation of the Company's Financial Statements and to maintain
accountability for the assets of the Company.
4.13. ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule 4.13,
since April 30, 2004, (a) the Company has conducted its business only in the
Ordinary Course of Business and has not taken any of the actions prohibited by
SECTION 6.1, and (b) there has not occurred any Material Adverse Event.
4.14. COMPLIANCE WITH LAW; NECESSARY PERMITS.
(a) NO VIOLATIONS. The Company is not in violation of, conflict
with, default under or breach of (a) any Law or Order applicable to the Company
or by which any property or asset of the Company is bound or affected; or (b)
any Permit or other Consent to which the Company is a party or by which any
property or asset of the Company is bound or affected.
(b) NO NOTICE. Without limiting the generality of the foregoing, the
Company has not received any notice or other communication (whether written or
oral), and no Proceeding is pending, or to the Knowledge of the Company,
threatened, from or before any Governmental Authority or other Person regarding
(i) any actual, alleged, possible or potential violation of, or failure to
comply with, any Law or Order or (ii) any actual, alleged, possible or potential
Liability for any remedial action of any nature.
21
(c) NECESSARY PERMITS. The Company has all material Permits
necessary or required to conduct its business except for those Permits the
absence of which are not likely to have a Material Adverse Effect. The Company
is in compliance with the terms of such Permits. No suspension or cancellation
of any of such Permits is pending, or to the Knowledge of Seller Parties,
threatened except for any noncompliance of which is not likely to have a
Material Adverse Effect.
4.15. LITIGATION. Except as disclosed on Schedule 4.15, there is no
Proceeding, pending or, to the Knowledge of Seller Parties, threatened, against
or relating to the Company, or that otherwise relates to or may affect the
business of or assets owned or used by the Company, or that in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement or any of the other Transaction
Documents. The Company is not subject to any outstanding Order. There are no
Proceedings by any Governmental Authority pending to which the Company or Seller
is a party or of which any of their respective property is the subject, and, to
the Knowledge of Seller Parties, no such Proceedings are threatened or
contemplated.
4.16. OWNED AND LEASED REAL PROPERTY.
(a) OWNED REAL PROPERTY. The Company does not own any real property
in fee or otherwise, except for the leasehold interests of the Company in the
Leased Real Property.
(b) LEASED REAL PROPERTY. Set forth on Schedule 4.16(b) is a true,
correct and complete list of all leases, subleases, licenses, occupancy
agreements and other Contracts under which the Company uses or occupies or has
the right to use or occupy any real property (the "REAL PROPERTY LEASES"). With
respect to the real property leased by the Company pursuant to the Real Property
Leases (the "LEASED REAL PROPERTY"):
(i) Leases. The Company has heretofore delivered to Buyer
true, correct and complete copies of all of the Real Property Leases. Each
Real Property Lease is valid, binding and in full force and effect, all
rent and other sums and charges payable by the Company as tenant
thereunder are current, and no termination event or condition or uncured
default of a material nature on the part of the Company or, to the
Knowledge of Seller Parties, on the part of any other party thereto exists
under any Real Property Lease. All of the Real Property Leases will
continue to be valid, binding and enforceable in accordance with their
respective terms and in full force and effect immediately following the
consummation of the transactions contemplated by this Agreement. The
Company has a good and valid leasehold interest in, or license to use,
each parcel of Leased Real Property leased by it or licensed by it, as the
case may be, free and clear of all Liens, except Permitted Liens.
(ii) Improvements. All of the improvements on the Leased Real
Property, including buildings, structural elements, mechanical systems,
roofs or parking and loading areas (A) to the Knowledge of the Company are
in good operating condition and repair and have been well maintained; (B)
to the Knowledge of the Company are free from infestation by rodents or
insects; (C) are adequate and suitable for the purposes for which they are
currently being used.
22
(iii) Compliance with Law; Permits. The Company has received
no notice from any Governmental Authority of any violation of any law or
order issues with respect to any of the Leased Real Property. All Permits
required in connection with the use or occupancy of the Leased Real
Property or required in connection with the operation thereof are
presently in effect, and the Leased Real Property has been used and
operated and maintained in accordance with applicable Laws and Orders.
4.17. TANGIBLE PERSONAL PROPERTY. Set forth on Schedule 4.17 is a
true, correct and complete list of each item of tangible personal property with
an original cost in excess of Five Thousand Dollars ($5,000) used in connection
with the Company's business. Except as disclosed on Schedule 4.17, the Company
is in possession of and has good title to, or has valid leasehold interests in,
all tangible personal property used in the business of the Company. All such
tangible personal property is owned by the Company, free and clear of all Liens
(or will be free and clear at the Closing), or is leased under valid leases in
full force and effect, and in any case, is in good working condition and repair,
free from material defects (patent and latent) and is adequate and suitable for
the purpose for which it is currently being used. Except as specifically
indicated on Schedule 4.17, no Person other than the Company owns any vehicles,
equipment, computer systems, Intellectual Property or other tangible assets or
properties situated on the Leased Real Property or which are used in or are
necessary for the operation of the Company's business, except for leased items
described on Schedule 4.17 and for items of immaterial value. The tangible
personal property owned by the Company is sufficient for the continued operation
of the Company in the Ordinary Course of Business and for the conduct of its
business after the Closing Date in the same manner as conducted prior to the
Closing.
4.18. INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY RIGHTS. Set forth on Schedule 4.18(a) is a
true, correct and complete list of all (i) material Patents, Trademarks,
Copyrights, Domain Names and Computer Software (collectively, the "REGISTERED
INTELLECTUAL PROPERTY") included in the Intellectual Property that are owned or
held by the Company (the "OWNED INTELLECTUAL PROPERTY") and (ii) the
Intellectual Property owned or held by third parties that is otherwise used in
the business of the Company (the "THIRD PARTY INTELLECTUAL PROPERTY", together
with the Owned Intellectual Property, the "COMPANY INTELLECTUAL PROPERTY") and
identifies all license agreements and other similar Contracts in effect on the
date hereof pursuant to which any such Company Intellectual Property is licensed
to or from the Company. Except as otherwise indicated on Schedule 4.18(a), (i)
the Company is the sole and exclusive owner or holder of such Owned Intellectual
Property free and clear of any royalty or other payment obligation or Lien; and
(ii) there are no Contracts which restrict or limit the use by the Company of
such Company Intellectual Property.
(b) USE AND PROTECTION OF INTELLECTUAL PROPERTY.
(i) (A) the Registered Intellectual Property disclosed on Schedule
4.18(a) is valid and enforceable; (B) the Company Intellectual Property is
all of the Intellectual Property used by the Company or necessary for the
Company to conduct its business as it is currently conducted; (C) to the
Knowledge of Seller Parties, the Owned Intellectual Property does not
violate any trade secret agreement and does not
23
infringe on any Patents, Trademarks, Copyrights or any other Intellectual
Property of any Person in any country; (D) all use by, and disclosure of
the Owned Intellectual Property to, any other Person has been pursuant to
the terms of a written Contract with such Person and all use of Third
Party Intellectual Property has been pursuant to the terms of a written
Contract with such Person or is otherwise lawful; (E) all reasonable
action necessary to protect the Owned Intellectual Property has been taken
by the Company; (F) the Company has required all professional and
technical employees and consultants, and other employees and consultants
having access to the Company Intellectual Property, to execute Contracts
under which such employees or consultants are required to convey to the
Company ownership of all inventions and developments conceived or created
by them in the course of their employment and to maintain the
confidentiality of all such Company Intellectual Property; and (G) all
maintenance and license fees, taxes, annuities and renewal fees have been
paid and all other necessary actions to maintain the Registered
Intellectual Property have been taken;
(ii) To the Knowledge of Seller Parties, the Company has not
interfered with, infringed upon or misappropriated any Intellectual
Property rights of any Person, and the Company has not received any
written notice of a claim that any of the Owned Intellectual Property has
expired, is not valid or enforceable in any country or that it infringes
upon, conflicts with or misappropriates any Intellectual Property of any
Person, and no such claims or controversies currently exist; and
(iii) Neither the Company nor Seller has given any notice of
infringement to any Person with respect to any of such Intellectual
Property or has become aware of facts or circumstances evidencing the
infringement by any Person of any of such Intellectual Property.
4.19. ACCOUNTS RECEIVABLE. Set forth on Schedule 4.19 is a true,
correct and complete list, as of July 15, 2004 of billed Accounts Receivable of
the Company and as of June 30, 2004 of unbilled Accounts Receivable of the
Company, which includes an aging of all Accounts Receivable and notes receivable
showing amounts due in 30-day aging categories. The Accounts Receivable and
notes receivable of the Company (i) represent valid obligations arising in the
Ordinary Course of Business from sales made or services actually performed by
the Company in the Ordinary Course of Business; (ii) are generally due within
forty-five (45) days after being accrued on the books of the Company; (iii) are
not subject to any defense, counterclaim or right of set-off, and (iv) to the
Knowledge of the Company, have not had the funding associated with them expired
or withdrawn.
4.20. ACCOUNTS PAYABLE. Set forth on Schedule 4.20 is a true, correct and
complete list, as of July 15, 2004, of the accounts and notes payable of the
Company specifying in each case the payee, the face amount of each payable, the
age of each payable regardless of classification on the balance sheet account
and any defenses, set-offs or counterclaims that may exist with respect thereto,
which includes an aging of all accounts and notes payable showing amounts owing
in thirty (30) day aging categories. All accounts and notes payable of the
Company (collectively, the "ACCOUNTS PAYABLE") have been incurred or have arisen
only in the Ordinary Course of Business. Except as disclosed on Schedule 4.20,
there is no dispute between the Company or any payee with respect to any Account
Payable.
24
4.21. LIENS. Except for Permitted Liens and Liens disclosed on Schedule
4.21, the Interests are not subject to and neither the Company nor Seller has
granted, created or suffered to exist with respect to any of the Company's
assets or properties, any Lien.
4.22. INSURANCE. Set forth on Schedule 4.22 is a true, correct and
complete list of (a) all insurance policies maintained by the Company or in
which the Company has an interest; (b) the names of the providers of such
insurance policies; and (c) all claims made under such policies since December
31, 2002, including all outstanding claims. Each such insurance policy is in
full force and effect and will continue to be in full force and effect with
respect to those policies maintained by the Company immediately following the
Closing. All premiums due and payable under all such policies have been paid,
the Company will not be liable for retroactive premiums or similar payments, and
the Company is otherwise in compliance with the terms of such policies. Since
December 31, 2002, the Company has not received any notice of cancellation,
termination or material premium increase with respect to any such policy which
was not replaced on substantially similar terms prior to the date of such
cancellation. The Company has previously provided Buyer with a true, correct and
complete copy of each such policy. All claims thereunder have been filed in a
due and timely fashion in the manner required by the policy or binder. Except as
set forth on Schedule 4.22, the Company does not have any self-insurance or
co-insurance programs.
4.23. MATERIAL CONTRACTS.
(a) GENERAL. Set forth on Schedule 4.23 is a true, complete and
correct list of each of the following Contracts to which the Company is a party
or by which the Company or any of its assets or properties is bound (together
with the Government Contracts and Government Bids listed on Schedule 4.24, the
"MATERIAL CONTRACTS"):
(i) all leases, subleases, licensees and other similar
Contracts concerning the use, occupancy, management or operation of any
Leased Real Property;
(ii) all Contracts under which the Company has granted or
received any license or other right to use Company Intellectual Property;
(iii) all Contracts relating to the confidentiality,
non-disclosure or ownership of any Company Intellectual Property or other
rights or assets of the Company or any other Person;
(iv) all leases, subleases, licenses and other similar
Contracts under which the Company has granted or received any license or
other right to use any tangible personal property with an original cost in
excess of over Five Thousand Dollars ($5,000);
(v) all Contracts for the sale of spare parts, materials,
equipment or other personal property to the Company or for the furnishing
of services to the Company under the terms of which the Company (A) is
likely to pay or otherwise give consideration of more than $25,000 in the
aggregate during any calendar year or other twelve-month period, (B) is
likely to pay or otherwise give consideration of more than $50,000 in the
aggregate over the remaining term of such Contract, or (C) cannot be
25
cancelled by the Company without penalty or further payment and without
more than thirty (30) days' notice;
(vi) all Contracts for the sale by the Company of any product,
inventory, parts, equipment or other personal property or the furnishing
by the Company of services under the terms of which the Company (A) is
likely to be paid or otherwise receive consideration of more than $25,000
in the aggregate during any calendar year or other twelve-month period,
(B) is likely to be paid or otherwise receive consideration of more than
$50,000 in the aggregate over the remaining term of such Contract, or (C)
cannot be cancelled by the Company without penalty or further payment and
without more than thirty (30) days' notice;
(vii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing, consulting and advertising and similar Contracts;
(viii) all promissory notes of the Company and other Contracts
relating to any loan, capital financing or any other Indebtedness of the
Company; all Contracts pursuant to which the Company has entered into any
guaranties of any Indebtedness or other Liability of any Person, and other
similar Contracts; and all Contracts relating to any loan or financing
from the Company to any Person;
(ix) all Contracts pursuant to which the Company has granted
to any Person a Lien on any of its assets or properties;
(x) all Contracts that limit or restrict, or purport to limit
or restrict, the ability of the Company to compete in any line of business
or with any Person or in any geographic area or during any period of time;
(xi) all Contracts between or among the Company, on one hand,
and any of Seller or any Affiliate of Seller (other than the Company), on
the other hand;
(xii) all management Contracts and Contracts with independent
contractors or consultants, and other similar Contracts, that are not
cancelable without penalty or further payment and without more than thirty
(30) days' notice;
(xiii) all employment, compensation bonus, severance pay,
termination pay, change of control and deferred compensation Contracts,
and other similar Contracts, between the Company and any employee of or
consultant to the Company;
(xiv) all collective bargaining agreements and other similar
Contracts between the Company and any labor union or other labor
organization;
(xv) all Plans and all Contracts providing for benefits under
any Plan;
(xvi) all polices of insurance and other similar Contracts;
(xvii) all tax sharing Contracts;
26
(xviii) all Contracts pursuant to which the Company acquired
or has any right to acquire all or any substantial part of the business
and properties or capital stock of any Person (including any acquisition
structured as a sale of stock, sale of assets, merger, consolidation or
share exchange), and any Contract pursuant to which any Person has the
right to so acquire the Company; and
(xix) all other Contracts, whether or not made in the Ordinary
Course of Business, which are material to the Company, or the absence of
which would have a Material Adverse Effect.
(b) DELIVERY OF MATERIAL CONTRACTS. The Company has previously
provided or made available to Buyer (i) a true, correct and complete copy of
each written Material Contract; (ii) a written summary of the material terms and
conditions of each oral Material Contract; and (iii) has made available all
material correspondence and reports related to each Material Contract or the
performance thereof.
(c) BINDING ENFORCEABILITY AND EFFECT. Other than any Material
Contract which has terminated or expired in accordance with its terms, each of
the Material Contracts identified and disclosed on Schedule 4.23 is valid,
binding and enforceable in accordance with its terms and is in full force and
effect, and assuming all Consents required by the terms thereof or applicable
Law have been obtained, such Material Contracts will continue to be valid,
binding and enforceable in accordance with their respective terms and in full
force and effect immediately following the Closing.
(d) NO VIOLATION, BREACH OR DEFAULT. The Company is not, nor has the
Company or Seller received any notice that the Company is, nor, to the Knowledge
of Seller Parties, is any other party to a Material Contract in violation,
breach or default in any material respect thereunder, and, to the Knowledge of
Seller Parties, there has not occurred any event that with the lapse of time or
the giving of notice or both would constitute such a violation, breach or
default since December 31, 2002. No party to any Material Contract has (i)
indicated to the Company its intention to amend or terminate the Contract, (ii)
alleged any failure to perform on the part of the Company or (iii) made any
claims against, or sought indemnification from, the Company as to any matter
arising under or with respect to such Material Contract, and, to the Knowledge
of Seller Parties, neither Seller, the Company nor any of its directors or
officers has been advised that any such claims may be asserted or initiated.
Except for Liens made in accordance with the Assignment of Claims Act, 31 U.S.C.
Section 3727, and the Assignment of Contracts Act, 31 U.S.C. Section 15, the
Company has not assigned or otherwise conveyed or transferred, or agreed to
assign, to any Person, any right, title or interest in or to any of the Material
Contracts, or any account receivable relating thereto, whether as a security
interest or otherwise.
(e) FIXED PRICE CONTRACTS. With respect to each of the Material
Contracts that provides for a fixed price to be paid to the Company upon the
performance of the Company's services, (i) the estimate to complete set forth in
the Company's books represents the Program Manager's best estimate of all costs
expected to be incurred in order to secure final payment under the Contract;
(ii) all known risks related to delivery or cost have been set forth in the
Company's books; (iii) such Contract does not include retention or liquidated
damages
27
provisions that could impose aggregate costs to the Company exceeding $10,000
per Material Contract; and (iv) except as set forth on Schedule 4.23, no work is
being performed on such Contract outside the scope of the Contract.
(f) DELIVERABLES. Except as set forth on Schedule 4.23, with respect
to any Material Contract, (i) the acceptance of any deliverables has not been
contested; (ii) there are no outstanding requests for the removal of any of the
Company's personnel from the contract; (iv) no penalties of any type have been
assessed; and (v) there are no pending or to, the Company's Knowledge,
threatened, contract suspension, scope reduction or curtailment actions.
4.24. GOVERNMENT CONTRACTS.
(a) LIST. A true and correct list of each Government Contract which
is in effect as of the date of this Agreement and each Government Bid to which
the Company is a party and for which an award has not been issued thirty (30)
days or more prior to the date of this Agreement, is set forth in Schedule 4.24.
Schedule 4.24 sets forth a true and correct list of each Government Contract
which is in effect as of the date of this Agreement.
(b) COMPLIANCE; NO DEFAULT. Except as set forth in Schedule 4.24, to
the Knowledge of Seller Parties: (i) the Company has fully complied with all
material terms and conditions of each Government Contract and Government Bid to
which it is a party as required; (ii) the Company has complied with all material
requirements of any statute, rule or regulation pertaining to such Government
Contract or Government Bid; (iii) all representations and certifications made by
the Company with respect to such Government Contract or Government Bid were
accurate in every material respect as of their effective date and as of the date
hereof and the Company has fully complied with all such representations and
certifications in all material respects; and (iv) no termination for default,
cure notice or show cause notice has been issued and remains unresolved.
(c) INVESTIGATIONS; AUDIT. Except as set forth in Schedule 4.24: (i)
to the Knowledge of Seller Parties, none of the Company's employees, consultants
or agents is (or, to the Knowledge of Seller Parties, during the last five years
has been) under administrative, civil or criminal investigation or indictment by
any Governmental Authority with respect to the conduct of the business of the
Company; (ii) except for contract audits of a routine nature, there is not
currently pending, nor has there been pending within the last two (2) years, any
audit or investigation of the Company or any of its officers, directors,
employees or representatives with respect to any material alleged irregularity,
misstatement or omission arising under or relating to any Government Contract or
Government Bid by the Defense Contract Audit Agency of the United States,
General Accounting Office, Defense Criminal Investigative Service, the
Department of Justice or any United States Attorney Office, nor has any such
audit or investigation been threatened in writing; and (iii) during the last two
(2) years, the Company has not made any voluntary disclosure in writing to the
Government or any other Governmental Authority with respect to any material
alleged irregularity, misstatement or omission arising under or relating to a
Government Contract or Government Bid. Except as set forth in Schedule 4.24, the
Company has not had any such irregularities, misstatements or omissions arising
under or relating to any such Government Contract or Government Bid that has led
to any
28
of the consequences set forth in clause (i) or (ii) of the immediately preceding
sentence or any other material damage, penalty assessment, recoupment of payment
or disallowance of cost.
(d) CLAIMS; DISPUTES. Except as set forth in Schedule 4.24 there are
(i) no outstanding written claims against the Company or, to the Company's
Knowledge, any pending claims, either by any Governmental Authority or any prime
contractor, subcontractor, vendor or other third party arising under or relating
to any Government Contract or Government Bid to which the Company is a party,
and (ii) no written outstanding disputes between the Company, on the one hand,
and any Governmental Authority, on the other hand, under the Contract Disputes
Act or any other Federal statute or between the Company, on the one hand, and
any prime contractor, subcontractor or vendor, on the other hand, arising under
or relating to any such Government Contract or Government Bid.
(e) SUSPENSIONS; DEBARMENTS. Except as set forth in Schedule 4.24,
none of the Company nor, to the Knowledge of Seller Parties, any of its
employees, consultants or agents is (or during the last five years has been)
suspended or debarred from bidding on contracts or subcontracts or doing
business with any Governmental Authority or is (or during such period was) the
subject of a finding of non-responsibility or ineligibility for government
contracting. Except as set forth in Schedule 4.24, to the Knowledge of Seller
Parties, the Company has conducted its operations in all material respects in
compliance with all requirements of all Laws pertaining to all Government
Contracts and Government Bids. No suspension or debarment action with respect to
Government Contracts has been threatened in writing or commenced against the
Company or any of its officers, directors or current employees. To the Knowledge
of Seller Parties, there is no valid basis, nor current specific circumstances
which with the passage of time could become a basis, for the Company's
suspension or debarment from bidding on contracts or subcontracts from any
Governmental Authority.
(f) DISCLOSURES. Except as set forth in Schedule 4.24, to the
Knowledge of Seller Parties, the Company has not made any untrue statement of
material fact, or failed to state a material fact necessary to make the
statements therein contained, in light of the circumstances in which they are
made, not misleading, except for any untrue statement or failure to state a
material fact that would not result in any material liability to the Company as
a result of such untrue statement or failure to state a material fact in any
statement, representation or warranty, in any Government Contract, any
Government Bid or any exhibit thereto or in any certificate, statement, list,
schedule or other document submitted or furnished to any Governmental Authority
in connection with any Government Contract or Government Bid contained on the
date so furnished or submitted (or on any other date where such statement,
representation or warranty is deemed made or brought down as of a subsequent
date either under applicable Law or pursuant to the applicable Government
Contract or Government Bid or any exhibit thereto or in any written certificate,
statement, list, schedule or other document submitted or furnished to any
Governmental Authority in connection with such Government Contract or Government
Bid).
(g) RATE SUBMISSIONS. Except as set forth in Schedule 4.24, the
final indirect rate submissions, including all support schedules, submitted to
any Governmental Authority with respect to Government Contracts of the Company
have been approved for all years prior to 2000. Except as listed on Schedule
4.24, the Company has submitted final invoices for all Contracts or option
periods with a period of performance ending prior to June 30, 2004.
29
(h) NATIONAL SECURITY. The Company is in compliance in all material
respects with all national security obligations, including those specified in
the National Industrial Security Program Operating Manual, DOD 5220.22-M
(January 1995).
(i) PROCUREMENT. Except as set forth in Schedule 4.24, to the extent
required by Law, all Government Contracts have been awarded, and all Government
Bids have been submitted, under a full and open procurement process without
preferential treatment of any kind. None of the Government Contracts listed on
Schedule 4.24 are subject to termination by a Governmental Authority solely as a
result of the consummation of the transactions contemplated by this Agreement.
(j) COST AND PRICING. To the Knowledge of Seller Parties, there
exists no basis for a claim of any material liability by any Government
Authority as a result of defective cost and pricing data submitted to such
Governmental Authority, including any such data relating to liabilities accrued
on the Company's books or in its financial accounts for deferred compensation to
any Company employees. To the Knowledge of Seller Parties, no audit or review of
any Government Contract or agreement will likely result in the disallowance of,
or claim for, any amount paid or payable to the Company under such contract or
agreement, whether as a result of excess payments, excess profit recapture or
otherwise.
(k) FOREIGN NATIONALS. Except as set forth on Schedule 4.24, there
are no foreign nationals employed in any Government Contract nor are there any
employees or contractors working on Government Contracts outside of the United
States.
(l) MANDATORY MODIFICATIONS. Seller has properly processed all
mandatory modifications issued by GSA including FX03, FX04 and FX06 and has
received fully-approved and executed modifications with respect thereto.
4.25. RELATED PARTY TRANSACTIONS. Except as disclosed on Schedule 4.25,
neither Seller nor any, employee or Affiliate of the Company: (a) has any cause
of action or other claim whatsoever against, or owes any amounts to, the Company
except for claims of employees in the Ordinary Course of Business, such as for
accrued vacation pay or for accrued benefits under a Plan maintained by the
Company; (b) owns, directly or indirectly, in whole or in part, any tangible or
intangible property which the Company is using or which is necessary for the
business of the Company; (c) owns any direct or indirect interest of any kind
in, or is an Affiliate or employee of, or consultant or lender to, or borrower
from, or has the right to participate in the management, operations or profits
of, any Person that is (i) a competitor, supplier, customer, client,
distributor, lessor, tenant, creditor or debtor of the Company, (ii) engaged in
a business related to the business of the Company or (iii) participating in any
transaction to which the Company is a party; or (d) otherwise is or has been a
party to any Contract or transaction with the Company.
4.26. CUSTOMERS AND SUPPLIERS.
(a) CUSTOMERS. Set forth on Schedule 4.26 is a list of the ten (10)
largest customers of the Company (on a consolidated basis) for the most recent
fiscal year and set forth opposite the name of each such customer on Schedule
4.26 is the percentage of consolidated net
30
sales attributable to such customer. Since December 31, 2003, no customer listed
on Schedule 4.26 has indicated that it shall stop, or materially decrease the
rate of, buying materials, products or services from the Company outside of
decreases which occur in the Ordinary Course of Business. Also set forth on
Schedule 4.26 is a true, correct and complete list of any additional customers
that the Company reasonably anticipates shall be among the ten (10) largest
customers for the current fiscal year. For purposes of this SECTION 4.26,
"CUSTOMER" shall mean any Person who or which has entered into a Contract with
the Company under which such Person has agreed to purchase, license or otherwise
acquire or distribute the Company's goods or services (without regard to the end
user of the goods or services in question).
(b) SUPPLIERS. Since December 31, 2003, no material supplier of the
Company has indicated that it shall stop, or materially decrease the rate of,
supplying materials, products or services to the Company.
4.27. EMPLOYEES; EMPLOYMENT AGREEMENTS.
(a) EMPLOYEES AND CONSULTANTS. Set forth on Schedule 4.27 is a true,
correct and complete list of all employees of and consultants to the Company as
of June 30, 2004 (including each employee on leave of absence or on layoff
status) showing, in respect of each such employee, (i) job title and function,
(ii) date of hire, (iii) hourly wage rate or salary or other basis of
compensation, (iv) type of security clearance, (v) each bonus, hourly rate
increase and/or salary increase granted (or committed to be granted, whether in
connection with the transactions contemplated by this Agreement or any of the
other Transaction Documents or otherwise), since December 31, 2003, (vi) accrued
vacation, sick time or other paid time off, and (vii) service credited for
purposes of vesting and eligibility to participate in any Plan. Each employee of
the Company has all material licenses, authorizations and security clearances
necessary or required for such employee to perform his or her duties and
responsibilities on behalf of the Company. All employees of the Company are
citizens of, or are authorized in accordance with federal immigration laws to be
employed in the United States.
(b) EMPLOYEE AND CONSULTANT AGREEMENTS. Set forth on Schedule 4.27
is a true, correct and complete list of each employment, compensation, bonus,
severance pay, termination pay, change of control and deferred compensation
agreement or similar Contract between the Company or Seller and any employee of
the Company (collectively, the "EMPLOYMENT AGREEMENTS"). Except as disclosed on
Schedule 4.27, neither the execution of this Agreement nor the consummation of
the transactions contemplated hereby will result in any payment being made or
coming due from the Company to any employee of, or consultant to, the Company
pursuant to any such Contract.
4.28. EMPLOYEE RELATIONS.
(a) LABOR ACTIVITIES. There has not occurred nor has the Company
been threatened with any strikes, slow downs, picketing, work stoppages,
concerted refusals to work overtime or other similar labor activities by
employees of the Company. The employees of the Company are not represented by
any labor union or other labor representative, and there are no collective
bargaining agreements or other labor contracts in effect with respect to such
employees. To the Knowledge of Seller Parties, there are no Persons attempting
to represent or
31
organize or purporting to represent any employees of the Company. The Company
has complied and is complying with all Laws relating to the employment of labor,
including the provisions relating to wages, hours, collective bargaining and
employee health, safety and welfare.
(b) EMPLOYEE LITIGATION. Except as disclosed on Schedule 4.28, there
are no Proceedings against the Company or, to the Knowledge of Seller Parties,
threatened, based on, arising out of, in connection with, or otherwise relating
to, the employment (or termination of employment) by the Company of any
individual, including individuals classified as independent contractors or
"leased employees" (within the meaning of Section 414(n) of the Code), or the
failure to employ any individual, including any Proceeding relating to
employment discrimination, equal pay, employee health, safety or welfare, sexual
harassment, immigration, wages and hours or workers' compensation
4.29. EMPLOYEE BENEFIT MATTERS.
(a) PLANS. Except as disclosed on Schedule 4.29(a), neither the
Company nor any ERISA Affiliate maintains, sponsors or contributes to, or has
any obligation to contribute to or have any Liability with respect to any plan,
program, policy or Contract which is an employment, consulting, severance pay,
termination pay, change in control or deferred compensation agreement, or an
executive compensation, incentive bonus or other bonus, employee pension,
profit-sharing, savings, retirement, stock option, stock purchase, stock
appreciation rights, phantom stock, fringe benefit, vacation, sick leave, life,
health, medical, disability or accident insurance plan, or other employee
benefit plan, program, policy or Contract, including any "employee benefit plan"
as defined in Section 3(3) of ERISA under which the Company has any Liability
(individually, a "PLAN," and collectively, the "PLANS"). Each such Plan is
identified on Schedule 4.29(a) to the extent applicable, as one or both of the
following: an "employee pension benefit plan" (as defined in Section 3(1) of
ERISA) or an "employee welfare plan" (as defined in Section 3(2) of ERISA).
(b) PLAN LIABILITIES. Neither the Company nor any of its ERISA
Affiliates is subject to any Liability under Title IV of ERISA, Section 302 of
ERISA, Section 412 or 4971 of the Code, whether in respect of any Plan
maintained by the Company or by any other employer or Person or otherwise. No
event has occurred, and to the Knowledge of the Seller Parties, no circumstance
exists, in connection with which the Company or any of its ERISA Affiliates, or
any Plan, directly or indirectly, could be subject to any material Liability
under ERISA, the Code or any other applicable Law or under any Contract, Law or
Order, pursuant to or under which the Company has agreed to indemnify or is
required to indemnify any Person against any Liability incurred under, or for a
violation or failure to satisfy the requirements of ERISA, the Code or any other
statute, regulation or order applicable to any Plan.
(c) PLAN ADMINISTRATION AND COMPLIANCE. With respect to each Plan:
(i) all payments due from the Company have been timely made and all amounts
properly accrued as liabilities of the Company which have not been paid have
been and will be properly recorded on the books of the Company; (ii) each such
Plan which is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) and intended to qualify under Section 401 of the Code has received a
favorable determination letter from the IRS with respect to such qualification,
its related trust has been determined to be exempt from taxation under Section
501(a) of the Code,
32
and nothing has occurred since the date of such letter that has or is likely to,
and the consummation of the transactions contemplated hereby will not, adversely
affect such qualification or exemption; (iii) there are no Proceedings pending
(other than routine claims for benefits) or, to the Knowledge of Seller Parties,
threatened with respect to such Plan or against the assets of such Plan; (iv)
except as set forth on Schedule 4.29(c), such Plan can be terminated within
thirty (30) days, without payment of any additional contribution or amount by
the Company and without the vesting or acceleration of any benefits promised or
provided by such Plan; and (v) the Company has complied with, and such Plan
conforms in form and operation to, all applicable Laws, including ERISA and the
Code.
(d) PROCEEDINGS. No Plan is under audit or is the subject of an
investigation or other Proceeding by the IRS, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation (the "PBGC") or any other Governmental
Authority. The Company and its ERISA Affiliates have paid all amounts due to the
PBGC pursuant to Section 4007 of ERISA.
(e) EFFECT OF TRANSACTIONS. Except as disclosed on Schedule 4.29(e),
the consummation of the transactions contemplated by this Agreement and of the
other Transaction Documents (alone or together with any other event) will not
(i) entitle any Person to any benefit under any Plan, (ii) accelerate the time
of payment or vesting, or increase the amount, of any compensation or other
benefit due to any Person under any Plan, or (iii) result in the payment or
series of payments by the Company to any Person of an "excess parachute payment"
within the meaning of Section 280G of the Code, or any other payment which is
not deductible for federal income tax purposes under the Code, whether or not
such payment is considered to be reasonable compensation for services rendered.
(f) NO CONTINUING LIABILITIES. Except as disclosed in the Financial
Statements, the Company has no material Liability with respect to an obligation
to provide benefits, including death or medical benefits (whether or not
insured) with respect to any Person beyond their retirement or other termination
of service other than (i) coverage mandated by Part 6 of Title I of ERISA or
Section 4980B of the Code or state law, (ii) retirement or death benefits under
any employee pension plan, (iii) disability benefits under any employee welfare
plan that have been fully provided for by insurance or otherwise, (iv) deferred
compensation benefits accrued as liabilities on the books of the Company, (v)
worker's compensation or similar benefits, (vi) accrued vacation or sick leave
or (vii) benefits in the nature of severance pay.
(g) DELIVERY OF PLAN DOCUMENTS. The Company has delivered to Buyer,
with respect to each Plan for which the following exists:
(i) a copy of the three most recent forms 5500 with respect to
each Plan;
(ii) the most recent copy of the Summary Plan Description,
together with each Summary of Material Modifications, required under ERISA
with respect to such Plan, all current material employee communications
relating to such Plan, and, unless the Plan is embodied entirely in an
insurance policy to which the Company or any of its ERISA Affiliates are a
party, a true and complete copy of such Plan;
33
(iii) if the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a true, correct and
complete copy of the trust instrument or other funding agreement; and
(iv) the most recent determination letter received from the IRS
with respect to each Plan that is intended to be a "qualified plan" under
Section 401 of the Code.
(h) DELIVERY OF PLAN FINANCIAL STATEMENTS. With respect to each Plan
for which financial statements are required by ERISA, Seller Parties have
delivered to Buyer true, correct and complete copies of such financial
statements for the last three fiscal years of such Plan and other than
investment gains or losses or additional contributions or distributions since
the most recent financial statement there has been no material adverse change in
the financial status of such Plan since the date of such interim financial
statements.
(i) NO NEW PLANS OR AMENDMENTS. The Company (and to the extent
liability could reasonable accrue to the Company, its ERISA Affiliates) have not
announced a plan or legally binding commitment to create any additional Plans or
to amend or modify any existing Plan, other than amendments required by Law or
those that would not materially increase costs under any such Plan.
(j) COMPLIANCE. The Company and its ERISA Affiliates have complied
in all material respects with the provisions of Part 6 of Title I of ERISA and
Sections 4980B, 9801 and 9802 of the Code.
(k) CERTAIN PLANS. Neither the Company nor any of its ERISA
Affiliates does and has never sponsored, maintained, contributed to, or incurred
an obligation to contribute to any Defined Benefit Plan, Multiemployer Plan or
to a Multiple Employer Plan. For these purposes, "DEFINED BENEFIT PLAN" has the
meaning set forth in Section 414 of the Code, "MULTIEMPLOYER PLAN" means a
multiemployer plan as defined in Section 3(37) and 4001 (a) (3) of ERISA and
"MULTIPLE EMPLOYER PLAN" means any plan sponsored by more than one employer,
within the meaning of Sections 4063 or 4064 of ERISA or Section 413(c) of the
Code.
(l) NON-EXEMPT EMPLOYEES. The Company has complied with and is in
compliance with the Fair Labor Standards Act 29 U.S.C. Sections 201 et seq., and
all relevant state wage and hour Laws and in particular has (i) properly
classified employees as either exempt or non-exempt for purposes of determining
who is eligible for receiving overtime pay and (ii) paid all non-exempt
employees for any and all overtime work they have performed for the Company.
(m) INDEPENDENT CONTRACTORS. Any Person who has provided or is
properly providing services to the Company and who has not or will not receive
an IRS W-2 form has been classified as an independent contractor in full
compliance with the Code and federal and state wage and hour Laws and the
Company has fully and accurately reported such independent contractors'
compensation on IRS forms 1099 when required to do so.
34
4.30. TAX MATTERS.
(a) (i) Seller and the Company have timely filed all income and
other material Tax Returns for all taxable periods ended on or prior to
the date of this Agreement required to be filed by applicable Law and has
paid all amounts due in respect of Taxes relating to periods covered by
such Tax Returns (whether or not actually shown on such Tax Returns); all
such Tax Returns are true, correct and complete in all material respects
and accurately set forth all items required to be reflected or included in
such Tax Returns by applicable Tax Laws; and as of the time of filing, all
such Tax Returns correctly reflected the facts regarding the income,
gains, losses, deductions, business, assets, operations, activities,
status or other matters of the Company or any other information required
to be shown thereon;
(ii) Neither Seller nor the Company have executed any waivers
or comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns;
(iii) Seller and the Company have withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other Person and has complied in all material respects with
all information reporting and back-up withholding requirements, including
maintenance of required records with respect thereto, in connection with
amounts paid or owing to any employee, creditor, independent contractor,
or other third party;
(iv) since December 31, 2002, no Proceeding has commenced,
and, to the Knowledge of Seller Parties, prior to December 31, 2002, no
Proceeding was commenced or threatened, by any Governmental Authority in a
jurisdiction where the Company does not file Tax Returns that it is or may
be subject to any Tax of that jurisdiction;
(v) there are no Liens with respect to any Taxes, other than
Liens for Taxes not yet due and payable, upon any of the assets or
properties of the Company;
(vi) Seller and the Company have paid in full or set up
reserves in accordance with GAAP in respect of all Taxes for the periods
covered by the filed Tax Returns described in subsection (i) of this
Section 4.30, as well as all other Taxes, penalties, interest, fines,
deficiencies, assessments and governmental charges that have become due or
payable (including all Taxes that the Company is obligated to withhold
from amounts paid or payable to or benefits conferred upon employees,
independent contractors, creditors, stockholders and other Persons) on or
prior to the date of the signing of this Agreement; and to the Company's
Knowledge there is no proposed Liability for any Tax to be imposed upon
Seller or the Company for which there is not an adequate reserve;
(vii) adequate provisions in accordance with GAAP have been
made in the Financial Statements for the payment of all Taxes for which
Seller may be liable for
35
the periods covered thereby that were not yet due and payable as of the
date thereof, regardless of whether the Liability for such Taxes is
disputed; and
(viii) Since the date of June 30, 2004, neither Seller nor the
Company has incurred any liability for Taxes arising from extraordinary
gains or losses, as that term is used in GAAP, outside the ordinary course
of business consistent with past custom and practice.
(b) The Company is not liable for any Taxes of any other Person,
whether pursuant to U.S. Treasury Regulation Section 1.1502-6 (or any comparable
provision of Law) or otherwise, and there is no Contract or intercompany account
system in existence under which the Company has, or may at any time in the
future have, an obligation to contribute to the payment of any portion of a Tax
(or pay any amount calculated with reference to any portion of a Tax) of any
group of corporations of which the Company is or was a part.
(c) Set forth on Schedule 4.30(c) is a true, correct and complete
list of all income and other Tax Returns filed by Seller and the Company that
have been examined or audited by the IRS or other appropriate authority with
respect to the past three fiscal years of Seller and the Company, and a list of
all adjustments resulting from each such examination or audit. Except as set
forth on Schedule 4.30(c), no such examination or audit is in progress. Except
as set forth on Schedule 4.30(c), all deficiencies proposed as a result of such
examinations or audits have been paid or finally settled and no issue has been
raised in any such examination or audit that, by application of similar
principles, reasonably can be expected to result in the assertion of a
deficiency for any other year of Seller and the Company not so examined or
audited. Except for Taxes payable with Tax Returns not yet due and filed, there
are no grounds for any further Tax Liability, beyond amounts accrued with
respect to the years that have not been examined or audited.
(d) None of the assets owned by the Company is property that is
required to be treated as owned by any other Person pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, as in effect immediately prior
to the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(e) Seller is not a foreign person within the meaning of Section
1445 of the Code.
(f) At all times since its organization, the Company has been
classified for United States federal income tax purposes as disregarded as an
entity separate from its owner within the meaning of Section 301.7701-3 of the
Treasury Regulations. The Company is not a party to any joint venture,
partnership or other arrangement that is treated as a partnership for federal
income tax purposes.
4.31. ENVIRONMENTAL MATTERS. The Company (including its predecessors): (a)
except in compliance with applicable Law, have not engaged in or permitted any
operation or activity at or upon, or any use or occupancy of, any real property
for the purposes of or in any way involving, the handling, use, treatment,
disposal, dumping or storage of any Hazardous Materials on, under, in or about
any real property, or transported any Hazardous Materials to, from or
36
across any real property; (b) is, and at all times has been, in compliance with
any and all applicable Environmental, Health and Safety Laws; (c) has received
and is, and at all times has been, in compliance with all Permits required under
any applicable Environmental, Health and Safety Law for the conduct of its
business; and (d) has not received notice of any actual or potential claim,
Proceeding or Liability involving the handling, use, storage, transportation,
disposal, release or threat of release of Hazardous Materials. There are no
facts or circumstances providing a basis for any material claim or Proceeding
against, or Liability of, the Company involving the handling, use, storage,
transportation, disposal or release of Hazardous Materials. The Company has
provided to Buyer copies of all documents, records and information available to
the Company concerning any environmental, health or safety matter relevant to
the Company, whether generated by the Company or others, including environmental
audits, environmental risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials, spill control plans, and
reports, correspondence, Permits related to environmental, health or safety
matters.
4.32. BANKS; POWERS OF ATTORNEY. Set forth on Schedule 4.32 is a true,
correct and complete list setting forth the name of each financial institution
in which the Company has an account or safe deposit box, the title and number of
the account, the names of all persons authorized to draw thereon or to have
access thereto, and the names of any Person holding a power of attorney from the
Company.
4.33. BROKERS. Except as disclosed on Schedule 4.33, no investment banker,
broker, agent, finder, advisor, firm or other Person, other than Xxxxxxxx Xxxxx
Xxxxxx & Xxxxx Capital (the "SELLER'S INVESTMENT BANKER") is, or will be,
entitled to receive any brokerage, finder's or other payment, fee or commission
in connection with this Agreement or the transactions contemplated hereby based
upon any Contract made by or on behalf of Seller or the Company or any of its
officers, directors or employees.
4.34. CERTAIN BUSINESS PRACTICES. Neither the Company nor, to the
Knowledge of Seller Parties, any of the Company's directors, officers,
employees, consultants or agents has, in connection with or furtherance of the
business of the Company: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments relating to political activity; (b)
made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977; (c) consummated any
transaction, made any payment, entered into any Contract or taken any other
action in violation of Section 1128B(b) of the Social Security Act; or (d) made
any other unlawful payment or other arrangement which could cause the Company or
its affiliates to be disqualified or debarred from serving as a contractor,
directly or indirectly, for any Governmental Authority.
4.35. PERSONALLY IDENTIFIABLE INFORMATION AND PRIVACY. To the Knowledge of
Seller Parties, the Company's collection, use, storage, transfer and disclosure
of any personally identifiable information ("INFORMATION PRACTICES"), and use by
third parties having authorized access to the Company's websites or other
records, conforms, and at all times has conformed, to all applicable Laws,
including applicable provisions of HIPAA and all applicable standards set forth
in any final regulations and orders promulgated under such Act, and all
contractual commitments of the Company to its customers, the viewers of the
Company's websites, and third
37
parties relating to such practices. To the Knowledge of Seller Parties, the
Company's Information Practices have been consistent with all statements or
representations made to customers, potential customers and third parties,
whether orally or in writing, regarding such practices. Without limiting the
foregoing, to the Knowledge of Seller Parties, the Company has taken all
necessary and appropriate steps to comply with the regulations set forth in 45
C.F.R. Parts 160, 162 and 164 as promulgated by the U.S. Department of Health
and Human Services, and has obtained all written authorizations or assurances
required under such regulations.
4.36. COMPLETE DISCLOSURE. No representation or warranty made by any of
Seller Parties in this Agreement, including the schedules hereto, or in any
certificate furnished or to be furnished to Buyer pursuant to this Agreement, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading or necessary to provide Buyer with adequate and complete
information as to the Company or the businesses, operations, finances, assets
and liabilities of the Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1. ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts with
all corporate power and authority to own or lease all of its properties and
assets and to conduct its business as presently conducted.
5.2. AUTHORITY OF BUYER. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement and each of the other
Transaction Documents to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by Buyer of this Agreement and each of
the other Transaction Documents to which it is a party, the performance by Buyer
of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of Buyer and no other corporate proceedings
on the part of Buyer are necessary to authorize this Agreement and each of the
Transaction Documents to which Buyer is a party, the performance of such
obligations or the consummation of such transactions.
5.3. ENFORCEABILITY. This Agreement and each of the other Transaction
Documents to which Buyer is a party has been duly and validly executed and
delivered by Buyer and (assuming such agreements constitute the legal, valid and
binding obligations of Seller Parties) constitutes the legal, valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms.
5.4. NO VIOLATION OR CONFLICT; CONSENTS. Neither the execution and
delivery by Buyer of this Agreement or any of the other Transaction Documents to
which it is a party, nor the performance by Buyer of its obligations hereunder
and thereunder, nor the consummation of
38
the transactions contemplated hereby and thereby will, directly or indirectly
(with or without notice or lapse of time or both):
(i) violate, contravene, conflict with or breach any term or
provision of the Organizational Documents of Buyer or any resolution or vote
adopted by the Board of Directors or stockholders of Buyer;
(ii) violate, contravene, conflict with, breach, constitute a
default under, require any notice under, or give any Person the right to cancel,
modify or terminate, or accelerate the maturity or performance of, any
obligation or other Contract or Consent to which Buyer is a party or by which
any of their respective assets or properties is bound;
(iii) give any Person the right to cause an indemnity payment to be
made by Buyer under, or result in the creation or imposition of any Lien upon
any property or assets of Buyer under, any Contract, Permit, Consent, Law or
Order to which Buyer is a party or by which Buyer has any rights or Liabilities
or any of their respective assets or properties is subject, bound or encumbered;
(iv) give any Person the right to require Buyer to purchase or
repurchase, redeem or acquire any Liabilities or Contracts of any kind;
(v) violate, contravene or conflict with any of the terms,
conditions or requirements of, or require any notice to or filing with any
Governmental Authority or other Person under, any Permit, Law or Order
applicable to Buyer or any of their respective assets or properties;
(vi) give any Governmental Authority the right to revoke, withdraw,
suspend, cancel, modify, or terminate any Permit held by Buyer; or
(vii) require any Permit or other Consent of, or filing with or
notification to, any Governmental Authority or other Person.
5.5. BROKERS. No investment banker, broker, agent, finder, advisor, firm
or other Person acting on behalf of Buyer or its stockholders is, or will be,
entitled to any commission or broker's or finder's fees from any of the parties
hereto, or from any Person controlling, controlled by or under common control
with any of the parties hereto, in connection with any of the transactions
contemplated herein.
5.6. INVESTMENT INTENT. Buyer is acquiring the Interests for its own
account and not with a view to its distribution within the meaning of Section
2(11) of the Securities Act. Buyer confirms that Seller and the Company have
made available to Buyer and its representatives and agents the opportunity to
ask questions of the officers and management employees of the Company and to
acquire such additional information about the business and financial condition
of the Company as Buyer has requested.
5.7. FINANCING. Buyer has provided Seller with a true, complete and
correct copy of that executed Commitment Letter dated July 30, 2004, from Xxxxx
Brothers Xxxxxxxx & Co. pursuant to which it will provide an aggregate amount of
$92,000,000 to fund Buyer's purchase
39
of the Interests (the "COMMITMENT LETTER"). As of the date hereof, the
Commitment Letter has not been withdrawn and, to Buyer's Knowledge, no
circumstances exist which would reasonably be likely to cause any of the terms
or conditions of the Commitment Letter to not be satisfied.
5.8. LITIGATION. There is no suit, action, proceeding, claim or
investigation pending, or, to Buyer's Knowledge, threatened, against Buyer that
would affect the consummation of the transactions contemplated by this
Agreement.
ARTICLE 6
COVENANTS OF THE PARTIES
6.1. CONDUCT OF BUSINESS OF THE COMPANY.
(a) COMPANY ACTION. During the period from the date of this
Agreement to the Closing, the Company shall, and Seller shall cause the Company
to: (i) conduct its operations in the Ordinary Course of Business; (ii) use
their reasonable best efforts to preserve intact its business organization, keep
available the services of its current managers, officers, employees, consultants
and agents; (iii) use their reasonable best efforts to preserve the goodwill of
and maintain satisfactory relationships with all customers, suppliers,
distributors, lessors, tenants, creditors, debtors, employees, consultants and
agents of the Company and any other Persons having business relationships with
the Company; and (iv) promptly advise Buyer in writing of any Material Adverse
Event. Without limiting the generality of the foregoing, during the period
specified in the preceding sentence, the Company shall not, and Seller shall
cause the Company not to, without the prior written consent of Buyer, which
consent shall not be unreasonably withheld:
(i) issue, sell, grant options or rights to purchase, pledge
or authorize or propose the issuance, sale, grant of options or rights to
purchase or pledge any Company Securities, or grant or accelerate any
right to convert or exchange any Company Securities;
(ii) purchase, acquire or redeem, directly or indirectly, or
amend the terms of any Company Securities;
(iii) split, combine or reclassify its membership interests or
declare, set aside, make or pay any distribution (whether in cash or
property);
(iv) make or offer to make (A) any acquisition of any interest
in any assets or securities of any Person (whether by merger, stock
purchase, asset purchase, lease, license or otherwise) or (B) any sale or
other disposition or encumbrance of any of its assets or securities
(whether by merger, stock sale, asset sale, lease, license or otherwise);
(v) except in the Ordinary Course of Business, enter into any
material Contract or amend or cause the termination of any Material
Contract, or grant any release or relinquishment of any rights under any
Material Contract;
40
(vi) (A) incur or assume any Indebtedness, except for
short-term accounts payable and accrued liabilities (as such term is used
in the Financial Statements) in the Ordinary Course of Business; or (B)
enter into any financing arrangements or modify the terms of any existing
Indebtedness or financing arrangements;
(vii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
Liabilities of any other Person;
(viii) make any loans, advances or capital contributions to,
or investments in, any other Person;
(ix) change any of the accounting principles or practices used
by it (including changes in reserve or accrual amounts or policies) in a
manner that would have a Material Adverse Effect;
(x) make, change or revoke any Tax election, settle or
compromise any material Tax Liability, or amend any Tax Return;
(xi) propose or adopt any amendments to the Organizational
Documents of the Company;
(xii) grant any equity-related performance or similar awards
or bonuses;
(xiii) forgive any loans to any directors, officers or
employees of the Company or any of their respective affiliates or
associates;
(xiv) except in the Ordinary Course of Business, enter into
any new, or amend any existing, Material Contract;
(xv) enter into any new, or amend any existing, employment,
consulting, severance payment, termination payment, salary continuation,
change of control or deferred compensation agreements or similar Contracts
with any directors, officers or employees of the Company, or make any
changes in the compensation or benefits payable to directors, officers or
employees of the Company, except for regularly scheduled increases to
employee compensation and benefits made in the Ordinary Course of
Business;
(xvi) enter into any collective bargaining or other labor
Contract;
(xvii) adopt, approve or enter into any new, or materially
amend or modify, or terminate any existing, Plan or other employee benefit
plan or Contract;
(xviii) adopt or approve any new, or amend, modify or
terminate any existing, plan regarding the compensation of employees or
consultants, including any compensation plan for sales employees;
(xix) hire or terminate any management level employees;
41
(xx) settle or agree to settle any claim or Proceeding
(including any claim or Proceeding relating to this Agreement or the
transactions contemplated hereby) or pay, discharge or satisfy or agree to
pay, discharge or satisfy any claim or Liability other than the payment,
discharge or satisfaction of Liabilities (A) reflected or reserved against
in-full in the Financial Statements, or incurred in the Ordinary Course of
Business subsequent to June 30, 2004 or (B) in an aggregate amount not to
exceed $20,000; or
(xxi) agree to take any of the foregoing actions or any action
which would make any representation or warranty in this Agreement untrue
or incorrect as of the date when made or as of a future date or which
would result in any of the conditions set forth in ARTICLE 7 not being
satisfied.
(b) SELLER ACTION. During the period from the date of this Agreement
to the Closing, Seller shall not and Seller shall cause the Company not to (i)
take any action specified in SECTION 6.1(a) on behalf of or with respect to the
Company or (ii) take any action which would make any representation or warranty
in this Agreement untrue or incorrect as of the date when made or which would
result in any of the conditions set forth in ARTICLE 7 hereof not being
satisfied.
6.2 ACCESS TO INFORMATION; CUSTOMER VISITS.
(a) ACCESS. From and after the date of this Agreement, Seller
Parties shall: (a) afford Buyer and Buyer's commercial lenders and their
respective accountants, investment bankers, counsel and other authorized
representatives complete access (during regular business hours, upon reasonable
advance notice) to all officers, key employees, offices and other facilities,
and to all Contracts, books and records (including Tax Returns of the Company)
and other documents and data of the Company, and cause the Company's Accountants
to provide access to their work papers and such other information as Buyer may
reasonably request; (b) permit Buyer to make such inspections as Buyer may
require; and (c) cause the officers of the Company to furnish Buyer with such
financial and operating data and other information with respect to the business,
properties and personnel of the Company as Buyer may from time to time
reasonably request. Nothing contained in this Agreement shall affect the
continuing applicability of the Confidentiality Agreement. The access provided
pursuant to this SECTION 6.2 shall be subject to such measures as may be
reasonably required to minimize the disruption to the Company's business,
including Seller's having the right to be present at any meeting or telephone
call pursuant to this SECTION 6.2.
(b) CUSTOMER VISITS. Prior to the Closing, the Company shall have
introduced, in the presence of Xxxxx Xxxxxx, Xxxx Xxxxxx, Xxx Xxxxx and/or Xxx
Xxxxxx, as appropriate, to the senior representative of those customers listed
on the attached Schedule 6.2(b).
6.3. REASONABLE BEST EFFORTS; COMPLIANCE WITH ANTITRUST LAWS.
(a) CONSUMMATION OF TRANSACTION. Subject to the terms, conditions
and other provisions of this Agreement, each of the parties hereto agrees to use
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all
42
things necessary, proper or advisable under applicable Laws and Orders to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement. In connection with and without
limiting the foregoing, Seller Parties and Buyer shall cooperate with one
another (i) in promptly determining whether any notices or filings are required
to be or should be given or made, or whether any Permits or Consents are
required to be or should be obtained under any Law or Order or whether any
Consents are required to be or should be obtained from other parties to any
Contract in connection with the consummation of the transactions contemplated by
this Agreement, and (ii) in promptly giving or making any such notices or
filings, furnishing information required in connection therewith and seeking to
timely obtain any Permits and Consents. Seller shall use its reasonable best
efforts to secure the Permits and Consents listed on Schedule 4.8. In case at
any time after Closing any further action is necessary or desirable to carry out
the purposes of this Agreement, the parties hereto (or as applicable, their
directors, officers, employees, consultants and agents) shall take all such
necessary action as may be reasonable in the context thereof. Buyer and Seller
agree to consult with each other as to the timing, manner and content of any
general communication to the employees of the Company with respect to the
transaction contemplated by this Agreement.
(b) DEFENSE OF PROCEEDINGS. In the event that any Proceeding seeking
to challenge, block or otherwise frustrate the consummation of the transactions
contemplated hereby is commenced, whether before or after the Closing, the
parties hereto agree to cooperate and use reasonable best efforts to defend
vigorously against such Proceeding.
(c) ANTITRUST LAWS. Buyer and Seller Parties shall cooperate in
making filings under the HSR Act and shall use their best efforts to take, or
cause to be taken, all actions necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, including using its best efforts to resolve such objections, if any,
as the Antitrust Division of the Department of Justice or the Federal Trade
Commission or state antitrust enforcement or other Governmental Entities may
assert under the antitrust laws with respect to the transactions contemplated
hereby. Buyer and Seller Parties agree to use their best efforts to make any
filings required under the HSR Act within five (5) days of the execution of this
Agreement, and agree to request early termination of the waiting period relating
to any such filing. In the event an action is instituted by any Person
challenging the transactions contemplated hereby as violative of the antitrust
laws, each of Buyer and Seller Parties shall use its best efforts to resist or
resolve such action.
6.4. NOTIFICATION OF CERTAIN MATTERS. Seller Parties shall give prompt
notice to Buyer, and Buyer shall give prompt notice to Seller Parties, of the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely (a) to cause any representation or warranty of such party
contained in this Agreement to be untrue, inaccurate or incomplete in any
material respect at or prior to the Closing, or (b) to result in any material
failure of such party to comply with or satisfy any condition, obligation,
covenant or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this SECTION 6.4
shall not limit or otherwise affect any representations and warranties or any
conditions, obligations, covenants or agreements under this Agreement, or the
rights or remedies available hereunder to any of the parties receiving such
notice. Should any of the events for which notice is provided pursuant to this
SECTION 6.4 require a change to any of the schedules delivered by Seller
Parties, Seller Parties shall deliver an amendment to the relevant schedule
43
specifying such change. If Seller Parties have made accurate supplemental
disclosure in accordance with this SECTION 6.4 and Buyer nevertheless chooses to
close the transactions contemplated by this Agreement, Buyer shall not be
entitled to claim a Breach of the relevant representation or warranty in
connection with which such supplemental disclosure was made.
6.5. PUBLIC ANNOUNCEMENTS. No party to this Agreement shall without the
express written approval of the other parties, which approval shall not be
unreasonably withheld, issue any press release or make any general internal
announcement or otherwise make any public statement with respect to this
Agreement, the sale of the Company or the Interests, or any of the other
transactions provided for in this Agreement or any of the other Transaction
Documents; provided, however, that nothing in this SECTION 6.5 shall be deemed
to prohibit any party from making any disclosure which its counsel in good xxxxx
xxxxx necessary or advisable in order to satisfy such party's disclosure
obligations imposed by Law.
6.6. CONFIDENTIAL BUSINESS INFORMATION. Seller represents and warrants
that it has provided confidential information about the business of the Company
to other prospective purchasers only pursuant to a confidentiality agreement
that is substantially similar to the Confidentiality Agreement. Seller will
maintain confidentiality about the business consistent with past practice.
Seller will request destruction or retrieve from any other prospective
purchasers of the business any confidential information provided to them, and
Seller will enforce against other prospective purchasers its rights under the
confidentiality agreements it has entered into with them.
6.7. EXCLUSIVE DEALING; ACQUISITION PROPOSALS. After the date hereof,
Seller Parties shall not (nor shall they permit any of the Affiliates,
employees, consultants or agents of the Company to), directly or indirectly, (a)
except as contemplated by this Agreement, solicit, encourage, initiate or
participate in any negotiations or discussions with respect to any offer or
proposal to acquire all or any substantial part of the business and properties
or membership interests of the Company (including any acquisition structured as
a sale of stock, sale of assets, merger, consolidation or share exchange) (a
"COMPANY ACQUISITION"), or (b) except as contemplated by this Agreement,
disclose any information not customarily disclosed to any Person concerning the
business, operations and assets or properties of the Company, afford to any
Person access to the assets, properties, books or records of the Company or
otherwise assist or encourage any Person in connection with any of the
activities referred to in clause (a) of this sentence. Seller will not, except
as contemplated by this Agreement, (a) transfer any Interests to any other
Person, or solicit, encourage, initiate or participate in any negotiations or
discussions with respect to any offer or proposal therefore, or (b) vote the
Interests in favor of any Company Acquisition.
6.8. PREPARATION OF CERTAIN FINANCIAL STATEMENTS. Upon execution of this
Agreement the Company shall engage the Company's accountants to perform an audit
of the Company's 2002 fiscal year financial statements. All costs and expenses
of such audit shall not be reflected on the Closing Balance Sheet and shall be
paid by Buyer whether or not the Closing occurs. After the Closing, upon the
request of Buyer and at its expense, Seller shall reasonably cooperate with and
assist Buyer and Buyer's independent public accountants (the "BUYER'S
ACCOUNTANTS") in the compilation and preparation of all financial statements and
financial statement schedules of the Company (prepared in accordance with GAAP)
and reports of the
44
Company's Accountants as may be necessary for Buyer to comply in a timely manner
with SEC reporting and disclosure requirements. Seller shall use its reasonable
best efforts to deliver to Buyer's Accountants and/or the Company's Accountants
all engagement letters and management representation letters, as may be
reasonably requested by Buyer or such accountants, which shall cover such
periods from January 1, 2003 through the Closing Date. In connection with the
foregoing, Seller shall use reasonable best efforts to cause the Company's
Accountants to cooperate with and assist Buyer and Buyer's Accountants in the
preparation of the financial statements contemplated by this SECTION 6.8.
6.9. TRANSITION. Neither Seller nor the Company will take any action that
is designed or intended to have the effect of discouraging any director,
officer, employee, consultant, agent, lessor, licensor, franchisor, customer,
supplier, Governmental Authority or other Person having a business relationship
with the Company from maintaining the same business relationships with the
Company after the Closing as it maintained with the Company prior to the
Closing. Seller will refer all customer inquiries relating to the business of
the Company to Buyer from and after the Closing.
6.10. CERTAIN TAXES.
All Taxes incurred in connection with the sale of the Interests pursuant
to this Agreement (including any transfer, documentary, sales, use, stamp,
registration and other similar Taxes, New York City Transfer Tax and any similar
tax imposed by any other Governmental Authority), shall be shared equally by
Buyer and Seller. Each party will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such Taxes, and, if required
by any applicable Law or Order, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
6.11. NON-COMPETITION; NON-INTERFERENCE.
(a) In order to induce Buyer to purchase the Interests pursuant to
this Agreement, Seller hereby covenants and agrees that for a five (5) year
period following the Closing Date, it will not directly or indirectly in any
capacity:
(i) own, manage, operate, control or otherwise become interested
in any Person that offers information technology consulting services to any
department or agency of the U.S. federal government;
(ii) offer information technology consulting services to any
department or agency of the U.S. federal government, whether on behalf of itself
or others;
(iii) enter into any agreement or arrangement with any Person
pursuant to which such Person will offer information technology consulting
services to any department or agency of the U.S. federal government;
(iv) contact or solicit any employee, consultant, independent
contractor, or agent of the Company with the intention or effect of encouraging
such party to terminate his or her employment, engagement, agency or other
relationship, as applicable, with the Company;
45
(v) persuade or attempt to persuade any customer of the Company
not to purchase any of the products or services provided by Buyer (and any
related or successor groups); or
(vi) engage in any practice the purpose of which is to evade the
provisions of this SECTION 6.11.
(b) It is the intent of the parties to this Agreement that the
provisions of this SECTION 6.11 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought and that any purchaser of Seller of substantially
all of Seller's assets also agrees to be bound by the provisions of this SECTION
6.11 as a condition to any such purchase. If any particular provisions or
portions of this SECTION 6.11 shall be adjudicated to be invalid or
unenforceable, such provisions or portion thereof shall be deemed amended to the
minimum extent necessary to render such provision or portion valid and
enforceable, such amendment to apply only with respect to the operation of such
provisions or portions in the particular jurisdiction in which such adjudication
is made.
(c) The parties acknowledge that damages and remedies at law for any
breach of this SECTION 6.11 will be inadequate and that Buyer shall be entitled
to specific performance and other equitable remedies (including and injunction)
and such other relief as a court or tribunal may deem appropriate in addition to
any other remedies Buyer may have.
6.12. TRADEMARK LICENSE. Pursuant to the terms and conditions of a
Trademark License Agreement substantially in the form of Exhibit C, (a) the
Company shall have the royalty-free, non-terminable, exclusive right to use the
trademarks "Impact," "Impact Innovations," and "Impact Innovations Group,"
(collectively, the "LICENSED TRADEMARKS") on or in connection with the operation
and promotion of the government contracts business (involving the provision of
information technology consulting services to departments and agencies of the
U.S. federal government) currently conducted by the Company following the
Closing Date; and (b) Seller shall not license, assign or transfer the Licensed
Trademarks to a third party who competes in the government contracts business
during the term of the Trademark License Agreement.
6.13. 280G COVENANT. Prior to the Closing Date, Seller shall submit to a
shareholder vote the right of any "disqualified individual" (as defined in
Section 280G(c) of the Code) to receive any and all payments that could be
deemed "parachute payments" under Section 280G(b) of the Code, in a manner that
satisfies the shareholder approval requirements for the small business exemption
of Section 280G(b)(5) of the Code and any regulations (including proposed
regulations) promulgated thereunder. Such vote shall establish the "disqualified
individual's" right to the payment or other compensation. In addition, before
the Closing Date, Seller shall provide adequate disclosure to the shareholders
of Seller of all material facts concerning all payments that, but for such vote,
could be deemed "parachute payments" to a "disqualified individual" under
Section 280G of the Code in a manner that satisfies Section 280G(b)(5).
6.14. TRANSITION SERVICES. On or before the Closing, the Company and
Seller will enter into an Application Support Service Level Agreement
substantially in the form of Exhibit D and an additional Employee Benefits
Transition Services Agreement (collectively, the
46
"TRANSITION SERVICES AGREEMENTS"). Such Employee Benefits Transition Services
Agreement shall require Seller to continue to provide certain employee benefit
programs and/or administrative services (not, however, including any benefits or
administrative services under or pertaining to any Pension Plan as defined under
Section 3(2) of ERISA or any other employee benefit plan qualified under
sections 401(a) or 501(a) of the Code) to the employees of the Company, for such
minimum period of time, not to extend beyond 60 calendar days from the date of
Closing, as is necessary for Buyer to establish those employee benefit plans and
employment policies for such employees as it may deem appropriate. Such Employee
Benefits Transition Services Agreement shall allocate financial responsibility
for all benefits claims (including but not limited to medical care claims)
between the Company and Seller. Seller shall retain liability for all claims
whose date of service occurs before the Closing, but which are not reported
until some time thereafter. The Company shall be financially responsible for all
claims or other costs of any sort incurred on or after the date of Closing,
regardless of the nature of such claims, regardless of the party to whom such
claims are billed or addressed, and regardless of whether such claims are part
of a series of continuing treatments. It is the further intention of the parties
that the Employee Benefits Transition Services Agreement contain valid and
enforceable indemnification provisions in favor of Seller. The parties hereby
agree to negotiate in good faith the provisions of the Employee Benefits
Transition Services Agreement.
6.15. GSA SCHEDULE RATES. Prior to Closing, the Company will (i) submit
the revised GSA proposal, and (ii) make the appropriate adjustments to the
invoices to customers using the GSA schedule in connection with the matters
described in Item 2 of Schedule 4.24.
6.16. CERTAIN CONTRACTS. Prior to Closing, the Company will enter into an
amendment to the existing agreement between the Company and Allied Capital
extending the existing agreement for two years.
ARTICLE 7
CONDITIONS TO CLOSING
7.1. CONDITIONS TO OBLIGATIONS OF SELLER PARTIES. The obligations of
Seller Parties to close the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver by Seller at or prior to the Closing of
the following conditions:
(i) Buyer shall have performed or complied with its obligations,
covenants and agreements contained in this Agreement (considered individually
and collectively) required to be performed or complied with at or prior to the
Closing;
(ii) The representations and warranties of Buyer contained in this
Agreement (considered individually and collectively) shall be true, correct and
complete on and as of the date hereof and on and as of the Closing Date with the
same force and effect as if made on and as of the Closing Date (provided that
representations and warranties which are confined to a specific date shall speak
only as of such date);
(iii) Seller Parties shall have received from Buyer the deliveries
referred to in SECTION 3.3;
47
(iv) No Law or Order shall have been enacted, entered, promulgated,
issued or enforced by any Governmental Authority of competent jurisdiction which
prohibits, restrains, enjoins or restricts the consummation of the transactions
contemplated hereby; provided, however, that the parties shall use reasonable
best efforts to cause any such Law or Order to be vacated or lifted;
(V) Buyer shall have obtained the financing on terms contemplated by
the Commitment Letter;
(vi) The Company's and Seller's lender shall have approved the terms
of this Agreement and shall have consented, in writing, to the Company's and
Seller's execution of this Agreement; and
(vii) The shareholders of Seller shall have approved the
transactions contemplated herein.
7.2. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to close
the transaction contemplated hereby shall be subject to the satisfaction or
waiver by Buyer at or prior to the Closing of the following conditions:
(i) Seller Parties shall have performed or complied with their
obligations, covenants and agreements, including restrictive covenants,
contained in this Agreement (considered individually and collectively) required
to be performed or complied with at or prior to the Closing;
(ii) The representations and warranties of Seller Parties contained
in this Agreement (considered individually and collectively) shall be true,
correct and complete, when made and on and as of the Closing Date with the same
force and effect as if made on and as of the Closing Date (without giving effect
to any amendment(s) to Seller Parties' disclosure schedules delivered pursuant
to SECTION 6.4 hereof);
(iii) Seller shall have obtained the Consents listed or required to
be listed on Schedule 4.8;
(iv) Buyer shall have received the deliveries referred to in SECTION
3.2;
(v) No Law or Order shall have been enacted, entered, promulgated,
issued or enforced by any Governmental Authority of competent jurisdiction, and
no Proceeding shall have been commenced or threatened, which prohibits,
restrains, enjoins or restricts the consummation of the transactions
contemplated hereby; provided, however, that the parties shall use reasonable
best efforts to cause any such Law or Order to be vacated or lifted;
(vi) Any filings or notifications listed on Schedule 4.8 which are
required to be given to any Person, but which do not require Consent with
respect to the transactions contemplated hereby, shall have been given on or
before the Closing Date;
(vii) Buyer shall have obtained the financing on terms contemplated
by the Commitment Letter, unless the failure to obtain the financing was the
result of a failure by Buyer
48
to perform any covenant or condition contained therein or herein or the
inaccuracy of any representation or warranty of Buyer.
(viii) No Material Adverse Event shall exist or shall have occurred
since the date of this Agreement.
ARTICLE 8
TERMINATION
8.1. TERMINATION. This Agreement may be terminated and the transaction
contemplated hereby may be abandoned at any time prior to the Closing, as
follows:
(a) by mutual written consent of Buyer and Seller Parties;
(b) by Buyer or Seller, if the Closing shall not have occurred on or
before September 1, 2004 (provided that the right to terminate this Agreement
under this SECTION 8.1(B) shall not be available to any party hereto whose
failure to perform or comply with any covenant or agreement under this Agreement
has been the cause of, or resulted in, the failure of the transaction to be
consummated on or before such date);
(c) by Buyer or Seller, if any Governmental Authority of competent
jurisdiction shall have issued a final Order restraining, enjoining or
prohibiting the transactions contemplated by this Agreement and such Order is or
shall have become final and nonappealable;
(d) by Seller if prior to the Closing Date there shall have been a
material breach of any of the representations, warranties, covenants or
agreements of Buyer contained in this Agreement which cannot be or has not been
cured within twenty (20) days after notice thereof to Buyer; or
(e) by Buyer if prior to the Closing Date there shall have been a
Breach of any of the representations, warranties, covenants or agreements on the
part of the Company or Seller contained in this Agreement which cannot be or has
not been cured within twenty (20) days after notice thereof to Seller.
8.2. EFFECT OF TERMINATION. If this Agreement is terminated in accordance
with SECTION 8.1, this Agreement shall hereafter become null and void and of no
further force or effect, except that the terms and provisions of this SECTION
8.2 and the following other Sections shall survive such termination and shall
remain in full force and effect:
SECTION 6.5 (Public Announcements),
SECTION 10.3 (Notices),
SECTION 10.4 (Entire Agreement),
SECTION 10.11 (Expenses),
49
SECTION 10.12 (Governing Law), and
SECTION 10.13 (Resolution of Conflicts; Arbitration).
Notwithstanding the foregoing, any termination of this Agreement shall not
relieve any party hereto from any Liability for any Breach of its
representations, warranties, covenants or agreements contained herein. The
exercise of a right of termination under this Agreement by any party hereto
shall not be an election of remedies.
ARTICLE 9
INDEMNIFICATION
9.1. SURVIVAL.
(a) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the parties contained in this Agreement, including the schedules
hereto, shall survive the Closing and shall continue in full force and effect
for a period of eighteen (18) months following the Closing Date.
(b) COVENANTS AND AGREEMENTS. All of the covenants and agreements of
the parties shall survive the Closing and continue in full force and effect
forever, or otherwise in accordance with their respective terms.
(c) TIMELY CLAIMS. No party shall have any liability (for
indemnification or otherwise) based upon any claim for indemnification arising
out of the Breach of any representation or warranty contained in this Agreement,
including the schedules hereto, or in any of the other Transaction Documents, to
be fulfilled or complied with at or before the Closing unless such party is
given notice asserting a claim with respect thereto prior to the termination of
the applicable time period set forth under SECTION 9.1(a). Any representation or
warranty as to which a claim for indemnification (including a contingent claim)
shall have been asserted during the survival period shall continue in effect
with respect to such claim until such claim shall have been finally resolved or
settled.
9.2. TERMS OF INDEMNIFICATION. Subject to the terms and provisions
of this Agreement,
(a) Seller Parties, jointly and severally, shall indemnify Buyer
Parties against, and shall protect, defend and hold harmless Buyer Parties from,
all Damages arising out of, relating to, or resulting from (i) any Breach of any
of Seller's or the Company's respective representations, warranties, covenants
or agreements contained in this Agreement, including the schedules hereto or in
any of the other Transaction Documents, and (ii) notwithstanding any disclosures
made in this Agreement, including the disclosure schedules hereto or in any of
the other Transaction Documents, any Damages arising from (A) the matter
described in Item 3 of Schedule 4.24 or (B) the Contract described on Schedule
4.23(vi)(d).
(b) Buyer shall indemnify Seller against, and shall protect, defend
and hold harmless Seller from, all Damages arising out of, relating to, or
resulting from (i) any Breach of
50
any of Buyer's representations, warranties, covenants or agreements contained in
this Agreement or in any of the other Transaction Documents and (ii) the Offer
and Acceptance Letters and the termination of the agreements listed as Items 1
through 4 on Schedule 4.13.
9.3. PROCEDURES WITH RESPECT TO THIRD-PARTY CLAIMS. Promptly after the
occurrence of any claim, assertion, event, action or proceeding against the
Company or any party hereto which could give rise to a claim for indemnification
under this ARTICLE 9, the party seeking indemnification (the "INDEMNIFIED
PARTY") shall give notice to the party from whom indemnification is sought (the
"INDEMNIFYING PARTY") if it wishes to assert a claim for indemnification under
this ARTICLE 9. The failure of the Indemnified Party to timely deliver such
notice shall not reduce the liability of the Indemnifying Party except to the
extent the Indemnifying Party demonstrates that the defense of the subject claim
has been prejudiced by such failure. The Indemnifying Party shall then be
entitled to participate in such action or proceeding and, to the extent that it
shall wish, to assume the defense thereof with counsel satisfactory to such
Indemnified Party (but prior to assuming such defense the Indemnifying Party
shall have acknowledged in writing its indemnification obligation hereunder).
After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of a claim, the Indemnifying Party shall not be
liable to such Indemnified Party under SECTION 9.2 for any fees of other counsel
or any other expenses, in each case subsequently incurred by such Indemnified
Party in connection with the defense thereof, other than reasonable costs of
investigation. If an Indemnifying Party assumes the defense of such an action
(a) no compromise or settlement thereof may be effected by the Indemnifying
Party without the Indemnified Party's consent (which shall not be unreasonably
withheld) unless (i) there is no finding or admission of any violation of law of
any violation of the rights of any person and no effect on any other claims that
may be made against the Indemnified Party and (ii) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party and (b) the
Indemnifying Party shall have no liability with respect to any compromise or
settlement thereof effected by the Indemnified Party without its consent (which
shall not be unreasonably withheld). If notice is given to an Indemnifying Party
of the commencement of any action and it does not, within 30 days after the
Indemnifying Party's notice is given, give notice to the Indemnified Party of
its election to assume the defense thereof (and in connection therewith,
acknowledges in writing its indemnification obligation hereunder), the
Indemnifying Party shall be bound by any determination made in such action or
any compromise or settlement thereof effected by the Indemnified Party.
Notwithstanding the foregoing, if an Indemnified Party determines in good faith
that there is a reasonable probability that any action may materially and
adversely affect it or its Affiliates other than as a result of monetary
damages, such Indemnified Party may, by notice to the Indemnifying Party, assume
the exclusive right to defend, compromise or settle such action, but the
Indemnifying Party shall have no liability with respect to judgment entered in
any action so defended, or a compromise or settlement thereof entered into,
without its consent (which shall not be unreasonably withheld).
9.4. INDEMNIFICATION CAP AND THRESHOLD.
(a) INDEMNIFICATION CAP. The maximum aggregate liability of Seller
Parties, for claims for indemnification made pursuant to in SECTION 9.2(a) shall
be limited to an amount equal to the amount of the Indemnity Escrow remaining in
escrow at the time a claim for indemnification is made (the "INDEMNIFICATION
CAP"). The maximum aggregate liability of
51
Buyer Parties for claims for indemnification made pursuant to SECTION 9.2(b)
shall be limited to an amount equal to the Indemnification Cap.
(b) INDEMNIFICATION THRESHOLD. No Buyer Party shall be entitled to
make any claim for indemnification pursuant to SECTION 9.2(a) unless and until
the aggregate amount of Damages with respect to all such claims that may be made
by Buyer Parties pursuant to this ARTICLE 9 as a result of a Breach of any of
Seller Parties' representations, warranties, obligations, covenants or
agreements set forth in this Agreement exceeds Five Hundred Thousand Dollars
($500,000) (the "INDEMNIFICATION THRESHOLD"), after which Seller Parties shall
be liable for the full amount of such Damages, subject to the Indemnification
Cap. No Seller Party shall be entitled to make any claim for indemnification
pursuant to SECTION 9.2(b) unless and until the aggregate amount of Damages with
respect to all such claims that may be made by Seller Parties pursuant to this
ARTICLE 9 exceeds the Indemnification Threshold, after which Buyer shall be
liable for the full amount of such Damages, subject to the Indemnification Cap.
Notwithstanding anything to the contrary set forth in this Agreement, claims for
Damages pursuant to SECTION 9.2(a)(ii) hereof shall not be subject to the
Indemnification Threshold.
(c) APPLICABILITY OF INDEMNIFICATION CAP AND THRESHOLD.
Notwithstanding anything in this ARTICLE 9 to the contrary, neither the
Indemnification Cap nor the Indemnification Threshold shall apply to or against,
and the parties shall be liable under this ARTICLE 9 for, the entirety of any
Damages resulting from, arising out of, in the nature of, or caused by any
fraudulent, willful or intentional Breach by any party of any of its
representations, warranties or covenants set forth herein.
9.5. ADDITIONAL INDEMNIFICATION PROVISIONS.
(a) ACCURACY AND COMPLIANCE. The right to indemnification or other
remedy based on any representations, warranties, obligations, covenants and
agreements set forth in this Agreement, including the schedules hereto, or in
any of the other Transaction Documents, will not be affected by any
investigation conducted by Buyer prior to or after the date of this Agreement.
To the extent that as a result of Buyer's investigation prior to or after the
date of this Agreement Buyer has actual knowledge of facts contrary to the
statements made in any representation, warranty, covenant or agreement of the
Company or Seller set forth herein and completes the Closing without requiring
correction or amendment of such contrary statements, Buyer shall be estopped
from asserting reliance on such contrary representation, warranty, covenant or
agreement in connection with any post-Closing claim for indemnification pursuant
to ARTICLE 9 hereof.
(b) INDEMNIFICATION FROM THE COMPANY. Notwithstanding any term or
provision of this Agreement to the contrary, upon the Closing, the Company shall
cease to be a Seller Party and shall cease to have any indemnification
obligations as a Seller Party hereunder and shall be treated as a Buyer Party,
and Seller Parties shall have no rights of recourse, whether for contribution or
otherwise, against the Company for any payments that Seller Parties make, or are
obligated to make, under this ARTICLE 9 or any other term or provision of this
Agreement.
(c) MATERIALITY. Once it has been determined that there has been a
Breach of a representation, warranty, covenant or agreement, for purposes of the
measure of Damages
52
pursuant to this ARTICLE 9, the extent of any inaccuracy in or Breach of any
representation, warranty, covenant or agreement contained in this Agreement,
including the schedules hereto, or in any of the other Transaction Documents,
shall be determined by reading the representation, warranty, covenant or
agreement that is inaccurate or Breached as if all materiality standards
contained in such specific representation or warranty or covenant, as applicable
(i.e., qualifiers such as "material", "in all material respects" or similar
qualifiers), but not any dollar amounts or thresholds, had been deleted from
such representation, warranty, covenant or agreement in their entirety.
(d) OTHER RECOVERIES; INSURANCE. Notwithstanding anything herein to
the contrary, no party shall be entitled to indemnification or reimbursement
under any provision of this Agreement for any amount to the extent such party or
its Affiliates has been indemnified or reimbursed for such amount under any
other provision of this Agreement, the exhibits or schedules attached hereto, or
any document executed in connection with this Agreement or otherwise.
Furthermore, in the event any Damage related to a claim by Buyer are covered by
insurance, Buyer agrees to use commercially reasonable efforts to seek recovery
under such insurance and Buyer shall not be entitled to recovery from Seller
(and shall refund amounts received up to the amount of indemnification actually
received) with respect to such damages to the extent, and only to the extent,
Buyer recovers the insurance payment specified in the policy. Further still, all
indemnification payments payable under this SECTION 9.5 shall be reduced to the
extent that such event causing Damage has a specific reserve on the Closing
Balance Sheet.
(e) NET OF TAX EFFECT. Any calculation of Damages for purposes of
this ARTICLE 9 shall be reduced to take account of any net Tax benefit actually
realized by the Indemnified Party as a result of any such Damages. Any payment
hereunder shall initially be made without regard to this paragraph and shall be
reduced to reflect any such net Tax benefit only after the Indemnified Party has
actually realized such benefit. For purposes of this Agreement, the Indemnified
Party shall be deemed to have "actually realized" a net Tax Benefit to the
extent that, and at such time as, the amount of Taxes required to be paid by the
Indemnified Party is reduced below the amount of Taxes that it would have been
required to pay but for deductibility of such Damages. The amount of any
reduction hereunder shall be adjusted to reflect any final determination with
respect to the Indemnified Party's liability for Taxes.
(f) MITIGATION. The parties shall take all commercially reasonable
steps (to the extent then available or possible) to mitigate all Damages upon
and after becoming aware of any event which could reasonably be expected to give
rise to such Damages.
9.6. EXCLUSIVE REMEDY. Except with respect to claims arising out of, in
the nature of, or caused by any fraudulent, willful or intentional breach by any
party of any of its representations, warranties or covenants set forth herein,
the indemnification provided in this ARTICLE 9 shall be the sole and exclusive
remedy after the Closing Date available to the parties for breach of any of the
terms, conditions, representations, warranties or covenants contained herein or
any right, claim or action arising from the transactions contemplated by this
Agreement. Nothing contained herein, however, shall preclude a party from
seeking injunctive relief or specific performance, under circumstances where
such relief might be appropriate, provided that the moving party shall not be
entitled to ancillary relief in the nature of damages or fee awards unless
specifically so provided for herein.
53
ARTICLE 10
GENERAL PROVISIONS
10.1. PARTIES IN INTEREST; SUCCESSORS AND ASSIGNS; NO THIRD PARTY RIGHTS.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, and, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, title, privilege, benefit, interest,
remedy or claim of any nature whatsoever under or by reason of this Agreement,
or any term or provision hereof.
10.2. ASSIGNMENT. This Agreement and the rights, title, privileges,
benefits, interests, remedies and obligations hereunder may not be assigned by
any party hereto, by operation of law or otherwise; provided, however, that
Buyer may (a) assign any or all of its rights, title, privileges, benefits,
interests and remedies hereunder to any one or more of its Affiliates; (b)
designate any one or more of its Affiliates to perform its obligations hereunder
(in any or all of which cases Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder); and (c) assign any or all of
its rights, title, privileges, benefits, interests and remedies hereunder to and
for the benefit of any lender to Buyer or the Company for the purpose of
providing collateral security; provided further, in the event Seller sells all
or substantially all of its assets remaining after the Closing to a third party,
Seller shall condition the closing of any such sale upon Seller assigning, and
such purchaser assuming, the obligations of Seller contained in SECTIONS 6.11
AND 6.14, and such assignment and assumption shall not require the prior consent
of Buyer as described in this SECTION 10.2.
10.3. NOTICES. All notices, requests, claims, instructions and other
communications required or permitted under this Agreement shall be in writing
and shall be (a) delivered personally, (b) sent by national overnight courier,
with all costs and expenses therefor prepaid (c) sent by certified mail, postage
prepaid, return receipt requested, or (d) by facsimile transmission, with a
confirmation sent by one of the foregoing methods to the address of such party
as set forth below:
If to Buyer or to the Company after the Closing:
Dynamics Research Corporation
00 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attn: General Counsel
Facsimile: (000) 000-0000
with a required copy (which copy shall not constitute notice
hereunder) to:
Xxxxx Xxxxxxx LLP
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
54
If to the Company or to Seller before Closing:
J3 Technology Services Corp.
0000 Xxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Childs
Facsimile: (000) 000-0000
with a required copy (which copy shall not constitute
notice hereunder) to:
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxx Xxxx XxXxxxx
Facsimile: (000) 000-0000
with a required additional copy (which shall not
constitute notice hereunder) to:
CGW Southeast Partners
Twelve Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxx
Facsimile: (000) 000-0000
If to Seller at or after Closing:
J3 Technology Services Corp.
0000 Xxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Childs
Facsimile: (000) 000-0000
with a required copy (which copy shall not constitute
notice hereunder) to:
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxx Xxxx XxXxxxx
Facsimile: (000) 000-0000
55
with a required additional copy (which shall not
constitute notice hereunder) to:
CGW Southeast Partners
Twelve Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxx
Facsimile: (000) 000-0000
or to such other address or facsimile number as such party may have furnished to
the other parties by notice in accordance with this SECTION 10.3.
10.4. ENTIRE AGREEMENT. This Agreement (including the schedules hereto,
which are incorporated into this Agreement by this reference and made a part
hereof), together with the Confidentiality Agreement, and each of the other
Transaction Documents, constitutes the entire agreement among the parties with
respect to the subject matter hereof and thereof, and supersedes all prior or
contemporaneous agreements and understandings, whether written or oral, among
the parties hereto, or any of them, with respect to the subject matter hereof
and thereof.
10.5. COUNTERPARTS AND FACSIMILE SIGNATURE. This Agreement may be executed
in any number of counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original, and
all of which, taken together, shall be deemed to constitute one and the same
instrument. This Agreement may be executed by facsimile signature.
10.6. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced under any Law, Order or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
10.7. AMENDMENT. This Agreement may not be amended or modified except by a
written instrument, specifically referring to this Agreement and signed by each
of the parties hereto.
10.8. WAIVER. Neither the failure nor any delay of any party to this
Agreement to assert or exercise any right, power, privilege or remedy under this
Agreement, any of the other Transaction Documents or otherwise, or to enforce
any term or provision hereof or thereof, shall constitute a waiver of such
right, power, privilege or remedy, and no single or partial exercise of any such
right, power, privilege or remedy shall preclude any other or further exercise
of such right, power, privilege or remedy or the exercise of any other right,
power, privilege or remedy. The rights, powers, privileges and remedies of the
parties to this Agreement are cumulative and not alternative. Any waiver of any
right, power, privilege or remedy hereunder or under any of the Transaction
Documents shall be valid and binding only if set forth in a written instrument
specifically referring to this Agreement and signed by the party or parties
giving such waiver,
56
and shall be effective only in the specific instance and for the specific
purpose for which it is given. At any time prior to the Closing Date, Buyer with
respect to Seller Parties and Seller with respect to Buyer may, subject to and
in accordance with the provisions of this SECTION 10.8, (a) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any of the other Transaction Documents; and (b) waive compliance with any
of the conditions, covenants or agreements contained in this Agreement or in any
of the other Transaction Documents.
10.9. FURTHER ASSURANCES. Each party shall do and perform or cause to be
done and performed all further acts and things and shall execute and deliver all
further agreements, certificates, instruments and documents as any other party
may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
10.10. LEGAL COUNSEL. Each of the parties to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the negotiations and preparation of this Agreement and each of
the other Transaction Documents to which it is a party, and in connection with
the transactions contemplated hereby and thereby, with the opportunity to seek
advice as to its legal rights from such counsel. Each party hereto further
represents that it is being independently advised as to the tax consequences of
such transactions.
10.11. EXPENSES. Except as set forth in SECTION 6.8, each of Buyer and
Seller Parties shall bear its own fees, costs and expenses incurred in
connection with this Agreement (including the preparation, negotiation and
performance hereof) and the transactions contemplated hereby (including fees and
disbursements of attorneys, accountants, agents, representatives and financial
and other advisors). Seller will pay all fees, costs and expenses of Seller's
Investment Banker. Buyer will pay one-half and Seller will pay one-half of the
HSR Act filing fee. The Company may bear such fees, costs and expenses of Seller
through the Closing Date, provided, however, that all such fees, costs and
expenses shall either be paid in full by the Company before the Closing Date or
reflected on the Financial Statements as current Liabilities, in which event
Buyer will cause the Company to pay such fees, costs and expenses promptly after
the Closing Date.
10.12. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the Laws of the State of New York without regard to any
conflict of laws principles that would cause the application of the Laws of any
other jurisdiction.
10.13. RESOLUTION OF CONFLICTS; ARBITRATION.
(a) In the event of any dispute among the parties in connection with
this Agreement, including without limitation, disputes over a claim pursuant to
SECTION 9.2, disputes involving compliance with this Agreement, claims of fraud
or other claims arising out of the interpretation, construction, validity or
enforcement of this Agreement (the "CLAIMS"), Seller and Buyer shall attempt in
good faith to agree upon the rights of the respective parties with respect to
each of such claims. If Seller and Buyer should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties.
57
(b) If no such agreement can be reached after good faith negotiation
(or in any event after sixty (60) days from the date of a notice setting forth
such dispute) resolving the Claims, the Claims shall be resolved by arbitration
unless the amount of the damage or loss is at issue in pending litigation with a
third party, in which event arbitration shall not be commenced until such amount
is ascertained or both parties agree to arbitration; and in either such event
the matter shall be settled by arbitration. The board of arbitration shall be
composed of three arbitrators (one to be chosen by Buyer, one to be chosen by
Seller and one to be chosen by the first two chosen arbitrators or in accordance
with the rules of the American Arbitration Association then existing if the
first two chosen arbitrators should fail to choose a third arbitrator within
thirty (30) days of their appointment). All three arbitrators shall be neutral
arbitrators. The arbitrators shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing the
parties an opportunity, adequate in the sole judgment of the arbitrator, to
discover relevant information from the opposing parties about the subject matter
of the dispute, provided, however, that pre-hearing discovery shall be limited
to exchange or production of documents and other written information unless good
cause can be shown to allow the taking of depositions. If good cause is
demonstrated, the arbitrators shall determine the number of depositions that may
be taken. The arbitrators shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including attorneys' fees and
costs, to the same extent as a court of law or equity, should the arbitrator
determine that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification. The
decision of the arbitrators on the Claims shall be binding and conclusive upon
the parties to this Agreement. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrator. The arbitrators
shall not be empowered to award punitive damages or to modify any term or
provision of this Agreement.
(c) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Washington, DC under the commercial arbitration rules then in effect of the
American Arbitration Association, but without administration by the American
Arbitration Association. The arbitrators are empowered to make an award which
orders one of the parties to pay the attorneys' fees and expenses of the other
party, including the fees of the arbitrators.
[The remainder of this page is intentionally left blank.]
58
IN WITNESS WHEREOF, the parties hereto have duly caused this Equity
Purchase Agreement to be executed, as an instrument under seal, as of the date
first above written.
Buyer:
DYNAMICS RESEARCH CORPORATION
Signature: _______________________________
Printed Name: _______________________________
Title: _______________________________
Seller:
J3 TECHNOLOGY SERVICES CORP.
Signature: _______________________________
Printed Name: _______________________________
Title: _______________________________
The Company:
IMPACT INNOVATIONS GROUP LLC
Signature: _______________________________
Printed Name: _______________________________
Title: _______________________________
Signature Page to Equity Purchase Agreement
Exhibits and Schedules to the Equity Purchase Agreement as listed in the Table
of Contents listed below have been omitted pursuant to Item 601(b)(2) of
Regulation S-K which the Registrant agrees to furnish supplementally to the
Commission upon request. The Registrant reserves the right to seek confidential
treatment of portions or such Schedules pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, and Rule 190 under the Commission's
Rules of Practice.
Exhibit A Escrow Agreement
Schedule A - Fee Schedule
Exhibit B Confidentiality and Non-Solicitation Agreement
Exhibit C Trademark License Agreement
Exhibit D Transition Services Agreement
Schedule 1.1 Offers and Acceptance Letters
Schedule 2.5 Selected Accounting Firms
Schedule 4.1 Jurisdictions
Schedule 4.3 Capitalization
Schedule 4.7 Seller Title Exceptions
Schedule 4.8 No Violation or Conflicts; Consents
Schedule 4.13 Absence of Certain Changes
Schedule 4.15 Litigation
Schedule 4.16(b) Leased Real Property
Schedule 4.17 Tangible Personal Property
Schedule 4.18(a) Intellectual Property
Schedule 4.19 Accounts Receivable
Schedule 4.20 Accounts Payable
Schedule 4.21 Liens
Schedule 4.22 Insurance
Schedule 4.23 Material Contracts
Schedule 4.24 Government Contracts and Government Bids
Schedule 4.25 Related Party Transactions
Schedule 4.26 Customers
Schedule 4.27 Employees and Consultants
Schedule 4.28 Employee Litigation
Schedule 4.29(a) Employee Benefit Plans
Schedule 4.29(c) Plans That Cannot Be Terminated Within 30 Days
Schedule 4.29(e) Effect of Transaction
Schedule 4.30(c) Tax Matters
Schedule 4.32 Banks; Powers of Attorney
Schedule 4.33 Brokers
Schedule 6.2(b) Customer Visits