Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
among
Integrated Data Systems Corporation,
The Shareholders of Integrated Data Systems Corporation,
ManTech Kappa Corporation,
and
ManTech International Corporation
Dated as of February 24, 2003
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TABLE OF CONTENTS
Page(s)
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ARTICLE I DEFINITIONS................................................................. 1
Section 1.1 Definitions................................................ 1
Section 1.2 Construction............................................... 9
ARTICLE II THE MERGER................................................................. 10
Section 2.1 The Merger................................................. 10
Section 2.2 Closing.................................................... 10
Section 2.3 Effective Time............................................. 10
Section 2.4 Articles of Incorporation and Bylaws of the Surviving
Corporation................................................ 10
Section 2.5 Directors and Officers..................................... 11
Section 2.6 Effect of the Merger....................................... 11
Section 2.7 Consideration for the Merger............................... 11
Section 2.8 Deliveries at the Closing.................................. 12
Section 2.9 Closing Net Worth Adjustment and Estimated Closing
Net Worth Adjustment....................................... 15
Section 2.10 Post-Closing Adjustment Payment............................ 16
Section 2.11 Earnout Payment(s)......................................... 17
Section 2.12 Section 338(h)(10) Election................................ 19
Section 2.13 Tax Benefit Amount......................................... 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDERS......................................................... 20
Section 3.1 Organization and Good Standing............................. 20
Section 3.2 Corporate and Shareholder Authority; No Violation.......... 20
Section 3.3 Capitalization of the Company.............................. 21
Section 3.4 Ownership of Shares........................................ 22
Section 3.5 Corporate Records.......................................... 22
Section 3.6 Tax Matters................................................ 22
Section 3.7 Employee Benefit Plans..................................... 24
Section 3.8 Broker's or Finder's Fees.................................. 26
Section 3.9 Financial Statements....................................... 26
Section 3.10 Accounts Receivable........................................ 27
Section 3.11 Absence of Undisclosed Liabilities......................... 27
Section 3.12 Existing Condition......................................... 27
Section 3.13 Title to Properties; Leasehold Interests................... 29
Section 3.14 Litigation................................................. 29
Section 3.15 Compliance with Law........................................ 29
Section 3.16 Insurance.................................................. 29
Section 3.17 Contracts and Commitments.................................. 30
Section 3.18 Environmental Matters...................................... 31
TABLE OF CONTENTS (cont'd)
Page(s)
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Section 3.19 Intellectual Property...................................... 31
Section 3.20 No Third Party Options..................................... 33
Section 3.21 Governmental Authorizations................................ 33
Section 3.22 Government Contract Regulatory Matters..................... 33
Section 3.23 Bank Accounts.............................................. 35
ARTICLE IV REPRESENTATIONS OF BUYER AND MERGER SUB.................................... 36
Section 4.1 Organization and Good Standing............................. 36
Section 4.2 Corporate Authority; No Violation.......................... 36
Section 4.3 Compliance with Laws....................................... 37
Section 4.4 Litigation................................................. 37
Section 4.5 Finders; Brokers........................................... 37
Section 4.6 Merger Sub................................................. 37
Section 4.7 SEC Documents and Other Reports............................ 38
ARTICLE V CERTAIN AGREEMENTS.......................................................... 38
Section 5.1 Shareholder Notice......................................... 38
Section 5.2 Conduct of the Business.................................... 38
Section 5.3 Access to Information...................................... 40
Section 5.4 Efforts; Further Assurances; Permits....................... 41
Section 5.5 No Solicitation............................................ 42
Section 5.6 Books and Records.......................................... 42
Section 5.7 Governmental Regulatory Approvals and Required
Consents................................................... 42
Section 5.8 Employee Relations and Benefits............................ 43
Section 5.9 Public Announcements....................................... 43
Section 5.10 Certain Additional Covenants............................... 43
ARTICLE VI CONDITIONS................................................................. 45
Section 6.1 Conditions Precedent to Obligations of Buyer, Merger
Sub and the Company........................................ 45
Section 6.2 Conditions Precedent to Obligation of the Company.......... 45
Section 6.3 Conditions Precedent to Obligation of Buyer and Merger
Sub........................................................ 46
ARTICLE VII INDEMNIFICATION AND ESCROW ACCOUNTS....................................... 46
Section 7.1 Indemnification by the Shareholders........................ 46
Section 7.2 Indemnification by Buyer and Merger Sub.................... 47
Section 7.3 Survival of Representations and Warranties; Limitations
on Indemnification......................................... 47
Section 7.4 Escrow Accounts............................................ 48
Section 7.5 Method of Asserting Claims................................. 48
Section 7.6 Exclusive Remedy........................................... 52
ARTICLE VIII TAX MATTERS ............................................................. 52
Section 8.1 Tax Returns................................................ 52
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TABLE OF CONTENTS (cont'd)
Page(s)
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Section 8.2 Certain Contest Rights..................................... 53
Section 8.3 Cooperation and Exchange of Information.................... 54
Section 8.4 Refunds.................................................... 54
Section 8.5 Certain Taxes.............................................. 55
ARTICLE IX TERMINATION OF AGREEMENT; PAYMENT OF EXPENSES; WAIVER OF
CONDITIONS............................................................... 55
Section 9.1 Termination of Agreement................................... 55
Section 9.2 Payment of Expenses........................................ 56
ARTICLE X MISCELLANEOUS............................................................... 56
Section 10.1 Amendments................................................. 56
Section 10.2 Governing Law; Submission to Jurisdiction.................. 56
Section 10.3 Notices.................................................... 56
Section 10.4 Assignment and Binding Effect.............................. 58
Section 10.5 Entire Agreement........................................... 58
Section 10.6 Severability............................................... 58
Section 10.7 Counterparts............................................... 58
Section 10.8 Waiver..................................................... 58
Section 10.9 Headings................................................... 58
Section 10.10 Specific Performance....................................... 59
Section 10.11 The Shareholders and the Shareholder Representative........ 59
EXHIBITS:
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Exhibit A Company's Disclosure Schedule
Exhibit B Buyer's Disclosure Schedule
Exhibit C Form of Articles of Merger
Exhibit D Written Consent of Shareholders
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Agreement and Plan of Merger, dated as of February 24, 2003
(hereinafter "Agreement"), by and among INTEGRATED DATA
SYSTEMS CORPORATION, a Virginia corporation (the "Company"),
the shareholders of the Company ("Shareholders"), MANTECH
KAPPA CORPORATION, a newly incorporated Virginia corporation
("Merger Sub"), and MANTECH INTERNATIONAL CORPORATION, a
Delaware corporation ("Buyer").
WHEREAS, the board of directors of each of Buyer, Merger Sub and the
Company have: (a) determined that the merger of Merger Sub with and into the
Company, with the Company as the surviving corporation (the "Merger"), is
advisable, fair to, and in the best interests of their respective shareholders;
and (b) approved the Merger under and pursuant to the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, the shareholders of Merger Sub and the Company have determined
that the Merger is in each of their best interests and desire to enter into this
Agreement under and pursuant to the terms and subject to the conditions set
forth herein and have voted their shares to approve the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the indicated
meaning when used in this Agreement:
"Accounting Principles" shall have the meaning ascribed to such term in
Section 2.9(a).
"Actual Net Worth Adjustment" shall have the meaning ascribed to such
term in Section 2.10(a).
"Adjustment in Favor of Buyer" shall have the meaning ascribed to such
term in Section 2.10(a).
"Adjustment in Favor of Shareholders" shall have the meaning ascribed
to such term in Section 2.10(a).
"Affiliate" shall mean with respect to any Person, any other Person
that is directly or indirectly controlling, controlled by or under common
control with such Person or entity or any of its subsidiaries, and the term
"control" (including the terms "controlled by" and "under common control with")
means having, directly or indirectly, the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities or by contract or otherwise.
"Aggregate Merger Consideration" shall have the meaning accorded to
such term in Section 2.7(a).
"Articles of Merger" shall mean that certain Articles of Merger
substantially in the form of Exhibit C.
"Ancillary Agreements" shall mean the forms and agreements attached
hereto as Exhibits A, C, and D respectively.
"Asserted Tax Claim" shall have the meaning accorded to such term in
Section 8.2(a).
"Authorizations" shall mean all licenses, certificates, permits,
franchises, or other authorizations granted to the Company by Governmental
Entities that are used in or relate to the conduct of the business of the
Company, including those that are listed on Section 3.2(b) of the Company
Disclosure Schedule.
"Benefit Plan" shall mean each written pension, profit-sharing, thrift,
savings or other retirement, bonus, deferred compensation, incentive
compensation, employee stock ownership, stock purchase, stock option, stock
bonus, severance or termination pay, hospitalization or other medical, life or
other insurance, long- or short-term disability, supplemental unemployment
benefit, fringe benefit, sick pay, or vacation pay or similar plan, program,
agreement, or arrangement maintained for the benefit of current or former
employees, directors or consultants of the Company or with respect to which the
Company makes or has any obligation to make contributions.
"Bonus Retention Escrow Agent" shall mean Branch Banking & Trust.
"Bonus Retention Escrow Amount" shall mean an amount equal to One
Million Five-Hundred Thousand dollars ($1,500,000).
"Bonus Retention Escrow Termination Date" shall be August 31, 2004.
"Books and Records" shall mean all of the Company's customer or
subscriber lists and records, accounts and billing records, detailed property
records, equipment records, plans, blueprints, specifications, designs,
drawings, surveys, engineering reports, and personnel records (where applicable)
and all other documents, computer data and records owned or controlled by the
Company relating to the Company.
"Business" means the business of Integrated Data Systems Corporation as
currently conducted by the Company or as currently contemplated by it to be
conducted.
"Business Day" shall mean any day other than a Saturday, Sunday or
federal holiday.
"Buyer" shall have the meaning ascribed to such term in the recitals
above.
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"Buyer Adjustment Notice" shall have the meaning ascribed to such term
in Section 2.10(a).
"Buyer's Disclosure Schedule" shall mean the contents of Exhibit B.
"Buyer SEC Documents" shall have the meaning ascribed to such term in
Section 4.7.
"Certificate(s)" shall have the meaning ascribed to such term in
Section 2.6(c).
"Closing" shall have the meaning ascribed to such term in Section 2.2.
"Closing Date" shall have the meaning ascribed to such term in Section
2.2.
"Closing Date Balance Sheet" shall have the meaning ascribed to such
term in Section 2.9(b).
"Closing Merger Consideration" shall have the meaning accorded to such
term in Section 2.7(e).
"Closing Net Worth" shall have the meaning ascribed to such term in
Section 2.9(b).
"Closing Net Worth Adjustment" shall have the meaning ascribed to such
term in Section 2.9(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning ascribed to such term in the first
paragraph of this Agreement.
"Company Balance Sheet" shall mean the proforma balance sheet of the
Company as of the Company Balance Sheet Date.
"Company Balance Sheet Date" shall mean December 31, 2002.
"Company Common Stock" shall mean the common stock of the Company.
"Company Debt" shall mean any and all notes payable to Shareholder(s)
or lines of credit entered into and held by the Company.
"Company Intellectual Property" shall have the meaning ascribed to such
term in Section 3.19(a).
"Company's Disclosure Schedule" shall mean the contents of Exhibit A.
"Current Government Contracts" shall have the meaning ascribed to such
term in Section 3.22(a).
"Deductible Amount" shall have the meaning ascribed to such term in
Section 7.3(b).
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"Draft Form 8023 Schedule" shall have the meaning ascribed to such term
in Section 2.12(b).
"Earnout Payment(s)" shall have the meaning ascribed to such term in
Section 2.11(a).
"Earnout Payment Buyer Determination" shall have the meaning ascribed
to such term in Section 2.11(a).
"Earnout Payment Final Payment" shall have the meaning ascribed to such
term in Section 2.11(e).
"Earnout Payment Referee" shall have the meaning ascribed to such term
in Section 2.11(c).
"Earnout Payment Shareholder Objection Notice" shall have the meaning
ascribed to such term in Section 2.11(b).
"EBITDA" shall mean the Surviving Corporation's earnings before
interest, tax and other income plus the sum of depreciation and amortization
expense (including any write-downs of intangible assets) after adding back any
allocations of any costs or expenses of Buyer to Surviving Corporation,
including without limitation, any allocations for home office, general and
administrative and overhead expenses. Notwithstanding the foregoing, allocations
of costs and expenses of Buyer added back to Surviving Corporation shall not
include any such allocations the Buyer and Shareholder Representative mutually
agree are similar costs and expenses that the Company would have otherwise
incurred. The Merger Parties agree that any expense associated with establishing
the Retention Agreements shall be taken by the Company prior to Closing.
"Effective Time" shall have the meaning ascribed to such term in
Section 2.3.
"Environmental Laws" means all United States federal, state and local
laws, statutes, ordinances, and codes which address or are otherwise concerned
with, environmental issues, and all regulations, rules, standards, orders and
directives of all properly constituted governmental authorities (charged with
the responsibility of implementing or enforcing such laws, statutes, ordinances
and codes) relating to (a) "Releases" (as defined in 42 U.S.C. sec. 9601(22)) or
threatened Releases of Hazardous Material (as defined below) into the
environment, (b) the generation, treatment, storage, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Material, (c) the health
or safety of employees in the workplace, (d) protecting or restoring natural
resources or (e) the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any person, firm or entity (whether or not
incorporated) which, by reason of its relationship with the Company, is required
to be aggregated with the Company under Sections 414(b), (c) or (m) of the Code.
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"Escrow Account(s)" shall mean the Indemnification Escrow Account and
the Retention Bonus Escrow Account maintained by the Escrow Agent pursuant to
the terms hereof.
"Escrow Agent" shall mean Allfirst Trust Company National Association,
a national association with trust powers.
"Estimated Net Worth Adjustment" shall have the meaning ascribed to
such term in Section 2.9(a).
"Form 8023 Schedule" shall have the meaning ascribed to such term in
Section 2.12(a).
"Forms 8023" shall have the meaning ascribed to such term in Section
2.12(a).
"GAAP" shall mean United States generally accepted accounting
principles.
"Government Contract" shall mean any prime contract with the United
States government or any other Governmental Entity and any subcontract with a
prime contractor or higher-tier subcontractor under a prime contract with the
United States government or any other Governmental Entity, in each case, to
which the Company is a party.
"Government Contract Bids" shall have the meaning ascribed to such term
in Section 3.22(a).
"Governmental Entity" shall mean any public body or authority,
including courts of competent jurisdiction, domestic or foreign.
"Hazardous Materials" shall mean any hazardous or toxic substance,
material or waste which is regulated under, or defined as a "hazardous
substance," "pollutant," "contaminant," "toxic chemical," "hazardous material,"
"toxic substance" or "hazardous chemical" under (i) Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.
("CERCLA"); (ii) the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; (iii) the U.S. Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq.; (iv) the U.S. Toxic Substances Control
Act, 15 U.S.C. Section 2601 et seq.; (v) the U.S. Occupational Safety and Health
Act of 1970, 29 U.S.C. Section 651 et seq.; (vi) regulations promulgated under
any of the above statutes or (vii) any applicable state or local statute,
ordinance, rule, or Regulation that has a scope or purpose similar to those
statutes identified above.
"Indemnification Escrow Amount" shall mean an amount equal to ten
percent (10%) of the amount each Shareholder received from the Initial Purchase
Price.
"Indemnification Escrow Funds" shall mean the funds that are held by
the Escrow Agent in the Indemnification Escrow Account.
"Indemnification Escrow Termination Date" shall be the date that falls
on the fifteenth (15/th/) month following the Closing Date.
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"Indemnification Referee" shall have the meaning ascribed to such term
in Section 7.5(c)(ii).
"Indemnified Losses" shall have the meaning ascribed to such term in
Section 7.3(b).
"Initial Purchase Price" shall have the meaning ascribed to such term
in 2.7(b).
"Intellectual Property" shall mean (a) letters patent, patents, patent
applications, patent licenses, and all claims with regard thereto; (b) software
licenses and know-how licenses, source codes, passwords, trade names,
trademarks, service marks, licenses of trademarks, trade names and/or service
marks, trademark registrations and applications, service xxxx registrations and
applications and copyright registrations and applications; (c) interests in
inventions, processes and trade secrets, whether reduced to practice or not, on
which no application for letters patent has been filed but as to which the
Company has a right or option to obtain an assignment or license by reason of an
existing contract with or employment of the inventor; (d) methods or processes,
designs, technical data, product development data, research data, know-how,
market reports, consumer investigations, product surveys, distribution methods
customer lists, trade secrets, notebooks and other industrial property rights,
whether or not secret and whether or not reduced to writing; and (e) all other
factual and proprietary information, whether or not secret and whether or not
reduced to writing, including all invention disclosures, data, analytic methods,
acceptance or rejection criteria, whether or not capable of precise separate
description, but which in any event alone or when accumulated give to the one
acquiring it an ability to study, test, produce or market something which one
otherwise would not have known to study, test, produce or market in the same
way.
"IRS" shall mean the Internal Revenue Service or its successor.
"Knowledge of the Company," "Company's Knowledge" or words of similar
import shall mean the actual knowledge that any current director of the Company,
Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxx, Xxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxxx
X. Xxx, Xxxxxx X. Xxxxx or Xxxxxxx X. Xxxxxx has or would have reason to have if
he or she had performed his or her services and duties in the ordinary course on
behalf of the Company in a reasonably diligent manner, but without additional
investigation or inquiry beyond that required for the discharge of his or her
duties in the ordinary course in a reasonably diligent manner.
"Law(s)" means, with respect to any Person, any federal, state, local
or other statute, law, ordinance, rule, regulation, order, writ, injunction,
judgment, decree or other requirement of any governmental authority (including
Environmental Laws) existing as of the date of this Agreement or as of the
Closing Date applicable to such Person or any of such Person's property, assets,
officers, directors, employees, consultants or agents.
"Liabilities" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, known or unknown, and whether accrued, absolute,
contingent, matured, unmatured or other.
"Licensed Intellectual Property" shall have the meaning ascribed to
such term in Section 3.19(d).
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"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, collateral sales contract, security interest or encumbrance of
any kind.
"Listed Contract" shall have the meaning ascribed to such term in
Section 3.17(b).
"Losses" shall have the meaning ascribed to such term in Section 7.1.
"Material Adverse Effect" means, when used with respect to any Person,
any event, change or effect which is materially adverse to the financial
condition, operations, business as currently conducted, assets, liabilities, or
results of operations of such Person, taken as a whole, but shall not include
any events, effects or changes that (a) are generally applicable in the United
States economy, the industry in which the referenced Person operates, or the
United States securities markets (provided that such events, effects or changes
do not affect such Person in a disproportionate manner) or (b) arise from or are
related to the announcement or pendency of the transactions contemplated hereby.
"Merger" shall have the meaning ascribed to such term in the recitals
above.
"Merger Parties" shall mean, individually and collectively, the
Company, the Shareholders, Merger Sub and Buyer.
"Merger Sub Common Stock" shall have the meaning ascribed to such term
in Section 2.6(d).
"Multiemployer Plan" shall mean a "multiemployer plan", as defined in
Section 3(37) of ERISA.
"Officer's Certificate" shall have the meaning ascribed to such term in
Section 7.5(a).
"Per Share Closing Merger Consideration" shall have the meaning
ascribed to such term in Section 2.7(f).
"Permitted Lien(s)" shall mean (a) statutory Liens for Taxes and water
and sewer charges not yet delinquent or Liens arising out of Taxes or general or
special assessments not in default and payable without penalty or interest or
the validity of which is being contested in good faith by appropriate
proceedings; (b) those Liens disclosed in Section 3.13 of the Company's
Disclosure Schedule; (c) statutory Liens of carriers, warehousemen, mechanics,
materialmen and the like arising in the ordinary course of business for
obligations not yet due and that could not reasonably be expected to have a
Material Adverse Effect on the Company; (d) easements, restrictive covenants,
rights of way and other similar restrictions that could not reasonably be
expected to have a Material Adverse Effect on the Company; (e) landlord's Liens;
(f) imperfections of title and Liens that could not reasonably be expected to
have a Material Adverse Effect on the Company or that are reserved against in
the Company Balance Sheet; (g) Liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or public
liability obligations; (h) legal or equitable encumbrances deemed to exist by
reason of the existence of any litigation or other legal proceeding or arising
out of a judgment or award with respect to which an appeal is being prosecuted
in good faith and levy and execution thereon have been stayed and continue to be
stayed; and (i) zoning, building and other
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similar restrictions imposed by any laws that could not reasonably be expected
to have a Material Adverse Effect on the Company.
"Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Pro Forma Closing Net Worth" shall have the meaning ascribed to such
term in Section 2.9(a).
"Proposed Settlement" shall have the meaning accorded to such term in
Section 8.2(b).
"Purchase Price Adjustment Final Payment" shall have the meaning
ascribed to such term in Section 2.10(d).
"Purchase Price Adjustment Referee" shall have the meaning ascribed to
such term in Section 2.10(c).
"Real Property" shall mean all real property and interests in real
property (including those certain easements, privileges, right-of-way
agreements, surface use rights, servitudes, and other real property interests
necessary for access to or which are ancillary or appurtenant to the use and
enjoyment of such real property and the operation of the business of the
Company).
"Regulatory Approvals" shall have the meaning ascribed to such term in
Section 5.8.
"Retention Agreements" shall have the meaning ascribed to such term in
Section 5.11(b).
"Required Consents" shall have the meaning ascribed to such term in
Section 3.2(b).
"Section 338 Election" shall have the meaning ascribed to such term in
Section 2.12(a).
"Shareholder Purchase Price Adjustment Objection Notice" shall have
the meaning ascribed to such term in Section 2.10(b).
"Shareholder Representative" shall mean (a) Xxxxxx X. Xxxxxxx, and (b)
in the event of the death or disability of Xxxxxx X. Xxxxxxx, a Person
designated by the Shareholders holding a majority in interest of the
Indemnification Escrow Account.
"Shareholder(s)" shall mean the holders of the Company Common Stock
immediately prior to the Effective Time representing 100% ownership of the
Company.
"Surviving Corporation" shall have the meaning ascribed to such term in
Section 2.1.
"Surviving Corporation Common Stock" shall have the meaning ascribed to
such term in Section 2.6(d).
"Tax Benefit Amount" shall be the product obtained by multiplying (i)
the aggregate amount of any payments made to employees (present or former) of
the Surviving Corporation
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from the Bonus Retention Escrow Amount (including any payments of withholding
Taxes made on behalf of or with respect to such employees) during a calendar
year by (ii) forty percent (40%); less any taxes paid by Surviving Corporation
on any amounts earned on the Bonus Retention Escrow Amount, or portion thereof,
in the Bonus Retention Escrow Account.
"Tax Claim Notice" shall have the meaning accorded to such term in
Section 8.2(a).
"Tax Returns" shall mean all returns, declarations, reports, claims for
refund, statements and other documents required or permitted to be filed with
any Governmental Entity in respect of any Tax (including payroll tax remittances
and payroll tax returns, but not including the Shareholders' personal returns,
declarations, reports, claims for refund, statements and other documents) and
"Tax Return" shall mean one of the foregoing Tax Returns.
"Taxes" shall mean all taxes, charges, fees, levies, imposts,
withholdings or other assessments, domestic or foreign, including, without
limitation all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment (including withholding, payroll and employment taxes
required to be withheld with respect to income paid to employees), excise,
estimated, severance, stamp, occupation, premium, windfall profits,
environmental, capital stock, social security (or similar), unemployment,
disability, registration, value added, alternative or add-on minimum, real
property, personal property or other taxes, customs, duties, fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign).
"Termination Date" shall have the meaning accorded such term in Section
9.1.
"Transaction Fees" shall have the meaning accorded such term in Section
2.7(e).
"Transferred Employees" shall have the meaning ascribed to such term in
Section 5.9.
"Voluntary Termination Date" shall mean March 15, 2003, or such other
date as may be from time to time agreed by Buyer and the Company.
"VSCA" shall mean the Virginia Stock Corporation Act, as amended.
"Welfare Plan" shall mean any "employee welfare benefit plan" as such
term is defined in Section 3(l) of ERISA.
Section 1.2 Construction.
(a) This Agreement is to be deemed to have been prepared
jointly by the parties hereto after arm's length negotiations, and any
uncertainty or ambiguity existing with respect to a provision herein shall
not be interpreted against the party drafting such provision solely by reason
of such party drafting such provision.
(b) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one gender shall be
held to include the other genders as the context requires, (ii) the terms
"hereof," "herein," and "herewith" and words of similar import
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shall, unless otherwise stated, be construed to refer to this Agreement as a
whole (including all of the Schedules and Exhibits hereto and all attachments
thereto) and not to any particular provision of this Agreement, and Article,
Section, paragraph, Exhibit and Schedule references are to the Articles,
Sections, paragraphs, Exhibits and Schedules to this Agreement unless
otherwise specified, (iii) the word "including" and words of similar import
when used in this Agreement shall mean "including, without limitation,"
unless the context otherwise requires or unless otherwise specified, (iv) the
word "or" shall not be exclusive, (v) "dollars" or "$" shall refer to United
States dollars, and (vi) provisions shall apply, when appropriate, to
successive events and transactions.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the VSCA, at the Effective Time,
Merger Sub shall be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation (the Company, as existing on and after the
Effective Time, being hereinafter sometimes referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the Commonwealth
of Virginia.
Section 2.2 Closing. The closing of the Merger (the "Closing") shall
take place at 11:00 a.m. (Washington, D.C. time) on February 28, 2003, which
shall be no later than the second Business Day after satisfaction or waiver of
the conditions set forth in Article VI, at the Tysons office of Xxxxxxx, Xxxxxxx
and Xxxxxx, LLP, unless another date or place is agreed to in writing by the
parties hereto (such date upon which the Closing occurs, the "Closing Date").
Section 2.3 Effective Time. Concurrently with the Closing, the
parties hereto shall cause the Articles of Merger to be filed with the State
Corporation Commission of Virginia in accordance with the VSCA. The time the
Merger becomes effective in accordance with applicable law, which shall be the
date and time at which the Articles of Merger have been duly filed with the
State Corporation Commission of Virginia or at such other date and time as is
agreed between the parties and specified in the Articles of Merger, is referred
to herein as the "Effective Time".
Section 2.4 Articles of Incorporation and Bylaws of the Surviving
Corporation. The articles of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the articles of
incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law; provided, however, the articles of
incorporation shall be amended by virtue of the Merger to provide that the
name of the Surviving Corporation from and after the Effective Time shall be
ManTech Integrated Data Systems Corporation.
(b) Unless otherwise determined by Buyer, the bylaws of the
Company in effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
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Section 2.5 Directors and Officers. All the directors of the Company
immediately prior to the Effective Time shall resign effective as of the
Effective Time and Buyer, as sole shareholder of the Surviving corporation,
shall appoint new directors effective as of the Effective Time. The officers of
the Company immediately prior to the Effective Time shall continue to hold their
certain office until their respective successors are duly elected and qualified,
or their earlier death, resignation or removal.
Section 2.6 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the VSCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time:
(a) all the property, rights, privileges, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation, and all debts,
Liabilities and duties of the Company and Merger Sub shall become the debts,
Liabilities and duties of the Surviving Corporation;
(b) each share of Company Common Stock held in the treasury of the
Company immediately prior to the Effective Time, if any, shall automatically be
cancelled and retired and shall cease to exist, and no cash, stock or other
property shall be delivered in exchange therefor;
(c) all shares of Company Common Stock shall automatically be
cancelled and shall cease to exist. Each holder of a validly issued and
non-assessable stock certificate of the Company ("Certificate") shall cease to
have any rights with respect thereto, except the right to receive the proper
portion of Aggregate Merger Consideration, upon surrender of such Certificate
pursuant to Section 2.8(b)(iii), without interest. The Aggregate Merger
Consideration paid or payable in respect of the surrender of Certificates shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock represented by such Certificates. If after the
Effective Time, Certificates are presented to Buyer or the Surviving
Corporation, they shall be cancelled and exchanged for the proper portion of the
Aggregate Merger Consideration deliverable in respect thereof pursuant to this
Agreement in accordance with the procedures set forth in Section 2.8(b)(iii);
and
(d) each share of common stock, par value $.01 per share, of Merger
Sub (the "Merger Sub Common Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation (the "Surviving
Corporation Common Stock"). Each stock certificate of Merger Sub evidencing
ownership of any such shares of Merger Sub Common Stock shall, as of the
Effective Time, evidence ownership of such shares of Surviving Corporation
Common Stock.
Section 2.7 Consideration for the Merger.
(a) Aggregate Merger Consideration. Subject to the terms and
conditions of this Agreement, Buyer agrees to pay or cause to be paid to, or on
behalf of, the Shareholders an aggregate amount (the "Aggregate Merger
Consideration") equal to the Initial Purchase Price
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(as defined below); the Earnout Payments pursuant to Section 2.11 herein, if
any; and (iii) the Tax Benefit Amount, if any.
(b) Initial Purchase Price. The Initial Purchase Price shall be
Sixty Million dollars ($60,000,000) in cash (i) less the amount equal to any
outstanding Company Debt at Closing, if any; and (ii) increased or decreased by
the Estimated Net Worth Adjustment (as defined below), if any.
(c) Payment of Company Debt. Buyer shall pay any amounts withheld
from the Initial Purchase Price pursuant to 2.7(b)(i) herein to the Company's
debt holders of the Company Debt on behalf of the Company in cash.
(d) Payment of Escrow Amounts and Transaction Fees. At the
Effective Time, the Buyer shall deliver or cause to be delivered, on behalf of
the Shareholders:
(i) a portion of the Initial Purchase Price equal to the
Indemnification Escrow Amount to the Escrow Agent to be
held in escrow pursuant to the terms contained herein
relating to the Indemnification Escrow Account; and
(ii) such portion of the Initial Purchase Price as is
necessary to satisfy final bills rendered by the legal,
accounting and investment banking advisors to the
Company invoicing fees and expenses incurred in such
advisors' representation of the Company in connection
with the transactions contemplated hereby, such final
bills to be delivered to the Company no later than one
Business Day prior to Closing (such fees and expenses,
"Transaction Fees").
The amount of Initial Purchase Price remaining after the delivery of the
Indemnification Escrow Amount to the Escrow Agent and the payment in full of the
Transaction Fees is referred to herein as the "Closing Merger Consideration".
(e) Allocation of Closing Merger Consideration. At Closing Buyer
shall pay or cause to be paid, in cash, for each share of Company Common Stock,
an amount equal to (i) the Closing Merger Consideration divided by (ii) the
total number of shares of Company Common Stock outstanding immediately prior to
the Effective Time (the "Per Share Closing Merger Consideration"). All cash
payments shall be made by wire transfer of immediately available funds.
Section 2.8 Deliveries at the Closing.
(a) Buyer and Merger Sub Deliveries. Without limiting any other
obligation of Buyer and Merger Sub under this Agreement, at the Closing, Buyer
and Merger Sub shall deliver or cause to be delivered to the Company and the
Shareholder Representative, for the benefit of the Shareholders, the following:
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(i) A certificate of each of Buyer and Merger Sub dated the
Closing Date and signed, in each case, on its behalf by its
authorized officer certifying that:
(A) its articles of incorporation and bylaws, attached to
the certificate, are true and complete and have been in
full force and effect in the form attached thereto
since the date of the adoption of the resolutions
referred to in clause (B) below and have not been
amended, rescinded or modified, except to the extent
attached thereto;
(B) the resolutions adopted by its board of directors,
attached to the certificate, authorizing its execution,
delivery and performance of this Agreement and its
actions taken in connection with the transactions
contemplated by this Agreement, were duly adopted at a
duly convened meeting thereof, at which a quorum was
present and acting throughout or by unanimous written
consent, remain in full force and effect, and have not
been amended, rescinded or modified, except to the
extent attached thereto;
(C) the resolutions adopted by the shareholders of Merger
Sub, attached to the certificate, authorizing its
execution, delivery and performance of this Agreement
and its actions taken in connection with the
transactions contemplated by this Agreement, were duly
adopted at a duly convened meeting thereof, and acting
by unanimous consent, remain in full force and effect,
and have not been amended, rescinded or modified,
except to the extent attached thereto;
(D) its officers executing this Agreement and any other
documents delivered pursuant to this Agreement are
incumbent officers and the specimen signatures on the
certificate are their genuine signatures; and
(E) it shall attach a good standing certificate for Buyer
certified by the Secretary of State of Delaware and a
good standing certificate for Merger Sub certified by
the State Corporation Commission of Virginia, each
dated as of a date not more than fifteen (15) days
prior to the Closing Date; and
(F) the conditions specified in Section 6.2(a) of this
Agreement have been fulfilled or waived; and
(ii) such other documents, instruments, certificates and writings
as reasonably may be requested by the Company or the
Shareholder
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Representative on behalf of the Shareholders no later than
three (3) Business Days prior to the Closing.
(b) Company and Shareholders Deliveries. Without limiting any other
obligation of the Company and the Shareholders under this Agreement, at the
Closing, the Company and the Shareholders shall deliver or cause to be delivered
the following to Buyer and Merger Sub:
(i) A certificate of the Company dated the Closing Date and
signed on its behalf by its authorized officer certifying
that:
(A) its articles of incorporation and bylaws, attached to
the certificate, are true and complete and have been in
full force and effect in the form attached thereto
since the date of the adoption of the resolutions
referred to in clause (B) below and have not been
amended, rescinded or modified, except to the extent
attached thereto;
(B) the resolutions adopted by its board of directors,
attached to the certificate, authorizing its execution,
delivery and performance of this Agreement and its
actions taken in connection with the transactions
contemplated by this Agreement, were duly adopted at a
duly convened meeting thereof, at which a quorum was
present and acting throughout or by unanimous written
consent, remain in full force and effect, and have not
been amended, rescinded or modified, except to the
extent attached thereto;
(C) the resolutions adopted by the Shareholders, attached
to the certificate, authorizing its execution, delivery
and performance of this Agreement and its actions taken
in connection with the transactions contemplated by
this Agreement, were duly adopted at a duly convened
meeting thereof, and acting by unanimous consent,
remain in full force and effect, and have not been
amended, rescinded or modified, except to the extent
attached thereto;
(D) its officers executing this Agreement and any other
documents delivered pursuant to this Agreement are
incumbent officers and the specimen signatures on the
certificate are their genuine signatures; and
(E) it shall attach a good standing certificate certified
by the State Corporation Commission of Virginia, dated
as of a date not more than fifteen (15) days prior to
the Closing Date; and
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(F) the conditions specified in Section 6.3(b) of this
Agreement have been fulfilled or waived;
(ii) Debt pay-off letter(s) with agreements by the lien
holder(s) to release all liens;
(iii) Certificate(s) from each Shareholder representing 100%
of his/her ownership of Company, endorsed in blank or
accompanied by duly executed assignment documents;
(iv) An executed IRS Form 8023 (or any successor form(s)
thereto) by each Shareholder.
(v) The minute books, corporate seals and stock ledger of
the Company; and
(vi) Such other documents, instruments, certificates and
writings as reasonably may be requested by Buyer no
later than three (3) Business Days prior to the
Closing.
Section 2.9 Closing Net Worth Adjustment and Estimated Closing Net
Worth Adjustment.
(a) The "Closing Net Worth Adjustment" shall be the positive or
negative amount by which the Closing Net Worth (as defined below) differs from
$2,800,000 (the "Pro Forma Closing Net Worth"). If the Closing Net Worth exceeds
the Pro Forma Closing Net Worth, then the Closing Net Worth Adjustment shall be
positive; and if the Closing Net Worth is less than the Pro Forma Closing Net
Worth, then the Closing Net Worth Adjustment shall be negative. The Company
shall estimate in good faith the Closing Net Worth, as of Closing, and deliver
such estimate (including (i) an unaudited balance sheet of the Company as of a
date within three (3) days of the Closing Date prepared in accordance with GAAP,
applied in a manner consistent with and using all of the same accounting
principles, practices, methodologies and policies (including, in the case of
judgments, judgments consistent with the applicable judgment made with respect
to the Company Balance Sheet) used in the preparation of the Company Balance
Sheet (the "Accounting Principles") and fully annotated in accordance with
Company's past practices to Buyer no later than three (3) Business Days before
the Closing Date (the difference between such estimate and the Pro Forma Closing
Net Worth being the "Estimated Net Worth Adjustment"). The Initial Purchase
Price shall be adjusted for the Estimated Net Worth Adjustment. The Closing Net
Worth shall be finally determined in accordance with Section 2.9(b) and Section
2.10.
(b) Promptly after the Closing, Company's independent accountants
shall, at Buyer's expense (i) audit the books of account of the Company as of
the Closing Date, and (ii) prepare an audited balance sheet of the Company as of
the Closing Date (the "Closing Date Balance Sheet"). The Closing Date Balance
Sheet shall be prepared in accordance with the Accounting Principles and shall
be accompanied by an unqualified report of Company's independent accountants on
the Closing Date Balance Sheet certifying that the Closing Date Balance Sheet
and any related notes thereto were prepared in accordance with the Accounting
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Principles. The Merger Parties acknowledge that (A) the sole purpose of the
determination of Closing Net Worth is to adjust the Initial Purchase Price so as
to reflect the change in net worth of the Company from the Pro Forma Closing Net
Worth to the Closing Date and (B) such change is to be measured on a totally
consistent basis so that the calculation is to be done using the same Accounting
Principles at both dates. For purposes of this Agreement, "Closing Net Worth"
shall mean (i) the Company's assets as of the Closing, less (ii) the Company's
liabilities as of Closing, in each case as reflected on the Closing Date Balance
Sheet.
Section 2.10 Post-Closing Adjustment Payment.
(a) Buyer, based on the Closing Date Balance Sheet, shall provide
to the Shareholder Representative, within sixty (60) days after Closing, (i) a
copy of the Closing Date Balance Sheet accompanied by the unqualified report of
Company's accountant as provided in Section 2.9(b), and (ii) a copy of Company's
independent accountants' calculation of (A) the actual Closing Net Worth
Adjustment ("Actual Net Worth Adjustment"); (B) the amount, if any, by which the
Estimated Net Worth Adjustment is less than the Actual Net Worth Adjustment (an
"Adjustment in Favor of Shareholders"); and (C) the amount, if any, by which the
Estimated Net Worth Adjustment is greater than the Actual Net Worth Adjustment
(an "Adjustment in Favor of Buyer") (such materials, the "Buyer Adjustment
Notice").
(b) Buyer, at the Shareholder Representative's request, shall
allow the Shareholder Representative and his or her representatives access at
all reasonable times to the Surviving Corporation's and Company's accountants,
personnel, properties, books and records, work papers, schedules and
calculations relating to the Closing Date Balance Sheet and the Actual Net Worth
Adjustment for the purpose of reviewing the Buyer Adjustment Notice and the
Closing Date Balance Sheet and confirming the accuracy of the preparation
thereof. In the event that the Shareholder Representative provides notice
("Shareholder Purchase Price Adjustment Objection Notice") to Buyer no later
than thirty (30) days after receipt of the Buyer Adjustment Notice that the
Shareholders dispute the Company's Accountants' determination of the Actual Net
Worth Adjustment, the Adjustment in Favor of Shareholders or the Adjustment in
Favor of Buyer determined in accordance with Section 2.10(a), the Shareholder
Representative and Buyer shall then meet and negotiate in good faith to resolve
such dispute, such negotiation to begin as soon as practicable (but in any case,
no later than thirty (30) days) after Buyer's receipt of the Shareholder
Purchase Price Adjustment Objection Notice; provided, that, any amounts not then
in dispute shall be paid promptly by the owing party hereto.
(c) In the event that Buyer and the Shareholder Representative
are not able to resolve such dispute within thirty (30) days after the date on
which the Shareholder Representative provides Buyer with the Shareholder
Purchase Price Adjustment Objection Notice, then either the Shareholder
Representative or Buyer may refer the issues in dispute to a neutral mutually
acceptable independent accounting firm of national reputation with which no
party hereto has had a preexisting relationship for resolution (the "Purchase
Price Adjustment Referee"). The decision of such issues by the Purchase Price
Adjustment Referee shall be final and binding on all Merger Parties. The Merger
Parties shall submit their positions on the dispute to the Purchase Price
Adjustment Referee within thirty (30) days after referral, and shall direct the
Purchase Price Adjustment Referee to decide the dispute within
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fifteen (15) days after submission to it. The Purchase Price Adjustment Referee
shall also decide the allocation of fees and expenses of the Purchase Price
Adjustment Referee between the Merger Parties with any amounts due from the
Shareholders being paid from the Indemnification Escrow Funds. Buyer and the
Shareholder Representative shall direct the Purchase Price Adjustment Referee to
promptly provide invoices of all such fees and expenses directly to the
Shareholder Representative, the Escrow Agent and Buyer. In the event the
Shareholders are required to pay any fees and expenses for the Purchase Price
Adjustment Referee, as soon as possible following Escrow Agent's receipt of the
Purchase Price Adjustment Referee's invoice, Escrow Agent shall be instructed to
distribute the portion of the invoice amount to be paid by the Shareholders from
the funds on deposit in the Indemnification Escrow Account in accordance with
the wire transfer instructions set forth in such invoice. The Escrow Agent shall
have no responsibility to verify the accuracy of any information contained in
such invoice, nor shall the Escrow Agent incur any liability for acting in
accordance with such invoice. Any other costs incurred by either party
including, but not limited to, experts, attorneys or financial advisors shall be
at the sole cost of the party incurring such cost regardless of the
determination.
(d) On the applicable date referred to in this Section 2.10,
either (i) Buyer shall pay to the Shareholders (pro rata in accordance with
their respective ownership of shares of Company Common Stock outstanding
immediately prior to the Effective Time) the amount of any Adjustment in Favor
of Shareholders, or (ii) Shareholder Representative shall cause any Adjustment
in Favor of Buyer to be distributed to Buyer from the funds on deposit in the
Indemnification Escrow Account. Any such payment is hereinafter referred to as
the "Purchase Price Adjustment Final Payment".
(e) Any Purchase Price Adjustment Final Payment shall be made by
wire transfer of immediately available funds after its final determination in
accordance with this Section 2.10 to account(s) specified by Buyer and
Shareholder Representative to receive the Purchase Price Adjustment Final
Payment.
Section 2.11 Earnout Payment(s).
(a) Buyer shall pay to the Shareholders Earnout Payment(s) in
amounts equal to thirty-six percent (36%) of the EBITDA of the Surviving
Corporation's Business for calendar year 2003 and thirty percent (30%) of the
EBITDA of the Surviving Corporation's Business for calendar year 2004, provided,
however, for calendar year 2003, the Earnout Payment shall only accrue and be
paid on that portion of the calendar year following the Effective Date ("Earnout
Payment(s)"). For each calendar year, or portion thereof the Earnout Payments
are to be made, Buyer shall provide the Shareholders with written notice (in
accordance with the Notice provisions hereof) of its determination of the
Earnout Payment ("Earnout Payment Buyer Determination") for such calendar year
within 10 days following the earlier of (i) Buyer's filing of its annual report
covering such calendar year with the SEC, or (ii) 100 days following any such
calendar year.
(b) For a period of thirty (30) days following Shareholder
Representative's receipt of the Earnout Payment Buyer Determination, at the
Shareholder Representative's request, Buyer shall allow the Shareholder
Representative and his or her representatives access
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at all reasonable times to the Surviving Corporation's and Company's
accountants, personnel, properties, books and records, work papers, schedules
and calculations relating to the determination of the Earnout Payment and
confirming the accuracy of the preparation thereof. In the event the Shareholder
Representative provides notice ("Earnout Payment Shareholder Objection Notice")
to Buyer no later than forty-five (45) days after receipt of the Earnout Payment
Buyer Determination that the Shareholders dispute the amount of the Earnout
Payment, the Shareholder Representative and Buyer shall then meet and negotiate
in good faith to resolve such dispute, such negotiation to begin as soon as
practicable (but in any case, no later than fifteen (15) days) after Buyer's
receipt of the Earnout Payment Shareholder Objection Notice.
(c) In the event that Buyer and the Shareholder Representative
are not able to resolve such dispute within forty-five (45) days after the date
on which the Shareholder Representative provides Buyer with the Earnout Payment
Shareholder Objection Notice, then either the Shareholder Representative or
Buyer may refer the issues in dispute to a neutral mutually acceptable
independent accounting firm of national reputation with which no party hereto
has had a preexisting relationship for resolution for resolution (the "Earnout
Payment Referee"). The decision of such issues by the Earnout Payment Referee
shall be final and binding on all Merger Parties. The Merger Parties shall
submit their positions on the dispute to the Earnout Payment Referee within
thirty (30) days after referral, and shall direct the Earnout Payment Referee to
decide the dispute within Fifteen (15) days after submission to it. The Earnout
Payment Referee shall also decide the allocation of fees and expenses of the
Earnout Payment Referee between the Merger Parties with any amounts due from the
Shareholders being paid from the Indemnification Escrow Funds. Buyer and the
Shareholder Representative shall direct the Earnout Payment Referee to promptly
provide invoices of all such fees and expenses directly to the Shareholder
Representative, the Escrow Agent and Buyer. In the event the Shareholders are
required to pay any fees and expenses for the Earnout Payment Referee, as soon
as possible following Escrow Agent's receipt of the Earnout Payment Referee's
invoice, Escrow Agent shall be instructed to distribute the portion of the
invoice amount to be paid by the Shareholders from the funds on deposit in the
Indemnification Escrow Account in accordance with the wire transfer instructions
set forth in such invoice. The Escrow Agent shall have no responsibility to
verify the accuracy of any information contained in such invoice, nor shall the
Escrow Agent incur any liability for acting in accordance with such invoice. Any
other costs incurred by either party including, but not limited to, experts,
attorneys or financial advisors shall be at the sole cost of the party incurring
such cost regardless of the determination.
(d) On the applicable date referred to in Section 2.11(e), Buyer
shall pay to the Shareholders (pro rata in accordance with their respective
ownership of shares of Company Common Stock outstanding immediately prior to the
Effective Time) the amount of any Earnout Payment, if any. Any such payment is
herein after referred to as the "2003 Final Earnout Payment and 2004 Final
Earnout Payment".
(e) Any 2003 Final Earnout Payment and 2004 Final Earnout Payment
shall be made by wire transfer of immediately available funds within five (5)
Business Days after its final determination in accordance with this Section 2.11
to account(s) specified by Buyer and Shareholder Representative to receive the
Earnout Payment Final Payment.
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(f) The parties agree that any and all Earnout Payments, if any, paid
to the Shareholders by Buyer hereunder shall be considered "goodwill" for
accounting and tax purposes. More specifically, to the extent such payments are
accounted for on Form 8883 in connection with the Election, they shall be
considered Class VII goodwill in their entirety.
Section 2.12 Section 338(h)(10) Election.
(a) Each Shareholder shall join with Buyer in making an election under
Section 338(h)(10) of the Code and, at the request of Buyer, any analogous
provision of state or local law (each such election, a "Section 338 Election")
with respect to the purchase of the stock of the Company. At or prior to the
Closing Date, the Company shall deliver to Buyer a separate IRS Form 8023
executed by each Shareholder (collectively referred to as "Forms 8023") and each
Shareholder shall cooperate with Buyer to take all actions necessary and
appropriate (including filing such additional forms, returns, elections
schedules and other documents as may be required) to effect and preserve a
timely election, in accordance with the provisions of Treasury Regulation
Section 1.338(h)(10)(1).
(b) In connection with the Section 338 Election, with the cooperation of
Seller, Buyer shall prepare a draft Form 8883 (or successor form) with any
attachments, and any comparable forms required by provisions of state or local
law. Buyer shall deliver to the Shareholder Representative an initial draft of
the Form 8883 (together with any successor form(s) thereto, the "Draft Form
8883") within ninety (90) days after the Closing. In the event that the
Shareholder Representative shall disagree with the Draft Form 8883, the
Shareholder Representative shall so notify Buyer in writing within thirty (30)
days after its receipt of the Draft Form 8883. The Shareholder Representative
and Buyer shall negotiate in good faith to resolve any disputed aspects of the
Draft Form 8883. If the Shareholder Representative and Buyer are unable to agree
upon the allocation within thirty (30) days of Buyer's receipt of the notice of
the Shareholder Representative, Buyer and each Shareholder may file their own
version of Form 8883 as an attachment to their respective tax forms
understanding that submission of differing Form 8883's may subject the entire
Section 338 Election to scrutiny an audit by the IRS.
(c) Buyer, the Company and the Shareholders shall each file all tax returns
(including amended returns and claims for refund) and information reports in a
manner consistent with the Form 8883.
(d) The Shareholders shall include their pro rata share of any income,
gain, loss, deduction, or other tax item resulting from the Section 338 Election
on their tax returns to the extent required by applicable law.
(e) Buyer and the Shareholders shall mutually prepare any forms or
schedules similar to Forms 8023 and 8883 that are required for provisions of
state or local law that are comparable to Treasury Regulation Section
1.338(h)(10)(1) in a manner similar to the above procedure. In the event that
the Final Forms 8023 and 8883 (or similar forms or schedules required for
provisions of state or local law) is disputed by any taxing authority, the party
receiving written notice of the dispute shall promptly notify the other party
hereto concerning such dispute.
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Section 2.13 Tax Benefit Amount
(a) Buyer shall pay to the Shareholders (pro rata in accordance with their
respective ownership of shares of Company Common Stock outstanding immediately
prior to the Effective Time) the Tax Benefit Amount, if any, relating to any
distributions from the Bonus Retention Escrow Account during 2003 simultaneously
with the payment of the 2003 Final Earnout Payment and the Tax Benefit Amount
relating to any distributions from the Bonus Retention Escrow Account during
2004 simultaneously with the payment of the 2004 Final Earnout Payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
As a material inducement to the Buyer and Merger Sub to enter into this
Agreement, except as disclosed on the Company's Disclosure Schedule delivered to
Buyer and Merger Sub by the Company concurrently herewith, the Company and each
of its Shareholders, jointly and severally, hereby represent and warrant to
Buyer and Merger Sub as provided in this Article III. Except for those
representations and warranties expressly set forth in this Article III, neither
the Company nor any of the Shareholders makes any representations or warranties,
express or implied, at law or in equity, of any kind or nature whatsoever
concerning the organization, business, assets, Liabilities and operations of the
Company and any such other representations or warranties are hereby expressly
disclaimed in full and for all time.
Section 3.1 Organization and Good Standing. The Company is a corporation,
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia, and has all requisite corporate power to conduct its
business as presently conducted, and to own and operate the assets and
properties now owned and operated by it. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified could reasonably be expected to have a Material Adverse Effect on
the Company. The Company has no parents or subsidiaries and owns no shares of
any corporation and has no ownership or other investment interest, either of
record, beneficially, or equitably, in any association, partnership, joint
venture or other legal entity.
Section 3.2 Corporate and Shareholder Authority; No Violation.
(a) This Agreement and the consummation of all of the transactions
provided for herein, including the Merger together with the agreements reflected
in the Ancillary Agreements, have been duly authorized by the board of directors
of the Company and by all requisite corporate or other action (other than
Shareholder action), and the Company has full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, subject only to
the approval by the requisite Shareholders. This Agreement has been duly
executed and delivered by the Company, and when executed and delivered by Buyer
and Merger Sub, assuming the enforceability of such agreements upon Buyer and
Merger Sub, will constitute valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization,
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moratorium, or other laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity (regardless of whether
in equity or at law).
(b) Except as disclosed in Schedule 3.2(b) of the Company's Disclosure
Schedule (the "Required Consents"), the execution and delivery by the Company of
this Agreement and the consummation and performance by the Company of the
transactions contemplated hereby in the manner herein provided does not and will
not (i) require the approval, consent or authorization of, or any filing with or
notice to, any federal, state, local or other governmental agency or body or any
other third party (which is not deemed to include the Shareholders), other than
(A) approvals, consents, authorizations, filings or notices of a character such
that a failure to obtain, file or give them could not reasonably be expected to
have a Material Adverse Effect on the Company or otherwise impair or affect the
validity of this Agreement or prevent the consummation of the transactions
contemplated hereby and (B) approvals, consents, authorizations, filings or
notices which have been obtained, made or given, or (ii) conflict with, or
result in an uncured or unwaived breach or violation of any term or provision
of, constitute a default under, or cause the acceleration of any payments
pursuant to (A) the articles of incorporation or bylaws of the Company, (B) any
indenture, mortgage, deed of trust, lease, note or note agreement or any other
agreement or instrument to which the Company is a party or by which the Company
or any of its assets or properties is bound, (C) any governmental license,
franchise, permit or other authorization held by the Company, or (D) any law,
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or body applicable to the Company, in
each case set out in this clause (ii), the conflict, breach or violation of
which could reasonably be expected to have a Material Adverse Effect on the
Company or otherwise impair or affect the validity of this Agreement or prevent
the consummation of the transactions contemplated hereby.
(c) Pursuant to the Virginia Stock Corporation Act, the Certificate of
Incorporation and the Bylaws of the Company, this Agreement and the Merger must
be approved by more than a two-thirds (2/3) vote of the Shareholders that hold
the outstanding shares of the Common Stock. The Shareholders that hold the
outstanding shares of 100% of the Common Stock have each approved this Agreement
and the Merger by executing this Agreement and by executing a written consent of
Shareholders dated as of the date hereof (the "Written Consent of
Shareholders"), an executed copy of which is attached hereto as Exhibit D. The
approval of this Agreement and the Merger by the Shareholders that hold the
outstanding shares of 100% of the Common Stock constitutes the requisite
approval of the Shareholders and no other vote of the Shareholders shall be
required with respect to approval of the matters contemplated hereby.
(d) Each Shareholder has all requisite power and authority, and has
taken all action necessary, to execute, deliver and perform this Agreement, to
consummate the transactions contemplated hereby and to perform his, her or its
obligations hereunder. This Agreement has been duly executed and delivered by
such Shareholder and is the legal, valid and binding obligations of such
Shareholder, enforceable against him, her or it in accordance with its terms.
Section 3.3 Capitalization of the Company. (a) The authorized capital
stock of the Company consists of 25,000 shares of common stock with a $.10 par
value per share of which
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144 shares are issued and are outstanding on the date hereof. All of the issued
and outstanding shares of Company Common Stock have been duly authorized, are
validly issued and outstanding, and are fully paid and nonassessable.
(b) Except as set forth on Schedule 3.3(b), there are no (i) options,
warrants, agreements, convertible or exchangeable securities or other
commitments pursuant to which the Company is or may become obligated to issue,
sell, transfer, purchase, return or redeem capital stock of the Company, (ii)
securities of the Company reserved for issuance for any purpose, (iii)
agreements pursuant to which registration rights in the capital stock of the
Company have been granted, (iv) shareholders agreements, whether written or
verbal, among any current or former shareholders of the Company or (v) statutory
or contractual preemptive rights, rights of first refusal or similar rights with
respect to the capital stock of the Company.
Section 3.4 Ownership of Shares.
(a) Common Stock. All of the issued and outstanding shares of Company
Common Stock are owned as set forth on Schedule 3.4(a) of the Company's
Disclosure Schedule.
(b) Except as set forth on Schedule 3.4(b), each Shareholder is the
registered and sole beneficial owner of the shares of Company Common Stock held
by such Shareholder, with good and marketable title thereto, free and clear of
any and all liens, security interests, pledges, mortgages, charges, limitation,
claims, restrictions, rights of first refusal, rights of first offer, rights of
first negotiation or other encumbrance of any kind or nature whatsoever.
Section 3.5 Corporate Records. The minute books of the Company (a) are
current and contain correct and complete copies of the articles of incorporation
and bylaws of the Company, including all amendments thereto and restatements
thereof, and (b) accurately and adequately reflect in all material respects all
action previously taken by the shareholders, board of directors and committees
of the board of directors of the Company. The stock record books of the Company
are true, correct and complete, and accurately reflect all transactions effected
in the capital stock of the Company through and including the date hereof.
Section 3.6 Tax Matters.
(a) The Company has duly and timely filed all Tax Returns required to
be filed by the Company on or prior to the Closing Date and all such Tax Returns
are accurate, correct and complete in all material respects. The Company has
paid in full all Taxes or has made adequate provision on the Closing Date
Balance Sheet for the payment of all Taxes which have been incurred or are due
or, to the Company's Knowledge, claimed to be due from them by any taxing
authorities. The provisions for Taxes currently payable on the Company Balance
Sheet are at least equal, as of the date thereof, to all unpaid Taxes of the
Company, whether or not disputed.
(b) Neither the Company nor any Shareholders have received any notice
of deficiency or assessment from any taxing authority with respect to
Liabilities for Taxes of the Company that have not been fully paid or finally
settled.
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(c) Except as set forth on Schedule 3.6(c) of the Company's Disclosure
Schedule, (i) the Tax Returns of the Company have been audited by the
appropriate authorities or are closed by the applicable statutes of limitations
for all taxable periods through December 31, 1998, and any Liabilities of the
Company with respect thereto has been fully paid, finally settled or adequately
provided for on the Company Balance Sheet, and (ii) there are no disputes
pending in respect of, or claims asserted for, Taxes on the Company, nor are
there any pending or, to the Company's Knowledge, threatened, audits or
investigations or outstanding matters under discussion with any taxing
authorities with respect to the payment of Taxes by the Company, nor has the
Company given or been requested by any taxing authority to give any waivers
extending the statutory period of limitations applicable to any assessment or
collection of any Taxes of the Company which have a continuing effect on the
Company.
(d) Except as set forth on Schedule 3.6(d) of the Company's Disclosure
Schedule, the Company has not (i) requested any extension of time within which
to file any Tax Return for the Company, which Tax Return has not since been
filed, or (ii) executed any power of attorney, which is currently in effect,
with respect to any matter relating to Taxes of the Company.
(e) The Company, with regard to any property or assets held or
acquired by it at any time, has not filed a consent pursuant to Section 341(f)
of the Code.
(f) The Company is not and has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii).
(g) The Company has not agreed to make, nor is it required to make any
adjustment pursuant to Sections 481(a) or 263A of the Code (or similar
provisions of other law) by reason of a change in accounting method. The Company
has not taken action that is not in accordance with past practice that could
defer a liability for Taxes of the Company from any taxable period ending on or
before the Closing Date to any taxable period ending after such date.
(h) There are no Liens with respect to Taxes (except for Liens for
Taxes not yet delinquent) upon any of the properties or assets, personal or
mixed, tangible or intangible, of the Company.
(i) The Company is not a party to or bound by any agreement providing
for the indemnification, allocation or sharing of Taxes.
(j) The Company has no liability for the Taxes of any Person (other
than the Company) (i) under Treasury Regulations Section 1.1502-6 of the income
tax regulations (or any similar provision of State, local or foreign law), (ii)
as a transferee or successor, (iii) by contract, or (iv) otherwise.
(k) The Company is not party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
connection with the Agreement or any change of control of the Company, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code.
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(l) The Company is not party to or bound by any closing agreement or
offer in compromise with any taxing authority.
(m) Schedule 3.6(m) of the Company's Disclosure Schedule discloses all
foreign jurisdictions in which the Company is subject to Tax, is engaged in
business or has a permanent establishment.
(n) The Company is not party to any joint venture, partnership, or
other arrangement or contract which could be treated as a partnership for
federal income tax purposes.
(o) Except as set forth in Schedule 3.6(o) of the Company's Disclosure
Schedule, in the twenty-four (24) months preceding the date of this Agreement,
the Company has not: (i) made any distributions, redemptions or other payments
in respect of its capital stock other than regular and normal distributions
consistent with the Company's past practice; or (ii) disposed of any of its
assets other than in the ordinary course or business.
Section 3.7 Employee Benefit Plans.
(a) Schedule 3.7(a) of the Company's Disclosure Schedule lists all
Benefit Plans. Except as set forth in Schedule 3.7(a) of the Company's
Disclosure Schedule, the Company has no formal plan or commitment, whether
legally binding or not, to create any additional Benefit Plan or modify or
change any existing Benefit Plan that would affect any current employee,
director or consultant, or former employee, director or consultant, of the
Company and there are no oral Benefit Plans to which the Company is a party.
(b) The Company has delivered or made available the following
documents to Buyer with respect to each Benefit Plan: correct and complete
copies of the plan documents (including all amendments thereto); the most recent
summary plan description or other plan description and all modifications and
updates thereto; the most recent IRS determination letter or opinion letter if
the Benefit Plan is intended to be qualified under the Code, if any, and all
material notices that were given by the IRS or the Department of Labor to a
Benefit Plan; the two most recent Form 5500 Annual Reports filed with the IRS,
actuarial reports, if any, and related financial statements, if any; and all
related trust agreements, group annuity contract, other insurance contracts and
other funding agreements, if any related to each Benefit Plan.
(c) Except as set forth in Schedule 3.7(c) of the Company's Disclosure
Schedule, each Benefit Plan has been maintained, operated and administered in
accordance with its terms and all applicable laws, except where a failure to so
operate could not be reasonably expected to have a Material Adverse Effect on
the Company. Except as set forth in Schedule 3.7(c) of the Company's Disclosure
Schedule, all required reports and descriptions have been filed or distributed
timely with respect to each Benefit Plan, except where a failure to file or
distribute timely could not be reasonably expected to have a Material Adverse
Effect on the Company. The requirements of Parts 6 and 7 of Subtitle B of Title
I of ERISA and of sections 4980B and 4980D of the Code have been met in all
material respects, where applicable, with respect to each Benefit Plan that is a
Welfare Plan.
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(d) Except as set forth in Schedule 3.7(d) of the Company's Disclosure
Schedule, each Benefit Plan intended to be qualified under Section 401(a) of the
Code has been determined by the IRS to be so qualified and such determination is
evidenced by a determination letter or as identified in Schedule 3.7(d) of the
Company's Disclosure Schedule, may still be amended within the remedial
amendment period to cure any qualification defect. Likewise, each trust created
thereunder intended to be exempt from federal income tax under Section 501(a) of
the Code is so exempt and is evidenced by a determination letter or as
identified in Schedule 3.7(d) of the Company's Disclosure Schedule, may still be
so amended within the remedial amendment period. No amendment has been made to
such Benefit Plan or the trust created thereunder since the date of the Benefit
Plan's most recent determination letter in any respect that would be reasonably
be expected to adversely affect the qualification of the Benefit Plan or the
exemption of the trust. Each Benefit Plan intended to satisfy the requirements
of Section 125 or 501(c)(9) of the Code satisfies such requirements in all
material respects.
(e) The Company has no ERISA Affiliates. Any person, firm or entity
that was an ERISA Affiliate in the past is set forth on Schedule 3.7(e) of the
Company's Disclosure Schedule and did not sponsor a plan covered by Title I of
ERISA during the period in which it was an ERISA Affiliate.
(f) The Company does not maintain nor has it ever maintained a
retirement plan subject to Title IV of ERISA or Section 412 of the Code.
(g) The Company has not maintained, contributed to or otherwise had
any obligation with respect to any "multiemployer Plan" as defined in Section
3(37) of ERISA.
(h) Except as set forth on Schedule 3.7(h) of the Company's Disclosure
Schedule, the Company does not have any commitment, intention or understanding
to create, terminate or adopt any Benefit Plan that would result in any
additional material liability to the Company or the Buyer or any of the Buyer's
subsidiaries.
(i) There are no suits, actions, disputes, arbitrations, claims,
arbitrations, administrative or other proceedings pending or to the Company's
Knowledge threatened, anticipated or reasonably expected to be asserted of a
material nature against the Company, any Benefit Plan or the assets thereof,
with respect to any Benefit Plan (other than routine claims for benefits); there
are no investigations or audits of any Benefit Plan by any governmental
authority currently pending or to the Company's Knowledge threatened; and there
have been no such investigations or audits that have been concluded that
resulted in any material liability of the Company that has not been fully
discharged. There is no judgment, decree, injunction, rule or order of any
court, governmental body, commission, agency or arbitrator outstanding against
or in favor of any Benefit Plan or any fiduciary thereof (other than rules of
general applicability).
(j) Except as otherwise disclosed in Schedule 3.7(j) of the Company's
Disclosure Schedule, neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will result in, or is a
precondition to, (i) any employee, director or consultant of the Company
becoming entitled to severance pay or any similar
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payment, (ii) the acceleration of the time of payment or vesting, or an increase
in the amount of, any compensation due to any employee, former employee,
director or consultant of the Company, whether or not such payment would be an
"excess parachute payment" (within the meaning of Section 280G of the Code),
(iii) the renewal or extension of the term of any agreement regarding the
compensation of any employee, former employee, director or consultant of the
Company.
(k) The Company is not required to maintain or contribute to any
Benefit Plan by the law or applicable custom or rule of any jurisdiction outside
of the United States.
(l) Except as set forth in Schedule 3.7(l) of the Company's Disclosure
Schedule, all contributions required to be made under the terms of any Benefit
Plan as of the date of this Agreement have been timely made.
(m) Except as set forth on Schedule 3.7(m) of the Company's Disclosure
Schedule, Buyer and the Company, as applicable, may terminate any Benefit Plan
maintained by the Company or may cease contributions to any such Benefit Plan
without incurring any liability exceeding Ten Thousand dollars ($10,000) other
than (i) a benefit liability accrued in accordance with the terms of such
Benefit Plan prior to such termination or ceasing of contributions; or (ii) any
expenses attendant to the termination of such Benefit Plan.
Section 3.8 Broker's or Finder's Fees. Except as disclosed on Schedule 3.8
of the Company's Disclosure Schedule, the Company is not party to any agreement
with any agent, broker, investment banker or other Person, or in any way
obligated to any agent, broker, investment banker or other Person, for any
commissions, fees or expenses, in connection with the origin, negotiation,
execution or performance of this Agreement or any of the transactions
contemplated herein, including any agent, broker, investment banker or other
Person who would have a valid claim for a fee or commission from Buyer or Merger
Sub.
Section 3.9 Financial Statements.
The balance sheets of the Company as of December 31, 2001, December 31,
2000, and December 31, 1999, the related statements of income and retained
earnings, and notes thereto for the 12-month periods then ended, reviewed by
Xxxxxxx & Company, independent certified public accountants, complete copies of
all of which have been delivered by the Company to the Buyer; (i) are complete
in all material respects, (ii) are in accordance with the books and records of
the Company, (iii) have been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, and (iv) present fairly in all
material respects, the financial position of the Company as of the respective
dates thereof and the results of operations and changes in cash flows for the
periods then ended. Specifically, but not by way of limitation, the Company
Balance Sheet discloses all of the material debts, Liabilities and obligations
of any nature of the Company, whether due or to become due, as of the date
thereof, to the extent such debts, Liabilities and obligations are required to
be disclosed in accordance with GAAP. Such statements of operations do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business except as expressly specified therein,
and do not reflect any material change in accounting principles during the
period indicated. The
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Company owns all assets set forth on the Company Balance Sheet, except for such
assets as have been spent, sold or transferred in the ordinary course of
business since the date thereof.
Section 3.10 Accounts Receivable. Except as set forth in Schedule 3.10 of
the Company's Disclosure Schedule, all accounts receivable reflected on the
Company Balance Sheet, and all accounts receivable arising subsequent to the
Company Balance Sheet Date including those reflected on the Company Balance
Sheet; (a) represent bona fide claims of the Company against debtors for
products sold and/or services performed; (b) have arisen only in the ordinary
course of business, consistent with past practice; and (c) to the Company's
Knowledge, are not subject to any defenses, set-offs or counterclaims.
Section 3.11 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.11 of the Company's Disclosure Schedule, the Company has no material
Liabilities or obligations, either accrued, absolute, contingent or otherwise,
of a nature that would be required to be disclosed, reflected or reserved
against in a balance sheet prepared in accordance with GAAP except those
Liabilities, contingencies or obligations:
(a) set forth on the Company Balance Sheet or incurred thereafter in
the ordinary course of business and consistent with past practices;
(b) arising in the ordinary course of business under any agreement,
contract, commitment, lease or plan disclosed on the Company's Disclosure
Schedule;
(c) arising in the ordinary course of business under any agreement,
contract commitment, lease or plan entered into by the Company in the ordinary
course of business which agreement, contract, commitment, lease or plan is not
required to disclosed on the Company's Disclosure Schedule because of the term
or amount involved or otherwise; or
(d) incurred, consistent with past business practice, in or as a
result of the normal and ordinary course of business since the Company Balance
Sheet Date or as contemplated by this Agreement.
Section 3.12 Existing Condition. Except as disclosed in Schedule 3.12 of
the Company's Disclosure Schedule, since the Company Balance Sheet Date, the
Company has not:
(a) declared, set aside or paid any dividend or made or agreed to make
any other distribution or payment in respect of its capital shares or redeemed,
purchased or otherwise acquired or agreed to redeem, purchase or acquire any of
its capital shares;
(b) incurred any Liabilities, other than Liabilities incurred in the
ordinary course of business consistent with past practice, or discharged or
satisfied any Lien other than Permitted Liens or paid any Liabilities, other
than in the ordinary course of business consistent with past practice, or failed
to pay or discharge when due any Liabilities which the failure to pay or
discharge has caused or could be reasonably expected to cause a Material Adverse
Effect on the Company;
(c) sold, assigned or transferred any of its assets or properties,
except in the ordinary course of business consistent with past practice;
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(d) created, incurred, assumed or guaranteed any indebtedness for
money borrowed, or mortgaged, pledged or subjected to any Lien, any of its
material assets or properties, other than Liens, if any, for current Taxes not
yet due and payable or other Permitted Liens;
(e) made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan to which it is a party or by
which it is bound, or cancelled, modified or waived any debts or claims held by
it, other than in the ordinary course of business consistent with past practice,
or waived any rights of substantial value;
(f) suffered any damage, destruction or loss, whether or not covered
by insurance, (i) that could be reasonably expected to have a Material Adverse
Effect on the Company or (ii) of any item carried on its books of account at
more than $25,000;
(g) suffered any repeated, recurring or prolonged shortage, cessation
or interruption of material supplies or utility services required to conduct its
business and operations;
(h) received notice, or to the Knowledge of the Company, been made
aware of any facts or circumstances giving rise to any actual or threatened
labor trouble, labor organizing effort, strike, work stoppage;
(i) made any capital expenditure or capital addition or betterment
except in the ordinary course of business consistent with past practice;
(j) except in the ordinary course of business consistent with past
practice, (i) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its Shareholders, directors, officers or employees, (ii) made
any increase in, or any addition to, other benefits to which any of its
Shareholders, directors, officers or employees may be entitled, (iii) granted
any severance or termination pay to any of its Shareholders, directors, officers
or employees, or (iv) entered into any employment, deferred compensation or
other similar agreement with (or any amendment to any such existing agreement)
any of its Shareholders, directors, officers or employees;
(k) changed any of the accounting principles followed by it or the
methods of applying such principles except as required by changes in applicable
laws or regulations;
(l) entered into any transaction that creates an obligation that will
continue to bind the Company after the Effective Time other than as contemplated
by this Agreement or in the ordinary course of business consistent with past
practice;
(m) issued equity securities of the Company; or
(n) authorized, committed or agreed to take any of the actions
described in subsections (a) through (m) of this Section 3.12, except as
otherwise permitted by this Agreement.
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Section 3.13 Title to Properties; Leasehold Interests. (a) The Company
does not own any Real Property. Schedule 3.13(a) of the Company's Disclosure
Schedule sets forth a true and complete list of all real property leased by the
Company.
(b) The Company owns all the properties and assets which it purports
to own and all of these properties and assets are held free and clear of all
Liens except for Permitted Liens or liens set forth on Schedule 3.13(b).
(c) All material leases, licenses, permits and authorizations related
to the real or personal properties used by the Company and all other
instruments, documents and agreements pursuant to which the Company has obtained
the right to use any real or personal property are, to the Company's Knowledge,
valid and effective in accordance with their respective terms.
Section 3.14 Litigation. (a) Except as set forth in Schedule 3.14(a) of
the Company's Disclosure Schedule, there is no action, suit, claim, mediation,
arbitration, litigation, arbitration, investigation or other proceeding of or
before any court, arbitrator or governmental or regulatory official, body or
authority pending or to the Company's Knowledge, threatened against the Company
or its assets, properties or business, or the transactions contemplated by this
Agreement. To the Company's Knowledge, the Company is not a party to or
expressly named as subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority. The Company has no obligation to
indemnify any third party for defense, settlement, and/or judgment costs
incurred by such third party.
(b) There is no proceeding pending against, or to such Shareholder's
actual knowledge, currently threatened against or affecting, such Shareholder
before any court or arbitrator or any governmental body, agency or official that
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
Section 3.15 Compliance with Law. The Company has complied with each, and
is not in violation of any law, ordinance or governmental rule or regulation to
which it or its business, operations, assets or properties are subject, which
noncompliance or violation could reasonably be expected to have a Material
Adverse Effect on the Company or otherwise impair or affect the validity of this
Agreement or prevent the consummation of the transactions contemplated hereby.
The Company has not received any notice to the effect that, or otherwise been
advised that, it is not in compliance with any Law and no circumstances exist
that are likely to result in violations of any Law.
Section 3.16 Insurance. Schedule 3.16 of the Company's Disclosure Schedule
contains a true, complete and correct list of all policies or binders of
insurance held as of the date hereof by or on behalf of the Company relating to
its businesses or any of its assets or properties (specifying the insurer, the
insured(s), the amount of the coverage, the premiums, the type of insurance, the
risks insured, the policy expiration dates, the deductibles, the loss retention
amounts and any pending claims thereunder). To the Company's Knowledge, each of
the policies and binders listed in Schedule 3.16 of the Company's Disclosure
Schedule is in full force and effect and serves to insure the Company in
reasonably sufficient amounts against risk usually insured against by similarly
situated businesses.
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Section 3.17 Contracts and Commitments.
(a) Except as listed and described in Schedule 3.7, Schedule 3.13,
Schedule 3.17 or Schedule 3.22 of the Company's Disclosure Schedule and except
as will be terminated upon Closing or as are terminable on less than ninety (90)
days' notice without penalty, the Company is not a party to any written or oral:
(i) agreement, contract or commitment with any present or
former Shareholder, director, officer, employee or
consultant or for the employment of any person, including
any consultant;
(ii) agreement, contract, commitment or arrangement with any
labor union or other representative of the Company's
employees;
(iii) agreement, contract or commitment for the future purchase
of, or payment for, supplies or products, or for the
performance of services by a third party, involving in any
one case $50,000 or more;
(iv) agreement, contract or commitment to sell or supply
products or to perform services, involving in any one case
$50,000 or more;
(v) agreement, contract or commitment not otherwise listed on
the Company's Disclosure Schedule and continuing over a
period of more than one year from the date hereof or
exceeding $50,000 in value;
(vi) representative or sales agency agreement, contract or
commitment;
(vii) Real Property or personal property lease providing for a
lease payment in excess of $50,000 per year under which
the Company is either the lessor or lessee;
(viii) note, debenture, bond, conditional sale or equipment trust
agreement, letter of credit agreement, loan agreement or
other contract or commitment for the borrowing or lending
of money (including loans to or from officers, directors,
Shareholders, or any members of their immediate families),
agreement or arrangement for a line of credit, or
guarantee, pledge or undertaking of the indebtedness of
any other person;
(ix) agreement, contract or commitment for any charitable or
political contribution;
(x) agreement, contract, or commitment for any capital
expenditure in excess of $50,000;
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(xi) agreement, contract or commitment limiting or
restraining the Company from engaging or competing
in any lines of business with any person; or
(xii) any other agreement, contract or commitment which
the failure to fulfill could reasonably be
expected to have a Material Adverse Effect on the
Company.
(b) Each of the agreements, contracts, commitments, leases and
other instruments, documents and undertakings listed on Schedule 3.7,
Schedule 3.13 or Schedule 3.17 of the Company's Disclosure Schedule (a
"Listed Contract") is valid and enforceable in accordance with its terms. The
Company is not in violation or breach of or default under any Listed
Contract, except where such violation, breach or default could not reasonably
be expected to have a substantial impact on the Listed Contract. To the
Company's Knowledge, no party other than the Company is in default in the
performance, observance or fulfillment of any material obligation, covenant
or condition contained in a Listed Contract. To the Company's Knowledge no
party to any Listed Contract intends to terminate or amend the terms thereof
or to refuse to renew any such Listed Contract upon the expiration of its
term. Except for those Listed Contracts denoted with an asterisk (*) as set
forth on Schedule 3.17 of the Company's Disclosure Schedule, no Listed
Contract requires the consent of any other contracting party to prevent a
breach of, or default under, or a termination, change in terms or conditions
or modification of, any Listed Contract as a result of the consummation of
the transactions contemplated hereby.
Section 3.18 Environmental Matters.
(a) The Company is in compliance, in all material respects,
with all applicable Environmental Laws in respect of the Business.
(b) The Company has obtained, possesses, and is in full
compliance, in all material respects, with all permits, licenses, reviews,
certifications, approvals, registrations, consents, and any other
authorizations required under any Environmental Laws.
(c) The Company has never discharged, emitted, spilled,
released, disposed of, abandoned or placed Hazardous Materials, in any
amount, at, on or under any Real Property occupied or used by the Company.
(d) To the Company's Knowledge, there has not been any
presence, disposals, releases or threatened releases of Hazardous Materials
on, from or under any Real Property occupied by the Company, which may have
occurred prior to the Company's occupation and/or use of such Real Property.
Section 3.19 Intellectual Property.
(a) Schedule 3.19(a) of the Company's Disclosure Schedule
lists all of the material Intellectual Property owned by the Company that is
necessary for the operation of the Business as currently conducted or that
has been registered with, filed in or issued by, as the case may be, the
United States Patent and Trademark Office or such other government entities
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as are indicated in Schedule 3.19(a) of the Company's Disclosure Schedule
("Company Intellectual Property"). Unless otherwise indicated in such
Schedule 3.19(a) of the Company's Disclosure Schedule, the Company owns the
entire right, title and interest in and to the Company Intellectual Property
(including the exclusive right to use and license the same), free and clear
of any and all liens, encumbrances, covenants, conditions and restrictions or
other adverse claims or interests of any kind or nature. No current or former
officer, director or employee of the Company has any right, license, claim or
interest whatsoever in or with respect to any of the Company Intellectual
Property and to the Company's Knowledge, no Person is infringing upon any of
the Company Intellectual Property.
(b) There is no pending or to the Company's Knowledge,
threatened, claim or notice (whether written, oral or otherwise) against the
Company or to the Company's Knowledge, the licensors of material Intellectual
Property owned by third parties that is licensed to the Company ("Licensed
Intellectual Property"), asserting that any Company Intellectual Property or
Licensed Intellectual Property, or the Company's use thereof, infringes or
violates the rights of third parties or suggesting that any other person has
any claim of legal or beneficial ownership with respect thereto, nor to the
Knowledge of the Company is there a reasonable basis for any claim that the
Company does not so own or have proper license to make use of the Licensed
Intellectual Property.
(c) Schedule 3.19(c) of the Company's Disclosure Schedule sets
forth a complete and accurate list of all agreements granting to the Company
any material right under or with respect to any Licensed Intellectual
Property other than standard desktop software applications used generally in
the Company's operations and that are subject to a license fee of no more
than $10,000 pursuant to "shrink wrap" or "click through" licenses
(collectively, the "Inbound License Agreements"), indicating for each the
title and the parties thereto. Schedule 3.19(c) of the Company's Disclosure
Schedule also sets forth a complete and accurate list of the amount of any
future royalty, license fee or other payments that may become payable by the
Company under each such Inbound License Agreements by reason of the use or
exploitation of the Licensed Intellectual Property licensed thereunder. The
rights licensed under each Inbound License Agreement shall be exercisable by
the Company on and after the Closing to the same extent as by the Company
prior to the Closing. No loss or expiration of any material Intellectual
Property licensed to the Company under any Inbound License Agreement is
pending or to the Company's Knowledge, or threatened. Except as set forth in
Schedule 3.19(c) of the Company's Disclosure Schedule, no licensor under any
Inbound License Agreement has any ownership or exclusive license rights in or
with respect to any improvements made by the Company to the Intellectual
Property licensed thereunder. Schedule 3.19(c) of the Company's Disclosure
Schedule sets forth a complete and accurate list of all license agreements
under which the Company grants any rights under any Intellectual Property,
excluding the terms of use applicable to users of any of the websites of the
Company.
(d) The Company has taken all reasonable steps in accordance
with standard industry practices to protect their respective rights in the
Company Intellectual Property owned or purported to be owned by the Company
and maintains the confidentiality of all of the trade secrets of the Company.
Without limiting the foregoing, the Company has and does enforce a policy
requiring certain employees, consultants and contractors as appropriate, to
enter into proprietary information, confidentiality and assignment agreements
substantially in the
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Company's standard forms (which have previously been provided to Buyer) and
those current and former employees, consultants and contractors of the
Company have executed such an agreement. Except as may be set forth in
Schedule 3.19(d) of the Company's Disclosure Schedule, the Company has not
disclosed, nor is the Company under any contractual or other obligation to
disclose, to another person any of its trade secrets, except on a "need to
know" basis and pursuant to an enforceable confidentiality agreement or
undertaking, and no person has materially breached any such agreement or
undertaking.
(e) Except as set forth in Schedule 3.19(e) of the Company's
Disclosure Schedule: (i) the Company has not taken any action or failed to
take any action (including the manner in which it has conducted the Business,
or used or enforced, or failed to use or enforce, any of the Company
Intellectual Property) that would result in the abandonment, cancellation,
forfeiture, relinquishment, invalidation or unenforceability of any of the
Company Intellectual Property (including, with respect to the patents owned
by the Company, failing to disclose any known material prior art in
connection with the prosecution of patent applications) and (ii) all Company
Intellectual Property has been registered or obtained in accordance with all
applicable legal requirements and are currently in effect and in compliance
with all applicable legal requirements (including, in the case of registered
marks of the Company, the timely post-registration filing of affidavits of
use and incontestability and renewal applications). The Company has timely
paid all filing, examination, issuance, post registration and maintenance
fees, annuities and the like associated with or required with respect to any
of the Company Intellectual Property.
Section 3.20 No Third Party Options. There are no existing
agreements, options, commitments or rights with, to or in any person to
acquire any of the Company's assets or properties or any interest therein,
except for this Agreement and those contracts entered into in the ordinary
course of business consistent with past practice for the sale of the
Company's products or services.
Section 3.21 Governmental Authorizations.The governmental consents,
if any, listed on Schedule 3.2(b) together with those listed on Schedule
3.21 of the Company's Disclosure Schedule lists all Authorizations necessary
for the conduct of the business of the Company as of the date hereof, and
each such Authorization is in full force and effect.
Section 3.22 Government Contract Regulatory Matters.
(a) Government Contracts and Bids. Schedule 3.22(a) of the
Company's Disclosure Schedule lists all: (i) Government Contracts the period
of performance of which has not yet expired or terminated and for which final
payment has not yet been received and there is a reasonable likelihood of
payment or financial liability greater than $25,000 thereunder (the "Current
Government Contracts"); (ii) quotations, bids and proposals for awards of new
Government Contracts made by the Company for which no award has been made and
for which the Company believes there is a reasonable prospect that such an
award to the Company may yet be made (the "Government Contract Bids"); and
(iii) to the Company's Knowledge, any Government Contract pursuant to which
the Company is currently or is reasonably likely to experience cost,
schedule, technical or quality problems that could result in claims against
the Company (or its successors in interest) in the amount of $25,000 or
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more by a Governmental Entity, a prime contractor or a higher-tier
subcontractor. The Company has delivered or made available to Buyer true and
complete copies of all Current Government Contracts and of all Government
Contract Bids. Except as described in Schedule 3.22(a) of the Company's
Disclosure Schedule, to the Company's Knowledge all of the Current Government
Contracts were legally awarded, are binding on the parties thereto, and are
in full force and effect. Except as set forth in Schedule 3.22(a) of the
Company's Disclosure Schedule, the Current Government Contracts (or, where
applicable, the prime Government Contracts under which the Current Government
Contracts were awarded) are not currently the subject of bid or award protest
proceedings, and, to the Company's Knowledge, no such Current Government
Contracts (or, where applicable, the prime Government Contracts under which
the Current Government Contracts were awarded) are reasonably likely to
become the subject of bid or award protest proceedings.
(b) Compliance with Contract Requirements. Except as set forth
in Schedule 3.22(b) of the Company's Disclosure Schedule, the Company has
complied, in all material respects, with all statutory and regulatory
requirements, including the Armed Services Procurement Act, the Federal
Procurement and Administrative Services Act, the Federal Acquisition
Regulation and related cost principles and the Cost Accounting Standards,
where and as applicable to each of the Current Government Contracts and the
Government Contract Bids. Except as set forth in Schedule 3.22(b) of the
Company's Disclosure Schedule, the Company has not received a substantially
adverse or negative government past performance evaluation or rating for the
past three (3) years that could be reasonably expected to adversely affect
the evaluation by the Government or other potential customer of the Company's
bids or proposals for future Government Contracts.
(c) Notice of Non-Compliance. Except as set forth in Schedule
3.22(c) of the Company's Disclosure Schedule, with respect to the Current
Government Contracts, no Governmental Entity, prime contractor or higher-tier
subcontractor under a Government Contract or any other person has notified
the Company of any actual or alleged violation or breach of any statute,
regulation, representation, certification, disclosure obligation, contract
term, condition, clause, provision or specification that could be reasonably
expected to adversely affect payments under Current Government Contracts or
adversely affect the award of Government Contracts to the Company in the
future.
(d) False Claims, Defective Pricing and Requests for Pricing
Reductions. The Company has taken no action and is not party to any
litigation that could reasonably be expected to give rise to (i) liability
under the False Claims Act, (ii) a claim for price adjustment under the Truth
in Negotiations Act, or (iii) any other request for a reduction in the price
of any Government Contracts.
(e) Termination for Default or Convenience. Except as
described in Schedule 3.22(e) of the Company's Disclosure Schedule, the
Company has not received any show cause, cure, deficiency, default or similar
notice relating to the Current Government Contracts. None of the Current
Government Contracts has been terminated for default. Except as described in
Schedule 3.22(e) of the Company's Disclosure Schedule, the Company has not
received any written or, to the Company's Knowledge, oral notice terminating
any of the Current
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Government Contracts for convenience or indicating an intent to terminate any
of the Current Government Contracts for convenience.
(f) Disputes and Claims. Except as described in Schedule
3.22(f) of the Company's Disclosure Schedule, to the Company's Knowledge,
there are no outstanding claims or contract disputes to which the Company is
a party (i) relating to the Current Government Contracts and involving either
a Governmental Entity, any prime contractor, any higher-tier subcontractor or
any third party; and (ii) relating to the Current Government Contracts that,
if resolved unfavorably to the Company, would be reasonably expected to
materially increase the Company's cost to complete performance of any Current
Government Contracts.
(g) Suspension and Debarment. The Company has never been, nor
is it currently, suspended, debarred or been put on notice of being proposed
for suspension or debarment from government contracting.
(h) Responsibility Determinations. No negative determination
of responsibility has been issued against the Company during the past seven
(7) years with respect to any quotation, bid or proposal for a Government
Contract.
(i) Audits, Investigations and Enforcement Actions. Except as
described in Schedule 3.22(i) of the Company's Disclosure Schedule, the
Company has not undergone in the past seven (7) years and is not currently
undergoing any audit, review, inspection, investigation, survey or
examination of records relating to any Government Contracts, nor is there an
audit, review, inspection, investigation, survey or examination of records
pending, or to the Company's knowledge, threatened. No audit, review,
inspection, investigation, survey or examination of records described in
Schedule 3.22(i) of the Company's Disclosure Schedule has revealed any fact,
occurrence or practice which could be reasonably expected to have a Material
Adverse Effect on the Company.
(j) Organizational Conflicts of Interest. Except as described
in Section Schedule 3.22(j) of the Company's Disclosure Schedule, the Company
performs no activities under Current Government Contracts, and has no other
relationships with any other person or entity, that could, to the Company's
Knowledge, result in an "organizational conflict of interest" as defined in
Subpart 9.5 of the Federal Acquisition Regulation and agency supplements
thereto.
Section 3.23 Bank Accounts.
Schedule 3.23 of the Company's Disclosure Schedule contains a true,
correct and complete list of all bank accounts maintained by the Company,
including each account number and the name and address of each bank and the name
of each person who has signature power with respect to each such account.
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ARTICLE IV
REPRESENTATIONS OF BUYER AND MERGER SUB
As a material inducement to the Company and the Shareholders to enter into
this Agreement, except as disclosed on the Buyer and Merger Sub's Disclosure
Schedule delivered to Company and the Shareholders by the Buyer and Merger Sub
concurrently herewith (each schedule of which qualifies only the representation
in the correspondingly numbered Section of this Agreement, and together form a
part of this Agreement), Buyer and merger Sub, jointly and severally, hereby
represent and warrant to the Company and the Shareholders as provided in this
Article IV. Representations and warranties made herein are, as of the date
hereof, and will be, as of the Closing Date, true, correct and complete.
Section 4.1 Organization and Good Standing. Buyer and Merger Sub are each
corporations duly organized, validly existing and in good standing under the
laws of Delaware and the Commonwealth of Virginia respectively, and each of them
has all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as the same is now being
conducted. Each of Buyer and Merger Sub is duly qualified to do business and is
in good standing in each jurisdiction except where failure to be so qualified
could reasonably be expected to have a Material Adverse Effect on Buyer or
Merger Sub or otherwise impair or affect the validity of this Agreement or
prevent the consummation of the transactions contemplated hereby.
Section 4.2 Corporate Authority; No Violation.
(a) This Agreement and the consummation of all of the
transactions provided for herein, including the Merger, have been duly
authorized by the respective boards of directors of each of Buyer and Merger Sub
and by all requisite corporate, Shareholder or other action, and each of Buyer
and Merger Sub has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement has been duly
executed and delivered by each of Buyer and Merger Sub, and when executed and
delivered by the Company, assuming the enforceability of such agreements upon
the Company, will constitute valid and binding obligations of Buyer and Merger
Sub, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
relating to or affecting the rights and remedies of creditors generally and to
general principles of equity (regardless of whether in equity or at law).
(b) Except as set forth on Schedule 4.2(b) of Buyer's Disclosure
Schedule, the execution and delivery by Buyer and Merger Sub of this Agreement
and the consummation and performance by each of them of the transactions
contemplated hereby in the manner herein provided does not and will not (i)
require the approval, consent or authorization of, or any filing with or notice
to, any federal, state, local or other governmental agency or body or any other
third party, other than (A) approvals, consents, authorizations, filings or
notices of a character such that a failure to obtain, file or give them could
not reasonably be expected to have a Material Adverse Effect on Buyer or
otherwise impair or affect the validity of this Agreement or prevent the
consummation of the transactions contemplated hereby and (B) approvals,
consents, authorizations, filings or notices which have been obtained, made or
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given, or (ii) conflict with, or result in an uncured or unwaived breach or
violation of any term or provision of, constitute a default under, or cause the
acceleration of any payments pursuant to (A) the articles of incorporation or
bylaws of Buyer or Merger Sub, (B) any indenture, mortgage, deed of trust,
lease, note or note agreement or any other agreement or instrument to which
Buyer or Merger Sub is a party or by which either of them or any of their
respective assets or properties is bound, (C) any governmental license,
franchise, permit or other authorization held by Buyer or Merger Sub, or (D) any
law, judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or body applicable to the Buyer or
Merger Sub, in each case set out in this clause (ii) the conflict, breach or
violation of which could reasonably be expected to have a Material Adverse
Effect on Buyer or otherwise impair or affect the validity of this Agreement or
prevent the consummation of the transactions contemplated hereby.
Section 4.3 Compliance with Laws. Buyer and Merger Sub have complied with
each, and is not in violation of any law, ordinance or governmental rule or
regulation to which it or its business, operations, assets or properties are
subject, and has not failed to obtain or to adhere to the requirements of any
license, permit or authorization necessary to the ownership of its assets and
properties or to the conduct of its business, which noncompliance, violation or
failure to obtain or adhere could reasonably be expected to have a Material
Adverse Effect on Buyer or otherwise impair or affect the validity of this
Agreement or prevent the consummation of the transactions contemplated hereby.
Section 4.4 Litigation. Except as set forth on Schedule 4.4 of Buyer's
Disclosure Schedule, there is no litigation, arbitration, investigation or other
proceeding of or before any court, arbitrator or governmental or regulatory
official, body or authority pending or, to the Buyer's or Merger Sub's actual
knowledge, threatened, against Buyer or Merger Sub or their respective assets,
properties or business, or the transactions contemplated by this Agreement,
which, if adversely decided, could reasonably be expected to have a Material
Adverse Effect on Buyer. Neither Buyer nor Merger Sub is a party to or expressly
named as subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority that could reasonably be expected to have a Material Adverse
Effect on Buyer or otherwise impair or affect the validity of this Agreement or
prevent the consummation of the transactions contemplated hereby.
Section 4.5 Finders; Brokers. Except as set forth on Schedule 4.5 of
Buyer's Disclosure Schedule, neither Buyer nor Merger Sub is a party to any
agreement with any agent, broker, investment banker or other Person, or in any
way obligated to any agent, broker, investment banker or other Person, for any
commissions, fees or expenses, in connection with the origin, negotiation,
execution or performance of this Agreement or any of the transactions
contemplated herein, including any agent, broker, investment banker or other
Person who would have a valid claim for a fee or commission from the
Shareholders or the Company.
Section 4.6 Merger Sub.
(a) Merger Sub was formed solely for the purpose of the Merger
and engaging in the transactions contemplated hereby.
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(b) As of the date hereof and the Effective Time, the capital
stock of Merger Sub is and will be directly owned 100% by Buyer. There are not
as of the date hereof and there will not be at the Effective Time any
outstanding or authorized options, warrants, calls, rights, commitments or any
other agreements of any character which Merger Sub is a party to, or may be
bound by, requiring it to issue, transfer, sell, purchase, redeem or acquire any
shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of capital stock of Merger Sub.
(c) As of the date hereof and the Effective Time, except for
obligations or Liabilities incurred in connection with its incorporation or
organization and the transactions contemplated hereby and activities, agreements
or arrangements in connection with the transactions contemplated hereby, Merger
Sub has not and will not have (i) incurred, directly or indirectly, any
obligations or Liabilities, (ii) engaged in any business or activities of any
type or kind whatsoever or (iii) entered into any agreements or arrangements
with any Person.
Section 4.7 SEC Documents and Other Reports. Buyer has filed all required
documents with the SEC since February 7, 2002 (the "Buyer SEC Documents"). As of
their respective dates, to the Buyer's knowledge, the Buyer SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and, at the respective times they were
filed, none of the Buyer SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of Buyer included in the Buyer SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP (except, in the case of
the unaudited statements, to the extent permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto).
CERTAIN AGREEMENTS
Section 5.1 Shareholder Notice.
The Company shall provide notice to the Shareholders to the extent
applicable of the approval of this Agreement and the Merger in accordance with
all applicable provisions of the Virginia Stock Corporation Act.
Section 5.2 Conduct of the Business. From the date hereof until the Closing
Date, except as otherwise contemplated by this Agreement or disclosed in the
Company's Disclosure Schedule, the Company shall conduct its business in the
ordinary course consistent with past practice. Without limiting the generality
of the foregoing, except as otherwise contemplated by this Agreement or as set
forth in Schedule 5.2 of the Company's Disclosure Schedule, from the date hereof
until the Closing Date, without the prior written consent of Buyer, the Company
will not:
(a) issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge or
other encumbrance of (i) any additional
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shares of its capital stock of any class, or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for any
shares of its capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire any
shares of its capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of its
capital stock, or (ii) any other securities in respect of, in lieu of, or in
substitution for, shares outstanding on the date hereof;
(b) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities or authorize or
pay any dividends or other distributions on such securities;
(c) split, combine, subdivide or reclassify any shares of its
capital stock;
(d)(i) grant any increases in the compensation of any of its
directors, officers or employees, except in the ordinary course of business
consistent with past practice, (ii) pay or agree to pay any pension, life
insurance, retirement allowance or other employee benefit not required or
contemplated by any of the existing Benefit Plans, as in effect on the date
hereof, to any director, officer or employee, whether past or present, (iii)
prepay or pay any premiums with regard to any such existing pension, life
insurance, retirement allowance or other employee benefits, so that the benefits
thereunder shall extend beyond the Closing Date, except in the ordinary course
of business consistent with past practice, (iv) enter into any new or materially
amend any existing employment agreement with any director or officer, (v) enter
into any new or materially amend any existing severance agreement with any
director or officer, or (vi) except as may be required to comply with applicable
law or as otherwise contemplated by this Agreement, become obligated under any
new Welfare Plan, Multiemployer Plan, Benefit Plan, severance plan or
arrangement that was not in existence on the date hereof or amend any Welfare
Plan, Multiemployer Plan, Benefit Plan, severance plan or arrangement in
existence on the date hereof if the effect thereof would be to enhance benefits
thereunder;
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company;
(f) make any acquisition by means of merger, consolidation or
otherwise;
(g) adopt any amendments to its articles of incorporation or
bylaws;
(h) incur any indebtedness for borrowed money or guarantee any
such indebtedness or, except in the ordinary course consistent with past
practice, make any loans, advances or capital contributions to, or investments
in, any other Person;
(i) engage in the conduct of any business other than the
Business;
(j) enter into any agreement providing for acceleration of
payment or performance or other consequence as a result of a change of control
of the Company;
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(k) except as otherwise contemplated in this Agreement, fail to
maintain all authorizations and licenses materially necessary for the conduct by
the Company of its respective business;
(l) fail to maintain all insurance policies and binders shown in
Schedule 3.16 of the Company's Disclosure Schedule unless new or replacement
insurance policies or binders with similar coverage are obtained;
(m) enter into any negotiations or discussions with, regarding or
relating to recognizing any collective bargaining representative for the
employees of the Company or fail to promptly notify Buyer of any organizing
efforts with respect to the Company's employees;
(n) submit or file with, except as otherwise contemplated in this
Agreement, or otherwise voluntarily participate as a party to any stipulation,
pleading, filing or other proceeding with any regulatory authority with
jurisdiction over the Company where such stipulation, pleading, filing or other
proceeding could reasonably be expected to have a Material Adverse Effect on the
Company or fail to notify Buyer promptly of any involuntary participation by the
Company in any of the foregoing;
(o) except in the ordinary course of business, enter into any
contract, agreement, commitment or other binding arrangement that would result
in a liability or financial commitment which in the aggregate exceeds $50,000;
(p) sell, transfer or otherwise dispose of or encumber any of its
properties or assets pertaining to the Business, other than (i) in the ordinary
course of business or (ii) any property or asset the sale, transfer or disposal
of which could not be reasonably expected to have a Material Adverse Effect on
the Company;
(q) cancel any debts owing to, or waive any claims or rights
pertaining to, the Business, except in the ordinary course of business;
(r) make any capital expenditure or commitment in excess of
$50,000 pertaining to the Business, other than (i) in the ordinary course of
business or (ii) pursuant to existing commitments or business plans; or
(s) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 5.3 Access to Information. Subject to applicable law, the Company
shall give Buyer, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during business hours to the offices,
properties, books and records and officers of the Company and will instruct the
officers, counsel and financial advisors of the Company to cooperate with Buyer
in its investigation of the Company. In addition, with the prior consent of the
Company, such consent not to be unreasonably withheld, and with the
participation of the Company, the Company will use commercially reasonable
efforts to provide reasonable access to the Company's employees and customers.
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Section 5.4 Efforts; Further Assurances; Permits.
(a) Subject to the terms and conditions of this Agreement,
(i) each party shall use its commercially reasonable
efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to
consummate the transactions contemplated by this
Agreement, including, preparing and making any filings
required to be made under applicable law;
(ii) Buyer and Merger Sub shall each use its commercially
reasonable efforts to cause those conditions to the
obligations of the Company to consummate the
transactions contemplated hereby that are set forth in
Sections 6.1 and 6.2 to be satisfied as promptly as
reasonably possible following the date hereof, and in
any event by the Voluntary Termination Date;
(iii) the Company shall use its commercially reasonable
efforts to cause those conditions to the obligations of
the Buyer and Merger Sub to consummate the transactions
contemplated hereby that are set forth in Sections 6.1
and 6.3 to be satisfied as promptly as reasonably
possible following the date hereof, and in any event by
the Voluntary Termination Date; and
(iv) each of the parties shall furnish to the other parties
such necessary information and reasonable assistance as
such other party may request in connection with the
foregoing.
(b) Upon Buyer's request, the Company shall use commercially
reasonable efforts to assist Buyer in obtaining any permits, licenses or other
authorizations necessary for Buyer's operation of the Company consistent with
past practice after the Closing Date.
(c) In the event that at any time, any order, decree or injunction
shall be entered which prevents or delays the consummation of any of the
transactions contemplated by this Agreement, each party shall promptly use its
best efforts to cause such order, decree or injunction to be reversed, vacated
or modified in order to permit such transactions to proceed as expeditiously as
possible.
(d) The Company and the Shareholders shall give prompt notice to Buyer
upon obtaining knowledge of the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation, warranty or covenant made by the Company and the Shareholders in
Article III and Article V that is qualified as to materiality to be untrue or
incorrect in any respect, and for any representation, warranty or covenant made
by the Company and the Shareholders in Article III and Article V not so
qualified, untrue or incorrect in any material respect.
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(e) Buyer and Merger Sub shall give prompt notice to the Shareholder
Representative upon obtaining knowledge of the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty made by Buyer and Merger Sub in Article IV that is
qualified as to materiality to be untrue or incorrect in any respect, and for
any representation or warranty made by the Buyer and Merger Sub in Article IV
not so qualified, untrue or incorrect in any material respect.
Section 5.5 No Solicitation.
Neither the Company, the Shareholders, nor any agent, officer, director or
any representative thereof, shall, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement in accordance with its terms, directly or
indirectly, (a) solicit, encourage or initiate the submission of proposals or
offers from any person or entity for, (b) participate in any discussions
pertaining to, or (c) furnish any information to any person or entity, other
than Buyer and Merger Sub, relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the Company or a
merger, consolidation or business combination involving the Company. If the
Company or any of the Shareholders receives any unsolicited offer or proposal
relating to any of the above, the Company or the Shareholders shall immediately
notify Buyer and Merger Sub thereof, including the identity of the party making
such offer or proposal and the specific terms of such offer or proposal.
Section 5.6 Books and Records. Buyer shall cause the Surviving Corporation
to agree, for the benefit of the Shareholders, to retain for a period of three
(3) years after the Closing Date or such longer period as may be required by law
or prudent business practices, any and all Books and Records (hard copy,
electronic or otherwise) related to the Company for all periods through the
Closing Date or related to the transactions contemplated hereby. Notwithstanding
the foregoing, either Buyer or the Surviving Corporation may notify the
Shareholder Representative of its desire to discontinue retention of specified
documents or other materials in accordance with applicable record retention
requirements during such period upon thirty (30) days' prior written notice. The
Shareholder Representative may, by written notice delivered to Buyer within 30
days of the date of the aforesaid notice, elect to assume custody thereof. In
the absence of such notice from the Shareholder Representative, the Buyer or the
Surviving Corporation, as the case may be, may destroy the documents or other
materials referenced in its original notice to the Shareholder Representative.
In the event the Shareholders need access to such Books and Records for purposes
of verifying any representations and warranties contained in this Agreement,
responding to inquiries or audits from Governmental Entities, indemnifying,
defending and holding harmless Buyer or Merger Sub in accordance with applicable
provisions of this Agreement, or any other legitimate business purpose, Buyer
and Merger Sub shall allow the Shareholder Representative and his or her
advisors access to such Books and Records upon reasonable notice during regular
business hours for the sole purpose of obtaining information for use as
aforesaid and will permit such persons to make such extracts and copies thereof
as may be necessary or convenient and, if required for such purpose, to have
access to and possession of original documents.
Section 5.7 Governmental Regulatory Approvals and Required Consents. Buyer
and the Company have filed or will file the required applications and notices
with the appropriate
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Governmental Entities as are necessary for consummation of the transactions
contemplated by this Agreement (the "Regulatory Approvals") and shall take all
other actions as may be necessary to obtain Required Consents. Each party agrees
to use its best efforts to obtain the Regulatory Approvals and Required Consents
and the parties agree to cooperate fully with each other and with all
Governmental Entities and other Persons to obtain the Regulatory Approvals and
Required Consents at the earliest practicable date. Buyer shall pay any
applicable filing fee required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
Section 5.8 Employee Relations and Benefits.
(a) Employees of the Company immediately before the Effective Time
shall become employees of the Surviving Corporation at the Effective Time
("Transferred Employees"). Each plan, program, policy, and arrangement covering
employees of the Surviving Corporation shall credit each Transferred Employee's
length of service with the Company for purposes of determining eligibility to
participate and vesting (but not for benefits accrual). To the extent any
Transferred Employee has satisfied any deductible or co-payments under a Benefit
Plan for the current plan year, such Transferred Employee shall be credited for
such payment under the employee benefit plan, program, policy, or arrangement of
Buyer or the Surviving Corporation, if any, that most closely resembles the
Benefit Plan under which the deductible or co-payment was paid.
(b) Buyer shall ensure that the Surviving Corporation shall recognize
vested but unused paid vacation accrued by a Transferred Employee as of the
Effective Time in accordance with the Company's current policies. Prior to the
Effective Time, the Company shall confirm in writing to Buyer the amount of
accrued and unpaid days of vacation applicable to such Transferred Employee.
(c) Buyer, Merger Sub, and the Company do not intend this Agreement to
create any rights or interests, except as among Buyer, Merger Sub, and the
Company, and no present, former or future employee of Buyer, Merger Sub, or the
Company shall be treated as a third party beneficiary by, in or under this
Agreement or any related document.
Section 5.9 Public Announcements. The parties hereto agree that press
releases and other public communications of any sort relating to this Agreement
or the transactions contemplated hereby are subject to the approval of all the
parties hereto, such approval not to be unreasonably withheld or delayed.
Section 5.10 Certain Additional Covenants
(a) Buyer shall cause the Business of the Surviving Corporation to be
operated as a separately reporting business unit until December 31, 2004. Buyer
agrees that from and after the Closing Date until December 31, 2004, Buyer shall
cause the Surviving Corporation's Business to maintain a financial reporting
system that will be sufficient to permit a firm of independent accountants to
determine the Business' EBITDA, and consequently, the amount of the Earnout
Payments for 2003 and 2004, if any, pursuant to Section 2.11. If after the
Closing Date until December 31, 2004, any contracts of the Surviving
Corporation's Business are transferred, assigned, or otherwise allocated or
attributed, for financial reporting purposes, to
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Buyer or any of its other subsidiaries (other than the Company), then equitable
and reasonable adjustments will be made in calculating the Business' EBITDA, and
consequently, the amount of Earnout Payments, if any, to eliminate the effect of
any transfer, assignment, allocation or attribution, and no such transfer,
assignment, allocation or attribution shall be made unless the financial
reporting system referred to in the immediately preceding sentence is capable of
tracking the performance of distinct contracts in a manner that will permit such
determination of the Business' EBITDA, and consequently, of the amount of the
Earnout Payments payable pursuant to the terms of this Agreement. If after the
Closing Date until December 31, 2004, any contracts of the Buyer or its
subsidiaries (other than the Company) are transferred, assigned, or otherwise
allocated or attributed, for financial reporting purposes, to the Surviving
Corporation's Business, then equitable and reasonable adjustments shall be made
in calculating the Business' EBITDA, and consequently, the amount of the Earnout
Payments, if any, to eliminate the effect of any transfer, assignment,
allocation or attribution and no such transfer, assignment, allocation or
attribution shall be made unless the financial reporting system referred to in
the immediately preceding sentence is capable of tracking the performance of
distinct contracts in a manner that will permit such determination of the
Business' EBITDA, and consequently, of the amount of Earnout Payments pursuant
to the terms of this Agreement. All actions taken by Buyer during the period
covered by this Section 5.11(a) shall be in good faith and not for the purpose
of reducing the amount of Earnout Payments pursuant to the terms of this
Agreement.
(b) Notwithstanding anything herein to the contrary, after the
Effective Time and continuing through December 31, 2004, the Surviving
Corporation, at the discretion of the Shareholder Representative, shall be
permitted to initially continue, in accordance with the Company's past
practices, (i) its employee vacation policy, (ii) its employee Bonus Plan and
(iii) profit sharing distributions pursuant to its Profit Sharing Plan, with the
understanding that each of the foregoing benefits may be revised in the future,
on a mutually agreeable basis, with the understanding that there will be no
adverse effect to the employees' compensation on an overall basis.
Notwithstanding anything herein to the contrary, after the Effective Time and
continuing through December 31, 2004, the Surviving Corporation shall be
permitted to continue its overtime pay policy for direct billable employees.
(c) The Merger Parties agree to use their best efforts to work
together to limit any adverse effects of allocations of overhead and general and
administrative expenses with respect to the Surviving Corporation's competitive
position.
(d) The Bonus Retention Escrow Amount shall be held in the Bonus
Retention Escrow Account in order to compensate certain employees of the Company
who continue their employment with the Surviving Corporation for a certain
period of time after the Closing Date in accordance with certain retention
agreements by and between such employees and the Company ("Retention
Agreements"). Buyer agrees to cause the Surviving Corporation to comply with the
terms of the Retention Agreements entered into by such employees to effect
proper distributions from the Retention Bonus Escrow Account.
(e) Bonus Retention Escrow Period; Final Distribution From the Bonus
Retention Escrow Account. The Bonus Retention Escrow Account shall be in
existence just prior to the Effective Time and shall terminate at 5:00 p.m.,
Washington, D.C. time, on the
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fifth (5/th/) day following the Bonus Retention Escrow Termination Date.
Immediately prior to the Effective Time, the Company shall deposit into the
Bonus Retention Escrow Account the Bonus Retention Escrow Amount. The Bonus
Retention Escrow Agent shall be instructed to distribute the Bonus Retention
Escrow Amount, plus any interest or other income earned thereon, if any, on or
before the Bonus Retention Escrow Termination Date by the Shareholder
Representative in accordance with the terms of the Retention Agreements. The
parties agree that in the event the Bonus Retention Escrow Amount earns any
income while in the Bonus Retention Escrow Account, it shall belong to the
Surviving Corporation and shall be treated for accounting and tax purposes as
the income of the Surviving Corporation and not the Company or the Shareholders.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions Precedent to Obligations of Buyer, Merger Sub and
the Company. The respective obligations of Buyer, Merger Sub and the Company to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction at or prior to the Closing Date of the following conditions:
(a) No Injunction or Other Governmental Action. (i) No preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or by any governmental or regulatory body nor any statute, rule,
regulation or executive order promulgated or enacted by any Governmental Entity
after the date of this Agreement which prohibits the consummation of the
transactions contemplated hereby shall be in effect; and (ii) no Governmental
Entity or body shall have instituted any suit, action, or legal or
administrative proceeding to restrain, enjoin or otherwise question the validity
or legality of the transactions contemplated by this Agreement and no order or
decree so restraining or enjoining such transactions shall be in effect.
(b) Statutory Requirements, Regulatory Approvals. All Regulatory
Approvals and all other authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations or terminations of waiting periods
imposed by, any Governmental Entities necessary to effect the transactions
contemplated by this Agreement shall have occurred, been filed or been obtained;
and all other Required Consents shall have been obtained and shall be in full
force and effect.
Section 6.2 Conditions Precedent to Obligation of the Company. The
obligation of the Company to consummate the transactions provided for in this
Agreement is subject to fulfillment of each of the following conditions:
(a) Accuracy of Buyer's and Merger Sub's Representations and
Warranties; Covenants of Buyer. The representations and warranties of Buyer and
Merger Sub contained in this Agreement (except as affected by the transactions
contemplated in this Agreement) that are qualified as to materiality shall be
true and correct and the representations and warranties of Buyer and Merger Sub
set forth in this Agreement that are not so qualified shall be true and
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correct in all material respects, in each case on the date of this Agreement
(except to the extent cured prior to the Closing Date) and on the Closing Date
as though made on the Closing Date, except to the extent such representations
and warranties are given as of a particular date and relate solely to a
particular date or period. Buyer shall have complied in all material respects
with all covenants contained in this Agreement to be performed by it prior to
Closing.
(b) Payment of the Closing Merger Consideration. Buyer shall have
paid, or caused to be paid, the Closing Merger Consideration as set forth
herein.
Section 6.3 Conditions Precedent to Obligation of Buyer and Merger Sub.
The obligation of Buyer and Merger Sub to consummate the transactions provided
for in this Agreement is subject to fulfillment of each of the following
conditions:
(a) Corporate Action by the Company. The Merger and this Agreement
shall be unanimously approved by the Shareholders and board of directors of the
Company. All other corporate action necessary on the part of the Company to
authorize the execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby shall have been duly and validly taken.
(b) Accuracy of Representations and Warranties of the Company and
Shareholders; Covenants of the Company and Shareholders. The representations and
warranties of the Company and the Shareholders contained in this Agreement
(except as affected by the transactions contemplated in this Agreement) that are
qualified as to materiality shall be true and correct and the representations
and warranties of Company and the Shareholders set forth in this Agreement that
are not so qualified shall be true and correct in all material respects, in each
case on the date of this Agreement (except to the extent cured prior to the
Closing Date) and on the Closing Date as though made on the Closing Date, except
to the extent such representations and warranties are given as of a particular
date and relate solely to a particular date or period. Company and the
Shareholders shall have complied in all material respects with all covenants
contained in this Agreement to be performed by them prior to Closing.
(c) Lien Release and Debt Pay-off. Company shall deliver to Buyer and
Merger Sub sufficient written evidence to support proof of debt pay-off and
agreements from any lien holder(s) to use best efforts to promptly release all
liens.
(d) Section 338(h)(10) Election. Each of the Shareholders shall have
delivered to Buyer at Closing a separate, executed IRS Form 8023 (or any
successor form(s) thereto).
Article VII
INDEMNIFICATION AND ESCROW ACCOUNTS
Section 7.1 Indemnification by the Shareholders. Subject to Section 7.3,
the Shareholders, on a pro rata basis, shall indemnify, defend and hold Buyer,
Merger Sub and Buyer's Affiliates harmless from and against any and all
Liabilities, losses, damages (excluding, however, any claims for diminution in
value where such base claim is initially unrelated to the
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multiple of the amount of any actual damages and subsequently claimed as a
diminution in value based on the multiple of the amount of any actual damages),
costs and expenses (collectively, "Losses") asserted against, imposed on, or
incurred or suffered by Buyer, Merger Sub, the Company or the Surviving
Corporation as a result of (a) the inaccuracy of any representation or the
breach of any warranty set forth in Article III, any Exhibit or Schedule thereto
or in any agreement or certificate executed and delivered by the Company or any
Shareholder pursuant to this Agreement; or (b) the non-fulfillment of any
unwaived covenant or agreement on the part of the Company or any Shareholder set
forth in this Agreement or in any agreement or certificate executed and
delivered pursuant to this Agreement.
Section 7.2 Indemnification by Buyer and Merger Sub. Subject to Section
7.3, Buyer and Merger Sub shall, jointly and severally, indemnify, defend and
hold the Shareholders harmless from and against any and all Losses asserted
against, imposed on, or incurred or suffered by the Shareholders as a result of
(a) the inaccuracy of any representation or the breach of any warranty set forth
in Article IV or in any agreement or certificate executed and delivered by Buyer
or Merger Sub pursuant to this Agreement; or (b) the non-fulfillment of any
material unwaived covenant or agreement on the part of Buyer or Merger Sub set
forth in this Agreement or in any agreement or certificate executed and
delivered pursuant to this Agreement.
Section 7.3 Survival of Representations and Warranties; Limitations on
Indemnification.
(a) Survival. The representations and warranties in this Agreement and
the indemnification provisions in this Agreement with respect thereto shall
survive the Closing for a period of fifteen (15) months following the Closing
Date, at which time they shall terminate and no claim shall thereafter be
brought in respect of them; provided, however, that such termination shall not
affect any claim for breach of any representation or warranty if written notice
thereof, in reasonable detail, has been given to the breaching party prior to
such termination date (in such case, the survival period for the representation
and warranty shall continue until the claim is fully resolved). The covenants of
the parties set forth in this Agreement to be performed after the Closing shall
survive until performed.
(b) Limitation on Indemnification. Notwithstanding anything else in
this Agreement to the contrary, (i) none of Buyer, Merger Sub nor any of Buyer's
Affiliates shall make any claim against the Indemnification Escrow Account for
any Losses described in Section 7.1 until the Buyer, Merger Sub or Buyer's
Affiliates have suffered, incurred, sustained or become subject to such Losses
in excess of Two Hundred and Fifty Thousand Dollars ($250,000) (the "Deductible
Amount"); (ii) if such Deductible Amount is exceeded, the Shareholders shall be
required to pay to the indemnified parties, solely from the Indemnification
Escrow Account, only the amount by which the aggregate of such Losses exceeds
the Deductible Amount and (iii) the obligation and liability for any and all
Indemnified Losses and any other indemnification set forth in this Agreement, on
the one hand by Buyer and Merger Sub, on the other hand the Shareholders and
Company, shall in neither event exceed ten percent (10%) of the Initial Purchase
Price.
(c) Insurance Proceeds. The amount payable by an indemnifying party to
an indemnified party with respect to a Loss pursuant to the terms of this
Agreement shall be
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reduced by the amount of any insurance proceeds received by the indemnified
party with respect to such Loss.
Section 7.4 Escrow Accounts.
(a) Deposit of Funds into Escrow Accounts. As security for the
indemnity provided for in Section 7.1, at the Effective Time, Buyer shall
deposit into the Indemnification Escrow Account, on behalf of the Shareholders,
the Indemnification Escrow Amount, as contemplated by Section 2.7(e)(i). The
parties agree that in the event the Indemnification Escrow Amount earns any
income while in the Indemnification Escrow Account, it shall belong to the
Shareholders and shall be treated for accounting and tax purposes as the income
of the Shareholders and not Buyer or Merger Sub.
(b) Indemnification Escrow Period; Final Distribution From the
Indemnification Escrow Account. Subject to the following requirements, the
Indemnification Escrow Account shall be in existence immediately following the
Effective Time and shall terminate at 5:00 p.m., Washington, D.C. time, on the
fifth (5/th/) day following the Indemnification Escrow Termination Date;
provided that the Indemnification Escrow Account shall not terminate on such
date with respect to such remaining portion of the Indemnification Escrow Amount
(or some portion thereof) that in the reasonable judgment of Buyer, subject to
the objection of the Shareholder Representative and the subsequent arbitration
of the matter in the manner provided in Section 7.5, is necessary to satisfy (i)
any then pending unsatisfied claims specified in any Officer's Certificate
delivered to the Escrow Agent by Buyer prior to the Indemnification Escrow
Termination Date, and (ii) any unsatisfied claims specified in any Officer's
Certificate delivered to the Escrow Agent by Buyer prior to the Indemnification
Escrow Termination Date with respect to facts and circumstances existing prior
to the Indemnification Escrow Termination Date. The Escrow Agent shall be
instructed to promptly distribute any portion of the Indemnification Escrow
Amount, plus interest or other income earned thereon, if any, that is not then
in dispute, first using the cash funds of Indemnification Escrow Account, then
using the stock funds of the Indemnification Escrow Account. As soon as all such
claims have been resolved, the Escrow Agent shall distribute funds from the
Indemnification Escrow Account sufficient to satisfy the expenses of the
Shareholder Representative in connection with the Indemnification Escrow Account
and shall thereafter deliver to the Shareholders ratably in accordance with
their ownership of shares of Company Common Stock outstanding immediately prior
to the Effective Time the remaining portion of the Indemnification Escrow
Account, plus interest or other income earned thereon, if any, not required to
satisfy such claims and expenses.
Section 7.5 Method of Asserting Claims. All claims for indemnification
by a party entitled to be indemnified hereunder shall be asserted and resolved
as follows:
(a) Claims Upon Indemnification Escrow Account. Upon receipt by the
Escrow Agent at any time on or before the last day of the Indemnification Escrow
Period of a certificate signed by any officer of Buyer (an "Officer's
Certificate"): (i) stating that Buyer has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Losses, and (ii) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid or properly accrued, or the basis for
such anticipated
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liability, and the nature of the misrepresentations, breach of warranty or
covenant to which such items is related, the Escrow Agent shall, subject to the
provisions of Section 7.5(b), be directed to distribute to Buyer from the
Indemnification Escrow Account as promptly as practicable, funds in an amount
equal to such Losses.
(b) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered by Buyer to the Shareholder Representative and for a period of thirty
(30) days after such delivery, the Escrow Agent shall make no distribution to
Buyer of any funds contained in the Indemnification Escrow Account pursuant to
Section 7.5(a) unless the Escrow Agent shall have received written authorization
from the Shareholder Representative to make such distribution. After the
expiration of such thirty (30) day period, the Escrow Agent shall be directed to
distribute funds from the Indemnification Escrow Account in accordance with
Section 7.5(a), provided that no such payment or delivery may be made if the
Shareholder Representative shall object in a written statement to the claim made
in the Officer's Certificate, and such statement shall have been delivered to
the Escrow Agent prior to the expiration of such thirty (30) day period.
(c) Resolution of Conflicts; Arbitration.
(i) In case the Shareholder Representative shall so object in
writing to any claim or claims made in any Officer's
Certificate, the Shareholder Representative and Buyer shall
attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If
the Shareholder Representative and Buyer should so agree, a
memorandum setting forth such agreement shall be prepared
and signed by both parties, and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and distribute funds from the
Indemnification Escrow Account in accordance with the terms
thereof.
(ii) With respect to claims that the parties agree are accounting
or bookkeeping based claims, if an agreement cannot be
reached after good faith negotiation, either Shareholder
Representative or Buyer may refer the dispute to a neutral
mutually acceptable independent accounting firm of national
reputation with which no party hereto has had a preexisting
relationship for resolution (the "Indemnification Referee").
The decision of such issues by the Indemnification Referee
shall be final and binding on all Merger Parties. The Merger
Parties shall submit their positions on the dispute to the
Indemnification Referee within thirty (30) days after
referral, and shall direct the Indemnification Referee to
decide the dispute within fifteen (15) days after submission
to it. The Indemnification Referee shall also decide the
allocation of fees and expenses of the Indemnification
Referee between the Merger Parties with any amounts due from
the Shareholders being paid from the Indemnification Escrow
Funds. Buyer and the
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Shareholder Representative shall direct the
Indemnification Referee to promptly provide invoices of
all such fees and expenses directly to the Shareholder
Representative, the Escrow Agent and Buyer. In the event
the Shareholders are required to pay any fees and expenses
for the Indemnification Referee, as soon as possible
following Escrow Agent's receipt of the Indemnification
Referee's invoice, Escrow Agent shall be instructed to
distribute the portion of the invoice amount to be paid by
the Shareholders from the funds on deposit in the
Indemnification Escrow Account in accordance with the wire
transfer instructions set forth in such invoice. The
Escrow Agent shall have no responsibility to verify the
accuracy of any information contained in such invoice, nor
shall the Escrow Agent incur any liability for acting in
accordance with such invoice. Any other costs incurred by
either party including, but not limited to, experts,
attorneys or financial advisors shall be at the sole cost
of the party incurring such cost regardless of the
determination.
(iii) With respect to claims not based on accounting or
bookkeeping matters, if no such agreement can be reached
after good faith negotiation, either Buyer or the
Shareholder Representative may request that the other
party consent to arbitration of the matter unless the
amount of the damage or loss at issue is 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 conducted
by one arbitrator mutually agreeable to Buyer and the
Shareholder Representative. In the event that within
forty-five (45) days after submission of any dispute to
arbitration, Buyer and the Shareholder Representative
cannot mutually agree on one arbitrator, Buyer and the
Shareholder Representative shall each select one
arbitrator, and the two arbitrators so selected shall
select a third arbitrator. The arbitrator or arbitrators,
as the case may be, 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 or
majority of the three arbitrators, as the case may be, to
discover relevant information from the opposing parties
about the subject matter of the dispute. The arbitrator or
a majority of the three arbitrators, as the case may be,
shall rule upon motions to compel or limit discovery and
shall have the authority to impose sanctions, including
attorneys' fees and costs, to the extent as a court of
competent law or equity, should the arbitrator or a
majority of the three arbitrators, as the case may be,
determine that discovery was sought without substantial
justification or that discovery was refused or objected to
without substantial justification. The decision of the
arbitrator or a majority of the
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three arbitrators, as the case may be, as to the
validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the
parties to this Agreement, and notwithstanding
anything in Section 7.5(a) or (b), the Buyer and
Shareholder Representative shall direct the Escrow
Agent to act in accordance with such decision and make
or withhold payments out of the Indemnification Escrow
Account in accordance therewith. 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(s).
(iv) Judgment upon any award rendered by the arbitrator(s)
may be entered in any court having jurisdiction. Any
such arbitration shall be held in Fairfax, Virginia
under the rules then in effect of the American
Arbitration Association. The arbitrator(s) shall
determine how all expenses relating to the arbitration
shall be paid, including the respective expenses of
each party, the fees of each arbitrator and the
administrative fee of the American Arbitration
Association.
(d) Third-Party Claims. In the event that any claim for which an
indemnifying party would be liable to an indemnified party hereunder is
asserted against an indemnified party by a third party, the indemnified party
shall notify the indemnifying party of such claim, specifying the nature of
such claim and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
claim). Within fifteen (15) days after receipt of a claim notice, the
indemnifying party may assume the defense of such claim; provided, however,
that (a) the indemnifying party shall retain counsel of its choice reasonably
acceptable to the indemnified party; and (b) the indemnifying party shall
not, without the prior written consent of the indemnified party (which shall
not be unreasonably withheld), enter into any settlement of a claim, consent
to the entry of any judgment with respect to a claim or cease to defend a
claim, if pursuant to or as a result of such settlement, consent or
cessation, injunctive or other equitable relief shall be imposed against the
indemnified party or if such settlement does not expressly and
unconditionally release the indemnified party from all liabilities with
respect to such claim, with prejudice. The indemnified party may participate
in the defense of such claim with counsel of its choice; provided, however,
that the fees and expenses of the indemnified party's counsel shall be paid
by the indemnified party unless (i) the indemnifying party has failed to
assume the defense and employ counsel as provided herein; or (ii) a claim
shall have been brought or asserted against the indemnifying party as well as
the indemnified party, and the indemnified party shall have been advised in
writing by outside counsel that there may be one or more factual or legal
defenses available to it that are in conflict with those available to the
indemnifying party, in which case such counsel shall be at the expense of the
indemnifying party only to the extent that indemnifying party would otherwise
be required to pay for such counsel by reason of Section 7.1 hereof. If the
indemnifying party does not assume the defense of such claim, the indemnified
party may defend against the same in any manner that it reasonably deems
appropriate. In the event that the Shareholder Representative, on behalf of
the Shareholders as the indemnifying party, has consented to any such
settlement, the Shareholder Representative,
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on behalf of the Shareholders shall have no power or authority to object
under any provision of this Article to the amount of any claim by Buyer
against the Indemnification Escrow Account with respect to such settlement.
Section 7.6 Exclusive Remedy. Except as set forth in Section 10.10,
the foregoing indemnification provisions in this Article VII shall be the
exclusive remedy of the Buyer and Merger Sub against the Shareholders and by the
Shareholders against the Buyer or the Merger Sub for Losses hereunder, provided
that nothing contained in this Agreement shall relieve or limit the liability of
any party or any officer or director of such party from any liability arising
out of or resulting from actual fraud, intentional misrepresentation or active
concealment in connection with the transactions contemplated by this Agreement
or in connection with the delivery of any of the documents referred to herein.
If the Shareholders are required to indemnify Buyer, Merger Sub or Buyer's
Affiliates for any Losses hereunder, such payments shall be made solely from the
Indemnification Escrow Account.
ARTICLE VIII
TAX MATTERS
Section 8.1 Tax Returns.
(a) Tax Periods Ending On or Before the Closing Date. Buyer
and the Surviving Corporation shall prepare or cause to be prepared, using
the accounting and tax preparation services of Xxxxxxx & Company, and shall
duly and timely file or cause to be filed all Tax Returns for the Company for
taxable periods ending on or before the Closing Date which are filed after
the Closing Date. Buyer and the Surviving Corporation shall permit the
Shareholder Representative and his or her advisors to review and comment on
each such Tax Return prior to filing and shall make such revisions to such
Tax Returns as are reasonably requested by the Shareholder Representative.
The Shareholder Representative shall direct the Escrow Agent to pay to the
Surviving Corporation from funds comprising the Escrow Amount an amount equal
to the portion of Company Taxes reported on such Tax Returns that relate to
the portion of such taxable period ending on or before the Closing Date that
were not paid before the Closing Date or that were not reserved for on the
Closing Date Balance Sheet in a manner consistent with past practice of the
Company, except to the extent that such Taxes are allowable and recoverable
costs for inclusion in the costs of agreements with Governmental Entities.
(b) Tax Periods Beginning Before and Ending After the Closing
Date. Buyer and the Surviving Corporation shall file or cause to be filed any
Tax Returns of the Company for tax periods that begin before the Closing Date
and end after the Closing Date and pay all Taxes owed by the Company for such
periods, including all payroll taxes relating to distributions of the Bonus
Retention Escrow Amount. Contemporaneously with any distributions from the
Bonus Retention Escrow Amount, the Shareholder Representative shall direct
the Bonus Retention Escrow Agent to distribute to the Surviving Corporation
an amount necessary for the Surviving Corporation to pay all required payroll
or other withholding taxes relating to such distribution from the Bonus
Retention Escrow Agreement. The Shareholder
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Representative shall direct the Escrow Agent to pay to the Surviving
Corporation from funds comprising the Escrow Amount within fifteen (15) days
after the date on which such Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes that relate to the portion of such
taxable period ending on the Closing Date that were not paid before the
Closing Date or that were not reserved for on the Closing Date Balance Sheet
in a manner consistent with past practice of the Company, except to the
extent that such Taxes are allowable and recoverable costs for inclusion in
the costs of agreements with Governmental Entities. For purposes of this
Section 8.1(b), in the case of any Taxes that are payable by the Company for
a taxable period that ends after the Closing Date, the portion of such Tax
payable by the Company which relates to the portion of such taxable period
ending on the day before the Closing Date shall (i) in the case of any Taxes
other than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire taxable period multiplied by a fraction
the numerator of which is the number of days in the taxable period ending on
the day before the Closing Date and the denominator of which is the number of
days in the entire taxable period, and (ii) in the case of any Tax based upon
or related to income or receipts be equal to the amount which would be
payable by the Company if the relevant taxable period ended on the day before
the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of the Company (taking into account (i) the Tax status of the
Company for such period, including its Subchapter S corporation status for
federal income Tax purposes and any similar status for other Tax purposes,
and (ii) Taxes that are allowable costs and recoverable for inclusion in the
costs of agreements with Governmental Entities).
Section 8.2 Certain Contest Rights.
(a) Promptly after receipt by Buyer, the Company or any
Shareholder of a written notice of any demand, claim or circumstance that,
either at such time or after the lapse of time, might give rise to an
adjustment or audit of any Tax Return of the Company for periods (i) ending
on or prior to the Closing Date, or (ii) beginning before and ending after
the Closing Date, the party receiving such notice shall notify the other
parties hereunder (the "Tax Claim Notice"). The Tax Claim Notice shall
contain factual information (to the extent known to the party receiving the
inquiry or notice from the taxing authority) describing such demand, claim or
circumstance, including any asserted tax liability (an "Asserted Tax Claim")
in reasonable detail and shall include copies of any notice or other document
received in respect of any such Asserted Tax Claim.
(b) Each Shareholder, if such Shareholder desires to contest
any such Asserted Tax Claim, shall through counsel of such Shareholder's own
choosing and at their own expense, compromise or contest, either
administratively or in the courts, any such Asserted Tax Claim. Any
settlement of an Asserted Tax Claim of the Company shall be entered into only
upon the written agreement of Buyer. In such event, Buyer and the Surviving
Corporation shall promptly empower and shall cause the Company to empower (by
power of attorney and such other documentation as may be appropriate) such
representative of each such Shareholder as they may designate to represent
Buyer, or the Surviving Corporation in any audit, claim or refund or
administrative or judicial proceeding insofar as such audit, claim for refund
or proceeding involves an Asserted Tax Claim. If Buyer withholds its consent
to any proposed
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settlement to any Asserted Tax Claim (a "Proposed Settlement"), then each
such Shareholder's liability with respect to the subject matter of the
Proposed Settlement shall be limited to the amount that such liability would
have been if the Proposed Settlement had been accepted and the Buyer shall be
responsible for all expenses incurred thereafter in connection with the
contest of such tax audit or proceeding except to the extent that the final
settlement imposes less liability on such Shareholder than the Proposed
Settlement would have imposed (taking into account such Shareholder's share
of such expenses).
Section 8.3 Cooperation and Exchange of Information. Each party
hereto will provide each other with such cooperation and information as any of
them may reasonably request of the other in filing any Tax Return of the
Company, amended return or claim for refund, determining a liability for Taxes
of the Company or a right to a refund of Taxes of the Company or in conducting
any audit or other proceeding in respect of Taxes of the Company. Such
cooperation and information shall include providing copies of relevant Tax
Returns of the Company or portions thereof, together with accompanying schedules
and related work papers and documents that are reasonably relevant to rulings or
other determinations by taxing authorities. Each party shall make its
representatives available on a mutually convenient basis to provide explanation
of any documents or information provided hereunder. Buyer and the Surviving
Corporation shall give the Shareholder Representative reasonable written notice
prior to transferring, destroying or discarding any Books and Records with
respect to Tax matters pertinent to the Company relating to any taxable period
beginning before or on the Closing Date and, if the Shareholder Representative
so requests, Buyer and the Surviving Corporation shall allow the Shareholder
Representative to take possession of such Books and Records.
Section 8.4 Refunds.
(a) In the event that Buyer or the Company receives a refund or
credit of Tax of the Company for which the Shareholders made a payment (or a
payment was made by the Escrow Agent on behalf of the Shareholders) pursuant
to Section 8.2 of this Agreement or any other provision of this Agreement,
then the Buyer or the Company, as the case may be, shall promptly pay to the
Indemnification Escrow Account, if such account still exists, or otherwise to
the Shareholders, the amount of such refund (including any accrued interest
paid in respect of such refunded Tax) or credit to the extent the refund or
credit represents payments made by or for the Shareholders with respect to
events occurring prior to the Closing Date. Each Shareholder shall, as a
condition to receiving any such refund or credit, agree jointly and severally
with all other Shareholders receiving the refund or credit, in the event that
any refund or credit of Taxes for which a payment has been made to the
Shareholders pursuant to this Section 8.4(a) is subsequently reduced or
disallowed, to indemnify and hold harmless the payor for any Tax liability
assessed against such payor by reason of the reduction or disallowance.
(b) In the event that the Shareholders receive a refund or
credit of Tax of the Company for which the Buyer or the Company made a
payment pursuant to Section 8.2 or any other provision of this Agreement,
then the Shareholders shall promptly pay to the Buyer or the Company, as the
case may be, the amount of such refund (including any accrued interest paid
in respect of such refunded Tax) or credit to the extent the refund or credit
represents payments made by or for the Buyer or the Surviving Corporation
with respect to events occurring after the Closing Date. Each of Buyer and
the Surviving Corporation shall agree jointly and
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severally that, as a condition to receiving any such refund or credit, in the
event that any refund or credit of Taxes for which a payment has been made to
Buyer or the Surviving Corporation pursuant to this Section 8.4(a) is
subsequently reduced or disallowed, to indemnify and hold harmless the payor
for any Tax liability assessed against such payor by reason of the reduction
or disallowance.
Section 8.5 Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any
corporate-level gains Tax triggered by the sale of Company Common Stock and any
similar Tax imposed in any states or subdivisions), shall be paid one-half by
Buyer and one-half by the Escrow Agent from the Indemnification Escrow Account
when due, and the party required by applicable law will file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, the other parties will, and will cause their affiliates to, join
in the execution of any such Tax Returns and other documentation. The expense of
such filings shall be paid one-half by Buyer and one-half by the Escrow Agent
from the Indemnification Escrow Account.
ARTICLE IX
TERMINATION OF AGREEMENT;
PAYMENT OF EXPENSES; WAIVER OF CONDITIONS
Section 9.1 Termination of Agreement. Anything herein to the contrary
notwithstanding, this Agreement may be terminated at any time (such date of
termination being the "Termination Date") before the Closing Date as follows,
and in no other manner:
(a) Mutual Consent. By mutual written consent of Buyer and the
Company; or
(b) Either Party. By either Buyer or the Company if (i) the
Closing shall not have occurred on or prior to the Voluntary Termination
Date; (ii) there shall be a final nonappealable order of a federal or state
court of competent jurisdiction in effect preventing the consummation of the
transactions contemplated hereby, (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the parties by any Governmental Entities that would make the Merger illegal,
(iv) there shall have occurred after the date hereof any event that makes it
impossible to satisfy a condition precedent to the party's obligations to
consummate the transactions contemplated by this Agreement, unless the
occurrence of such event is due to the failure of the party to perform or
comply with any of the agreements, covenants, or conditions hereof to be
performed or complied with by such party prior to the Closing, or (v) if
either the Company, on the one hand, or the Buyer or Merger Sub, on the other
hand, respectively, becomes insolvent or seeks protection under any
bankruptcy, receivership, trust deed, creditors' arrangement, composition or
comparable proceeding, or such proceeding is instituted against such other
party (and not dismissed within sixty (60) days).
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Section 9.2 Payment of Expenses. In the event that this Agreement shall be
terminated pursuant to this Article IX, (a) all obligations of the parties
hereto under this Agreement shall terminate and there shall be no ongoing
liability of any party to any other party hereto and (b) each party hereto will
pay all costs and expenses incident to its negotiation and preparation of this
Agreement and to its performance of and compliance with all agreements and
conditions contained herein on its part to be performed or complied with,
including the fees, expenses and disbursements of its counsel, its auditors and
its actuaries. No termination of this Agreement shall in any manner affect or
alter the liability of any party hereto for any breach of its obligations
hereunder prior to the Termination Date.
ARTICLE X
MISCELLANEOUS
Section 10.1 Amendments. Subject to applicable law, this Agreement and any
Exhibit or Schedule attached hereto may be amended at any time prior to the
Closing Date by an instrument in writing duly signed by or on behalf of each of
the parties hereto.
Section 10.2 Governing Law; Submission to Jurisdiction. This agreement and
the legal relations between the parties shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, excluding any
conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Agreement to the substantive law of
another jurisdiction. Each party hereto hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Eastern District of
Virginia and of any Virginia state court for purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. Each party hereto irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court, any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum,
and any right to which it may be entitled on account of its place of residence
or domicile.
Section 10.3 Notices. All written instructions, waivers, notices, requests,
demands or other communications under this Agreement shall be in writing and
shall be deemed to have been duly given (i) on the date of receipt if served
personally, (ii) on the next Business Day if served by confirmed facsimile or
other similar communication, (iii) on the first Business Day after sending if
sent for guaranteed next day delivery by Federal Express or other nationally
recognized next-day courier service or (iv) on the tenth Business Day after
mailing if mailed to the party or parties to whom notice is to be given by
registered or certified mail, return receipt requested, postage prepaid, and
properly addressed as follows:
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If to Buyer or Merger Sub:
ManTech International Corporation
00000 Xxx Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxx, Xx.
Email: xxxx.xxxxx@xxxxxxx.xxx
Facsimile: 000-000-0000
With a copy, in the case of Buyer, Merger Sub or the Surviving
Corporation, to:
ManTech International Corporation
00000 Xxx Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
Attention: Office of General Counsel
Email: xxxx.xxxxx@xxxxxxx.xxx
Facsimile: 000-000-0000
If to the Shareholders or the Shareholder Representative:
Integrated Data Systems Corporation
00000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Phone (000) 000-0000
FAX (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
If to the Company:
Integrated Data Systems Corporation
00000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Phone (000) 000-0000
FAX (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
With a copy, in the case of the Company, the Shareholders or
the Shareholder Representative, to:
Xxxxxxx X. Xxxxxxxxx, Esq.
Venable, Xxxxxxx and Xxxxxx, LLP
0000 Xxx Xxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxxxxx, XX 00000
000-000-0000 office
000-000-0000 facsimile
xxxxxxxxxxx@xxxxxxx.xxx
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Any party may change its address for purposes of this Section by giving the
other parties hereto notice of the new address in the manner set forth above.
Section 10.4 Assignment and Binding Effect. This Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties hereto; provided, however, that no consent from any other party hereto
shall be required in the event Buyer, Merger Sub and/or the Surviving
Corporation collaterally assigns its/their right, title and interest in and to
this Agreement to its/their lender(s) under the current business loan and
security agreement, as such agreement may be further amended, modified or
replaced from time to time, and all parties hereto agree to execute and deliver
such documents, instruments and agreements as such lender(s) may reasonably
require in connection therewith. Subject to the foregoing, all of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the successors and assigns of the Company, Buyer, Merger
Sub and/or the Surviving Corporation.
Section 10.5 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, including the Company's Disclosure Schedule and Buyer's Disclosure
Schedule, that certain confidentiality agreement entered into by or on behalf of
Buyer and the Company, through its agent, in respect of the transactions
contemplated hereby, dated as of August 14, 2002, and other documents delivered
pursuant hereto, referred to herein or executed and delivered in connection with
the transactions contemplated hereby contain the entire agreement among the
parties with respect to the transactions contemplated herein and supersede all
previous negotiations, commitments and writings.
Section 10.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
Section 10.7 Counterparts. This Agreement may be executed and delivered in
one or more counterparts, each of which shall be deemed an original. Copies of
executed counterparts transmitted by telecopy, facsimile or other electronic
transmission service shall be considered original executed counterparts,
provided receipt of copies of such counterparts is confirmed.
Section 10.8 Waiver. No delay or omission to exercise any right, power or
remedy accruing to Buyer, Merger Sub or the Company upon any breach or default
of Buyer, Merger Sub or the Company under this Agreement shall impair any such
right, power or remedy of such party nor shall it be construed to be a waiver of
any such breach or default, or any acquiescence therein, or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring.
Section 10.9 Headings. The Table of Contents and the Section, Article and
other headings contained in this Agreement are inserted for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
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Section 10.10 Specific Performance. The parties acknowledge and agree that
any breach of the terms of this Agreement would give rise to irreparable harm
for which money damages would not be an adequate remedy. Accordingly, the
parties agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
Section 10.11 The Shareholders and the Shareholder Representative. Any
provision in this Agreement that grants rights or remedies to the Shareholders
shall be deemed to be for the joint and several benefit of the Shareholders,
unless otherwise specifically provided. Notwithstanding the foregoing, Buyer,
Merger Sub and the Surviving Corporation shall be entitled to conclusively rely
as to any obligation they may have hereunder to the Shareholders upon any
written instruction, waiver, notice, request, demand or other communication
delivered by or on behalf of the Shareholders by the Shareholder Representative.
-End of Page--
[Signatures appear on following page]
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IN WITNESS WHEREOF, the parties have each caused this Merger Agreement
to be duly executed by their respective authorized officers as of the date first
above written.
BUYER:
MANTECH INTERNATIONAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman of the Board, Chief Executive
Officer and President
MERGER SUB:
ManTech Kappa Corporation
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman of the Board, Chief Executive
Officer and President
COMPANY:
Integrated Data Systems Corporation
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
Shareholders:
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
By: /s/ Xxxxxx X. Xxx
-----------------------------------
Name: Xxxxxx X. Xxx
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxx
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
