FINAL
STOCK PURCHASE AGREEMENT
AMONG
DYNAMICS RESEARCH CORPORATION
AND
X. X. XXXX ASSOCIATES, INC.
AND
THE SHAREHOLDERS OF X. X. XXXX ASSOCIATES, INC.
MAY 28, 2002
FINAL
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION..........................................1
1.1 Definitions....................................................................1
1.2 Certain Interpretive Matters...................................................8
ARTICLE 2 SALE AND PURCHASE OF THE SHARES................................................9
2.1 Sale and Purchase of the Shares................................................9
2.2. Purchase Price; Closing Payment................................................9
2.3 Post Closing Adjustment to Purchase Price.....................................10
ARTICLE 3 THE CLOSING...................................................................14
3.1 Closing and Closing Date......................................................14
3.2 Documents to be delivered to the Buyer by the Seller Parties..................14
3.3 Documents To Be Delivered to the Seller Parties by the Buyer..................15
3.4 Other Documentation...........................................................16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES..........................16
4.1 Organization and Qualifications of the Company................................16
4.2 Capitalization................................................................16
4.3 Actions and Authority; Enforceability.........................................17
4.4 Issuance; Authority of the Sellers and the Sellers' Title to Shares...........17
4.5 Charter and By-Laws...........................................................18
4.6 Consents and Approvals; No Violation..........................................18
4.7 Financial Statements; No Undisclosed Liabilities..............................18
4.8 Absence of Certain Changes....................................................19
4.9 Brokers.......................................................................19
4.10 Employee Benefit Matters......................................................19
4.11 Actions and Proceedings.......................................................22
4.12 Tax Matters...................................................................22
4.13 Compliance with Law; Licenses and Permits.....................................24
4.14 Intellectual Property.........................................................25
4.15 Real Property; Personal Property..............................................25
4.16 Insurance.....................................................................26
4.17 Material Contracts............................................................27
4.18 Related Party Transactions....................................................27
4.19 Liens.........................................................................27
4.20 Employee Relations............................................................28
4.21 Employees; Employment Agreements..............................................28
4.22 Environmental Matters.........................................................28
4.23 Accounts Receivable and Accounts Payable......................................29
4.24 Accounting Practices..........................................................29
4.25 Banks; Powers of Attorney.....................................................29
4.26 Certain Payments..............................................................30
4.27 HMR Tech, LLC................................................................30
4.28 Complete Disclosure...........................................................31
4.29 Reliance on Advisors..........................................................31
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER.......................................31
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5.1 Organization..................................................................31
5.2 Actions and Authority; Enforceability.........................................31
5.3 Consents and Approvals; No Violation..........................................32
5.4 Brokers.......................................................................32
5.5 Solvency; Ability to Perform Agreement........................................32
5.6 Investment Intent.............................................................33
5.7 Investigation by Buyer........................................................33
5.8 Reliance on Advisors..........................................................33
ARTICLE 6 COVENANTS OF THE PARTIES......................................................34
6.1 Conduct of Business of the Company............................................34
6.2 Access to Information.........................................................36
6.3 Reasonable Best Efforts.......................................................36
6.4 Notification of Certain Matters...............................................37
6.5 Public Announcements..........................................................37
6.6 Acquisition Proposals.........................................................37
6.7 Preparation of Certain Financial Statements...................................38
6.8 Closing Period Tax Return.....................................................38
6.9 Professional Fees.............................................................38
6.10 Paid Personal Leave...........................................................38
6.11 Termination of Employees......................................................39
6.12 Accounts Receivable Collections...............................................39
6.13 338(h)(10) Election and S Corporation Status..................................40
6.15 Software Compliance...........................................................41
ARTICLE 7 CONDITIONS TO CLOSING.........................................................41
7.1 Conditions to Obligations of the Seller Parties...............................41
7.2 Conditions to Obligations of the Buyer........................................42
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.............................................43
8.1 Termination...................................................................43
8.2 Effect of Termination.........................................................44
8.3 Expenses......................................................................44
8.4 Amendment.....................................................................44
8.5 Waiver........................................................................44
ARTICLE 9 INDEMNIFICATION...............................................................45
9.1 Survival of Representations and Warranties....................................45
9.2 Terms of Indemnification......................................................45
9.3 Set Off.......................................................................46
9.4 Procedures....................................................................46
9.5 Limitations on Indemnification; Additional Indemnification Provisions.........47
ARTICLE 10 GENERAL PROVISIONS............................................................48
10.1 Notices.......................................................................48
10.2 Severability..................................................................50
10.3 Cooperation in Tax Matters....................................................50
10.4 Entire Agreement; Assignment; Failure of Certain Conditions...................51
10.5 Parties in Interest; Successors and Assigns...................................51
10.6 Legal Counsel.................................................................51
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10.7 Governing Law.................................................................52
10.8 Arbitration...................................................................52
10.9 Headings......................................................................52
10.10 Counterparts..................................................................53
10.11 Waiver of Trial by Jury.......................................................53
10.12 Attorneys Fees................................................................53
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A 338(h)(10) Procedures
Exhibit B Escrow Agreement
SCHEDULES
Schedule 1.1(E) Employment Agreements
Schedule 1.1(N) Non-Solicitation Agreements
Schedule 2.2 Share Ownership
Schedule 4.1 Subsidiaries and Other Interests
Schedule 4.2 Stock Agreements
Schedule 4.6 Consents; Approvals
Schedule 4.7 Financial Statements; No Undisclosed Liabilities
Schedule 4.8 Absence of Certain Changes
Schedule 4.10(a) Employee Benefit Matters
Schedule 4.11 Actions and Proceedings
Schedule 4.12(a) Tax Matters
Schedule 4.12(c) Tax Returns
Schedule 4.13 Compliance with Law
Schedule 4.14(a) Intellectual Property
Schedule 4.14(b) Intellectual Property Exceptions
Schedule 4.15(b) List of all Leases, Subleases and other Agreements
Schedule 4.15(d) Tangible Personal Property; Liens
Schedule 4.16 Insurance
Schedule 4.17 Material Contracts
Schedule 4.18 Related Party Transactions
Schedule 4.19 Liens
Schedule 4.20(b) Employee Complaints, Charges and/or Claims
Schedule 4.21 ........Employment Agreements; Employees
Schedule 4.23(a) Accounts and Notes Receivable
Schedule 4.23(b) Accounts and Notes Payable
Schedule 4.23(c) .........Unbilled Receivables
Schedule 4.25 Banks; Powers of Attorney
Schedule 6.11 Terminated Employees
Schedule 6.13 .........Allocation of Assets
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of May
28, 2002, by and among DYNAMICS RESEARCH CORPORATION, a Massachusetts
corporation (the "Buyer"), and X. X. XXXX ASSOCIATES, INC., a Delaware
corporation (the "Company") and the shareholders of the Company identified on
the signature page hereto (each, individually, a "Seller" and collectively, the
"Sellers").
RECITALS
WHEREAS, the Sellers are the sole shareholders of the Company, owning all
of the issued and outstanding shares of the capital stock of the Company (the
"Shares"); and
WHEREAS, the Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to the Buyer, the Shares, all upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, the mutual covenants,
agreements, representations, and warranties herein contained, and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms have
the meanings set forth below:
"ACCOUNTS RECEIVABLE" shall mean the all of the billed and
unbilled, current and long term accounts receivable of the Company.
"ADDITIONAL PURCHASE PRICE" has the meaning set forth in
Section 2.4.
"AFFILIATE" of a Person shall mean a Person that is a
stockholder, member, director or officer of that Person, or a Person that
directly or indirectly controls, is controlled by or is under common control
with that Person.
"BREACH" a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and the term
"Breach" means any such inaccuracy, breach, failure, occurrence, or
circumstance.
"BUYER" has the meaning set forth in the preamble to this
Agreement.
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"BUYER PARTY" shall mean, prior to Closing, the Buyer (and its
directors, officers and employees), and from and after Closing shall mean each
of the Buyer and the Company (and their respective directors, officers, agents
and employees).
"BUYER'S ACCOUNTANT" has the meaning set forth in Section 6.7.
"CLAIM" has the meaning set forth in Section 9.4.
"CLAIMS ESCROW" shall mean the amount of Three Hundred
Twenty-five Thousand Dollars ($325,000) placed into escrow for a period of
eighteen (18) months from the Closing Date to cover any claims that arise out of
Seller's obligations under Section 9.2(i)(A) and (B) except for the claims
related to Item 3 of SCHEDULE 4.11 which is provided for in the DCAA Escrow.
"CLOSING" has the meaning set forth in Section 3.1.
"CLOSING BALANCE SHEET" shall mean a balance sheet of the
Company as of May 31, 2002 prepared in accordance with GAAP and, to the extent
consistent with GAAP, using the same methods and criteria employed by the
Company in connection with its preparation of the Financial Statements. For
clarification purposes and notwithstanding GAAP or Company's prior application
of GAAP, the parties have agreed to the treatment of the following items on the
Closing Balance Sheet:
(i) all amounts due to Xxxxxxx Xxxxxxx and Xxxxx Xxxxxx
under their Employee Retention Agreements after the Closing will not be accrued
as expenses to the extent not paid prior to Closing;
(ii) no amount to become due to D&L LLC for their services
after Closing in connection with the Company's 2001 Indirect Cost Submission,
preparation of the Company's 2001 Tax Returns and preparation of the Closing
Balance Sheet will be accrued as an expense;
(iii) none of the Taxes due and all other charges resulting
or arising from the conversion of the Company from a tax basis to an accrual
basis shall be reflected on the Closing Balance Sheet;
(iv) $177,000 as a reserve against all Accounts Receivable
of the Company ("Reserved Accounts Receivable") provided, however, that if all
of the Company's unbilled accounts receivable on the Closing Balance Sheet that
as of the Closing are twelve (12) or more months beyond the period of
performance are collectively more than $432,186, the Reserved Accounts
Receivable shall be increased by 50% of the amount by which such accounts exceed
$432,186;
(v) none of the fees associated with the audit of the
Closing Balance Sheet shall be included on the Closing Balance Sheet as a
liability; and
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(vi) any amounts for FICA, 401(k) contributions or other
amounts payable in addition to the actual amount of paid personal leave in
connection therewith shall be included as a liability on the Closing Balance
Sheet ("PPL Adjustment").
"CLOSING DATE" has the meaning set forth in Section 3.1.
"CLOSING PAYMENT" has the meaning set forth in Section 2.2.
"CODE" shall mean the Internal Revenue Code of 1986 and rules
and regulations promulgated pursuant thereto, each as amended and in effect from
time to time.
"COMPANY PERMITS" has the meaning set forth in Section 4.13(a).
"COMPANY SECURITIES" has the meaning set forth in Section 4.2.
"CONFIDENTIALITY AGREEMENT" shall mean the Confidentiality and
Non-Disclosure Agreement, dated as of August 7, 2001, between the Buyer and the
Company.
"CONSULTING AGREEMENTS" shall mean the Consulting Agreements
between the Company and each of Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxxx.
"COSTS" has the meaning set forth in Section 8.3.
"DAMAGES" shall mean any and all losses, charges, claims,
damages, liabilities, Liens, obligations, judgments, settlements, fines,
penalties, awards, demands, offsets, reasonable out-of-pocket costs, expenses
and reasonable attorneys' fees (including any such reasonable costs, expenses
and attorneys' fees incurred in enforcing a party's right to indemnification
against any indemnifying party or with respect to any appeal).
"DCAA" shall mean the Defense Contract Audit Agency.
"DCAA AUDIT CHARGES" shall mean any and all amounts due to the
United States government arising or resulting from any audit or review of the
Company performed by the Defense Contract Audit Agency for periods prior to the
Closing including, without limitation, with respect to the ongoing audits
referred to in SCHEDULE 4.11, Items 3 and 4.
"DCAA ESCROW" shall mean the amount of Three Hundred Thousand
Dollars ($300,000) placed into escrow by the Buyer from the Purchase Price to
cover any claims that arise out of any of the items referred to in SCHEDULE
4.11, Item 3.
"D&L LLC" shall mean Xxxxxxxx & Xxxxx, LLC.
"EMPLOYMENT AGREEMENTS" shall mean the Employment Agreements
between the Company and each of the employees listed on SCHEDULE 1.1(E) attached
hereto.
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"ENVIRONMENTAL LAWS" shall mean any federal, state or local
law, statute, ordinance, code, order, decree, common law, rule or regulation
relating to pollution or protection of the environment or public health and
safety including laws relating to the use, treatment, storage, transportation or
handling of Hazardous Materials or the release, discharge, emission or disposal
of Hazardous Materials; or to exposure to toxic, hazardous or other controlled,
prohibited or regulated substances; and, in particular, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq.
("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq.
("RCRA"), the Toxic Substances Control Act, 15 U.S.C. 2601, et seq. ("TSCA"),
the Occupational, Safety and Health Act, 29 U.S.C. 651, et seq., the Clean Air
Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control Act, 33 U.S.C.
1251, et seq., the Safe Drinking Xxxxx Xxx, 00 X.X.X. 000x, et seq., the
Hazardous Materials Transportation act, 49 U.S.C. 1802 et seq. ("HMTA") and the
Emergency Planning and Community Right to Know Act, 42 U.S.C. 11001 et seq.
("EPCRA"), and other comparable state and local laws and all rules, regulations
and policy or guidance documents promulgated pursuant thereto or published
thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"ESCROW AGENT" shall have the meaning set forth in Section
2.2(c).
"ESCROW AGREEMENT" shall have the meaning set forth in Section
2.2(c).
"FINANCIAL STATEMENTS" has the meaning set forth in Section
4.7.
"GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
"GSA" shall mean the United States General Services
Administration.
"GSA SCHEDULE" has the meaning set forth in Section 2.4.
"GOVERNMENTAL AUTHORITY" shall mean any foreign, Federal, state
or local governmental entity or subdivision of any of the foregoing including
any authority, department, commission, board, bureau, agency, court or other
instrumentality, in particular, and without limiting the foregoing, the
following Federal departments, office and agencies: Environmental Protection
Agency, Equal Employment Opportunity Commission, Defense Contract Management
Agency, Defense Contract Audit Agency, Defense Security Service, Department of
Defense/Office of Special Investigations and the General Accounting Office.
"HAZARDOUS MATERIALS" shall mean each and every element,
compound, chemical mixture, contaminant, pollutant, material, waste or other
substance which is defined, determined or identified as hazardous or toxic under
Environmental Laws or the release of which is regulated under Environmental
Laws, or that poses a hazard to the health and safety of persons
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or the environment. Without limiting the generality of the foregoing, the term
includes: "hazardous substances" as defined in CERCLA; "extremely hazardous
substances" as defined in EPCRA; "hazardous waste" as defined in RCRA;
"hazardous materials" as defined in HMTA; "chemical substance or mixture" as
defined in TSCA; crude oil, petroleum products or any fraction thereof;
radioactive materials including source, byproduct or special nuclear materials;
asbestos or asbestos-containing materials; chlorinated fluorocarbons ("CFCs");
and radon.
"HMR" has the meaning set forth in Section 4.27.
"INDEMNIFICATION CAP" has the meaning set forth in Section
9.5(a).
"INDEMNIFICATION THRESHOLD" has the meaning set forth in
Section 9.5(a).
"INDEPENDENT ACCOUNTING FIRM" has the meaning set forth in
Section 2.3(b).
"INTELLECTUAL PROPERTY" shall mean: (i) all trademarks, service
marks, trade dress, logos, trademark registrations, service xxxx registrations,
trade names and applications for registration of trademarks and service marks;
(ii) all licenses which create rights in or to the trademark, service xxxx or
trade name properties described in clause (i) above; (iii) all copyrights,
copyright registrations and applications for registration of copyrights; (iv)
all renewals, modifications and extensions of any items referred to in clauses
(i) through (iii) above; (v) all patents, design patents, utility patents and
plant patents, all applications for grant of any such patents pending as of the
date hereof or as of the Closing or filed within five years prior to the date
hereof, and all reissues, divisions, continuations and extensions thereof; (vi)
all technical documentation, data, trade secrets, designs, drawings, inventions,
processes, rights in plant varieties, formulae, know-how, operating manuals and
guides, plans, new product development, technical and marketing surveys,
material specifications, product specifications, samples, invention records,
research records, labor routings, inspection processes, equipment lists,
engineering reports and drawing, architectural or engineering plans, know-how
agreements and all other confidential business information; (vii) all marketing
and licensing records, sales literature, customer lists, trade lists, sales
forces and distributor networks lists, advertising and promotional materials,
service and parts records, warranty records, maintenance records and similar
records; (viii) all rights arising under, and rights to develop, use and sell
under, any of the foregoing and all licenses with respect thereto; (ix) all
rights and incidents of interest in and to all noncompetition or confidentiality
agreements; and (x) any software or hardware used by the Company in the conduct
of its business.
"KNOWLEDGE" means, (i) with respect to the Buyer, the actual
knowledge of any director, officer, or manager of the Buyer; (ii) with respect
to the Sellers and the Company, the actual knowledge of any of Xxxxxx Xxxxxxx,
Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx or Xxxxxxx Xxxxxxx, which shall include such
knowledge that any foregoing would have had after reasonable inquiry in the
normal course of his duties on behalf of the Company.
"LIEN" means any mortgage, pledge, hypothecation, collateral
assignment, security interest, lease, sublease, occupancy agreement, adverse
claim or interest, easement,
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covenant, encroachment, burden, option, lien (statutory or otherwise), right of
first refusal or other encumbrance or restriction of any kind whatsoever.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, operations, condition (financial or otherwise), results of
operations, prospects, assets or liabilities (excluding general economic
conditions or conditions affecting the Government Contracting industry,
provided, that such conditions do not effect the Company disproportionately more
than other companies in the Government Contracting industry) of the Company as a
whole or a material adverse effect on the ability of the Company or the Sellers
to consummate the transactions contemplated by this Agreement. For purposes of
this definition, and without limiting the foregoing, any event, circumstance or
condition that results in or is likely to result in Damages to the Company in
excess of $150,000 shall be presumed to be material.
"MATERIAL CONTRACTS" shall mean any and all written or oral
contracts, agreements, commitments, arrangements, leases (including with respect
to personal property), policies, instruments and understandings presently in
effect that have not been closed out and finally paid to which the Company is a
party or by which the Company or any of its assets or properties is bound (a)
which involves or could involve aggregate payments of more than $5,000 annually,
or (b) which is or could reasonably be expected to be material to the Company.
"PBGC" has the meaning set forth in Section 4.10(e).
"PERSON" means any natural person, firm, partnership,
association, corporation, company, limited liability company, trust, business
trust, Governmental Authority or other entity.
"PLAN" has the meaning set forth in Section 4.10(a).
"PPL ADJUSTMENT" has the meaning set forth in the definition of
the Closing Balance Sheet.
"PRE-CLOSING COSTS" shall have the meaning set forth in Section
8.3.
"PROFESSIONAL FEES CERTIFICATE" shall have the meaning set
forth in Section 6.9.
"PROFESSIONAL FEES" has the meaning set forth in Section 6.9.
"PURCHASE PRICE" has the meaning set forth in Section 2.2.
"REAL PROPERTY" has the meaning set forth in Section 4.15(b).
"REAL PROPERTY LEASES" has the meaning set forth in Section
4.15(b).
"REIMBURSABLE ITEMS ESCROW" shall mean the amount of One
Hundred Seventy-five Thousand Dollars ($175,000) placed into escrow by the Buyer
from the Purchase Price to pay for the first Twenty-five Thousand Dollars
($25,000) payable to the Selected Accounting Firm by the Sellers pursuant to
this Agreement, amounts which Sellers have agreed to pay to
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purchase software licenses pursuant to Section 6.14 and the fees associated with
employee or contractor costs incurred to perform contract close-out work which
Sellers have agreed to pay pursuant to Section 6.12 in accordance with the
procedures set forth in the Escrow Agreement.
"RESERVED ACCOUNTS RECEIVABLE" has the meaning set forth in the
definition of the Closing Balance Sheet.
"RESOLUTION PERIOD" shall have the meaning set forth in Section
2.3(b).
"RULES" shall have the meaning set forth in Section 10.8(a).
"SEC" shall mean the United States' Securities and Exchange
Commission.
"SECTION 338(H)(10) AMOUNT" has the meaning set forth in
Section 2.2.
"SECTION 338(H)(10) ELECTION" has the meaning set forth in
Section 6.13.
"SECTION 338(H)(10) ELECTION FORMS" has the meaning set forth
in Section 6.13.
"SECTION 338(H)(10) ESCROW" shall mean the Two Hundred Fifty
Thousand Dollars ($250,000) placed into Escrow by the Buyer to pay the Sellers
the balance of the Section 338(h)(10) Amount, within ten (10) days following the
determination of the Section 338(h)(10) Amount pursuant to Exhibit A.
"SELECTED ACCOUNTING FIRM" has the meaning set forth in Section
2.3.
"SELLERS" has the meaning set forth in the preamble to this
Agreement.
"SELLERS' ACCOUNTANTS" has the meaning set forth in Section
6.7.
"SELLERS' COUNSEL" has the meaning set forth in Section 7.2.
"SELLERS' INVESTMENT BANKER" has the meaning set forth in
Section 4.9.
"SELLER PARTY" shall mean, prior to Closing, each of the
Sellers and the Company and from and after Closing shall mean each of the
Sellers.
"SHARES" has the meaning set forth in the Recitals hereto.
"SPECIAL INDEMNITIES" shall have the meaning set forth in
Section 9.4.
"XXXXX RELEASE" has the meaning set forth in Section 6.11.
"TANGIBLE ASSET" shall mean all assets of the Company listed on
the Closing Balance Sheet except for intangible assets such as goodwill, patents
or trademarks.
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"TANGIBLE ASSET VALUE" has the meaning set forth in Section
2.3(a).
"TANGIBLE ASSET ESCROW" shall mean the amount of Five Hundred
Thousand Dollars ($500,000) placed into escrow by the Buyer from the Purchase
Price pending the determination of Tangible Asset Value pursuant to Section 2.3
hereof.
"TAX" or "TAXES" shall mean, however denominated, all federal,
state, local, foreign and other taxes, levies, imposts, assessments, impositions
or other similar government charges, including, without limitation, all net
income, gross income, estimated income, gross receipts, business, occupation,
franchise, real property, payroll, personal property, sales, transfer, stamp,
use, employment, social security, unemployment, worker's compensation,
commercial rent, withholding, occupancy, premium, gross receipts, profits,
windfall profits, deemed profits, license, lease, severance, capital,
production, corporation, ad valorem, excise, duty, escheat, built in gain
pursuant to Code Section 1374 or similar tax under state or local law or other
taxes, including interest, penalties and additions (to the extent applicable)
thereto whether disputed or not.
"TAX RETURN" shall mean any report, return, document,
declaration or other information or filing (including any amendments) required
to be supplied to any taxing authority or jurisdiction (foreign or domestic)
with respect to Taxes, including, without limitation, information returns, where
permitted or required, combined or consolidated returns for any group of
entities that includes the Company, any documents with respect to or
accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information.
"TRANSACTION DOCUMENTS" shall mean this Agreement and all
agreements, documents, certificates or instruments being delivered pursuant to
this Agreement.
"UNBILLED RECEIVABLES" shall have the meaning set forth in
Section 4.23(c).
1.2 CERTAIN INTERPRETIVE MATTERS. In this Agreement, unless the
context otherwise requires:
(a) words of the masculine or neuter gender shall include the
masculine and/or feminine gender, and words in the singular number or in the
plural number shall each include the singular number or the plural number;
(b) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity;
(c ) reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof;
(d) any accounting term used and not otherwise defined in this
Agreement or any Transaction Document has the meaning assigned to such term in
accordance with GAAP;
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(e) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding or
succeeding such term;
(f) relative to the determination of any period of time,
"from" means "from and including," "to" means "to but excluding" and "through"
means "through and including;"
(g) reference to any law (including statutes and ordinances)
means such law as amended, modified codified or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations promulgated
thereunder; and
(h) any agreement, instrument, insurance policy, statute,
regulation, rule or order defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument,
insurance policy, statute, regulation, rule or order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein.
The parties further acknowledge and agree that: (i) this Agreement is
the result of negotiations between the parties and shall not be deemed or
construed as having been drafted by any one party, (ii) each party and its
counsel have reviewed and negotiated the terms and provisions of this Agreement
(including any Exhibits and Schedules attached hereto) and have contributed to
its revision, (iii) the rule of construction to the effect that any ambiguities
are resolved against the drafting party shall not be employed in the
interpretation of this Agreement, and (iv) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto and not in favor of
or against any party, regardless of which party was generally responsible for
the preparation of this Agreement.
ARTICLE 2
SALE AND PURCHASE OF THE SHARES
2.1 SALE AND PURCHASE OF THE SHARES. Upon and subject to the terms and
provisions of this Agreement, the Buyer shall purchase and accept delivery from
the Sellers, and the Sellers shall sell, assign, transfer, and deliver to the
Buyer, at the Closing, all of the Shares, free and clear of all Liens.
2.2. PURCHASE PRICE; CLOSING PAYMENT. The total purchase price for the
Shares will be Ten Million Dollars ($10,000,000) plus the amount calculated by
applying the amounts on the Closing Balance Sheet to the formula and computation
described in EXHIBIT A and by applying the specific assumptions and
representations set forth on EXHIBIT A (the "Section 338(h)(10) Amount" which
amount is estimated to be approximately $1,250,000), subject to adjustment
following the Closing pursuant to Section 2.3 hereof and to increase by the
amount of the Additional Purchase Price pursuant to
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Section 2.4 hereof (the "Purchase Price"). The Purchase Price will be paid by
the Buyer to the Sellers PRO RATA based upon each Seller's ownership of the
Shares as set forth on SCHEDULE 2.2 hereto as follows:
(a) At the Closing, the Buyer shall (i) deliver to the Sellers
Ten Million Dollars ($10,000,000) less (A) the aggregate amount of the Tangible
Asset Escrow, the DCAA Escrow, the Claims Escrow, and the Reimbursable Items
Escrow (which amounts total $1,300,000) and (B) the amount of the Professional
Fees (the aggregate amount payable by the Buyer to the Sellers at the Closing is
sometimes referred to herein as the "Closing Payment."), and (ii) deliver to the
Escrow Agent the Tangible Asset Escrow, the DCAA Escrow, the Claims Escrow, the
Reimbursable Items Escrow and the Section 338(h)(10) Escrow (which amounts total
$1,550,000) and to the parties listed on the Professional Fees Certificate the
Professional Fees. The Closing Payment will be paid to the Sellers via wire
transfer to the accounts of the Sellers that are designated by the Sellers in
writing at least five (5) days prior to the Closing. The Professional Fees will
be paid to the parties listed on the Professional Fees Certificate in accordance
with the payment instructions set forth therein.
(b) The Section 338(h)(10) Amount will be paid to the Sellers
on the basis of the computations as set forth on EXHIBIT A applied to the
Closing Balance Sheet. One Million Dollars ($1,000,000) of the Section
338(h)(10) Amount shall be paid to the Sellers at Closing and the balance shall
be paid to Sellers by disbursing from escrow the Section 338(h)(10) Escrow
immediately after the Section 338(h)(10) Amount is determined based on the
Closing Balance Sheet as set forth in Section 2.3(d) hereof.
(c) The term, conditions and procedures by which the DCAA
Escrow, the Reimbursable Items Escrow, Claims Escrow, Section 338(h)(10) Escrow
and Tangible Asset Value Escrow shall be disbursed shall be set forth in an
Escrow Agreement in the form attached hereto as EXHIBIT B (the "Escrow
Agreement") to be entered into between the Buyer, the Sellers, the Company and a
mutually agreed upon escrow agent (the "Escrow Agent").
2.3 POST CLOSING ADJUSTMENT TO PURCHASE PRICE.
(a) As soon as reasonably practical following the Closing (but
not more than sixty (60) days after the Closing Date), one of the regional
accounting firms listed on SCHEDULE 2.3 hereto, which Buyer and Sellers mutually
agree to select prior to Closing ("Selected Accounting Firm"), such approval by
either party not to be unreasonably withheld shall prepare and deliver to the
Sellers and Buyer (i) the Closing Balance Sheet; and (ii) based on the Closing
Balance Sheet, a calculation of the dollar value of the Tangible Assets of the
Company less the total liabilities of the Company as shown on the Closing
Balance Sheet minus the PPL Adjustment (the "Tangible Asset Value"). Up to the
first Twenty-five Thousand Dollars ($25,000) of the expenses incurred in
connection with the preparation of the Closing Balance Sheet shall be paid from
the Reimbursable Items Escrow and the balance of such expenses (the expenses
less Twenty-five Thousand Dollars ($25,000)) shall be paid by Buyer. The parties
each agree to grant reasonable access to all records of the Company and to
follow such procedures and make such submissions to the Selected Accounting
Firm, as it may request in preparing the
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Closing Balance Sheet. All documents prepared by the Selected Accounting Firm
shall be provided to the Buyer and Sellers and Buyer and Sellers may, at their
option, participate in all meetings and communications with the Selected
Accounting Firm.
(b) The Closing Balance Sheet and the Tangible Asset Value
shall become final and binding upon the parties unless, within sixty (60) days
following delivery to the Sellers and Buyer, either the Sellers notify the Buyer
of their objection thereto or the Buyer notifies the Sellers, which objection
may only be that the Closing Balance Sheet was not properly prepared in
accordance with this Section 2.3. Any notice of objection shall specify in
reasonable detail the reasons for objection. If either party so notifies the
other party of their objection to the Closing Balance Sheet and/or the Tangible
Asset Value, the Sellers and the Buyer shall negotiate in good faith to resolve
any differences. If within thirty (30) days (the "Resolution Period") following
the receipt of such notice by the objecting party any of such differences have
not been resolved, the parties shall submit the dispute to Deloitte & Touche, or
another mutually agreed independent accounting firm selected by Buyer and
Sellers (the "Independent Accounting Firm"). Buyer and Sellers each represent
and warrant that no party or its Affiliates has or has had any relationship with
the Independent Accounting Firm in any capacity including, without limitation,
as auditor, consultant or in a teaming relationship. The Independent Accounting
Firm will conduct its own review and evaluate those items or amounts in the
Closing Balance Sheet relevant to the calculation of the Tangible Asset Value
and shall determine only those items still in dispute at the end of the
Resolution Period and shall determine whether such items have been prepared in
accordance with the terms of this Agreement and with GAAP. The Independent
Accounting Firm will be granted reasonable access to all records of the Seller
Parties and the parties agree to follow such procedures and make such
submissions to the Independent Accounting Firm as it may request in conducting
its review and making its determination under this Section 2.3(b). Each party
agrees to execute, if requested by the Independent Accounting Firm, a reasonable
engagement letter. The Independent Accounting Firm's determination shall be made
within forty-five (45) days after its engagement (which engagement shall be made
no later than five (5) business days after the end of the Resolution Period), or
as soon thereafter as possible, shall be set forth in a written statement
delivered to the Sellers and Buyer and shall be final, conclusive,
non-appealable and binding for all purposes hereunder, provided that such
determination may be reviewed, corrected or set aside in an arbitration under
Section 10.8 of this Agreement, but only if the arbitrators find that the
Independent Accounting Firm committed manifest error with respect to its
determination. The determination of the Independent Accounting Firm shall not be
deemed an award subject to review under the Federal Arbitration Act or any other
statute. The fees and expenses of the Independent Accounting Firm in resolving
any differences pursuant shall be paid one-half by the Sellers and one-half by
the Buyer.
(c) In accordance with the terms of the Escrow Agreement,
within ten (10) days of the final determination of the Closing Balance Sheet and
the Tangible Asset Value:
(i) If the Tangible Asset Value is greater than or
equal to $3,800,000 minus the PPL Adjustment, the Buyer and Sellers
shall instruct the Escrow Agent (unless the procedures in Section 2.2(b)
are employed and in that case, the Independent Accounting Firm shall
instruct the Escrow Agent) to pay to the Sellers the Tangible Asset
Escrow;
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(ii) If the Tangible Asset Value is less than
$3,800,000 minus the PPL Adjustment but equal to or greater than
$3,300,000 minus the PPL Adjustment, the Buyer and Sellers shall
instruct the Escrow Agent (unless the procedures in Section 2.2(b) are
employed and in that case, the Independent Accounting Firm shall
instruct the Escrow Agent) to pay to the Buyer from the Tangible Asset
Escrow the amount by which the Tangible Asset Value is less than
$3,800,000 minus the PPL Adjustment and accordingly shall instruct the
Escrow Agent to pay the balance of the Tangible Asset Escrow to the
Sellers; and
(iii) If the Tangible Asset Value is less than
$3,300,000 minus the PPL Adjustment, the Buyer and Sellers shall
instruct the Escrow Agent (unless the procedures in Section 2.2(b) are
employed and in that case, the Independent Accounting Firm shall
instruct the Escrow Agent) to pay to the Buyer the entire Tangible Asset
Escrow, and the Sellers, shall on a pro rata basis in accordance with
SCHEDULE 2.2 pay to the Buyer in cash an amount equal to the difference
between (A) $3,300,000 minus the PPL Adjustment and (B) the Tangible
Asset Value.
(d) Within ten (10) days following the final determination of
the Closing Balance Sheet the Buyer shall present to the Sellers a computation
of the Section 338(h)(10) Amount calculated by applying the Closing Balance
Sheet amounts to the formula and computations set forth on EXHIBIT A. The
Section 338(h)(10) Amount as computed by the Buyer shall be binding upon the
Sellers unless within twenty (20) days following delivery of the Buyer's
calculation to the Sellers, the Sellers notify the Buyer of any objection
thereto, which may only be that the Section 338(h)(10) Amount was not properly
calculated pursuant to this Section. If the Sellers notify the Buyer of their
objection to the Buyer's calculation of the Section 338(h)(10) Amount, the
parties shall negotiate in good faith to resolve their differences. If within
twenty (20) days following receipt of the Sellers objection notice such
differences are not resolved, the parties shall submit their dispute to the
Independent Accounting Firm for resolution upon the same terms as set forth in
Section 2.3(b) hereof. Within ten (10) days of the final determination of the
Section 338(h)(10) Amount, the parties shall settle the payment of the Section
338(h)(10) Amount as follows:
(i) If the Section 338(h)(10) Amount exceeds
$1,250,000, the Escrow Agent shall disburse to the Sellers the entire
amount of the Section 338(h)(10) Escrow and the Buyer shall pay to the
Sellers the amount by which the Section 338(h)(10) Amount exceeds the
amounts paid to the Sellers from the Section 338(h)(10 Escrow;
(ii) If the Section 338(h)(10) Amount is between
$1,250,000 and $1,000,000, the Escrow Agent shall disburse to the
Sellers the amount by which the Section 338(h)(10) Amount exceeds
$1,000,000 and shall disburse the balance of the Section 338(h)(10)
Escrow to the Buyer; and
(iii) If the Section 338(h)(10) Amount is less than
$1,000,000, the Sellers shall severally on a pro-rata basis in
accordance with SCHEDULE 2.2, reimburse
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Buyer the amount by which $1,000,000 exceeds the Section 338(h)(10)
Amount and the Escrow Agent shall disburse the Section 338(h)(10) Escrow
to the Buyer.
2.4 ADDITIONAL PURCHASE PRICE.
(a) In the event and at such time as the GSA, or it successors,
notifies the Company, or any of its successors or Affiliates, that the GSA will
exercise the option for continuation of five years or more on the Company's GSA
Professional Engineering Schedule (GS-23F-0206K), (hereinafter referred to as
the "GSA Schedule") in a manner that allows the Company, or any of its
successors or Affiliates, to continue with, bid and provide services as a small
business under the GSA Schedule on GSA Schedule based contracts, including those
originating from the US Air Force at Xxxxxx-Xxxxxxxxx Air Force Base, then the
Buyer shall pay to the Sellers, within ten (10) business days after the notice
of the exercise of the option of the GSA Schedule by GSA, or, in the absence of
notice, the exercise of such option of the GSA Schedule by GSA, as additional
Purchase Price, the aggregate amount of One Million Dollars ($1,000,000) (the
"Additional Purchase Price"). In the event that the Additional Purchase Price
becomes payable by Buyer to Sellers, the Section 338(h)(10) Amount shall be
recalculated in accordance with EXHIBIT A to take into account the Additional
Purchase Price. The amount that reflects the difference between the recalculated
Section 338(h)(10) Amount and the Section 338(h)(10) Amount agreed to by the
parties computed without the Additional Purchase Price shall be the "Additional
Section 338(h)(10) Amount". The Additional Section 338(h)(10) Amount shall be
paid to Sellers concurrent with the payment of the Additional Purchase Price by
wire transfer to Sellers in the proportions specified in SCHEDULE 2.2.
(b) In connection with such GSA Schedule option the Buyer and
its successors or Affiliates shall (i) cause the Company to notify the GSA of
the Company's desire to exercise the GSA Schedule option in advance of the GSA
Schedules' option exercise date, and (ii) cause the Company to remain as a
subsidiary of Buyer or its successors, and (iii) not permit the Company to
engage in an acquisition of the stock, interests or material assets of another
Person or merge with another Person, either of which would disqualify the
Company from being eligible to receive the GSA Schedule exercise of option.
(c) The Company, upon request from the Sellers, will
periodically discuss with the Sellers the state of the Company's GSA Schedule
related business and activities.
(d) In the event that there occurs (i) (A) a sale, exchange or
transfer by Buyer or Company of all or a substantial portion of its assets; (B)
a merger by Buyer in which Buyer is not the surviving entity, or in which
shareholders of Buyer immediately prior to the merger own less than 50% of the
outstanding capital stock in the merged entity immediately after the merger; (C)
a sale by shareholders of Buyer of more than 50% of the outstanding capital
stock of Buyer; or (D) the sale of substantially all of the assets, or a change
in control of the Company, and such occurrences in items (A) through (D) above
cause the Company or its successors to become ineligible to receive notice to
exercise the option of the GSA Schedule; or (ii) a breach of subparagraph 2.4
(b) above, the Additional Purchase Price shall be paid to the Sellers at the
earlier of the time the option would otherwise be exercised or the time in which
any of the events or occurrences listed in sub-sections (i) through (ii) above
occur. If the Additional Purchase Price
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is not paid, when due to Sellers pursuant to this Section 2.4, interest shall
accrue on any unpaid amount at the rate of 7% per annum commencing on the date
that payment is due.
ARTICLE 3
THE CLOSING
3.1 CLOSING AND CLOSING DATE. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned in
accordance with the provisions of Article 8 hereof, the Closing (the "Closing")
of the transactions contemplated by this Agreement shall take place at 10:00
a.m. (Boston time) on a date to be designated by the Buyer and the Sellers as
promptly as practical after all of the conditions to the respective obligations
of the parties set forth in Article 7 hereof shall have been satisfied or waived
(such date and time on and at which the Closing actually occurs being referred
to herein as the "Closing Date"). The Closing shall take place at the offices of
the Buyer's counsel, Xxxxx Peabody LLP, Suite 900, 000 0xx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000.
3.2 DOCUMENTS TO BE DELIVERED TO THE BUYER BY THE SELLER PARTIES. At
the Closing, the Seller Parties will deliver to the Buyer:
(a) Certificates representing 100% of the Shares, duly endorsed
for transfer in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer by each Seller;
(b) A certificate, in form and substance reasonably acceptable
to the Buyer, executed by the President of the Company, and attested to by the
Secretary of the Company, dated the Closing Date, and certifying that attached
thereto are true and complete copies of: (i) the Certificate of Incorporation of
the Company, as in effect as of the Closing Date; (ii) the By-laws of the
Company, as amended and as in effect as of the Closing Date; (iii) the
resolutions duly adopted by the Board of Directors of the Company authorizing
the execution, delivery, and performance of this Agreement and each Transaction
Document to which the Company is a party, which resolutions have not been
modified, rescinded, or amended and are in full force and effect as of the
Closing Date;
(c) Certificates, in form and substance reasonably acceptable
to the Buyer, dated the Closing Date, executed by (i) the President of the
Company, certifying as to the accuracy of the Company's representations and
warranties at and as of the Closing and the performance by Sellers and the
Company of its covenants and agreements set forth in this Agreement and each
Transaction Document to which the Company is a party to be performed prior to
the Closing Date and (ii) by each of the Sellers certifying as to the accuracy
of his and the Company's representations and warranties at and as of the Closing
and the performance by such Seller and the Company of his and its covenants and
agreements set forth in this Agreement and each Transaction Document to be
performed prior to the Closing Date;
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(d) Resignations of all of the directors and officers of the
Company;
(e) All of the Company's contracts, books, records, and other
data relating to the Company's operations, including the Company's minute and
stock record books;
(f) Each of the Consulting Agreements duly executed by Xxxxxx
Xxxxxxx and Xxxxxx Xxxxxxxx;
(g) Each of the Employment Agreements duly executed by Xxxxxxx
Xxxxxxx, Xxxxxxx Xxxxx and Xxxxx Xxxxxx;
(h) A certificate of good standing of the Company from the
Secretary of State of the state of Delaware, and a certificate from the
Secretaries of State of the states of each jurisdiction in which the Company
owns or leases real property or otherwise does business evidencing the Company's
authorization to conduct business as a foreign corporation in such state, dated
not earlier than 10 days prior to the Closing Date;
(i) The opinion of counsel for the Seller Parties referred to
in Section 7.2(d) of this Agreement;
(j) Consents to transfer of all leases, licenses and other
contracts listed in SCHEDULE 4.6 of this Agreement in form reasonably
satisfactory to Buyer;
(k) A duly executed Termination Agreement effectively
terminating the Shareholders Agreement, dated November 12, 1990, by the Company
and the Sellers of the Company;
(l) A duly executed Escrow Agreement;
(m) Such other certificates and documents as the Buyer or its
counsel may reasonably request;
(n) Bank of America Payoff Letter; and
(o) Executed Section 338(h)(10) Election Forms.
3.3 DOCUMENTS AND ITEMS TO BE DELIVERED TO THE SELLER PARTIES BY THE
BUYER. At the Closing, the Buyer will deliver to the Seller Parties:
(a) Against receipt of stock certificates for the Shares in
accordance with Section 3.2(a) above, the Closing Payment, the Section
338(h)(10) Amount and all other amounts required to be paid by Buyer to Sellers
pursuant to Section 2.2 of this Agreement;
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(b) A certificate, in form and substance reasonably acceptable
to the Seller Parties, executed by an authorized officer of the Buyer, dated the
Closing Date, and certifying that attached thereto are true and complete copies
of (i) the Articles of Organization of the Buyer as in effect as of the Closing
Date; (ii) the By-Laws of the Buyer, as amended and as in effect as of the
Closing Date; and (iii) the votes duly adopted by the Board of Directors of the
Buyer authorizing the execution, delivery, and performance of this Agreement and
each Transaction Document to which it is a party, which votes have not been
modified, rescinded or amended and are in full force and effect;
(c) A certificate, in form and substance reasonably acceptable
to the Seller Parties, executed by an authorized officer of the Buyer, dated the
Closing Date, certifying as to the accuracy of the Buyer's representations and
warranties at and as of the Closing and the performance by the Buyer of its
covenants and agreements set forth in this Agreement and each Transaction
Document to which it is a party to be performed prior to the Closing Date;
(d) Duly executed Consulting Agreements;
(e) The opinion of counsel for the Buyer referred to in Section
7.1(d) of this Agreement;
(f) A duly executed Escrow Agreement; and
(g) Such other certificates and documents as the Sellers or
their counsel may reasonably request.
3.4 OTHER DOCUMENTATION. Sellers with the assistance of Buyer
shall use reasonable best efforts to obtain each of the Employment Agreements
duly executed by Xxxxxxxxx Xxxxxxxx and Xxxxxx Xxxxx.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller Parties, jointly and severally, hereby represent
and warrant to the Buyer as follows:
4.1 ORGANIZATION AND QUALIFICATIONS OF THE COMPANY. The Company is a
duly organized and validly existing corporation in good standing under the laws
of the State of Delaware with all corporate power and authority to own or lease
all of its properties and assets and to conduct its business as currently
conducted, and is duly qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions in which the character of
the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary. Except as set forth on
SCHEDULE 4.1, the Company does not own nor does it have the right or obligation
to acquire, directly or indirectly, any interest in any Person.
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4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000 shares of Common Stock, no par value, of which 61,656 shares
are issued and outstanding and 3,245 shares are held in the Company's treasury.
Except for this Agreement, there are no outstanding (i) shares of capital stock
or other voting securities of the Company, (ii) securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities or ownership interests in the Company or (iii) options, warrants,
rights or other agreements or commitments to acquire from the Company, and no
obligation of the Company to issue, any capital stock, voting securities or
other ownership interests in, or securities convertible into or exchangeable for
capital stock or voting securities or other ownership interests in, the Company,
and no obligation of the Company to grant, extend or enter into any
subscription, warrant, option, right, convertible or exchangeable security or
other similar agreement or commitment (the items in clauses (i), (ii) and (iii)
being referred to herein collectively as the "Company Securities"). There are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any Company Securities. As of the Closing Date, there will be no voting
trusts, stockholders' agreements, or other agreements, contracts or
understandings relating to the ownership, voting or transfer of capital stock of
the Company to which the Company or any of the Sellers is a party. Except as set
forth on SCHEDULE 4.2, there are no other agreements, contracts or
understandings with respect to the ownership, voting or transfer of capital
stock of the Company. No Person other than the Sellers owns of record or
beneficially any Company Securities.
4.3 ACTIONS AND AUTHORITY; ENFORCEABILITY. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and each Transaction Document to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and each
Transaction Document to which the Company is a party by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Board of Directors of the Company
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and each Transaction Document to which the Company is a
party or to consummate the transactions so contemplated. This Agreement and each
Transaction Document to which the Company is a party has been duly and validly
executed and delivered by the Company and, assuming such agreements constitute
the legal, valid and binding obligations of the Buyer, constitute the legal,
valid and binding agreements of the Company, enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and general principles of equity (whether considered in a proceeding
in equity or at law).
4.4 ISSUANCE; AUTHORITY OF THE SELLERS AND THE SELLERS' TITLE TO
SHARES. The Sellers have all requisite power and authority to execute and
deliver this Agreement and each of the Transaction Documents to which the
Sellers are a party, to perform their obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. Each Seller has
all requisite legal capacity, power and authority to execute and deliver
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this Agreement and each of the Transaction Documents to which the Sellers are a
party, to perform, his obligations hereunder and thereunder and consummate the
transactions contemplated herein and therein. This Agreement and each
Transaction Document to which the Sellers are a party have been duly and validly
executed and delivered by the Sellers and, assuming such agreements constitute
the legal, valid and binding obligations of the Buyer, constitute the legal,
valid and binding agreements of the Sellers, enforceable against each of the
Sellers in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and general principles of equity (whether considered
in a proceeding in equity or at law). The Shares are duly authorized, validly
issued, fully paid and non-assessable. Each Seller has good and marketable title
to and is the lawful, legal and beneficial owner of the number of Shares set
forth opposite his name on SCHEDULE 2.2 hereto, free and clear of all Liens and
the Buyer, at the Closing and on payment of the Closing Payment, will receive
good and marketable title to the Shares, free and clear of all Liens.
4.5 CHARTER AND BY-LAWS. Copies of the Certificate of Incorporation
and By-Laws of the Company have been provided to Buyer, and each such copy is
true, correct and complete.
4.6 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement and each Transaction Document to which any of the
Seller Parties is a party by the Seller Parties nor the performance by the
Seller Parties of their respective obligations hereunder and thereunder, nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the Certificate of Incorporation or
By-Laws of the Company, (ii) except as set forth on SCHEDULE 4.6, require any
consent, waiver, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, (iii) except as set forth on
SCHEDULE 4.6, violate, breach, be in conflict with or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of the Company or the Sellers, or any of them, or
cause an indemnity payment to be made by the Company under, or result in the
creation or imposition of any lien upon any properties, assets or business of
the Company under, any note, bond, indenture, mortgage, deed of trust, lease,
franchise, permit authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which the Company or
the Sellers, or any of them, is a party or by which the Company or the Sellers
or any of their respective assets or properties is bound or encumbered, or give
any Person the right to require the Company to purchase or repurchase any notes,
bonds or instruments of any kind, or (iv) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or the
Sellers, or any of them, or any of their respective properties or assets.
4.7 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
(a) The Company has delivered to the Buyer copies of audited
financial statements of the Company as at and for the year ended December 31,
2001, together with all related schedules and notes (the "Financial
Statements"). The balance sheets (including, where
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applicable, the related notes and schedules) included in the Financial
Statements fairly present the financial position of the Company as of the date
thereof in all material respects, and the statements of income (or statements of
results of operations), stockholders' equity and cash flows (including the
related notes and schedules) included in the Financial Statements fairly present
the results of operations, stockholders' equity, and retained earnings and cash
flows, as the case may be, of the Company for the year ended December 31, 2001
in accordance with GAAP, except as stated therein or, where applicable, in the
notes to the Financial Statements.
(b) Except as disclosed on SCHEDULE 4.7, since December 31,
2001, there were no liabilities or obligations of any nature (whether accrued,
absolute, fixed, contingent, liquidated, unliquidated or otherwise and whether
due or to become due) required by GAAP to be set forth on the balance sheet of
the Company that were not reflected or reserved against on such balance sheet as
of December 31, 2001, included in the Financial Statements. Except as and to the
extent specifically reflected or reserved against in the Financial Statements or
otherwise disclosed in SCHEDULE 4.7, as of December 31, 2001 the Company does
not have any liabilities or obligations of any nature, whether absolute,
accrued, contingent, matured or unmatured or otherwise, and whether due or to
become due (including, without limitation, any liability for Taxes and interest,
penalties and other charges payable with respect to any such liability or
obligation). Since December 31, 2001, the Company has not incurred any
liabilities other than liabilities which (i) have been incurred in the ordinary
course of business consistent with past practice and (ii) have not had and would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
4.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 4.8,
since September 30, 2001, (i) the Company has conducted its business only in the
ordinary and usual course of business consistent with past practice, and (ii)
except for matters of general knowledge in the industry related to general
economic or industry conditions, there has not been any change in or development
with respect to the Company's business, operations, condition (financial or
otherwise), results of operations, prospects, assets or liabilities, except for
changes and developments which have not had and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect. Except as
set forth in SCHEDULE 4.8, since September 30, 2001, the Company has not taken
any of the actions prohibited by Section 6.1 hereof, and there has not been any
material damage, destruction or loss (whether or not covered by insurance) to
any property of the Company. Notwithstanding the exclusion set forth in Section
6.1 for distributions to pay taxes, SCHEDULE 4.8 shall list any and all
distributions made to shareholders from September 30, 2001 to the Closing Date.
4.9 BROKERS. No investment banker, broker or finder, other than
Windsor Group, LLC (the "Sellers' Investment Banker") is entitled to receive any
brokerage, finder's or other fee or commission in connection with this Agreement
or the transactions contemplated hereby based upon agreements made by or on
behalf of the Company or any of its officers, directors or employees or the
Sellers.
4.10 EMPLOYEE BENEFIT MATTERS.
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(a) Except as set forth on SCHEDULE 4.10(A), the Company does
not maintain or contribute to, or have any obligation to contribute to or have
any liability (including a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement) with respect to any plan,
program, arrangement, agreement or commitment which is an employment,
consulting, severance pay, termination pay, change in control or deferred
compensation agreement, or an executive compensation, incentive bonus or other
bonus, employee pension, profit-sharing, savings, retirement, stock option,
stock purchase, stock appreciation rights, life, health, disability or accident
insurance plan, or other employee benefit plan, program, arrangement, agreement
or commitment, including any "employee benefit plan" as defined in Section 3(3)
of ERISA (individually, a "Plan," or collectively, the "Plans"). Each such Plan
is identified on SCHEDULE 4.10(A) to the extent applicable, as one or both of
the following: an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) or an "employee welfare plan" (as defined in Section 3(l) of ERISA).
(b) The Company is not subject to any actual or contingent
liability under Title IV of ERISA, Section 302 of ERISA, Section 412 or 4971 of
the Code or any similar provision of foreign law or regulation, whether in
respect of any employee benefit plan maintained by the Company or by any other
employer or person or otherwise.
(c) No event has occurred, and no circumstance exists, in
connection with which the Company, or any Plan, directly or indirectly, could be
subject to any material liability under ERISA, the Code or any other law,
regulation or governmental order applicable to any Plan or under any agreement,
instrument, statute, rule of law or regulation pursuant to or under which the
Company has agreed to indemnify or is required to indemnify any Person against
liability incurred under, or for a violation or failure to satisfy the
requirements of ERISA, the Code or any other statute, regulation or order
applicable to any Plan.
(d) With respect to each Plan, (i) all payments due from the
Company to date have been timely made and all amounts properly accrued to date
or as of the Closing Date as liabilities of the Company which have not been paid
have been and will be properly recorded on the books of the Company; (ii) each
such Plan which is an "employee pension benefit plan" (as defined in Section
3(2) of ERISA) and intended to qualify under Section 401 of the Code has
received a favorable determination letter from the Internal Revenue Service (the
"IRS") with respect to such qualification, its related trust has been determined
to be exempt from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of such letter that has or is likely to, and the
consummation of the transactions contemplated hereby will not, adversely affect
such qualification or exemption; (iii) there are no actions, suits or claims
pending (other than routine claims for benefits) or, to the Knowledge of the
Seller Parties, threatened with respect to such Plan or against the assets of
such Plan; and (iv) the Company has complied with, and such Plan conforms in
form and operation to, all applicable laws and regulations, including ERISA and
the Code, in all material respects.
(e) No Plan is under audit or is the subject of an
investigation by the IRS, the U.S. Department of Labor, the Pension Benefit
Guaranty Corporation ("PBGC") or any other Governmental Authority.
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(f) Except as set forth on SCHEDULE 4.10(A), the consummation
of the transactions contemplated by this Agreement and each Transaction Document
(alone or together with any other event) will not (i) entitle any Person to any
benefit under any Plan, (ii) accelerate the time of payment or vesting, or
increase the amount, of any compensation or other benefit due to any Person
under any Plan, or (iii) result in the payment or series of payments by the
Company or any of its subsidiaries to any Person of an "excess parachute
payment" within the meaning of Section 280G of the Code, or any other payment
which is not deductible for federal income tax purposes under the Code, whether
or not such payment is considered to be reasonable compensation for services
rendered.
(g) Except as disclosed in the Financial Statements or in
SCHEDULE 4.10(A), the Company has no material liability with respect to an
obligation to provide benefits, including death or medical benefits (whether or
not insured) with respect to any Person beyond their retirement or other
termination of service other than (i) coverage mandated by Part 6 of Title I of
ERISA or Section 4980B of the Code or state law, (ii) retirement or death
benefits under any employee pension plan, (iii) disability benefits under any
employee welfare plan that have been fully provided for by insurance or
otherwise, (iv) deferred compensation benefits accrued as liabilities on the
books of the Company, or (v) benefits in the nature of severance pay.
(h) The Company has delivered or made available to the Buyer,
with respect to each Plan for which the following exists:
(i) a copy of the three most recent Forms 5500 with
respect to each Plan;
(ii) a copy of the Summary Plan Description, together
with each Summary of Material Modifications, required under ERISA with
respect to such Plan in the past three years, all material employee
communications relating to such Plan, and, unless the Plan is embodied
entirely in an insurance policy to which the Company is a party, a true
and complete copy of such Plan;
(iii) if the Plan is funded through a trust or any
third party funding vehicle (other than an insurance policy), a copy of
the trust or other funding agreement; and
(iv) the most recent determination letter received from
the IRS with respect to each Plan that is intended to be a "qualified
plan" under Section 401 of the Code.
(i) With respect to each Plan for which Financial Statements
are required by ERISA, there has been no material adverse change in the
financial status of such Plan since the date of the most recent such statements
provided to the Buyer.
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(j) The Company has no announced plan or legally binding
commitment to create any additional Plans or to amend or modify any existing
Plan, other than amendments required by law or those that would not materially
increase costs under any such Plan.
(k) The Company has complied in all material respects with the
provisions of Part 6 of Title I of ERISA and Sections 4980B, 9801 and 9802 of
the Code.
(l) The Company does not and has never sponsored, maintained,
contributed to, or incurred an obligation to contribute to any Defined Benefit
Plan, Multiemployer Plan or to a Multiple Employer Plan. For these purposes,
"Defined Benefit Plan" has the meaning set forth in Section 414 of the Code ,
"Multiemployer Plan" means a multiemployer plan as defined in Section 3(37) and
4001 (a) (3) of ERISA and "Multiple Employer Plan" means any plan sponsored by
more than one employer, within the meaning of Sections 4063 or 4064 of ERISA or
Section 413(c) of the Code.
(m) All employees of the Company are citizens of, or are
authorized in accordance with Federal immigration laws to be employed in the
United States.
(n) The Company has complied with and is in compliance with the
Fair Labor Standards Act 29 U.S.C. ss. 201, ET SEQ., and all relevant state wage
and hour laws and in particular has (i) properly classified employees as either
exempt or non-exempt for purposes of determining who is eligible for receiving
overtime pay and (ii) paid all non-exempt employees for any and all overtime
work they have performed for the Company.
(o) Any individual who has provided or is providing services to
the Company and who has not or will not receive an IRS W-2 form has been
classified as an independent contractor in full compliance with federal and
state wage and hour laws.
4.11 ACTIONS AND PROCEEDINGS. Except as set forth on SCHEDULE 4.11,
there is no claim, litigation, suit, action, proceeding, investigation pending
or, to the Knowledge of the Seller Parties, threatened, against or relating to
the Company or that in any manner challenges or seeks to prevent, enjoin, alter
or materially delay the transactions contemplated hereby. The Company is not
subject to any outstanding judgment, order, writ, injunction, decree or ruling
of any legal or administrative body or arbitrator. There are no audits,
investigations, inquiries or proceedings by any Governmental Authority pending
to which the Company or the Sellers are a party or of which any of their
respective property is the subject, and, to the Knowledge of the Seller Parties,
no such audits, investigations, inquiries or proceedings are threatened or
contemplated.
4.12 TAX MATTERS.
(a) Except as set forth on SCHEDULE 4.12(A) (with paragraph
references corresponding to those set forth below):
(i) the Company has timely filed (taking into account
all available extensions) all Tax Returns required to be filed by
applicable law and has paid all
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amounts due in respect of Taxes (whether or not actually shown on such
Tax Returns); all such Tax Returns are true, correct and complete in all
material respects and accurately set forth all items to the extent
required to be reflected or included in such Tax Returns by applicable
federal, state, local or foreign Tax laws, regulations or rules;
(ii) the Company has not executed any outstanding
waivers or comparable consents regarding the application of the statute
of limitations with respect to any Taxes or Tax Returns; and the period
during which any assessment against the Company may be made by the IRS
or other appropriate authority has expired without waiver or extension
of any such period for each such authority;
(iii) since January 1, 1997, no claim has been made,
and, to the Knowledge of the Seller Parties, prior to January 1, 1997,
no claim was made, by any authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction;
(iv) there are no liens with respect to any material
Taxes upon any of the assets or properties of the Company;
(v) the Company has paid in full or set up reserves in
accordance with GAAP in respect of all Taxes for the periods covered by
such Tax Returns, as well as all other Taxes, penalties, interest,
fines, deficiencies, assessments and governmental charges that have
become due or payable (including, without limitation, all Taxes that the
Company is obligated to withhold from amounts paid or payable to or
benefits conferred upon employees, creditors and third parties); as of
the date hereof, there is no proposed liability for any Tax to be
imposed upon the Company for which there is not an adequate reserve;
(vi) adequate provisions in accordance with GAAP
consistently applied to the Company have been made in the Financial
Statements for the payment of all Taxes for which the Company may be
liable for the periods covered thereby that were not yet due and payable
as of the date thereof, regardless of whether the liability for such
Taxes is disputed; and
(vii) The Company (and any predecessor of the Company)
is and was at all times a validly electing S corporation within the
meaning of Code sections 1361 and 1362.
(b) The Company is not liable for Taxes of any other Person,
whether pursuant to U.S. Treasury Regulation Section 1.1502-6 (or any comparable
provision of state or local law), and there is no contract, agreement or
intercompany account system in existence under which the Company has, or may at
any time in the future have, an obligation to contribute to the payment of any
portion of a Tax (or pay any amount calculated with reference to any portion of
a Tax) of any group of corporations of which the Company is or was a part. The
Company will not be liable for any Taxes under Section 1374 of the Code in
connection with the deemed sale of the Company's assets caused by Section
338(h)(10) Election.
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(c) Set forth on SCHEDULE 4.12(C) is a complete list of income
and other Tax Returns filed by the Company pursuant to the laws or regulations
of any federal, state, local or foreign Tax authority that have been examined or
audited by the IRS or other appropriate authority with respect to the past three
(3) fiscal years of the Company, and a list of all adjustments resulting from
each such examination or audit. Except as set forth on SCHEDULE 4.12(C), no such
examination or audit is in progress. Except as set forth on SCHEDULE 4.12(C),
all deficiencies proposed as a result of such examinations or audits have been
paid or finally settled and no issue has been raised in any such examination or
audit that, by application of similar principles, reasonably can be expected to
result in the assertion of a deficiency for any other year not so examined or
audited. Except for Taxes payable with Tax Returns not yet due and filed, there
are no grounds for any further Tax liability, beyond amounts accrued with
respect to the years that have not been examined or audited.
(d) None of the assets owned by the Company is property that is
required to be treated as owned by any other Person pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, as amended, as in effect
immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(e) The Company has maintained the books and records required
to be maintained pursuant to Section 6001 of the Code and the rules and
regulations thereunder, and comparable laws, rules and regulations of the
countries, states, counties, provinces, localities and other political divisions
wherein it is required to file returns and reports relating to Taxes.
(f) No amount will be required to be withheld under Section
1445 of the Code in connection with any of the transactions contemplated by this
Agreement.
(g) The Company has not received or applied for a Tax ruling or
has entered into a closing agreement pursuant to Section 7121 of the Code, any
predecessor provision or similar provision of state or local law which closing
agreement is currently in effect.
(h) There are no outstanding adjustments for Tax purposes
applicable to the Company under Section 481 of the Code or similar provisions
under state or local law as a result of changes in methods of accounting that
would apply to, or have an effect on the Company subsequent to the date herein.
(i) The Company will not, as a result of the transaction
contemplated by this Agreement, make or become obligated to make any "excess
parachute payment" as defined in Section 280G of the Code.
4.13 COMPLIANCE WITH LAW; LICENSES AND PERMITS.
(a) Except as set forth on SCHEDULE 4.13, the Company is not,
in any material respect, in conflict with, in default under or in violation of,
(i) any statute, law, ordinance, code, rule, regulation, order, judgment or
decree applicable to the Company or by which any property
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or asset of the Company is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which any
property or asset of the Company is bound or affected. The Company has all
material permits, licenses, authorizations, security clearances, consents,
approvals and franchises from Governmental Authorities necessary or required to
conduct its business (the "Company Permits"). The Company is in compliance with
the terms of all Company Permits.
(b) Without limiting the generality of the foregoing, the
Company does not have any continuing liability or obligation resulting from (i)
any citations, notices of violations, audits, written complaints, consent orders
(or amendments to or modifications of such orders), compliance schedules or
other similar enforcement orders received from any Governmental Authority
thereof, or (ii) any notice or inquiry, including inspection reports, received
from any Governmental Authority or agency thereof, which in any case would
indicate that the Company was not then or is not currently in compliance with
all applicable statutes, laws, ordinances, rules and regulations.
4.14 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.14(A) sets forth a true, correct and complete
list of all patents, patents pending, registered trademarks, registered
copyrights, registered service marks and registered names owned or held by the
Company (or otherwise used in the business of the Company) on the date hereof
and identifies all license agreements in effect on the date hereof pursuant to
which any of the above is licensed to or by the Company, in each case, which are
material to the Company. Except as otherwise indicated on SCHEDULE 4.14(A), (i)
the Company is as of the date hereof and will be at the Closing the sole and
exclusive owner or holder of such Intellectual Property free and clear of any
royalty or other payment obligation, lien, charge or other encumbrance, (ii)
such Intellectual Property is fully assignable, without conditions, limitations
or restrictions of any kind, and (iii) there are no agreements which restrict or
limit the use by the Company of such Intellectual Property.
(b) Except as set forth on SCHEDULE 4.14(B): (i) (A) the
Intellectual Property disclosed on SCHEDULE 4.14(A) is valid and enforceable,
(B) to the Knowledge of the Seller Parties, such Intellectual Property does not
violate any trade secret agreement and does not infringe on any patents,
trademarks, copyrights or any other intellectual property or proprietary rights
of any Person in any country, (C) all use of any Company software by any other
Person has been pursuant to the terms of a written agreement with such Person or
is otherwise lawful, (D) all necessary and desirable action to maintain and
protect such Intellectual Property has been taken by the Company and (E) all
maintenance fees, taxes, annuities and renewal fees have been paid and all other
necessary actions to maintain such Intellectual Property have been taken through
the date hereof and will continue to be paid or taken by the Company through the
Closing; (ii) to the Knowledge of the Seller Parties, the Company has not
interfered with, infringed upon or misappropriated any Intellectual Property
rights of third parties, and the Company has not received any written notice of
claim that any of its Intellectual Property has expired, is not valid or
enforceable in any country or that it infringes upon, conflicts with or
misappropriates any trade secret, patent, trademark, service xxxx, copyright or
trade name of any
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third party, and no such claims or controversies currently
exist; and (iii) the Company has not given any notice of infringement to any
third party with respect to any of such Intellectual Property or has become
aware of facts or circumstances evidencing the infringement by any third party
of any of such Intellectual Property.
4.15 REAL PROPERTY; PERSONAL PROPERTY.
(a) The Company does not own any real property in fee or
otherwise (except for the leasehold interests referred to in this Section 4.15).
(b) SCHEDULE 4.15(B) sets forth a true, correct and complete
list of all leases, subleases and other agreements under which the Company uses
or occupies or has the right to use or occupy any real property (the "Real
Property Leases" and the property governed by such Real Property Leases is
referred to herein as the "Real Property"). The Company has heretofore delivered
to the Buyer true, correct and complete copies of all Real Property Leases
(including all written modifications, amendments, supplements, waivers and side
letters thereto). Each Real Property Lease is valid, binding and in full force
and effect, all rent and other sums and charges payable by the Company as tenant
thereunder are current, and no termination event or condition or uncured default
of a material nature on the part of the Company or, to the Knowledge of the
Seller Parties, on the part of any other party thereto exists under any Real
Property Lease. All such Real Property Leases will continue to be valid, binding
and enforceable in accordance with their respective terms and in full force and
effect immediately following the consummation of the transactions contemplated
hereby. The Company has a good and valid leasehold interest in each parcel of
Real Property leased by it, free and clear of all mortgages, pledges, liens,
encumbrances and security interests, except (i) those reflected or reserved
against in the balance sheet included in the Financial Statements, (ii) Taxes
and general and special assessments not in default and payable without penalty
and interest, and (iii) other liens, mortgages, pledges, encumbrances and
security interests which do not materially interfere with the Company's use of
such Real Property or materially detract from or diminish the value thereof.
(c) To the Knowledge of the Seller Parties the buildings and
improvements on the Real Property (i) are in good operating condition and repair
and are adequate and suitable for the purposes for which they are currently
being used; and (ii) to the Knowledge of the Seller Parties, have received all
approvals of Governmental Authorities (including licenses and permits) required
in connection with the operation thereof and have been operated and maintained
in accordance with applicable laws, rules and regulations.
(d) SCHEDULE 4.15(D) sets forth a true, accurate and complete
list of each item of tangible personal property with an original cost in excess
of $3,000 used in connection with the Company's business. To the Knowledge of
Seller Parties all of the tangible personal property in excess of $3,000
primarily used by the Company in its business is either owned or leased by the
Company. Except as disclosed in SCHEDULE 4.15(D), the Company is in possession
of and has good title to, or has valid leasehold interests in, all tangible
personal property used in the business of the Company. All such tangible
personal property is owned by the Company, free and clear of all liens and other
encumbrances other than those which do not materially
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interfere with the current use of such property or materially detract from the
value thereof, or is leased under valid and subsisting leases, and in any case,
is in good working condition and is adequate and suitable for the purpose for
which it is currently being used.
4.16 INSURANCE. Set forth on SCHEDULE 4.16 is a list of all insurance
policies maintained by the Company or in which the Company has an interest
(including the providers of such insurance policies) and all claims made under
such policies (including all outstanding claims) since December 31, 1998. All
such insurance policies have been issued by an insurer that is financially sound
and reputable, are legal, valid, binding, enforceable, and in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date hereof have been paid or accrued in appropriate month-end
financial statements, and the Company is not in default thereunder. The Company
has not received any notice of cancellation or termination with respect to any
such policy which was not replaced on substantially similar terms prior to the
date of such cancellation. The Company has previously provided the Buyer with
copies of such policies. All claims thereunder have been filed in a due and
timely fashion.
4.17 MATERIAL CONTRACTS. Set forth on SCHEDULE 4.17, is a true,
correct and complete list of all Material Contracts, and the Company has made
available to the Buyer, true, correct and complete copies of all written
Material Contracts (including, but not limited to, with respect to each Material
Contract all correspondence, performance reports, at risk funding, adverse
reports or decisions, government property lists, pending or completed close-out
documentation, delays in deliverables, overrun of funding, and pending or
settled claims). Other than Material Contracts which have terminated or expired
in accordance with their terms, each of the Material Contracts identified on
SCHEDULE 4.17 is valid, binding and enforceable in accordance with its terms
(subject to the effects of bankruptcy, insolvency and similar laws affecting
creditors' rights generally and general principles of equity (whether considered
in a proceeding in equity or at law)) and is in full force and effect, and
assuming all consents required by the terms thereof or applicable law have been
obtained, such Material Contracts will continue to be valid, binding and
enforceable in accordance with their respective terms and in full force and
effect immediately following the Closing. Except as described on SCHEDULE 4.17,
the Company is not, nor has the Company received any notice that it is, nor to
the Knowledge of the Seller Parties is any other party in default in any
material respect under any Material Contract, and, to the Knowledge of the
Seller Parties, there has not occurred any event that with the lapse of time or
the giving of notice or both would constitute such a default since December 31,
1998. No party to any Material Contract has made any claims against, or sought
indemnification from, the Company as to any matter arising under or with respect
to any Material Contract, and, to the Knowledge of the Seller Parties, neither
the Sellers, the Company nor any of its directors or officers has been advised
that any such claims may be asserted or initiated.
4.18 RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE 4.18,
since December 31, 1997, neither any of the Sellers nor any employee or
Affiliate of the Company (i) has borrowed any monies from or has outstanding any
indebtedness or other similar obligations to the Company; (ii) owns any direct
or indirect interest of any kind in, or is a director, officer, employee,
partner, affiliate or associate
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of, or consultant or lender to, or borrower from, or has the right to
participate in the management, operations or profits of, any Person or entity
which is (x) a competitor, supplier, customer, distributor, lessor, tenant,
creditor or debtor of the Company, (y) engaged in a business related to the
business of the Company or (z) participating in any transaction to which the
Company is a party; or (iii) otherwise is or has been a party to any contract,
arrangement, understanding or transaction with the Company.
4.19 LIENS. Except as set forth on SCHEDULE 4.19, and other than Liens
which do not materially interfere with the Company's use of its property or
assets or materially diminish or detract from the value thereof, the Company has
not granted, created or suffered to exist with respect to any of its assets or
properties, any Lien or, provided any guarantee with respect to, or is otherwise
responsible for, any obligation of any third party.
4.20 EMPLOYEE RELATIONS.
(a) Since December 31, 1996 there has not occurred nor, to the
Knowledge of the Seller Parties, has the Company been threatened with any
strikes, slow downs, picketing, work stoppages, concerted refusals to work
overtime or other similar labor activities by employees of the Company. The
employees of the Company are not represented by any labor union or other labor
representative, and there are no collective bargaining agreements or other
arrangements in effect with respect to such employees. To the Knowledge of the
Seller Parties, there are no Persons attempting to represent or organize or
purporting to represent any employees of the Company. The Company has complied
and is complying with all laws, rules and regulations relating to the employment
of labor, including the provisions relating to wages, hours, collective
bargaining, employee health, safety and welfare.
(b) Except as set forth on SCHEDULE 4.20(B) there are no
complaints, charges or claims against the Company or, to the Knowledge of the
Seller Parties, threatened, based on, arising out of, in connection with or
otherwise relating to the employment (or termination of employment) by the
Company of any individual, including individuals classified as independent
contractors or "leased employees" (within the meaning of section 414 (n) of the
Code), or the failure to employ any individual, including any claim relating to
employment discrimination, equal pay, employee safety and health, sexual
harassment, immigration, wages and hours or workers' compensation.
4.21 EMPLOYEES; EMPLOYMENT AGREEMENTS. Set forth on SCHEDULE 4.21 is a
list of each employment, compensation or similar agreement, arrangement or
understanding (written or oral) between the Company and any employee, and the
Company has heretofore provided the Buyer with true and complete copies of all
such agreements. Except as set forth on SCHEDULE 4.21, neither the execution of
this Agreement nor the consummation of the transactions set forth herein will
result in any payment being made or coming due from the Company to any employee
pursuant to any such agreement or arrangement. SCHEDULE 4.21 also sets forth a
true and complete list of all employees of and consultants to the Company,
showing date of hire, hourly rate or salary or other basis of compensation, each
bonus, hourly rate increase and/or salary increase granted since December 31,
2001 (or committed to be granted in connection with the transactions
contemplated
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hereunder), amount of accrued vacation, sick time or other paid
time off, and job function. Each employee of the Company has all material
security clearances required for such employee to perform his or her duties and
responsibilities on behalf of the Company.
4.22 ENVIRONMENTAL MATTERS. The Company (i) except in compliance with
applicable law, has not engaged in or permitted any operation or activity at or
upon, or any use or occupancy of, any Real Property for the purposes of or in
any way involving the handling, use, treatment, disposal, dumping, storage or
disposal of any Hazardous Materials on, under, in or about any Real Property, or
transported any Hazardous Materials to, from or across any Real Property; (ii)
is, and at all times has been in compliance with any and all applicable
Environmental Laws, (iii) has received and is, and at all times has been, in
compliance with all permits, licenses or other approvals required under
applicable Environmental Laws for the conduct of its business, and (iv) has not
received notice of any actual or potential liability involving the handling,
use, disposal or release of Hazardous Materials. There are no facts or
circumstances providing a basis for any material liability against the Company
involving the handling, use, disposal or release of Hazardous Materials.
4.23 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.
(a) Attached hereto as SCHEDULE 4.23(A) is a true, correct and
complete list, as of a date not more than ten (10) business days prior to the
date hereof, of the accounts and notes receivable of the Company, which includes
an aging of all accounts and notes receivable showing amounts due in 30-day
aging categories. To the Knowledge of the Seller Parties, all Accounts
Receivable and notes receivable of the Company (i) have arisen only in the
ordinary course of business consistent with past practice, and (ii) are not
subject to defenses, set-offs or counterclaims. To the Knowledge of the Seller
Parties, all billed Accounts Receivable are generally due within thirty (30)
days after being accrued on the books of the Company and have been collected, or
are collectible, in the full aggregate recorded amounts thereof, less, in the
case of the Accounts Receivable reflected on the Closing Balance Sheet, the
allowance for doubtful accounts utilized in the preparation of the Closing
Balance Sheet.
(b) Attached hereto as SCHEDULE 4.23(B), is a true, correct and
complete list, as of a date not more than ten (10) business days prior to the
date hereof, of the accounts and notes payable and accrued expenses of the
Company specifying in each case the payee, the face amount of each payable, the
age of each payable regardless of classification on the balance sheet account
and any defenses, set-offs or counterclaims that may exist with respect thereto,
which includes an aging of all accounts and notes payable showing amounts owing
in thirty (30) day aging categories. All accounts and notes payable and accrued
expenses of the Company (collectively, the "Accounts Payable") have been
incurred or have arisen only in the ordinary course of business consistent with
past practice. Except as noted on SCHEDULE 4.23(B), there is no dispute between
the Company or any payee with respect to any Account Payable.
(c) Attached hereto as SCHEDULE 4.23(C), is a true, correct and
complete list of a date not more than ten (10) business days prior to the date
hereof, of the unbilled receivables of the Company (the "Unbilled Receivables").
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To the Knowledge of the Seller Parties, all Unbilled Receivables have arisen
only in the ordinary course of business consistent with past practices, are
collectible in the ordinary course of business and are not subject to defenses,
set-offs or counterclaims. All Unbilled Receivables, once billed are generally
due within thirty (30) days after being accrued on the books of the Company.
4.24 ACCOUNTING PRACTICES. The Company makes and keeps accurate books
and records reflecting its assets and maintains internal accounting controls
that provide reasonable assurance that (a) transactions are executed in
accordance with management's authorization and (b) transactions are recorded as
necessary to permit preparation of the Company's Financial Statements and to
maintain accountability for the assets of the Company.
4.25 BANKS; POWERS OF ATTORNEY. Attached hereto as SCHEDULE 4.25 is a
true, correct and complete list setting forth the name of each bank in which the
Company has an account or safe deposit box, the names of all persons authorized
to draw thereon or to have access thereto, and the names of any person holding a
power of attorney from the Company.
4.26 CERTAIN PAYMENTS. Neither the Company nor any Affiliate,
director, officer, agent or employee of the Company, or to the Knowledge of the
Seller Parties, any other Person associated with or acting on behalf of the
Company has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
public or private, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing or maintaining business, (ii) to
pay for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any Affiliate of the Company, or (iv) in violation of any
statute, law, ordinance, code, rule regulation, order, judgment or decree, or
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Company.
4.27 HMR TECH, LLC. To the Knowledge of the Seller Parties, with
respect to HMR Tech, LLC ("HMR"):
(a) HMR is a duly organized and validly existing limited
liability company in good standing under the laws of the Commonwealth of
Virginia with all company power and authority to own or lease all of its
properties and assets and to conduct its business as currently conducted, and is
duly qualified and in good standing as a foreign limited liability company
authorized to do business in each of the jurisdictions in which the character of
the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary. A true, correct and
complete copy of the Operating Agreement of HMR has been provided to Buyer.
(b) HMR keeps accurate books and records reflecting its assets
and maintains internal accounting controls that provide reasonable assurance
that (i) transactions are executed in accordance with management's authorization
and (ii) transactions are recorded as necessary to permit preparation of
financial statements and to maintain accountability for HMR's assets.
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HMR has timely filed (taking into account all available extensions) all Tax
Returns required to be filed by applicable law and has paid all amounts due in
respect to Taxes (whether or not actually shown on such Tax Returns); all such
Tax Returns are true, correct and complete in all material respects.
(c) All employees of HMR are citizens of, or are authorized in
accordance with Federal immigration laws to be employed in the United States.
HMR is not subject to any outstanding judgment, order, writ, injunction, decree
or ruling of any legal or administrative body or arbitrator. There are no
audits, investigations, inquiries or proceedings by any Governmental Authority
pending to which HMR is a party or which its property is the subject, and no
such audits, investigations, inquiries or proceedings are threatened or
contemplated.
(d) HMR is not, in any material respect, in conflict with, in
default under or in violation of, (i) any statute, law, ordinance, code, rule,
regulation, order, judgment or decree applicable to HMR or by which any property
or asset of HMR is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which HMR is a party or by which any property or
asset of HMR is bound or affected. HMR has and is in compliance with the terms
of all material permits, licenses, authorizations, security clearances,
consents, approvals and franchises from Governmental Authorities necessary or
required to conduct its business.
4.28 COMPLETE DISCLOSURE. The Seller Parties have delivered to the
Buyer true and complete copies of each agreement, contract, commitment or other
document (or summaries thereof) that is referred to specifically in the
Schedules or that has been requested by the Buyer. No representation or warranty
by the Company or the Sellers in this Agreement, and no exhibit, certificate, or
schedule furnished or to be furnished to the Buyer pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading or necessary to provide the Buyer with adequate and
complete information as to the Company or the businesses, assets and liabilities
of the Company. To the Knowledge of the Seller Parties, there is no fact,
development or threatened development (excluding general economic factors
affecting business in general) which the Seller Parties have not disclosed to
the Buyer in writing which has a Material Adverse Effect or, so far as the
Seller Parties can reasonably foresee and may reasonably be expected to have a
Material Adverse Effect.
4.29 RELIANCE ON ADVISORS. The Seller Parties have relied solely on
their own accountants, legal counsel, investment banker and other advisors in
negotiating and consummating the transactions contemplated by this Agreement. No
Seller Party is relying upon any representations, promises or agreements of any
of Buyer's accountants, legal counsel, investment banker or other advisors
excepts as specifically set forth in this Agreement.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers as follows:
5.1 ORGANIZATION. The Buyer is a duly organized and validly existing
corporation in good standing under the laws of The Commonwealth of Massachusetts
with all corporate power and authority to own or lease all of its properties and
assets and to conduct its business as presently conducted.
5.2 ACTIONS AND AUTHORITY; ENFORCEABILITY. The Buyer has all requisite
corporate power and authority to execute and deliver this Agreement and each
Transaction Document to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and each
Transaction Document to which the Buyer is a party by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Board of Directors of the Buyer and
no other corporate proceedings on the part of the Buyer are necessary to
authorize this Agreement and each Transaction Document to which the Buyer is a
party or to consummate such transactions. This Agreement and each Transaction
Document to which it is a party has been duly and validly executed and delivered
by the Buyer and, assuming such agreements constitute the legal, valid and
binding obligations of the Seller Parties, constitute the legal, valid and
binding agreements of the Buyer, enforceable against the Buyer in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and general principles of equity (whether considered in a proceeding in equity
or at law).
5.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement and each Transaction Document to which the Buyer is a
party by the Buyer nor the performance by the Buyer of its obligations hereunder
and thereunder, nor the consummation of the transactions contemplated hereby and
thereby will (i) conflict with or result in any breach of any provision of the
Articles or Organization or By-Laws of the Buyer, (ii) require any consent,
waiver, approval, authorization or permit of, or filing with or notification to
any Governmental Authority, (iii) violate, breach, be in conflict with or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or permit the termination of any provision
of, or result in the termination of, the acceleration of the maturity of, or the
acceleration of the performance of any obligation of the Buyer, or cause an
indemnity payment to be made by the Buyer under, or result in the creation or
imposition of any lien upon any properties, assets or business of the Buyer
under, any note, bond, indenture, mortgage, deed of trust, lease, franchise,
permit authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which the Buyer is a party or by
which the Buyer or any of its assets or properties is bound or encumbered, or
give any Person the right to require the Buyer to purchase or repurchase any
notes, bonds or instruments of any kind, or (iv) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Buyer or
any of its properties or assets, except in the case of clauses (ii) through (iv)
above, where failure to obtain such consent, approval, authorization or permit,
or failure to make such filing or notification, or where such violation, breach,
conflict or default, would not, individually or in the aggregate, cause a
material adverse effect on the Buyer's ability to perform its obligations
hereunder or thereunder or the ability of the parties hereto to consummate the
transactions contemplated hereby or thereby.
5.4 BROKERS. No investment banker, agent, broker, Person or firm
acting on behalf of Buyer or its stockholders is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated herein.
5.5 SOLVENCY; ABILITY TO PERFORM AGREEMENT. Buyer is solvent, now has,
or at the Closing Date will have, available funds necessary to pay the Purchase
Price without the need to obtain additional financing, and there is no
occurrence, event or condition with respect to it that would prevent it from
performing this Agreement in all material respects. Buyer will not become
insolvent as a result of consummating the transaction contemplated by this
Agreement.
5.6 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to its distribution within the meaning of Section
2(11) of the Securities Act of 1933, as amended, and the rules and regulations
issued pursuant thereto.
5.7 INVESTIGATION BY BUYER.
(a) Buyer acknowledges that, except for the representations and
warranties of Seller Parties contained in Section 4 of this Agreement, the
Schedules hereto or in any other Transaction Document or schedules thereto, none
of the Sellers or the Company or any of the Company's directors, officers,
employees, affiliates, controlling persons, agents, advisors or representatives,
makes or shall be deemed to have made any representation or warranty, either
express or implied, as to the accuracy or completeness of any of the information
(including, without limitation, any estimates, projections, forecasts or other
forward-looking information) provided or otherwise made available to Buyer or
any of its directors, officers, employees, affiliates, controlling persons,
agents, advisors or representatives (including, without limitation, in any
management presentations, information or offering memorandum, supplemental
information or other materials or information with respect to any of the above).
With respect to any such estimate, projection or forecast delivered by or on
behalf of the Company or any Sellers to Buyer, Buyer acknowledges that (i) there
are uncertainties inherent in attempting to make such projections and forecasts,
(ii) Buyer is aware that actual results may differ materially and (iii) Buyer
shall have no claim against Company or Sellers with respect to any such
projection or forecast, provided such projection or forecast was prepared and
furnished in good faith.
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(b) Buyer agrees, to the fullest extent permitted by law, that
neither the Company nor any Sellers shall have any liability or responsibility
whatsoever to Buyer or any of its directors, officers, employees, affiliates,
controlling persons, agents, advisors or representatives on any basis other than
fraud or willful misconduct (including, without limitation, in contract or tort,
under federal or state securities laws or otherwise) based upon any information
provided or otherwise made available, or statements made (or omissions to so
provide, make available or state) to Buyer or any of its directors, officers,
employees, affiliates, controlling persons, agents, advisors or representatives,
including, without limitation, in respect of the representations and warranties
of Seller Parties set forth in Section 4 hereof, except as and only to the
extent set forth herein, with respect to such representations and warranties and
subject to the limitation and restrictions contained herein and in the Schedules
hereto.
5.8 RELIANCE ON ADVISORS. The Buyer has relied solely on its own
accountants, legal counsel, investment banker and other advisors in negotiating
and consummating the transactions contemplated by this Agreement. Buyer is not
relying upon any representations, promises or agreements of any of the Sellers'
or the Company's accountants, legal counsel, investment banker or other advisors
excepts as specifically set forth in this Agreement.
ARTICLE 6
COVENANTS OF THE PARTIES
6.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) During the period from the date of this Agreement to the
Closing, the Sellers shall cause the Company to conduct, and the Company shall
conduct, its operations according to its ordinary and usual course of business
consistent with past practice, and the Sellers shall cause the Company to use,
and the Company shall use its reasonable best efforts to preserve intact its
business organization, to keep available the services of its current officers
and employees and to preserve the goodwill of and maintain satisfactory
relationships with those Persons and entities having business relationships with
the Company, and the Sellers and the Company shall promptly advise the Buyer in
writing of any material adverse change in the Company's business, condition
(financial or otherwise), properties, major customer or supplier relationships,
assets, liabilities, prospects or results of operations. Without limiting the
generality of the foregoing during the period specified in the preceding
sentence, without the prior written consent, which with respect to subparagraphs
(iv), (v), (xii), (xiii), (xiv) or (xviii) shall not be unreasonably withheld,
conditioned or delayed, of the Buyer, the Sellers shall cause the Company not
to, and the Company shall not:
(i) issue, sell, grant options or rights to purchase,
pledge, or authorize or propose the issuance, sale, grant of options or
rights to purchase or pledge any Company Securities, or grant or
accelerate any right to convert or exchange any Company Securities;
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(ii) acquire or redeem, directly or indirectly, or
amend the terms of any Company Securities;
(iii) split, combine or reclassify its capital stock or
declare, set aside, make or pay any dividend or distribution (whether in
cash, stock or property), on any shares of its capital stock (except for
distributions or dividends to pay Taxes or estimated Taxes of Sellers
which arise from periods prior to Closing and in an amount not to exceed
$200,000, which is to reflect the actual estimated Taxes for periods
prior to the Closing Date.
(iv) except in the ordinary course of business
consistent with past practice, (A) make or offer to make any
acquisition, by means of a merger or otherwise, of assets or securities,
or, any sale, lease, encumbrance or other disposition of assets or
securities, or (B) enter into any material contract, agreement,
commitment, arrangement, lease (including with respect to personal
property), instrument or understanding or amend or cause the termination
of any Material Contract, or grant any release or relinquishment of any
rights under any Material Contract;
(v) (A) incur or assume any long-term debt or
short-term debt except for short-term accounts payable and accrued
liabilities (as such term is used in the Financial Statements), or (B)
enter into any financing arrangements or modify the terms of any
existing indebtedness or financing arrangements;
(vi) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person;
(vii) make any loans, advances or capital contributions
to, or investments in, any other Person;
(viii) change any of the accounting principles or
practices used by it in a manner that would have a material effect;
(ix) make any tax election or settle or compromise any
material federal, state or local income tax liability;
(x) propose or adopt any amendments to its Certificate
of Incorporation or By-Laws;
(xi) grant any stock-related, performance or similar
awards or bonuses;
(xii) forgive any loans to employees, officers or
directors or any of their respective affiliates or associates;
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(xiii) except in the ordinary course of business
consistent with past practice, enter into any new or amend any existing
Material Contract;
(xiv) except in the ordinary course of business
consistent with past practice, enter into any new, or amend any
existing, employment, severance, consulting or salary continuation
agreements with any officers, directors or employees, or make any
changes in the compensation or benefits payable to officers, directors
or employees, except for regularly-scheduled increases to employees in
the ordinary course of business consistent with past practice;
(xv) enter into any collective bargaining or other
labor agreement;
(xvi) adopt, materially amend or modify, or terminate
any Plan or other employee benefit plan or arrangement;
(xvii) adopt, amend, modify or terminate any plan
regarding the compensation of employees or consultants, including but
not limited to the compensation plan for sales department employees;
(xviii) hire or terminate any management level
employees other than Xxxxxx Xxxxx;
(xix) settle or agree to settle any suit, action,
claim, proceeding or investigation (including any suit, action, claim,
proceeding or investigation relating to this Agreement or the
transactions contemplated hereby) or pay, discharge or satisfy or agree
to pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise)
other than the payment, discharge or satisfaction of liabilities (A)
reflected or reserved against in full in the Financial Statements, or
incurred in the ordinary course of business subsequent to December 31,
2001, or (B) in an aggregate amount not to exceed $5,000; or
(xx) agree to take any of the foregoing actions or
any action which would make any representation or warranty in this
Agreement untrue or incorrect as of the date when made or as of a
future date or which would result in any of the conditions set forth in
Article 7 hereof not being satisfied.
(b) The Sellers shall not (i) take any action specified in
Section 6.1 on behalf of or with respect to the Company or (ii) take any action
which would make any representation or warranty in this Agreement untrue or
incorrect as of the date when made or which would result in any of the
conditions set forth in Article 7 hereof not being satisfied.
6.2 ACCESS TO INFORMATION. From and after the date hereof, the Seller
Parties shall (i) afford the Buyer and the Buyer's commercial lenders and their
respective accountants, investment bankers, counsel and other authorized
representatives complete access (during regular business hours, upon reasonable
advance notice) to all employees, offices and other facilities and to all books,
contracts, commitments and
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records (including tax returns) of the Company and cause the Company's
independent public accountants to provide access to their work papers and such
other information as the Buyer may reasonably request, (ii) permit the Buyer to
make such inspections as the Buyer may require, and (iii) cause the officers of
the Company to furnish the Buyer with such financial and operating data and
other information with respect to the business, properties and personnel of the
Company as the Buyer may from time to time reasonably request. Nothing herein
contained shall affect the continuing applicability of the Confidentiality
Agreement. The access provided pursuant to this Section shall be subject to such
measures as may be reasonably required to minimize the disruption to the
Company's business including Sellers' having the right to be present at any
meeting or telephone call pursuant to this Section 6.2.
6.3 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions herein provided for,
each of the parties hereto agrees to use reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement. In connection with and without
limiting the foregoing, the Seller Parties, and the Buyer, shall cooperate with
one another (i) in promptly determining whether any filings are required to be
or should be made, or any consents, approvals, permits or authorizations are
required to be or should be obtained under any federal, state or local law or
regulation or whether any consents, approvals or waivers are required to be or
should be obtained from other parties to loan agreements or other contracts or
instruments material to the business of the Company in connection with the
consummation of the transactions contemplated by this Agreement and (ii) in
promptly making any such filings, furnishing information required in connection
therewith and seeking to obtain timely any such consents, permits,
authorizations, approvals or waivers. In case at any time after Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, the parties to this Agreement (or as applicable, their officers and
directors) shall take all such necessary action as may be reasonable in the
context thereof.
(b) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated hereby is
commenced, whether before or after the Closing, the parties hereto agree to
cooperate and use reasonable best efforts to defend vigorously against it.
6.4 NOTIFICATION OF CERTAIN MATTERS. The Seller Parties shall give
prompt notice to the Buyer, and the Buyer shall give prompt notice to the Seller
Parties, of the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely (i) to cause any representation or warranty of
such party contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing, or (ii) to result in any material
failure of such party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.4 shall not limit or
otherwise affect the representations and warranties or any covenant, condition
or agreement or the remedies available hereunder to any of the parties receiving
such notice. Should any of the events for
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which notice is provided pursuant to this Section 6.4 require a change to any of
the disclosure schedules delivered by the Seller Parties, the Seller Parties may
deliver an amendment to the relevant schedule specifying such change. Any such
amendment shall not affect the right of the Buyer to indemnification pursuant to
Section 9 hereof.
6.5 PUBLIC ANNOUNCEMENTS. Neither the Sellers nor the Company shall
without the express written approval of the Buyer, issue any press release or
otherwise make any public statement with respect to this Agreement or the sale
of the Company or the Shares, except as may be required by law or any listing
agreement with any securities exchange. Without limiting the foregoing, the
Buyer and the Company and the Sellers shall consult with each other with respect
to issuing any press release or otherwise making any public statements with
respect to this Agreement or the sale of the Company or the Shares. The Company
shall not make a general communication to its employees relating to the
transactions contemplated hereby, without the prior written consent of the
Buyer, which consent shall not be unreasonably withheld and the parties agree to
cooperate with each other as to the timing, manner and content of any public
announcement.
6.6 ACQUISITION PROPOSALS. After the date hereof, the Company shall
not (nor will it permit any of its Affiliates, employees or agents to), directly
or indirectly, (a) solicit, encourage, initiate or participate in any
negotiations or discussions with respect to any offer or proposal to acquire all
or any substantial part of the business and properties of the Company, or (b)
except as contemplated by this Agreement, disclose any information not
customarily disclosed to any Person concerning the business and properties of
the Company, afford to any Person access to the properties, books or records of
the Company or otherwise assist or encourage any Person in connection with any
of the activities referred to in clause (a) above.
6.7 PREPARATION OF CERTAIN FINANCIAL STATEMENTS. After the Closing,
upon the request of the Buyer and at its expense, the Sellers shall reasonably
cooperate with and assist the Buyer and the Buyer's independent public
accountants ("Buyer's Accountants") in the compilation and preparation of all
financial statements and financial statement schedules of the Company (prepared
in accordance with GAAP) and reports of Xxxxx & Company, P.C., in its capacity
as the Company's independent public accountants ("Sellers' Accountants") prior
to the Closing, as may be necessary for the Buyer to comply in a timely manner
with SEC reporting and disclosure requirements. If requested by the Buyer, the
Sellers shall deliver to the Buyer's Accountants and/or the Sellers' Accountants
all engagement letters and management representation letters, as may be
reasonably requested by the Buyer or such accountants, which shall cover such
periods from the January 1, 1998 through the Closing Date. In connection with
the foregoing, the Sellers shall use reasonable best efforts to cause the
Sellers' Accountants to cooperate with and assist the Buyer and the Buyer's
Accountants in the preparation of the financial statements contemplated by this
Section 6.7.
6.8 CLOSING PERIOD TAX RETURN. D&L LLC shall prepare the Company's
federal and state tax returns for the period ending on the Closing Date based
upon the close-the-books method and in a manner consistent with the
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prior practice of the Company at Company's expense after the Closing Date. The
Sellers shall provide the Buyer with an opportunity to review and comment upon
such income tax returns at least fifteen (15) days prior to the date that such
returns are required to be filed (which includes any extensions of time). In the
event that there is a disagreement between Buyer and Sellers regarding the
Company's federal and state tax returns, the parties agree to negotiate in good
faith to resolve their differences and to execute and file such tax returns when
such returns are required to be filed. If such differences are not resolved
prior to the due date of the returns, then such tax returns shall be executed
and filed as prepared and the parties shall amend the returns after a final
resolution has been reached either through agreement of the parties or as
otherwise provided herein.
6.9 PROFESSIONAL FEES. At least five (5) days prior to Closing, the
Sellers shall deliver to the Buyer a Certificate (the "Professional Fees
Certificate") certifying as to the commissions, fees and other charges and
expenses due to each of (i) Sellers' Investment Banker, (ii) Sellers'
Accountants, (iii) D&L, LLC and (iv) Sellers' Counsel in connection with the
transactions contemplated by this Agreement. The total amount due to such
parties as reflected on such Certificate is referred to herein as the
"Professional Fees." The Professional Fees Certificate shall include all charges
incurred to the date of such Certificate which have not been paid and a good
faith projection of all charges through and including the Closing and shall
state that the Company has no further payment obligations to the professionals
listed on such Certificate in connection with the transactions contemplated by
this Agreement. The Professional Fees Certificate shall include wire transfer or
other payment instructions for each of the professionals listed on the
Certificate.
6.10 PAID PERSONAL LEAVE. On or immediately after the Closing Date,
the Company shall, based upon accruals as of December 28, 2001, pay to each
employee of the Company the cash value of any paid personal leave based on each
employee's salary as of May 17, 2002, so that as of the Closing Date no employee
of the Company with ten (10) years or more service time will have more than two
hundred forty (240) hours of accrued personal leave and no employee of the
Company with less than ten (10) years service time will have more than two
hundred (200) hours of accrued personal leave; provided however that the parties
may agreed to except out of certain employees from such payment of paid personal
leave.
6.11 TERMINATION OF EMPLOYEES. Prior to the Closing, the Company shall
terminate the employment of all of the Company's part-time/on-call employees and
all of the employees listed on SCHEDULE 6.11 hereto. In connection with the
termination of Xxxxxx Xxxxx'x employment, the Company shall use its reasonable
best efforts to obtain from Xxxxxx Xxxxx a release of any and all claims against
the Company in a form reasonably acceptable to the Buyer (the "Xxxxx Release").
All amounts to be paid in connection with the Xxxxx Release shall be paid
one-half by Sellers or Company (prior to Closing) and one-half by Buyer. Buyer
shall pay its one-half of the payments to Sellers at Closing. Sellers may
reserve their portion of such payment on the Closing Balance Sheet.
6.12 ACCOUNTS RECEIVABLE COLLECTIONS. If the amount collected by the
Company from Accounts Receivable
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included on the Closing Balance Sheet exceed the total amount of Accounts
Receivable reflected on the Closing Balance Sheet minus 90% of the Reserved
Accounts Receivable, then the difference between such amount and the amount of
actual collections shall immediately be paid to Sellers within seven (7) days of
receipt of any such payment. Buyer shall use all reasonable best efforts to
collect all the Accounts Receivable included in the Closing Balance Sheet as
expeditiously as possible. Sellers shall be granted reasonable access to all
records and appropriate personnel of the Company related to the Company Accounts
Receivable to ensure Buyer's compliance with this Section 6.12. If the amount
collected by the Company from Accounts Receivable included on the Closing
Balance Sheet is less than the total amount of the Accounts Receivable reflected
on the Closing Balance Sheet minus 110% of the Reserved Accounts Receivable,
then the difference between such amount and the amount of actual collections
shall be paid to Buyer from the Claims Escrow pursuant to the Escrow Agreement.
Following the Closing, the Company shall engage an employee, or an outside
contractor subject to the approval of the Sellers, such approval not to be
unreasonably withheld, to perform close out activities and obtain final
acceptance on all of the Company's contracts that, as of the Closing the period
of performance was completed on or before December 31, 1999. The employee or
contractor shall be required to utilize a specified charge number for all work
relating to the specified Company close-out work. Sellers agree to permit to be
paid from the Reimbursable Items Escrow and pursuant to the Escrow Agreement the
salary plus reasonable overhead (not exceeding 30% of salary) of such employee
or fees of such contractor for completion of the close-outs but not longer than
eighteen (18) months following the Closing Date, provided that the total amount
payable by Sellers hereunder shall not exceed $75,000. On or before eighteen
(18) months following the Closing Date, Buyer and Sellers shall review together
in good faith the remaining Accounts Receivable included in the Closing Balance
Sheet that have not been collected and, with respect to each uncollected
account, shall either (i) agree that the account is not collectible; or (ii)
agree that the account is likely to be collected and should therefore be counted
toward the amounts collected for purposes of determining the adjustment pursuant
to this Section; or (iii) agree that an account should be held open and agree on
the disposition or treatment of such account. All uncollected amounts of the
Accounts Receivable included on the Closing Balance Sheet that are subsequently
collected shall be paid to the Sellers. Buyer shall provide D&L, LLC monthly a
written report containing a detailed Accounts Receivable listing showing
Accounts Receivable transactions during such period. Sellers shall have the
right to participate with the Company in the collection, to discuss the status
of and to coordinate with respect to the Accounts Receivable included on the
Closing Balance Sheet with Buyer. Sellers will not directly contact customers of
the Company regarding the collection and processing of Accounts Receivable
without the Company's or Buyer's prior written consent.
6.13 338(H)(10) ELECTION AND S CORPORATION STATUS. Buyer, Company and
the Sellers agree that (a) they shall make a joint election under Section
338(h)(10) of the Code (and any corresponding election under state, local and
foreign Tax law) in respect of the purchase and sale of Stock (a "Section
338(h)(10) Election") to cause the purchase and sale of the Shares to be treated
as a purchase and sale of the assets of the Company; (b) Sellers will include
any income, gain, loss, deduction or other Tax item resulting from the Section
338(h)(10) Election on their Tax Returns to the extent
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required by applicable Law; (c) Buyer shall pay any non-income-based Tax imposed
on the Company attributable to the making of the Section 338(h)(10) Election;
and (d) no party shall take any actions or make any filings or elections
inconsistent with such Section 338(h)(10) Election and the intent to treat the
purchase and sale of the Shares as a purchase and sale of the assets of the
Company for all Tax purposes; and (e) each party shall cooperate and take all
actions necessary and appropriate to complete the Section 338(h)(10) Election.
The Purchase Price and the liabilities of the Company (plus other relevant
items) will be allocated prior to Closing to the assets of the Company for all
purposes (including Tax and financial accounting) in a manner consistent with
Code Section 338 and the regulations promulgated thereunder, and any comparable
provisions of state, local or foreign law, as appropriate. The allocation will
be set forth on an allocation schedule to be jointly prepared and approved
promptly following completion of the Closing Balance Sheet, such approval not to
be unreasonably withheld, by Buyer, the Company and Sellers, and Buyer and the
Company will file all Tax Returns (including amended returns and claims for
refund) and information reports in a manner consistent herewith. The Company and
Sellers will not revoke the Company's election to be Taxed as an S corporation
within the meaning of Code Sections 1361 and 1362, and Company and Sellers after
the date of this Agreement prior to termination of this Agreement or Closing
will not take or allow any action that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of Code
Sections 1361 and 1362.
The Buyer shall prepare and deliver to Sellers prior to the Closing, a
validly executed IRS form 8023 (and, as applicable, analogous forms required
pursuant to state, local or foreign tax law) providing for a Section 338(h)(10)
election with respect to the purchase and sale of the Shares ("Section
338(h)(10) Election Forms") which with exception of the amounts to be inserted
in accordance with the Closing Balance Sheet shall be completed. Sellers shall
execute such forms and deliver the executed forms to Buyer at Closing. The
Section 338(h)(10) Forms shall be completed, to the extent necessary, after
Closing in accordance with the Closing Balance Sheet. Prior to filing such
forms, Buyer shall provide a copy of the completed forms to Sellers and Sellers
shall be reasonably satisfied that the completed forms are prepared in
accordance with the Closing Balance Sheet and shall provide Buyer with their
objection to the accuracy of the forms specifying in reasonable detail their
reasons for objection within seven (7) days of receiving the completed forms.
The parties shall attempt in good faith to resolve their difference regarding
the completed forms. However, if the parties are unable to resolve their
differences within fourteen (14) days, the parties shall submit their dispute to
the Independent Accounting Firm, which will review the completed forms and
deliver a written statement to the parties which shall be final, conclusive
non-appealable and binding for all purposes hereunder. The Independent
Accounting Firm will be granted reasonable access to all necessary records of
the parties necessary to make a final decision. Each party agrees to execute, if
required by the Independent Accounting Firm a reasonable engagement letter.
Buyer shall be responsible for the filing of such completed forms and, in the
event that any dispute with respect to the completion of the forms is not
resolved prior to the deadline for the filing of such forms, Buyer may file such
forms as completed by Buyer and the parties shall continue the dispute
resolution process until completion and thereafter file any necessary amendments
to such forms.
6.14 SOFTWARE COMPLIANCE. Following the Closing, the Buyer may cause
the Company to purchase sufficient software
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licenses reasonably required by Company to remedy the Company's failure to
purchase sufficient software licenses as described on SCHEDULE 4.13, ITEM 1 to
the extent that any such failures are not remedied by the Company prior to
Closing. Buyer shall make reasonable efforts to minimize such purchases and
purchase only those licenses required for the function to be performed by the
user of each such computer. The Buyer shall be reimbursed from the Reimbursable
Items Escrow for the further cost of such licenses to the extent such costs
exceed $2,500.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 CONDITIONS TO OBLIGATIONS OF THE SELLER PARTIES . The obligations
of the Seller Parties to close the transaction contemplated hereby shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) The Buyer shall have performed or complied in all material
respects with its agreements and covenants contained in this Agreement required
to be performed or complied with at or prior to the Closing Date including, but
not limited to payment of the $1,000,000 of the Section 338(h)(10) Amount due
and payable to Sellers at Closing.
(b) The representations and warranties of the Buyer contained
in this Agreement shall be true and correct in all material respects when made
and on and as of the Closing Date with the same force and effect as if made on
and as of such date, except as expressly contemplated or otherwise expressly
permitted by this Agreement.
(c) Seller Parties shall have received the deliveries referred
to in Section 3.3.
(d) The Seller Parties shall have received an opinion addressed
to them and dated as of the Closing Date of Xxxxxxx X. Xxxxx, Vice President and
General Counsel of the Buyer, in a form reasonably satisfactory to the Seller
Parties.
(e) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any court or
Governmental Authority of competent jurisdiction which prohibits, restrains,
enjoins or restricts the consummation of the transactions contemplated hereby;
provided, however, that the parties shall use reasonable best efforts to cause
any such decree, ruling, injunction or other order to be vacated or lifted.
(f) Xxx Xxxxxxx and Xx Xxxxxxxx shall be released from the
Company Line of Credit and all other Company obligations.
(g) Sellers shall be released on all welfare and benefit
programs of the Company as trustees and from all fiduciary responsibilities
associated therewith.
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7.2 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the
Buyer to close the transaction contemplated hereby shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The Seller Parties shall have performed or complied in all
material respects with their agreements and covenants contained in this
Agreement required to be performed or complied with at or prior to the Closing
Date.
(b) The representations and warranties of the Seller Parties
contained in this Agreement shall be true and correct in all material respects,
when made and on and as of the Closing Date with the same force and effect as if
made on and as of such date, except as expressly contemplated or otherwise
expressly permitted by this Agreement.
(c) The Buyer shall have received the deliveries referred to in
Section 3.2.
(d) The Buyer shall have received an opinion of Holland &
Knight LLP, counsel to the Seller Parties ("Sellers' Counsel"), dated as of the
Closing Date and addressed to the Buyer, in a form reasonably satisfactory to
the Buyer.
(e) The Buyer shall have received such consents, approvals and
assurances as the Buyer may reasonably require to ensure the effective
continuation of all schedule-based contracts including the ITSP, PES and MOBIS
GSA Schedules and the continuation of the prime contracts and subcontracts
presented under such schedules.
(f) The Buyer shall have received the Professional Fees
Certificate signed by the Sellers.
(g) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any court or
Governmental Authority of competent jurisdiction which prohibits, restrains,
enjoins or restricts the consummation of the transactions contemplated hereby;
provided, however, that the parties shall use reasonable best efforts to cause
any such decree, ruling, injunction or other order to be vacated or lifted.
(h) With the exception of the 8(a) Contracts, all consents,
approvals and waivers disclosed or required to be disclosed on SCHEDULE 4.6
hereto shall have been received. Any notifications which do not require consent,
approval or waiver of the transactions contemplated hereby listed on SCHEDULE
4.6 required to be given to any third party shall be given at Closing.
(i) Sellers shall have obtained the employee terminations
required by Section 6.11 and the Buyer shall have been provided with a copy of
the Xxxxx Release duly executed by Xxxxxx Xxxxx.
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(j) The Company shall have executed an engagement agreement
with D&L LLC which shall be reasonably satisfactory to Buyer.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated and the transaction
contemplated hereby may be abandoned at any time prior to the Closing:
(a) By mutual written consent of the Buyer and the Seller
Parties;
(b) By the Buyer, or by the Seller Parties, if the Closing
shall not have occurred on or before June 15, 2002 (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the transaction to be consummated on or
before such date);
(c) By the Buyer, or by the Seller Parties, if any court or
other Governmental Authority of competent jurisdiction shall have issued a final
order, decree or ruling or taken any other final action restraining, enjoining
or otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action is or shall have become final and nonappealable;
(d) By the Seller Parties if prior to the Closing Date (i)
there shall have been a Breach of any of the representations or warranties on
the part of the Buyer contained in this Agreement which, individually or in the
aggregate, has had or would reasonably be expected to have a material adverse
effect on the ability of the Buyer to consummate the transactions contemplated
hereby, or (ii) there shall have been a Breach of any covenant or agreement on
the part of the Buyer contained in this Agreement which, individually or in the
aggregate has had or would reasonably be expected to have a material adverse
effect on the ability of the Buyer to consummate the transactions contemplated
hereby, in either case (i) or (ii) which Breach shall not have been cured prior
to five (5) days following notice thereof to the Buyer; or
(e) By the Buyer if prior to the Closing Date (i) there shall
have been a Breach of any of the representations or warranties on the part of
the Company and the Sellers contained in this Agreement which, individually or
in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect , or (ii) there shall have been a material breach of any covenant
or agreement on the part of the Seller Parties contained in this Agreement, in
either case (i) or (ii) which Breach shall not have been cured prior to five (5)
days following notice thereof to the Seller Parties, as applicable; or (iii)
there shall have occurred any event or circumstance that constitutes a Material
Adverse Effect.
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8.2 EFFECT OF TERMINATION. If this Agreement is terminated in
accordance with Section 8.1 hereof, this Agreement shall become null and void
and of no further force and effect, except that (i) the terms and provisions of
the Confidentiality Agreement, Section 6.4, this Section 8.2, Section 8.3,
Section 10.1, Section 10.4, Section 10.6, and Section 10.7 shall remain in full
force and effect and (ii) any termination of this Agreement shall not relieve
any party hereto from any liability for any Breach of its obligations hereunder.
8.3 EXPENSES. Each of the Buyer and the Seller Parties shall bear its
own fees and expenses ("Costs") incurred in connection with this Agreement and
the transactions contemplated hereby (including, but not limited to, fees and
disbursements of attorneys and financial advisors). The Company shall bear the
Costs of the Sellers through the Closing Date (the "Pre-Closing Costs"),
provided that all such Pre-Closing Costs shall be either paid by the Company
before the Closing Date or reflected on the Financial Statements as current
liabilities at the Closing in which event the Buyer will cause the Company to
pay such Pre-Closing Costs promptly after the Closing Date.
8.4 AMENDMENT. This Agreement may not be amended except by an
instrument, specifically referring to this Agreement signed by the parties
hereto.
8.5 WAIVER. At any time prior to the Closing Date, the Buyer with
respect to the Seller Parties and the Seller Parties with respect to the Buyer
may (a) extend the time for the performance of any of the obligations or other
acts provided herein or in any document delivered pursuant hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing specifically referring to this
Agreement signed by the party or parties to be bound thereby. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE 9
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Except for the representations and warranties set forth in
Section 4.12, Section 4.13, Section 4.14, and Section 4.22 which shall survive
Closing for the period for which the applicable statute of limitations
(including extensions thereof) remains open and except for the representations
and warranties set forth in Section 4.2, Section 4.3 and Section 4.4 which shall
survive Closing indefinitely, each representation and warranty in this
Agreement, the
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Schedules and Exhibits hereto, in any Transaction Document and in certificates
delivered pursuant to this Agreement or any Transaction Document, of any of the
Seller Parties, shall survive the Closing for a period of eighteen (18) months.
(b) Notwithstanding any investigation conducted or notice or
knowledge obtained by or on behalf of the Company or the Sellers, each
representation and warranty in this Agreement, the Exhibits and Schedules
hereto, in any Transaction Document and in Certificates delivered pursuant to
this Agreement or any Transaction Document, of the Buyer shall survive the
Closing for a period of eighteen (18) months.
(c) Any claim for indemnification arising out of the Breach of
any representation or warranty contained herein, in the Exhibits or Schedules
hereto, in any Transaction Document or in the certificates delivered pursuant to
this Agreement or any Transaction Document to be fulfilled or complied with at
or before the Closing must be made prior to the termination of the applicable
time periods set forth under Section 9.1 (a) and 9.1(b). The covenants contained
in Sections 6.1, 6.2, 6.3, 6.4 and 6.5 of this Agreement shall survive the
Closing for a period of eighteen (18) months and any other covenants shall
survive the Closing Date until the expiration of the applicable statute of
limitations.
9.2 TERMS OF INDEMNIFICATION. Subject to the provisions of this
Article 9, (i) the Seller Parties, severally, as more specifically described
below, agree to indemnify the Buyer Parties against, and to protect, defend and
hold harmless the Buyer Parties from, all Damages (whether arising from claims
by third parties or otherwise incurred or suffered by the Company) arising out
of or resulting from (A) except as more specifically set forth in Section
9.2(i)(B) below, any Breach of, any of their or the Company's respective
representations, warranties, covenants and other agreements contained in this
Agreement (without giving effect to any amendment(s) to the Seller Parties'
disclosure schedules delivered pursuant to Section 6.2 hereof), the Schedules
and Exhibits hereto, in any Transaction Document and in certificates delivered
pursuant to this Agreement or any Transaction Document and (B) notwithstanding
any disclosures made on any Schedules or Exhibits attached hereto, (I) any DCAA
Audit Charges (II) Damages arising as a result out of the matter set forth on
SCHEDULE 4.13, ITEM 1 , (III) any Damages arising out of the matters set forth
on SCHEDULE 4.13, ITEM 3, (IV) Damages arising out of the matter set forth in
SCHEDULE 4.10(A), ITEM 9, and (V) any Damages arising from any suit or claim
against the Company by Xxxxxx Xxxxx in connection with his termination of
employment with the Company and (ii) the Buyer Parties, jointly and severally,
agree to indemnify the Seller Parties against, and to protect, defend and hold
harmless the Seller Parties from, all Damages arising out of or resulting (A)
from any Breach of any of the Buyer's representations, warranties, covenants or
other agreements contained in this Agreement, the Exhibits hereto, in any
Transaction Document and in certificates delivered pursuant to this Agreement or
any Transaction Document and (B) any Tax imposed on the Company attributable to
making of the Section 338(h)(10) Election (as described in Section 6.13).
Sellers shall have the ability to defend, contest or otherwise protect against
any action, investigation or claim relating to any potential fines or penalties
described in sub-parts (i)(B)(I) through (V) above. With respect to any
indemnification claim made by any Buyer Party, Xxx Xxxxxxx agrees to indemnify
any Buyer Party for up to 100% of the Indemnification Cap; Xxxxxx Xxxxxxxx
agrees to indemnify any Buyer Party for up to 20% of the Indemnification
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Cap; and Xxxxxx Xxxxxxxx agrees to indemnify any Buyer Party for up to 5% of the
Indemnification Cap, provided, however that , in no event shall the aggregate
liability of the Sellers for indemnification under this Section 9.2 exceed the
Indemnification Cap.
9.3 SET OFF. In addition to other remedies available to it under this
Agreement or otherwise at law or in equity, the Buyer has the right to withhold
and set off from any payment of (after exhausting the Claims Escrow) the
Additional Purchase Price due pursuant to Section 2.4 any amounts that it
reasonably determines to be owed to the Buyer by the Sellers pursuant to any
claim for indemnification under this Agreement, provided, however that prior to
any such setoff, Buyer shall provide notice to Sellers describing the amount of
and basis for such setoff and in the event that within seven (7) days of the
date of such notice the Sellers object to the amount or basis of such setoff,
such amount shall be placed into an interest bearing escrow account at the time
any additional Purchase Price is payable until there is either a final judgment,
award or settlement of damages. If such claim that is the basis for the setoff
results in a final judgment, award or settlement of damages less than the amount
of the setoff, then the Buyer shall pay the Sellers, on a pro-rata basis the
difference between the amount setoff for such claim and the award or settlement
of damages, plus actual interest earned in the escrow account on such amount.
9.4 PROCEDURES. The following provisions shall apply to claims for
Damages arising from claims by a third party ("Claim"). The indemnifying party
shall have the absolute right, in its sole discretion and expense, to elect to
defend, contest or otherwise protect against any such Claim with legal counsel
of its own selection. The indemnified party shall have the right, but not the
obligation, to participate, at its own expense, in the defense thereof through
counsel of its own choice and shall have the right, but not the obligation, to
assert any and all crossclaims or counterclaims it may have. The indemnified
party shall, and shall cause its Affiliates (and their respective directors,
officers, agents and employees), to at all times cooperate in all reasonable
ways with, make their relevant files and records available for inspection and
copying by, or otherwise render reasonable assistance to, the indemnifying party
(i) in its defense of any action for which indemnity is sought under this
Article 9 and (ii) its prosecution under the last sentence of this Section 9.4
of any related claim, cross-complaint, counterclaim or right of subrogation. In
the event the indemnifying party fails to timely defend, contest or otherwise
protect against any such suit, action, investigation, claim or proceeding, the
indemnified party shall have the right, but not the obligation, to defend,
contest, assert cross-claims or counterclaims or otherwise protect against the
same at the indemnifying party's expense. No claim or action subject hereto may
be settled unless the indemnified party and the indemnifying party consent
thereto, such consent not to be unreasonably withheld. The indemnifying party
shall be subrogated to the claims or rights of an indemnified party with respect
to any Damages paid by the indemnifying party under this Article 9.
9.5 LIMITATIONS ON INDEMNIFICATION; ADDITIONAL INDEMNIFICATION
PROVISIONS.
(a) Notwithstanding any other provision of this Agreement, but
subject to the last sentence of this Section 9.5(a) and Section 9.5(b) below,
(i) the maximum aggregate liability
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of the Sellers Parties, on the one hand, and the Buyer Parties, on the other
hand, for claims made pursuant to this Article 9 shall be limited to an amount
(the "Indemnification Cap") equal to Three Million Dollars ($3,000,000), (ii) no
Buyer Party shall be entitled to make any claim pursuant to this Article 9
unless and until the aggregate amount of Damages with respect to all such claims
that may be made by the Buyer Parties pursuant to this Article 9 exceeds $50,000
(the "Indemnification Threshold") after which the Seller Parties shall be liable
for the full Indemnification Threshold amount and all amounts in excess thereof
not to exceed the Indemnification Cap, and (iii) no Seller Party shall be
entitled to make any claim pursuant to this Article 9 unless and until the
aggregate amount of Damages with respect to all such claims that may be made by
the Seller Parties pursuant to this Article 9 exceeds the Indemnification
Threshold, after which the Buyer Parties shall be liable for the full
Indemnification Threshold amount and all amounts in excess thereof.
Notwithstanding anything to the contrary in this Agreement, claims relating to
matters set forth in Section 9.2(i)(A) based on (i) Breaches of the
representations and warranties contained in Sections 4.2, 4.3, 4.4, 4.9, and
4.12, and (ii) claims relating to matters set forth in Section 9.2(i)(B) (the
"Special Indemnities") shall not be subject the Indemnification Threshold.
(b) The remedies provided for in this Agreement shall be the
sole and exclusive remedies of the parties and their respective officers,
directors, employees, Affiliates, agents, representatives, successors and
assigns for any breach of or inaccuracy in any representation or warranty
contained in this Agreement or any certificate delivered at Closing, PROVIDED,
however, that nothing herein is intended to waive or otherwise limit any claims
for Damages resulting or arising from fraudulent or willful misconduct or waive
any equitable remedies to which a party may be entitled.
(c) The right to indemnification, payment of Damages or other
remedy based on any representations, warranties, covenants, and obligations in
this Agreement or in the Exhibits or Schedules hereto will not be affected by
any investigation conducted with respect to, or any notice or knowledge acquired
(or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
(d) Notwithstanding anything to the contrary herein, upon
Closing, the Company shall cease to be a Seller Party and shall cease to have
any indemnification obligations as a Seller Party hereunder and shall be treated
as a Buyer Party, and the Seller Parties shall have no rights of recourse,
whether for contribution or otherwise, against the Company for any payments such
the Seller Party make, or are obligated to make, under this Article 9 or any
other section of this Agreement.
(e) Upon making an indemnity payment pursuant to this
Agreement, the indemnifying party will, to the extent of such payment, be
subrogated to all rights of the indemnified party against any third party in
respect of the damages to which the payment related.
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Without limiting the generality of any other provision hereof, each such
indemnified party and indemnifying party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above described
subrogation rights.
(f) Notwithstanding anything herein to the contrary, no party
shall be entitled to indemnification or reimbursement under any provision of
this Agreement for any amount to the extent such party or its Affiliate has been
indemnified or reimbursed for such amount under any other provision of this
Agreement the Exhibits or Schedules attached hereto, or any document executed in
connection with this Agreement or otherwise. Furthermore, in the event any
Damages related to a claim by Buyer are covered by insurance, Buyer agrees to
use commercially reasonable efforts to seek recovery under such insurance and
Buyer shall not be entitled to recovery from the Sellers (and shall refund
amounts received up to the amount of indemnification actually received) with
respect to such damages to the extent, and only to the extent, Buyer recovers
the insurance payment specified in the policy.
(g) Each party agrees to use reasonable efforts to mitigate any
Damages which form the basis of any claim hereunder.
(h) Unless otherwise required by applicable law, all
indemnification payments shall constitute adjustments to the Purchase Price for
all tax purposes allocated to ordinary income items, and no party shall take any
position inconsistent with such characterization.
ARTICLE 10
GENERAL PROVISIONS
10.1 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy,
or by registered or certified mail (postage prepaid, return receipt requested)
or commercial overnight courier to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Buyer:
Dynamics Research Corporation
00 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attn: General Counsel
Fax: (000) 000-0000
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with a copy to:
Xxxxx Xxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to the Company or Sellers before Closing:
X. X. Xxxx Associates, Inc.
0000 Xxxxxxxxx Xxxxx Xxxxxxx
Xxxxx 000, Xxxxxxx North, Crystal City
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, President
with a copy to:
Holland & Knight LLP
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxx
If to the Sellers at or after Closing:
Xxxxxx X. Xxxxxxxx
0000 Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
with a copy to:
Holland & Knight LLP
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxx
10.2 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the
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original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
10.3 COOPERATION IN TAX MATTERS. The following provisions shall govern
the allocation of responsibility as between the Buyer and the Sellers for
certain tax matters after the Closing Date:
(a) The Sellers shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns of the Company for Tax periods which begin
before the Closing Date and end as of the Closing Date. The Buyer shall prepare
or cause to be prepared and file or cause to be filed any Tax Returns of the
Company for the tax periods which begin on or before the Closing Date and end
after the Closing Date. The Sellers shall jointly and severally pay to the Buyer
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such taxable period ending on the Closing Date to the extent such
Taxes are not reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Balance Sheet.
In the case of any Taxes that are imposed on a periodic basis
and are payable for a taxable period that includes (but does not end on) the
Closing Date, the portion of such Tax which relates to the portion of such Tax
period ending on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be the amount of
such Tax for the entire Tax period multiplied by a fraction the numerator of
which is the number of days in the Tax period ending on the Closing Date and the
denominator of which is the number of days in the entire Tax period, and (y) in
the case of any Tax based upon or related to income or receipts be deemed equal
to the amount which would be payable if the relevant Tax period ended on the
Closing Date. Any credits relating to a taxable period that begins before and
ends after the Closing Date shall be apportioned between the Buyer and the
Sellers using the same formulas as used to determine the Tax liability of the
Buyer and the Sellers with respect to such periods. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Company. Sellers shall not be responsible for any
corporate level Taxes of the Company before or after Closing for Taxes due for
periods after Closing.
(b) The Buyer and the Seller Parties shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Buyer and the Seller Parties agree (A) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any Tax
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Buyer or the Sellers, any
extensions thereof) of the respective Tax periods, and to abide by all record
retention agreements entered into with any taxing authority, and (B) to give the
other parties reasonable written notice prior to
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transferring, destroying or discarding any such books and records and, if the
other parties so request, the Buyer, the Company or the Sellers, as the case may
be, shall allow the requesting party to take possession of such books and
records. The Buyer and the Seller Parties further agree, upon request, to use
reasonable best efforts to obtain any certificate or other document from any
Governmental Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(c) All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with the consummation of the transactions provided for in this
Agreement, shall be paid by the Buyer when due, and the Sellers will, at their
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, the Buyer will, and will
cause its Affiliates to, join in the execution of any such Tax Returns and other
documentation.
10.4 ENTIRE AGREEMENT; ASSIGNMENT; FAILURE OF CERTAIN CONDITIONS. This
Agreement including the Exhibits and Schedules thereto, together with the
Confidentiality Agreement, constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
any party hereto, by operation of law or otherwise; provided, however, that the
Buyer may assign any of its respective rights and obligations to any Affiliate
of the Buyer but no such assignment shall relieve the Buyer of its obligations
hereunder. Any attempted assignment which does not comply with the provisions of
this Section 10.4 shall be null and void ab initio.
10.5 PARTIES IN INTEREST; SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure solely to the benefit of each party hereto and their
respective permitted successors and assigns, and, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
10.6 LEGAL COUNSEL . Each party to this Agreement acknowledges and
represents that it has been represented by its own legal counsel in connection
with the transactions contemplated by this Agreement, with the opportunity to
seek advice as to its legal rights from such counsel. Each party further
represents that it is being independently advised as to the tax consequences of
the transactions contemplated by this Agreement.
10.7 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of The Commonwealth of Massachusetts without regard
to the choice or conflict of law principles thereof.
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10.8 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach, termination or invalidity thereof
(each a "Dispute") that the parties are not able to resolve after good faith
efforts over a period of 15 days shall be settled by arbitration conducted in
Washington, D.C., Orlando, Florida or Boston, Massachusetts and administered by
the American Arbitration Association (the "AAA"). Such arbitration shall be
under the Commercial Arbitration Rules of the AAA ("Rules"), except as otherwise
set forth in this Section 10.8, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(a) If any party asserts that there exists a Dispute, such
party shall select one arbitrator and the other party shall select one
arbitrator. If either party fails to make a selection, the AAA shall select one
arbitrator on behalf of such party. The two arbitrators so selected will choose
within 20 days after their selection a third arbitrator (or, if they fail to
make a choice, the AAA shall choose a third arbitrator). All three arbitrators
shall be neutral arbitrators and subject to Rule 19 of the Rules.
(b) In making their determination, the arbitrators shall not
have the authority to modify any term or provision of this Agreement. The
decision of any two of the arbitrators shall be final, conclusive and binding on
the parties. The arbitrators shall award the costs and expenses of the
arbitration, including reasonable attorneys' fees, disbursements, arbitrators'
fees and fees payable to the AAA, to the prevailing party as they see fit. The
arbitrators shall deliver a written and reasoned award with respect to the
dispute to each of the parties, who promptly shall act in accordance therewith.
(c) Pre-hearing discovery shall be limited to exchange or
production of documents and other written information. The arbitrators shall
conduct the arbitration so that a final award is made or rendered as soon as
practicable, but in no event later than 120 days after the commencement of the
arbitration nor later than twenty (20) days following the completion of the
hearing, unless either period is reduced or extended by agreement of the
parties, or by the arbitrators for cause.
(d) In any arbitration hereunder, all Sellers shall be deemed,
for procedural purposes, to be a single party; the other party in the
arbitration shall be deemed, for procedural purposes, to be the Buyer. Each of
the Sellers and the Buyer, if given due notice of the proceedings, shall be
bound by the award in any arbitration hereunder, whether or not he or it chooses
to participate in the arbitration.
10.9 HEADINGS. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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10.11 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED HEREON, OR RISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY IN CONNECTION WITH SUCH
AGREEMENTS.
10.12 ATTORNEYS FEES.
(a) Buyer shall pay to Sellers, on demand, all costs of
collection and reasonable attorneys fees incurred by Sellers with respect to (i)
the collection of the Additional Purchase Price, if it is not paid when due and
(ii) disputes that arise pursuant to the Reimbursable Items Escrow, provided
that with respect to (i) Sellers substantially prevail in enforcing the terms of
Section 2.4 by collecting substantially all amounts due and with respect to (ii)
Sellers substantially prevail with respect to any claims regarding the
Reimbursable Items Escrow which are asserted pursuant to the Escrow Agreement.
(b) Sellers shall pay to Buyer, on demand, all costs of
collection and reasonable attorneys fees incurred by Buyer with respect to
collection of amounts due from Sellers if not paid when due pursuant to (i)
Section 2.3(a) hereof with respect to the costs of the Selected Accounting Firm,
(ii) Section 6.12 hereof with respect to uncollected accounts receivable, (iii)
Section 6.14 hereof with respect to the cost of close out work and (iv) Section
6.15 hereof with respect to software compliance, provided that Buyer
substantially prevails in enforcing the terms of such Sections by collecting
substantially all amounts due.
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed, as an instrument under seal, as of the date first above written.
DYNAMICS RESEARCH CORPORATION
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx, Chairman, President
and Chief Executive Officer
X. X. XXXX ASSOCIATES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxx. X. Xxxxxxx, individually
SELLERS:
/s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxx. X. Xxxxxxx, individually
/s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxx, individually
/s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxx, individually
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