EXHIBIT 2.01
EXECUTION COPY
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RECAPITALIZATION
AND
STOCK PURCHASE AND SALE AGREEMENT
among
FIREARMS TRAINING SYSTEMS INTERNATIONAL N.V.
FIREARMS TRAINING SYSTEMS, INC.
and
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
STATE BOARD OF ADMINISTRATION OF FLORIDA
CENTRE PARTNERS MANAGEMENT LLC
_________________________________________
Dated as of June 5, 1996
_________________________________________
RECAPITALIZATION OF FIREARMS TRAINING SYSTEMS, INC.
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TABLE OF CONTENTS
SECTION PAGE
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1. Purchase and Sale of Shares; Recapitalization 2
2. Closing 17
3. Conditions to Closing.......................... 19
(a) Buyers' Obligation......................... 19
(b) Seller's Obligation........................ 20
(c) Frustration of Closing Conditions.......... 21
4. Representations and Warranties of Seller....... 21
(a) Authority.................................. 21
(b) No Conflicts; Consents..................... 21
(c) The Shares................................. 23
(d) Organization and Standing; Books and
Records.................................... 23
(e) Capital Stock of the Company and the
Subsidiaries............................... 24
(f) Equity Interests........................... 25
(g) Financial Statements; Undisclosed
Liabilities................................ 25
(h) Taxes...................................... 25
(i) Assets Other than Real Property
Interests.................................. 27
(j) Title to Real Property..................... 27
(k) Intellectual Property...................... 28
(l) Contracts.................................. 30
(m) Litigation................................. 33
(n) Benefit Plans.............................. 33
(o) Absence of Changes or Events............... 34
(p) Compliance with Applicable Laws............ 35
(q) Employee and Labor Matters................. 37
(r) Licenses; Permits.......................... 37
(s) Transactions with Affiliates............... 38
(t) Government Contracting Matters............. 38
(u) Backlog.................................... 40
5. Covenants of Seller............................ 40
(a) Access..................................... 40
(b) Ordinary Conduct........................... 40
(c) Insurance.................................. 42
(d) Confidentiality............................ 43
2
(e) International Agency and Sales
Representative Contract.................. 43
6. Representations and Warranties of Buyers....... 43
(a) Authority.................................. 43
(b) No Conflicts; Consents..................... 44
(c) Securities Act............................. 44
(d) Actions and Proceedings, etc............... 45
(e) Availability of Funds...................... 45
7. Covenants of Buyers and Centre Management...... 45
8. Mutual Covenants............................... 48
(a) Consents................................... 48
(b) Cooperation................................ 49
(c) Publicity.................................. 50
(d) Best Efforts............................... 50
(e) Antitrust Notification..................... 50
(f) Access 51
(g) Registration Rights Agreement.............. 51
(h) Release of Lien on Certain Shares of
Common Stock............................. 51
9. Further Assurances............................. 52
10. Indemnification................................ 52
(a) Indemnification by Seller.................. 52
(b) Exclusive Remedy........................... 53
(c) Indemnification by Buyers.................. 53
(d) Losses Net of Insurance, etc............... 54
(e) Termination of Indemnification............. 54
(f) Procedures Relating to Indemnification..... 55
(g) Other Claims............................... 57
(h) Procedures Relating to Indemnification of
Tax Claims................................. 57
(i) Mitigation................................. 58
11. Tax Matters.................................... 58
12. Assignment..................................... 59
13. No Third-Party Beneficiaries................... 59
14. Termination.................................... 59
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15. Survival of Representations.................... 60
16. Expenses....................................... 61
17. Attorney Fees.................................. 61
18. Amendments..................................... 61
19. Notices........................................ 61
20. Interpretation; Exhibits and Schedules;
Certain Definitions......................... 62
21. Counterparts................................... 63
22. Entire Agreement............................... 63
23. Fees........................................... 64
24. Severability................................... 64
25. Governing Law.................................. 64
26. Consent to Jurisdiction and Service
of Process.................................. 64
List of Exhibits
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Exhibit A Percentage of Shares Purchased
Exhibit B Stockholders' Agreement
Exhibit C Registration Rights Agreement
Exhibit D Form of Waiver and Release
Exhibit E Escrow Agreement
Exhibit F Form of Opinion of Counsel to the Company and Form of Opinion of
Counsel to Seller
Exhibit G Commitment Letters
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Disclosure Schedules (as received from Seller to date without material changes
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prior to execution of definitive document)
Schedule 4(b) Subsidiaries
Schedule 4(d) Organization
Schedule 4(e) Capital Stock
Schedule 4(f) Equity Interests
Schedule 4(g) Financial Statements
Schedule 4(h) Taxes
Schedule 4(i) Assets Other than Real Property Interests
Schedule 4(j) Title to Real Property
Schedule 4(k) Intellectual Property
Schedule 4(l) Contracts
Schedule 4(m) Litigation
Schedule 4(n) Benefit Plans
Schedule 4(o) Absence of Changes or Events
Schedule 4(p) Compliance with Applicable Laws
Schedule 4(q) Employee and Labor Matters
Schedule 4(r) Licenses; Permits
Schedule 4(s) Transactions with Affiliates
Schedule 4(t) Government Contracting
Schedule 5(b) Ordinary Conduct
Specific Definitions
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The following terms are defined in the Sections referenced below:
Term Section
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1. Acquired Shares Section 1(a)
2. Acquisition Section 1(a)
3. Additional Auditor Section 1(c)
4. Additional Expert Section 1(c)
5. Affiliate Section 1(c)
6. Agreement Preamble
7. Applicable Laws Section 4(p)(i)
8. Appraised Value Section 1(c)
9. Appraiser Section 1(c)
10. Base Period Section 1(c)
11. Benefit Plans Section 4(n)(i)
12. Bridge Credit Agreement Section 1(c)
13. Borrowings Section 1(b)
14. Buyer Preamble
15. Buyer Indemnified Party Section 10(a)
16. Buyers Preamble
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17. Cash Election Period Section 1(c)
18. Cash Notice Section 1(c)
19. Centre Management Section 1(a)
20. CERCLA Section 4(p)(ii)
21. CFO Certificate Section 1(c)
22. Closing Section 2(a)
23. Closing Date Section 2(a)
24. Closing Place Section 2(a)
25. Code Section 2(c)(v)
26. Company Balance Sheet Section 4(g)
27. Company Financial Statements Section 4(g)
28. Common Stock Preamble
29. Company Preamble
30. Company's Appraiser Section 1(c)
31. Company's Current Premium Section 7(e)
32. Company's Auditors Section 1(c)
33. Confirming Opinion Section 1(c)
34. Contingent Payment Section 1(c)
35. Contracts Section 4(l)
36. Credit Agreement Section 1(c)
37. Disposition Section 1(c)
38. DOJ Section 8(e)
39. EBITDA Section 1(c)
40. EBITDA Test Stock Notice Section 1(c)
41. Environmental Laws Section 4(p)(ii)
42. ERISA Section 4(n)(i)
43. Escrow Agent Section 2(f)
44. Escrow Agreement Section 3(a)(iv)
45. Escrowed Amount Section 2(f)
46. Financial Statements Section 4(g)(i)
47. Financing Section 6(e)
48. Firm Commitments Section 6(e)
49. FTC Section 8(e)
50. Foreign or Domestic Governmental Section 4(p)(ii)
Entity
51. GAAP Section 1(c)
52. Government Contract Section 4(t)(i)
53. Governmental Entity Section 3(a)(ii)
54. Hazardous Substances Section 4(p)(ii)
55. HSR Act Section 3(a)(iii)
56. including Section 20(b)(i)
57. indemnified party Section 10(f)
58. Intellectual Property Section 4(k)
59. Initial Period Section 1(c)
60. Initial Shares Section 1(c)
61. Investors Section 7(b)
62. IPO Section 1(c)
63. IPO Valuation Section 1(c)
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64. knowledge of Seller Section 20(b)(ii)
65. knowledge of Buyers Section 20(b)(iii)
66. Leased Property Section 4(j)
67. Lenders Section 1(b
68. Management Agreement Section 1(a)
69. Market Value Section 1(c)
70. Material Adverse Effect Section 4(b)
71. Memorandum Section 7(b)
72. NASDAQ Section 1(c)
73. NMS Section 1(c)
74. Negative Opinion Section 1(c)
75. Owned Property Section 4(j)
76. Parties Preamble
77. Party Preamble
78. Permitted Liens Section 4(i)
79. person Section 20(b)(iv)
80. Personnel Section 4(k)
81. Pension Plans Section 4(n)(i)
82. Plans Section 10(c)
83. Pledge Agreement Section 1(c)
84. Pre-Closing Tax Period Section 4(h)(i)
85. Pre-Split Stock Preamble
86. Pro Forma EBITDA Section 1(c)
87. Prohibition Section 1(c)
88. Purchase Price Section 1(a)
89. Redeemed Shares Preamble
90. Redemption Preamble
91. Redemption Price Section 1(b)
92. Registration Rights Agreement Section 1(c)
93. Retained Shares Preamble
94. Seller Preamble
95. Seller's Appraiser Section 1(c)
96. Seller Balance Sheet Section 4(g)
97. Seller Financial Statements Section 4(g)
98. Seller Shares Preamble
99. Stock Election Period Section 1(c)
100. Stock Notice Section 1(c)
101. Subsidiary Section 4(b)
102. Target Value Section 1(c)
103. Tax or Taxes Section 4(h)(i)
104. Tax Indemnified Party Section 10(h)
105. Tax Indemnitor Section 10(h)
106. Third Appraiser Section 1(c)
107. Third Party Claim Section 10(f)
108. Trigger Event Section 1(c)
109. Trigger Event Date Section 1(c)
110. Transactions Section 1(b)
111. WARN ACT Section 7(a)(iii)(C)
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The following are terms which are defined by cross reference to an
external source:
1. employee pension benefit Section 4(n)(i)
plans
2. employee welfare benefit Section 4(n)(i)
plans
3. multiemployer plan Section 4(n)(iv)
4. release Section 4(p)(ii)
RECAPITALIZATION AND STOCK PURCHASE
AND SALE AGREEMENT (the "Agreement") dated as of
June 5, 1996 among FIREARMS TRAINING SYSTEMS
INTERNATIONAL N.V., a Netherlands Antilles
corporation ("Seller"), FIREARMS TRAINING SYSTEMS,
INC., a Delaware corporation (the "Company"), and
CENTRE CAPITAL INVESTORS II, L.P. a Delaware
limited partnership, CENTRE PARTNERS COINVESTMENT,
L.P., a Delaware limited partnership, CENTRE
PARALLEL MANAGEMENT PARTNERS, L.P., a Delaware
limited partnership, CENTRE CAPITAL OFFSHORE
INVESTORS II, L.P., a Bermuda limited partnership,
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P., a
Delaware limited partnership, and STATE BOARD OF
ADMINISTRATION OF FLORIDA, a body corporate
organized under the constitution of the State of
Florida (each a "Buyer" and collectively limited
as described below, the "Buyers"), and CENTRE
PARTNERS MANAGEMENT LLC.
WHEREAS, Seller owns all the 300 issued and outstanding shares of
Common Stock, par value $1 per share, of the Company (the "Pre-Split Stock"),
and prior to the Closing Date each share of Pre-Split Stock shall be changed
into 10,000 shares of Common Stock, par value $.001 per share (the "Common
Stock", and the resulting 3,000,000 shares of Common Stock to be held by the
Seller prior to the Closing Date being referred to herein as the "Seller
Shares");
WHEREAS, the Company desires to issue and sell to each Buyer as
described below, and each Buyer desires to purchase from the Company, newly
issued shares of Common Stock on the terms and subject to the conditions set
forth herein;
WHEREAS, the obligations of each Buyer represent the several and not
joint obligations of such Buyer to be apportioned severally in accordance with
the percentages set forth in Exhibit A hereto and all references to "Buyers"
shall be construed accordingly;
WHEREAS, in connection with such sale of Common Stock to Buyers, the
Company shall be recapitalized by
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virtue of extensions of credit to the Company and certain related transactions
as more fully set forth herein;
WHEREAS, the proceeds from such extensions of credit and such sale of
Common Stock to Buyers shall be utilized to redeem (the "Redemption") 2,821,206
shares (the "Redeemed Shares") of the 3,000,000 Seller Shares currently held by
Seller, as a result of which the Seller shall continue to hold 178,794 shares
(the "Retained Shares");
NOW, THEREFORE, in consideration of the premises, representations and
warranties and the mutual covenants and agreements contained herein and other
good, valuable and sufficient consideration, the receipt of which is hereby
acknowledged, each of Seller, Buyers and the Company (collectively, the
"Parties" and, sometimes individually, a "Party"), intending to be legally
bound, hereby agrees as follows:
1. Purchase and Sale of Shares; Recapitalization. (a) On the terms
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and subject to the conditions set forth herein, at the Closing (as defined in
Section 2 hereof), the Company shall issue, sell and deliver to each Buyer, and
each Buyer shall purchase and accept from the Company in accordance with Exhibit
A, an aggregate of 672,605 shares of Common Stock (the "Acquired Shares") (it
being understood that Centre Partners Management LLC ("Centre Management"),
pursuant to certain management agreements between Centre Management and the
Buyers (the "Management Agreement") may reallocate the Commitment Amounts set
forth on Exhibit A among the Buyers or other funds for which it acts as manager
prior to the Closing Date), free and clear of all preemptive rights, liens,
claims and encumbrances (the "Acquisition"). In consideration for the Acquired
Shares, Buyers shall pay the Company in cash an aggregate purchase price of
$36,000,000 (the "Purchase Price").
(b) On the terms and subject to the conditions set forth herein, at
the Closing, the Company shall borrow (the "Borrowings"), and Buyers shall cause
certain providers of financing (the "Lenders") to collectively lend to the
Company, $115,000,000; the Company shall effect the Redemption; and Buyers shall
pledge the Acquired Shares, and Seller shall pledge the Retained Shares, to the
Lenders. The aggregate redemption price (the "Redemption Price") to be paid for
the Redeemed Shares at the Closing shall be equal to $151,000,000. The
Redemption Price will be increased by any of the contingent payment payable
pursuant
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to Section 1(c) of this Agreement. The Acquisition, the Borrowings, the
Redemption, the Contingent Payment and the other transactions contemplated
hereby are collectively referred to herein as the "Transactions".
(c) The Redemption Price shall be increased by the amount of the
Contingent Payment (as hereinafter defined) at the times, under the
circumstances and subject to the conditions set forth below, and Seller shall
have certain other rights, all as set forth below.
(A) Definitions. As used in this Section 1(c), the following
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terms shall have the following respective meanings:
"Affiliate" of any person means any person controlling, controlled by,
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or under common control with such first person.
"Appraised Value" of any share of Common Stock on any date means the
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fully distributed trading value (based on a "public company valuation") of
the entire Common Stock equity interest in the Company taken as a whole on
such date, divided by the number of the outstanding shares of Common Stock
and options and warrants to purchase shares of Common Stock on the preceding
date (based on the treasury method in accordance with GAAP), without
premiums for control or discounts for minority interest or restrictions on
transfer, determined by an Appraiser designated by Seller and an Appraiser
designated by the Company, and if such two Appraisers cannot agree on the
Appraised Value, then the Company and Seller shall retain a third Appraiser
mutually agreeable to the Company and Seller, which third Appraiser shall,
upon the basis of an independent analysis, determine the Appraised Value by
selecting either the valuation determined by Seller's Appraiser or the
valuation determined by the Company's Appraiser. Seller and the Company
shall use reasonable efforts to designate their respective Appraisers and
the third Appraiser, and to cause such Appraisers to complete their work, as
quickly as is reasonably practicable.
"Appraiser" means an independent nationally recognized investment
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banking firm.
4
"Base Period" means the period commencing on April 1, 1996 and
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ending March 31, 1999.
"Bridge Credit Agreement" means the credit agreement to be entered
-----------------------
into between the Company and NationsBridge, LLC, the preferred stock
agreement, warrant agreement and/or other agreements or instruments to be
entered into in connection with the bridge financing contemplated hereby and
any successor agreement or instrument, including any agreement or instrument
entered into in connection with the issuance of securities as contemplated
by the commitment letter and related term sheet of NationsBank, N.A. (South)
set forth in Exhibit G hereto.
"Credit Agreement" means the Credit Agreement to be entered into among
----------------
the Company, NationsBank, N.A. (South), as Agent, and the Lenders identified
therein, as such Credit Agreement may be amended or succeeded by a successor
credit agreement; provided that for purposes of this definition, the Seller
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consents to such amendment thereto or such successor credit agreement
(unless the provisions relating to or creating any Prohibition are unchanged
by such amendment or succession).
"Contingent Payment" means $20,000,000.
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"EBITDA" means, with respect to any period, the Company's consolidated
------
earnings before interest, income taxes, depreciation and amortization
(including income recognized from investments accounted for under the equity
method of accounting), as determined in accordance with GAAP as applied by
the Company in preparing the March 31, 1996 Company Financial Statements (as
defined in Section 4(g) hereof), minus extraordinary gains and plus
extraordinary losses, in each case to the extent included in earnings;
provided, however, that there shall be excluded from EBITDA all amounts
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associated with any business acquired or investment made after the Closing
Date, except to the extent that the acquisition of such business or the
making of such investment was financed by internally generated cash and/or
debt financing the ability to effect which was created by internally
generated cash. To the extent that, after the Closing Date, the Company
acquires a business other than by means of internally generated cash and/or
debt financing the ability to
5
effect which was created by internally generated cash, the Company shall
prepare and deliver to Seller as promptly as practicable a report as to the
appropriate methodology for measuring EBITDA after giving effect to such
acquisition ("Pro Forma EBITDA") for purposes of the cash flow test
contained in Section 1(c)(C) hereof, which report shall describe the matters
covered therein in reasonable detail. The report will take into
consideration, among other things, all material aspects of the acquisition
and will exclude from Pro Forma EBITDA (a) the stand alone projections of
the acquisition, (b) restructuring expenses and reserves associated with the
assimilation of the acquisition and (c) transaction expenses. Pro Forma
EBITDA will include all synergies and combination benefits realized from the
acquisition. If Seller notifies the Company in writing that it does not
agree with such report and identifies with reasonable specificity the items
in such report that it wishes to dispute within 30 business days after the
delivery of such report, Seller and the Company shall promptly select an
independent nationally recognized investment banking firm (the "Additional
Expert") to conduct such additional review as is necessary to resolve the
dispute identified in such notice. The determination of the Additional
Expert shall be completed as promptly as practicable following such
selection, shall be confirmed in writing to, and shall be final and binding
on, the Company and Seller for purposes hereof. All expenses of any
Additional Expert shall be paid by the Company.
"GAAP" means generally accepted accounting principles.
----
"Initial Shares" means the 178,794 Retained Shares and the 672,605
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Acquired Shares, and, if issued, the 93,417 additional shares of Common
Stock issued upon conversion of the Company's Junior Preferred Stock and any
additional shares of Common Stock or rights or other securities distributed
or otherwise issued with respect to the Initial Shares or such Junior
Preferred Stock (other than rights to cash dividends with respect to such
Junior Preferred Stock), in each case whether or not owned by the Seller or
the Buyers, as the case may be, on any relevant date.
"IPO" means a public offering pursuant to an effective registration
---
statement under the Securities
6
Act of 1933 covering the offer and sale of Common Stock to the public and
underwritten by an investment banking firm of nationally recognized
standing.
"IPO Valuation" means the implied valuation of the Company based on
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the price per share to the public of Common Stock that could then be
obtained in an IPO.
"Market Value" of any share of Common Stock as of any date shall mean
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(w) if shares of Common Stock are traded on a national securities exchange,
-
the average of the reported closing prices for the ten preceding trading
dates on the exchange where such shares are primarily traded, (x) if such
-
shares are traded in the National Association of Securities Dealer Automated
Quotation System ("NASDAQ"), National Market System ("NMS") the average of
the reported closing prices as quoted for the ten preceding trading dates by
the NASDAQ NMS, (y) if such shares are traded on the over-the-counter
market, the average of the reported closing bid and asked quotations as
quoted for the ten preceding trading dates by the NASDAQ or (z) if an IPO
-
has not yet occurred, the Appraised Value of such share as of such date.
"Pledge Agreement" means the Pledge Agreement in the form attached as
----------------
an exhibit to the Credit Agreement or a successor pledge agreement.
"Prohibition" shall mean a covenant or other restriction contained in
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the Credit Agreement or the Bridge Credit Agreement or any provision of
applicable law that would prohibit the Company from making the Contingent
Payment in full in cash pursuant to the provisions hereof.
"Target Value" means an aggregate implied value for the Initial Shares
------------
(other than the 93,417 additional shares of Common Stock issued upon
conversion of the Company's Junior Preferred Stock) of at least
$190,000,000; provided, however, that from and after the conversion
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(if any) of the Company's Junior Preferred Stock into 93,417 additional
shares of Common Stock, "Target Value" means an aggregate implied value for
the Initial Shares of at least $200,000,000.
"Trigger Event" means:
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(i) the consummation of an IPO at a price to the public that
implies the Target Value for the Initial Shares;
(ii) if an IPO has occurred, the average of the reported closing prices on the
national securities exchange on which the shares of Common Stock are then
listed, or the average of the reported closing prices on the NASDAQ NMS
if the shares are then so quoted, or the average of the reported closing
bid and asked quotations on the over-the-counter market as quoted by
NASDAQ if the shares are then so quoted, of the shares of Common Stock,
for any 15 consecutive trading days implying the Target Value for the
Initial Shares; or
(iii) the consummation of (1) a noncommercial private sale of 25% or more of
the outstanding shares of Common Stock to an unaffiliated third party,
(2) a noncommercial private issuance by the Company of newly-issued
shares of Common Stock in an amount equal to 25% or more on a pro forma
basis of the outstanding shares of Common Stock, (3) a noncommercial
transfer to an unaffiliated third party of a controlling equity interest
or a controlling beneficial interest in an entity that owns 25% or more
of the outstanding shares of Common Stock, (4) a borrowing against or
other monetization of 25% or more of the outstanding shares of Common
Stock (other than pursuant to the Credit Agreement), (5) a merger, sale
of all or substantially all assets or other business combination
transaction involving the Company (other than an internal reorganization)
or the liquidation of the Company, (6) a substantial recapitalization of
the Company or (7) any other direct or indirect transfer (other than an
internal reorganization) of 25% or more of the outstanding shares of
Common Stock or any interest therein that, in any such case referred to
in clauses (1) through (7) above, implies the Target Value for the
Initial Shares.
8
"Trigger Event Date" means the date on which a Trigger Event occurs.
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(B) Valuation Test. (i) If at any time during the period commencing
---------------
on the first anniversary of the Closing Date and ending on the last day of the
Base Period a Trigger Event has not yet occurred, Seller shall have the right to
deliver to the Company an opinion of an Appraiser selected by Seller ("Seller's
Appraiser") to the effect that the IPO Valuation would result in at least the
Target Value being implied for the Initial Shares (and specifying the expected
valuation). Such opinion may be in such form, and subject to such
qualifications, as may be consistent with the customary practice of Seller's
Appraiser.
(ii) The Company shall have the right to deliver to Seller, prior to
the expiration of a 15 calendar day period beginning on the date the opinion of
Seller's Appraiser is delivered to the Company (the "Initial Period"), an
opinion of an Appraiser selected by the Company (the "Company's Appraiser") to
the effect that the IPO Valuation would not result in at least the Target Value
being implied for the Initial Shares (and specifying the expected valuation) (a
"Negative Opinion"). If the Company fails to deliver such a Negative Opinion to
Seller prior to the expiration of the Initial Period or if the Company delivers
an opinion of the Company's Appraiser to the effect that the IPO Valuation would
result in at least the Target Value being implied for the Initial Shares (a
"Confirming Opinion"), then the provisions set forth in subparagraph (iii) below
shall be applicable. If the Company delivers a Negative Opinion to Seller prior
to the expiration of the Initial Period, then the Company and Seller shall
retain, as promptly as is reasonably practicable, a third Appraiser mutually
agreeable to the Company and Seller (the "Third Appraiser"). The Third
Appraiser shall perform, as promptly as is reasonably practicable, an
independent analysis of whether the IPO Valuation would result in at least the
Target Value being implied for the Initial Shares and, upon the conclusion
thereof, shall select either the valuation determined by Seller's Appraiser or
the valuation determined by the Company's Appraiser and shall notify Seller and
the Company of its selection. If the Third Appraiser selects the valuation
determined by the Company's Appraiser, the process described in this paragraph
(B) shall terminate.
(iii) If (1) the Company fails to deliver a Negative Opinion prior to
the expiration of the Initial Period, (2)
9
the Company delivers a Confirming Opinion, or (3) the Company delivers a
Negative Opinion and the Third Appraiser selects the valuation determined by
Seller's Appraiser, then the Company shall have an option exercisable during the
seven calendar day period (the "Cash Election Period") commencing on, as
applicable, (i) the date immediately succeeding the last day of the Initial
Period, (ii) the date of delivery to Seller of the Confirming Opinion or (iii)
the date of notification by the Third Appraiser that it has selected the
valuation determined by Seller's Appraiser to elect to make the Contingent
Payment to Seller in cash by delivering notice of such election to Seller (a
"Cash Notice").
(iv) If the Company delivers a Cash Notice to Seller prior to the
expiration of the Cash Election Period, then Seller shall have the right,
exercisable at any time during a five business day period (the "Stock Election
Period") commencing on the date of delivery to Seller of the Cash Notice, to
deliver a notice to the Company that it elects to receive all or a portion of
the Contingent Payment in the form of shares of Common Stock (a "Stock Notice").
If Seller delivers a Stock Notice within the Stock Election Period, then the
Company shall issue to Seller shares of Common Stock in an amount equal to
$20,000,000, minus the amount of the Contingent Payment not requested to be paid
in shares of Common Stock by Seller, with the number of shares to be issued to
be determined based on the Appraised Value thereof, and shall make the amount of
the Contingent Payment not required to be paid in shares of Common Stock in cash
by wire transfer of immediately available funds, in each case within 45 days
after receipt by the Company of the Stock Notice. If Seller fails to deliver a
Stock Notice to the Company within the Stock Election Period, or if Seller
notifies the Company in writing within the Stock Election Period that it will
not deliver a Stock Notice, then the Company shall make the Contingent Payment
in cash by wire transfer of immediately available funds to Seller no later than
the 45th day immediately succeeding the earlier of the last day of the Stock
Election Period or the date Seller notifies the Company in writing that it will
not deliver a Stock Notice.
(v) If the Company fails to deliver a Cash Notice to Seller within
the Cash Election Period, or if the Company notifies Seller within the Cash
Election Period that it will not deliver a Cash Notice, then Seller shall have
the right, for a period of 30 days following the earlier of the last
10
day of the Cash Election Period or the date the Company notifies Seller that it
will not deliver a Cash Notice, to exercise the demand registration rights
provided for in Section 2 of the Registration Rights Agreement dated as of the
Closing Date among the Company, the Seller, Xxxx Xxxxxxxxx, Xxxxx Xxxxxx and the
Institutional Holders (as defined therein) (the "Registration Rights
Agreement").
(vi) If Seller exercises its registration rights pursuant to
subparagraph (v) and consummates an IPO pursuant to which the aggregate price to
the public is at least $30 million and that implies at least the Target Value
for the Initial Shares, then the Company shall make the Contingent Payment in
cash to Seller within 45 days after consummation of the IPO; provided, however,
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that if the Company reasonably anticipates being subject to a Prohibition on the
payment date the Company may, to the extent the Company is thereby prohibited
from paying the Contingent Payment in cash, or if Seller so requests at any
time prior to the effectiveness of the registration statement for the IPO, the
Company shall, issue to Seller in sufficient time to permit the sale thereof (if
Seller so elects) in the IPO, shares of Common Stock in an amount equal to
$20,000,000, minus the amount of the Contingent Payment the Company is not
Prohibited from paying in cash or minus the amount of the Contingent Payment not
requested to be paid in shares of Common Stock by Seller, as the case may be,
with the number of shares to be issued to be determined based on the price to
the public in the IPO.
(vii) The Company shall have the right to withdraw the offering
described above if the price to the public would imply a value for the Initial
Shares of less than $150 million. If the offering is so withdrawn, Seller shall
have one additional right to initiate the process described in this paragraph
(B) by delivering an opinion of an Appraiser pursuant to subparagraph (i) above;
provided that such opinion is not delivered earlier than 180 days after the date
--------
of such withdrawal.
(viii) If the IPO resulting from Seller's exercise of its
registration rights pursuant to subparagraph (v) above is consummated but the
Contingent Payment is not earned because the price to the public does not imply
the Target Value for the Initial Shares, the Seller shall continue to be
eligible to receive the Contingent Payment pursuant to paragraphs (C) or (D)
below.
11
(C) Cash Flow Test. (i) If the cumulative EBITDA of the Company and
---------------
its consolidated subsidiaries for any period commencing on April 1, 1996, and
ending on a date on or prior to March 31, 1999, is equal to or greater than
$129,250,000, and the Company has not previously made the Contingent Payment in
cash or stock to Seller in accordance with the provisions hereof, then the
Company shall pay to Seller the Contingent Payment in immediately available
funds within 90 days after the end of such period; provided, however, that if on
-------- -------
such payment date the Company is subject to a Prohibition, the Company may, to
the extent the Company is thereby prohibited from paying the Contingent Payment
in cash, make that portion of the Contingent Payment that it is prohibited from
paying in cash in the form of shares of Common Stock (valued for this purpose at
the Market Value thereof on the payment date); provided further, however, that
-------- ------- -------
Seller shall have the right to elect to receive all or a portion of the
Contingent Payment in the form of shares of Common Stock rather than cash
pursuant to subparagraph (ii) below.
(ii) Seller shall have the right, exercisable at any time during a 10
business day period commencing on the date of receipt by Seller of a CFO's
Certificate (as defined in subparagraph (v)) showing that the Contingent Payment
is payable, to deliver a notice to the Company that it elects to receive all or
a portion of the Contingent Payment in the form of shares of Common Stock (an
"EBITDA Test Stock Notice"). If Seller delivers an EBITDA Test Stock Notice
within such 10 business day period, then the Company shall issue shares of
Common Stock to Seller in an amount equal to $20,000,000, minus the amount of
the Contingent Payment not requested to be paid in shares of Common Stock by
Seller, with the number of shares to be issued to be determined based on the
Market Value, and shall make the amount of the Contingent Payment not requested
to be paid in shares of Common Stock in cash (subject to the provisions of
subparagraph (i)), in each case within 45 days after determination of the Market
Value. If Seller fails to deliver an EBITDA Test Stock Notice within such 10
business day period or if Seller notifies the Company within such 10 business
day period that it will not deliver an EBITDA Test Stock Notice, then the
Company shall make the Contingent Payment in cash to Seller pursuant to
subparagraph (i) above.
(iii) If the Company pays all or any portion of the Contingent Payment
in the form of shares of Common
12
Stock pursuant to subparagraph (i) above as a result of a Prohibition, then
Seller shall have the right, for a period of 30 days following the issuance of
such shares to Seller, to initiate the exercise of the demand registration
rights provided for in Section 2 of the Registration Rights Agreement.
(iv) If Seller exercises its registration rights pursuant to
subparagraph (iii), the Company shall have the right to withdraw the resulting
offering if the price to the public would imply a value for the Initial Shares
of less than $150 million. If the offering is so withdrawn, Seller shall have
one additional right to accelerate the exercisability of its registration rights
pursuant to subparagraph (iii) above; provided that such exercise is not
--------
requested earlier than 180 days after the date of such withdrawal.
(v) During the Base Period, the Company shall maintain its accounting
books and records for purpose of tracking EBITDA for purposes of this provision
in accordance with GAAP applied in a manner consistent with the Company's pre-
Closing Date practices. Without limiting the generality of the foregoing,
Seller and the Company agree that, without Seller's consent for purposes hereof,
no changes shall be made in any reserve or other account, and no special charges
shall be taken, except as a result of specific events or developments occurring
after the Closing Date, and in such event, only in a manner consistent with GAAP
and past practices. The Company shall deliver to Seller within 90 days after
the end of each fiscal year the Company's audited consolidated financial
statements, together with a written audit report certified by the Company's
independent certified public accountants (the "Company's Auditors"), which audit
report shall also set forth the cumulative EBITDA from April 1, 1996 to the end
of the fiscal year then ended and the calculations used in the deriving of the
foregoing. The Company shall deliver to Seller together with the audited
financial statements a certificate of the chief financial officer of the Company
stating that such statements have been prepared in accordance with GAAP applied
on a basis consistent with the March 31, 1996 Company Financial Statements and
setting forth the cumulative EBITDA amount from April 1, 1996 to the end of the
fiscal year then ended (the "CFO's Certificate"). In addition, the Company
shall use its reasonable best efforts to cause the Company's Auditors to deliver
to Seller the work papers used in preparation of the information set forth
13
above in sufficient detail to enable Seller to verify the information set forth
above subject to Seller's execution of customary access letters required by the
Company's Auditors.
The Company shall use its reasonable best efforts to cause the
Company's Auditors to make all of its work papers and other relevant documents
in connection with such audit and calculations available to Seller and any
independent accounting firm chosen by Seller, and shall make the persons in
charge of the auditor available for reasonable inquiry by Seller and such
accounting firm, subject to execution of customary access letters required by
the Company's Auditors. If Seller notifies the Company in writing that it does
not agree to any item set forth in such audit report, and identifies with
reasonable specificity the items in such report that it wishes to dispute,
within 30 business days after the delivery of such audit report, Seller and the
Company shall promptly select an additional nationally recognized independent
public accounting firm (the "Additional Auditor") to conduct such additional
review as is necessary to resolve the disputed items identified in such notice.
The determination of such Additional Auditor, which shall be completed as
promptly as practicable following such selection, shall be confirmed in writing
to, and shall be final and binding on, the Company and Seller for purposes
hereof.
(D) Trigger Event. (i) If at any time during the Base Period a
--------------
Trigger Event occurs, then the Company shall make the Contingent Payment in cash
to Seller within 45 days after the Trigger Event Date; provided, however, that
-------- -------
if the Company is subject to a Prohibition on the Trigger Event Date, the
Company may, to the extent the Company is thereby prohibited from paying the
Contingent Payment in cash, make that portion of the Contingent Payment that it
is prohibited from paying in cash in the form of shares of Common Stock (valued
for this purpose at the Market Value on the date of issuance).
(ii) If the Company pays all or any portion of the Contingent Payment
in the form of shares of Common Stock pursuant to subparagraph (i) above as a
result of a Prohibition, then Seller shall have the right, for a period of 30
days following the issuance of such shares to Seller, to initiate exercise of
the demand registration rights provided for in Section 2 of the Registration
Rights Agreement.
14
(iii) If Seller exercises its registration rights pursuant to
subparagraph (ii), the Company shall have the right to withdraw the resulting
offering if the price to the public would imply a value for the Initial Shares
of less than $150 million. If the offering is so withdrawn, Seller shall have
one additional right to accelerate the exercisability of its registration rights
pursuant to subparagraph (ii); provided that such exercise is not requested
--------
earlier than 180 days after the date of such withdrawal.
(E) Prohibition Condition. (i) Notwithstanding anything to the
----------------------
contrary in this Section 1(c), the Company shall not have the right to make all
or any portion of a Contingent Payment required to be made hereunder in the form
of shares of Common Stock as a result of a Prohibition unless the Company shall
have used its reasonable best efforts, in light of the then existing
circumstances, to remove the applicable Prohibition.
(ii) The Company shall use its reasonable best efforts to ensure that
any debt securities issued in connection with the contemplated refinancing of
the Company's bank indebtedness will not contain a Prohibition. If,
notwithstanding the foregoing, such securities include a Prohibition, the
Company shall use its reasonable best efforts not to utilize any available
basket or exception contained in such Prohibition for any purpose other than the
making of the Contingent Payment.
(F) Assignment. Seller may assign, distribute or transfer its rights
-----------
under this Section 1(c) in whole or in part and Seller's rights under this
Section 1(c) shall not be contingent upon Seller's continued ownership of any or
all of the Retained Shares; provided, however, that in the case of multiple
-------- -------
contemporaneous assignees, distributees or transferees, one agent shall be
designated by such assignees, distributees or transferees who shall be
authorized to act on behalf of all such persons and that the act of assignees,
distributees or transferees (or the agent on their behalf) representing a
majority of Seller's interests hereunder shall be deemed to be the act of the
"Seller" hereunder and; provided, further, however, that any assignee,
-------- ------- -------
distributee or transferee shall take its interests subject to the Pledge
Agreement and the Stockholders' Agreement. Seller's rights under this Section
1(c) constitute part of the Redemption Price.
15
(G) Shares. Any shares of Common Stock issued by the Company to
-------
Seller pursuant to this Section 1(c) shall be duly authorized, validly issued,
fully paid and nonassessable and shall be issued and delivered to Seller free
and clear of all preemptive rights, liens, claims and encumbrances (other than
the lien of the Pledge Agreement).
(H) Access; Expenses. The Company shall cooperate with Seller, any
-----------------
Appraiser appointed by Seller, any Appraiser appointed by the Company and any
Third Appraiser so as to enable the Appraisers to deliver their respective
opinions required under any provision of this Section 1(c), including by giving
Seller and the Appraisers reasonable access, during normal business hours and
upon reasonable notice, to the personnel, properties, books and records
(including management's budgets and forecasts) of the Company and each
Subsidiary, subject to reasonable and customary confidentiality arrangements.
The Company shall reimburse the reasonable out-of-pocket costs of the Seller's
Appraiser upon demand in connection with the procedures described in paragraph
(B). The Company shall pay the fees, if any, and expenses of the Company's
Appraiser and the Third Appraiser in connection with the procedures described in
paragraph (B). The Company shall pay the fees, if any, and expenses of each
Appraiser in connection with the procedures described in paragraphs (C) and (D).
The Company shall pay the fees and expenses of the Company's Auditors and the
Additional Auditor in connection with paragraph (D) hereof. In addition, the
Company will agree to indemnify the Appraisers in accordance with customary
indemnification agreements.
(I) Dispositions. During the Base Period, the Company shall not
-------------
enter into any transaction that would constitute a Disposition (as defined
below) but that would not constitute a Trigger Event unless the Company, if it
is the surviving corporation of such Disposition, the person formed by such
consolidation or into which the Company is merged or the person that acquires
all or substantially all of the properties and assets of the Company, shall
expressly assume the obligations of the Company under this Section 1(c), which
obligations shall be equitably adjusted, if necessary, to preserve the benefits
intended to be conveyed to Seller under this Section 1(c) such that, as
determined by resolution of the Company's Board of Directors prior to the
consummation of such Disposition, the consummation of the Disposition shall not
adversely affect the interests of the Seller hereunder. As used herein,
16
"Disposition" means (i) a merger, consolidation or other business combination
-----------
involving the Company as a result of which no shares of Common Stock remain
outstanding, (ii) a sale, transfer or other disposition, in one or a series of
transactions, of all or substantially all the assets of the Company, (iii) a
reclassification of Common Stock as any other capital stock of the Company or
any other person or (iv) a liquidation of the Company. Notwithstanding anything
to the contrary in this Section 1(c), the provisions contained in this Section
1(c) shall terminate upon any foreclosure of the Retained Shares pursuant to the
provisions of the Pledge Agreement.
(J) Transactions with Affiliates. During the Base Period, except as
-----------------------------
expressly contemplated herein or in any agreement executed in connection
herewith, neither the Company nor any Subsidiary shall enter into any contract
or other arrangement with, issue any security to, or make any investment in, any
Affiliate of the Company, unless:
(i) the terms of such contract, arrangement, security or investment
are (A) set forth in writing and (B) at least as favorable to the Company or
such Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with an
unrelated third person or, if such standard would not be relevant, are otherwise
fair to the Company or such Subsidiary; and
(ii) to the extent that such contract, arrangement, security or
investment is known by the Board of Directors of the Company or such Subsidiary
to involve an Affiliate of the Company, then:
(A) with respect to a transaction or series of related transactions
involving aggregate pay ments or other consideration in excess of $50,000,
such transaction or series of related transactions has been determined to
satisfy the requirements of clause (i)(B) above by a majority of those
members of the Board of Directors of the Company or such Subsidiary having
no personal stake in such transaction or series of transactions; and
(B) with respect to a transaction or series of related transactions
involving aggregate payments or other consideration in excess of
17
$1,000,000, such transaction or series of related transactions has been
determined, in the written opinion of a nationally recognized investment
banking firm to be fair, from a financial point of view, to the Company or
such Subsidiary.
Notwithstanding the foregoing, the issuance by the Company of its
Junior Preferred Stock and the payment of fees and expenses in connection
therewith in accordance with the terms set forth in the term sheet set forth in
Exhibit G hereto and the execution, delivery and/or issuance of employment
contracts and employee stock options in the ordinary course of business shall be
deemed to satisfy the requirements of this Section 1(c)(J). Notwithstanding
anything to the contrary herein, the foregoing requirements of this paragraph
(J) shall not apply to any sale of the Company, by merger or otherwise, in
connection with a foreclosure pursuant to the Pledge Agreement, so long as such
sale has been determined, by a nationally recognized investment banking firm, to
be fair, from a financial point of view, to the Company's stockholders.
2. Closing. (a) The closing of the Transactions (the "Closing")
--------
shall take place at the offices of Cravath, Swaine & Xxxxx, 825 Eighth Avenue,
New York, New York, or such other place as the Parties may mutually agree (the
"Closing Place") on the day (the "Closing Date") which is the first business day
following the satisfaction or waiver by the affected Party of each condition to
the obligations of the Parties to this Agreement.
(b) At the Closing, the following actions shall take place in the
order indicated:
(i) Buyers shall pay the Purchase Price to the Company by wire
transfer of immediately available funds and the Company shall issue the Acquired
Shares to the Buyers;
(ii) the Company shall, along with Seller and Buyers, enter into a
Stockholders' Agreement in the form attached hereto as Exhibit B and the
Registration Rights Agreement attached hereto as Exhibit C;
(iii) Seller shall obtain and deliver the resignation of all
directors of the Company then serving in office;
18
(iv) the Board of Directors of the Company shall be reconstituted in
accordance with the provisions of the Stockholders' Agreement and shall cause
the Company to consummate the Borrowings on such terms and conditions as the
Buyers shall determine in their sole discretion; and
(v) the Company shall redeem the Redeemed Shares as provided in
Section 3 below and shall pay to Seller the Redemption Price by wire transfer of
immediately available funds.
(c) At the Closing, Seller shall deliver to Buyers or Seller shall
cause the Company to deliver to Buyers, as applicable:
(i) one copy of the resolutions adopted by the Board of Directors of
Seller, authorizing the Transactions certified by appropriate authorized
officers of the Seller;
(ii) one copy of the resolutions adopted by the Board of Directors of
the Company authorizing the Transactions, certified by appropriate authorized
officers of the Company;
(iii) evidence of the action taken by the Seller as the sole holder of
Common Stock authorizing the Transactions, certified by appropriate authorized
officers of the Company;
(iv) the duly executed stock certificates representing the Acquired
Shares registered in the name of the Buyers; and
(v) certification to the effect that the Company is not a "U.S. real
property holding corporation" as defined in Section 897 of the Internal Revenue
Code of 1986, as amended (the "Code").
(d) At the Closing, Buyers shall deliver or cause to be delivered
to Seller:
(i) one copy of the resolutions adopted by the general partners, or
general manager, as the case may be, of Buyers authorizing the Transactions
certified by appropriate authorized officers of Buyers; and
19
(ii) a waiver and release, in substantially the form of Exhibit D,
from the Lenders pursuant to which the Lenders shall agree that Seller and its
officers, directors and stockholders shall have no liability to the Lenders to
the extent that the Transactions, or any portion thereof, are alleged or deemed
to constitute a fraudulent conveyance or transfer; provided, however, that the
-------- -------
Board of Directors and the Lenders shall have received an appropriate opinion in
customary form from a firm with recognized expertise in valuation to be selected
and obtained by Buyers on the basis of which the Board of Directors may conclude
that the Redemption Price does not exceed the available surplus of the Company
and to the effect that the Company is solvent after giving effect to the
Transactions.
(e) At the Closing, Seller shall deliver to the Company the
certificates representing the Redeemed Shares, duly endorsed in blank or
accompanied by stock transfer powers in proper form for transfer and duly
endorsed in blank and the certificates representing the Redeemed Shares shall
immediately be cancelled by the Company.
(f) At the Closing, Buyers shall deliver to Bankers Trust Company, a
New York corporation, as Escrow Agent (the "Escrow Agent") by wire transfer of
immediately available funds to the account specified in the Escrow Agreement (as
defined in Section 3(a)(iv)) an amount equal to $15,000,000 of the amount to be
paid to the Seller in the Redemption (the "Escrowed Amount").
3. Conditions to Closing. (a) Buyers' Obligation. The obligation
---------------------- -------------------
of Buyers to consummate the Transactions is subject to the satisfaction (or
waiver by Buyers) as of the Closing of the following conditions:
(i) The representations and warranties of Seller made in this
Agreement shall be true and correct in all material respects on and as of such
time, except for representations and warranties that are expressly made as of a
specific date (in which case such representations and warranties shall be true
and correct on and as of such specific date). Seller shall have performed or
complied in all material respects with all obligations and covenants required by
this Agreement to be performed or complied with by Seller by the time of the
Closing. Seller shall have delivered to Buyers a certificate dated the Closing
Date and
20
signed by an authorized officer of Seller confirming the foregoing.
(ii) No temporary restraining order, preliminary or permanent
injunction or other order entered, promulgated or issued by any U.S. or U.K.
federal, state or local government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality (a "Governmental Entity") preventing the consummation of the
Transactions shall be in effect.
(iii) The waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx"), shall have expired or been terminated.
(iv) An escrow agreement substantially in the form of Exhibit E (the
"Escrow Agreement") shall have been duly executed and delivered by each of the
Escrow Agent, Buyers and Seller.
(v) Seller shall cause to be delivered to Buyers opinions of counsel
to the Company and Seller to the effect set forth in Exhibit F in form
reasonably acceptable to Buyers, on which the Lenders may rely, and to deliver
to the Lenders such further customary opinions of counsel as they shall require
in connection with the Borrowings.
(vi) Buyers shall have received a letter from Xxxxxx Xxxxxxxx & Co.
dated the Closing Date and addressed to the Buyers to the effect that the
Transactions will qualify for leveraged recapitalization accounting treatment
and will not be accounted for as a purchase.
(vii) The conditions set forth in each of the commitment letters
(including each annex or exhibit thereto) attached hereto as Exhibit G shall
have been satisfied.
(b) Seller's Obligation. The obligation of Seller to consummate the
--------------------
Transactions is subject to the satisfaction (or waiver by Seller) as of the
Closing of the following conditions:
(i) The representations and warranties of Buyers made in this
Agreement shall be true and correct in all
21
material respects on and as of the time of the Closing as though made as of such
time except for representations and warranties that are expressly made as of a
specific date (in which case such representations and warranties shall be true
and correct in all material respects on and as of such specific date). Buyers
shall have performed or complied in all material respects with all obligations
and covenants required by this Agreement to be performed or complied with by
Buyers by the time of the Closing. Buyers shall have delivered to Seller a
certificate dated the Closing Date and signed by an authorized officer of Buyers
confirming the foregoing.
(ii) No temporary restraining order, preliminary or permanent
injunction or other order entered, promulgated or issued by any Governmental
Entity preventing the consummation of the Transactions shall be in effect.
(iii) The waiting period under the HSR Act shall have expired or
been terminated.
(c) Frustration of Closing Conditions. Neither Buyers nor Seller may
----------------------------------
rely on the failure of any condition set forth in Section 3(a) or 3(b),
respectively, or in Section 2, to be satisfied if such failure was caused by
such party's failure to act in good faith or to use its reasonable best efforts
to cause the Closing to occur, as required by Section 8(d).
4. Representations and Warranties of Seller. Seller hereby
-----------------------------------------
represents and warrants to Buyers as follows:
(a) Authority. Each of the Seller and the Company is a corporation
----------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of Seller and the Company has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
All corporate acts and other proceedings required to be taken by Seller or the
Company to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
properly taken. This Agreement has been duly executed and delivered by each of
Seller and the Company and constitutes a legal, valid and binding obligation of
Seller and the
22
Company, enforceable against Seller and the Company in accordance with its
terms.
(b) No Conflicts; Consent. Except as set forth on Schedule 4(b)(i),
----------------------
the execution and delivery of this Agreement by each of Seller and the Company
do not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any lien, claim, encumbrance of security interest of any kind upon any of the
properties or assets of Seller or the Company or any Subsidiary under, any
provision of (i) the Certificate of Incorporation or By-laws, or the comparable
governing instruments, of Seller, the Company or any Subsidiary, (ii) any
judgment, order or decree, or material statute, law, ordinance, rule or
regulation applicable to Seller, the Company or any Subsidiary or their
respective properties or assets, other than such as in the aggregate, would not
have a material adverse effect on the business, financial condition, material
existing agreements and relationships or results of operations of the Company
and the Subsidiaries, taken as a whole (a "Material Adverse Effect") or (iii)
any agreement or any obligation that provides for aggregate further payments to
the Company and its subsidiaries of $500,000 or more as listed in Schedule 4(l)
and the Company's lease as listed in Schedule 4(j) to which Seller, the Company
or any Subsidiary is a party or by which any of their respective assets are
bound. Except as set forth on Schedule 4(b)(i), no material consent, approval,
license, permit, order or authorization of, or registration, declaration or
filing with, any Foreign or Domestic Governmental Entity, as defined in Section
4(p), is required to be obtained or made by or with respect to Seller, the
Company or any Subsidiary in connection with either the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
other than (i) compliance with and filings under the HSR Act, if applicable, and
(ii) those that may be required solely by reason of Buyers' participation in the
transactions contemplated hereby; provided, however, that, except as provided in
the second to last sentence in this paragraph, no representation is made as to
the requirement to obtain any material consent, approval, license, permit, order
or authorization of, or registration, declaration or filing with any Foreign or
Domestic Governmental Entity by or with
23
respect to Seller, the Company or any Subsidiary in connection with the
Contracts listed on the Schedules hereto or any other contract entered into in
the ordinary course of business. Buyers acknowledge that, except as otherwise
represented hereby, certain consents and waivers with respect to the
transactions contemplated by this Agreement may be required from parties to the
Contracts listed on the Schedules hereto and that such consents and waivers have
not been obtained. To the best of Seller's knowledge, no material consent,
approval, license, permit, order or authorization of, or registration,
declaration or filing with any foreign governmental entity is required to be
obtained or made by or with respect to Seller, the Company or any Subsidiary in
connection with either the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby with respect to, in either
case, any foreign government contract to which any of them is a party that
provides for aggregate further payments to the Company and its Subsidiaries of
$500,000 or more as listed on Schedule 4(l)13. The term "Subsidiary" means each
entity listed in Schedule 4(b)(ii).
(c) The Shares. Seller has good and valid title to the Seller
-----------
Shares, free and clear of any liens, claims, encumbrances or other restrictions
of any kind. The Acquired Shares, when issued and delivered at the Closing in
accordance herewith, shall be duly authorized, fully paid and nonassessable and
shall be sold and delivered to Buyers free and clear of all preemptive rights,
liens, claims and encumbrances, except for such rights, liens, claims and
encumbrances that arise as a result of actions of the Buyers.
(d) Organization and Standing; Books and Records. Each of the
---------------------------------------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, which jurisdiction
is set forth in Schedule 4(d). Each of the Company and the Subsidiaries has
full corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to own,
lease or otherwise hold its properties and assets and to carry on its business
as presently conducted, other than such the lack of which would not have a
Material Adverse Effect. Each of the Company and the Subsidiaries is duly
qualified and in good standing to do business as a foreign corporation in each
jurisdiction in which the conduct or nature of its business or the ownership,
leasing or holding
24
of its properties makes such qualification necessary, except such jurisdictions
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
Seller has prior to the execution of this Agreement delivered to
Buyers true and complete copies of the Certificate of Incorporation and By-laws
or the comparable governing instruments, each as amended to date, of the Company
and of each Subsidiary. The stock certificate and transfer books and the minute
books of the Company and each Subsidiary (which have been made available for
inspection by Buyers prior to the date hereof) are true and complete.
(e) Capital Stock of the Company and the Subsidiaries. The
--------------------------------------------------
authorized capital stock of the Company on the Closing Date will consist of
10,000,000 shares of Common Stock, of which the 3,000,000 Seller Shares will be
duly authorized, validly issued, outstanding and fully paid and nonassessable.
Seller is the record and beneficial owner of the Seller Shares. Except for the
Seller Shares, no shares of capital stock or other equity securities of the
Company are or will be outstanding prior to and on the Closing Date. Schedule
4(e) sets forth for each Subsidiary the amount of its authorized capital stock,
the amount of its outstanding capital stock and the record and beneficial owners
of its outstanding capital stock. All the outstanding shares of capital stock
of each Subsidiary have been duly authorized and validly issued and are fully
paid and nonassessable. The Company is the record and beneficial owner of the
capital stock of each Subsidiary, free and clear of any liens, claims, or
encumbrances or other restrictions of any kind. Except as set forth in Schedule
4(e), there are no shares of capital stock or other equity securities of any
Subsidiary outstanding. Neither the Seller Shares nor any shares of capital
stock of any Subsidiary have been issued in violation of, and none of the Seller
Shares or such shares of capital stock are subject to, any purchase option,
call, right of first refusal, preemptive, subscription or similar rights under
any provision of applicable law, the Certificate of Incorporation or By-laws of
the Company or the comparable governing instruments of any Subsidiary or any
contract, agreement or instrument to which the Seller, the Company or any
Subsidiary is subject, bound or a party or otherwise. The Seller Shares are not
subject to any purchase option, call, right of first refusal, preemptive or
similar rights under any provision of applicable law, the Certificate of
25
Incorporation or By-laws of the Company or any Subsidiary, any contract,
agreement or instrument to which the Company or any Subsidiary is subject or
bound. There are no options, rights, warrants or other commitments (other than
pursuant to this Agreement and the financing contemplated hereby) pursuant to
which the Seller, the Company or any Subsidiary is or may become obligated to
issue any shares of capital stock or other securities of the Company or any
Subsidiary. Except as set forth in Schedule 4(e), there are no outstanding debt
securities having the right to vote on any matters on which stockholders of the
Company or any Subsidiary may vote.
(f) Equity Interests. Except for the Subsidiaries and as set forth
-----------------
in Schedule 4(f), the Company does not directly or indirectly own any capital
stock of or other equity interests in any corporation, partnership or other
person and neither the Company nor any of the Subsidiaries is a member of or
participant in any partnership, joint venture or similar person.
(g) Financial Statements; Undisclosed Liabilities. (i) Schedule
----------------------------------------------
4(g) sets forth the audited consolidated balance sheets of the Seller (the
"Seller Balance Sheet") and the Company (the "Company Balance Sheet"), in each
case as of March 31, 1996, and the related consolidated statements of income and
cash flows of the Seller (together with the Seller Balance Sheet, the "Seller
Financial Statements") and the Company (together with the Company Balance sheet,
the "Company Financial Statements", the Seller Financial Statements and the
Company Financial Statements are referred to collectively as the "Financial
Statements") for the year ended March 31, 1996. The Financial Statements have
been prepared in conformity with generally accepted accounting principles
consistently applied and on that basis fairly present the consolidated financial
condition, results of operations and cash flows of the Seller and the Company,
respectively, as of the respective dates thereof and for the respective periods
indicated.
(ii) The Company and the Subsidiaries do not have any liability,
contingent or otherwise, in excess of $500,000 and do not have any material
liabilities, contingent or otherwise, or material obligations required by United
States generally accepted accounting principles to be set forth on a
consolidated balance sheet of the Company, except (1) as disclosed, reflected or
reserved against in
26
the Seller Balance Sheet, (2) for items set forth in Schedule 4(g), and (3) for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the Seller Balance Sheet and not
in violation of this Agreement.
(h) Taxes. (i) For purposes of this Agreement, (A) "Tax" or "Taxes"
------
shall mean all Federal, state, local and foreign taxes and assessments,
including all interest, penalties and additions imposed with respect to such
amounts and (B) "Pre-Closing Tax Period" shall mean all taxable periods ending
on or before the Closing Date and the portion ending on the Closing Date of any
taxable period that includes (but does not end on) such day.
(ii) Except as set forth in Schedule 4(h), (A) the Company and each of
the Subsidiaries has filed or caused to be filed in a timely manner (within any
applicable extension periods) all material Tax returns, reports and forms
required to be filed under any, applicable federal, state, local or foreign tax
laws and all such tax returns are complete and accurate in all material respects
and disclose all Taxes required to be paid in respect of the Company and all
Subsidiaries, (B) all Taxes shown to be due on such returns, reports and forms
have been timely paid in full or will be timely paid in full by the due date
thereof, (C) no material tax liens have been filed, (D) there is no action,
suit, investigation, audit, claim or assessment pending or proposed or
threatened with respect to Taxes of the Company or the Subsidiaries, (E) there
are no current arrangements that will obligate the Buyers, the Company or any
Subsidiary to make a payment to an individual that would be a "parachute
payment" to a "disqualified individual" as those terms are defined in Section
280G of the Internal Revenue Code, without regards to whether such payment is
reasonable compensation for personal services performed or to be performed in
the future, (F) all monies required to be withheld by the Company or the
Subsidiaries from employees for income Taxes and social security Taxes and other
payroll Taxes (including amounts of similar character as required under the laws
of the United Kingdom) have been collected or withheld, and either paid to the
respective taxing authorities, set aside in accounts for such purpose, or
accrued, reserved against and entered upon the books of the Company and the
Subsidiaries, as applicable, and (G) none of the Company or its Subsidiaries
have made a dividend distribution to the Seller.
27
No extension by the Company of the statute of limitation with respect
to the Federal income tax returns of the Company for any taxable year through
the year ended March 31, 1992 is currently in effect and the Federal income tax
return of the Company is being examined by the Internal Revenue Service for the
taxable year ended March 31, 1993. Except as disclosed in the preceding
sentence, no examination of the tax returns of the Company or any Subsidiary are
currently being conducted by any other relevant taxing authority. All
deficiencies resulting from examinations by the Internal Revenue Service or any
other relevant taxing authority have either been paid or adequately provided
for.
(iii) Except as set forth in Schedule 4(h), there are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any material tax returns required to be filed with respect to the Company or any
of the Subsidiaries and neither the Company nor any of the Subsidiaries, has
requested any extension of time within which to file any material tax return,
which return has not yet been filed.
(i) Assets Other than Real Property Interests. The Company or a
------------------------------------------
Subsidiary has good and valid title to all material assets (other than real
property and Seller's Shares) reflected on the Seller Balance Sheet or
thereafter acquired, except those sold or otherwise disposed of since the date
of the Seller Balance Sheet in the ordinary course of business consistent with
past practice and not in violation of this Agreement, in each case free and
clear of all mortgages, liens and encumbrances of any kind except (i) such as
are set forth in Schedule 4(i), (ii) mechanics' and other like liens arising or
incurred in the ordinary course of business, liens arising under original
purchase price conditional sales contracts and equipment leases for office
equipment providing for payments in each instance of less than $25,000 with
third parties entered into in the ordinary course of business and liens for
Taxes that are not due and payable or that may thereafter be paid without
penalty, (iii) mortgages, liens, security interests and encumbrances that secure
the Company working capital facility which is undrawn (except for letters of
credit in the aggregate face amount of $725,338) as of the date hereof, (iv)
other imperfections of title or encumbrances, if any, that do not materially
impair the continued use and operation or value of the assets to which they
relate in the business of the Company and the Subsidiaries, taken as a
28
whole, as presently conducted (the mortgages, liens, encumbrances and
imperfections of title described in clauses (ii), (iii) and (iv) above are
hereinafter referred to collectively as "Permitted Liens").
(j) Title to Real Property. Schedule 4(j) sets forth a brief
-----------------------
description of real property owned in fee by the Company and the Subsidiaries
(individually, an "Owned Property") and sets forth a list of real property
leased by the Company or a Subsidiary (individually, a "Leased Property"). The
Company or a Subsidiary has (i) good and insurable fee title to such Owned
Property and (ii) good and valid title to leasehold estates in such Leased
Property, in each case free and clear of all mortgages or liens, except (A) such
as are set forth in Schedule 4(j), (B) leases, subleases and similar agreements
set forth in Schedule 4(l) (or not required to be so listed), (C) Permitted
Liens, (D) easements, covenants, rights-of-way and other similar restrictions of
record, (E) any conditions that may be shown by a current, accurate survey or
physical inspection made prior to Closing and (F) (I) zoning, building and other
similar restrictions, (II) mortgages, liens, security interests, encumbrances,
easements, covenants, rights-of-way and other similar restrictions that have
been placed by any developer, landlord or other third party on property over
which the Company or any Subsidiary has easement rights or on any leased
property and subordination or similar agreements relating thereto, and (III)
unrecorded easements, covenants, rights-of-way and other similar restrictions,
none of which items set forth in clauses (I), (II) and (III) materially impair
the continued use and operation or value of the property to which they relate in
the business of the Company and the Subsidiaries, taken as a whole, as presently
conducted.
(k) Intellectual Property. Schedule 4(k) sets forth a brief
----------------------
description of all the material software that has been approved for external
distribution in accordance with the quality assurance procedures of the Company
and a true and complete list of all patents, trademarks, trade names, service
marks and copyrights and registrations and applications therefor (collectively,
including the software, "Intellectual Property"), owned, used, filed by or
licensed to the Company or any of the Subsidiaries. With respect to registered
or applied for trademarks, copyrights and patents, Schedule 4(k) sets forth a
list of all jurisdictions in which such trademarks, copyrights and patents are
registered or applied for and application serial
29
numbers. Except as set forth in Schedule 4(k) and except for agreements
relating to shrink-wrapped computer software licensed to the Company in the
ordinary course of business, the Company or one of the Subsidiaries owns, and
the Company and the Subsidiaries have the perpetual, royalty-free right, free
and clear of any encumbrances, liens, security interests or pledges to use,
execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other person, all
Intellectual Property listed in Schedule 4(k) and the consummation of the
transactions contemplated hereby will not conflict with, alter or impair any
such rights. Except for non-exclusive rights as customarily provided to its
customers, in the ordinary course of business and except for the U.S. Government
Department of Defense's "limited rights" in technical data and "restricted
rights" in computer software, neither the Company nor any of the Subsidiaries
has granted any options, licenses or agreements of any kind relating to
Intellectual Property listed in Schedule 4(k). No claims are pending, and to
the knowledge of Seller, none have been asserted, as of the date of this
Agreement against the Company or any Subsidiary by any person with respect to
the ownership, validity, enforceability, effectiveness or use of any
Intellectual Property. Except as described in Schedule 4(k)(7), to Seller's
knowledge no claims of infringement of any copyright, trademark, service xxxx,
trade name, patent, patent right, trade secret or other property right of any
other Person are pending, and none have been asserted, as of the date of this
Agreement as against the Intellectual Property. Except as disclosed on Schedule
--------
4(k), (i) neither the Company nor any of the Subsidiaries are in breach of any
----
material provision of any, license, sublicense, or other agreement which relates
to any of the Intellectual Property, and neither the Company nor any of the
Subsidiaries have taken any action which would impair or otherwise adversely
affect its rights in any of the Intellectual Property. The Intellectual
Property, as set forth in Schedule 4(k), is valid and enforceable, except that,
with respect to the applications to register any unregistered Intellectual
Property as described in Schedule 4(k) (but not with respect to the underlying
Intellectual Property rights that are the subject of such applications), Seller
only represents and warrants that such applications are pending and in good
standing all without challenge of any kind. The Intellectual Property listed in
Schedule 4(k) has been maintained in confidence in accordance with protection
procedures customarily used to protect rights of like
30
importance. To the best of the Company's knowledge and belief, all former and
current members of management and key personnel of the Company or any of the
Subsidiaries, including all former and current employees, agents, consultants
and independent contractors who have contributed to or participated in the
conception and development of software or other Intellectual Property for the
XXXX XX, FX, III, L.E. and IV listed in Schedule 4(k) (collectively,
"Personnel"), have executed and delivered to the Company or such Subsidiary a
proprietary information agreement restricting such person's right to disclose
proprietary information of the Company, the Subsidiaries and their respective
clients. No such representation is made with respect to XXXX X. All former and
current Personnel, as referenced above, either (i) have been party to a "work-
for-hire" arrangement or agreement with the Company, in accordance with
applicable Federal and state law, that has accorded the Company or a Subsidiary
full, effective, exclusive and original ownership of all tangible and intangible
property thereby arising or (ii) have executed appropriate instruments of
assignment in favor of the Company or a Subsidiary as assignee that have
conveyed to the Company or a Subsidiary full, effective and exclusive ownership
of all tangible and intangible property thereby arising. No former or
current Personnel have any claim against the Company or any of the Subsidiaries
in connection with such person's involvement in the conception and development
of any Intellectual Property and no such claim has been asserted or is
threatened. None of the current officers and employees of the Company or any of
the Subsidiaries have any patents issued or applications pending for any device,
process, design or invention of any kind now used or needed by the Company or
any of the Subsidiaries in the furtherance of its business operations, which
patents or applications have not been assigned to the Company or a Subsidiary,
with such assignment duly recorded in the United States Patent Office.
(l) Contracts. Except as described in Schedule 4(1), neither the
----------
Company nor any Subsidiary is, as of the date of this Agreement, a party to or
bound by any:
(1) material agreement or contract not made in the ordinary course
of business;
(2) employment agreement or employment contract that is not terminable
at will by the Company or the Subsidiary without material cost, including a
31
transition bonus payable to any employee of the Company in excess of the
individual amounts therefor described in Schedule 4(l)(2);
(3) employee collective bargaining agreement or other contract
with any labor union;
(4) covenant not to compete or confidentiality agreement (other than
pursuant to any software license agreement);
(4A) covenant not to compete in any software license agreement
excluding standard license agreements that may be in effect on shrink-wrapped
software used by the Company in the ordinary course of business;
(5) material agreement or contract with any affiliate, officer,
director or employee of the Company or the Subsidiary (other than employment
agreements covered by clause (2) above);
(6) lease or similar agreement under which the Company or the
Subsidiary is a lessor or sublessor of, or makes available for use by any third
party, any material real property owned or leased by the Company or the
Subsidiary or any portion of premises otherwise occupied by the Company or the
Subsidiary;
(7) (A) lease or similar agreement under which (i) the Company or the
Subsidiary is lessee of, or holds or uses, any machinery, equipment, vehicle or
other tangible personal property owned by a third party or (ii) the Company or
the Subsidiary is a lessor of, or makes available for use by any third party,
any tangible personal property owned by the Company or the Subsidiary, (B)
continuing contract for the future purchase of materials, supplies or equipment
or (C) management, service, consulting or other similar type of contract, in any
such case which has an aggregate future liability in excess of $100,000 and
which is not terminable by the Company or the Subsidiary for a cost of less than
$50,000;
(8) material license or other agreement relating in whole or in part
to (A) patents, trademarks, trade names, service marks or copyrights or (B)
inventions, discoveries, processes, formulae, trade secrets, technology, ideas
or other know-how (including any
32
license or other agreement under which the Company or the Subsidiary has the
right to use any of the same owned or held by a third party);
(9) agreement or contract under which the Company or the Subsidiary
has borrowed any money (including, without limitation, any interest rate or
foreign currency swap, cap, collar, hedge or similar insurance agreements, or
options or forwards on such agreements, or other similar agreements for the
purpose of managing the interest rate and/or foreign exchange risk associated
with its financing) or issued any note, bond, indenture or other evidence of
indebtedness or directly or indirectly guaranteed indebtedness, liabilities or
obligations of others (other than endorsements for the purpose of collection in
the ordinary course of business);
(10) mortgage, pledge, security agreement, deed of trust or other
document granting a lien (including liens upon properties acquired under
conditional sales, capital leases or other title retention or security devices);
(11) any material consignment, distributor, dealer, manufacturer's
representative, sales agency, advertising representative or advertising or
public relations contract;
(12) any derivative financial instrument or any derivative commodity
instrument; or
(13) other agreement, contract, lease, license, commitment or
instrument to which the Company or the Subsidiary is a party or by or to which
it or any of its assets or business is bound or subject that (A) is material to
the Company or (B) provides for aggregate further payments to the Company and
its Subsidiaries of $250,000 or more.
Except as set forth in Schedule 4(1), all such agreements listed in
such Schedule (collectively, the "Contracts") are valid, binding and in full
force and effect in all material respects. Except as set forth in Schedule
4(1), the Company and the Subsidiaries have performed all material obligations
required to be performed by them to date under the Contracts and they are not in
breach or default in any material respect thereunder and, to
33
the knowledge of Seller, no other party to any of the Contracts is in breach or
default in any material respect thereunder. All U.S. Department of Defense
Contracts and modifications to such contracts with a face value in excess of
$100,000 have been negotiated, fixed priced agreements, as defined in the
Federal Acquisition Regulations, as amended.
(m) Litigation. Schedule 4(m) sets forth a list as of the date of
-----------
this Agreement of all pending or to the best of Seller's knowledge threatened
litigation, arbitration or other proceeding, against the Company or any
Subsidiary that involves a claim for more than $50,000. Except as set forth in
Schedule 4(m), none of such lawsuits, claims, arbitrations or other proceedings
as to which there is a reasonable possibility of adverse determination would
have, if so determined, a Material Adverse Effect. To the knowledge of Seller,
except as set forth in Schedule 4(m), neither the Company nor any Subsidiary is
a party or subject to or in default under any material judgment, order,
injunction or decree of any Governmental Entity or arbitration tribunal.
(n) Benefit Plans. (i) Schedule 4(n) contains a list of all
--------------
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA), bonus, stock option, stock purchase, deferred
compensation plans or arrangements and other employee fringe benefit plans (all
the foregoing being herein called "Benefit Plans") maintained, or contributed
to, by Seller, the Company or any Subsidiary for the benefit of any officers or
employees of the Company or any Subsidiary. Seller has made available to Buyers
true, complete and correct copies of (A) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof), (B) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with respect to each
Benefit Plan (if any such report was required), (C) the most recent summary plan
description for each Benefit Plan for which such a summary plan description is
required and (D) each trust agreement and group annuity contract relating to any
Benefit Plan;
(ii) Each Benefit Plan has been administered in all material respects
in accordance with its terms. The Company and all the Benefit Plans are in
compliance in
34
all material respects with the applicable provisions of ERISA and the Code.
Except as set forth in Schedule 4(n), all material reports, returns and similar
documents with respect to the Benefit Plans required to be filed with any
Governmental Entity or distributed to any Benefit Plan participant have been
duly and timely filed or distributed. Except as set forth in Schedule 4(n),
there are no lawsuits, actions, termination proceedings or other proceedings
pending, or, to the knowledge of Seller, threatened against or involving any
Benefit Plan and, to the knowledge of Seller, there are no investigations by any
Governmental Entity or other claims (except claims for benefits payable in the
normal operation of the Benefit Plans) pending or threatened against or
involving any Benefit Plan or asserting any rights to benefits under any Benefit
Plan, with respect to which it is likely that Buyers would be liable. Except as
required by law, no Benefit Plan that is an "employee welfare benefit plan" (as
defined above) provides benefits to former employees or their dependents or
beneficiaries after retirement or other termination of employment. Except as
set forth in Schedule 4(n), the consummation of the transactions contemplated by
this Agreement will not increase or accelerate the payment of any compensation
or benefits under a Benefit Plan or otherwise result in any amount becoming
subject to an excise tax under Section 4999 of the Code.
(iii) None of the Company, or any other person or entity that,
together with the Company, is treated as a single employer under Section 414 of
the Code, has incurred any liability to any Company Pension Plan (other than for
contributions not yet due) or to the Pension Benefit Guaranty Corporation (other
than for the payment of premiums not yet due), except for any liabilities that,
individually or in the aggregate, would not have a Material Adverse Effect.
(iv) Except as set forth in Schedule 4(n), neither the Company nor a
Subsidiary is required to contribute to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) for the benefit of any officers or employees of the
Company and neither the Company nor a Subsidiary has incurred any material
withdrawal liability, within the meaning of Section 4201 of ERISA, with respect
to any such
35
multiemployer plan, which liability has not been fully paid as of the date
hereof.
(o) Absence of Changes or Events. Except as set forth in Schedule
-----------------------------
4(o), since the date of the Seller Balance Sheet, there has not been either (i)
any material adverse change in the material existing agreements and
relationships, business, financial condition or results of operations of the
Company and the Subsidiaries, taken as a whole, other than changes relating to
the economy in general or the defense, law enforcement or simulations industries
in general and not specifically relating to the Company or a Subsidiary or (ii)
any damage, destruction, loss or claim, whether or not covered by insurance, or
condemnation or other taking that has a Material Adverse Effect on the Company
or the Subsidiaries. Buyers acknowledge that there may have been disruption to
the Company's and the Subsidiaries' business as a result of the announcement by
Seller of its intention to sell the Company (and there may be disruption to the
Company's and the Subsidiaries' business as a result of the execution of this
Agreement and the consummation of the transactions contemplated hereby), and
Buyers agree that such disruptions do not and shall not constitute a breach of
this Section 4(o). Except as set forth in Schedule 4(o), since the date of the
Seller Balance Sheet, Seller has caused the business of the Company and the
Subsidiaries to be conducted in the ordinary course and in substantially the
same manner as previously conducted and has not taken any action that, if taken
after the date of this Agreement, would constitute a breach of any of the
covenants set forth in Section 5(b).
(p) Compliance with Applicable Laws. (i) Except as set forth in
--------------------------------
Schedule 4(p), the Company and the Subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Foreign or Domestic Governmental Entity ("Applicable Laws") including those
relating to occupational health and safety, except for instances of
noncompliance that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Except as set forth in Schedule 4(p), as of the date
of this Agreement none of Seller, the Company or a Subsidiary has received any
written communication during the past three years from a Foreign or Domestic
Governmental Entity that alleges that the Company or a Subsidiary is not in
compliance in any material respect with any Applicable Laws. Except as set
forth in Schedules 4(p)(i) and 4(r), to the knowledge of Seller,
36
there is no pending or threatened investigation of the Company or a Subsidiary
by any Foreign or Domestic Governmental Entity. This Section 4(p)(i) does not
relate to matters with respect to Taxes, which are the subject of Section 4(h),
or to environmental matters, which are the subject of Section 4(p)(ii).
(ii) Except as set forth in Schedule 4(p)(ii): (A) as of the date of
this Agreement, none of Seller, the Company or any of the Subsidiaries has
received any written communication during the past five years from a Foreign or
Domestic Governmental Entity that alleges that the Company or any of the
Subsidiaries is not in compliance with any Environmental Laws which has not been
resolved to the satisfaction of the Foreign or Domestic Governmental Entity; (B)
the Company and the Subsidiaries hold and are in compliance with, all material
permits, licenses and governmental authorizations required for the Company and
the Subsidiaries to conduct its business in compliance with the Environmental
Laws, and are in compliance with all Environmental Laws, except for any
instances of noncompliance which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect; (C) as of the date of
this Agreement, none of Seller, the Company or any of the Subsidiaries has
received any written communication alleging that the Company or any of the
Subsidiaries is liable to any party (including, but not limited to, a Foreign or
Domestic Governmental Entity) as a result of the Release of a Hazardous
Substance; (D) to the knowledge of Seller, none of the properties owned or
leased by the Company or any of the Subsidiaries contains underground storage
tanks, asbestos-containing materials, or PCB-containing materials; and (E) to
the actual knowledge of Seller, there have been no Releases of Hazardous
Substances on any of the properties owned or leased by the Company or any of the
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. As used in this Agreement, the term
"Environmental Laws" means any and all applicable foreign, federal, state or
local laws, regulations, binding determinations, orders, decrees or permits
issued, promulgated or entered into by any Foreign or Domestic Governmental
Entity, relating to the Release of Hazardous Substances. As used in this
Agreement, the term "Hazardous Substances" means all materials
37
defined as hazardous substances pursuant to Section 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. (S)(S) 9601
et seq. ("CERCLA") and petroleum, and the term "Release" shall have the meaning
-- ----
set forth in Section 101(22) of CERCLA. For the purposes of Sections 4(b) and
4(p), "Foreign or Domestic Governmental Entity" shall mean any foreign or
---------------------------------------
domestic, federal, state, local or other government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality.
(q) Employee and Labor Matters. Except as set forth in Schedule
---------------------------
4(q), as of the date of this Agreement (i) there is no labor strike, dispute,
work stoppage or lockout pending, or, to the knowledge of Seller, threatened,
against the Company or a Subsidiary; (ii) to the knowledge of Seller, no union
organizational campaign is in progress with respect to the employees of the
Company or a Subsidiary; (iii) there is no unfair labor practice charge or
complaint against the Company or a Subsidiary pending, or, to the knowledge of
Seller, threatened, before the National Labor Relations Board; (iv) there are no
pending, or, to the knowledge of Seller, threatened, union grievances against
the Company or a Subsidiary as to which there is a reasonable possibility of
adverse determination and that, if so determined, would have a Material Adverse
Effect; (v) there are no pending, or, to the knowledge of Seller, threatened,
charges against the Company, a Subsidiary or any current or former employee of
the Company before the Equal Employment Opportunity Commission or any state or
local agency responsible for the prevention of unlawful employment practices;
and (vi) none of Seller, the Company and the Subsidiaries has received written
notice during the past three years of the intent of any Governmental Entity
responsible for the enforcement of labor or employment laws to conduct an
investigation of the Company or a Subsidiary and, to the knowledge of Seller, no
such investigation is in progress.
(r) Licenses; Permits. Schedule 4(r) sets forth a true and complete
------------------
list of all material licenses, permits and authorizations issued or granted to
the Company and the Subsidiaries by Governmental Entities which are necessary or
desirable for the conduct of the business of the Company and the Subsidiaries as
currently conducted. Except as set
38
forth in Schedule 4(r), all such licenses, permits and authorizations are
validly held by the Company or the relevant Subsidiary, the Company and the
Subsidiaries have complied in all material respects with all terms and
conditions thereof and the same will not be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(s) Transactions with Affiliates. Except as set forth in Schedule
-----------------------------
4(s), none of the agreements, contracts or other arrangements set forth in
Schedule 4(l) between the Company or any Subsidiary, on the one hand, and Seller
or any of its affiliates, on the other hand, will continue in effect subsequent
to the Closing. After giving effect to the transfer and assignment to the
Company by the Seller of (i) all the outstanding shares of Firearms Training
Systems Limited, a United Kingdom corporation, and (ii) the Seller's rights
under the international agency and sales representative agreements (as listed in
Schedule 4(l)(11)) which transfers (x) have been completed prior to the date
hereof, (y) are in the process of being transferred, or (z) will be cancelled by
the Seller prior to the Closing Date(provided, however, that such cancellation
-------- -------
will not have a Material Adverse Effect on the Company); the Seller has no
assets used in or necessary for the conduct of the business of the Company,
except for the Seller's name which Seller agrees to relinquish the right to use
effective upon the Closing. Promptly after the Closing, Seller shall cause its
name to be changed so that it no longer contains the words "Firearms Training
Systems", "FATS" or any combination thereof or other words or phrases which
might be confusingly similar to the Company's name or trademarks.
(t) Government Contracting Matters. (i) Except as set forth in
------------------------------
Schedule 4(t), the Company has complied with all material terms and conditions
of all Government Contracts that provides for aggregate payments to the Company
of $500,000 or more, including all clauses, provisions and requirements
incorporated by reference or by operation of law therein and there are no claims
that could reasonably be expected to have a Material Adverse Effect nor any
potential liability for defective pricing, false statements or false claims on
Government Contracts. For the purposes of this Agreement, "Government Contract"
-------------------
means any bid, quotation, proposal, contract, agreement, work authorization,
lease, commitment or sale or purchase order of the Company or any of the
Subsidiaries with any foreign
39
or domestic, federal, state, local or other governmental authority, agency or
instrumentality, including all contracts and work authorizations to supply goods
and services to such governmental authority, agency or instrumentality and
including contracts that are first-tier subcontracts on prime contracts.
(ii) Except as set forth in Schedule 4(t), there is no action, suit,
proceeding or, to the Seller's or the Company's knowledge, investigation
relating to any proposed suspension or debarment of the Company or any of the
Subsidiaries or any of their respective directors, officers, employees or agents
from doing business with any foreign or domestic, federal, state, or local
government (or any agency or instrumentality thereof). Neither the Company nor
any of the Subsidiaries, nor any of their respective directors, officers, or
employees is (or, to the Seller's knowledge, during the last five years has
been) suspended, proposed for debarment, or debarred from doing business with
any foreign or domestic, federal, state, or local government (or any agency or
instrumentality thereof) or is (or during such period was) the subject of a
finding of nonresponsibility or ineligibility for contracting with any foreign
or domestic, federal, state, or local government (or any agency or
instrumentality thereof).
(iii) Except as set forth in Schedule 4(t), to the Seller's knowledge,
none of the Company's nor any of the Subsidiaries' respective directors,
officers, employees or agents is (or during the last five years has been) under
administrative, civil, or criminal investigation, indictment or information by
any governmental authority with respect to any material alleged irregularity,
misstatement or omission arising under or relating to any Government Contract.
None of the Seller, the Company or any of the Subsidiaries has any knowledge of
any material irregularity, misstatement or omission arising under or relating to
any Government Contract that has led or could reasonably lead, either before or
after the Closing Date, to any of the consequences set forth in Section 4(t)(ii)
or to any other material damage, penalty, assessment, recoupment of payment or
disallowance of cost.
40
(iv) Except as set forth in Schedule 4(t), there exist (A) no
outstanding material claims against the Company or any of the Subsidiaries, by
any foreign or domestic, federal, state, or local government (or any agency or
instrumentality thereof) or by any prime contractor, subcontractor, vendor or
other third party, arising under or relating to any Government Contract; and (B)
no material disputes between the Company or the Subsidiaries and any foreign or
domestic, federal, state, or local government (or any agency or instrumentality
thereof), or any prime contractor, subcontractor, vendor or other third party,
arising under or relating to any Government Contract.
(v) Neither the Company nor any of the Subsidiaries has, nor are any
of them in the conduct of their respective businesses required to have, any
facility security clearance or personnel security clearance or other security
clearance from any foreign or domestic, federal, state, or local government (or
any agency or instrumentality thereof), and none of them have any access to
classified information in connection with any Government Contract or otherwise.
(u) Backlog. As of May 1, 1996, the Company had confirmed purchase
--------
orders and contracts with an aggregate value of not less than $40,000,000 in
sales which have not been recognized in the Financial Statements for the period
ending March 31, 1996. Such purchase orders and contracts are subject to
various contingencies, including rights of the customers to cancel under certain
circumstances and, in some cases, requirements that the customers provide
letters of credit.
5. Covenants of Seller. Seller covenants and agrees as follows:
--------------------
(a) Access. Prior to the Closing, Seller shall, and shall cause the
-------
Company and each Subsidiary to, give Buyers, the Lenders and their
representatives reasonable access, during normal business hours and upon
reasonable notice, to the personnel, properties, books and records of the
Company and each Subsidiary; provided, however, that such access does not
-------- -------
unreasonably disrupt the normal operations of Seller or the Company or any
Subsidiary.
(b) Ordinary Conduct. Except as set forth in Schedule 5(b) or
-----------------
otherwise expressly permitted by the terms
41
of this Agreement, from the date hereof to the Closing, Seller shall cause the
business of the Company and the Subsidiaries to be conducted in the ordinary
course in substantially the same manner as presently conducted and shall make
all reasonable efforts consistent with past practices to preserve their
relationships with customers, suppliers and others with whom the Company or any
Subsidiary deals; provided that Seller shall not be obligated to, directly or
--------
indirectly, provide any funds to the Company or any Subsidiary. Seller shall
not, and shall not permit the Company or any Subsidiary to, take any action that
would result in any of the conditions to the purchase and sale of the Acquired
Shares set forth in Section 3(a) not being satisfied. In addition, except as
set forth in Schedule 5(b) or otherwise expressly permitted or required by the
terms of this Agreement, Seller shall not permit the Company or any Subsidiary
to do any of the following without the prior written consent of Buyers:
(i) amend its Certificate of Incorporation or By-laws;
(ii) declare or pay any dividend or make any other distribution to its
stockholders in respect of any shares of its capital stock;
(iii) redeem or otherwise acquire any shares of its capital stock or
any option, warrant or right relating thereto or any securities convertible into
or exchangeable for any shares of capital stock;
(iv) adopt or amend in any material respect any Benefit Plan or
collective bargaining agreement, except as required by law;
(v) grant to any executive officer or employee any increase in
compensation or benefits, except in the ordinary course of business consistent
with past practice or as may be required under existing agreements, except for
any increases for which Seller shall be solely obligated and except for the
"transition bonus" plan described on Schedule 5(b); provided, that the aggregate
--------
amount of transition bonuses shall not exceed $400,000.
(vi) incur or assume any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or indebtedness,
other
42
than letters of credit obligations in the ordinary course of business consistent
with past practice and draw downs on the revolving credit agreement; provided
--------
that the Company gives Buyers notice of any draw downs at least three days in
advance of such draw downs;
(vii) permit, allow or suffer any of its assets to become subjected to
any mortgage, lien or encumbrance, which would have been required to be set
forth in Schedule 4(i) or 4(j) if existing on the date of this Agreement, or not
in the ordinary course of business consistent with past practice;
(viii) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of substantial value;
(ix) except for intercompany transactions not involving Seller or any
affiliate of Seller (other than a Subsidiary of the Company) in the ordinary
course of business, pay, loan or advance any amount to, or sell, transfer or
lease any of its assets to, or enter into any agreement or arrangement with,
Seller or any of its affiliates;
(x) make any change in any method of accounting or accounting practice
or policy other than those required by United States generally accepted
accounting principles;
(xi) acquire by merging or consolidating with any business or any
corporation, partnership, association or other business organization or division
thereof or otherwise acquire any assets (other than inventory) which are
material to the Company and the Subsidiaries, taken as a whole;
(xii) make or incur any capital expenditure (which for purposes of
this Section 5(b)(xii) shall be defined as purchases in excess of $2,500) that
exceeds $30,000 for any individual purchase, or $200,000 in the aggregate;
(xiii) sell, lease or otherwise dispose of any of its assets which are
material to the Company and the Subsidiaries, except in the ordinary course of
business consistent with past practice;
43
(xiv) enter into any lease of real property, except any renewals of or
finalization of pending amendments to existing leases in the ordinary course of
business; or
(xv) agree, whether in writing or otherwise, to do any of the
foregoing.
(c) Insurance. Seller shall cause the Company to keep insurance
----------
policies currently maintained by the Company covering the business or properties
of the Company, or suitable replacements therefor, in full force and effect
through the close of business on the Closing Date.
(d) Confidentiality. On or prior to the Closing Date, Seller shall
----------------
execute a confidentiality agreement between Seller and the Company with terms
reasonably acceptable to the Seller regarding nondisclosure of confidential
information of the Company.
(e) International Agency and Sales Representative Contracts. In
--------------------------------------------------------
connection with the assignment of Seller's rights under the international agency
and sales representative agreements (as listed in Schedule 4(1)(11)), Seller
shall use its reasonable best efforts to obtain the covenants of such
international agents or sales representatives to comply with the Foreign Corrupt
Practices Act.
6. Representations and Warranties of Buyers. Each Buyer hereby
-----------------------------------------
severally and not jointly and only as to itself represents and warrants to
Seller as follows:
(a) Authority. Each of Centre Capital Investors II, L.P., Centre
----------
Partners Coinvestment, L.P., Centre Parallel Management Partners, L.P., and
Centre Capital Tax-exempt Investors II, L.P. is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Centre Capital Offshore Investors II, L.P. is a limited partnership
duly organized, validly existing and in good standing under the laws of Bermuda.
The State Board of Administration of Florida is a body corporate duly organized
under the constitution of the State of Florida and validly existing and in good
standing under the laws of the State of Florida. Each of Centre Capital
Investors II, L.P., Centre Partners Coinvestment, L.P., Centre Parallel
Management Partners, L.P., Centre Capital Tax-exempt
44
Investors II, L.P., and Centre Capital Offshore Investors II, L.P. has all
requisite partnership power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The State Board of Administration of Florida has all
requisite power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
All acts and other proceedings required to be taken by each Buyer to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and properly taken. This
Agreement has been duly executed and delivered by each Buyer and constitutes a
legal, valid and binding obligation of such Buyer, enforceable against such
Buyer in accordance with its terms.
(b) No Conflicts; Consents. The execution and delivery of this
-----------------------
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof shall not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any lien, claim or encumbrance of any kind upon any of the properties or
assets of each Buyer under, any provision of (i) the Certificate of Formation or
Partnership Agreement of each of Centre Capital Investors II, L.P., Centre
Partners Coinvestment, L.P., Centre Parallel Management Partners, L.P., Centre
Capital Tax-exempt Investors II, L.P., and Centre Capital Offshore Investors II,
L.P. or the comparable governing instruments of the State Board of
Administration of Florida. (ii) any material agreement or obligation to which
any Buyer is a party or by which any of its respective assets are bound, or
(iii) any judgment, order, or decree, or material statute, law, ordinance, rule
or regulation applicable to any Buyer or its respective assets, other than such
as in the aggregate, would not adversely affect any such Buyer's ability to
consummate the transactions contemplated hereby. No material consent, approval,
license, permit, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to any Buyer or its respective affiliates in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, other than (A) compliance
45
with and filings under the HSR Act, if applicable, and (B) those that may be
required solely by reason of Seller's participation in the transactions
contemplated hereby.
(c) Securities Act. The Acquired Shares purchased by each Buyer
---------------
pursuant to this Agreement are being acquired for investment only and not with a
view to any public distribution thereof, and each Buyer shall not offer to sell
or otherwise dispose of the Acquired Shares so acquired by it in violation of
any of the registration requirements of the Securities Act.
(d) Actions and Proceedings, etc. There are no (i) outstanding
-----------------------------
judgments, orders, injunctions or decrees of any Governmental Entity or
arbitration tribunal against any Buyer or its affiliates, (ii) lawsuits, actions
or proceedings pending or, to the knowledge of any Buyer, threatened against any
such Buyer or any of its affiliates, or (iii) investigations by any Governmental
Entity which are, to the knowledge of any Buyer, pending or threatened against
any such Buyer or any of its affiliates, and which, in the case of each of
clauses (i), (ii) and (iii), have or could adversely affect any such Buyer's
ability to consummate the transactions contemplated hereby.
(e) Availability of Funds. Each Buyer has cash available to fund its
----------------------
commitments to purchase the Acquired Shares, and Centre Management has executed,
on behalf of the Buyers, firm commitments attached hereto as Exhibit G
(collectively, the "Firm Commitments") not subject to any conditions other than
as set forth therein with respect to the Borrowings which together with
$5,000,000 cash of the Company are sufficient to enable the Buyers to consummate
the Transactions. True and correct copies of any such facilities and Firm
Commitments have been provided to Seller. The financing required to consummate
the Transactions is collectively referred to as the "Financing". As of the date
hereof, no Buyer has any reason to believe that any of the conditions to the
Financing will not be satisfied or that the Financing will not be available on a
timely basis for the Transactions.
7. Covenants of Buyers and Centre Management. (a) Buyers covenant
------------------------------------------
and agree as follows:
(i) Confidentiality. Buyers acknowledge that, to Buyers' knowledge,
----------------
the information being provided to them in connection with the purchase and sale
of the Acquired Shares
46
and the consummation of the other transactions contemplated hereby is subject to
the terms of a confidentiality agreement between Buyers and Seller which
confidentiality agreement will terminate at Closing.
(ii) No Additional Representations. Buyers acknowledge that, to
------------------------------
Buyers' knowledge, they and their representatives have been permitted full and
complete access to the books and records, facilities, equipment, tax returns,
contracts, insurance policies (or summaries thereof) and other properties and
assets of the Company and the Subsidiaries which they and their representatives
have desired or requested to see and/or review, and that they and their
representatives have had a full opportunity to meet with the officers and
employees of Seller, the Company and the Subsidiaries to discuss the businesses
and assets of the Company and the Subsidiaries. Buyers acknowledge and agree
that, except as expressly set forth in this Agreement, none of Seller, the
Company, any Subsidiary or any other person has made any representation or
warranty, expressed or implied, with respect to the transactions contemplated
hereby, the Company, any Subsidiary or its assets, liabilities and business, the
accuracy or completeness of any information regarding the Company and the
Subsidiaries furnished or made available to Buyers and their representatives.
Buyers acknowledge and agree that none of Seller, the Company, any Subsidiary or
any other person shall have or be subject to any liability to Buyers or any
other person, including pursuant to Section 10 hereof, absent fraud, resulting
from the distribution to Buyers, or Buyers' use of, any such information,
including the Confidential Memorandum prepared by Lazard Freres & Co. LLC dated
February 1996 (the "Memorandum") and any information, documents or material
made available to Buyers in the "data room", management presentations or in any
other form in expectation of the transactions contemplated hereby.
(iii) Benefits. (A) Continuation of Benefits. Buyers shall cause
--------- -------------------------
the Company and the Subsidiaries to maintain, for a period of not less than 2
years following the Closing Date compensation and employee benefit plans for
employees of the Company and the Subsidiaries generally that are substantially
comparable in the aggregate to those provided under the Benefit Plans in
accordance with their terms in effect
47
on the date of this Agreement. Notwithstanding the foregoing, for a period of
not less than 2 years following the Closing Date, Buyers shall provide, or cause
the Company and the Subsidiaries to provide, severance pay and benefits to each
employee of the Company and its Subsidiaries as of the Closing Date that are no
less favorable than under the Benefit Plans and current practices of Seller as
in effect as of the date of this Agreement. Nothing in this Section 7(c) shall
be construed as (x) granting any rights to continued employment or (y) an
amendment to the terms of any specific benefit under a compensation or employee
benefit plan in effect on the date of this Agreement.
(B) Accrued Vacation. Buyers shall honor all accrued but untaken
-----------------
vacation and sick pay benefits accrued by employees of the Company and its
Subsidiaries as of the Closing Date.
(C) WARN Act. Buyers agree to provide any required notice under the
---------
Worker Adjustment and Retaining Notification Act, as amended (the "WARN Act"),
and any similar statute, and to otherwise comply with any such statute with
respect to any "plant closing" or "mass layoff" (as defined in the WARN Act) or
similar event affecting employees and former employees of the Company and its
Subsidiaries and occurring on or after the Closing Date. Buyers shall indemnify
and hold harmless Seller and its subsidiaries with respect to any liability
under the WARN Act or similar statute arising from the actions of Buyers or
their subsidiaries on or after the Closing Date.
(iv) Indemnification of Directors and Officers. From and after the
------------------------------------------
Closing, Buyers shall cause the Company to indemnify and hold harmless each
present and former director or officer of the Company or any Subsidiary to the
fullest extent allowed by law against any and all costs or expenses (including
reasonable attorneys fees) judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring during the period prior to
and including the Closing Date (and Buyers shall cause the
48
Company to advance expenses as incurred to the fullest extent allowed by law).
(v) D & O Insurance. Buyers shall use their best efforts to cause
----------------
the persons serving as officers and directors of the Company immediately prior
to the Closing to be covered for a period of six years from the Closing by the
directors' and officers' liability insurance policy maintained by the Company on
the date hereof (provided that Buyers may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
not less advantageous to such directors and officers of the Company than the
terms and conditions of such existing policy) with respect to acts or omissions
occurring prior to the Closing which were committed by such officers and
directors in their capacity as such; provided, however, that the Company shall
-------- -------
not be obligated to make annual premium payments for such insurance to the
extent such premiums exceed 250% of the premiums paid as of the date hereof by
the Company for such insurance (the "Company's Current Premium"), and if such
premiums for such insurance would at any time exceed 250% of the Company's
Current Premium, then the Company shall cause to be maintained policies of
insurance which, in the Company's good faith determination, provide the maximum
coverage available at an annual premium equal to 250% of the Company's Current
Premium.
(b) Centre Management covenants and agrees that in the event that the
State Board of Administration of Florida or any limited partner in Centre
Capital Investors II, L.P., Centre Capital Tax-exempt Investors II, L.P. or
Centre Capital Offshore Investors II, L.P. (collectively, the "Investors")
defaults in the performance of its obligation under the capital call issued to
fund the purchase of Acquired Shares by the State Board of Administration of
Florida or any of such partnerships under this Agreement, Centre Management will
exercise the authority (which it hereby represents it has) to require that the
non-defaulting Investors advance additional capital to fund the shortfall caused
by such default.
8. Mutual Covenants. Each of Seller and Buyers covenant and agree
----------------
as follows:
49
(a) Consents. Buyers acknowledge that certain consents and waivers
---------
with respect to the transactions contemplated by this Agreement may be required
from parties to the Contracts listed on the Schedules hereto and that such
consents and waivers may not have been obtained. Buyers agree that Seller shall
not have any liability whatsoever to Buyers arising out of or relating to the
failure to obtain any consents or waivers that may be required in connection
with the transactions contemplated by this Agreement or because of the
termination of any Contract as a result thereof, subject to the accuracy of
Seller's representations and warranties made herein. Buyers further agree that
no representation, warranty or covenant of Seller contained herein shall be
breached or deemed breached, and no condition shall be deemed not satisfied, as
a result of (i) the failure to obtain any such consent or waiver so described,
(ii) any such termination or (iii) any lawsuit, action, proceeding or
investigation commenced or threatened by or on behalf of any person arising out
of or relating to the failure to obtain any such consent or any such
termination, subject to the accuracy of Seller's representations and warranties
made herein. Prior to the Closing, Seller shall, and shall cause the Company
and the Subsidiaries to, cooperate with Buyers, upon the request of Buyers, in
any reasonable manner in connection with Buyers' obtaining any such consents and
waivers; provided, however, that such cooperation shall not include any
-------- -------
requirement of Seller or any of its affiliates (including the Company and the
Subsidiaries) to expend money, commence or participate in any litigation or
offer or grant any accommodation (financial or otherwise) to any third party;
provided further, however, if a novation agreement or similar agreement covering
---------------- -------
Government Contracts is required by the Company's customers (including, but not
limited to the United States Government and its agencies) because of the Buyers'
acquisition of the Acquired Shares, the Company and Seller agree to cooperate
fully with the Buyers and to use all reasonable efforts to obtain a novation
agreement, if required, as promptly as possible which efforts may include
execution of a novation by the Seller (as to which Seller will be entitled to
indemnification by the Company) reasonably acceptable to Seller with respect to
such novation.
(b) Cooperation. Buyers and Seller shall cooperate with each other,
------------
and shall cause their officers, employees, agents, auditors and representatives
to cooperate with each other, for a period of 90 days after the Closing
50
to ensure the orderly transition of the Company and the Subsidiaries from Seller
to Buyers and to minimize any disruption to the respective businesses of Seller,
Buyers or the Company and the Subsidiaries that might result from the
transactions contemplated hereby. After the Closing, upon reasonable written
notice, Buyers and Seller shall furnish or cause to be furnished to each other
and their employees, counsel, auditors and representatives access, during normal
business hours, to such information and assistance relating to the Company and
the Subsidiaries as is reasonably necessary for financial reporting and
accounting matters, the preparation and filing of any tax returns, reports or
forms or the defense of any tax claim or assessment. Each party shall reimburse
the other for reasonable out-of-pocket costs and expenses incurred in assisting
the other pursuant to this Section 8(b). Neither party shall be required by
this Section 8(b) to take any action that would unreasonably interfere with the
conduct of its business or unreasonably disrupt its normal operations.
(c) Publicity. The initial press release relating to this Agreement
----------
shall be a joint press release. Seller and Buyers agree that, from the date
hereof through the Closing Date, no other public release or announcement
concerning the transactions contemplated hereby shall be issued by any party
without the prior consent of the other parties (which consent shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the rules or regulations of any United States or foreign securities
exchange, in which case the party required to make the release or announcement
shall allow the other parties reasonable time to comment on such release or
announcement in advance of such issuance.
(d) Best Efforts. Subject to the terms and conditions of this
-------------
Agreement (including without limitation Section 8(e)), each party shall use its
reasonable best efforts to cause the Closing to occur as soon as practicable.
(e) Antitrust Notification. Each of Seller and Buyers shall as
-----------------------
promptly as practicable, but in no event later than five business days following
the execution and delivery of this Agreement, file with the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
(the "DOJ") the notification and report form, if any, required for the
transactions contemplated hereby and any supplemental information
51
requested in connection therewith pursuant to the HSR Act. Any such notification
and report form and supplemental information shall be in substantial compliance
with the requirements of the HSR Act. Each of Buyers and Seller shall furnish
to the other such necessary information and reasonable assistance as the other
may request in connection with its preparation of any filing or submission which
is necessary under the HSR Act. Seller and Buyers shall keep each other
apprised of the status of any communications with, and any inquiries or requests
for additional information from, the FTC and the DOJ and, subject to Section
14(a)(v), shall comply promptly with any such inquiry or request. Each of
Seller and Buyers shall use its reasonable best efforts to obtain any clearance
required under the HSR Act for the consummation of the Transactions provided
that Buyers shall be solely responsible for any filing fees payable by Buyers
under the HSR Act.
(f) Access. Subsequent to the Closing, Buyers shall, and shall cause
-------
the Company and each Subsidiary to, give Seller and its representatives
reasonable access, during normal business hours and upon reasonable notice, to
the personnel, properties, books and records of the Company and each Subsidiary
to the extent Seller requires such access for any proper purpose (including
without limitation in connection with any tax returns, reports or forms required
to be filed by Seller).
(g) Registration Rights Agreement. Buyers and Seller shall cooperate
------------------------------
in good faith to negotiate and agree upon, prior to the Closing, a registration
rights agreement granting Buyers registration rights consistent with the rights
granted to Seller under the Registration Rights Agreement; provided that Buyers'
--------
demand registration rights shall be exercisable earlier and on more frequent
occasions in accordance with their greater proportionate common stock interest.
(h) Release of Lien on Certain Shares of Common Stock. The Company
--------------------------------------------------
shall use its reasonable best efforts to effect the release of the lien of the
Pledge Agreement on any Retained Shares and on any shares issuable in connection
with the Contingent Payment if either of the following events occur:
(i) the Company consummates a reorganization pursuant to which the
Company's operating assets are transferred to a subsidiary, which reorganization
the
52
Company currently intends to initiate approximately six months after the Closing
Date; or
(ii) the Company consummates the issuance of securities in an amount
at least equal to $85,000,000 as contemplated by the commitment letter and
related term sheet of NationsBank, N.A. (South) set forth as Exhibit G hereto
and the demand registration rights of Seller contained in the Registration
Rights Agreement have become exercisable (including by reason of Section 1(c)
hereof).
9. Further Assurances. After the Closing, from time to time, as and
-------------------
when requested by either party hereto, the other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions (subject to the provisions of Sections 8(a), 8(d) and 8(e)), as such
other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement.
10. Indemnification. (a) Indemnification by Seller. Subject to (b)
---------------- --------------------------
below, Seller shall indemnify the Company, except to the extent indemnification
provided under this Section 10(a) relates to any loss, liability, claim, damage
or expense (including reasonable legal fees and expenses) that adversely affects
Buyers, their affiliates or each of the officers, directors, employees,
stockholders, agents and representatives of the Company or Buyers (each a "Buyer
Indemnified Party"), but only to the extent such loss does not affect the
Company, in which case, if Buyers so elect, the Seller shall indemnify Buyers
and any other Buyer Indemnified Party if applicable, against and hold them
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such indemnified
party to the extent arising from (i) any breach of any representation or
warranty of Seller contained in this Agreement which by the terms of Section 15
hereof survives the Closing and (ii) any breach of any covenant of Seller
contained in this Agreement; provided, however, that Seller shall not have any
-------- -------
liability under this Section 10(a) unless the aggregate of all losses,
liabilities, costs and expenses relating thereto for which Seller would, but for
this proviso, be liable exceeds on a cumulative basis an amount equal to
$1,000,000, and then only to the extent of any such excess; provided further,
----------------
however, that Seller shall not have any liability under this
-------
53
Section 10(a) for any individual items where the loss, liability, cost or
expense relating thereto is less than $25,000 and such items shall not be
aggregated for purposes of the first proviso to this Section 10(a); and provided
--------
further, however, that Seller's liability under this Section 10(a) shall in no
------- -------
event exceed the Escrowed Amount and shall be satisfied only from the Escrowed
Amount on deposit with the Escrow Agent; and provided further, however, that
---------------- -------
Seller shall not have any liability under this Section 10(a) to the extent the
loss, liability, claim, damage or expense arises as a result of any action taken
or omitted to be taken by Buyers or any of their affiliates (including, after
the Closing, any officers or employees of the Company and the Subsidiaries)
after the Closing.
(b) Exclusive Remedy. Buyers acknowledge and agree that, assuming
-----------------
that the Closing occurs, absent fraud, their sole and exclusive remedy with
respect to any and all claims relating to this Agreement, the Transactions, the
Company and the Subsidiaries and their respective assets, liabilities and
business shall be pursuant to the indemnification provisions set forth in this
Section 10. Buyers acknowledge and agree that the sole source of payment for any
indemnification claims under Section 10 of this Agreement shall be the Escrowed
Amount on deposit pursuant to the terms of the Escrow Agreement and Buyers
hereby waive and release the Seller from any and all obligations to make any
payment for any indemnification claims under Section 10 from any other source.
In furtherance of the foregoing, Buyers hereby waive, from and after the
Closing, any and all rights, claims and causes of action (other than claims of,
or causes of action arising from, fraud) they, the Company or any Subsidiary may
have against Seller and its affiliates arising under or based upon any Federal,
state, local or foreign statute, law, ordinance, rule or regulation or otherwise
(except pursuant to the indemnification provisions set forth in this Section 10
and in the Escrow Agreement).
(c) Indemnification by Buyers. (i) Buyers shall, and shall cause
--------------------------
the Company and the Subsidiaries to, indemnify Seller, its affiliates and each
of their respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses) suffered or
incurred by any such indemnified party to the extent arising from (A) any breach
of any representation or warranty of Buyers which survives the Closing contained
in this
54
Agreement or in any certificate delivered pursuant hereto, and (B) any breach of
any covenant of Buyers contained in this Agreement.
(ii) Buyers shall cause the Company and the Subsidiaries to indemnify
Seller, its affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives against and hold them
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such indemnified
party to the extent arising from (A) any guarantee or obligation to assure
performance given or made by Seller or an affiliate of Seller with respect to
any obligation of the Company or any Subsidiary set forth in clause (B) below,
(B) all obligations and liabilities of whatever kind and nature, primary or
secondary, direct or indirect, absolute or contingent, known or unknown, whether
or not accrued, whether arising before, on or after the Closing Date, of the
Company or any Subsidiary, including any such obligations or liabilities
contained in the Contracts or any agreement, lease, license, permit, plan or
commitment that, because it fails to meet the relevant threshold amount or term,
is not included within the definition of Contracts, or the Benefit Plans set
forth in Schedule 4(n) or any plan, fund, program, policy, contract or
arrangement described in Section 4(n) but not required to be set forth in
Schedule 4(n) (collectively, the "Plans"), (C) any claim that the purchase and
sale of the Acquired Shares or the transactions contemplated thereby give rise
to any severance or other benefits under any Plan, (D) any discontinuance,
suspension or modification on or after the Closing Date of any Plan, and (E) any
Taxes of the Company for any period other than a Pre-Closing Tax Period;
provided, however, that nothing in clause (ii) shall limit Buyers' rights of
-------- -------
indemnification hereunder.
(d) Losses Net of Insurance, etc. In determining whether a loss,
-----------------------------
liability, claim, damage or expense is eligible for indemnification under this
Section 10 and in determining the amount of any loss, liability, claim, damage
or expense for which indemnification is provided under this Section 10, the
amount of such loss, liability, claim, damage or expense shall be net of any
amounts recovered or recoverable by the indemnified party under insurance
55
policies. Any indemnity payment under this Agreement shall be treated as an
adjustment to the Purchase Price for Tax purposes, unless a final determination
(which shall include the execution of a Form 870-AD or successor form) with
respect to the indemnified party or any of its affiliates causes any such
payment not to be treated as an adjustment to the Purchase Price for United
States Federal income Tax purposes.
(e) Termination of Indemnification. The obligations to indemnify and
-------------------------------
hold harmless a party hereto set forth in this Section 10 shall terminate when
the applicable representation or warranty terminates pursuant to Section 15;
provided, however, that such obligations to indemnify and hold harmless shall
-------- -------
not terminate with respect to any item as to which the person to be indemnified
or the related party thereto shall have, before the expiration of the applicable
period, previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis of such claim) to the indemnifying party.
(f) Procedures Relating to Indemnification. In order for a party
---------------------------------------
(the "indemnified party") to be entitled to any indemnification provided for
under this Agreement (other than a claim with respect to Taxes) in respect of,
arising out of or involving a claim or demand made by any person against the
indemnified party (a "Third Party Claim"), such indemnified party must notify
the indemnifying party in writing, and in reasonable detail, of the Third Party
Claim within 10 business days after receipt by such indemnified party of written
notice of the Third Party Claim; provided, however, that failure to give such
-------- -------
notification shall not affect the indemnification provided hereunder except to
the extent the indemnifying party shall have been actually prejudiced as a
result of such failure (except that the indemnifying party shall not be liable
for any expenses incurred during the period in which the indemnified party
failed to give such notice). Thereafter, the indemnified party shall deliver to
the indemnifying party, within five business days after the indemnified party's
receipt thereof, copies of all notices and documents (including court papers)
received by the indemnified party relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
56
indemnifying party and reasonably acceptable to the indemnified party. Should
the indemnifying party so elect to assume the defense of a Third Party Claim,
the indemnifying party shall not be liable to the indemnified party for legal
expenses subsequently incurred by the indemnified party in connection with the
defense thereof. If the indemnifying party assumes such defense, the indemnified
party shall have the right to participate in the defense thereof, including the
opportunity to keep fully informed as to all matters which might affect the
amount of any claims for indemnification to be made hereunder, and to employ
counsel (not reasonably objected to by the indemnifying party), at its own
expense, separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
failed to assume the defense thereof (other than during the period prior to the
time the indemnified party shall have given notice of the Third Party Claim as
provided above).
If the indemnifying party so elects to assume the defense of any Third
Party Claim, the indemnified party shall cooperate with the indemnifying party
in the defense thereof. Such cooperation shall include the retention and (upon
the indemnifying party's request) the provision to the indemnifying party of
records and information that are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The
indemnifying party shall reimburse the indemnified party for its reasonable out-
of-pocket costs of such cooperation. Whether or not the indemnifying party shall
have assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent. If
the indemnifying party shall have assumed the defense of a Third Party Claim,
the indemnified party shall agree to any settlement, compromise or discharge of
a Third Party Claim which the indemnifying party may recommend and which by its
terms obligates the indemnifying party to pay the full amount of the liability
in connection with such Third Party Claim; provided, however, that, where the
-------- -------
Seller is the indemnifying party, the indemnified party shall not be required to
agree to any such settlement, compromise or discharge if the Company's
57
board of directors shall have determined by resolution that such settlement,
compromise or discharge could reasonably expect to have a Material Adverse
Effect on the business of the Company or the Subsidiary. Notwithstanding the
foregoing, if the Seller is the indemnifying party and recommends a settlement,
compromise or discharge that would require or have the effect of requiring the
Company or a Subsidiary to modify or amend an existing Government Contract or to
otherwise take or omit to take certain actions that would not have a Material
Adverse Effect on the Company or such Subsidiary, the indemnified party shall
not unreasonably withhold its consent to such settlement, compromise or
discharge.
(g) Other Claims. In the event any indemnified party should have a
-------------
claim against any indemnifying party under Section 10(a) or 10(b) that does not
involve a Third Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying party, such notice to state
that it is pursuant to this Section 10(g) and that the indemnifying party is
required to respond within 20 business days of such notice. The failure by any
indemnified party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to such indemnified
party under Section 10(a) or 10(b), except to the extent that the indemnifying
party demonstrates that it has been materially prejudiced by such failure. If
the indemnifying party does not notify the indemnified party within 20 business
days following its receipt of such notice that the indemnifying party disputes
its liability to the indemnified party under Section 10(a) or 10(b), such claim
specified by the indemnified party in such notice shall be conclusively deemed a
liability of the indemnifying party under Section 10(a) or 10(b) and the
indemnifying party shall pay the amount of such liability to the indemnified
party on demand or, in the case of any notice in which the amount of the claim
(or any portion thereof) is estimated, on such later date when the amount of
such claim (or such portion thereof) becomes finally determined. If the
indemnifying party has timely disputed its liability with respect to such claim,
other than any claim relating to Taxes under Section 10(h) hereunder, the
indemnifying party and the indemnified party shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by
58
litigation in an appropriate court of competent jurisdiction.
(h) Procedures Relating to Indemnification of Tax Claims. Each party
-----------------------------------------------------
entitled to an indemnity payment with respect to Taxes pursuant to the
provisions of Section 10 herein (a "Tax Indemnified Party") agrees to give
written notice to the indemnifying party (the "Tax Indemnitor") of the receipt
of any written notice by the Tax Indemnified Party or an affiliate of such Tax
Indemnified Party (including, in the case where any Buyer is the Tax Indemnified
Party, the Company or its affiliates) which involves the assertion of any claim,
or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought within 10 days of such receipt or such earlier time as
would allow the Tax Indemnitor to timely respond to such claim, demand, action
or proceeding, and the Tax Indemnified Party shall give the Tax Indemnitor such
information with respect thereto as the Tax Indemnitor may reasonably request.
The Tax Indemnitor may discharge, at any time, its indemnity obligations by
paying the Tax Indemnified Party the amount of the applicable loss, calculated
on the date of such payment. The Tax Indemnitor may, at its own expense,
participate in and, upon notice to the Tax Indemnified Party, assume control of
the defense of any such claim, demand, suit, action or proceeding (including any
Tax audit). If the Tax Indemnitor elects to assume control of the defense, the
Tax Indemnitor shall have sole control over the conduct of the defense,
including the decision whether to settle, litigate, or pay and xxx for a refund,
but the Tax Indemnified Party shall be permitted to participate in any such
action and shall be kept fully informed about the progress of any such action;
provided, however, that, the Tax Indemnitor shall not admit any liability with
-------- -------
respect to or settle such claim, demand, action or proceeding without the Tax
Indemnified Party's prior written consent, which consent shall not be
unreasonably withheld. Whether or not the Tax Indemnitor chooses to defend or
prosecute any claim, all of the parties hereto shall cooperate in the defense or
prosecution thereof.
(i) Mitigation. Buyers and Seller shall cooperate with each other
-----------
with respect to resolving any claim or liability with respect to which one party
is obligated to indemnify the other party hereunder, including by making
commercially reasonably efforts to mitigate or resolve any such claim or
liability; provided that such
--------
59
party shall not be required to make such efforts if they would be detrimental in
any material respect to such party.
11. Tax Matters. All transfer, documentary, sales, use, registration
------------
and other such Taxes due pursuant to the laws of the United States or any
Governmental Entity within the United States (including all applicable real
estate transfer or gains Taxes) and related fees (including any penalties,
interest and additions to Tax) incurred in connection with this Agreement and
the transactions contemplated hereby (other than stock transfer Taxes) shall be
paid by the Company, and the Company, Seller and Buyers shall cooperate in
timely making all filings, returns, reports and forms as may be required to
comply with the provisions of such Tax laws.
12. Assignment. This Agreement and the rights and obligations
-----------
hereunder shall not be assignable or transferable by Buyers or Seller (including
by operation of law in connection with a merger, or sale of substantially all
the assets, of Buyers or Seller) without the prior written consent of the other
party hereto; provided, however, that Buyers may assign their rights to purchase
-------- -------
the Acquired Shares hereunder to a wholly-owned subsidiary of Buyers without the
prior written consent of Seller and upon the Closing, Buyers may assign as
collateral their rights to receive payment under Section 10 hereunder and the
Escrow Agreement to the Lender without the previous written consent of the
Seller; provided, further, that no such assignment shall limit or affect the
-------- -------
assignor's obligations hereunder. Any attempted assignment in violation of this
Section 12 shall be void.
13. No Third-Party Beneficiaries. Except as provided in Sections 7
-----------------------------
and 10, this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
14. Termination. (a) Anything contained herein to the contrary
------------
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(i) by mutual written consent of Seller and Buyers;
60
(ii) by Seller if any of the conditions set forth in Section 3(b)
shall have become incapable of fulfillment, and shall not have been waived by
Seller;
(iii) by Buyers if any of the conditions set forth in Section 3(a)
shall have become incapable of fulfillment, and shall not have been waived by
Buyers; or
(iv) by either party hereto, if the Closing does not occur on or
prior to July 31, 1996;
provided, however, that the party seeking termination pursuant to clause (ii),
-------- -------
(iii) or (iv) is not in breach in any material respect of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
(b) In the event of termination by Seller or Buyers pursuant to this
Section 14, written notice thereof shall forthwith be given to the other party
and the transactions contemplated by this Agreement shall be terminated, without
further action by either party. If the transactions contemplated by this
Agreement are terminated as provided herein:
(i) Buyers shall return all documents and other material received from
Seller or the Company or any Subsidiary relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to Seller;
(ii) all confidential information received by Buyers with respect to
the business of the Company and the Subsidiaries shall be treated in accordance
with the Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement;
(c) If this Agreement is terminated and the transactions contemplated
hereby are abandoned as described in this Section 14, this Agreement shall
become void and of no further force or effect, except for the provisions of (i)
Section 7(a) relating to the obligation of Buyers to keep confidential certain
information and data obtained by them, (ii) Section 16 relating to certain
expenses, (iii) Section 17 relating to attorney fees and expenses, (iv) Section
8(c) relating to publicity, (v) Section 23
61
relating to finder's fees and broker's fees and (vi) this Section 14. Nothing
in this Section 14 shall be deemed to release either party from any liability
for any breach by such party of the terms and provisions of this Agreement or to
impair the right of either party to compel specific performance by the other
party of its obligations under this Agreement.
15. Survival of Representations. The representations and warranties
----------------------------
in this Agreement and in any certificate delivered pursuant hereto shall survive
the Closing solely for purposes of Sections 10(a) and (b) and the
representations and warranties in Sections 4(b), (f), (i), (j), (l), (m), (n),
(o), (q), (r), (s) and (u) shall terminate at the close of business 60 days
after the delivery of the opinion with respect to the annual audit by the
Company's independent auditors of the financial statements of the Company for
the fiscal year ended March 31, 1997, but in no event later than August 31,
1997; provided, however, the representations and warranties in Sections 4(a),
-------- -------
(c), (d), (e), (g), (k), (p) and (t) will terminate on June 30, 1998, and the
representations and warranties in Section (h) will terminate after the
applicable periods of limitations have expired.
16. Expenses. Whether or not the transactions contemplated hereby
---------
are consummated, and except as otherwise specifically provided in this
Agreement, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
costs or expenses; provided, however, if the Transactions are consummated, the
-------- -------
Company shall (i) pay all costs and expenses related to the Borrowings, (ii) pay
all costs and expenses related to the services provided by Venable, Baetjer,
Xxxxxx & Xxxxxxxxx, Xxxxxx Xxxxxxxx & Co. and Xxxxxxxx Xxxxx Xxxxxx and Xxxxx,
(iii) pay the Buyers a transaction fee of $790,000, and (iv) reimburse the
Seller for expenses in the amount of $210,000 related to the Transactions.
17. Attorney Fees. A party in breach of this Agreement shall, on
--------------
demand, indemnify and hold harmless the other party for and against all
reasonable out-of-pocket expenses, including reasonable legal fees, incurred by
such other party by reason of the enforcement and protection of its rights under
this Agreement. The payment of such expenses is in addition to any other relief
to which such other party may be entitled.
62
18. Amendments. No amendment, modification or waiver in respect of
-----------
this Agreement shall be effective unless it shall be in writing and signed by
Seller and Centre Management.
19. Notices. All notices or other communications required or
--------
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by confirmed fax and sent, postage prepaid, by certified or express
mail or reputable overnight courier service and shall be deemed given when so
delivered by hand, confirmed faxed, or if mailed, ten days after mailing (three
business days in the case of express mail or overnight courier service), as
follows:
(i) if to Buyers or Centre Management,
Centre Capital Investors II, L.P.
c/o Centre Partners Management LLC
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: 212-332-5801
Attention: Xxxxxxxx Xxxxx
with a copy to:
Sidley & Austin
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
Attention: Xxxxx X. Xxxxxx; and
(ii) if to Seller,
Firearms Training Systems International N.V.
c/o Holland Intertrust (Antilles) N.V.
Landhuis Joonchi
Kaya Xxxxxxx X. Xxxxxxx z/n
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxx Antilles
Facsimile No.: 011-599-9-366-161
Attention: Xxxxxxx Xxxxx, Director
with a copy to:
Cravath, Swaine & Xxxxx
00 Xxxx Xxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
63
England
Fascimile No.: 011-44-171-860-1150
Attention: Xxxxx X. Xxxxxx
20. Interpretation; Exhibits and Schedules; Certain Definitions. (a)
------------------------------------------------------------
The headings contained in this Agreement, in any Exhibit or Schedule hereto and
in the table of contents to this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Any matter expressly set forth in any provision, subprovision, section or
subsection of the Disclosure Schedule hereto shall be deemed set forth for all
purposes of the Disclosure Schedule to the extent relevant. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Any capitalized
terms used in any Schedule or Exhibit but not otherwise defined therein, shall
have the meaning as defined in this Agreement.
(b) For all purposes hereof:
(i) "including" means including, without limitation;
(ii) "knowledge of Seller" means the knowledge after reasonable
inquiry of, Xxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxx Xxxxx, Xxxxx
Xxxxxxxx, Xxxx Xxxxxx, and/or Xxxx xx Xxxxxxx.
(iii) "knowledge of Buyers" means the knowledge after reasonable
inquiry of Xxxxxxxx X. Xxxxx, Xxxxx Xxxxxxxxx and Xxxx X. Xxxx; and
(iv) "person" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, Governmental Entity or other
entity.
21. Counterparts. This Agreement may be executed in one or more
-------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
22. Entire Agreement. This Agreement, the Escrow Agreement, the
-----------------
Stockholders Agreement and the
64
Confidentiality Agreement contain the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings relating to such subject matter. Neither
party shall be liable or bound to any other party in any manner by any
representations, warranties or covenants relating to such subject matter except
as specifically set forth herein, in the Escrow Agreement, the Stockholders
Agreement or in the Confidentiality Agreement.
23. Fees. Each party hereto hereby represents and warrants that no
-----
brokers or finders have acted for such party in connection with this Agreement
or the transactions contemplated hereby or may be entitled to any brokerage fee,
finder's fee or commission in respect thereof except Lazard Freres & Co. LLC on
behalf of Seller.
24. Severability. If any provision of this Agreement (or any portion
-------------
thereof) or the application of any such provision (or any portion thereof) to
any person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof (or the remaining
portion thereof) or the application of such provision to any other persons or
circumstances.
25. Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.
26. Consent to Jurisdiction and Service of Process. Any action, suit
----------------------------------------------
or claim arising out of or relating to this Agreement, or the Transactions shall
be instituted in any federal court of the State of New York or in any state
court located in the State of New York, and each party agrees not to assert, by
way of motion, as a defense or otherwise, in any such action, suit or
proceeding, any claim that it is not subject personally to the jurisdiction of
such court, that the action, suit or proceeding is brought in an inconvenient
forum, that the venue of the action, suit or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.
Each party further irrevocably submits to the jurisdiction of such court in any
such action, suit or proceeding. The Seller will appoint CT
65
Corporation, located at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, as such party's
authorized agent to accept and acknowledge on such party's behalf service of any
and all process that may be served in any such action, suit or proceeding
against the Seller. Any and all service of process and any other notice in any
such action, suit or proceeding shall be effective against any party given
personally or by registered or certified mail, return receipt requested, or by
any other means of mail that requires a signed receipt, postage prepaid, mailed
to such party as herein provided, or by personal service on the Agent with a
copy of such process mailed to such party by first class mail or registered or
certified mail, return receipt requested, postage prepaid. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any other jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
FIREARMS TRAINING SYSTEMS INTERNATIONAL N.V.,
by /s/ Xxxx Xxxxxxxxx
--------------------------
Name: Xxxx Xxxxxxxxx
Title: Director
FIREARMS TRAINING SYSTEMS, INC.
by /s/ Xxxxx Xxxxxx
---------------------------
Name: Xxxxx Xxxxxx
Title: Secretary
66
CENTRE CAPITAL INVESTORS II, L.P.,
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
by Centre Partners II, L.P. as general partner of
such partnerships
by Centre Partners Management
LLC, attorney-in-fact
by /s/ Xxxxxxxx X. Xxxxx
---------------------------
Xxxxxxxx X. Xxxxx
Managing Director
CENTRE PARTNERS COINVESTMENT, L.P.
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
by Centre Partners II, LLC, as general partner
by /s/ Xxxxxxxx X. Xxxxx
----------------------------
Xxxxxxxx X. Xxxxx
Managing Director
00
XXXXX XXXXX XX XXXXXXXXXXXXXX XX XXXXXXX
by Centre Parallel Management Partners, L.P., as
manager
by Centre Partners Management LLC, attorney-in-
fact
by /s/ Xxxxxxxx X. Xxxxx
----------------------------
Xxxxxxxx X. Xxxxx
Managing Director
CENTRE PARTNERS MANAGEMENT LLC
by /s/ Xxxxxxxx X. Xxxxx
----------------------------
Xxxxxxxx X. Xxxxx
Managing Director
68
Exhibit A
Number of Percentage of*
Shares* Aggregate Acquired
Buyer Entity to be Purchased Shares
------------ --------------- ------------------
Centre Capital Investors II, L.P. 225,412 33.5%
Centre Partners Coinvestment, L.P. 34,180 5.1%
Centre Parallel Management Partners, 3,484 0.5%
L.P.
Centre Capital Offshore 34,839 5.2%
Investors II, L.P.
Centre Capital Tax-exempt Investors 29,787 4.4%
II, L.P.
State Board of Administration of 344,903 51.3%
Florida
______________________
* Centre Partners Management LLC, as manager, may reallocate the percentage
of aggregate acquired shares and the number of shares to be purchased among the
Buyers and their affiliates.
