COMMON STOCK PURCHASE AGREEMENT
among
COMPUDYNE CORPORATION
CERTAIN OF THE SHAREHOLDERS OF TIBURON, INC.
and
TIBURON, INC.
TABLE OF CONTENTS
ARTICLE I SALE AND TRANSFER OF THE STOCK
1.1 Agreement to Purchase and Sell
1.2 The Sellers' Representative
ARTICLE II PURCHASE PRICE
2.1 Purchase Price
2.2 Preliminary Purchase Price
2.3 Closing Date Balance Sheet of the Company
2.4 Payment of Purchase Price
2.5 Allocation and Distribution of Purchase Price
ARTICLE III CLOSING
3.1 Time and Place
3.2 Deliveries at the Closing
3.3 Payment at the Closing
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
4.1 Corporate Organization
4.2 Capitalization; Ownership of Stock
4.3 No Subsidiaries
4.4 Authorization; Binding Agreement
4.5 Financial Statements and Undisclosed Liabilities
4.6 Inventory
4.7 Taxes
4.8 Environmental, Health and Safety Matters
4.9 Title to and Condition of Assets
4.10 Conduct of the Business
4.11 Patents, Trade Names, Trademarks and Copyrights
4.12 Contracts
4.13 Litigation
4.14 Insurance
4.15 Employee Benefit Plans
4.16 Personnel
4.17 Governmental and Other Approvals
4.18 Accounts Receivable
4.19 Brokerage
4.20 Labor Relations
4.21 Product Defects
4.22 Corporate Name
4.23 Prepayment of Liabilities
4.24 Compliance With the Foreign Corrupt Practices Act and Export
Control and Anti-Boycott Laws
4.25 Insider Interests
4.26 Disclosure
4.27 No Material Change
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLER
5.1 Authorization; Binding Effect
5.2 No Conflicts, etc.
5.3 Ownership of Stock
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.1 Corporate Organization
6.2 Authorization; Binding Effect
6.3 No Conflicts, etc.
6.4 Brokerage
ARTICLE VII COVENANTS
7.1 Access to Properties and Records
7.2 Furnishing Information; Announcements
7.3 Supplements to Schedules
7.4 Further Assurances
7.5 Conduct of Business of the Company Prior to the Effective
Date
7.6 Consents
7.7 Filings
7.8 Title Insurance
7.9 Consents Under Financing Documents
7.10 Employment of the Company Employees
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
8.1 Representations and Warranties True
8.2 Seller's Performance
8.3 Opinion of Counsel to the Sellers
8.4 Absence of Litigation
8.5 Resignation of Directors
8.6 Certificates
8.7 Non-Compete Agreements
8.8 Draft Closing Date Balance Sheet
8.9 Waivers of Claims Against the Company
8.10 Consent of Purchaser's Lenders
8.11 Evidence of Non-Competition and Confidentiality]
8.12 No Material Adverse Change
8.13 No Additional Shares of Common Stock
ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
9.1 Representations and Warranties True
9.2 The Purchaser's Performance
9.3 Opinion of the Purchaser's Counsel
9.4 Certificates
9.5 Absence of Litigation
ARTICLE X TERMINATION
10.1 Termination of the Agreement
10.2 Effect of Termination
ARTICLE XI MISCELLANEOUS
11.1 Expenses
11.2 Survival of Representations and Warranties
11.3 Indemnification
11.4 Section 338(h)(10) Election and Allocation
11.5 Headings
11.6 Notices
11.7 Assignment
11.8 Complete Agreement
11.9 Amendments and Waivers
11.10 Time of Essence
11.11 Counterparts
11.12 Parties in Interest
11.13 Accounting Terms
11.14 Governing Law
11.15 Mediation of Disputes
11.16 Knowledge Qualifiers
SCHEDULES
EXHIBITS
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT, dated as of the 10th day of
May, 2001 (the "Agreement"), by and among CompuDyne Corporation, a
Nevada Corporation (the "Purchaser") with its principal office at 0000
Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, Tiburon, Inc., a Virginia
corporation (the "Company") with its principal office at 00000 Xxxxx
Xxxxxx Xxxxx, Xxxxxxx, XX 00000, and each of the persons designated as
the Sellers on the signature page of this Agreement (collectively the
"Sellers").
W I T N E S S E T H:
WHEREAS, the Sellers are the record holders and beneficial owners
of shares of common stock of the Company, par value $0.10 per share
(hereinafter, the "Common Stock"); and
WHEREAS, the Sellers desire to sell and the Purchaser desires to
purchase the Sellers' shares of Common Stock of the Company;
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and of the representations, warranties,
covenants and agreements hereinafter contained, and intending to be
legally bound, the parties hereto agree as follows:
ARTICLE I
SALE AND TRANSFER OF THE STOCK.
1.1 Agreement to Purchase and Sell. The Purchaser agrees to buy
from each of the Sellers who will participate in the sale portion of the
transactions contemplated by this Agreement (the "Participating
Sellers", who are identified on Exhibit 1.1 to this Agreement) and each
of the Participating Sellers agrees to sell to the Purchaser, on the
Closing Date, as defined in Section 3.1, such Participating Seller's
pro rata share of a total of 625,000 Shares of Common Stock, par value
$0.10, (such total number of shares of Common Stock being referred to
herein as the "Shares"). Each Participating Seller's pro rata share of
the Shares shall be equal to the number of shares of Common Stock owned
by the Participating Seller which is set forth opposite the name of that
Participating Seller on Exhibit 1.1 hereto (the "Participating Seller's
Shares") divided by the sum of (i) the total number of Participating
Seller's Shares owned by all of the Participating Sellers and (ii) the
total number of shares tendered by the holders of the Company's
Common Stock (other than the Sellers) in response to the Purchaser's
tender offer made as provided in Section 7.14 hereof.
1.2 Agreements Regarding Merger. The Purchaser's obligations
under this agreement are contingent upon the execution by each of the
Sellers of an agreement ("Stockholders Agreement"), substantially in
the form as set forth in Exhibit 1.2A hereto, by which each Seller
agrees to vote all of each such Seller's shares of the Company's Capital
Stock in favor of a merger of the Company into a wholly-owned subsidiary
of the Purchaser (the "Merger"), pursuant to an Agreement and Plan of
Merger in form and substance substantially as set forth in Exhibit 1.2B
attached hereto (the "Merger Agreement").
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. In consideration for the Shares, the
Purchaser will pay a total purchase price (the "Purchase Price") of
Three Million Dollars ($3,000,000) in immediately available
funds. Such payment of the Purchase Price will be made on the Closing
Date. The specific amount of the Purchase Price payable to each of the
Participating Sellers shall be determined by multiplying $4.80 by the
aggregate number of shares sold to the Purchaser by that Participating
Seller.
ARTICLE III
CLOSING
3.1 Time and Place. The closing of the transactions contemplated
hereby (the "Closing") shall be held at the offices of the Purchaser,
0000 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx, xx or about June 15, 2001.
Subject to the provisions of Article X, failure to consummate the
transactions contemplated by this Agreement on the date determined
pursuant to this Section 3.1 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this
Agreement, but the Closing will occur as soon as practicable. The date
on which the Closing is scheduled to occur is referred to herein as the
"Closing Date".
3.2 Deliveries at the Closing. Subject to the provisions of
Articles VIII, IX and X hereof, at the Closing:
(a) There shall be delivered to the Purchaser and Ober,
Kaler, Xxxxxx & Xxxxxxx, counsel for the Sellers, the opinions,
certificates and other documents and instruments provided to be
delivered under Articles VIII and IX hereof.
(b) Each Participating Seller shall deliver to the Purchaser
stock certificates representing the Shares owned by such Participating
Seller, free and clear of liens, encumbrances and claims, together with
executed stock or other transfer powers sufficient to transfer those
Shares to the Purchaser on the Company's stock transfer books and any
spousal consents or waivers required to effectuate the transfer of the
stock to the Company.
3.3 Payment at the Closing. At the Closing, the Purchaser shall
deliver to the Participating Sellers the Purchase Price.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPALS
Except as set forth on the disclosure letter delivered by the
Company and the Principals, defined below, prior to the execution of this
Agreement (the "Company Disclosure Letter"), the Company, Xxxxx Xxxxxxx
("Xxxxxxx"), and Xxxxxx Xxxxx ("Xxxxx"; Xxxxxxx and Xxxxx are referred
to together as the "Principals"), jointly and severally, represents and
warrants to the Purchaser as of the date hereof as follows. All
references to schedules in this Article IV are intended as references to
Schedules of the Company Disclosure Letter:
4.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. The Company has full power and authority
(corporate and other) to own, operate and lease its properties and to
conduct its business in the manner in which and in the places where such
properties are owned, operated or leased and such business is now
conducted or proposed to be conducted. The Company is not in breach of
any provision of either of its articles of incorporation or by-laws,
complete and accurate copies of which are attached as Exhibit 4.1. The
minute books containing the records of meetings of the shareholders, the
board of directors and any committees of the board of directors, the
stock certificate books and the stock record books of the Company are
correct and complete.
The Company is duly qualified, licensed and authorized to do
business as a foreign corporation and is in good standing as a foreign
corporation in each jurisdiction listed on Schedule 4.1, and there is no
jurisdiction not so listed in which the ownership of the Company's
properties or the conduct of its business requires such qualification in
which the failure to so qualify would have a material adverse effect on
the Company's business or results of operations.
The Company has not received any written notice within the last
three years from the Secretary of State or comparable official of any
jurisdiction to the effect that the Company is required to be
qualified or otherwise authorized to do business therein, in which
jurisdiction the Company has not qualified or obtained such
authorization.
4.2 Capitalization; Ownership of Stock. The authorized capital
stock of the Company consists of twenty million (20,000,000) shares of
Common Stock, par value $0.10, four million six hundred forty five
thousand seventeen (4,645,017) shares of which are issued and
outstanding, two million forty nine thousand seven hundred fifty
eight (2,049,758) shares of which are reserved for issuance upon the
exercise of conversion rights, options or warrants and none of which are
held as treasury shares, and ten thousand (10,000) shares of 1997 6.0%
Cumulative Convertible Preferred stock, par value $100.00 (the "6.0%
Preferred Stock"), three thousand three hundred thirty four (3,334)
shares of which are outstanding and none of which are treasury shares,
twenty five thousand (25,000) shares of 6.5% Cumulative Convertible
Preferred Stock, par value $100.00 (the "6.5% Preferred Stock"), one
thousand four hundred (1,400) shares of which are outstanding and none
of which are treasury shares, and, subject to the completion of the
closing under the 7.5% Cumulative Convertible Preferred Stock Purchase
Agreement of even date herewith by and between the Company and the
Purchaser ("Preferred Stock Purchase Agreement:"), five hundred twenty
thousand eight hundred thirty three (520,833) shares of 7.5% Cumulative
Convertible Preferred Stock, par value $5.76 (the "7.5% Preferred
Stock"), all shares of which are outstanding, (collectively, the Common
Stock and the various series of preferred stock are referred to as the
"Capital Stock"). There are no other authorized shares of any other
class. All outstanding shares of Capital Stock have been validly issued
by the Company and are fully paid, non-assessable and free of preemptive
rights. Except as set forth in Schedule 4.2, no shares of Capital Stock
have been reserved for issuance for any purpose and there is no
subscription, option, warrant, call, right, contract, commitment,
understanding or arrangement relating to the issuance, sale or transfer
by the Company of any shares of Capital Stock including any right of
conversion or exchange under any outstanding security or other instrument
other than the Stockholders Agreements of even date herewith between the
Purchaser and the Sellers. The issuance and sale of all shares of
Capital Stock have been in full compliance with all applicable federal
and state securities laws. Each Seller holds of record the number of
shares of Common Stock and Preferred Stock, if any, set forth next to
his name in Schedule 4.2.
4.3 No Subsidiaries. Except as set forth on Schedule 4.3, the
Company has never owned, directly or indirectly, any capital stock or
other equity of any corporation or had any direct or indirect equity or
ownership interest in any other business entity. The Company is not
subject to any obligation or requirement to make any investment (in the
form of a loan, capital contribution or otherwise) in any entity.
4.4 Authorization; Binding Agreement. The Company has full power
and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby, and such action has been duly
authorized by all necessary action by the Company's shareholders
and board of directors. This Agreement constitutes and, when executed
and delivered, each of the other agreements to which the Company is a
party delivered or to be delivered to the Purchaser pursuant to this
Agreement will constitute, the valid and binding obligation of the
Company, enforceable against it in accordance with their respective
terms.
Except as set forth on Schedule 4.4, the execution, delivery and
performance of this Agreement or any other agreement, document or
instrument by the Company and the consummation of the transactions
contemplated hereby do not and will not with the passage of time or the
giving of notice or both:
(a) conflict with or result in a breach of any provision of
the articles of incorporation or by-laws of the Company;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or
accelerate or create in any person the right to accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties of the
Company under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, lease, contract, agreement or other instrument or commitment
or obligation to which the Company is a party or by which it or any of
its properties may be bound or affected; or
(c) violate any order, writ, injunction, decree, judgment or
ruling, or any law, rule or regulation of any court or governmental
authority, federal, state, local or foreign, applicable to the Company or
any of its properties, the violation of which would be material to the
Company.
4.5 Financial Statements and Undisclosed Liabilities. The Company
has delivered to the Purchaser audited Balance Sheets, income
statements, cash flow statements and statements of shareholder's equity
for the fiscal years ended June 30, 1997, June 30, 1998, June 30, 1999
and June 30, 2000, and the notes to such financial statements, as
prepared by the Company's accountants, PriceWaterhouse, n/k/a
PricewaterhouseCoopers. The Company has also delivered to the Purchaser
monthly balance sheets together with related statements of income,
shareholders' equity and cash flow as of the end of each of the nine
months ending March 31, 2001. All of such financial statements of the
Company are referred to collectively as the
"Financial Statements". The Financial Statements have been prepared
from and are in accordance with the books and records of the Company,
are true and correct and complete, and present fairly the financial
condition, results of operations and, except with respect to unaudited
interim financial statements, cash flows of the Company as of the dates
and for the periods indicated, in each case in conformity with GAAP
consistently applied during such periods, except as otherwise stated in
such financial statements or on Schedule 4.5, and except to the
extent that unaudited interim financial statements may be condensed or
summary statements and may omit footnotes to the extent permitted by
Rule 10.01(a)(5) of Regulation S-X of the Securities and Exchange
Commission. Except as and to the extent reflected in the Financial
Statements, the Company had at each such date no liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise and whether due or to become due). The books of account and
other financial records of the Company, all of which have been made
available to the Purchaser, are complete and correct and represent
actual, bona fide transactions and have been maintained in accordance
with sound business practices and the requirements of Section 13(b)(2)
of the Securities Exchange Act of 1934 (the "exchange Act"), including
the maintenance of an adequate system of internal controls. Attached to
Schedule 4.5 are complete and correct copies of all letters from the
Company's Auditors to the Company's board of directors or its audit
committee during the 36 months preceding the execution of this
Agreement, together with complete and correct copies of all responses
thereto.
4.6 [Intentionally Omitted]
4.7 Taxes.
(a) Except as disclosed on Schedule 4.7, the Company has
filed all income, franchise, sales and other tax returns, declarations,
statements and reports of every nature, including any schedule or
attachment thereto and including any amendment thereof ("Tax Return")
required to be filed by it accurately reflecting any and all taxes
owing to the United States or any other government or any subdivision
thereof, state or local, or any other taxing authority, and has paid in
full or made or will make adequate provision as part of its current
liabilities in the Financial Statements for the payment of all taxes
with respect to all tax periods ending on or before the Closing Date
(including penalties and interest) for which the Company has or may
have liability, whether or not shown on any Tax Return. The Company has
delivered or made available to the Purchaser copies of, and Schedule 4.7
contains a complete and accurate list of, all Tax Returns filed by the
Company since December 31, 1999. Except as disclosed on Schedule 4.7,
there is no unassessed tax deficiency proposed or to the knowledge of
the Company threatened against the Company. There are, and will
hereafter be, no net tax deficiencies (including penalties and interest)
of any kind assessed against or relating to the Company with respect to
any of the taxable periods ending on or before the Closing Date. The
Company is not currently the beneficiary of any extension of time within
which to file any Tax Return. Except as disclosed on Schedule 4.7,
no claim has ever been made to the Company by any authority in a
jurisdiction where the Company does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction.
(b) There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, state,
local or foreign tax return of the Company for any period. To the
Company's knowledge, the federal income tax returns of the Company have
never been audited by the Internal Revenue Service. To the Company's
knowledge, no state, local or foreign taxing authority has ever audited
any tax return or report filed therewith by the Company. Proper amounts
have been withheld by the Company from its employees, independent
contractors and other third parties in compliance with the tax
withholding provisions of all applicable federal, state, local,
foreign and other laws, and timely deposits have been made of all
payroll taxes due. Payment has been timely made by the Company of all
estimated income taxes and other taxes of any kind due.
The Company has not filed any consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. The Company has not made any payments, is not
obligated to make any payments and will not be so obligated by
reason of the transactions contemplated hereby, and is not a party to
any agreement that under certain circumstances could obligate it to make
any payments, that will not be deductible under Section 280G of the
Code. The Company has disclosed on its federal income tax returns all
positions taken therein that could give rise to an underpayment of
federal income tax to which Section 6662 of the Code applies. The
Company is not a party to any tax allocation or sharing agreement. The
Company has never been a member of an Affiliated Group within the
meaning set forth in Section 1504(a) of the Code.
4.8 Environmental, Health and Safety Matters
Except as disclosed in Schedule 4.8:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither the Company nor either of the
Principals has any basis to expect, nor has any of them received, any
actual or threatened order, notice, or other communication from (i) any
governmental authority or private citizen acting in the public
interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any Facility, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by the
Company, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
(b) There are no pending or, to the knowledge of the Company,
threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any Facility.
(c) Neither the Company nor either of the Principals has any
knowledge of or any basis to expect, nor has any of them, received, any
citation, directive, inquiry, notice, order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply with
any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any Facility, or with respect to
any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by
the Company have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
(d) The Company has no Environmental, Health, and Safety
Liabilities with respect to any Facility or, to the knowledge of the
Company, with respect to (i) any Facility, or (ii) any property
geologically or hydrologically adjoining any Facility.
(e) There are no Hazardous Materials present on or in the
Environment at any Facility or to the Company's knowledge, at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether
movable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of the
Facility or such adjoining property, or incorporated into any structure
therein or thereon. Neither the Company nor, to the knowledge of the
Company, any other person, has permitted or conducted, or is aware
of, any Hazardous Activity conducted with respect to any Facility except
in full compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the knowledge of the
Company, Threat of Release, of any Hazardous Materials at or from any
Facility, or to the knowledge of the Company any geologically or
hydrologically adjoining property, whether by the Company or any other
person.
(g) The Company has delivered to the Purchaser true and
complete copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance, by the Company or any other person for whose
conduct it is or may be held responsible, with Environmental Laws.
As used in this Section 4.8 and Section 6.6, the following
capitalized terms shall have the following meanings:
"Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters and ocean waters), groundwaters,
drinking water supply, stream sediments, ambient air (including indoor
air), plant and animal life, and any other environmental medium or
natural resource.
"Environmental, Health and Safety Liabilities" -- any cost,
damages, expense, liability, obligation, or other responsibility arising
from or under any Environmental Law or Occupational Safety and Health
Law, including those consisting of or relating to:
(a) any environmental, health, or safety matter or condition
(including on-site or off-site contamination, occupational safety and
health, and regulation of any chemical substance or product);
(b) any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand or response,
remedial, or inspection cost or expense (other than costs and expenses
of routine inspections) arising under any Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by any
Environmental Law or Occupational Safety and Health Law (whether
or not such Cleanup has been required or requested by any governmental
authority or any other person) and for any natural resource damages; or
(d) any other corrective or remedial measure required under
any Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
("CERCLA").
"Environmental Law" -- any statute, regulation or other legal
requirement that requires or relates to:
(a) advising appropriate authorities, employees, or the
public of intended or actual Releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and the commencement of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the Release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the Release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been Released,
preventing the threat of Release, or paying the costs of such clean up
or prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"Facilities" -- for purposes of Section 4.8, any real property,
leasehold or other interest in real property currently or formerly owned
or operated by the Company, including the tangible personal property
being used or operated by the Company at the respective locations of the
real property specified on Schedule 4.9; provided, that any
representation or warranty with respect to any Facility shall be limited
to the knowledge of the Company except to the extent related to the
period during which the Company owned or operated the Facility; and for
purposes of Section 6.6, any real property, leasehold or other interest
in real property currently or formerly owned or operated by the
Purchaser, including the tangible personal property being used or
operated by the Purchaser at the respective locations of any real
property owned or operated by the Purchaser.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or
use (including any withdrawal or other use of groundwater) of Hazardous
Material in, on, under, about, or from any of the Facilities or any part
thereof into the Environment, and any other act, business, operation, or
thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the
Facilities.
"Hazardous Materials" -- any substance that is or contains:
(a) any "hazardous substance" as now or hereafter defined in
Section 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA") (42 U.S.C.
Section 9601 et. seq.) or any regulations promulgated under CERCLA.
(b) any "hazardous waste" as now or hereafter defined in the
Resource Conservation and Recovery Act, as amended ("RCRA") (42 U.S.C.
Section 6901 et. seq.) or any regulations promulgated under RCRA.
(c) any substance now or hereafter regulated by the Toxic
Substances Control Act, as amended ("TSCA") (15 U.S.C. Section 2601 et.
seq.) or any regulations promulgated under TSCA.
(d) petroleum, petroleum by-products, gasoline, diesel fuel,
or other petroleum hydrocarbons.
(e) asbestos and asbestos-containing material, in any form,
whether friable or non-friable.
(f) polychlorinated biphenyls;
(g) lead and lead-containing materials;
(h) radon gas; or
(i) any additional substance, material or waste on, under or
related to any Facility which requires reporting, investigation or
remediation under any Environmental Laws (as hereinafter defined),
causes or threatens to cause a nuisance on such Facility or any
adjacent premises or poses or threatens to pose a hazard to the health
or safety of persons in or on such Facility or any adjacent premises; or
which, if it emanated or migrated from such Facility, could constitute a
trespass, or which is now or is hereafter classified or considered to be
hazardous or toxic under any Environmental Laws.
"Occupational Safety and Health Law" -- any statute, regulation or
other legal requirement designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards,
including the Occupational Safety and Health Act.
"Release" -- any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching, or migration on or into the Environment or into or
out of any property.
"Representative" -- with respect to a particular person, any
director, officer, manager, employee, agent, consultant, advisor,
accountant, financial advisor, legal counsel or other representative of
that Person.
"Threat of Release" -- a reasonable likelihood of a Release that
may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
4.9 Title to and Condition of Assets. The Company has (i) good,
valid and marketable title to all personal property relating to its
operations, business or properties, which it purports to own, including,
without limitation, Intellectual Property, as that term is defined in
Section 4.11 hereto, and (ii) to the knowledge of the Company, good,
valid and marketable leasehold estates to the leasehold premises
described on Schedule 4.9. All such properties which the Company
purports to own are held free and clear of all title defects and any
liens, pledges, claims, charges, security interests or other
encumbrances and are not, in the case of real property, subject to any
rights of way, building or use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever, except, with
respect to all such properties, real and personal, (a) as set forth in
Schedule 4.9, (b) liens for current taxes not yet due and assessments
not in default and (c) other liens and encumbrances incidental to the
conduct of its business or the ownership of its assets which were not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not in the aggregate materially detract
from the value of its assets or materially impair the use thereof in the
operation of its business. There are no claims adverse or challenges to
the title or ownership of any property which the Company purports to
own. Except as disclosed on Schedule 4.9, all personal property and all
buildings, structures and fixtures used by the Company in the conduct of
its business are in good operating condition (subject to normal
maintenance and repair) and the Company has not received any notice of
any violation (which has not been cured) of any building, zoning or
other law, ordinance or regulation in respect of such property or
structures or its use thereof.
Schedule 4.9 lists each lease (which term shall include subleases)
of real property to which the Company is a party, true copies of which
leases (including all amendments thereof and modifications thereto) have
been delivered to the Purchaser prior to the date hereof. All such
leases are valid and binding obligations of the Company and in full
force and effect; there are no material defaults by the Company or, to
the knowledge of the Company, the lessors thereunder; and no event has
occurred which (whether with or without notice, lapse of time or both)
would constitute a material default by the Company or, to the knowledge
of the Company, the lessors thereunder. To the knowledge of the
Company, no premises leased under any such lease are subject to any
lien, encumbrance, easement, right of way, building or use restriction,
exception, variance, reservation or limitation as might interfere with
or impair the present and continued use thereof in the usual and normal
conduct of the business of the Company. No party to any such lease has
repudiated any provision thereof and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
Except as disclosed on Schedule 4.9, all assets other than motor
vehicles owned, used, or operated by the Company are located at premises
listed on Schedule 4.9.
Except as disclosed on Schedule 4.9, to the knowledge of the
Company, there is no existing, proposed or contemplated, plan to modify
or realign any street or highway or any existing, proposed or
contemplated eminent domain proceeding that would result in the taking
of all or any part of any real property owned or leased by the Company
or that would prevent or hinder the continued use of such real property
as heretofore used in the conduct of the business of the Company.
Except as disclosed on Schedule 4.9, to the knowledge of the Company
there are no encroachments onto any such real property by any
improvements on any adjoining property. To the knowledge of the Company
there are no encroachments onto any adjoining property by any
improvements on such real property that have an adverse impact on the
present use of such adjoining property. There are no unpaid taxes,
local improvement levies, assessments (special, general or otherwise)
or bonds of any nature affecting any real property owned by the Company
or any portion thereof. All covenants, conditions, restrictions,
easements and similar matters affecting any real property owned by the
Company have been complied with by the Company. Neither this Agreement
nor anything provided to be done under this Agreement violates or will
violate any contract, document, understanding, agreement, arrangement or
instrument affecting any real property owned by the Company.
4.10 Conduct of the Business. The Company is not a party to, or
subject to or bound by, nor are any of its assets subject to or bound
by, any agreement, oral or written, or any statute or any judgment,
rule, regulation, order, writ, injunction or decree of any court or
governmental or administrative body, which prohibits or adversely
affects or, upon the consummation of the transactions contemplated
hereby, would prohibit or adversely affect: (i) the use of any or all
of the assets and property associated with, necessary to, or used or
employed in the business of the Company, or (ii) the conduct of such
business in the same manner as it has been conducted. Upon consummation
of the transactions contemplated by this Agreement, the Company will
continue to have all of the properties and rights necessary to conduct
its business in all respects in the same manner and at the same
production levels as such business has been conducted by it prior to the
Closing.
4.11 Intellectual Property. As used in this Agreement,
"Intellectual Property" shall mean (a) all computer software (including
without limitation, source code, data and related documentation), (b)
all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (c) all trademarks, service marks, trade dress,
logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all
goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (d) all copyrightable works, all
copyrights, and all applications, registrations, and renewals in
connection therewith, (e) all mask works and all applications,
registrations, and renewals in connection therewith, (f) all trade
secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof, in whatever form or medium.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
currently used in the operation of its business. With respect to
Intellectual Property previously incorporated by the Company into its
products, the Company owned or had the right to use pursuant to license,
sublicense, agreement or permission such Intellectual Property at the
time of its use by the Company. Except as set forth on Schedule
4.11(a), each item of Intellectual Property owned or used in connection
with the Company's business immediately prior to the Closing will be
owned or available for use by the Company on identical terms and
conditions immediately subsequent to the Closing. The transactions
contemplated in this Agreement will not require obtaining the consent of
any person to permit the continued use of the Intellectual Property.
The Company has taken all commercially reasonable steps to maintain and
protect each item of Intellectual Property that it owns or uses.
(b) The Company, in operating its business, has not, to the
knowledge of the Company, interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and has not received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation. To the knowledge of the
Company, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Company relating to its business.
(c) Schedule 4.11(c) identifies each patent or registration,
which has been issued to the Company, each trademark and service xxxx
registered by the Company, and each copyright filed by the Company with
respect to any of its Intellectual Property relating to its business,
identifies each pending patent, trademark and service xxxx application
or application for registration which the Company has made with respect
to any of its Intellectual Property relating to the Company's business,
and identifies each license, agreement, or other permission which the
Company has granted to any third party with respect to any of its
Intellectual Property relating to the Company's business. The Company
has delivered to the Purchaser correct and complete copies of all such
patents, trademarks, service marks, copyrights, registrations,
applications, licenses, agreements, and permissions, as amended to date,
and has made available to the Purchaser correct and complete copies of
all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. Schedule 4.11(c) also identifies each
trade name or unregistered trademark used by the Company or any of its
affiliates in connection with the Company's business. With respect to
each item of Intellectual Property required to be identified in Schedule
4.11(c), except as otherwise set forth in Schedule 4.11(c):
(i) the Company possesses all right, title, and interest
in and to the item, free and clear of any security interest, lien,
encumbrance, license, or other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of the Company, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) the Company has not agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(d) Schedule 4.11(d) identifies each item of Intellectual
Property that any third party owns and that is used in connection with
the Company's business pursuant to license, sublicense, agreement, or
permission, other than license agreements for standard "shrink wrapped,
off the shelf" commercially available products used by the Company.
The Company has delivered to Purchaser correct and complete copies
of all such licenses, sublicenses, agreements, and permissions. With
respect to each item of Intellectual Property required to be identified
in Schedule 4.11(d);
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, and binding obligation of the
Company;
(ii) the license, sublicense, agreement, or permission
will continue to be legal, valid, and binding, obligation of the Company
following the Closing;
(iii) neither the Company nor, to the knowledge of the
Company, any other party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default by the
Company or, to the knowledge of the Company, by any other person or
permit termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, to the knowledge of
the Company the representations and warranties set forth in subsections
(a) through (d) above are true and correct with respect to the
underlying license;
(vi) to the knowledge of the Company, the underlying item
of Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(vii) to the knowledge of the Company, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
is pending or, threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(viii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or
permission; and
(ix) to the knowledge of the Company, the transaction
contemplated by this Agreement will not require obtaining the consent of
any person relating to the continued use of the Intellectual Property by
the Company or the Purchaser.
(e) To the knowledge of the Company, the continued operation of
the Company's business will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties.
(f) The Company has no knowledge of any new products,
inventions, procedures, or methods of manufacturing or processing that
any competitors or other third parties have developed which reasonably
could be expected to supersede or make obsolete any product or process
that is material to the Company's business.
4.12 Contracts. Schedule 4.12 lists and briefly describes all of
the following contracts, commitments, plans, agreements, instruments,
arrangements and understandings (written or oral), bids and proposals,
including all amendments and supplements thereto, to which the Company
is a party (whether or not legally bound thereby),:
(a) Contracts or other understandings (whether oral or
written) for or regarding the employment of any officer or employee,
including, without limitation, terms, conditions and policies relating
to vacation and sick days, severance pay and incentive, sales
commissions and other bonuses which are not included in Schedule 4.16;
(b) Collective bargaining agreements and any other agreement
or contract with any labor union or other employees' association;
(c) Leases and agreements relating to real or personal
property;
(d) Bonus, pension, profit-sharing, retirement,
hospitalization, or insurance or similar plans or practices, formal or
informal which are not included in Schedule 4.15;
(e) Franchise, dealer, distribution, sales and agency
contracts and commitments;
(f) Contracts of sale and distribution agreements creating
any obligation of the Company to sell or distribute services or
products;
(g) Guarantees and indemnities, direct or indirect, current
or contingent of the obligations of customers or any other person or
entity;
(h) Contracts with suppliers, vendors, distributors, clients,
customers or others for the future performance of services or provision
of goods by or for the Company, and bids and proposals for such
contracts and in each case, in the event that the contract is for the
purchase of goods and services, involving an amount in excess of
$50,000 and, in the event that the contract is for the provision of
goods or services by the Company, involving an amount in excess of
$250,000;
(i) Insurance policies;
(j) Advertising contracts and commitments;
(k) Bank accounts, lock box and similar depository
arrangements;
(l) License agreements (as licensor or licensee) which are
not included in Schedule 4.11;
(m) Loan or credit agreements with lenders, real estate
mortgages, indentures, pledges, conditional sale or title retention
agreements, equipment obligations and leases, and lease purchase
agreements;
(n) Contracts purporting to limit the freedom of the Company
or any of its employees to compete in any line of business or in any
geographic area;
(o) Agreements concerning a partnership or joint venture;
(p) Agreements concerning confidentiality or noncompetition;
(q) Agreements granting options or warrants to purchase
shares of the Company's common stock. With respect to the agreements
set forth in this subsection (q), Schedule 4.12 shall list the name of
the holder of the option or warrant, the number of shares of the
Company's common stock which such holder is entitled to purchase with
the option or warrant and the exercise and vesting terms for each
option or warrant.
(r) Agreements relating to the issuance by the Company of
preferred stock; and
(s) Agreements relating to any and all outstanding
performance and bid bonds.
Except as set forth on Schedule 4.12, each contract, commitment,
plan, agreement, instrument, arrangement, understanding, bid and
proposal required to be listed in Schedule 4.12 is the valid and binding
obligation of the Company and, to the knowledge of the Company, any
other party thereto, enforceable in accordance with its respective terms
and conditions.
Except as set forth on Schedule 4.12, no contract required to be
set forth on Schedule 4.12 requires the consent of any other person, in
order to remain the binding obligation of such person, to the
acquisition of the Shares by the Purchaser, and to the extent that such
consent is required, such consent has been obtained and is in full force
and effect.
Except as set forth on Schedule 4.12, the Company is not a party
to any lease relating to personal property which cannot be terminated
by it, without penalty, on 30 days' notice.
Neither the Company nor, to the knowledge of the Company, any other
party thereto is in violation of or in default in respect of or has
failed in any material respect to perform any obligation under or
repudiated any provision of any such contract, commitment, plan,
agreement, instrument, arrangement, understanding, bid or proposal, and
nothing has occurred which with lapse of time or the giving of notice or
both would constitute a breach or default by the Company, or, to the
knowledge of the Company, any other party thereto or which would cause
acceleration of any obligation of the Company or, to the knowledge of
the Company, any other party thereto or the creation thereunder of any
lien, encumbrance or security interest in or upon the properties or
assets of the Company. The Purchaser has been furnished with true
copies of all items listed on Schedule 4.12 which are identified on
Schedule 4.12 as having been so furnished.
Except as set forth on Schedule 4.12, there is no outstanding power
of attorney executed on behalf of the Company.
4.13 Litigation. Except as set forth on Schedule 4.13, there is no
action, suit, claim, demand, investigation or proceeding pending or, to
the knowledge of the Company, threatened against, relating to or
affecting the Company or its business or which would in any way affect
the transactions contemplated by this Agreement, and to the knowledge
of the Company there is no basis for any of the foregoing. No order,
writ, injunction or decree has been issued by or requested of any court
or governmental agency which might result in any adverse change in the
business, property or assets or in the condition, financial or
otherwise, of the Company or which might adversely affect the
transactions contemplated by this Agreement. The Company has not
been subject to any bankruptcy or other insolvency proceedings.
4.14 Insurance. The Company is and has been insured by insurers
unaffiliated with the Company, with respect to its properties and
businesses in such amounts and against such risks as are customary with
respect to properties and businesses comparable to those of the Company.
Schedule 4.14 hereto lists all insurance policies (including title
insurance) of the Company, showing (a) the issuer, (b) risk insured, (c)
expiration date, (d) annual premium, (e) dollar amount of coverage and
(f) dollar amount of deductible or retention. The insurance coverage
provided by such policies will not in any material respect be affected
by, and will not terminate or lapse by reason of, the transactions
contemplated by this Agreement. Except as set forth on Schedule 4.14,
at no time has the Company been denied any insurance or indemnity bond
coverage which it has requested or made any material reduction in the
scope or amount of, or paid a substantially increased premium for, or
substantially increased any deductible under, any of its insurance
coverage, and no insurance carrier has cancelled or reduced any
insurance coverage for the Company or given any notice or other
indication of its intention to do so.
4.15 Employee Benefit Plans. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not constitute a violation of, or give rise to
any liability under, Title I of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder ("ERISA") or Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code"). Schedule 4.15 contains a
complete and correct list of all "employee benefit plans" as defined by
Section 3(3) of ERISA, all specified fringe benefit plans as defined in
Section 6039D of the Code, and all other bonus, incentive compensation,
deferred compensation, profit sharing, stock option, stock appreciation
right, stock bonus, stock purchase, employee stock ownership (including,
without limitation, the Tiburon, Inc. Employee Stock Ownership Plan),
savings, severance, change in control, supplemental unemployment,
layoff, salary continuation, retirement, pension, health, life
insurance, disability, accident, group insurance, vacation, holiday,
sick leave, fringe benefit or welfare plan, including any Section 125 or
so-called "cafeteria" plan, and any other employee compensation or
benefit plan, agreement, policy, practice, commitment, contract, or
understanding (whether qualified or nonqualified, currently effective or
terminated, written or unwritten), and any trust, escrow or other
agreement related thereto, that (i) is maintained or contributed to by
the Company or any other corporation or trade or business controlled by,
controlling, or under common control with the Company (within the
meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of
ERISA) (an "ERISA Affiliate") or has been maintained or contributed to
in the last six years by the Company or any ERISA Affiliate, or with
respect to which the Company or any ERISA Affiliate has or may have
any liability, and (ii) provides benefits, or describes policies or
procedures applicable to any current or former director, officer,
employee, or service provider of the Company or any ERISA Affiliate, or
the dependents of any thereof, regardless of how (or whether) liabilities
for the provision of benefits are accrued or assets are acquired or
dedicated with respect to the funding thereof (collectively the "Employee
Plans"). Schedule 4.15 identifies as such any Employee Plan
that is
a "Defined Benefit Plan" (as defined in Section 414(l) of the
Code),
a plan intended to meet the requirements of Section 401(a) of
the Code,
a "Multiemployer Plan" (as defined in Section 3(37) of ERISA),
or
a plan subject to Title IV of ERISA, other than a
Multiemployer Plan.
Also set forth in Schedule 4.15 is a complete and correct list of
all of the Company's ERISA Affiliates during the last six years. Except
as set forth on Schedule 4.15, no such plan, policy, practice, agreement
or arrangement has been previously maintained or contributed to by the
Company whose "date of termination" (within the meaning of Section 4048
of ERISA) occurred after September 1, 1974.
To the extent necessary or appropriate for the proper operation and
administration of each of the Employee Plans, the participant and
beneficiary records of each plan accurately state the employment history
of each participant and beneficiary in connection with such plan and
accurately state the data from which there may be calculated the
benefits earned by and owed to each such person under such plan.
With respect to each of the Employee Plans, the Company has
delivered or has otherwise made available to Parent for inspection and
copying, a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and to the extent
applicable of: (i) the plan; (ii) any related trust agreement or other
funding instrument; (iii) the most recent determination letter, if
applicable; (iv) any summary plan description and other written
communications (or a description of any oral communications) by the
Company or its ERISA Affiliates to their employees concerning the extent
of the benefits provided under the Employee Plans; and (v) for the three
most recent years (A) the Form 5500 and attached schedules, (B)
audited financial statements, (C) actuarial valuation reports and (D)
attorney disclosures of "loss contingencies" in response to an auditor's
request for information.
Except as set forth in Schedule 4.15:
(a) None of the Employee Plans is a "multiemployer plan" as
that term is defined in Section 3(37) of ERISA or a "defined benefit
plan" as that term is defined in Section 3(35) of ERISA, no Employee
Plan provides retiree welfare benefits, and neither the Company nor its
ERISA Affiliates has any obligation to provide any retiree welfare
benefits except as required under Section 4980B of the Code or part
6 of Title I of ERISA.
(b) Neither any of the Employee Plans, nor any trust created
thereunder nor any trustee or administrator thereof, has engaged in a
transaction in connection with which any of the Employee Plans, any such
trust, or any trustee or administrator thereof, or any party dealing
with the Employee Plans or any such trust, could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA, or a tax
imposed by Section 4975 of the Code.
(c) Full payment has been made of all amounts which the
Company is required to pay under the terms of each of the Employee Plans
pursuant to applicable law and GAAP, consistently applied, as a
contribution to the Employee Plans as of the last day of the most recent
fiscal year of each of the Employee Plans ended prior to the date
of this Agreement and no accumulated funding deficiency or liquidity
shortfall (as those terms are defined in Section 302 of ERISA and
Section 412 of the Code) has been incurred with respect to any such
Employee Plan, whether or not waived. As to each of the Employee Plans
to which Section 4021(a) of the Code applies, the present value of
the assets of such plan equal or exceed the amount of all benefit
liabilities (determined on a plan termination basis using the actuarial
assumptions established by the PBGC as of the Closing Date) of such
Employee Plan.
(d) All reports, returns and disclosures relating to the
Employee Plans required to be filed or distributed to participants have
been timely filed or distributed in all material respects in compliance
with applicable law.
(e) Except as set forth on Schedule 4.15, other than claims
in the ordinary course for benefits under the Employee Plans, there is
no action, suit, claim or proceeding pending or to the knowledge of the
Company threatened, nor does there exist any basis therefor, which would
result in the imposition of any liability on any Employee Plan or on the
Company with respect to any such plan.
(f) Except as set forth on Schedule 4.15, each of the
Employee Plans is intended to be and has been written to comply with all
applicable laws, including but not limited to the Code and ERISA and has
been interpreted, administered and operated in all material respects in
accordance with the written Employee Plan documents, the respective
summaries thereof provided to the employees of the Company and is in
operational compliance in all material respects with all applicable
laws and regulations.
(g) Except as set forth on Schedule 4.15, as to each of the
Employee Plans to which Section 401(a) of the Code applies, the plan is
"qualified" within the meaning of Section 401 of the Code, each related
trust is exempt from tax under Section 501(a) of the Code, and an
application for a favorable determination letter for such plan as most
recently amended (a copy of which application is appended to Schedule
4.15 as an exhibit) has been made to the Internal Revenue Service. To
the knowledge of the Company, there are no factors which would adversely
affect the qualified status of any such Employee Plan.
(h) The Company has, at all times, complied, and currently
complies, in all material respects with the applicable continuation
requirements for its welfare benefit plans, including (1) Section 4980B
of the Code (as well as its predecessor provision, Section 162(k) of the
Code) and Sections 601 through 608, inclusive, of ERISA, which
provisions are hereinafter referred to collectively as "COBRA" and
(2) any applicable state statutes mandating health insurance
continuation coverage for employees.
(i) Except as set forth on Schedule 4.15, the consummation
of the transactions contemplated hereby will not create or accelerate
any right to receive benefits or the payment thereof under any Employee
Plan.
(j) Except as required under this Agreement or as set forth
on Schedule 4.15, during the period from June 30, 2000 through the date
hereof, there has not been (a) any acceleration, amendment or change of
the period of exercisability or vesting of any Company Stock Options
under the Option Plan (including any discretionary acceleration of the
exercise periods or vesting by the Board of Directors or any committee
thereof or any other persons administering an Option Plan) or
authorization of cash payments in exchange for any Company Stock Options
under such Option Plan, (b) any adoption or material amendment by the
Company or any of its subsidiaries of any Employee Plans, except as
required by law, or (c) any adoption of, or amendment to, or change in
employee participation or coverage under, any Employee Plans which
would increase materially the expense of maintaining such Employee Plans
above the level of the expense incurred in respect thereof for the
fiscal year ended on June 30, 2000. Neither the execution and delivery
of this Agreement nor the consummation of the transactions
contemplated hereby will (either alone or in conjunction with any
other event) result in, or cause the accelerated vesting or delivery of,
or increase the amount or value of, any payment or benefit to any
employee of the Company.
4.16 Personnel. Schedule 4.16 lists, to the extent not listed on
Schedule 4.15, all plans, contracts, agreements, programs and policies,
whether written or oral, relating to, and all information referred to
in, the following items: (a) all employment, savings, bonus, profit
sharing, percentage compensation, deferred compensation, severance pay,
pension, employee benefit, welfare and retirement plans, contracts and
agreements in each such case with directors, officers or employees, all
stock purchase and option plans, contracts and agreements, all
consulting agreements, and all labor union and collective bargaining
agreements, to which the Company is a party or is subject; (b) the names
and current salaries of all directors, officers, and division managers
of the Company; (c) the wage rates for non-salaried and non-executive
salaried employees of the Company by classification; (d) any increase
since June 30, 2000 in the compensation payable or to become payable by
the Company, or any bonus, percentage compensation, service award or
other similar benefit granted, made or accrued to the credit of,
any officer, director, employee, agent or consultant thereof except for
such as are payable to employees (other than officers and directors)
pursuant to (i) regular compensation reviews in accordance with past
practice (but not across the board general salary increases) or (ii)
employment agreements in effect on June 30, 2000; (e) all group
insurance programs in effect for employees of the Company; and (f) since
June 30, 2000, any contribution to any profit sharing or other employee
benefit plan. The Company is not in default with respect to any of its
obligations listed above. Except as set forth in Schedule 4.16, the
Company is not and will not be, by reason of anything done in connection
with (or within a period of time measured from) the execution of this
Agreement or the consummation of the transactions contemplated hereby,
liable to any employees of the Company for any amount of severance pay
or for any other payments which are or become payable in an increased
amount by reason of the consummation of the transactions contemplated
hereby. Except as set forth on Schedule 4.16, no employee of the
Company has been paid compensation in any form or other amounts in
any form where the payment has been discretionary and not pursuant to a
binding legal obligation of the Company. To the knowledge of the
Company, no officer, director, agent, employee, consultant or
contractor of the Company is bound by any agreement that purports to
limit the ability of such person (i) to engage in or continue or perform
any conduct, activity, duties or practice relating to the business of
the Company or (ii) to assign to the Company or to any other person any
rights to any invention, improvement or discovery.
Except as set forth on Schedule 4.16, there are no accrued
liabilities under any plans, programs, policies or practices maintained
by the Company on behalf of any of its employees which are not provided
for on the books of the Company and reflected in the March 31, 2001
Balance Sheet or which have not been fully (on an actuarial basis, or
plan termination basis, where appropriate) provided for by insurance
contracts, premiums on which are currently paid in full, or by
contributions to one or more trusts established to fund the plan,
program, policy or practice in question.
The qualifications of each employee of the Company for employment
under applicable immigration laws have been reviewed, a properly
completed Form I-9 is on file with respect to each such employee, and
the Company is in compliance with the Immigration Reform and
Control Act of 1986, as amended.
4.17 Governmental and Other Approvals. Except as set forth on
Schedule 4.17 hereto, all requisite consents, authorizations, licenses,
permits, orders, certificates and approvals of all governmental
authorities or other parties necessary for the Sellers to consummate
the transactions contemplated by this Agreement will be obtained as of
the Closing Date. Except as set forth on Schedule 4.17 hereto, the
Company has all consents, authorizations, licenses, permits, orders,
certificates, registrations or qualifications required under applicable
law or regulation, federal, state and local, necessary to the ownership
of all of its assets and to the operation of its business as presently
conducted. ("Consent"). The Company's business has been, and is
being, conducted in compliance with all applicable Consents, laws,
ordinances, orders or other rules or regulations. Each Consent is
valid and in full force and effect. To the Company's knowledge, no
event has occurred or circumstance exists that may constitute or
result directly or indirectly in a violation of any term or requirement
of any Consent or in the revocation, withdrawal, suspension,
cancellation or termination of, or modification to, any Consent. The
Company has not received any notice or communication regarding any
violation or potential violation of any Consent or regarding any actual
or proposed revocation, withdrawal, suspension, cancellation,
termination of or modification to any Consent. All applications
required to have been filed for the renewal of each Consent have been
duly filed in a timely basis. Neither the Company nor either Principal
has any expectation that, based upon the operations of the Company to
date, any customer, supplier or other person will not maintain its
relationship with the Company as previously maintained and conducted
after the date hereof and the Closing Date.
4.18 Accounts; Accounts Receivable. The Company's Costs and
Estimated Earnings in Excess of Xxxxxxxx ("Costs in Excess") and
Xxxxxxxx in Excess of Costs and Estimated Earnings ("Xxxxxxxx in
Excess") as reflected on the March 31, 2001 balance sheet have been
properly calculated in accordance with GAAP and in a manner that is
consistent with prior practices. To the Company's knowledge, (i) the
underlying assumptions related to the cost to complete projects under
contract as of such date are reasonable and (ii) any estimates related
to the cost to complete projects under contract as of such date have
been prepared in a manner to properly reflect the total costs to
complete all such projects taken in the aggregate. The Purchaser
acknowledges that material changes may occur in the estimates related
to the cost to complete projects under contract and that materially
adverse changes in such estimates have frequently occurred in connection
with completed projects. All of the accounts receivable of the Company
arose in the ordinary course of business and represent accounts validly
due for goods sold or services rendered and are validly incurred
indebtedness on the part of those obligated thereon and are not subject
to counterclaim or set-off other than with respect to credits which
arose in the ordinary course of business.
4.19 Brokerage. The Company has not dealt directly or indirectly
with any broker or finder in connection with the transactions
contemplated herein.
4.20 Labor Relations. There is no unfair labor practice complaint
pending or, to the knowledge of the Company, threatened against the
Company nor any basis therefor. There is no proceeding pending or, to
the knowledge of the Company, threatened before the National Labor
Relations Board that arises out of or pertains to the business of the
Company nor any basis therefor. The Company has not experienced any
work stoppage or other labor difficulty or any unionization attempt over
the last five years except as set forth in Schedule 4.20. Except as set
forth on Schedule 4.20, there is no discrimination charge (relating to
sex, age, race, national origin, handicap or veteran status) pending
before any federal or state agency or authority nor any basis therefor,
and there is no labor strike or similar dispute or labor arbitration
proceeding pending or to the knowledge of the Company or any Seller
threatened against or involving the Company nor any basis therefor that
arises out of or pertains to the business of the Company. There is no
outstanding demand for union representation of employees of the Company.
No representation question is pending before the National Labor
Relations Board involving any attempt to organize a bargaining unit
including any employees of the Company, and no labor grievance has been
filed within the past 12 months with the Company that arises out of or
pertains to its business. Except as set forth on Schedule 4.20, the
Company is not a party to any collective bargaining agreement and is not
currently negotiating a collective bargaining agreement with respect to
its employees.
4.21(a) Product Warranty. With the exception of breaches of
contracts or warranties that are correctable and normally encountered
in the ordinary course of business, each product and service licensed,
manufactured, sold, leased, or delivered to a customer of the Company
in connection with the Company's business has been provided in
conformity with all applicable contractual commitments and all express
and implied warranties, and the Company has no liability (and has no
knowledge of any basis) for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
for replacement or repair thereof or other damages in connection
therewith. Except as set forth on Schedule 4.21(a), no product or
service licensed, manufactured, sold, leased, or delivered in connection
with the Company's business is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and conditions of
license, sale or lease. Schedule 4.21(a) sets forth the standard terms
and conditions of license, sale or lease, including warranties, pursuant
to which the Company licenses, sells or leases its products.
(b) Product Liability. The Company presently has no
liability (and, to the knowledge of the Company, there is no basis for
any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against it giving rise to any
liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered in connection with the Company's business.
(c) Product Defects. There is no defect in the design,
source codes, production or manufacture of the software and/or other
products currently manufactured or sold by the Company not correctable
and normally encountered in the ordinary course of the Company's
business which would or could reasonably be expected to adversely affect
the safety, performance or quality of such products. There is no defect
in the design, source codes, production or manufacture of the software
and/or other products sold by the Company prior to the Closing Date not
correctable and normally encountered in the ordinary course of the
Company's business which would or could reasonably be expected to
adversely affect the safety, performance or quality of such products.
Except as set forth on Schedule 4.21, there are no warranties concerning
the products sold by the Company either currently or prior to the
Closing Date.
4.22 Corporate Name. Except as disclosed on Schedule 4.22, (a) no
other person or business has received from the Company the right to use,
nor is there any person or business using, any corporate name of the
Company, any tradename set forth in Schedule 4.11, or any variant
thereof, singly or in combination with any other term, and (b) no
person or business has attempted to restrain the Company from using any
such name or any variant thereof, singly or in combination with any
other term.
4.23 Prepayment of Liabilities. Except as disclosed on Schedule
4.23, the Company has no liability for borrowed money which cannot be
prepaid at any time without penalty.
4.24 Compliance With the Foreign Corrupt Practices Act and
Export Control and Anti-Boycott Laws
(a) The Company and, to the knowledge of the Company, its
directors, officers, employees, agents, contractors and other
representatives have not, to obtain or retain business, directly or
indirectly made any illegal contribution, gift, bribe, rebate, payoff,
influence, payment, kickback, or other payment to:
(i) any person who is an official, officer, agent, employee
or representative of any governmental body, or of any existing or
prospective customer (whether government-owned or non-government-owned);
(ii) any political party or official thereof;
(iii) any candidate for political or political party
office; or
(iv) any other individual or entity.
(b) Except as set forth on Schedule 4.24, the Company has
made all payments to third parties by check mailed to such third
parties' principal place of business or by wire transfer to a bank
located in the same jurisdiction as such party's principal place of
business.
(c) Each transaction is properly and accurately recorded on
the books and records of the Company, and each document on which entries
in the Company's books and records are based is complete and accurate
in all respects. The Company maintains a system of internal accounting
controls adequate to insure that the Company maintains no off-the-books
accounts and that the Company's assets are used only in accordance with
the Company's management directives.
(d) The Company has at all times been in compliance with all
statutes, regulations and other legal requirements relating to export
control and trade embargoes. No product sold or service provided by the
Company during the last five years has been, directly or indirectly, sold
to or performed on behalf of Cuba, Iraq, Iran, Libya, or North Korea.
(e) The Company has not violated the anti-boycott
prohibitions contained in 50 U.S.C. Section 2401 et seq. or taken any
action which can be penalized under Section 999 of the Code. Except as
set forth in Schedule 4.24, during the last five years, the Company has
not been a party to, is not a beneficiary under, and has not performed
any service or sold any product under, any contract under which a
product has been sold to customers in Bahrain, Iraq, Jordan, Kuwait,
Lebanon, Libya, Oman, Quatar, Saudi Arabia, Sudan, Syria, United Arab
Emirates, or the Republic of Yemen.
4.25 Insider Interests. Except as disclosed on Schedule 4.25, to
the Company's knowledge no present or former officer or director or
"affiliate" or "associate" (as such terms are defined in Rule 405 under
the Securities Act) of the Company has (a) any interest in any property
used in or pertaining to the business of the Company, (b) any
contract, commitment, arrangement or understanding with the Company
other than those listed on Schedule 4.16 or (c) any equity interest
(other than an investment in a publicly held corporation not exceeding
one percent (1%) of the outstanding capital stock of such corporation)
with any customer, competitor or supplier of the Company.
4.26 Disclosure. No representation or warranty made by the Company
or either Principal in this Article 4, and no statement contained
elsewhere in this Agreement or in any schedule, exhibit, certificate,
instrument or agreement delivered or to be delivered by the Company or
either Principal to the Purchaser contains or will contain any untrue
statement of fact or omits or will omit to state a material fact or
any fact necessary to make the statements contained herein or therein
not materially misleading. All material facts known to the Company
relative to the business, operations, properties, assets, liabilities
(whether accrued, absolute, contingent or otherwise), financial
condition and prospects of the Company have been disclosed to the
Purchaser by the Company and the Sellers. Nothing in any Schedule to
this Agreement shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless such Schedule identifies
the exception with particularity and describes the relevant facts in
detail.
4.27 No Material Change. Since June 30, 2000, except as disclosed
in any schedule or Financial Statements delivered by the Company to the
Purchaser prior to the execution of this Agreement and incorporated
herein, the Company has not (a) suffered any damage, destruction or loss
(whether or not covered by insurance) exceeding $50,000 in the
aggregate, (b) had any materially adverse change in its condition
(financial or other), operations, business, business outlook or property
(and no event has occurred that may result in such a material adverse
change) or (c) done anything which, if done between the date hereof and
the Closing Date, would violate any provision of Section 7.5 hereof.
4.28 Conduct of Business. Except as set forth on Schedule 4.28
or in any schedule or Financial Statements delivered by the Company to
the Purchaser prior to the execution of this Agreement and incorporated
herein, since June 30, 2000 the Company has not (i) incurred any
indebtedness for borrowed money; (ii) entered into any agreement
requiring the maintenance of a specified net worth; (iii) assumed,
guaranteed, endorsed or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
individual, firm or corporation; (iv) made any loans, advances or
capital contributions to, or investments in, any other individual, firm
or corporation; (v) mortgaged, pledged or otherwise subjected to any
lien any of its assets or property; (vi) made any tax election or
settled or compromised any federal, state, local or foreign income tax
liability; (vii) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business, consistent with past
practices, of liabilities reflected or reserved against in the June 30,
2000 balance sheet or incurred in the ordinary course of business
consistent with past practices since the date thereof, (viii) cancelled,
compromised, waived or released any right or claim outside the ordinary
course of business or involving in the aggregate more than $25,000, (ix)
increased the rate or terms (including, without limitation, any
acceleration of the right to receive payment) of compensation payable or
to become payable by the Company to, or made any other change in
the terms of employment of, or made any loan to, or entered into any
other transaction outside the ordinary course of business with, any of
its directors, officers or employees, (x) declared or paid any
dividend, declared payment, declared any split or made any other
distribution (whether in cash, stock, property or any combination
thereof) in respect of the Common Stock, or purchased, acquired or
redeemed any shares of the Common Stock, or (xi) issued any stock
options or warrants for the purchase of Common Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller separately represents and warrants to the Purchaser as
of the date hereof as set forth below in this Article V:
5.1 Authorization; Binding Effect. Such Seller has all necessary
right, power, authority and legal capacity to enter into this Agreement
and to consummate the transactions contemplated hereby. All acts and
other proceedings required to be taken by such Seller to authorize the
execution and delivery 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 such Seller and
constitutes and, when executed and delivered, each of the other
agreements to which such Seller is a party delivered or to be delivered
to the Purchaser pursuant to this Agreement will constitute, a valid and
binding obligation of such Seller enforceable against such Seller in
accordance with its terms. Such Seller is not and will not be required
to give any notice to or obtain any consent from any person in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
5.2 No Conflicts, etc. Neither the execution and delivery by such
Seller of this Agreement nor the consummation by such Seller of the
transactions contemplated hereby nor compliance by such Seller with any
of the provisions hereof will (a) violate, conflict with or result in a
breach of any provision of, or, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required
by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties of such Seller under, or
result in being declared void, voidable or without further binding
effect, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease,
contract, agreement or other instrument or commitment or obligation to
which such Seller is a party or by which such Seller or any of his
properties may be bound or affected, (b) violate any order, writ,
injunction, decree, judgment, law, rule, regulation or ruling of any
court or governmental authority, federal, state, local or foreign,
applicable to such Seller or any of his properties or (c) require any
consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority except as
disclosed on Schedule 5.2.
5.3 Ownership of Stock. Such Seller has good and valid title to,
and is the sole beneficial owner of, the shares of Common Stock set
forth next to his name on Schedule 4.2 free and clear of any
restriction on transfer, claims, taxes, security interests, options,
warrants, rights, contracts, calls, commitments, equities and demands.
Such Seller is not a party to any option, warrant, right, contract,
call, put or other agreement or commitment providing for the disposition
or acquisition of any Common Stock (other than this Agreement or as set
forth on Schedule 5.3). Except as set forth on Schedule 5.3, other than
the Stockholder's Agreement of even date herewith between the Purchaser
and such Seller, there is no voting trust, proxy or other agreement or
understanding with respect to the voting of any of the Common Stock.
5.4. Brokerage. Such Seller has not dealt directly or indirectly
with any broker or finder in connection with the transactions
contemplated herein, and such Seller agrees to indemnify and hold the
Purchaser harmless in connection with any claim for commissions or other
compensation made by any broker or finder claiming to have been
employed by or on behalf of such Seller or the Company in connection
with the transactions contemplated herein
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Except as set forth on the disclosure letter delivered by the
Purchaser to the Company prior to the execution of this Agreement (the
"Purchaser Disclosure Letter"), the Purchaser represents and warrants to
the Sellers and the Company as of the date hereof as follows. All
references to schedules in this Article VI are intended as references
to Schedules of the Purchaser Disclosure Letter:
6.1 Corporate Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada with full power and authority (corporate and other) to
own, operate and lease its properties and to conduct its business in the
manner in which and in the places where such properties are owned or
operated or leased and such business is now conducted.
6.2 Authorization; Binding Effect. The Purchaser has full
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The Board of Directors
of the Purchaser has duly authorized the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
and no other corporate proceedings on the part of the Purchaser are
necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This
Agreement constitutes and, when executed and delivered, each of the
other agreements to which the Purchaser is a party delivered or to be
delivered to the Company or the Sellers pursuant to this Agreement will
constitute, a valid and binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms.
6.3 No Conflicts, etc. Neither the execution and delivery by the
Purchaser of this Agreement nor the consummation by the Purchaser of the
transactions contemplated hereby nor compliance by the Purchaser with
any of the provisions hereof will (a) conflict with or result in a
breach of any provision of the charter or by-laws of the Purchaser, (b)
violate, conflict with or result in a breach of any provision of, or,
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or
in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties of the
Purchaser under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, lease, contract, agreement or other instrument or commitment
or obligation to which the Purchaser is a party or by which it or any of
its properties may be bound or affected, (c) violate any order, writ,
injunction, decree, judgment, law, rule, regulation or ruling of any
court or governmental authority, federal, state, local or foreign,
applicable to the Purchaser or any Purchaser subsidiary or any of their
respective properties, the violation of which would be material to the
Purchaser and its subsidiaries, taken as a whole or (d) require any
consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority except as
disclosed on Schedule 6.3 hereto.
6.4 Brokerage. The Purchaser has not dealt directly or indirectly
with any broker or finder in connection with the transactions
contemplated herein and the Purchaser agrees to indemnify and hold the
Company and each of the Sellers harmless in connection with any claims
for commissions or other compensation made by any broker or finder
claiming to have been employed by or on behalf of the Purchaser in
connection with the transactions contemplated hereby.
6.5 Taxes.
(a) Except as disclosed on Schedule 6.5, the Purchaser has
filed all income, franchise, sales and other tax returns, declarations,
statements and reports of every nature, including any schedule or
attachment thereto and including any amendment thereof ("Purchaser Tax
Return") required to be filed by it accurately reflecting any and
all taxes owing to the United States or any other government or any
subdivision thereof, state or local, or any other taxing authority, and
has paid in full or made or will make adequate provision as part of its
current liabilities in the Financial Statements for the payment of all
taxes with respect to all tax periods ending on or before the Closing
Date (including penalties and interest) for which the Purchaser has or
may have liability, whether or not shown on any Purchaser Tax Return.
The Purchaser has delivered or made available to the Company copies of,
and Schedule 6.5 contains a complete and accurate list of, all Purchaser
Tax Returns filed by the Purchaser since December 31, 1999. Except as
disclosed on Schedule 6.5, there is no unassessed tax deficiency
proposed or to the knowledge of the Purchaser threatened against the
Purchaser. There are, and will hereafter be, no net tax deficiencies
(including penalties and interest) of any kind assessed against or
relating to the Purchaser with respect to any of the taxable periods
ending on or before the Closing Date. The Purchaser is not currently
the beneficiary of any extension of time within which to file any Tax
Return. Except as disclosed on Schedule 6.5, no claim has ever been
made to the Purchaser by any authority in a jurisdiction where the
Purchaser does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(b) There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, state,
local or foreign tax return of the Purchaser for any period. The
federal income tax returns of the Purchaser were last audited by the
Internal Revenue Service for the fiscal year ended December 31, 1984.
To the Purchaser's knowledge, no state, local or foreign taxing
authority has ever audited any tax return or report filed therewith by
the Purchaser. Proper amounts have been withheld by the Purchaser from
its employees, independent contractors and other third parties in
compliance with the tax withholding provisions of all applicable
federal, state, local, foreign and other laws, and timely deposits have
been made of all payroll taxes due. Payment has been timely made by the
Purchaser of all estimated income taxes and other taxes of any kind due.
The Purchaser has not filed any consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. The Purchaser has not made any payments, is
not obligated to make any payments and will not be so obligated by
reason of the transactions contemplated hereby, and is not a party to
any agreement that under certain circumstances could obligate it to make
any payments, that will not be deductible under Section 280G of the
Code. The Purchaser has disclosed on its federal income tax returns all
positions taken therein that could give rise to an underpayment of
federal income tax to which Section 6662 of the Code applies. The
Purchaser is not a party to any tax allocation or sharing agreement.
The Purchaser has never been a member of an Affiliated Group within the
meaning set forth in Section 1504(a) of the Code.
6.6 Environmental, Health and Safety Matters
Except as disclosed in Schedule 6.6:
(a) The Purchaser is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. The Purchaser has no basis to expect,
nor has it received, any actual or threatened order, notice, or other
communication from (i) any governmental authority or private citizen
acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or
threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any
Facility, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by the Purchaser, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(b) There are no pending or, to the knowledge of the
Purchaser, threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities
or arising under or pursuant to any Environmental Law, with respect to
or affecting any Facility.
(c) The Purchaser has no knowledge of or any basis to expect,
nor has it received, any citation, directive, inquiry, notice, order,
summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to any
Facility, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used,
or processed by the Purchaser have been transported, treated, stored,
handled, transferred, disposed, recycled or received.
(d) The Purchaser has no Environmental, Health, and Safety
Liabilities with respect to any Facility or, to the knowledge of the
Purchaser, with respect to (i) any Facility, or (ii) any property
geologically or hydrologically adjoining any Facility.
(e) There are no Hazardous Materials present on or in the
Environment at any Facility or to the Purchaser's knowledge, at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether
movable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of the
Facility or such adjoining property, or incorporated into any structure
therein or thereon. Neither the Purchaser nor, to the knowledge of the
Purchaser, any other person, has permitted or conducted, or is aware
of, any Hazardous Activity conducted with respect to any Facility except
in full compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the knowledge of the
Purchaser, Threat of Release, of any Hazardous Materials at or from any
Facility, or to the knowledge of the Purchaser any geologically or
hydrologically adjoining property, whether by the Purchaser or any other
person.
(g) The Purchaser has delivered to the Company true and
complete copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Purchaser pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance, by the Purchaser or any other
person for whose conduct it is or may be held responsible, with
Environmental Laws.
6.7 No Registration Under Securities Act. The Purchaser
understands that the Shares to be purchased by it at the Closing
pursuant to the terms of this Agreement will not be registered under
the Securities Act of 1933 (the "Securities Act"), in reliance upon
exemptions contained in the Securities Act or interpretations thereof,
and cannot be offered for sale, sold or otherwise transferred unless the
Shares being acquired hereunder subsequently are so registered or
qualify for exemption from registration under the Securities Act.
6.8 Acquisition for Investment. The Shares are being acquired
under this Agreement by the Purchaser in good faith solely for its own
account, for investment and not with a view toward distribution within
the meaning of the Securities Act. The Shares will not be offered for
sale, sold or otherwise transferred by the Purchaser without either
registration or exemption from registration under the Securities Act.
6.9 Accredited Investor. The Purchaser is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act.
ARTICLE VII
COVENANTS
7.1 Access to Properties and Records. Between the date of this
Agreement and the Closing Date, the Company will provide the Purchaser
and its accountants, counsel and other authorized representatives
reasonable access to any and all premises, properties, contracts,
commitments, books, records and other information (including, without
limitation, tax returns filed and those in preparation and litigation
and correspondence files) of the Company and will cause its officers
and their independent certified public accountants and counsel to
furnish to the Purchaser and its authorized representatives any and all
financial, technical and operating data, including monthly financial
statements accompanied by the certification of the Company's Chief
Financial Officer, and other information pertaining to the business of
the Company as the Purchaser shall from time to time request.
7.2 Furnishing Information. The Company and the Sellers will
furnish to the Purchaser and the Purchaser will furnish to the Sellers,
promptly after the execution and delivery hereof, all the information
concerning any party or the transactions contemplated hereby requested
by the Purchaser or the Sellers, as the case may be, for inclusion in
any statement or application made or to be made by the Purchaser or the
Sellers to any governmental body in connection with the transactions
contemplated by this Agreement. Following the execution of this
Agreement, Purchaser shall make all such filings as required by the
federal securities laws, including information as may be required in
Item 5 of the Form 8-K Current Report with the Securities and Exchange
Commission. At all times at or before the Closing, Sellers, the
Company and the Purchaser will not issue or make any reports, statements
or releases generally to the employees, customers, suppliers or other
persons to whom the Company sells goods or provides services or with
whom the Company otherwise has significant business relationships with
respect to this Agreement or the transactions contemplated hereby
without the consent of the others
7.3 Supplements to Schedules. From time to time prior to the
Closing Date, the parties hereto each will promptly supplement or amend
any Schedules delivered pursuant to this Agreement (a) if any matter
hereafter arises which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Schedule or (b) if it becomes necessary to correct any information in
any such Schedule which has become inaccurate. A supplement or amendment
to any such Schedule shall not be effective to modify any supplemented
or amended Schedule for purposes of the indemnification provisions of
Section 11.3, and no such supplement or amendment shall be considered in
determining satisfaction of the conditions set forth in Article VIII or
IX of this Agreement.
7.4 Further Assurances. Consistent with the terms and conditions
hereof, each party hereto agrees to use his, her or its best efforts to
execute and deliver such instruments and take, or cause to be taken,
such other action as is necessary or appropriate in order to satisfy the
conditions set forth in Articles VIII and IX hereof and to carry out
this Agreement and the transactions contemplated hereby as promptly as
practicable and to obtain in a timely manner all waivers, consents and
approvals of, and to make all filings with and notifications to, any
third parties as are necessary in order to consummate the transactions
contemplated by this Agreement.
7.5 Conduct of Business of the Company Prior to the Closing Date.
The Company agrees and, with respect to the last clause of paragraph (c)
below and paragraph (d) below, each Seller, severally and not jointly,
agrees that from the date hereof until the Closing Date and except as
otherwise consented to or approved by an authorized officer of the
Purchaser in writing or as required by this Agreement:
(a) The business, operations, activities and practices of the
Company shall be conducted only in the ordinary course and consistent
with past practice and prudent business practice and in full compliance
with applicable law;
(b) No change shall be made in the charter or by-laws of the
Company, other than pursuant to the Preferred Stock Purchase Agreement;
(c) Other than pursuant to the Preferred Stock Purchase
Agreement, (i) no change shall be made in the number of shares of
authorized or issued capital stock of the Company, and (ii) no option,
warrant, call, right, commitment or agreement of any character shall be
granted or made by the Company relating to its authorized or issued
capital stock; nor shall the Company issue, grant or sell any securities
or obligations convertible into shares of capital stock of the
Company; nor shall any Seller transfer any Stock except as a result of
death;
(d) Neither the Company nor any of its officers, directors or
agents nor any Seller will, directly or indirectly, through any
representative or otherwise, solicit or entertain offers from, negotiate
with or in any manner encourage, discuss, accept, or consider any
proposal of any other person relating to the acquisition of the
Company's Common Stock, assets or business, in whole or in part, whether
directly or indirectly, through purchase, merger, consolidation, or
otherwise (other than sales of inventory in the normal course)(any such
transaction referred to hereinafter as an "Acquisition"); provided
however, that the Company's Board of Directors may, to the extent
reasonably necessary in the exercise of its fiduciary duties, entertain
bona fide offers relating to an Acquisition (where bona fide offers
include only offers of Acquisition for a stated amount with respect to
which the potential acquirer has demonstrated financial capacity to
consummate the offer). The Company will immediately notify the
Purchaser regarding any contact between the Company or its
representatives and any other person regarding any such offer or
proposal or any related inquiry;
(e) the Company will not (i) incur any indebtedness for
borrowed money other than the current line of credit with Civic Bank;
(ii) enter into any agreement requiring the maintenance of a specified
net worth other than under the current line of credit with Civic Bank;
(iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other individual, firm or corporation; (iv) make any
loans, advances or capital contributions to, or investments in, any
other individual, firm or corporation; (v) mortgage, pledge or otherwise
subject to any lien any of its assets or property; (vi) make any tax
election or settle or compromise any federal, state, local or foreign
income tax liability; (vii) pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) other than the payment, discharge
or satisfaction in the ordinary course of business, consistent with
past practices, of liabilities reflected or reserved against in the
March 31, 2001 balance sheet or incurred in the ordinary course of
business consistent with past practices since the date thereof, (viii)
cancel, compromise, waive or release any right or claim outside the
ordinary course of business or involving in the aggregate more than
$25,000, (ix) increase the rate or terms (including, without
limitation, any acceleration of the right to receive payment) of
compensation payable or to become payable by the Company to, or make any
other change in the terms of employment of, or make any loan to, or
enter into any other transaction outside the ordinary course of business
with, any of its directors, officers or employees, or (x) declare or pay
any dividend or declare payment or make any other distribution (whether
in cash, stock, property or any combination thereof) in respect of the
Common Stock, or purchase, acquire or redeem any shares of the
Common Stock;
(f) the Company will use its best efforts to preserve its
business organization intact, to keep available to itself the present
services of its employees, and to preserve for itself the goodwill of
its suppliers, customers and others with whom business relationships
exist;
(g) the Company will not make or amend or cancel any
contracts of the nature required to be disclosed in writing pursuant to
Article IV hereof other than in the ordinary course of business,
consistent with past practice;
(h) the Company will notify the Purchaser as soon as
practicable after the receipt of any notice that it has not performed
all the current and past obligations involving $25,000 or more to be
performed by it under any contract, agreement, commitment or instrument
to which it is a party;
(i) the Company will not take, agree to take, or knowingly
permit to be taken any action or do or knowingly permit to be done
anything in the conduct of its business, or otherwise, which would be
contrary to or in breach of any of the terms or provisions of this
Agreement, or (except as otherwise contemplated by this Agreement
including by this Section 7.5) which would cause any of the
representations or warranties of the Company or the Sellers contained
herein to be or become untrue or which would require any amendment or
supplement to any Schedule; and
7.6 Consents. Each of the parties will use his, her or its best
efforts to obtain all permits, approvals, authorizations and consents of
all governmental authorities and other third parties necessary or
desirable (a) for the consummation of the transactions contemplated
hereby and (b) for the continuing conduct after the Closing of the
business of the Company as conducted by such entities in the ordinary
course of business and consistent with past practices.
7.7 Filings. As promptly as practicable after the date hereof,
the Purchaser and the Sellers will file all documents and notifications
with governmental or regulatory bodies which in the opinion of the
Purchaser are necessary or appropriate for the consummation of the
transactions contemplated hereby.
7.8 Election of Directors. The Sellers shall take all actions
reasonably necessary (a) to cause the Company's Board of Directors to
nominate Xxxxxx X. Xxxxxxx and Xxxxxxx Xxxxxx ("CompuDyne Nominees") to
serve as Directors of the Company as of the Closing Date for terms of
service to be the shorter of eighteen months or until such time as the
Purchaser waives its rights under the Stockholders Agreements
contemplated in Section 1.2 hereof, and (b) to hold a meeting of
shareholders to vote upon such nominations. In addition, the Sellers
shall cause the size of the Company's Board of Directors (the "Board")
to be limited to seven (7) Directors, the balance of which, after
the nomination and election of the CompuDyne Directors, shall include
two (2) Directors who are employee officers of the Company and three (2)
Directors who are independent (but who may be existing non-employee
members of the Board). At the meeting of the Company's shareholders at
which the election the CompuDyne Nominees will be voted upon, each of
the Sellers shall vote all of his, her or its shares in favor of
electing the CompuDyne Nominees to the Company's Board of Directors (the
"Board").
7.9 Committee Appointments. The Company shall form an Executive
Committee to continue for the shorter of eighteen months or until such
time as the Purchaser waives its rights under the Stockholders
Agreements contemplated in Section 1.2 hereof and will appoint Xxxxx X.
Xxxxxxx and Xxxxxx X. Xxxxxxx as the only members of such committee.
The Company shall further authorize the Executive Committee to create
an Operations Consultant position to review and monitor the Company's
operations, the specific duties of which are to be defined by the
Executive Committee. The creation of, and delegation of duties to, the
Executive Committee shall be as set forth in an amendment to the
Company's By-laws in form and substance as set forth in Exhibit 7.9
attached hereto.
7.10 Cooperation. The Company, the Sellers and the Purchaser shall
take all commercially reasonable actions in a timely manner necessary or
convenient in order to effect the satisfaction of the conditions to the
obligations of the Purchaser contained in Article VIII hereof and the
conditions to the obligations of the Company and the Sellers contained
in Article IX hereof.
7.11 Agreements Regarding Merger. As set forth in Section 1.3
hereof, the Sellers agree to execute the Stockholders Agreement by which
each Seller agrees to vote all of each such Seller's shares of the
Company's Capital Stock in favor of the Merger.
7.12 [Intentionally Omitted]
7.13 Amendment of Articles of Incorporation and Bylaws. The
Company and each of the Sellers agree to take any and all steps
necessary to cause the Company's Articles of Incorporation and Bylaws to
be amended such that, as amended, the Articles of Incorporation and
Bylaws will be substantially in the form attached hereto as Exhibits
7.13 and 7.9, respectively.
7.14 Purchase of Common Stock. The Purchaser will make a tender
offer ("Offer to Purchase") to all holders of the Company's Common Stock
other than Sellers ("Offerees") to purchase from each Offeree a pro rata
portion of the Shares at a price of $4.80 per share of Common Stock.
The Offer to Purchase shall be substantially in the form as set forth in
Exhibit 7.14 hereto. Each Offeree's pro rata portion of the Shares
shall be equal to the number of shares of Common Stock tendered by
such Offeree divided by the sum of (i) the total number of Participating
Sellers' Shares and (ii) the total number of shares tendered by all
Offerees.
7.15 Vote of the Board of Directors and the Sellers. The Board of
Directors has approved the Merger Agreement and recommended approval of
same to the Sellers. Pursuant to the Stockholders Agreements, the
Sellers have agreed to vote by written consent to approve the Merger
Agreement and the Merger in their capacity as stockholders of the
Company. At least five (5) days prior to the action of the Sellers by
their written consent, the Company shall give notice to all of its
stockholders of the action to be taken by consent by the Sellers with
respect to the Merger Agreement.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on
or prior to the Closing Date, of each of the following conditions, each
of which may be waived by the Purchaser except as otherwise provided by
law:
8.1 Representations and Warranties True. The representations and
warranties of the Company and the Sellers contained in this Agreement
shall be true and correct as of the date hereof and shall be deemed to
have been made again at and as of the time of the Closing and shall then
be true and correct, except as a result of (i) actions taken by any
person or entity as expressly permitted hereby or (ii) any matters which
in the aggregate have not had and will not have a material adverse
effect on the business, properties, assets, results of operations,
condition (financial or otherwise) or prospects of the Company or the
value of or title to the Stock that the Purchaser has agreed to
purchase pursuant hereto, and at the Closing the Sellers shall have
delivered to the Purchaser a certificate to that effect signed by the
President and the Chief Financial Officer of the Company and by each of
the Sellers.
8.2 Sellers' Performance. Each of the obligations of the Company
and of each of the Sellers to be performed on or before the Closing
pursuant to the terms of this Agreement shall have been duly performed
by the Closing and at the Closing the Company shall have delivered to
the Purchaser a certificate to that effect signed by the President and
the Chief Financial Officer of the Company and by each of the Sellers.
8.3 Opinion of Counsel to the Company and the Sellers. The
Purchaser shall have been furnished with the opinions of Ober, Kaler,
Xxxxxx & Xxxxxxx and Xxxxxxx & Xxxxxx, counsel to the Company and the
Sellers ("Counsel for the Sellers"), dated the Closing Date, in the
forms attached hereto as Exhibit 8.3.
8.4 Absence of Litigation. No order, decree or ruling of any court
shall have been entered and no action or proceeding before any court or
governmental or regulatory authority or body shall have been instituted
or threatened by any governmental or regulatory authority challenging the
transactions contemplated hereby.
8.5 Certificates. The Company and the Sellers shall have
furnished the Purchaser with such certificates to evidence compliance
with the conditions set forth in this Article VIII or otherwise
facilitating the consummation of the transactions contemplated hereby as
may be requested by the Purchaser.
8.6 Balance Sheet. The Company shall have timely delivered to the
Purchaser the Balance Sheet as of March 31, 2001.
8.7 Waivers of Claims Against the Company. The Purchaser shall
have received from each Seller and from each other person who is
currently serving as a director or officer of the Company , a waiver, in
form and substance acceptable to the Purchaser, of any and all claims
against the Company, whether in connection with this Agreement and the
transactions contemplated hereby or otherwise, other than (i) claims
for liabilities reflected in the balance sheet as of March 31, 2001,
or incurred in the ordinary course of business subsequent thereto, and
(ii) claims for indemnification.
8.8 Consent of Purchaser's Lenders. The Purchaser shall have
received consent to the consummation of the transactions contemplated
in this Agreement, including without limitation the financing thereof,
from its lender, LaSalle National Bank (or any replacement or
supplemental financing source).
8.9 Evidence of Non-Competition and Confidentiality. The Purchaser
shall have received non-disclosure agreements from all managers and
other key employees of the Company.
8.10 No Material Adverse Change. The Company shall have suffered
no material adverse change in its business or condition, financial or
otherwise, from that previously disclosed to the Purchaser.
8.11 Due Diligence. Purchaser shall have completed its due
diligence review to the reasonable satisfaction of both Purchaser and
its counsel.
8.12 Appointment of Directors. The Sellers shall have taken
all action reasonably necessary to cause the Company Board of Directors
to nominate Xxxxxx X. Xxxxxxx, and Xxxxxxx Xxxxxx ("CompuDyne Nominees")
to serve as Directors of the Company as of the Closing Date and the
CompuDyne Nominees shall have been elected to serve as Directors of the
Company and the balance of the members of the Board shall have been
elected as contemplated in Section 7.8.
8.13 Amendment to By-laws and Articles of Incorporation. The
Sellers shall have taken all steps necessary to cause the Company to
have adopted, and the Company shall have adopted, the amendment to the
Company's Articles of Incorporation and By-laws described in Sections
7.9 and 7.13 hereof and Exhibits 7.9 and 7.13 attached hereto, and
Messrs. Xxxxxxx and Xxxxxxx shall have been appointed to the Company's
Executive Committee as contemplated in Section 7.9 hereof.
8.14 Execution of Agreements Regarding Merger. The Sellers shall
have executed the Stockholders Agreement, by which each Seller agrees to
vote all of each such Seller's shares of the Company's Capital Stock in
favor of the Merger.
8.15 Conditions to Preferred Stock Purchase Agreement. Any and
all of the conditions to the obligation of the Purchaser to consummate
the transactions contemplated in the Preferred Stock Purchase Agreement
shall have been satisfied.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE SELLERS
The obligation of the Company and each of the Sellers to consummate
the transactions contemplated by this Agreement shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, each of which may be waived by the Company and the Sellers
as provided herein, except as otherwise provided by law:
9.1 Representations and Warranties True. The representations and
warranties of the Purchaser contained in this Agreement shall be true
and correct in all material respects as of the date hereof and shall be
deemed to have been made again at and as of the Closing Date and shall
then be true and correct in all material respects (except as otherwise
contemplated by this Agreement), and at the Closing the Purchaser shall
have delivered to Counsel for the Sellers a certificate to that effect
signed by any two duly authorized officers.
9.2 The Purchaser's Performance. Each of the obligations of the
Purchaser to be performed by it on or before the Closing pursuant to the
terms hereof shall have been duly performed and complied with by the
Closing and at the Closing the Purchaser shall have delivered to the
Company and Counsel for the Sellers a certificate to that effect signed
by any two duly authorized officers.
9.3 Opinion of the Purchaser's Counsel. The Company and Counsel
for the Sellers shall have been furnished with the opinion of Xxxxx
Xxxxxx & Xxxxxx, LLP, counsel to the Purchaser, dated the Closing Date,
in the form attached hereto as Exhibit 9.3.
9.4 Certificates. The Purchaser shall have furnished the Company
and Counsel for the Sellers with such certificates of its officers and
others to evidence compliance with the conditions set forth in this
Article IX as may be reasonably requested by the Company or the Sellers.
9.5 Absence of Litigation. No order, decree or ruling of any
court shall have been entered and no action or proceeding before any
court or governmental or regulatory authority or body shall have been
instituted by any governmental or regulatory authority challenging the
consummation of the transactions contemplated hereby.
9.6 Indemnification for Personal Guarantees. The Purchaser shall
have indemnified Xxxxx Xxxxxxx and Xxxxxx Xxxxx ("Guarantors") in
accordance with that certain Indemnity Agreement-Existing Obligations in
form and substance as set forth in Exhibit 9.6 attached hereto.
9.7 Closing on Purchase of Preferred Stock. The Purchaser and
Company shall have satisfied all of the conditions necessary to permit
the closing of the purchase by the Purchaser of the Company's 7.5%
Preferred Stock pursuant to the terms of the Preferred Stock Purchase
Agreement simultaneously with the Closing of the transaction
contemplated by this Agreement.
9.8 Tender Offer. The Purchaser shall have accepted for payment
the Shares tendered to the Purchaser as contemplated in Section 7.14 and
made provision for payment for the Tender Shares in accordance with the
requirements applicable to the tender offer.
ARTICLE X
TERMINATION
10.1 Termination of the Agreement. This Agreement may be
terminated at any time prior to the Closing Date:
(a) by the mutual consent of the Purchaser and the Sellers; or
(b) by the Purchaser if any of the conditions set forth in
Article VIII hereof shall have become impossible to fulfill for reasons
beyond the control of the Purchaser, and shall not have been waived by
the Purchaser; or
(c) by the Sellers, if any of the conditions set forth in
Article IX hereof shall have become impossible to fulfill for reasons
beyond the control of the Sellers, and shall not have been waived by the
Sellers; or
(d) by the Purchaser, if there shall have been a material
misrepresentation or breach of warranty in the representations and
warranties of the Company or the Sellers set forth in this Agreement; or
(e) by the Purchaser, if a material breach of any provision of
this Agreement has been committed by the Company or any Seller and shall
not have been waived by the Purchaser; or
(f) by the Sellers, if a material breach of any provision of
this Agreement has been committed by the Purchaser and shall not have
been waived by the Sellers; or
(g) by the Purchaser, if the Closing has not occurred on or
before May 31, 2001, or such later date as the Purchaser and the Sellers
may agree upon, unless the Purchaser is in material breach of this
Agreement; or
(h) by the Sellers, if the Closing has not occurred on or
before May 31, 2001 or such later date as the Sellers and the Purchaser
may agree upon, unless any Seller or the Company is in material breach
of this Agreement.
10.2 Effect of Termination. Each party's right of termination
under Section 10.1 is in addition to any other rights it may have under
this Agreement or otherwise, and the exercise of such right of
termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 10.1, all obligations of the parties
under this Agreement will terminate; provided, however, that if this
Agreement is terminated because of a breach of this Agreement by the
non-terminating party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied
as a result of the other party's failure to comply with its obligations
under this Agreement, the terminating party's right to pursue all legal
remedies will survive such termination unimpaired.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Except as otherwise indicated 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 expenses.
11.2 Survival of Representations and Warranties. The respective
representations and warranties, obligations, covenants and agreements of
the parties contained herein or in any schedule or certificate delivered
pursuant hereto shall survive the Closing and continue in full force and
effect, regardless of any knowledge or reason to know which any party
may have had with respect to any misrepresentation or breach of warranty
or covenant at the time of the Closing. The representations and
warranties of the Purchaser shall expire on the date two years after the
Closing Date. The representations and warranties of the Company and
each of the Sellers shall expire on the later of (i) eighteen months
after the Closing Date and (ii) six months after the Effective Date of
the Merger, except that (a) the representations and warranties contained
in Section 4.7 shall expire with the applicability of the respective
statutes of limitations (as extended by agreement or otherwise), and
(b) the representations and warranties contained in Section 4.8 shall
not expire.
11.3 Indemnification.
(a) Each Seller agrees to indemnify and hold harmless, in an
individual amount not to exceed such Seller's pro rata share of the
Purchase Price, the Purchaser and the Company from and against any and
all loss, costs, damages and expenses (including court costs and
attorneys' fees and expenses) which the Purchaser or the Company may
sustain resulting from, arising out of, relating to or caused by (i) any
breach by such Seller of any covenant or other agreement of such Seller
contained herein and to be performed on or before the Closing, or (ii)
any breach of any representation or warranty made by such Seller in
Article V herein or in any certificate delivered pursuant to Article V
of this Agreement.
(b) The Company agrees to indemnify and hold harmless the
Purchaser from and against any and all loss, costs, damages and expenses
(including court costs and attorneys' fees and expenses) which the
Purchaser may sustain resulting from, arising out of, relating to or
caused by (i) any breach by the Company of any covenant or other
agreement of the Company contained herein and to be performed on or
before the Closing, or (ii) any breach of any representation or warranty
made by the Company herein or in any certificate delivered pursuant to
this Agreement. For purposes of this Section 11.3(b), the Purchaser's
loss, costs, damages and expenses (i) shall be 15.2% of the
aggregate amount of the loss, costs, damages and expenses resulting from
the Company's breach, (ii) shall be deemed to be zero except to the
extent, if any, that the cumulative amount of the loss, costs, damages
and expenses resulting from the Company's breaches exceed $500,000 and
(iii) shall be deemed to be zero to the extent that the Purchaser has
been indemnified with respect to the same loss, cost, damage or
expense pursuant to the Preferred Stock Purchase Agreement.
(c) Each Principal agrees to indemnify and hold harmless the
Purchaser, in an individual amount not to exceed (i) as to any
individual item of the Purchaser's loss, cost, damage or expense, the
percentage of such item which is equal to such Principal's percentage
share of the Company's Common Stock, and (ii) in the aggregate, such
Principal's share of the Purchase Price, to the extent not indemnified
by the Company under Section 11.3(b), it being understood that the
Purchaser shall seek indemnification from the Company prior to seeking
indemnification from the Principals, from and against any and all loss,
costs, damages and expenses (including court costs and attorneys' fees
and expenses) which the Purchaser may sustain resulting from, arising
out of, relating to or caused by (i) any breach by the Company of any
covenant or other agreement of the Company contained herein and to be
performed on or before the Closing, or (ii) any breach of any
representation or warranty made by the Company herein or in any
certificate delivered pursuant to this Agreement, For purposes of this
Section 11.3(c), the Purchaser's loss, costs, damages and expenses (i)
shall be 13.2% of the amount of the loss, costs, damages and expenses
resulting from the Company's breach, and (ii) shall be deemed to be zero
except to the extent, if any, that the cumulative amount of the loss,
costs, damages and expenses resulting from the Company's breaches
exceeds $500,000 and (iii) shall be deemed to be zero to the extent that
the Purchaser has been indemnified with respect to the same loss, cost,
damage or expense pursuant to the Preferred Stock Purchase Agreement.
(d) The Purchaser agrees to indemnify and hold harmless the
Company from and against any and all loss, costs, damages and expenses
(including court costs and attorneys' fees and expenses) which the
Company may sustain resulting from, arising out of, relating to or
caused by (i) any breach by the Purchaser of any covenant or other
agreement of the Purchaser contained herein and to be performed on or
before the Closing, or (ii) any breach of any representation or warranty
made by the Purchaser herein or in any certificate delivered pursuant
to this Agreement. No party shall be deemed to waive any claim for
indemnification hereunder by reason of its knowledge or reason to know,
prior to the occurrence of the Closing, of any such non-compliance,
non-performance, inaccuracy or breach.
(e) If an indemnified party under this Section 11.3 receives
notice of the assertion by a person who is not a party to this Agreement
of any claim or of the commencement by any such person of any action or
proceeding which may give rise to an obligation of another party to this
Agreement to indemnify such indemnified party (a "Third Party Claim"),
such indemnified party shall give such other party reasonably prompt
written notice thereof but in any event not later than 60 days after
becoming aware of such Third Party Claim. Such notice shall describe the
Third Party Claim in reasonable detail, and shall indicate the estimated
amount, if practicable, of the indemnifiable loss that has been or may
be sustained by such indemnified party. Such other party may elect to
assume the defense of any Third Party Claim, at such indemnifying
party's own expense and by such indemnifying party's own counsel and
such indemnified party shall cooperate in good faith in such defense and
such indemnifying party shall fully inform and consult with such
indemnified party. If such indemnifying party has assumed the defense
of a Third Party Claim, the indemnified party shall agree to any
settlement of such Third Party Claim recommended by the indemnifying
party which settlement by its terms discharges the indemnified party
from any liability with respect to such Third Party Claim
(f) Notwithstanding any other provisions herein to the
contrary, in the event that any charge, complaint, claim, demand, or
notice is made against or served upon the Company which if true would
constitute a breach of the representation made in Section 4.11(b), (i)
the Company shall be responsible for any and all costs of defending
against such charge, complaint, claim, demand, or notice (including
court costs and attorneys' fees and expenses) in the event that a
judgment or other finding of fault is entered against the Company by a
court, arbitrator or other tribunal or the matter is settled without the
Purchaser's prior written consent; and (ii) the Purchaser shall be
responsible for any and all costs of defending against such charge,
complaint, claim, demand, or notice (including court costs and
attorneys' fees and expenses) in the event that a judgment or other
finding of fault is not entered against the Company by a court,
arbitrator or other tribunal or the parties settle the matter with the
prior written consent of the Purchaser.
(g) The indemnities provided for in this Section 11.3 shall
expire eighteen months after the Closing Date (unless an indemnification
obligation hereunder arises from a breach of a representation or
warranty contained herein, in which case such indemnification obligation
shall expire concurrently with the expiration of the survival period of
such representation or warranty). No claim for indemnification
hereunder shall be effective unless it is asserted in writing prior to
the expiration of the related indemnity.
(h) The indemnity provisions in this Agreement, the Preferred
Stock Purchase Agreement of even date herewith and the Merger Agreement
are intended by the parties to provide a single, integrated source of
indemnity. Accordingly, the provisions in subsections (b) and (c)
hereof and in Section 11.3(a) of the Preferred Stock Purchase Agreement
with respect to the amount of cumulative losses, costs, damages and
expenses, being deemed to be zero except to the extent that they exceed
$500,000 on a cumulative basis, and the definition of "Unindemnified
Common Stock Purchase Agreement Loss" contained in the Merger Agreement,
shall be applied by taking into account the losses, cost, damages, and
expense, and the $500,000 threshold only once, such that (i) the
Purchaser may seek indemnification in accordance with each such
agreement with respect to any such losses in a cumulative amount in
excess of $500,000 regardless of whether it seeks such indemnification
pursuant to the provisions of this Agreement or the Preferred Stock
Purchase Agreement, or through a reduction in the consideration payable
by the Purchaser pursuant to the Merger Agreement, or any combination
thereof, and (ii) the Purchaser may recover only once for any such
losses.
(h) In determining whether or not the Company, a Principal or
a Seller shall have breached a representation or warranty made herein
for the purpose solely of determining all losses, costs, damages and
expenses for which the Purchaser shall be entitled to indemnification
pursuant to this Section 11.3, all representations and warranties shall
be deemed to have been made without respect to the materiality thereof
and all representations and warranties set forth in Section 4.7,
4.11(d), 4.11(e) and 4.12 shall be deemed to have been made without
respect to the knowledge of the Company or the Principals, as
applicable.
11.4 Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
11.5 Notices. All notices, consents, waivers, and other
communications required or permitted by this Agreement shall be in
writing and shall be deemed given to a party when (a) delivered to the
appropriate address by hand or by nationally recognized overnight
courier service (costs prepaid); (b) sent by facsimile with
confirmation of transmission by the transmitting equipment; or (c)
received or rejected by the addressee, if sent by certified mail,
return receipt requested; in each case to the following addresses or
facsimile numbers and marked to the attention of the person (by name
or title) designated below (or to such other address, facsimile number
or person as a party may designate by notice to the other parties):
If to the Purchaser, to:
CompuDyne Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: President
Telephone: 000-000-0000
Telecopy: 000-000-0000
Copy to:
Xxxxx Xxxxxx & Xxxxxx, LLP
185 Asylum Street
CityPlace - 00xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esquire
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Company, to:
Tiburon , Inc.
00000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000)000-0000
Telecopy: (000)000-0000
Copy to:
Ober, Kaler, Xxxxxx & Xxxxxxx
Xxxxx Xxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telephone: (000)000-0000
Telecopy: (000)000-0000
If to the Sellers:
To each Seller at the address shown on Exhibit 11.5 attached hereto.
or such other address as shall be furnished in writing by any party to
each of the other parties hereto.
11.6 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any party (including by way of a change in control
of any such party) without the prior written consent of the others,
except that the Purchaser may assign all its rights and interests but
not its obligations hereunder to a wholly-owned subsidiary of the
Purchaser, provided that such subsidiary agrees in writing to be bound
by all of the terms, conditions and provisions contained herein. No
assignment of this Agreement or any rights hereunder shall relieve any
party hereto of its obligations hereunder, all of which shall remain
recourse to the assigning party.
11.7 Complete Agreement. This Agreement, including the schedules,
exhibits and other writings referred to herein or delivered pursuant
hereto, contains the entire understanding of the parties with respect to
this Agreement and the transactions contemplated hereby and supersedes
all prior arrangements or understandings with respect thereto. There
are no restrictions, agreements, promises, warranties, covenants or
undertakings other than those expressly set forth herein.
11.8 Amendments and Waivers. The parties hereto may, by written
agreement, modify, amend or supplement any term or provision of this
Agreement. Any written instrument or agreement referred to in this
paragraph shall be validly and sufficiently authorized for the purposes
of this Agreement if signed on behalf of the Purchaser by a person
authorized to sign such amendment or waiver and by the Sellers.
11.9 Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
11.10 Counterparts. This Agreement and the related agreements
referred to herein may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11.11 Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or benefits or
remedies under or by reason of this Agreement on any persons other than
the parties to it and their respective successors and assigns; nor is
anything in this Agreement intended to modify or discharge the
obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any other third persons any
right of subrogation or action against any party to this Agreement.
11.12 Accounting Terms. All accounting terms used herein which
are not expressly defined in this Agreement shall have the meanings
given to them in accordance with GAAP.
11.13 Governing Law. This Agreement shall be governed by the laws
of the Commonwealth of Virginia (regardless of the laws that might be
applicable under principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect
and performance.
11.14 Action by the Sellers. Any action permitted to be taken
by the Sellers pursuant to Article IX or Article X of this Agreement
shall be effective if it is approved in writing by Sellers owning more
than 50% of the total Common Stock owned by all of the Sellers.
11.15 Knowledge Qualifiers. Knowledge of the Company or the
Purchaser shall be deemed, for purposes of Articles IV and VI of this
Agreement, to include the knowledge (including matters such person, in
the exercise of his responsibilities, had a duty to inquire about) of
officers, directors and other representatives of the Company set forth
on Schedule 11.15 hereof, and of the officers and directors of the
Purchaser on the date hereof and on any other date, including the
Closing Date, on which a representation or warranty is given
hereunder.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be executed by their respective duly authorized officers
and each of the Sellers has executed this Agreement, as of the day and
year first above written.
COMPUDYNE CORPORATION
[Corporate Seal] By_________________________
Its________________________
Attest
TIBURON, INC.
By_________________________
Its________________________
THE SELLERS:
______________________________ ______________________________
Xxxxx X. Xxxxxxx Xxxxxx Xxxxx
________________________________ ______________________________
Xxxxxx Xxxxx & Xxxxxxx Xxxxx, Xxxxxxxxx & Xxxxx Guaranty
as Joint Tenant Finance, LLC
________________________________ ______________________________
Xxxx X. Xxxx Xxxx Xxxxxxxxxx
________________________________ ______________________________
Xxxxxx X. Xxxxxxxxxx Xxxxxxx X. Person & Xxxxxxxx
X. Person, as Trustee
________________________________ ______________________________
Xxxxxx Xxxxx Xxxxxx X. Xxxx
________________________________ _____________________________
Xxxx X. Xxxxxx, as Trustee of The Xxxxxx X. Xxxxxxx & Xxxx X.
Xxxxxx Family Revocable Trust Xxxxxxxxx, as Joint Tenants
________________________________ _____________________________
Xxxxx Xxxxxx Inc. Rollover Xxxxx Xxxxxx Inc. Rollover
Custodian FBO Xxxxxx X. Xxxxxxx Custodian FBO Xxxx X.
Xxxxxxxxx
________________________________
Xxxx X. Xxxxxxx
