[Execution Copy]
STOCK PURCHASE AGREEMENT
AMONG
Federal Data Corporation
AND
Xxxxx X. Xxxxxxx, as Trustee
Xxxxxxx Xxxxxxx, as Trustee
Xxxxxxx X. Xxxxxxx
Xxxx Xxxxxxx
Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx
AND
Technical and Management Assistance, Inc.
March 11, 1998
[Execution Copy]
EXHIBITS
Exhibit A-1: Xxxxxxx Employment Agreement
Exhibit A-2: Xxxxxxx Employment Agreement
Exhibit B: Noncompetition Agreement
Exhibit C: Form of Note
Exhibit D: Financial Statements
Exhibit E: Projections
Exhibit F: Form of Required Consents; List of Required Consents
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STOCK PURCHASE AGREEMENT
Agreement entered into as of March 11, 1998, by and among Federal Data
Corporation, a Delaware corporation (the "Buyer"), and Xxxxx X. Xxxxxxx, Trustee
of the Xxxxx X. Xxxxxxx Revocable Trust (the "Seller Representative"); Xxxxxxx
Xxxxxxx, Trustee of the Xxxxxxx Xxxxxxx Revocable Trust; Xxxxxxx X. Xxxxxxx;
Xxxx Xxxxxxx; Xxxxxxxx Xxxxx; and Xxxxxxx Xxxxx (together, the "Other Holders"
and collectively with the Seller Representative, the "Sellers"), and Technical
and Management Assistance, Inc., a New Jersey corporation (the "Target"). The
Buyer, the Sellers and Target are referred to collectively herein as the
"Parties."
Sellers in the aggregate own all of the outstanding capital stock of
Target. Target is engaged in a business that consists of software engineering,
software maintenance, and computer programming services provided primarily to
agencies of the Government of the United States pursuant to contracts with such
agencies and subcontracts under prime contracts with such agencies (the
"Business").
This Agreement contemplates a transaction in which, on and subject to the
terms hereinafter set forth, Buyer will purchase from Sellers, and Sellers will
sell to the Buyer, all of the outstanding capital stock of Target, all as more
specifically set forth herein.
Now, therefore, in consideration of the premises and the mutual promises,
representations, warranties, and covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Applicable Rate" means the prime rate of interest published from time to
time in the Wall Street Journal plus 2% per annum.
"Affiliate" means, as to any Person, any corporation, partnership, limited
liability company or other entity which controls, is controlled by, or under
common control with, such Person, and as to any Person which is a corporation or
limited liability company, any director, managing member, officer or greater
than 10% shareholder of such Person.
"Ancillary Agreements" mean the employment agreements executed by Xxxxx X.
Xxxxxxx and Xxxxxxx X. Xxxxxxx, respectively, attached hereto as Exhibit A-1 and
A-2, respectively (the "Employment Agreements"), and the noncompetition
agreement executed by Xxxxx X. Xxxxxxx, attached hereto as Exhibit B (the
"Noncompetition Agreement") all in connection with the transactions contemplated
by this Agreement.
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"Assets" means all of Target's right, title and interest in and to
properties, assets and rights of any kind, whether tangible or intangible, real
or personal, owned by Target, other than the Excluded Assets (collectively, not
including such Excluded Assets, the "Assets").
"Books and Records" means (a) all records and lists pertaining to Target,
the Assets, the Business, customers, suppliers or personnel of Target, (b) all
product, business and marketing plans of Target and (c) all books, ledgers,
files, reports, plans, drawings and operating records of every kind maintained
by Target and relating to Target, the Business or the Assets, except for any
agreement solely between or among shareholders which will be terminated as of
the Closing, with no terms surviving thereafter (the "Excluded Books and
Records").
"Business" has the meaning set forth in the Preface.
"Buyer" has the meaning set forth in the preface above.
"Claim" means any claim for indemnification pursuant to section 9 of this
Agreement.
"Closing" has the meaning set forth in section 2(e) below.
"Closing Date" has the meaning set forth in section 2(e) below.
"Closing Date Net Assets" has the meaning set forth in section 2(c)(i)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the Target,
Business, or Assets or the businesses and affairs of Buyer, or their respective
Affiliates that is not already generally available to the public.
"Contract" means any written agreement, contract, lease, purchase order,
memoranda of understanding or other binding contractual commitment of Target,
provided, however, that the term Contract shall not, for any purpose hereof,
include any Excluded Assets.
"Disclosure Schedule" has the meaning set forth in section 4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, judgments, orders, codes, or
injunctions, which impose liability for or standards of conduct concerning the
manufacture, processing, generation, distribution, use,
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treatment, storage, disposal, cleanup, transport or handling of Hazardous
Substances including, The Resource Conservation and Recovery Act of 1976, as
amended, The Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), The Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, to the
extent it relates to the handling of and exposure to hazardous or toxic
materials or similar substances, and any other so-called "Superfund" or
"Superlien" law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" notwithstanding any other provision of this Agreement,
shall mean the following assets of Target which are to be transferred by Target
prior to or simultaneously with the Closing hereunder, so that such assets will
not be owned by Target after consummation of the transactions contemplated
hereby:
(i) all receivables or notes payable from Affiliates of Target or
shareholders of Target; and
(ii) all of Target's causes of action, choses in action, rights of
recovery and rights of set-off of any kind against any Person arising out
of or relating to the Excluded Assets or the Excluded Liabilities; and
(iii) any refunds of Taxes for periods ending on or prior to the
Closing Date.
"Excluded Liabilities" notwithstanding any other provision of this
Agreement, shall mean the following liabilities and obligations of Target or
relating to the Business or the Assets, which are not intended to be borne by
Target or Buyer by reason of the purchase of the Target Shares pursuant to the
terms of this Agreement:
(a) all causes of action, choses in action, rights of recovery and rights
of set-off of any kind by any Person against Target arising out or relating to
any acts or omissions of Target, or any events occurring, prior to the Closing
Date;
(b) all liabilities and obligations for Taxes of Target relating to the
periods ending on or prior to the Closing Date except to the extent such
liabilities and obligations relate to current periods and have been accrued for
on the Closing Date Net Asset Statement;
(c) all liabilities and obligations incurred by or on behalf of the
Sellers, Target or Target's Affiliates in connection with (i) the transactions
contemplated by this Agreement, including any fees due to Sellers' and Target's
counsel, Xxxxx X. Xxxxx, or, except as expressly set forth herein, X. X. Xxxxxx
Company;
(d) all liabilities and obligations to Affiliates of Target other than for
the provision of goods or services in the ordinary course of business on arm's
length terms;
(e) all other liabilities and obligations for which any Seller has
expressly assumed responsibility pursuant to this Agreement or otherwise;
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(f) all Pre-Closing Environmental Liabilities;
(g) all liabilities and obligations relating to former employees of Target
no longer employed by Target as of the close of business on the business day
prior to the Closing Date, except to the extent that Buyer has specifically
agreed that Target shall retain responsibility for such obligations in this
Agreement;
(h) all obligations for any indebtedness for borrowed money; except to the
extent the same are reflected on the Closing Net Asset Statement; and
(i) all other obligations and liabilities of Target accruing, or incurred
by Target, any time prior to the Closing except to the extent such obligations
and liabilities are accrued or noted on the Closing Net Asset Statement.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statements" has the meaning set forth in section 4(g) below.
"Fixtures" means any fixtures, machinery, installations and building
equipment owned by Target and located at or on any Leased Real Property.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Authority" means any Federal, state, municipal or local
government, governmental authority, regulatory or administrative agency,
governmental commission, department, board, bureau, court, tribunal, arbitrator
or arbitral body.
"Government Contracts" means contracts or subcontracts held by Target in
which the ultimate contracting party is the United States government or any
agency or instrumentality thereof.
"Hazardous Substance" means any hazardous or toxic substance or waste,
pollutant or contaminant including petroleum products, asbestos, PCBs and
radioactive materials.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Indemnified Party" has the meaning set forth in section 9(d)(i) below.
"Indemnifying Party" has the meaning set forth in section 9(d)(i) below.
"Intellectual Property" means the following, to the extent related to the
Business (a) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all
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improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
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, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) 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), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Inventory" means all inventory owned by Target or reflected on the
Closing Net Asset Statement and held for resale in the Business, wherever the
same may be located.
"Knowledge" means actual knowledge. Subject to the remaining provisions of
this definition, as to any corporation, limited liability company or
partnership, the knowledge of any executive officer of such corporation or the
managing member or managing director of such limited liability company or any
general partner of any such partnership shall constitute knowledge of the
entity. Any reference in this Agreement to "Knowledge of Seller Representative"
or "Knowledge of Target" or other similar phrase shall mean the Knowledge of
Xxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx, and Xxxxx X. Xxxxxxx. Any reference in
this Agreement to "Knowledge of Buyer" or other similar phrase shall mean the
Knowledge of Xxxxx X. Xxxx, Xxxxx Xxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxx Xxxxxxxx, or
Xxxxxxx Xxxxxxxxxx.
"Leasehold Improvements" shall mean all leasehold improvements situated in
or on the Leased Real Property used in the Business and owned by Target.
"Loss Contract" means any Contract for which Target has accrued a loss on
its financial statements or which Target reasonably expects, based on Target's
Knowledge as of the date of this Agreement and the Closing Date, to result in a
loss accruing after the Closing Date.
"Material Adverse Change" means any change relating to the Business or the
Assets which has a Material Adverse Effect.
"Material Adverse Effect" means a material adverse affect on the business,
financial condition, operations, results of operations or future prospects (to
the extent reasonably foreseeable as of the date hereof or the date of Closing)
of the Business or the Assets taken as a whole.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
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"Most Recent Financial Statements" has the meaning set forth in section
4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in section 4(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in section 4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Other Holder" has the meaning set forth in the preface above.
"Party" means Buyer and each Seller.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Personal Property" shall mean all of the personal property, whether
tangible or intangible, owned by Target, except for the personal property on
section 5(d) of the Disclosure Schedule.
"Pre-Closing Environmental Liabilities" means, in connection with the
Business or the Real Property, any written notice, claim, demand, action, suit,
complaint, proceeding or other communication by any Person or Government
Authority alleging liability or potential liability (including liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties) arising
out of, relating to, based on or resulting from circumstances which, as of the
Closing Date, exist and form the basis of any violation or alleged violation of
any Environmental Laws, including the presence, Release or threatened Release of
any Hazardous Substance.
"Purchase Price" has the meaning set forth in section 2(b) below.
"Real Property" means all real property owned, leased, operated or
occupied by the Target as of the date of this Agreement, together with all
Leasehold Improvements or Fixtures located thereon.
"Reference Amount" means Two Million Five Hundred Thousand Dollars
($2,500,000).
"Release" means any spill, leak, discharge, disposal, pumping, pouring,
emitting, emptying, injecting, abandoning, leaching, dumping or allowing to
escape of any Hazardous Substance.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a)(i) mechanic's, materialmen's, and
similar liens, and (ii) other statutory liens, which have been disclosed to
Buyer, with respect to amounts not yet due and
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payable or which are being contested in good faith through appropriate
proceedings, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings which have
been disclosed to Buyer, for which adequate reserves are maintained and
reflected on the Financial Statements, to the extent required by GAAP (c)
purchase money liens and liens securing rental payments under capital lease
arrangements which are reflected on the Closing Net Asset Statement and which do
not arise in whole or in part from indebtedness or capital lease arrangements
which constitute Excluded Assets, and (d) other encumbrances disclosed in the
Schedules to this Agreement.
"Seller Representative" means Xxxxx X. Xxxxxxx, or any other Seller
hereafter designated by a majority in interest of the Sellers to act in the
capacity of Seller Representative under this Agreement, which other Seller shall
be identified to Buyer by written notice in accordance with the terms hereof.
"Subsidiary" means any corporation, partnership, limited liability
company, joint venture or other entity in which Target, directly or indirectly,
holds more than fifty percent (50%) of the voting power of all equity securities
or other ownership interests of such entity, or possesses, directly or
indirectly, power to direct or cause the direction of management or policies
(whether through ownership of voting securities or otherwise).
"Seller" has the meaning set forth in the preface above.
"Target" has the meaning set forth in the preface above.
"Target Share" means any share of the Common Stock, without par value,
of Target.
"Tax" or "Taxes" means any federal, state, local or foreign net or gross
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, (including taxes under Code Sec. 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax, governmental fee or like assessment or charge of any kind
whatsoever, together with any interest and penalties, whether as a primary
obligor or as a result of being a "transferee" (within the meaning of Section
6901 of the Code and any corresponding state and local law) of another person or
a member of an affiliated, consolidated or combined group.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in section 9(d) below.
Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Section set forth below:
Term Section Reference
---- -----------------
7
Assignment of Claims Act Section 4(c)
Assignment of Contracts Act Section 4(c)
Business Employees Section 5(k)
Buyer Indemnification Matter Section 9(b)
Buyer Parties Section 9(b)
Cash Consideration Section 2(b)
CERCLA Section 1
Closing Net Asset Statement Section 2(c)
Determination Date Section 2(c)(i)
Employment Agreements Section 1
Leased Real Property Section 4(m)(ii)
Material Contracts Section 4(p)(i)
Material Intellectual Property Section 4(o)(i)
Material Non-Owned Intellectual
Property Section 4(o)(ii)
Net Assets Section 2(c)(i)
Noncompetition Agreement Section 1
Note Section 2(b)(i)
Objection Notice Section 2(c)(i)
Parties preface
Permit Section 4(r)
Post-Closing Adjustment Section 2(c)(i)
Pre-Closing Default Section 11(a)
Product Warranties Section 6(c)
Projections Section 4(h)
Pro Rata Share Section 2(b)(ii)
Receivables and Unbilled Costs Section 4(z)(iii)
Required Consents Section 5(g)
Seller Indemnification Matters Section 9(c)
Seller Parties Section 9(c)
Shareholder Agreements Section 3(b)(iv)
Termination Date Section 11(a)(iv)
2. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from each Seller, and each Seller agrees
to sell to the Buyer, all of such Seller's Target Shares, free and clear of all
restrictions, for the consideration specified below in this section 2.
(b) Total Consideration and Terms. The aggregate consideration for the
Target Shares to be purchased by the Buyer hereunder shall consist of the
Purchase Price, as defined below.
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(i) The "Purchase Price" shall, subject to adjustment as provided in
section 2(c) hereof, consist of (x) Eight Million Dollars ($8,000,000) in
cash (the "Cash Consideration"); and (y) a promissory note in the form
attached hereto as Exhibit C (the "Note"), made by the Buyer, in the
aggregate principal amount of One Million Dollars ($1,000,000), which
aggregate principal amount shall be subject to adjustment as set forth in
section 2(c) below and to the rights of set-off as provided in section
9(g) hereof.
(ii) At the Closing, the Buyer shall pay to the Sellers by wire
transfer of immediately available funds to an account or accounts
designated in writing by the Sellers an amount equal to the Cash
Consideration and issue and deliver to the Seller Representative the Note.
The Purchase Price shall be paid to, or as directed in writing by, each of
the Sellers as follows:
(A) a portion of the Cash Consideration shall be paid to each
Other Holder, in each case equal to such Other Holder's respective
percentage holding of Target Shares ("Pro Rata Share") multiplied by
$9,000,000;
(B) the remainder of the Cash Consideration shall be paid to
Seller Representative; provided, however, that Buyer shall withhold Two
Hundred Fifty Thousand Dollars ($250,000) (the "Holdback"); and
(C) the Note shall be fully payable to, and delivered at
Closing to, the Seller Representative.
(c) Net Asset Adjustment. Not later than ninety (90) days after the
Closing Date, the Seller Representative shall cause to be prepared and delivered
to Buyer an audited special purpose statement of the Net Assets (as defined
below) as of the Closing (the "Closing Net Asset Statement") which shall have
been audited by X. X. Xxxxxx Company in accordance with GAAP, applied on a basis
consistent with, and following the accounting principles, procedures, policies
and methods employed by Target in preparing Target's Most Recent Fiscal Year End
balance sheet (to the extent consistent with GAAP); provided, however, that
appropriate adjustments shall be made to exclude the Excluded Assets and
Excluded Liabilities. Buyer and Sellers each shall be responsible for one-half
of the fees and expenses charged by X. X. Xxxxxx Company for preparing such
Closing Net Asset Statement. Buyer and Sellers shall promptly provide the other
Party hereto access to, and copies of, all information reasonably requested by
the other Party or its representatives in connection with the preparation of the
Closing Net Asset Statement or to investigate the basis of any dispute
therewith.
(i) Buyer shall have a period of thirty (30) days after delivery to
it of the Closing Net Asset Statement to provide to the Seller
Representative notice setting forth with reasonable specificity any
objection thereto, which objection shall relate only to any matters which
affect the amount of Net Assets shown on the Closing Net Asset Statement
(an "Objection Notice"); provided, however, that no such objection may be
made by reason of any accounting methods, principles or practices used
consistently by Target prior to the Closing, as applied in or shown on the
Financial Statements described in section 4(g) of this Agreement. Failure
to provide an Objection Notice within such thirty-
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day period shall constitute Buyer's approval of the Closing Net Asset
Statement as so delivered. If Buyer timely provides an Objection Notice,
Buyer and the Seller Representative shall promptly commence good faith
discussions in an attempt to resolve any issues raised in the Objection
Notice. If Buyer and the Seller Representative are unable to resolve such
dispute within thirty (30) days after the delivery of the Objection
Notice, such dispute shall be resolved by a Big Four accounting firm
mutually acceptable to the Buyer and the Seller Representative or, in the
absence of agreement, by a Big Four accounting firm selected by lot after
eliminating Target's and Buyer's principal outside accountants. At or
prior to the time such dispute is submitted to such accounting firm for
resolution, Buyer shall provide a specific proposed Net Asset amount. The
accounting firm so selected shall make its determination within thirty
(30) days after delivery to it of the Objection Notice which determination
shall be final and binding upon the Parties with respect to the
Post-Closing Adjustment. The fees and expenses of such accounting firm
shall be paid by the Buyer and the Sellers pro rata in accordance with
each Party's asserted position relative to the accounting firm's final
determination. The amount of the Net Assets on the Closing Net Assets
Statement, as determined pursuant to this section, shall be the "Closing
Date Net Assets." For purposes of this Agreement, "Net Assets" means the
book value of total Assets (excluding, pursuant to the definition of
"Assets," all Excluded Assets) owned by Target as of the Closing, less the
book value of Target's liabilities as of the Closing, other than all
Excluded Liabilities, each as determined in accordance with GAAP, applied
on a basis consistent with, and following the accounting principles,
procedures, policies and methods employed by Sellers in preparing Target's
Most Recent Fiscal Year End balance sheet. The date on which the Closing
Date Net Assets is determined shall be the "Determination Date." The
"Post-Closing Adjustment" shall be computed by subtracting the Reference
Amount from the Closing Date Net Assets.
(ii) If the Post-Closing Adjustment is a positive number, Buyer
shall pay to Xxxxx X. Xxxxxxx the amount of such excess plus the Holdback,
in immediately available funds, within ten (10) business days after the
Determination Date.
(iii) If the Post Closing Adjustment is a negative number, the
Holdback shall be retained and applied by Buyer, to the extent of the
amount of the deficiency, and the remainder shall be paid to Seller
Representative within ten (10) business days after the Determination Date.
In the event the Post Closing Adjustment decreases the Purchase Price by
more than the Holdback, any such remaining amount shall first be applied
to reduce the principal amount of the Note, and then any additional
portion of such remaining amount shall be paid to Buyer by the Seller
Representative within ten (10) days after such amount is demanded by the
Buyer.
(d) Valuation of the Noncompetition Agreement and Noncompetition and
Nonsolicitation Provisions. Buyer and Sellers agree that the amount of the
consideration allocable to the Noncompetition Agreement shall be Twenty Thousand
Dollars ($20,000) and that the amount of the consideration allocable to the
Noncompetition and Nonsolicitation provisions of each Employment Agreement shall
each be Ten Thousand Dollars ($10,000).
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(e) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxx Xxxxxxx Xxxxx
& Xxxxxxxxxx in Washington, D.C., commencing at 1:00 p.m. local time on Friday,
March 13, 1998 or on the second business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Buyer and the Seller Representative may mutually determine (the "Closing
Date").
(f) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in section 7(a) below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in section 7(b)
below, (iii) each of the Sellers will deliver to the Buyer stock certificates
representing all of such Seller's Target Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv) the Buyer will
deliver to each Seller, as applicable, the portions of the consideration
specified in section 2(b)(i) and (ii) above.
3. Representations and Warranties of the Buyer and Sellers.
(a) Representations and Warranties Concerning the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in this
section 3(a) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this section 3(a)).
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of
Delaware.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions, except as
the enforceability hereof may be affected by bankruptcy, insolvency,
fraudulent transfer, reorganization and similar laws affecting the rights
of creditors generally, and by general principles of equity. The Buyer
need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement, except for the filing, if any, contemplated by section 5(b)
below.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its Certificate of Incorporation or Bylaws.
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(iv) Brokers' Fees. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(b) Representations and Warranties Concerning the Sellers. Each of the
Sellers represents and warrants to the Buyer that the statements contained in
this section 3(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this section 3(b)) with respect to himself, except as set forth in
the Disclosure Schedule attached hereto.
(i) Authorization of Transaction. Each Seller has full power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of each Seller, enforceable against such Seller in
accordance with its terms and conditions, except as the enforceability
hereof may be affected by bankruptcy, insolvency, fraudulent transfer,
reorganization, and similar laws affecting the rights of creditors
generally, and by general principles of equity. Except as expressly set
forth herein, no Seller is required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency or any other Person in order to consummate the
transactions contemplated by this Agreement.
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any Seller is
subject.
(iii) Brokers' Fees. No Seller has any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which the Buyer
could become liable or obligated.
(iv) Target Shares. Each Seller holds of record and owns
beneficially the number of Target Shares set forth next to his name in
section 3(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands other than such restrictions as may be contained in the agreements
(the "Shareholder Agreements") described in section 3(b) of the Disclosure
Schedule, each of which will be terminated and of no further force or
effect as of the Closing. No Seller is a party to any option, warrant,
purchase right, or other contract or commitment (other than the
Shareholder Agreements and this Agreement) that could require such Seller
to sell, transfer, or otherwise dispose of any capital stock of Target. No
Seller is a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of Target.
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4. Representations and Warranties Concerning Target. Each of Target and the
Seller Representative jointly and severally represent and warrant to the Buyer
that the statements contained in this section 4 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this section 4), except as set forth in
the disclosure schedule delivered by the Sellers to the Buyer on the date hereof
and initialed by the Parties (the "Disclosure Schedule"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this section 4.
(a) Corporate Existence and Capitalization.
(i) Target is a corporation duly organized, validly existing, and in
good standing under the laws of the State of New Jersey. Target is duly
authorized to conduct business as a foreign corporation and is in good
standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a
Material Adverse Effect. Section 4(a) of the Disclosure Schedule contains
an accurate list of all jurisdictions in which Target is qualified to do
business as a foreign corporation
(ii) The authorized capital stock of Target consists solely of
20,000 shares of common stock, no par value, of which 400 shares are
issued and outstanding. All of the issued and outstanding shares of such
common stock have been duly authorized and validly issued and are fully
paid and nonassessable and are not subject to any preemptive rights. To
the knowledge of Target, each of the Sellers owns of record and
beneficially the number of shares of common stock set forth on section
3(b) of the Disclosure Schedule with respect to such Seller, free and
clear of all restrictions on transfer (other than restrictions under the
Securities Act, state securities laws and the Shareholder Agreements,
which Shareholder Agreements shall be terminated on or before the
Closing), taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands, other than such
restrictions as may be contained in the Shareholder Agreements.
(iii) Target has not issued or granted any outstanding options,
warrants, rights or other securities convertible into or exchangeable or
exercisable for shares of the capital stock of Target, any other
commitments or agreements providing for the issuance of additional shares
of the capital stock of Target, the sale of treasury shares, or for the
repurchase or redemption of shares of Target's capital stock, or any
obligations arising from canceled stock. There are no agreements of any
kind which may obligate Target to issue, purchase, register for sale,
redeem or otherwise acquire any of its securities or interests. There are
no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to Target.
(iv) To the Knowledge of Target, except for the Shareholder
Agreements, there are no voting trusts, shareholder agreements, proxies or
other agreements in effect with respect to the voting or transfer of the
Target Shares.
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(b) Authorization of Transaction. Target has all requisite corporate power
and authority to own, lease and operate the properties owned by it, to conduct
its business as it is presently being conducted, to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement has been duly
executed and delivered by Target.
(c) Noncontravention. Except as set forth in section 4(c) of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Target or any of the Assets is subject or any
provision of the charter or bylaws of Target or (ii) conflict with, result in a
material breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any Contract to which Target is a party or by which it
is bound or to which any of the Assets is subject (or result in the imposition
of any Security Interest upon any of the Assets), except where, prior to or
simultaneously with the Closing, such Contract is being terminated or the
consent of the other party thereto will have been obtained. Target does not need
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement, except
where the failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a Material Adverse Effect on the business,
financial condition, operations, results of operations, or future prospects of
the Business, or on the ability of the Parties to consummate the transactions
contemplated by this Agreement, and except for the filing contemplated by
section 5(b) below. Notwithstanding the foregoing, Target and the Seller
Representative make no representation as to the applicability of 41 U.S.C.
section 15 (the "Assignment of Contracts Act") or 31 U.S.C. section 3727 (the
"Assignment of Claims Act").
(d) Title to Assets. Except as set forth in section 4(d) of the Disclosure
Schedule, Target has good title to, or a valid leasehold interest in, or, as to
Intellectual Property, valid license of, the property and assets used by it, or
shown on the Most Recent Balance Sheet or acquired after the date thereof and
shown on the Closing Net Asset Statement, free and clear of any Security
Interests. Except as contemplated by this Agreement, the Assets are all of the
assets necessary for the conduct of the Business as currently conducted.
(e) Books and Records. Target has made and kept (and given Buyer access
to) Books and Records and accounts, which, in reasonable detail, accurately and
fairly reflect in all material respects, Target's business. The minute books of
Target to which Buyer has been given access do not omit reference to any
corporate transaction of Target which will continue in effect or remain binding
on Target or any of the Assets after the Closing.
(f) Subsidiaries. Target has no Subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit D are the following
financial statements (collectively the "Financial Statements"): (i) reviewed
balance sheets and reviewed statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1997
(the "Most Recent Fiscal Year End"), December 31, 1996 and
14
December 31, 1995 for Target, and (ii) unaudited balance sheets and statements
of operations, (the "Most Recent Financial Statements") as of and for the one
month ended January 31, 1998 (the "Most Recent Fiscal Month End") for Target.
The Financial Statements described above present fairly the financial condition
of Target and the Business as of such dates and the results of operations of
Target for such periods. The Financial Statements (including the notes thereto )
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby; provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments and lack
footnotes and other presentation items.
(h) Projections. Seller Representative has delivered to Buyer projected
income statements and balance sheets of the Business for the 1998 and 1999
fiscal years (the "Projections"), which are attached as Exhibit E hereto. The
Projections were prepared in good faith and represent management's current
estimate, based on Target's current Knowledge, of the financial position and
results of operations of the Business for the periods indicated. To Target's
Knowledge as of the date hereof and as of the Closing Date, the assumptions
forming the basis of such Projections are reasonable. Buyer recognizes that the
basis for such Projections assumes the "stand alone" operation of the Business.
Buyer further recognizes that future circumstances and events may affect the
actual performance of the Business, and there can be no assurance that such
performance will be in accordance with the Projections.
(i) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any Material Adverse Change in
Target, or the Business, taken as a whole. Specifically, without limiting the
generality of the foregoing, since the Most Recent Fiscal Year End, except as
contemplated in this Agreement or as set forth in the Disclosure Schedule, there
has not been any:
(i) change in accounting methods, principles, or practices by
Target, except as required by law or by generally applicable changes
instituted in the accounting profession;
(ii) material damage, destruction or loss (whether or not covered by
insurance) adversely affecting the tangible Assets or the Business;
(iii) cancellation of any material indebtedness or waiver or release
of any material right or claim of Target;
(iv) increase in the rate of compensation payable or to become
payable to, any bonus, incentive compensation, service award or other like
benefit granted, made or accrued, contingently or otherwise, for or to the
credit of, any director, officer or other employee, except as provided in
any employment agreement (including any union contract) between Target and
any such persons or in any employee plan, and except for any increases in
the normal course of business;
(v) addition to or modification of the Employee Benefit Plans,
arrangements or practices affecting the officers, directors, or Business
Employees of Target other than (A) contributions made for 1997 in
accordance with the normal practices of the Target, or
15
(B) the extension of coverage to such persons who became eligible after
the Most Recent Fiscal Year End;
(vi) cancellation or termination of any material Contract or entry
into any Contract which is not in the ordinary course of the business of
Target;
(vii) sale, assignment or transfer of any material portion of the
Assets, other than in the ordinary course of business, except as approved
in writing in advance by Buyer and except for transfers of the Excluded
Assets;
(viii) capital expenditure or the execution of any lease or any
incurring of liability therefor by Target involving payments in excess of
$10,000 or $50,000 in the aggregate with respect to any such expenditure
or lease or otherwise not substantially in accordance with Target's past
practice;
(ix) any indebtedness incurred by Target for borrowed money or any
commitment to borrow money entered into by Target, or any loans made or
agreed to be made by Target except for loans constituting Excluded Assets
and indebtedness incurred in the ordinary course of business as part of
Target's Inventory financing or under the existing working capital line of
credit;
(x) revaluation by Target of any of the Assets, including, without
limitation, writing-off notes, or writing-off accounts receivable except
with respect to accounts receivable written off in the ordinary course of
business;
(xi) payment or declaration of any dividends, distributions with
respect to any of the Target Shares, or redemption, repurchase or
acquisition by Target of any of the Target Shares; or
(xii) agreement by Target or the Seller Representative to do any of
the things described in the preceding clauses (i) through (xi), other than
as expressly provided herein.
(j) Undisclosed Liabilities. Target does not have any material liability
(whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due, including any
liability for Taxes), except for (i) liabilities set forth on the Most Recent
Financial Statements (or in any notes to the December 31, 1997 Financial
Statements), (ii) liabilities which have arisen after the Most Recent Fiscal
Month End in the ordinary course of business, and (iii) Excluded Liabilities.
(k) Legal Compliance. Target has complied in its operations in all
material respects with all applicable statutes and governmental rules,
regulations and Permits. No action, suit, proceeding, hearing, or, to Seller
Representative's Knowledge, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against Target alleging any failure so to
comply, nor, to the Knowledge of Seller Representative, are any such actions
threatened.
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(l) Tax Matters.
(i) Filing of Tax Returns. Target has timely filed with the
appropriate taxing authorities all returns (including without limitation
information returns and other material information) in respect of Taxes
required to be filed through the date hereof and will timely file any such
returns required to be filed on or prior to the Closing Date, in each
case, subject to any applicable extensions. The returns and other
information filed are complete and accurate in all material respects.
Target has not requested any extension of time within which to file
returns (including without limitation information returns) in respect of
any Taxes.
(ii) Payment of Taxes. All Taxes that accrue or are payable by
Target in respect of taxable periods that end on or before the Closing
Date and for any taxable periods that begin before the Closing Date and
end thereafter to the extent such Taxes are attributable to the portion of
such period ending on the Closing Date (such period being referred to
herein as a "Pre-Closing Partial Period"), as determined under the closing
of the books method of allocation, have (or will have, on or before the
Closing Date) been timely paid, or an adequate reserve has been
established therefor, as set forth in Section 4(l) of the Disclosure
Schedule or in the Financial Statements. Target has no liability for Taxes
in excess of the amounts so paid or reserves so established.
(iii) Audit, Investigations or Claims. Except as set forth in
Section 4(l) of the Disclosure Schedule, there are no pending or to the
best of the Target's knowledge, threatened audits, investigations or
claims for or relating to any additional Tax liability, and there are no
matters under discussion with any governmental authorities with respect to
Taxes that in the reasonable judgment of the Target is likely to result in
a material additional liability of Target for Taxes. Except as set forth
in such Section, neither Target nor Seller Representative has been
notified that any taxing authority intends to audit a return for any
period.
(iv) Lien. There are no liens for Taxes (other than for current
Taxes not yet due and payable) on the Assets.
(v) Safe Harbor Lease Property. None of the Assets is property that
is required to be treated as being owned by any other person pursuant to
the so-called safe harbor lease provisions of former Section 168(f)(8) of
the Code.
(vi) Security for Tax-Exempt Obligations. None of the Assets
directly or indirectly secures any debt, the interest on which is
tax-exempt under Section 103(a) of the Code.
(vii) Tax Exempt Use Property. None of the Assets is "tax exempt use
property" within the meaning of Section 168(h) of the Code.
(viii) Foreign Person. Neither Target nor any Seller, is a person
other than a United States person within the meaning of the Code.
17
(ix) Wage Withholding. Target has withheld all Taxes required to
have been withheld and paid by them on their behalf in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party, and such withheld Taxes have either
been duly paid to the proper governmental authority or properly set aside
in accounts for such purpose.
(x) Disclosure Statements. Target has not filed with respect to any
item a disclosure statement pursuant to Code Section 6662 or any
comparable disclosure with respect to foreign, state and/or local
statutes.
(xi) Liability For Taxes of Others. Target (A) has not been a member
of any affiliated group filing a consolidated federal Income Tax Return
and (B) has no liability for the Taxes of any person as defined in Section
7701(a)(1) of the Code under Treas. Reg. ss. 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(xii) No Withholding. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or
of Subchapter A of Chapter 3 of the Code or of any other provision of law.
(xiii) Parachute Payments. Target has not made any payments, nor is
Target obligated to make any payments, and is not a party to any agreement
that could obligate it to make any payments that will not be deductible
under Section 280G of the Code.
(xiv) Changes in Accounting Method. Except as set forth in section
4(l) of the Disclosure Schedule, Target has not agreed to nor is it
required to make any adjustment pursuant to Section 481(a) of the Code by
reason of a change in accounting method initiated by Target, and neither
Target nor any Seller Representative has any knowledge that the IRS has
proposed any such adjustment or change in accounting method.
(m) Real Property.
(i) Target owns only the real property described on section 4(m)(i)
of the Disclosure Schedule (the "Owned Real Property"). Target's title to
and possession of the Owned Real Property is without any lien,
encumbrance, covenant, condition or adverse claim of any kind except as
shown on the owner's title insurance policy and deed with respect thereto,
as previously furnished to Buyer.
(ii) Section 4(m)(ii) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to Target for use in the
Business (the "Leased Real Property"). Target has made available to the
Buyer correct and complete copies of the leases and subleases listed in
section 4(m)(ii) of the Disclosure Schedule (as amended to date). With
respect to each lease and sublease listed in section 4(m)(ii) of the
Disclosure Schedule, the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect. Target has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in any such leasehold or subleasehold. Target enjoys peaceful
18
and undisturbed possession of all Leased Real Property, and Target has
fulfilled in all material respects all the obligations required to be
performed by it through the date hereof with respect to such Leased Real
Property. Each lease or sublease is transferable (upon receipt of
necessary landlord consents) in connection with the transactions
contemplated hereby.
(iii) Target has received all required material approvals of
governmental authorities (including Permits and material certificates of
occupancy or other similar certificates permitting lawful occupancy)
required in connection with the present use of the Leased Real Property.
(iv) Target has not received notice of any special assessment
relating to any Real Property for which Target would be liable under any
of the Real Property Leases.
(n) Tangible Personal Property. All items of tangible Personal Property
having a gross book value equal to or greater than $10,000 constituting part of
the Assets are in good operating condition and repair (subject to normal wear
and tear) and are suitable for the purposes for which they are intended (taking
into account the constantly evolving nature of computer and other technological
equipment).
(o) Intellectual Property. To the Knowledge of Seller Representative,
Target has not interfered with, infringed upon, misappropriated, or violated any
Intellectual Property rights of third parties in any material respect, and
Target has not received, within the last two years any written charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of Target, no
third party has interfered with, infringed upon, misappropriated, or violated
any material Intellectual Property rights of Target constituting part of the
Assets.
(i) Section 4(o)(i) of the Disclosure Schedule identifies those
items of Intellectual Property owned by Target and used in the Business,
the loss of which could reasonably be expected to have a Material Adverse
Effect ("Material Intellectual Property"), and identifies each license,
agreement, or other permission which Target has granted to any third party
with respect to any such Material Intellectual Property (together with any
exceptions). Copies of all documents of Material Intellectual Property
have been made available to Buyer. With respect to each item of
Intellectual Property required to be identified in section 4(o)(i) of the
Disclosure Schedule:
(A) the item is not subject to any adverse outstanding
injunction, judgment, order, decree, ruling, or charge; and
(B) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of
Target, threatened which challenges the legality, validity,
enforceability, use, or ownership of the item.
(ii) Section 4(o)(ii) of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that
Target uses in the Business
19
pursuant to license, sublicense, agreement, or permission ("Material
Non-Owned Intellectual Property"). Copies of all documents of Material
Non-Owned Intellectual Property have been made available to Buyer. With
respect to each item of Intellectual Property required to be identified in
section 4(o)(ii) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect; provided, however, that no representation is made as to the
ownership of any Material Non-Owned Intellectual Property or as to the
right of the Target's licensor, sublicensor or grantor to grant any such
license, sublicense, agreement or permission;
(B) neither Target nor, to the Knowledge of Target, any other
party to the license, sublicense, agreement, or permission is in breach or
default which would permit termination, modification, or acceleration
thereunder; and
(C) Target has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(iii) With respect to each software license or software sublicense
to which Seller is a party, Seller has not granted any sublicense or
similar right except in accordance with the terms and conditions thereof,
including the payment of all applicable royalties, and is not otherwise in
material violation of such license or sublicense agreement.
(p) Contracts.
(i) Buyer has been given access to copies of the currently effective
Contracts described in clauses (A) through (P) to which Target is a party
(the "Material Contracts"), which copies are true and correct in all
material respects, subject to ordinary course extensions, renewals, and
similar changes. Section 4(p) of the Disclosure Schedule lists:
(A) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting
the ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property, providing for payments in
excess of $5,000 per annum;
(B) any Contract (or group of related Contracts) (other than a
Government Contract) for the furnishing or receipt of services or delivery
of goods and/or materials, the performance of which will extend over a
period of more than one year after the date of this Agreement or under
which Target paid or received aggregate consideration in excess of $25,000
during the year ended December 31, 1997, or reasonably expects based upon
the operation of the Business as of the date hereof to pay or receive
aggregate consideration in excess of $25,000 during the year ending
December 31, 1998;
(C) any Government Contract;
20
(D) any Contract creating or governing a partnership, limited
liability company, joint venture or any teaming agreement or other
Contract (however named) which teaming agreement or other Contract
involves a sharing of profits, losses, costs, or liabilities by Target
with any other Person and involving a liability of Target in excess of
$10,000 per annum;
(E) any note, debenture, guarantee, loan, letter of credit,
surety-bond or other agreement, instrument or commitment (or group of
related agreements) in effect as of the date hereof, under which Target
has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, including any agreement or commitment for future loans,
credit or financing or any capitalized lease obligation, in excess of
$10,000 or under which Target has imposed a Security Interest on any of
the material Assets, tangible or intangible;
(F) any agreement (other than a teaming agreement) imposing on
Target a restriction or obligation regarding confidentiality or
noncompetition (the "Confidentiality Agreements);
(G) any Contract involving an obligation of Target to make any
payment to any Affiliate of Target, any Seller, or any of Target's
directors, officers or employees (not including salary or similar
compensation reflected on Target's payroll records);
(H) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
and employees (not including customary fringe benefits such as accrued
vacation or sick leave);
(I) any collective bargaining agreement or any other agreement
with any employee representative of a group of employees or labor union
relating to wages, hours or other conditions of employment;
(J) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis which is not terminable
at-will or which provides annual compensation in excess of $10,000 or
severance benefits;
(K) any agreement under which Target has advanced or loaned
any amount which remains outstanding, to any of its directors, officers,
and employees outside the ordinary course of business and which will not
be paid off at or prior to the Closing or will not constitute an Excluded
Asset;
(L) each Contract requiring capital expenditures by Target in
connection with the Business or the Assets after the date hereof in an
amount in excess of $5,000 individually or $25,000 in the aggregate;
21
(M) each written warranty, guaranty or other similar
undertaking with respect to contractual performance extended by Target
other than in the ordinary course of business;
(N) each Loss Contract: and
(O) each amendment, supplement, and modification (whether
written or oral) in respect of any of the foregoing.
(ii) With respect to each such Material Contract, except as set
forth in section 4(p) of the Disclosure Schedule, (A) the Contract is
legal, valid, binding, enforceable, and in full force and effect in all
material respects; and (B) no party is in breach or default which would
permit termination, modification, or acceleration under the Contract.
(iii) Except as set forth on section 4(p) of the Disclosure
Schedule, Target is not engaged in any renegotiations of any amounts paid
or payable to Target under current or completed Contracts with any Person
having the contractual or statutory right to demand or require such
renegotiation. Target has not received any written demand for such
renegotiation in respect of any such Contract. Except as set forth on
section 4(p) of the Disclosure Schedule, no Person, including any
government contracting officer or prime contractor has given Target
written notice that any material adjustments are required to the terms of
any Material Contracts.
(q) Notes and Accounts Receivable. The amount of all notes, accounts
receivable, unbilled invoices and other debts due or recorded in the Financial
Statements, except to the extent the same constitute Excluded Assets (the
"Transferred Receivables"), (A) will be, subject to the reserves reflected on
the Closing Net Asset Statement, good and collectible in full in the ordinary
course of business and in any event not later than one hundred eighty (180) days
after the Closing Date, or after the date billed, if later (assuming use by
Buyer of billing and collection practices which are customary in the industry),
and (B) are not subject to any counterclaim or setoff except to the extent of
any such reserve.
(r) Licenses, Permits and Authorizations. Section 4(r) of the Disclosure
Schedules contains a list of all material licenses, approvals, consents,
franchises and other permits (including without limitation, all facility
security clearances) of or with any governmental regulatory or administrative
authority, whether foreign, federal, state or local, which are held by Seller
and necessary for the current conduct of the Business as it is now conducted
(each a "Permit"). All such Permits are in full force and effect and there are
no proceedings pending or, to the Seller Representative's Knowledge, threatened
that seek the revocation, cancellation, suspension or adverse modification
thereof. Such Permits constitute all of the material licenses, approvals,
consents, franchises and permits necessary to permit Target to own, operate, use
and maintain its Assets in the manner in which they are now operated and
maintained and to conduct the Business substantially as currently conducted. All
required filings with respect to such Permits have been timely made and all
required applications for renewal thereof have been timely filed.
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(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) held by Target:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage; and
(iv) the amount (including a description of how deductibles and
ceilings are calculated and operate) of coverage.
With respect to each such insurance policy, (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all material respects; and
(B) no event has occurred which, with notice or the lapse of time, would permit
termination, modification, or acceleration, under the policy. Section 4(s) of
the Disclosure Schedule describes any material self-insurance arrangements
affecting Target. To the Seller Representative's knowledge, Target is not a
named insured or otherwise the beneficiary of coverage under any insurance
policy held by any other Person.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth each
instance in which Target (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or has received written
notice that it has been threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(u) Product Warranty. Substantially all of the products manufactured,
sold, leased, and delivered by Target have conformed in all material respects
with all applicable contractual commitments. Target has no material liability
for replacement or repair thereof or other damages in connection therewith,
subject only to (i) the express provisions of any of the Material Contracts, and
(ii) the reserve for product warranty claims set forth in the Financial
Statements, as adjusted for operations and transactions through the Closing Date
in accordance with the past custom and practice of Seller.
(v) Employees. Except as set forth in section 4(v) of the Disclosure
Schedule, as of the date of this Agreement, no executive officer has given
Target written notice of plans to terminate employment with Target during the
next 12 months. Target is not a party to or bound by any collective bargaining
agreement. There are no complaints against Target pending before the National
Labor Relations Board or any similar state or local labor agency by or on behalf
of any Employee of Target. Target has complied in all material respects with all
laws, rules and regulations relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and
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similar taxes (hereinafter collectively referred to as the "Employment Laws").
Target is not liable for the payment of taxes, fines, penalties or other
amounts, however designated, for failure to comply with any of the foregoing
Employment Laws. There are no representation questions, arbitration proceedings,
labor strikes, slow downs or stoppages, grievances or other labor disputes
pending or, to Target's Knowledge, threatened with respect to the Target's
Employees.
(w) Environmental Matters. To Target's knowledge, (i) Target has complied
with and is not in violation of any Environmental Laws with respect to the Owned
Real Property and the Leased Real Property, (ii) Target is not required to hold
or obtain any environmental permits, certificates, consents or other settlements
agreements, licenses, approvals, registrations or authorizations under any
Environmental Laws, (iii) no notice, citation, summons or order has been issued,
no complaint has been filed, no penalty has been assessed and no investigation
or review is pending or threatened by any governmental or other entity relating
to the Owned Real Property or the Leased Real Property or Target's operations
with respect to any alleged violation by Target of any Environmental Law or with
respect to any use, possession, generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Substances by or on behalf of
Target, (iv) there are no facts or circumstances related to environmental
matters concerning the Owned Real Property or the Leased Real Property that
could reasonably be expected to lead to any future environmental claims against
Target under current Environmental Laws, and (v) there have been no
environmental inspections, investigations, studies, audits, tests, reviews or
other analyses conducted in relation to the Owned Real Property or any Leased
Real Property, Target or the Business which have been provided or reported to
Target.
(x) Employee Benefits.
(i) Section 4(x) of the Disclosure Schedule lists each Employee
Benefit Plan that Target maintains or to which Target contributes.
(ii) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in all material respects with the
applicable requirements of ERISA, the Code, and other applicable laws.
(iii) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-l's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each such Employee Benefit Plan.
(iv) All contributions for any period ending on or before the
Closing Date which are not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and
practice of Target. All premiums or other payments for all periods ending
on or before the Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(v) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code
section 401(a) and has received a favorable determination letter from the
Internal Revenue Service.
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(vi) Copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan have been made available to
Buyer.
(vii) With respect to each Employee Benefit Plan that Target
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute, Target has not
incurred any material liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability) or under the Code with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit Plan.
(viii) Target never has contributed to, or ever has been required to
contribute to, any Multiemployer Plan or has any material liability
(whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due), including any
withdrawal liability, under any Multiemployer Plan.
(ix) Target does not maintain nor ever has maintained, or
contribute, ever has contributed, or ever has been required to contribute
to any Employee Welfare Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Code section 4980B).
(y) Guaranties. Target is not a guarantor or otherwise is responsible for
any liability or obligation (including indebtedness) of any other Person.
(z) Government Contracts. With respect to each Government Contract:
(i) At no time has any payment been made by Target, or by any Person
authorized to act on Target's behalf, to any Person in connection with any
such Government Contracts, in violation of applicable procurement laws or
regulations or in violation of (or requiring disclosure pursuant to) the
Foreign Corrupt Practices Act.
(ii) Section 4(z) of the Disclosure Schedule sets forth all
outstanding or pending change orders which could reasonably be deemed to
involve an amount in excess of $10,000 and all claims, requests for
equitable adjustments, outstanding or pending subcontractor, supplier or
vendor claims, and all teaming agreements, joint venture arrangements and
agency agreements, with respect to such Government Contracts.
(iii) Target's accounts receivable, unbilled costs and accrued
profits (less customer progress payments), notes receivable, contracts in
progress, accounts payable and notes payable (collectively the
"Receivables and Unbilled Costs") as of the Closing shall be recorded on
its books and records in the ordinary course of business in
25
accordance with GAAP applied on a consistent basis with prior years,
subject to the adjustments referred to in section 4(g) above.
(iv) With respect to each Government Contract, except as set forth
in section 4(z) of the Disclosure Schedule, (A) Target has complied with
all material terms and conditions of such Government Contract, including
all clauses, provisions and requirements incorporated expressly, by
reference or by operation of law therein, (B) Target has complied with all
requirements of applicable laws pertaining to such Government Contract,
(C) all representations and certifications executed, acknowledged or set
forth in such Government Contract were complete and correct in all
material respects as of their effective date, and Target has complied in
all material respects with all such representations and certifications,
and (D) neither the United States Government nor any prime contractor,
subcontractor or other Person has notified Seller in writing, that Target
has breached or violated any applicable law, or any material
certification, representation, clause, provision or requirement pertaining
to such Government Contract. Anything herein to the contrary
notwithstanding, to the extent any breach of this representation would
also constitute a breach of the representation made in section 4(u), such
breach shall be subject to the terms of section 6(d) below.
(v) Neither Target nor any officer or management employee of Target
is currently, nor has ever been, debarred or suspended from doing business
with any Federal government agency, nor has any such suspension or
debarment action been commenced. No show cause notices, notices of
termination for default or cure notices have ever been issued against
Target, except, as to any such cure notices, those with respect to which
cure has been made in the ordinary course of business.
(vi) Neither Target nor any officer or management employee of Target
is currently, nor has ever been, under administrative, civil or criminal
indictment or, to the Seller Representative's Knowledge, investigation,
with respect to any alleged irregularity, misstatement or omission arising
under or in any way relating to any of such Government Contracts.
(vii) No security clearances are required to be held by Target for
the execution of its obligations under any such Government Contracts;
Target has never been denied a security clearance necessary to perform any
such Government Contract unless such clearance has later been granted.
(aa) Brokers' Fees. Target has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(bb) Backlog. Section 4(ab) of the Disclosure Schedule identifies for each
Government Contract constituting part of the Assets, Target's reasonable
estimate, based on Target's past experience with such Government Contract and
other experience in the industry, of the amounts to be recognized under the term
of such Government Contract during the projected term thereof, assuming all
option years are exercised. The Parties recognize, however, that a
26
number of such contracts are IDIQ contracts as to which no specific quantities
are designated, that Target's estimates are not intended to be, or relied upon
by Buyer as, guarantees of the revenues which will actually be received under
such Government Contracts, and that there can be no assurance that the actual
experience under any particular Government Contract will conform to such
estimates.
(cc) Disclosure. The representations and warranties contained in this
section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this section 4 not misleading. Buyer agrees that, if
prior to Closing Buyer obtains Knowledge that any of the representations or
warranties in this section 4 is inaccurate or misleading in any material
respect, Buyer will give Seller Representative notice thereof and will either
(i) give Seller Representative a reasonable opportunity to cure such
representation or warranty prior to Closing, (ii) terminate this Agreement prior
to Closing, in which case Sellers shall be responsible under section 12 hereof
only for Buyer's out of pocket expenses in connection with this Agreement and
not for any further amount, or (iii) notify Seller Representative that Buyer is
prepared to waive such breach of representation and proceed to Closing.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable efforts to
cooperate with the other parties in order to consummate and make effective the
transactions contemplated by this Agreement.
(b) Governmental Consents. Each of Buyer, Sellers and Target consent to
give any notices to, make any filings with, and to use its reasonable efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in sections
3(a)(iii) and 3(b)(ii) and 4(c) above.
(c) Operation of Business. From the date hereof to the Closing Date,
Target and Sellers shall not, and Sellers will not permit Target to, engage in
any practice, take any action, or enter into any transaction outside the
ordinary course of the Business. Without limiting the generality of the
foregoing, except with the written consent of Buyer or with respect solely to
the Excluded Assets, Target shall not and Sellers will not cause Target to:
(i) change or amend the Articles of Incorporation or Bylaws of
Target;
(ii) enter into, extend, materially modify, terminate or renew any
Material Contract;
(iii) sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any material Assets, or any interests
therein, except in the ordinary course of business;
(iv) except as otherwise required by law or in the ordinary course
of business, take any action relating to Business Employees (as
hereinafter defined) with respect to the
27
grant of any bonus, severance or termination pay (otherwise than pursuant
to policies or agreements of Target in effect on the date hereof or in
section 5(c) of the Disclosure Schedule), or with respect to any increase
of benefits payable under its severance or termination pay policies or
agreements in effect on the date hereof or increase in any material
respect the compensation or fringe benefits of any employee or pay any
benefit not required by any existing Employee Plan, agreement or policy;
(v) make any change in the key management structure of Seller,
including, without limitation, the hiring of additional officers or the
termination of existing officers other than in the ordinary course of
business;
(vi) adopt, enter into or amend any Employee Plan, agreement
(including, without limitation, any collective bargaining or employment
agreement), trust, fund or other arrangement for the benefit or welfare of
its employees;
(vii) acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, or
otherwise acquire any material assets or business of any corporation,
partnership, association or other business organization or division
thereof;
(viii) make any capital expenditures or commitments in excess of
$10,000 in the aggregate, except any such expenditures disclosed to Buyer
prior to the date hereof;
(ix) make any material loans or advances to any Person;
(x) make any material tax election or settlement or compromise with
tax authorities which would affect the Assets or the Business after the
Closing hereunder, except as set forth in section 4(l) of the Disclosure
Schedule;
(xi) intentionally do any other act which would cause any
representation or warranty in this Agreement to be or become untrue in any
material respect;
(xii) fail to maintain the tangible Assets in their current state of
repair, excepting normal wear and tear or casualty, or fail to replace
consistent with Target's past practice inoperable, worn out, obsolete or
destroyed Assets;
(xiii) make any changes in accounting policies or practices;
provided that Sellers shall cause Target to report to Buyer promptly any
such changes Target proposes to make, and Buyer shall not withhold its
consent to any such change if the same would not reasonably be deemed to
have an adverse effect on Target or Buyer after the Closing; or
(xiv) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock; or
28
(xv) enter into any agreement, or otherwise become obligated, to do
any action prohibited hereunder.
(d) Preservation of Business. Target will make reasonable efforts, and
Sellers will make all reasonable efforts to cause Target, to keep the Business
and Assets substantially intact, including its present operations, physical
facilities, and relationships with employees, lessors, licensors, suppliers and
customers, subject to customary commercial practice.
(e) Full Access. Sellers and Target will permit representatives of the
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of Target, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to the Business.
(f) Confidentiality. Except (i) for any governmental filings required in
order to complete the transactions, and (ii) as Buyer and the Seller
Representative may agree or consent to in writing, each of Buyer and each Seller
will treat and hold as such any Confidential Information it receives from the
other Party or its representatives in the course of the reviews contemplated by
section 5(e) or otherwise, and will not use any of the Confidential Information
except in connection with this Agreement; provided, however, that any party
hereto may disclose such information to its legal and financial advisors,
lenders, financing sources and their respective legal advisors and
representatives so long as such Persons agree to maintain the confidentiality of
such information in accordance with this section 5(f). If this Agreement is
terminated for any reason whatsoever, each Party will return to the other Party
or destroy all tangible embodiments (and all copies) of the Confidential
Information, including all information prepared by the receiving party or such
receiving party's representatives, which are in its possession or the possession
of its representatives. Any provision hereof to the contrary notwithstanding,
information not so destroyed (or returned) will remain subject to these
confidentiality provisions (notwithstanding any termination of this Agreement)
until the second anniversary of the date of this Agreement. The foregoing
confidentiality provisions shall not apply to such portions of the information
received which (i) are or become generally available to the public through no
action by the receiving party or by such party's representatives, (ii) are or
become available to the receiving party on a nonconfidential basis from a
source, other than the disclosing party or its representatives, which the
receiving party believes, after reasonable inquiry, is not prohibited from
disclosure of such information by a contractual, legal or fiduciary obligation,
and shall not apply to any disclosure after the Closing by Buyer of any
information relating solely to Target (other than information relating to the
Excluded Assets or Excluded Liabilities).
(g) Consents; Reasonable Effort; Cooperation. Target and Sellers will make
reasonable efforts to obtain in writing the consents of third parties, in
connection with the consummation of the transactions, listed on Exhibit F
attached hereto, such consents to be substantially in the form set forth in such
Exhibit F (the "Required Consents"), including specifically (i) consents from
the landlords of the facilities leased by Target in Atlantic City, New Jersey,
and Washington, D.C., and (ii) letters from appropriate representative of each
of Lockheed Xxxxxx, Computer Sciences Corporation and the FAA Technical Center
stating that the contracts between Target and each such company, respectively,
will not be terminated due to the change in control of Target resulting from the
transactions contemplated by this Agreement.
29
(h) Notice of Developments. Buyer will give written notice to the Seller
Representative of any development causing a breach of any of the representations
and warranties in section 3(a) which has not previously been disclosed to the
Seller Representative, with reasonable promptness after Buyer gains Knowledge
thereof. The Seller Representative will give written notice to Buyer of any
development causing a breach of any of the representations and warranties in
section 3(b) or 4 above relating to the Sellers, Target, the Business, the
Assets or the transactions contemplated hereby, which has not previously been
disclosed, with reasonable promptness after Target has Knowledge thereof. Buyer
will give the Seller Representative notice, as soon as reasonably practicable
after Buyer has Knowledge thereof, of any material inaccuracy of the
representations and warranties of the Seller Representative with regard to the
Business or the Assets of which Buyer gains Knowledge from Buyer's or its
agents' due diligence investigation with regard to this Agreement.
(i) Exclusivity. Prior to the Closing or other termination of this
Agreement in accordance with the terms hereof, none of the Sellers will (and the
Sellers will not cause or permit Target to) accept an offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any portion of the Assets, of Target, other than in the ordinary course of
business (including any acquisition structured as a merger, consolidation, or
share exchange). None of the Sellers will vote their Target Shares in favor of
any such nonpermitted acquisition structured as a merger, consolidation, or
share exchange.
(j) No Solicitations. From the date hereof through the Closing Date or
termination of this Agreement in accordance with the terms hereof, neither
Target nor any Seller shall directly or through an agent solicit, participate in
or initiate discussions or negotiations with any Person or group of Persons
(other than Buyer or any of its Affiliates) concerning any merger, sale of
assets, sale of shares of capital stock or similar transactions involving Target
or the Business.
(k) Employee Matters. Upon the Closing, Buyer will cause Target to
continue the employment of each employee of Target ("Business Employees") except
for such individuals as are designated on section 4(v) of the Disclosure
Schedule (the "Excluded Employees") at a comparable level of salary and
comparable benefits as currently provided to such Business Employee by Target.
Notwithstanding the foregoing, Buyer shall not thereafter be restricted from any
modification in terms of employment or termination of the Business Employees in
the ordinary course of business. It is acknowledged and agreed that Buyer shall
have no obligation to pay, or cause Target after the Closing to pay, any
severance or termination payments to any Excluded Employee by virtue of the
termination of their employment with Target effective as of the Closing.
(l) Updated Contract Backlog and Financial Statements. Prior to the
Closing, (i) Target shall provide an updated estimate of the amounts anticipated
to be recognized during the remaining term of the Government Contracts, prepared
on the same basis (and subject to the same reservations) as described in the
representation set forth in section 4(ab) of this Agreement, and (ii) Target
shall deliver to Buyer on a timely basis any interim financial statements
prepared by Target in the ordinary course of business.
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6. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
(a) General.
(i) In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless
the requesting Party is entitled to indemnification therefor under section
9 below).
(ii) The Parties acknowledge and agree that from and after the
Closing the Buyer will be entitled to possession of the Books and Records
(other than such Books and Records relating solely to the Excluded Assets
and Excluded Liabilities, as to which Buyer shall be entitled to
possession of a compete and accurate copy), but will provide copies
thereof to Sellers promptly upon request therefor. Buyer will provide all
reasonable cooperation with Sellers in connection with obtaining any
information reasonably necessary for preparation of financial statements
and tax returns.
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, circumstance,
condition, occurrence, event, incident, action, failure to act, or transaction
prior to the Closing Date directly involving the Business, each of the other
Parties will make all reasonable efforts to cooperate with him or it and his or
its counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under section 9 below).
(c) Seller Representative represents and warrants to Buyer that the
Business does not include the manufacture or sale of any products.
(d) Except as otherwise set forth above, the terms of this Section 6 shall
survive the Closing for a period of two (2) years.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in sections 3(b)
and 4 above shall be true and correct in all material respects at and as
of the Closing Date (except for those expressly relating to a different
date);
31
(ii) Sellers shall have performed and complied in all material
respects with all of their covenants hereunder through the Closing;
(iii) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
prevent consummation of any of the transactions contemplated by this
Agreement or have a Material Adverse Effect;
(iv) the Buyer shall have received from counsel to the Sellers an
opinion, addressed to the Buyer, reasonably satisfactory to Buyer and its
counsel and dated as of the Closing Date;
(v) Buyer shall have received from Target and Sellers such
certificates of duly authorized officers and others to evidence compliance
with the conditions set forth in this section 7(a) as may be reasonably
requested by Buyer;
(vi) Buyer shall have received the Required Consents;
(vii) The Seller Representative shall have executed and delivered to
Buyer the Noncompetition Agreement subject to consummation of the
transactions contemplated hereby, as of the date of this Agreement, and
shall have executed the acknowledgment at the end of the Note; and
(viii) Buyer shall have had discussions with the appropriate
representatives of each of Lockheed Xxxxxx, Computer Sciences Corporation
and the FAA Technical Center, whereby Buyer shall have received reasonable
assurances in Buyer's sole discretion that the commercial relationship
between each such company and Target shall continue after the Closing
Date.
The Buyer may waive any condition specified in this section 7(a) in writing, or
by consummating the transactions contemplated hereby.
(b) Conditions to Obligation of the Sellers. The obligation of the Sellers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in section 3(a)
above shall be true and correct in all material respects at and as of the
Closing Date (except for those expressly relating to a different date);
(ii) the Buyer shall have performed and complied in all material
respects with all of its covenants hereunder through the Closing;
(iii) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling,
32
or charge would prevent consummation of any of the transactions
contemplated by this Agreement;
(iv) the Sellers shall have received from counsel to the Buyer an
opinion addressed to the Sellers, reasonably satisfactory to Sellers and
their counsel, and dated as of the Closing Date;
(v) Sellers shall have received from Buyer resolutions adopted by
the Board of Directors of Buyer approving this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby, certified
by Buyer's corporate secretary or assistant secretary; and Sellers shall
have received from Buyer such certificates of its duly authorized officers
and others to evidence compliance with the conditions set forth in this
section 7(b) as may be reasonably requested by Sellers.
The Seller Representative may waive any condition specified in this section 7(b)
in writing or by consummating the transactions contemplated hereby.
8. Consents To Assignment or Novation; Risk of Loss.
(a) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign or novate any Contract, or
any claim or right or any benefit arising thereunder or resulting therefrom, if
an attempted assignment or novation thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way adversely affect
the rights of Target thereunder. If such consent is not obtained, or if an
attempted assignment or novation thereof would be ineffective or would affect
the rights thereunder so that Target would not receive all such rights, Sellers
and Buyer will cooperate, in all reasonable respects but without material cost
to Sellers which is not promptly reimbursed by Buyer, to obtain such consent as
soon as practicable and, until such consent is obtained, to provide to Target
the benefits under any Contract to which such consent relates (with Target
responsible for all the liabilities and obligations thereunder). Recognizing
that any action taken by Sellers pursuant to this section 8(a) is at the request
of and for the benefit of Buyer, Buyer agrees to indemnify and hold harmless
Sellers from and against any claim, loss, liability, damages, cost or expense
(including reasonable attorneys' fees and expenses) arising from or related to
any breach or default under such contracts by Target following the Closing Date
or any action taken by Sellers pursuant to the terms of this section 8(a) at the
request of Buyer. No failure of a Contract to be transferred shall be deemed to
affect any amount payable to Sellers pursuant to any provision of section 2 of
this Agreement (subject to any set-off rights expressly provided for in this
Agreement), except to the extent such failure is the result of any breach by
Target or any Seller of any covenant, representation or warranty contained
herein.
(b) Risk of Loss. If any material portion of the tangible Assets is
destroyed or damaged by fire or any other cause prior to the Closing Date which
destruction or damage disables Target from carrying on, or materially impairs
Target's ability to carry on, a material part of the Business, the Seller
Representative shall give written notice to Buyer as soon as reasonably
practicable after, but in any event within five (5) business days of, Seller
Representative obtaining Knowledge thereof, including information as to the
amount of insurance, if any,
33
believed to cover such destruction or damage. In such event, prior to the
Closing, Buyer shall have the option, which shall be exercised by written notice
to the Seller Representative within ten (10) days after receipt of the Seller
Representative's notice or, if there are not ten (10) days prior to the Closing
Date, as soon as practicable prior to the Closing Date, of (i) closing with such
Assets in their destroyed or damaged condition, in which event Buyer shall be
entitled to the proceeds of any insurance or other proceeds payable with respect
to such loss and, subject to the limitations set forth in section 9 hereof, to
indemnification for any uninsured portion of such loss to the extent provided by
such section 9, and the full purchase price shall be paid, (ii) if agreed by the
Seller Representative, excluding such Assets from the transaction contemplated
hereby, in which case the purchase price shall be reduced by the amount
allocated to such Assets, as mutually agreed between the Parties, and Sellers
shall be entitled to promptly receive any insurance or other proceeds payable
with respect to such loss, or (iii) after providing Target with a reasonable
opportunity to repair such destruction or damage, terminating this Agreement in
accordance with section 11.
9. Survival; Indemnification.
(a) Survival of Representations and Warranties. All of the representations
and warranties of the Parties contained in this Agreement shall survive the
Closing and continue in full force and effect for a period of one (1) year
thereafter except (i) those representations made with respect to the matters set
forth in sections 4(a) (ii) and (iii), 4(j), 4(l), 4(w), 4(x) and 4(z) and any
claim with respect thereto, and any matters arising by reason of any DCAA audits
for periods prior to and through the Closing Date, and any claim with respect
thereto, shall survive until ninety (90) days after the expiration of the
applicable statute of limitations (with extensions) with respect to the matters
addressed in those sections, and (ii) as otherwise expressly set forth herein.
The termination after Closing of the representations and warranties provided
herein shall not affect the rights of a party in respect of any claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
(b) Indemnification Provisions for Benefit of the Buyer. In the event
Target or Buyer suffers Adverse Consequences after the Closing as a result of
(i) the breach by Sellers or Target of any of their respective representations
and warranties contained in section 3(b) or 4 hereof or of any covenant in
section 2, 5, 6 or 10 hereof, (ii) any third party claim with respect to the
operation of the Business or other actions of Target prior to the Closing Date
(except to the extent any such claim constitutes a liability included on the
Closing Net Asset Statement), (iii) any Excluded Liability or Pre-Closing
Environmental Liability, or (iv) any material breach or default by Target under
any of the Contracts prior to the Closing Date (each, a "Buyer Indemnification
Matter"), provided that the Buyer makes a written claim for indemnification
against Seller Representative pursuant to section 13(h) below within the
survival period described above, then the Seller Representative agrees to
indemnify and hold harmless the Buyer and its Affiliates, and their respective
directors, officers, shareholders and employees (collectively, the "Buyer
Parties") from and against any Adverse Consequences the Buyer Parties may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Buyer Parties may suffer after the end of any
applicable survival period) directly resulting from or caused by such Buyer
Indemnification Matter (calculated as set forth in subsection (e) below);
provided, however, that Seller Representative shall not have any
34
obligation to indemnify any of the Buyer Parties from or against any Adverse
Consequences resulting from any Buyer Indemnification Matter until the Buyer
Parties have suffered Adverse Consequences by reason of all such Buyer
Indemnification Matters in excess of $50,000 in the aggregate, after which point
Seller Representative will be obligated only to indemnify the Buyer Parties from
and against further such Adverse Consequences); further provided, that the
limitations set forth above shall not apply to (x) any breach of a covenant set
forth in sections 2, 5, 6 or 10 of this Agreement, or of the representation set
forth in section 4(l)(ix), hereof, or (y) any indemnification for any Excluded
Liability, except such excluded Liabilities as are described in clause (a) of
the definition thereof and are not described in any other clause of such
definition. Notwithstanding the foregoing, Seller Representative shall have no
liability for Adverse Consequences arising from the breach of the representation
set forth in section 4(q) except as follows. If and to the extent any
Transferred Receivable is not collected by Buyer within ninety (90) days after
the later of the Closing Date or the date on which the same was billed (the
"Preliminary Collection Date"), Buyer shall notify Seller representative of such
non-collection. For a period of ninety (90) days after the Preliminary
Collection Date, Seller Representative shall have the right to work together
with Buyer in an attempt to collect any such uncollected Transferred
Receivables; provided that Seller Representative shall not take any action which
could reasonably be deemed to have an adverse affect on any ongoing relationship
between Target or Buyer and the account debtor on any such Transferred
Receivable. If and to the extent that, at the end of such further ninety-day
period, any such Transferred Receivable has not been fully paid over to Buyer,
one-half (1/2) of any remaining uncollected amount thereof shall be deemed an
Adverse Consequence as to which Seller Representative shall have an
indemnification responsibility pursuant to this section 13(b).
(c) Indemnification Provisions for Benefit of Sellers. In the event (i)
the Buyer breaches any of its representations, warranties, and covenants
contained herein, or (ii) after the Closing, Target takes or fails to take any
action under any Contract which constitutes part of the Assets, or fails fully
and timely to perform its obligations with respect to any liabilities existing
as of the Closing and not constituting Excluded Liabilities (each, a "Seller
Indemnification Matter"), and a claim is made against any of the Sellers or any
of the Seller Parties (as defined below) with respect thereto, provided that any
of the Sellers or such Seller Party makes a written claim for indemnification
against the Buyer pursuant to section 13(h) below within the survival period
described above, then the Buyer agrees to indemnify, save, and hold harmless any
of such Sellers and any Sellers' Affiliates, and their respective directors,
officers, shareholders and employees (collectively, the "Seller Parties") from
and against any Adverse Consequences such Seller Parties may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the such Seller Parties may suffer after the end of any applicable
survival period) resulting from or caused by the Seller Indemnification Matter
(calculated as set forth in subsection (e) below; provided, however, that the
Buyer shall not have any obligation to indemnify the Sellers hereunder until the
Sellers have suffered Adverse Consequences by reason of all Seller
Indemnification Matters in excess of $50,000 in the aggregate, after which point
the Sellers shall be entitled to indemnification for all such Adverse
Consequences in excess of such amount; and further provided that the limitations
set forth above shall not apply to claims for breaches of any covenant set forth
in section 2, 5 or 6 of this Agreement.
35
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this section 9, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing within
ten (10) days after the Indemnified Party has Knowledge thereof; provided,
however, that the Indemnified Party's failure timely to provide such
notice shall not bar the Indemnified Party's right to indemnification
hereunder if the Indemnified Party can establish that such failure has not
materially prejudiced the Indemnifying Party's ability to defend the claim
or proceeding.
(ii) Any Indemnifying Party will have the right, at its sole cost
and expense, to assume the defense of the Third Party Claim with counsel
of his or its choice reasonably satisfactory to the Indemnified Party at
any time within ten (10) business days after the Indemnified Party has
given notice of the Third Party Claim; provided, however, that the
Indemnifying Party shall not have the right to control the defense of any
such claim or proceeding unless it has acknowledged in writing its
obligation to indemnify the Indemnified Party from liability arising from
such claim or proceeding pursuant to this section 9 (subject to any
applicable limitations set forth in subsections 9(b) and 9(c) above), and
then, and periodically thereafter, provides the Indemnified Party with
reasonably sufficient evidence of the ability of the Indemnifying Party to
satisfy its obligations under this section 9 with respect to such Third
Party Claim. In the event that the Indemnifying Party assumes the defense
as set forth hereunder, the Indemnifying Party shall conduct the defense
of the Third Party Claim with reasonable diligence thereafter. The
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim; provided
that Indemnifying Party's counsel will consult with such co-counsel, but
shall remain in sole control of such action.
(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with section
9(d)(ii) above, (A) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party
(not to be withheld, conditioned or delayed unreasonably) unless the
judgment or proposed settlement involves only the payment of money damages
by one or more of the Indemnifying Parties and does not impose any
material injunction or other equitable relief upon the Indemnified Party
and (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not to
be withheld, conditioned or delayed unreasonably).
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third Party Claim in accordance with section
9(d)(ii) above, however, (A) the Indemnified Party may defend against the
Third Party Claim in any manner he or it reasonably may deem appropriate;
provided that the Indemnified Party shall conduct the
36
defense of the Third Party Claim with reasonable diligence and (B) the
Indemnifying Parties will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the extent
provided in this section 9. In such event, (1) the Indemnifying Party may
retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim, and the Indemnified Party's counsel
will consult with such co-counsel but shall remain in sole control of such
proceeding, and (2) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not to
be withheld, conditioned or delayed unreasonably).
(e) Determination of Adverse Consequences. The Parties shall make
appropriate adjustments for tax consequences and insurance coverage and take
into account the time cost of money (using the Applicable Rate as the discount
rate from the later of the Closing Date or (x) the date of incurrence of such
Adverse Consequences, if not involving a Third Party Claim, or the date of such
Third Party Claim) in determining Adverse Consequences for purposes of this
section 9. All indemnification payments under this section 9 shall be deemed
adjustments to the Purchase Price.
(f) Exclusive Remedy. The Buyer and Sellers acknowledge and agree that,
except (i) as otherwise set forth in this Agreement, (ii) with respect to actual
fraud, intentional misconduct and violations of law, and (iii) for claims
brought for breaches of or default under any Ancillary Agreement, the foregoing
indemnification provisions in this section 9, together with any other
indemnification provisions expressly set forth in this Agreement, shall be the
exclusive remedy of the Buyer and Sellers with respect to matters relating to
the Business and the Assets and the transactions contemplated by this Agreement.
Without limiting the foregoing, Buyer acknowledges that Target's inclusion as a
Party to this Agreement is not intended to, nor shall it have the effect of,
enlarging the liability of the Seller Representative beyond the limitations set
forth in this section 9.
(g) Right of Set-Off. In addition to any other remedies, any Claims under
this section 9 are, at the option of the Buyer, subject to the following right
of set-off. At the Buyer's election, the principal amount of the Note is subject
to adjustment following the Closing for any aggregate amount finally determined
to be payable by or to Buyer or the Seller Representative pursuant to this
section 9. Any such adjustment is intended as, and shall be treated by the
Parties as, an adjustment to the Total Consideration. If the principal amount of
the Note is adjusted pursuant to this subsection (g)(ii), such adjustment shall
be deemed to be made effective as of the later of (i) Closing Date, or (ii) the
date such Claim arose, and all interest that may have accrued on the principal
amount so canceled or added shall also be deemed to be retroactively canceled or
added, effective as of such date. Upon any adjustment of the principal amount of
the Note, Seller Representative shall, upon request of Buyer, surrender the
outstanding Note for a replacement Note reflecting the adjusted principal
amount, and Buyer shall, upon request of Seller Representative, execute and
deliver to Seller Representative such replacement Note.
10. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters:
37
(a) Buyer shall, and shall cause Target to, promptly provide and make
available to the Seller Representative all information he may request for the
purpose of preparing and filing any such return or working on any such audit.
(b) Buyer and Sellers shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of any
Tax Returns for Target and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
(c) Buyer and Sellers further agree, upon request, to use all reasonable
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(d) Buyer and Sellers further agree, upon request, to provide each other
party with all information that either party may be required to report pursuant
to section ss.6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
(e) Any transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the transactions contemplated hereby, shall
be paid half by Sellers and half by Buyer when due, and Buyer will file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law.
(f) Sellers shall have no liability with respect to any Taxes of any kind
with respect to Target or its Assets or operations (i) with respect to all tax
periods beginning after the Closing Date, (ii) with respect to any tax period of
Target beginning before the Closing Date and ending after the Closing Date, but
only with respect to the portion thereof beginning after the Closing Date, or
(iii) with respect to any Pre-Closing Partial Period, but only to the extent
such Taxes were paid prior to Closing or are provided for on the Closing Net
Asset Statement. Except as set forth in subsection 10(f) above, Sellers shall
have sole liability for all Taxes that arise from the actual sale of the Target
Shares or any deemed sale of the Assets occurring as a result of the Election.
(g) Contests. Sellers and Buyer agree to give prompt notice to each other
of any proposed adjustment to Taxes for periods of Target ending on or prior to
the Closing Date or any Pre-Closing Partial Period. Sellers and Buyer shall
cooperate with each other in the conduct of any audit or other proceedings
involving Target for such periods and each party may participate at its own
expense. Seller Representative shall have the right to control the conduct of
any such audit or proceeding for which Seller Representative agrees that any
resulting Tax allocable to any period prior to or including the Closing Date is
covered by the indemnity provided in Section 9 of this Agreement, (such audit or
other proceeding, a "Sellers' Contest"), provided that: (i) Seller
38
Representative shall keep Buyer informed regarding the progress and substantive
aspect of any Sellers' Contest and (ii) Seller Representative shall not
compromise or settle any Sellers' Contest without Buyer's consent, which consent
may not be unreasonably withheld. If Seller Representative chooses to direct a
Sellers' Contest, Buyer shall cause powers of attorney authorizing Seller
Representative to represent Target before the relevant taxing authority and such
other documents as are reasonably necessary for Seller Representative to control
the conduct of any Sellers' Contest.
(h) Section 338(h)(10) Election and Allocation of Purchase Price. (i) Each
Seller and Buyer shall jointly make the election provided for by Section
338(h)(10) of the Code and any corresponding elections under state, local or
foreign tax law (the "Election") with respect to the purchase and sale of Target
Shares. Seller Representative and Buyer shall provide to the other all necessary
information to permit the Election to be made. Seller Representative and Buyer
shall, as promptly as practicable following the Closing Date, take all actions
necessary and appropriate (including filing IRS Form 8023-A and other such
forms, returns, elections, schedules, attachments and other documents as may be
required (collectively, the "Forms")) to effect and preserve a timely election.
(i) In connection with the Election, Buyer and Seller Representative
shall mutually determine (i) the amount of the modified aggregated deemed
sales price ("MADSP") of the Target Shares (within the meaning of Treas.
Reg. Section 1.338(h)(10)-1(f)) and (ii) the proper allocation of the
MADSP among the Assets in accordance with Treas. Reg. Section
1.338(h)(10)-1(f); provided, however that for such purpose, the
depreciable tangible assets of Target shall have the value of such assets
as set forth on the balance sheet of Target dated January 31, 1998. The
allocations referred to in the preceding sentence are referred to herein
as the "Allocations." Buyer and Seller Representative will calculate the
gain or loss, if any, in a manner consistent with the Allocations, and
Buyer and each Seller will not take any position inconsistent with the
Allocations in any Tax Return (subject to appropriate adjustments pursuant
to Treas. Reg. ss. 1.338(h)(10)-1(f)(4)).
(ii) Buyer shall prepare IRS Form 8594 allocating the Purchase Price
(including any Adjustment Amount under section 2.5 hereof) in accordance
with Section 1060 of the Code in light of the procedure set forth in the
preceding subsection (i) and such other information as required by Form
8594, and shall forward it within one hundred twenty (120) days after
Closing to Seller Representative for his approval, which approval shall
not be unreasonably withheld. In accordance with Code Section 1060(e),
Buyer and each of the Seller Representative shall file with their
respective federal Income Tax Returns for the tax year in which the
Closing occurs, IRS Form 8594 containing the information agreed upon by
the parties pursuant to the immediately preceding sentence.
(iii) Buyer shall prepare, after consultation with Seller
Representative, each Form and shall within thirty (30) days prior to the
latest date for the filing of each Form, submit each such Form to Seller
Representative for Seller Representative's approval, which approval shall
not be unreasonably withheld.
39
11. Termination.
(a) Termination of Agreement. Either Buyer or Seller Representative may
terminate this Agreement as provided below:
(i) Buyer and Seller Representative may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written notice to
the Seller Representative at any time prior to the Closing (A) in the
event any of the Sellers has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect,
the Buyer has notified the Seller Representative of the breach, and the
breach has continued without cure for a period of ten (10) days after the
notice of breach or (B) if the Closing shall not have occurred on or
before the Termination Date (as defined below), by reason of the material
failure of any condition precedent under section 7(a) hereof (unless the
breach of any representation, warranty, or covenant of Buyer contained in
this Agreement is a material factor therein); or (C) if consummation of
the transactions contemplated by this Agreement is enjoined, prohibited or
otherwise restrained by the terms of a final, non-appealable order or
judgment of a court of competent jurisdiction, or (D) if such termination
would be authorized pursuant to section 8(b) hereof; and
(iii) Seller Representative may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, Seller
Representative have notified the Buyer of the breach, and the breach has
continued without cure for a period of ten (10) days after the notice of
breach or (B) if the Closing shall not have occurred on or before the
Termination Date, by reason of the material failure of any condition
precedent under section 7(b) hereof (unless the breach of any
representation, warranty, or covenant of Target or any Seller contained in
this Agreement is a material factor therein); or (C) if consummation of
the transactions contemplated by this Agreement is enjoined, prohibited or
otherwise restrained by the terms of a final, non-appealable order or
judgment of a court of competent jurisdiction.
(iv) "Termination Date" means March 16, 1998; provided that Buyer
may extend the Termination Date, by written notice to Seller
Representative prior to any termination of this Agreement, to a date not
later than March 31, 1998 in order to obtain satisfaction of the closing
conditions set forth in Section 7.
(v) Effect of Termination. If any Party terminates this Agreement
pursuant to section 11(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other
Party (except for any liability of any Party then in breach); provided,
however, that (i) the confidentiality provisions contained in section 5(f)
above shall survive termination, and (ii) the provisions of Article 12
shall apply.
40
12. Breach of Agreement.
(a) Breach and Opportunity to Cure. If any party shall breach the
terms of this Agreement or default in the performance of its obligations
to be performed hereunder prior to Closing (a "Pre-Closing Default"), the
nondefaulting party shall have the right to provide the applicable Seller
and Seller Representative, or Buyer, as applicable, with notice specifying
in reasonable detail the nature of such breach or default. If such breach
or default has not been cured within the time period specified in section
10 above, or by two (2) business days prior to the Closing Date, if
earlier, then the party giving such notice may (i) terminate this
Agreement by giving written notice to the defaulting party hereunder, (ii)
extend the Closing Date for a period not in excess of ten (10) days, if
such default has not been cured by the Closing Date (but no such extension
shall constitute a waiver of such nondefaulting party's right to terminate
as a result of such default), (iii) exercise the remedies available to
such party pursuant to sections 12(b) or 12(c), as applicable, subject to
the right of the other party to contest such action through appropriate
proceedings, and/or (iv) proceed to Closing.
(b) Sellers' Remedies for Failure of Buyer to Close. Buyer
recognizes that if the transactions contemplated hereby are not
consummated as a result of Buyer's default, Sellers would incur damages,
the extent of which is extremely difficult and impractical to ascertain.
The parties, therefore, agree that if this Agreement is terminated or the
transactions contemplated are otherwise not consummated due to the
material default of Buyer, Buyer shall pay to the Sellers an amount equal
to $250,000, as liquidated damages, as Sellers' sole and exclusive remedy
in full settlement of any damages of such failure to close. The parties
agree that this sum shall be in lieu of any and all other relief to which
Sellers might otherwise be entitled due to such failure to close.
(c) Buyer's Remedies for Failure of Sellers to Close. Sellers agree
that the Target Shares represent unique property that cannot be readily
obtained on the open market and that Buyer would be irreparably injured if
Sellers' obligation to sell the Target Shares to Buyer pursuant to this
Agreement is not specifically enforced after default. Therefore, Buyer
shall have the right to specifically enforce Sellers' obligation to sell
the Target Shares to Buyer pursuant to this Agreement, and Sellers agree
to waive the defense in any such suit that Buyer has an adequate remedy at
law and to interpose no opposition, legal or otherwise, as to the
propriety of specific performance as a remedy. In addition, Buyer shall be
entitled to obtain from Sellers (in the event Buyer obtains the remedy of
specific performance) court costs and reasonable attorneys' fees incurred
by Buyer in enforcing its rights under this subsection (c). As a condition
to seeking specific performance, Buyer shall not be required to have
tendered the Cash Consideration, but shall be ready, willing and able to
do so. In the event Buyer elects not to seek specific performance, but
instead to terminate this Agreement as a result of any Pre-Closing
Default, then Buyer shall be entitled to recover an amount equal to
$250,000, as liquidated damages, as Buyer's sole and exclusive remedy in
full settlement of any damages of such wrongful failure of Sellers to
close. If, upon the default of Sellers in their obligation to close
hereunder, Buyer seeks specific performance and does not prevail in its
attempt to obtain specific performance, then Buyer shall be entitled to
recover an amount equal to $250,000, as liquidated damages, as Buyer's
sole and exclusive remedy in full settlement of any damages arising from
such wrongful failure of Sellers to close. Buyer shall have the right to
make any claim under this section 12(c) against Seller
41
Representative, without including a claim against any of the other Sellers. Any
claim of Buyer under this section 12(c) shall not be subject to any restrictions
or limitations on Seller Representative's liability set forth in section 9 of
this Agreement.
(d) Parties' Remedies for Breach After Closing. For the breach by any of
the Parties of any covenant or agreement of such Party to be performed after the
Closing, the nondefaulting Party shall have the rights provided for under
section 9 hereof, and all other rights and remedies available for breach of
contract at law and in equity.
13. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Buyer and the Seller
Representative; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will advise the other Parties prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; provided that the Buyer Parties and Seller
Parties are intended third party beneficiaries of section 9 hereof.
(c) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
(d) Further Assurances. Each Party to this Agreement shall execute such
documents and take, or cause Target to take, such further actions as may
reasonably be necessary to implement the provisions of this Agreement.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and Seller Representative; provided, however, that the
Buyer may (i) assign any or all of its rights and interests hereunder to one or
more of its Affiliates or as collateral to its financing source and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the original Buyer nonetheless shall remain fully
responsible for the performance of all obligations hereunder designated as the
obligations of Buyer); and (iii) after the Closing Date, assign its rights and
obligations under this Agreement to any Person in connection with a sale or
other disposition of substantially all of the Business or substantially all of
Target's assets, without the consent of Sellers.
42
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given when personally
delivered against a signed receipt or delivered by recognized overnight courier
(and then at the time of delivery or when delivery is refused) or if it is sent
by certified mail, return receipt requested, postage prepaid (and then three
business days after deposited in such mail) and addressed to the intended
recipient as set forth below:
If to the Sellers: c/o Xxxxx X. Xxxxxxx
00000 Xxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Copy to: Xxxxx X. Xxxxx
000 Xxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
If to the Buyer: Federal Data Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Copy to: Federal Data Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxx
Copy to: Xxxxxxxx X. Xxxxxxx, Esq.
Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means, but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Maryland without giving effect
to any choice
43
or conflict of law provision or rule (whether of the State of Maryland or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Maryland.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller Representative, provided that each Seller must agree to any amendment
or modification of the representations and warranties of the individual Sellers
in section 3(b) hereof. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Except as otherwise set forth herein, each of the Parties
will bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
(m) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits, Annexes and Schedules. The Exhibits,
Annexes and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
44
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER:
FEDERAL DATA CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: Sr. Vice President
SELLERS:
/s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx, Trustee of the
Xxxxx X. Xxxxxxx Revocable Trust
/s/ Xxxxx X. Xxxxxxx
Name: Xxxxxxx Xxxxxxx, Trustee of the
Xxxxxxx Xxxxxxx Revocable Trust
By: Xxxxx X. Xxxxxxx as Attorney-in-Fact
/s/ Xxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
By: Xxxxx X. Xxxxxxx as Attorney-in-Fact
/s/ Xxxxx X. Xxxxxxx
Name: Xxxx Xxxxxxx
By: Xxxxx X. Xxxxxxx as Attorney-in-Fact
/s/ Xxxxx X. Xxxxxxx
Name: Xxxxxxxx Xxxxx
By: Xxxxx X. Xxxxxxx as Attorney-in-Fact
/s/ Xxxxx X. Xxxxxxx
Name: Xxxxxxx Xxxxx
By: Xxxxx X. Xxxxxxx as Attorney-in-Fact
45
TARGET:
TECHNICAL AND MANAGEMENT ASSISTANCE, INC.
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: Secretary
46
