Exhibit 1
STOCK PURCHASE AGREEMENT
by and between
U.S. FACILITIES, INC.
(as "Buyer")
and
HALIFAX CORPORATION
(as "Seller")
Dated as of May 31, 2000
TABLE OF CONTENTS
PAGE
Recitals 1
1. Definitions 1
2. Sale and Transfer of Shares; Other Assets 8
2.1 Shares 8
2.2 Purchase Price 8
2.3 Allocation of Buyer Consideration 8
2.4 Intentionally Omitted 8
2.5 Other Assets Conveyed; Certain Retained
Liabilities 8
2.6 Section 338(h)(10) Election 9
2.7 Closing 10
3. Representations and Warranties of Seller 10
3.1 Organization and Good Standing 10
3.2 Authority; No Conflict 11
3.3 Capitalization 12
3.4 Financial Statements 12
3.5 Books and Records 12
3.6 Title to Properties; Encumbrances 13
3.7 Condition and Sufficiency of Equipment 13
3.8 Accounts 13
3.9 Reserved 14
3.10 No Undisclosed Liabilities 14
3.11 Taxes 14
3.12 No Material Adverse Change 15
3.13 Employee Benefits 15
3.14 Compliance with Legal Requirements; Governmental
Authorizations 18
3.15 Legal Proceedings; Orders 19
3.16 Absence of Certain Changes and Events 20
3.17 Contracts; No Defaults 22
3.18 Insurance 24
3.19 Environmental Matters 25
3.20 Employees 25
3.21 Labor Relations; Compliance 25
3.22 Intellectual Property 26
3.23 Certain Payments 26
3.24 Intentionally Omitted 27
3.25 Relationships with Related Persons 27
3.26 Brokers or Finders 27
3.27 Intentionally Omitted 27
3.28 Minimum Net Worth 27
4. Representations and Warranties of Buyer 27
4.1 Organization and Good Standing 27
4.2 Authority; No Conflict 27
4.3 Investment Intent 28
4.4 Certain Proceedings 28
4.5 Brokers or Finders 28
4.6 Buyer's Knowledge 28
4.7 Buyer's Qualification. 29
5. Covenants of Buyer. 29
5.1 WARN Act 29
5.2 Trademarks and Tradenames 29
6. Post-Closing Obligations 29
6.1 Transition Agreement 29
6.2 Intentionally Omitted 29
6.3 Covenant Not to Compete 29
6.4 Closing Balance Sheet; Purchase Price Adjustment 30
6.5 Audit Liability Under Redstone Arsenal Contract31
6.6 Buyer's Cooperation in Defense of Claims 31
6.7 Assignment of Lease 31
6.8 Performance Bonds 32
7. Indemnification; Remedies 32
7.1 Survival 32
7.2 Indemnification and Payment of Damages by Seller 32
7.3 Indemnification and Payment of Damages by Buyer34
7.4 Time Limitations 34
7.5 Procedure for Indemnification - Third Party Claims 35
7.6 Procedure for Indemnification - Other Claims 36
8. General Provisions 36
8.1 Expenses 36
8.2 Public Announcements 36
8.3 Notices 36
8.4 Jurisdiction; Service of Process 37
8.5 Further Assurances 37
8.6 Waiver 37
8.7 Entire Agreement and Modification 38
8.8 Schedule 38
8.9 Assignments, Successors, and No Third Party Rights 38
8.10 Severability 38
8.11 Section Headings; Construction 39
8.12 Time of Essence 39
8.13 Governing Law 39
8.14 Counterparts 39
Stock Purchase Agreement
This Stock Purchase Agreement ("Agreement") is made as of May 31,
2000, by U.S. FACILITIES, INC., a Delaware corporation ("Buyer"), and
HALIFAX CORPORATION, a Virginia corporation ("Seller").
RECITALS
Seller desires to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of
Halifax Technical Services, Inc., a Virginia corporation (the
"Company"), for the consideration and on the terms set forth in this
Agreement.
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 1:
"Accounts Payable" is defined in Section 3.8(b).
"Accounts Receivable" is defined in Section 3.8(a).
"Additional Taxes" is defined in Section 2.6(c).
"Affiliate" means any Person controlling, controlled by or under
common control with such other Person.
"Applicable Contract" means any Contract (a) under which the
Company has or may acquire any rights, (b) under which the Company has
or may become subject to any obligation or liability, or (c) by which
the Company or any of the assets owned or used by it is or may become
bound.
"Balance Sheet" is defined in Section 3.4.
"Business" means any facilities maintenance, operating and
support services engaged in by the Company and/or any Affiliate of the
Company.
"Buyer" is defined in the first paragraph of this Agreement.
"Closing" is defined in Section 2.7.
"Closing Date" means the date and time as of which the Closing
actually takes place.
"Closing Date Return" is defined in Section 2.6(b).
"Company" is defined in the Recitals of this Agreement.
"Company Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by the Company or an ERISA
Affiliate of the Company.
"Company Plan" means all Plans of which the Company or an ERISA
Affiliate of the Company is or was a Plan Sponsor, or to which the
Company or an ERISA Affiliate of the Company otherwise contributes or
has contributed, or in which the Company or an ERISA Affiliate of the
Company otherwise participates or has participated and to which the
Company or an ERISA Affiliate has a liability. All references to
Plans are to Company Plans unless the context requires otherwise.
"Consent" means any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" means all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement; and
(c) Buyer's acquisition and ownership of the Shares.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied)
that is legally binding.
"Damages" is defined in Section 7.2.
"Disclosure Schedules" means the disclosure schedules delivered
by Seller to Buyer concurrently with the execution and delivery of
this Agreement.
"Encumbrance" means any charge, claim, condition, lien, option,
pledge, security interest, right of first refusal, or restriction on
use, voting, transfer, receipt of income, or exercise of any other
attribute of ownership.
"Environment" means soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant
and animal life, and any other environmental medium or natural
resource.
"Environmental, Health, and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and
Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off- site contamination, occupational
safety and health, and regulation of chemical substances or
products);
(b) fines, penalties, judgments, awards, settlements, legal
or administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or
other remediation or response actions ("Cleanup") required by
applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial," and "response action," include
the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
9601 et seq., as amended ("CERCLA").
"Environmental Law" means any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up
or prevention; or
(h) making responsible Parties pay private Parties, or
groups of them, for damages done to their health or the Environment,
or permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"ERISA Affiliate" means, with respect to the Company, any other
person that, together with the Company, would be treated as a single
employer under IRC 414.
"Escrow Account" is defined in Section 2.6(e).
"Facilities" means any leaseholds or other interests currently or
formerly owned or operated by the Company and any buildings, plants,
structures, or equipment currently or formerly owned or operated by
the Company.
"Financial Statements" is defined in Section 3.4.
"GAAP" means generally accepted United States accounting
principles and "in accordance with GAAP", when used with reference to
the Financial Statements, indicates that the Financial Statements were
prepared using methodology consistent with GAAP, except as otherwise
noted therein.
"Governmental Authorization" means any approval, consent,
license, permit, waiver, or other authorization issued, granted,
given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"Governmental Body" means any:
(a) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any
court or other tribunal); or
(d) body entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Hazardous Activity" means the distribution, generation,
handling, importing, management, manufacturing, processing,
production, refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of
groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger, or risk
of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Company.
"Hazardous Materials" means any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any
admixture or solution thereof, and specifically including petroleum
and all derivatives thereof or synthetic substitutes therefor and
asbestos or asbestos-containing materials.
"Intellectual Property Assets" is defined in Section 3.22.
"Interim Balance Sheet" is defined in Section 3.4.
"IRC" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the
Internal Revenue Code or any successor law.
"IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"Knowledge" means, with respect to the Seller, the Company or the
Buyer, as applicable, the actual knowledge of any individual who is
serving as a director or executive officer (if such person is charged
with responsibility for the aspect of the business relevant or related
to the fact at issue) of the Seller the Company or the Buyer, as
applicable, and shall be limited to the actual knowledge of such
persons without any obligation on the part of such person to perform
any due diligence or reasonable inquiry. Each executive officer of
the Seller and the Company, for purposes of this definition, is
identified on Schedule 1 hereto.
"Legal Requirement" means any federal or state order,
constitution, law, ordinance, regulation or statute; or any municipal
of other administrative order, law, ordinance or regulation which is
specifically applicable to the Business or to any contract to which
the Company is a party or pursuant to which the Company provides
services.
"Material Adverse Effect" means any material adverse change in,
or material adverse effect on, the business, financial condition or
operations of the Company, provided, however, that the effects of
changes that are generally applicable to (i) the industries and
markets in which the Company operates or (ii) the United States
economy shall be excluded from the determination of Company Material
Adverse Effect.
"Multi-Employer Plan" has the meaning given in ERISA 3(37)(A).
"Occupational Safety and Health Law" means any Legal Requirement
designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or
sponsored by industry associations and insurance companies), designed
to provide safe and healthful working conditions.
"Order" means any award, decision, injunction, judgment, order,
ruling, or verdict entered, issued, made, or rendered against the
Company or the Seller by any court, administrative agency, or other
Governmental Body or by any arbitrator with respect to a legally
binding arbitration proceeding.
"Organizational Documents" means (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the
foregoing.
"Other Benefit Obligations" means all obligations, arrangements,
or customary practices, whether or not legally enforceable, to provide
benefits other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than
obligations, arrangements, and practices that are Plans. Other Benefit
Obligations include consulting agreements under which the compensation
paid does not depend upon the amount of service rendered, sabbatical
policies, severance payment policies, and fringe benefits within the
meaning of IRC 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" has the meaning given in ERISA 3(2)(A).
"Person" means any individual, corporation (including any non-
profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
"Plan" has the meaning given in ERISA 3(3).
"Plan Sponsor" has the meaning given in ERISA 3(16)(B).
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) involving or relating to
the Company commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator (with respect
to a legally binding arbitration proceeding).
"Qualified Plan" means any Plan that meets or purports to meet
the requirements of IRC 401(a).
"Release" means any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants,
and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Seller" is defined in the first paragraph of this Agreement.
"Seller Software" is defined in Section 2.5.
"Shares" is defined in the Recitals of this Agreement.
"Subsidiary" means with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other
Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests
having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person,
"Subsidiary" means a Subsidiary of the Company.
"Tax" means any tax, deficiency or other fee imposed, assessed or
collected by or under the authority of any Governmental Body.
"Tax Escrow Deposit" is defined in Section 2.6(d).
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of
or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" means a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Title IV Plans" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. 1301 et seq., other than Multi-Employer
Plans.
"Transferred Contracts" is defined in Section 6.1.
"Transition Agreement" means the Transition Agreement among
Buyer, the Company and Seller in the form attached hereto as Exhibit
6.1.
"Welfare Plan" has the meaning given in ERISA 3(1).
2. SALE AND TRANSFER OF SHARES; OTHER ASSETS.
2.1 SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Seller will sell and transfer the Shares to
Buyer, and Buyer will purchase the Shares from Seller.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price")
for the Shares and the Seller Software will be $5,600,000. The
Purchase Price shall be payable to Seller by wire transfer to an
account specified by Seller as follows:
(a) $5,500,000 at Closing; and
(b) $100,000 on the first anniversary of the Closing Date.
2.3 ALLOCATION OF BUYER CONSIDERATION.
(a) The consideration paid by Buyer under this Agreement
shall be allocated by the parties $1,000 to the Seller's covenant not
to compete (made pursuant to Section 6.3 below) and the entire
remaining balance to the Shares.
(b) If a Section 338(h)(10) Election is made with respect
to the purchase of the Shares, as contemplated in Section 2.6 below,
that portion of the consideration paid by Buyer under this Agreement
and allocated to the Shares shall be allocated by the parties among
the assets of the Company as provided in Schedule 2.6 attached hereto.
2.4 INTENTIONALLY OMITTED.
2.5 OTHER ASSETS CONVEYED; CERTAIN RETAINED LIABILITIES.
(a) Seller shall convey to the Company at the Closing Date,
the rights to use all software owned or licensed by Seller and used by
Company listed on Schedule 2.5 hereto (the "Seller Software").
Schedule 2.5 hereto lists all Seller Software. Seller and its
affiliates shall not be responsible for any ongoing costs and
expenses, including but not limited to costs and expenses relating to
maintenance and upgrade of the Seller Software from and after the
Closing Date.
2.6 SECTION 338(h)(10) ELECTION.
(a) At Buyer's request, Seller will join with Buyer in
making an election under Section 338(h)(10) of the IRC (and, at Buyer's
request, any corresponding elections under any state or local tax law
designated by Buyer) (collectively, a "Section 338(h)(10) Election")
with respect to the purchase and sale of the Shares hereunder. Buyer
has requested Seller's cooperation, and Seller has agreed to cooperate,
in Buyer's obtaining the tax treatment provided under Section
338(h)(10) of the IRC, but only to the extent and in the manner set
forth in this Section 2.6.
(b) As soon as reasonably practicable following the
Closing, Seller, with Buyer's cooperation, will prepare and file any
and all income and/or franchise tax returns required to be filed on or
with respect to the period ending on May 31, 2000 (the "Closing Date
Returns"). A Section 338(h)(10) Election, or an election under
equivalent state or local tax law counterparts, will be made in
connection with the filing of each such Closing Date Return, to the
extent such an election is permitted thereunder. Such returns shall
be prepared based on an allocation of the Purchase Price which is
substantially as set forth in Section 2.3 hereof and Schedule 2.6
hereto. The allocation of the Purchase Price shall in no event limit
or impact the enforceability of any representations, warranties,
covenants or agreements herein.
(c) Seller will be responsible for all income and/or
franchise taxes due and payable on or in connection with the filing of
such Closing Date Returns; except that (x) any portion of such income
and/or franchise taxes imposed as a result of the Section 338(h)(10)
Election and (y) the entire amount of all other taxes imposed as a
result of the Section 338(h)(10) Election (which amounts in (x) and (y)
are collectively, the "Additional Taxes") shall be treated as follows:
(i) Seller will be responsible, upon filing such returns,
for Additional Taxes of up to $190,000; and
(ii) Buyer will be responsible, from and after the filing of
such returns, for all Additional Taxes in excess of such
$190,000.
(d) Buyer agrees to pay to Seller as soon as possible after
Closing up to $190,000 (the "Tax Escrow Deposit") drawn, to the extent
available, from the first amounts received from and after Closing in
payment of Accounts Receivable, to be applied by Seller to the payment
of Additional Taxes pursuant to subparagraph (c)(i) above, all as
further described in the Transition Agreement. Buyer agrees to
indemnify, defend and hold Seller harmless from all taxes (other than
those expressly made Seller's responsibility under subparagraph (c)
above), including without limitation, Additional Taxes imposed as a
result of the Section 338(h)(10) Election which exceed the sum of
$190,000.
(e) (i) Seller shall place the Tax Escrow Deposit into a
separate and restricted interest bearing money market account (the
"Escrow Account") with an independent financial institution. All
interest accruing on the Tax Escrow Deposit shall become part of the
Tax Escrow Deposit and shall be held in the same manner as the Tax
Escrow Deposit and shall be distributed as described herein.
(ii) When the Closing Date Returns have been prepared
and delivered to Buyer for its review, Buyer shall promptly determine
in its sole discretion whether a Section 338(h)(10) Election, and, to
the extent permissible, elections under equivalent state or local tax
counterparts, will be made in connection with the filing of the Closing
Date Returns.
(iii) In the event Buyer determines to proceed with
the Section 338(h)(10) Election, Buyer shall so notify Seller and
Seller, immediately upon receipt of such notice, shall file the Closing
Date Returns and upon such filing shall be entitled to receive
disbursement from the Escrow Account of the amount of "Additional Taxes
due," as defined below. The balance of the Escrow Account, if any,
shall thereupon be disbursed to Buyer.
(iv) In the event Buyer determines not to proceed with
the Section 338(h)(10) Election, Buyer shall so notify Seller, and
instruct Seller not to make the Section 338(h)(10) Election. Upon
delivery of such notice to Seller, Buyer shall be entitled to receive
disbursement from the Escrow Account of the Tax Escrow Deposit.
(f) In determining the amount of Additional Taxes due for
purposes of subparagraph (e) (iii) above for which Seller is (x)
responsible under subparagraph (c)(i) above, and (y) entitled to draw
upon the Tax Escrow Deposit under (e) (iii) above, the taxes imposed as
a result of the Section 338(h)(10) Election shall equal the excess of
(i) the taxes actually imposed with the Section 338(h)(10) Election in
place over (ii) the taxes which would have been imposed if no Section
338(h)(10) Election had been made, except that any and all tax loss
carry forwards, net operating loss carry forwards and/or tax credits of
the Seller, arising or relating to any tax period of Seller ending on
or prior to the Closing Date shall be disregarded.
2.7 CLOSING. The purchase and sale (the "Closing") provided for
in this Agreement will take place in the offices of Obermayer ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Hippel LLP, One Penn Center, 19th Floor, ▇▇▇▇ ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. on
May 31, 2000 or at such other time and place as the parties may agree.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Virginia, with full corporate
power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to
own or use, and to perform all its obligations under Applicable
Contracts. The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification except where the failure
to be so duly qualified or in good standing would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
Schedule 3.1 hereto contains a list of jurisdictions in which the
Company is authorized to do business.
Seller has delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Seller, enforceable against Seller in accordance
with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, affecting creditors' rights
generally and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought. Upon the execution and delivery by
Seller of this Agreement and the Transition Agreement (collectively,
the "Seller's Closing Documents"), the Seller's Closing Documents will
constitute the legal, valid, and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms.
Seller has the corporate power and authority, and capacity to execute
and deliver this Agreement and the other Seller's Closing Documents
and to perform its obligations under this Agreement and the other
Seller's Closing Documents.
(b) Except as set forth in Schedule 3.2, and except for (x)
applicable requirements under federal and state securities laws, (y)
applicable requirements of any national securities exchange upon which
shares of common stock of the Seller are listed and (z) as otherwise
described in this Agreement, neither the execution and delivery of
this Agreement by the Seller nor the consummation or performance of
any of the Contemplated Transactions by the Seller will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the
Company, or (B) any resolution adopted by the board of directors or
the stockholder of the Company;
(ii) contravene, conflict with, or result in a
violation of any Legal Requirement or any Order pertaining to the
Company or the Seller respecting the business of the Company, or any
of the assets owned or used by the Company;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or any of
the assets owned or used by, the Company;
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify in
any material respect, any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by
the Company;
except in the case of clauses (ii), (iii), (iv) or (v), for such
contraventions, conflicts, violations, breaches or impositions which
would become applicable as a result of any business or activities
(other than the Business) in which Buyer is or proposes to be engaged
or as a result of any acts or omissions by, or the status of any facts
pertaining to, Buyer.
Except as set forth in Schedule 3.2, neither the Seller nor
the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
3.3 CAPITALIZATION. The authorized equity securities of the
Company consist of 5,000 shares of common stock, par value $1.00 per
share, of which 1,000 shares are issued and outstanding and constitute
the Shares. Seller is and will be on the Closing Date the record and
beneficial owner and holder of the Shares, free and clear of all
Encumbrances (except for requirements of federal and state securities
laws). The Shares have been duly authorized and validly issued and
are fully paid and nonassessable. There are no Contracts (other than
this Agreement) relating to the issuance, sale, or transfer of the
Shares. None of the Shares was issued in violation of the Securities
Act or any other Legal Requirement. The Company does not own or have
any Contract to acquire, any equity securities or other securities of
any Person or any direct or indirect equity or ownership interest in
any other business.
3.4 FINANCIAL STATEMENTS. Seller has delivered to Buyer: (a)
an unaudited balance sheet of the Company as at March 31, 2000 (the
"Balance Sheet") and the related unaudited statement of income for the
fiscal year ended March 31, 2000 (collectively, the "March 31, 2000
Financial Statements"); and (b) an unaudited balance sheet of the
Company as at April 30, 2000 (the "Interim Balance Sheet") and the
related unaudited statements of income for the month then ended,
including in each case the notes thereto (collectively with the March
31 Financial Statements, the "Financial Statements"). The Financial
Statements have been internally prepared by the Company and the
Seller, are accurate and correct in all material respects and fairly
present the financial condition and the results of operations of the
Company as at the date of and for the period referred to in such
Financial Statements. No financial statements of any Person other than
the Company are required by GAAP to be included in the Financial
Statements.
3.5 BOOKS AND RECORDS. The minute books and stock record books
of the Company, all of which have been made available to Buyer, are
complete and correct in all material respects. At the Closing, all of
the minute books and all Company records will be the property of the
Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. The Company does not own
(and has never owned) any real property. Schedule 3.6 contains a
complete and accurate list of all leaseholds or other interests of the
Company in real property. The Company owns all of the assets that it
purports to own located in the facilities occupied by the Company or
reflected as owned in the books and records of the Company, including
all of the assets reflected in the Balance Sheet and the Interim
Balance Sheet, except for dispositions of such assets in the ordinary
course of business. All of the assets purchased or otherwise acquired
by the Company since the date of the Balance Sheet have been purchased
or acquired in the ordinary course of business and consistent with
past practice. All material assets reflected in the Balance Sheet and
the Interim Balance Sheet are free and clear of all Encumbrances
except for (a) security interests shown on the Balance Sheet or the
Interim Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists,
(b) security interests incurred in connection with the purchase of
assets after the date of the Interim Balance Sheet (such security
interests being limited to the assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both,
would constitute a default) exists, (c) liens for current taxes not
yet due or taxes which are being contested in good faith and (d)
recorded liens discovered by CSC / The United States Corporation
Company in its searches performed on behalf of Buyer and Commerce
Bank/Pennsylvania, N.A. in the Commonwealth of Pennsylvania and the
Commonwealth of Virginia.
3.7 CONDITION AND SUFFICIENCY OF EQUIPMENT. The equipment owned
or used by the Company which is material to the operation of the
Company's business as presently conducted is in good operating
condition and repair, and is adequate for the uses to which it is
being put, and none of such equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are
not material in nature or cost. The equipment of the Company is
sufficient for the continued conduct of the Company's business after
the Closing in substantially the same manner as conducted prior to the
Closing.
3.8 ACCOUNTS.
(a) All accounts receivable of the Company that are
reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent
valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and valid. There are no current contests
or claims under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts
Receivable, except as listed on Schedule 3.8. Schedule 3.8(a)
contains a complete and accurate list of all Accounts Receivable as of
the date of the Interim Balance Sheet, which list sets forth the aging
of such Accounts Receivable.
(b) All accounts payable (the "Accounts Payable") and all
accrued expenses of the Company that are reflected on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date represent or will represent valid
obligations of the Company arising in the ordinary course of business.
Schedule 3.8(b) contains a complete and accurate list of all Accounts
Payable incurred by the Company in connection with, and are directly
related to, the sales made or services performed that gave rise to the
Accounts Receivable listed on Schedule 3.8(a).
3.9 RESERVED.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule
3.10, the Company has no liabilities or obligations or claims that
would be required to be reflected or reserved against in a balance
sheet of the Company prepared in accordance with the methodology used
in preparing the March 31 Financial Statements, except for (a)
liabilities or obligations reflected or reserved against in the
Balance Sheet or the Interim Balance Sheet, (b) current liabilities
incurred in the ordinary course of business since April 30, 2000 and
(c) liabilities and obligations incurred in connection with this
Agreement or the Contemplated Transactions.
3.11 TAXES.
(a) The Seller (or the Company in those jurisdictions where
the Seller does not file a consolidated return including the Company)
filed or caused to be filed all Tax Returns relating to income or
franchise taxes that are or were required to be filed by or with
respect to it, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Seller has
delivered or made available to Buyer copies of, and Schedule 3.11
consists of all such Tax Returns relating to income or franchise taxes
filed through March 31, 1999. The Seller (or the Company as the case
may be) has paid, or made provision for the payment of, all income or
franchise taxes that are due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Seller or the
Company, except such income or franchise taxes, if any, as are listed
in Schedule 3.11 and are being contested in good faith and as to which
adequate reserves (determined in accordance with the methodology used
in preparing the March 31 Financial Statements) have been provided in
the Balance Sheet and the Interim Balance Sheet.
(b) The United States federal and state income Tax Returns
of the Company subject to income and franchise taxes have been audited
by the IRS or relevant state tax authorities or are closed by the
applicable statute of limitations for all taxable years through 1996.
Schedule 3.11 contains a complete and accurate list of all audits of
all such Tax Returns, including a reasonably detailed description of
the nature and outcome of each audit. All deficiencies proposed as a
result of such audits have been paid, reserved against, settled, or,
as described in Schedule 3.11, are being contested in good faith by
appropriate proceedings. Schedule 3.11 describes all adjustments to
the United States federal income Tax Returns filed by the Seller, the
Company or any group of corporations including the Company for all
taxable years through March 31, 1999, and the resulting deficiencies
proposed by the IRS. Except as described in Schedule 3.11, neither
Seller nor the Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the
payment of Taxes of the Company or for which the Company may be
liable.
(c) There are no charges, accruals, and reserves with
respect to income or franchise taxes on the books of the Company.
There exists no proposed tax assessment against the Company except as
disclosed in the Balance Sheet or in Schedule 3.11. No consent to the
application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be acquired by
the Company. All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct in all material
respects, and complete. There is no tax sharing agreement that will
require any payment by the Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE. Except (a) as disclosed in the
Financial Statements, (b) as disclosed in Schedule 3.12 or (c) as
contemplated by this Agreement, since April 30, 2000 there has not
been any change in the business, operations or financial condition of
the Company that would, individually or in the aggregate, have a
Material Adverse Effect on the Company.
3.13 EMPLOYEE BENEFITS.
(a) (i) Schedule 3.13(i) contains a complete and accurate
list of all Company Plans and Company Other Benefit Obligations and
identifies as such all Company Plans that are (A) defined benefit
Pension Plans, (B) Qualified Plans, (C) Title IV Plans, or (D) Multi-
Employer Plans.
(ii) Schedule 3.13(ii) contains a complete and
accurate list of all Plans in which any ERISA Affiliate participates
or has participated, or to which any such ERISA Affiliate contributes
or has contributed, in each case for the benefit of any employee or
former employee of the Seller or any subsidiary of the Seller and to
which the Company or an ERISA Affiliate has a liability. Except as
set forth in Schedule 3.13 (ii), no Company Plan is both a Multi-
Employer Plan and a Pension Plan.
(b) Seller has delivered or made available to Buyer:
(i) all documents that set forth the terms of
each Company Plan or Company Other Benefit Obligation which is not a
Multi-Employer Plan, and of any related trust, including (A) all
current plan descriptions and summary plan descriptions of Company
Plans for which Seller or the Company is required to prepare, file,
and distribute plan descriptions and summary plan descriptions, and
(B) all current summaries and descriptions furnished to Participants
and beneficiaries regarding such Company Plans and Company Other
Benefit Obligations for which a plan description or summary plan
description is not required;
(ii) all current personnel, payroll, and
employment manuals and policies;
(iii) the two most recent collective bargaining
agreements pursuant to which contributions have been made or
obligations incurred (including both pension and welfare benefits) by
the Company and the ERISA Affiliates of the Company, and all
collective bargaining agreements pursuant to which contributions are
being made or obligations are owed by such entities;
(iv) a written description of any Company Plan or
Company Other Benefit Obligation which is not a Multi-Employer Plan
that is not otherwise in writing;
(v) all insurance policies purchased by or providing
benefits under any Company Plan which is not a Multi-Employer Plan;
(vi) all current contracts with third party
administrators, actuaries, investment managers, consultants, and other
independent contractors that relate to any Company Plan or Company
Other Benefit Obligation which is not a Multi-Employer Plan;
(vii) the Form 5500 filed in each of the most
recent three plan years with respect to each Company Plan which is not
a Multi-Employer Plan, including all schedules thereto and the
opinions of independent accountants; and
(viii) with respect to Qualified Plans, the most
recent determination letter for each Plan of the Company that is a
Qualified Plan and which is not a Multi-Employer Plan.
(c) Except as set forth in Schedule 3.13(vi) :
(i) The Company has performed all of its obligations
under all Company Plans and Company Other Benefit Obligations. The
Company has made entries in its financial records and statements for
all obligations and liabilities under such Plans and Obligations that
have accrued but are not due.
(ii) To the Knowledge of the Seller and the
Company, no written statement has been made by the Company to any
Person with regard to any Plan or Other Benefit Obligation that was
not in accordance with the Plan or Other Benefit Obligation and that
could have an Material Adverse Effect on the Company or the Buyer.
(iii) Each Company Plan and Company Other Benefit
Obligation which is not a Multi-Employer Plan has been administered
and operated in accordance, where applicable, with ERISA, the IRC, and
other applicable Laws and with any applicable collective bargaining
agreement.
(A) To the Knowledge of the Seller and the
Company, no transaction prohibited by ERISA 406 and no "prohibited
transaction" under IRC 4975(c) have occurred with respect to any
Company Plan which is not a Multi-Employer Plan.
(B) To the Knowledge of the Seller and the
Company, neither the Seller nor the Company has any liability to the
IRS with respect to any Plan.
(C) To the Knowledge of the Seller and the
Company, neither the Seller nor the Company has any liability under
ERISA 502 or 4071.
(D) To the Knowledge of the Seller and the
Company, all filings required by ERISA and the IRC as to each Plan
which is not a Multi-Employer Plan have been timely filed, and all
material notices and disclosures to participants required by either
ERISA or the IRC have been timely provided.
(E) To the Knowledge of the Seller and the
Company, all contributions and payments made or accrued with respect
to all Company Plans and Company Other Benefit Obligations are
deductible under IRC 162 or 404. No amount, or any asset of any
Company Plan which is not a Multi-Employer Plan is subject to tax as
unrelated business taxable income.
(iv) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving, any Company Plan or Company Other Benefit Obligation which
is not a Multi-Employer Plan is pending or, to Seller's Knowledge, is
threatened.
(v) Each Qualified Plan of the Company which is
not a Multi-Employer Plan is qualified in form and operation under IRC
401(a); each trust for each such Plan is exempt from federal income
tax under IRC 501(a). To the Knowledge of the Seller and the
Company, no event has occurred or circumstance exists that will or
reasonably could give rise to disqualification or loss of tax-exempt
status of any such Plan or trust.
(vi) No Company Plan other than a Multi-Employer
Plan is subject to Title IV of ERISA.
(vii) No amounts are due to the PBGC by the Company
pursuant to ERISA 4007.
(viii) Neither the Company nor any ERISA Affiliate
of the Company has filed a notice of intent to terminate any Plan or
has adopted any amendment to treat a Plan as terminated.
(ix) Neither the Seller nor the Company has
Knowledge of any facts or circumstances that reasonably may give rise
to any liability of Seller, the Company, or Buyer to the PBGC under
Title IV of ERISA.
(x) Neither the Company nor any ERISA Affiliate of the
Company has ever established, maintained, or contributed to or
otherwise participated in, or had an obligation to maintain,
contribute to, or otherwise participate in, any Multi-Employer Plan
which is a Pension Plan.
(xi) The Company does not provide health or
welfare benefits for any retired or former employee nor is the Company
obligated to provide health or welfare benefits to any active employee
following such employee's retirement or other termination of service.
(xii) Both the Seller and the Company have complied
in all material respects with the provisions of ERISA 601 et seq.
and IRC 4980B.
(xiii) No payment that is owed or may become due to
any director, officer, employee, or agent of the Company will be non-
deductible to the Company or subject to tax under IRC 280G or
4999; nor will the Company be required to "gross up" or otherwise
compensate any such person because of the imposition of any excise tax
on a payment to such person.
(xiv) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or acceleration
of any benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Schedule 3.14, as reflected in
the Financial Statements or except with respect to those matters
covered by Sections 3.11, 3.13, 3.19 or 3.21 of this Agreement:
(i) the Company is in compliance with each Legal
Requirement that is applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets;
(ii) no event has occurred that (with or without
notice or lapse of time) would reasonably be expected to constitute or
result in a violation by the Company of, or a failure on the part of
the Company to comply with, any Legal Requirement; and
(iii) the Company has not received any notice or
other communication (whether oral or written) from any Governmental
Body regarding any actual, alleged or potential violation of, or
failure to comply with, any Legal Requirement; except, in the case of
each of clauses (i), (ii) and (iii), where the failure to be in such
compliance, the occurrence of such events or the receipt of such
notice would not reasonably be likely to result, individually or in
the aggregate, in a Material Adverse Effect on the Company or would
become applicable as a result of any acts or omissions by, or the
status of any facts pertaining to, Buyer.
(b) Schedule 3.14 contains a complete and accurate list of
each Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or to any of the assets owned or
used by, the Company. Each Governmental Authorization listed or
required to be listed in Schedule 3.14 is valid and in full force and
effect. Except as set forth in Schedule 3.14:
(i) the Company is in full compliance with all of the
terms and requirements of each Governmental Authorization identified
or required to be identified in Schedule 3.14;
(ii) no event has occurred or exists that reasonably
may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with
any term or requirement of any Governmental Authorization listed or
required to be listed in Schedule 3.14, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization
listed or required to be listed in Schedule 3.14;
(iii) the Company has not received any notice or
other communication (whether oral or written) from any Governmental
Body regarding (A) any actual, alleged, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification
to any Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or required
to be listed in Schedule 3.14 have been duly filed on a timely basis
with the appropriate Governmental Bodies, and all other filings
required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies;
except, in the case of each of clauses (i), (ii), (iii) and (iv),
where the failure to be in such compliance, the occurrence of such
events or receipt of such notice would not reasonably be likely to
result, individually or in the aggregate, in a Material Adverse Effect
on the Company.
The Governmental Authorizations listed or required to be listed
in Schedule 3.14 collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and
operate its business in the manner it currently conducts and operates
such business and to permit the Company to own and use its assets in
the manner in which it currently owns and uses such assets.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Schedule 3.15, to the Knowledge
of the Seller, there is no pending Proceeding that has been commenced
by or against the Company or that otherwise relates to or affects the
business of, or any of the assets owned or used by, the Company.
To the Knowledge of Seller, (A) no such Proceeding has been
threatened, and (B) no event has occurred that reasonably may give
rise to the commencement of any such Proceeding that is reasonably
likely to have a Material Adverse Effect on the Company. Seller has
delivered to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Schedule 3.15.
(b) Except as set forth in Schedule 3.15:
(i) there is no Order to which the Company, or any of
the assets owned or used by the Company, is subject;
(ii) Seller is not subject to any Order that
relates to the business of, or any of the assets owned or used by, the
Company; and
(iii) no officer, director, agent, or employee of
the Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Schedule 3.15:
(i) the Company is in full compliance with all of the
terms and requirements of each Order to which it, or any of the assets
owned or used by it, is or has been subject;
(ii) no event has occurred that reasonably may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the
Company, is subject; and
(iii) the Company has not received any notice or
other communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual, alleged, or potential
violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the assets owned or used by
the Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except (i) as set
forth in Schedule 3.16, (ii) as disclosed in the Financial Statements
or (iii) as contemplated by this Agreement or the Contemplated
Transactions, since the date of the Interim Balance Sheet, the Company
has conducted its business only in the ordinary course of business and
there has not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the Company of any
shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of
capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment by the Company of any bonus or increase by the
Company of any salaries or other compensation to any stockholder,
director or (except in the ordinary course of business) any officer or
employee or entry by the Company into any employment, severance, or
similar Contract with any director, officer, or employee;
(d) adoption of, or increase (except in the ordinary course
of business) in the payments to or benefits under, any profit sharing,
bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, which
would, individually or in the aggregate, have a Material Adverse
Effect on the Company;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii)
any Contract or transaction involving a total remaining payment or
commitment by or to the Company of at least $10,000;
(g) sale, lease, or other disposition of any material asset
or property of the Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of the
Company, including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $5,000;
(i) material change in the accounting methods used by the
Company, except as required by GAAP or applicable law; or
(j) agreement, whether oral or written, by the Company to
do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Schedule 3.17(a) contains a complete and accurate list,
and Seller has delivered to Buyer true and complete copies, of (other
than the Transferred Contracts):
(i) each Applicable Contract that involves performance
of services by the Company in a remaining amount or value in excess of
$5,000;
(ii) each Applicable Contract that involves
performance of services to the Company of a remaining amount or value
in excess of $5,000;
(iii) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract to which the Company is a party affecting the
ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property;
(iv) each licensing agreement or other Applicable
Contract to which the Company is a party with respect to patents,
trademarks, copyrights, or other intellectual property, including
agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any
of the Intellectual Property Assets;
(v) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vi) each joint venture, partnership, and other
Applicable Contract to which the Company is a party (however named)
involving a sharing of profits, losses, costs, or liabilities by the
Company with any other Person;
(vii) each Applicable Contract to which the Company
is a party containing covenants that in any way purport to restrict
the business activity of the Company or any Affiliate of the Company
or limit the freedom of the Company or any Affiliate of the Company to
engage in any line of business or to compete with any Person;
(viii) each Applicable Contract to which the Company
is a party providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods;
(ix) each power of attorney that is currently
effective and outstanding;
(x) each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or provides for an
express undertaking by the Company to be responsible for consequential
damages;
(xi) each Applicable Contract to which the Company
is a party for capital expenditures in excess of $5,000;
(xii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance extended
by the Company other than in the ordinary course of business; and
(xiii) each amendment, supplement, and modification
(whether oral or written) to which the Company is a party in respect
of any of the foregoing.
Schedule 3.17(a) sets forth reasonably complete details
concerning such Applicable Contracts, including the Parties to the
Applicable Contracts, the amount of the remaining commitment of the
Company under the Applicable Contracts, and the Company's office where
details relating to the Applicable Contracts are located.
(b) Except as set forth in Schedule 3.17(b), and except as
required by applicable law and as contemplated by this Agreement and
the Contemplated Transactions, neither Seller nor any affiliate of
Seller other than the Company will have any remaining contractual
rights under any Applicable Contract that relates to the business of,
or any of the assets owned or used by, the Company; and
(c) Except as set forth in Schedule 3.17(c) , each Contract
identified or required to be identified in Schedule 3.17(a) is in
full force and effect and is valid and enforceable in accordance with
its terms.
(d) Except as set forth in Schedule 3.17(d):
(i) the Company is in full compliance with all
applicable terms and requirements of each Contract under which the
Company has any obligation or liability or by which the Company or any
of the assets owned or used by the Company is bound;
(ii) no event has occurred that (with or without
notice or lapse of time) is reasonably likely to contravene, conflict
with, or result in a violation or breach of, or give the Company or
other party the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iii) the Company has not given to or received from
any Person any notice or other communication (whether oral or written)
regarding any actual, alleged, or potential violation or breach of, or
default under, any Contract to which the Company is a party;
except, in the case of each of clauses (i), (ii) and (iii), where the
failure of such representation to be true would not be likely to
result, individually or in the aggregate, in a Material Adverse Effect
on the Company.
(e) There are presently no ongoing renegotiations of any
material amounts paid or payable to the Company under current or
completed Contracts with any Person and no such Person has made
written demand for such renegotiation.
3.18 INSURANCE.
(a) Seller has made available to Buyer:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the Company,
or any director of the Company, is or has been covered at any time
within the three years preceding the date of this Agreement; and
(ii) true and complete copies of all pending
applications for policies of insurance.
(b) Schedule 3.18(b) describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk by the
Company; and
(iii) all obligations of the Company to third
Parties with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under which
such coverage is provided.
(c) Except as set forth on Schedule 3.18(c):
(i) All policies to which the Company is a party
or that provide coverage to the Company, or any director or officer of
the Company taken together, provide insurance coverage for the Company
of the types and in the amounts normally obtained by a Person carrying
on a similar business as the Company.
(ii) Neither the Seller, with respect to any
insurance policy covering the Company, nor the Company has received
within the preceding two years (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights, or
(B) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(iii) The Company has paid all premiums due, and
has otherwise performed all of its obligations, under each policy to
which the Company is a party or that provides coverage to the Company
or any director thereof.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in Schedule
3.19:
(a) Except where the failure of such representations to be
true would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, (i) the Company is, and at all times
has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law; and (ii) neither
the Seller nor the Company has any basis to expect, nor has either of
them received any actual or threatened order, notice, or other
communication from any Governmental Body of any actual or potential
violation or failure to comply with any Environmental Law, or of any
actual or threatened obligation by the Company to undertake or bear
the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Company has had an
interest.
(b) Neither the Company, nor any other Person for
whose conduct it is or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or, to
the Knowledge of Seller, with respect to any other properties and
assets (whether real, personal, or mixed) in which the Company (or any
predecessor of the Company), has or had an interest.
3.20 EMPLOYEES
(a) Schedule 3.20 contains a complete and accurate list of
the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status:
employer; name; job title; and vacation accrued.
(b) To Seller's Knowledge, no employee or director of the
Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and
any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the
Company to conduct its business, including any Proprietary Rights
Agreement with Seller or the Company by any such employee or
director. To Seller's Knowledge, no director, officer, or other key
employee of the Company intends to terminate his employment with the
Company.
3.21 LABOR RELATIONS; COMPLIANCE. Except as disclosed on Schedule
3.21, the Company is not and has not in the past two years been a
party to any collective bargaining or other labor Contract. Except as
disclosed on Schedule 3.21, there has not been for the past two years,
there is not presently pending or existing, and to Seller's Knowledge
there is not threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or
affecting the Company relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting
any of the Company or its premises, or (c) any application for
certification of a collective bargaining agent. There is no lockout of
any employees by the Company, and no such action is contemplated by
the Company. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.22 INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets. Subject to Section 5.2
hereof, the term "Intellectual Property Assets" shall mean:
(i) the name "Halifax Technical Services, Inc.," all
fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks")
relating to the business of the Company; and
(ii) all material know-how, trade secrets,
confidential information, customer lists, Seller Software, technical
information and data (collectively, "Trade Secrets") owned or licensed
by the Company as licensee or licensor.
(b) Agreements. Schedule 3.22(b) contains a complete and
accurate list of all material Contracts relating to the Intellectual
Property Assets to which the Company is a party or by which the
Company is bound. Except as disclosed on Schedule 3.22, there are no
outstanding and, to Seller's Knowledge, no threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business. Except as
otherwise set forth in Schedule 3.22(c): (i) the Intellectual
Property Assets are all those necessary for the operation of the
Company's business as it is currently conducted; and (ii) the Company
is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims,
or has the right to use the Intellectual Property Assets pursuant to
valid contracts.
(d) Trademarks. Schedule 3.22(d) contains a complete and
accurate list and summary description of all Marks. All Marks that
have been registered with the United States Patent and Trademark
Office are currently in compliance in all material respects with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable.
3.23 CERTAIN PAYMENTS. To Seller's Knowledge after due inquiry,
neither the Company, nor any director, officer, agent, or employee of
the Company acting for or on behalf of the Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private
or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, or (iii) to obtain
special concessions or for special concessions already obtained, for
or in respect of the Company or any Affiliate of the Company in
violation of applicable law, or (b) established or maintained any fund
or asset that has not been recorded in the books and records of the
Company.
3.24 INTENTIONALLY OMITTED.
3.25 RELATIONSHIPS WITH RELATED PERSONS. To Seller's Knowledge
after due inquiry, neither Seller nor any affiliate of Seller or of
the Company is, or has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person
that presently (i) has business dealings material to the Company or a
material financial interest in any transaction with the Company other
than business dealings or transactions conducted in the ordinary
course of business with the Company at substantially prevailing market
prices and on substantially prevailing market terms, or (ii) engages
in competition with the Company with respect to any line of the
services of the Company (a "Competing Business") in any market
presently served by the Company. Except as set forth in Schedule
3.25, to the Seller's Knowledge after due inquiry, neither Seller nor
any affiliate of Seller or of the Company is a party to any Contract
with, or has any claim or right against, the Company (except for this
Agreement).
3.26 BROKERS OR FINDERS. Seller and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
3.27 INTENTIONALLY OMITTED.
3.28 MINIMUM NET WORTH. The Company has a minimum net worth
(calculated in a manner consistent with the methodology used in
preparing the Interim Balance Sheet) as of the Closing Date of not
less than $2,500,000, excluding goodwill and intangibles.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Delaware.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement has been duly executed and delivered by
the Buyer and constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought. Buyer has the corporate power, and authority and capacity to
execute and deliver this Agreement and to perform its obligations
hereunder and under the Contemplated Transactions. The Contemplated
Transactions have been duly authorized by all necessary action on the
part of the Board of Directors and/or the shareholder(s) of the Buyer.
(b) Neither the execution and delivery of this Agreement by
Buyer nor the consummation or performance of any of the Contemplated
Transactions by Buyer will directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the
Buyer, or (B) any resolution adopted by the board of directors or the
stockholder of the Buyer;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right
to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order
pertaining to the Buyer, or any of the assets owned or used by the
Buyer; or
(iii) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify,
any Contract to which the Buyer is party.
Buyer is not and will not be required to obtain any Consent from
any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its
own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that
has been commenced against Buyer and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been threatened.
4.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar
payment in connection with this Agreement and will indemnify and hold
Seller harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.
4.6 BUYER'S KNOWLEDGE. Buyer has no Knowledge (including, for
this purpose, Knowledge gained in the course of Buyer's due diligence
or other inquiry in connection with the Contemplated Transactions) of
any fact, circumstance, event or occurrence which causes to be
inaccurate or misleading any of the representations or warranties of
the Seller or the Company made in Article III of this Agreement.
4.7 BUYER'S QUALIFICATION. Except as set forth in Schedule 4.7
and as contemplated by the Transition Agreement and Section 6.8
hereof, at and as of the Closing Date, Buyer has and will have the
financial and other capability to meet any and all financial and other
requirements imposed in connection with the Transferred Contracts and
otherwise required in connection with obtaining any and all
performance bonds required thereunder.
5. COVENANTS OF BUYER.
5.1 WARN ACT. Buyer hereby agrees to indemnify Seller and to
defend and hold Seller harmless from and against any and all claims,
losses, damages, expenses, obligations and liabilities (including
costs of collection, attorney's fees and other costs of defense) which
Seller may incur in connection with any suit or claim or violation
brought against Seller under the Worker Adjustment and Retraining
Notification Act or any similar state, local or foreign law, which
relates, in whole or in part, to any actions taken by the Buyer or the
Company as of and following the Closing.
5.2 TRADEMARKS AND TRADENAMES. Notwithstanding anything to the
contrary contained herein, the parties acknowledge that the Seller
will continue to own and have exclusive use of the trade and corporate
name "Halifax" or any derivation thereof or any related logo,
trademark or tradename owned by the Seller. The Buyer hereby agrees
that it will, promptly as practicable, but in no event later than nine
(9) months from the Closing Date, rename the Company and cease use of
the trade and corporate name "Halifax Technical Services, Inc." or any
derivation thereof containing the name "Halifax."
6. POST-CLOSING OBLIGATIONS.
6.1 TRANSITION AGREEMENT. From and after May 31, 2000, all
contracts listed on Schedule 6.1 hereto (the "Transferred Contracts")
will be operated for Buyer's and the Company's account (i.e., all
financial and other benefits shall accrue to, and all costs, expenses
and liabilities shall be costs, expenses and liabilities of, Buyer and
the Company as further described in the Transition Agreement). Buyer
and Seller agree to cooperate in effecting the foregoing pursuant to
the terms of the Transition Agreement.
6.2 INTENTIONALLY OMITTED.
6.3 COVENANT NOT TO COMPETE.
(a) In consideration of the Buyer consummating the
transactions set forth in this Agreement, Seller hereby agrees that
for a period of thirty (30) months after the date hereof, it will not
engage in the Business in competition with the business of the Company
as of the date hereof.
(b) Seller recognizes that a breach of the provisions of
this Section 6.3 would cause the Buyer irreparable injury and damage
which cannot be reasonably or adequately compensated by damages at
law. Seller, therefore, expressly agrees that the Buyer shall be
entitled to injunctive and/or other equitable relief to prevent a
breach of such provisions in addition to any other remedies legally
available to it. No bond or other security shall be required in
obtaining such equitable relief, and Seller hereby consents to the
issuance of such injunction and to the ordering of specific
performance.
6.4 CLOSING BALANCE SHEET; PURCHASE PRICE ADJUSTMENT.
(a) Seller shall provide to Buyer within thirty (30) days
after the Closing Date, but not earlier than June 23, 2000, a final
unaudited balance sheet of the Company (the "Closing Balance Sheet")
for the period from the date of the Interim Balance Sheet through May
31, 2000. Buyer shall have the opportunity to audit the Closing
Balance Sheet as hereinafter provided. The Closing Balance Sheet
shall become final and binding upon the parties unless, within five
(5) business days following Buyer's receipt of the Closing Balance
Sheet, Buyer gives written notice to Seller that it disputes any
information contained therein. For a period of ten (10) days
following Seller's receipt of Buyer's notice of dispute, Buyer and
Seller, with the cooperation of their respective accountants, shall
attempt to resolve the disputed matters identified therein. If Buyer
and Seller are unable to resolve their dispute within such ten (10)
day period, Buyer and Seller shall submit the dispute to an
independent accountant who shall be reasonably acceptable to Buyer and
Seller. The accountant selected by Buyer and Seller shall, within ten
(10) days after undertaking to resolve the dispute, prepare a Closing
Balance Sheet which shall be final and binding upon the parties for
purposes of this Section 6.4. In the event the final and binding
Closing Balance Sheet shows a minimum net worth of the Company
(excluding goodwill and intangibles) of less than $2,500,000, Seller
shall immediately pay to Buyer as an adjustment to the Purchase Price
the difference between $2,500,000 and the minimum net worth of the
Company, as shown on such final and binding Closing Balance Sheet.
In the event the final and binding Closing Balance Sheet shows a
minimum net worth of the Company (excluding goodwill and intangibles)
of more than $2,500,000, Buyer shall immediately pay to Seller as an
adjustment to the Purchase Price the portion of the minimum net worth
of the Company in excess of $2,500,000, as shown on such final and
binding Closing Balance Sheet.
(b) The parties acknowledge that Seller has advanced
$650,000 (the "Bid Deposit") to secure obligations of the Company in
connection with its bid submitted in response to RFP No. 98394431
relating to a prospective contract for operations, maintenance and
support services at the ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Correctional Facility (Food
Factory and Future Accelerated Female Correctional Facility),
Philadelphia, Pennsylvania. The parties hereby agree that if the Bid
Deposit is not released or otherwise returned to Seller on or before
the date Seller delivers to Buyer the Closing Balance Sheet, the Bid
Deposit shall be deemed for purposes of this Agreement to be an asset
of the Company transferred to Buyer on and as of the Closing Date and
shall be included by Seller as an asset of the Company on the Closing
Balance Sheet to the effect that the minimum net worth of the Company
(excluding goodwill and intangibles) will be increased by the amount
of the Bid Deposit for purposes of determining the Purchase Price
adjustment, if any, under subsection 6.4(a) in the event such minimum
net worth, as augmented by the Bid Deposit, exceeds $2,500,000.
6.5. AUDIT LIABILITY UNDER REDSTONE ARSENAL CONTRACT. Seller
hereby agrees to indemnify Buyer and the Company and to defend and
hold Buyer and the Company harmless from and against any and all
claims, losses, damages, expenses, obligations and liabilities
(including costs of collection, attorney's fees and other costs of
defense) which Buyer and the Company may incur in connection with any
suit or claim or violation brought against Buyer or the Company by the
United States of America or any department or agency thereof in
connection with amounts paid to Seller or the Company prior to the
Closing for services provided to the US Army Aviation & Missile
Command, Redstone Arsenal, Alabama, under Contract DAAH01-99-C-R146
(and any supplement, addition or amendment thereto), but only to the
extent any such claim relates to a DCA audit period ending on or
before May 31, 2000.
6.6 BUYER'S COOPERATION IN DEFENSE OF CLAIMS. The parties
acknowledge that claims relating to the period prior to the Closing
Date may arise or continue beyond such date and that Seller may be
obligated to deal with such matters whether such obligation arises
under this Agreement or otherwise. Accordingly, Buyer agrees (a) to
retain for a period equal to the longer of seven (7) years or the
applicable statute of limitations any and all records obtained under
this Agreement, whether retained by the Company or at a project site
relating to the Transferred Contracts, (b) to provide Seller with
access to such records at Buyer's or the Company's principal office
during regular business hours upon not less than two (2) business days'
written notice identifying the records sought, and (c) to otherwise
cooperate to the extent reasonably requested by Seller in Seller's
defense, settlement or other handling of any and all such claims. The
parties agree that such cooperation shall be at Seller's expense
(including, without limitation, reasonable attorneys' fees and costs
incurred by the Company and/or Buyer) and shall include, without
limitation, providing Seller with access to such of the Company's
and/or Buyer's employees as Seller shall reasonably determine is
necessary or helpful in Seller's defense, settlement or other handling
of such claims; provided, however, that the Company or Buyer, as the
case may be, shall have the right to (x) have its representative
present at all times Seller is permitted access to any of its
employees; and (y) determine in its reasonable discretion the times and
locations at which Seller is permitted access to its employees.
6.7 ASSIGNMENT OF LEASE. Seller wishes to assign to the Company
and the Company wishes to accept from Seller all of Seller's right,
title and interest in and to the Agreement of Lease (the "Lease")
between 1800 JFK Joint Venture (the "Landlord") and Seller, dated
August 7, 1998, respecting office space located at 1800 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Boulevard, Philadelphia, Pennsylvania (the "Leased Premises"), and the
Company further wishes to assume all of Seller's obligations under the
Lease (such assignment and assumption being referred to herein as the
"Lease Assignment"). Seller agrees, from and after the Closing Date,
to continue to use best reasonable efforts to obtain Landlord's consent
to the Lease Assignment or to Seller's sublease of the Leased Premises
to Buyer or the Company, and Buyer agrees to cooperate with Seller in
obtaining such consent. Without regard to any limit on indemnification
set forth in this Agreement, Buyer hereby agrees to indemnify Seller
and to defend and hold Seller harmless from and against any and all
claims pertaining to the Lease to the extent same relate to the period
from and after the Closing Date during which Buyer or the Company
occupies the Leased Premises, and shall reimburse Seller for its
reasonable counsel fees incurred in defending any such claim. Seller
hereby agrees to indemnify Buyer and the Company and to defend and hold
Buyer and the Company harmless from and against any and all claims
pertaining to the Lease to the extent same relate to the period prior
to the Closing Date, and shall reimburse Buyer and the Company for
their reasonable counsel fees incurred in defending any such claim.
Buyer waives any default by Seller arising hereunder as a result of
Seller's failure to obtain by the Closing Date Landlord's consent to
the Lease Assignment.
6.8 PERFORMANCE BONDS. Buyer, the Company and Seller shall
cooperate and use reasonable best efforts from and after the Closing
Date to (a) have Seller released from its obligation to indemnify
Travelers Casualty and Surety Company of America ("Surety") for
payments made under the performance bonds (the "Bonds") issued on
behalf of the Company in favor of (i) the Commonwealth of Virginia,
Department of Transportation under Contract No. 673-WB and (ii) the
United States Department of Housing and Urban Development under
Contract No. DU100C-0000 18529 (collectively, the "Bonded Contracts")
or, alternatively, (b) obtain replacement performance bonds that
satisfy the requirements of the Bonded Contracts. Without regard to
any limit on indemnification set forth in this Agreement, Buyer hereby
agrees to indemnify Seller and to defend and hold Seller harmless from
and against any and all claims, losses, damages, expenses, obligations
and liabilities (including costs of collection, attorney's fees and
other costs of defense) which may be made against Seller or which
Seller may incur in connection with any suit or claim brought against
Seller under, or in connection with, the Bonds relating to events or
occurrences arising from and after the Closing Date. Buyer further
agrees to cause PRWT Services, Inc., a Pennsylvania corporation
("PRWT"), to execute and deliver to Seller at Closing a Guaranty
Agreement pursuant to which PRWT shall guarantee to Seller and become
liable as guarantor and surety for all obligations and liabilities of
Buyer to Seller arising from Buyer's indemnification of Halifax under
the preceding sentence of this Section 6.8. Seller waives any default
by Buyer arising hereunder as a result of Buyer's failure to obtain by
the Closing Date the performance bonds required under the Transferred
Contracts.
7. INDEMNIFICATION; REMEDIES.
7.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Schedules, and any other
certificate or document delivered pursuant to this Agreement will
survive the Closing for the time period specified in Section 7.4. The
sole remedy for breaches of the representations and warranties
contained in this Agreement shall, absent fraud, be through the
indemnification provisions set forth in this Article 7 and in Sections
2.6(d), 5.1, 6.5, 6.7 and 6.8.
7.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller
will indemnify and hold harmless Buyer, the Company (after the Closing
Date), and Affiliates of Buyer for, and will pay to Buyer, the Company
or any such Affiliates, the amount of, any loss, liability, claim,
damage (including incidental damages, but excluding any special,
consequential or punitive damages), expense (including reasonable
costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by
Seller in this Agreement, the Disclosure Schedules or any other
certificate or document delivered by Seller pursuant to this
Agreement;
(b) any Breach by Seller of any covenant or obligation of
Seller in this Agreement;
(c) any services provided by the Company prior to the
Closing Date;
(d) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either
Seller or the Company (or any Person acting on their behalf) prior to
the Closing Date in connection with any of the Contemplated
Transactions;
(e) any liability which may be imposed upon the Company
with respect to consolidated federal income tax returns filed by the
Seller for periods ending on or before May 31, 2000, except to the
extent otherwise provided under Section 2.6 hereof with respect to
Additional Taxes; and
(f) any amount by which actual liability of the Company for
federal, state or local taxes incurred with respect to operations or
transactions occurring on or before the Closing Date exceeds the
amount of such taxes paid, accrued or reserved for by the Company on
its financial statements, whether or not such taxes were reported on
tax returns as filed, except to the extent otherwise provided under
Section 2.6 hereof with respect to Additional Taxes.
Anything to the contrary contained herein notwithstanding, (A)
Buyer shall not be entitled to indemnification under this Agreement in
any instance where the event, occurrence or circumstance underlying
Buyer's claim for indemnification is one with respect to which Buyer
is in breach of Section 4.6; and (B) (except where expressly provided
that indemnification shall be without limit) neither party shall be
entitled to recover from the other unless and until the total of all
claims for indemnity or damages with respect to any inaccuracy or
breach of any such representation or warranties or breach of any
covenants, undertakings or other agreements, whether such claims are
brought under Sections 7.2, 7.3, 7.4 or otherwise, exceeds $50,000,
then only for the amounts by which such claim for indemnity or damages
exceeds $50,000, but in no event shall amounts paid under this Section
7.2 exceed $2.5 million and, provided further, that Seller's
obligation to indemnify under Section 6.7 above and for Tax
liabilities under subsections 7.2(e) and (f) above shall apply in
full, without regard to the $50,000 limitation referred to
hereinabove.
7.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER AND THE
COMPANY. Buyer will indemnify and hold harmless and will cause the
Company to indemnify and hold harmless Seller and its Affiliates, and
Buyer will pay and will cause the Company to pay to Seller and its
Affiliates the amount of any Damages arising, directly or indirectly,
from or in connection with (a) any Breach of any representation or
warranty made by Buyer in this Agreement or in any certificate
delivered by Buyer pursuant to this Agreement, (b) any Breach by Buyer
or the Company of any covenant or obligation of Buyer in this
Agreement, including, without limitation, under Section 2.6(d) for
Additional Taxes, under 6.7 for Lease obligations arising from and
after the Closing Date and under Section 6.8 in connection with the
Bonds, (c) all Damages arising from the operation of the Company from
and after the Closing and from the non-performance of any obligation
of the Company or Buyer relating to the business of the Company after
the Closing, or (d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyer (or
any Person acting on its behalf) in connection with any of the
Contemplated Transactions. The obligations of the Buyer and the
Company (arising after the Closing) under this Section 7.3 shall be
joint and several and (x) Buyer's and the Company's obligation to
indemnify for Additional Taxes under subsection 2.6(d) above and (y)
Buyer's obligation to indemnify Seller under Sections 6.7 and 6.8
above shall apply in full, without regard to the $50,000 limitation
referred to in Part (B) of the last sentence of Section 7.2.
7.4 TIME LIMITATIONS. An indemnifying party will have no
liability (for indemnification or otherwise) to a party seeking
indemnification (an "Indemnified Person") with respect to any
representation or warranty, or covenant or obligation to be performed
and complied with prior to the Closing Date, other than (with respect
to Seller) those in Sections 3.3, 3.11, 3.13, 3.19, 6.5, 7.2(e) and
7.2(f), unless during the period ending one (1) year from the Closing
Date, the Indemnified Person notifies the indemnifying party of an
indemnifiable event specifying the factual basis of that claim in
reasonable detail to the extent then known by the Indemnified Person;
a claim by Buyer with respect to Section 3.13, or 3.19, may be made
for a period of three (3) years from the Closing Date; claims by Buyer
which may be made with respect to Sections 3.11, 7.2(e) or 7.2(f) may
be made through the applicable statute of limitations; claims by Buyer
or the Company with respect to Section 6.5 may be made through the
applicable audit period; and claims by Buyer with respect to Section
3.3 may be made at any time. Claims by Seller with respect to
Sections 2.6(d), 6.7 or 6.8 may be made through the applicable statute
of limitations. The amount which an indemnifying party is required to
pay to, for or on behalf of any Indemnified Person pursuant to this
Agreement shall be adjusted (including, without limitation,
retroactively) (i) by any insurance proceeds actually recovered by or
on behalf of such Indemnified Person in reduction of the related
indemnifiable loss (the "Indemnifiable Loss") and (ii) to take account
of any tax benefit realized as a result of any Indemnifiable Loss.
Amounts required to be paid, as so reduced, are hereinafter sometimes
called an "Indemnity Payment." If an Indemnified Person shall have
received or shall have had paid on its behalf an Indemnity Payment in
respect of an Indemnifiable Loss, or realize any tax benefit as a
result of such Indemnifiable Loss, then the Indemnified Person shall
pay to the indemnifying party the amount of such insurance proceeds or
tax benefit (after the expiration of any relevant audit period) or, if
lesser, the amount of the Indemnity Payment.
7.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person under
Section 7.2 or 7.3 of notice of the commencement of any Proceeding
against it, such Indemnified Person will promptly, if a claim could be
made against an indemnifying party under such Section, give written
notice to the indemnifying party of the commencement of such claim,
but the failure to promptly notify the indemnifying party in writing
will not relieve the indemnifying party of any liability that it may
have to any indemnified party, except to the extent that the defense
of such action is prejudiced by the indemnified party's failure to
give such notice. Such notice shall be a condition precedent to any
liability of the indemnifying party hereunder.
(b) If any Proceeding referred to in Section 7.5(a) is
brought against an Indemnified Person and it gives prompt written
notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will be entitled to participate in
such Proceeding and, to the extent that it wishes (unless the
indemnifying party, upon written request of the Indemnified Person,
fails to provide reasonable assurance to the Indemnified Person of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding) to assume the defense
of such Proceeding with counsel reasonably satisfactory to the
Indemnified Person and, after notice from the indemnifying party to
the Indemnified Person of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it reasonably
conducts such defense, be liable to the Indemnified Person under this
Section 7 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently
incurred by the Indemnified Person in connection with the defense of
such Proceeding. If the indemnifying party assumes the defense of a
Proceeding, no compromise or settlement of such claims may be effected
by the indemnifying party without the Indemnified Person's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (C) the Indemnified Person will have no
liability with respect to any compromise or settlement of such claims
effected without its consent.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect its business operations or assets
other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the Indemnified
Person may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected in
such Proceeding without its consent (which may not be unreasonably
withheld) and the indemnifying party shall have no obligation to
indemnify the Indemnified Person for Damages arising from or in
connection with a Proceeding so defended or any compromise or
settlement effected in such Proceeding without its consent (which may
not be unreasonably withheld).
7.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may
be asserted by written notice to the party from whom indemnification
is sought.
8. GENERAL PROVISIONS.
8.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution, and
performance of this Agreement and the Contemplated Transactions,
including all fees and expenses of agents, representatives, counsel,
and accountants. Seller will cause the Company not to incur any out-
of-pocket expenses in connection with this Agreement. In the event of
termination of this Agreement, the obligation of each party to pay its
own expenses will be subject to any rights of such party arising from
a breach of this Agreement by another party.
8.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such
manner as the parties mutually agree; provided, however, that either
party hereto may, upon reasonable prior notice to the other party,
make such public announcements as are required by law. Seller and
Buyer will consult with each other concerning the means by which the
Company's employees, customers, and suppliers and others having
dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
8.3 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be
deemed to have been duly given when (a) delivered by hand (with
written confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee,
if sent by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
Seller:
Halifax Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esquire
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer:
U.S. Facilities, Inc.
▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Obermayer ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Hippel LLP
One Penn Center, 19th Floor
▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇'▇▇▇▇, Esquire
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.4 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out
of, this Agreement may be brought against any of the parties in the
courts of the Commonwealth of Pennsylvania, County of Philadelphia,
or, if it has or can acquire jurisdiction, in the United States
District Court for the Eastern District of Pennsylvania, and each of
the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or
proceeding referred to in the preceding sentence may be served on any
party anywhere in the world.
8.5 FURTHER ASSURANCES. The Parties agree (a) to furnish upon
request to each other such further information, (b) to execute and
deliver to each other such other documents, and (c) to do such other
acts and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents
referred to in this Agreement.
8.6 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor
any delay by any party in exercising any right, power, or privilege
under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right
arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand
as provided in this Agreement or the documents referred to in this
Agreement.
8.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
supersedes all prior agreements between the parties with respect to
its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
8.8 SCHEDULES.
(a) The disclosures in the Disclosure Schedules, and those
in any Supplement thereto, must relate only to the representations and
warranties in the section of the Agreement to which they expressly
relate and not to any other representation or warranty in this
Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Schedule
(other than an exception expressly set forth as such in the Schedule
with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
8.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the
prior consent of the other party, which will not be unreasonably
withheld. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions
and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
8.10 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force and
effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
8.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of
such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding
words or terms.
8.12 TIME OF ESSENCE. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
8.13 GOVERNING LAW. This Agreement will be governed by the laws
of the Commonwealth of Pennsylvania without regard to conflicts of
laws principles.
8.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed
to constitute one and the same agreement.
IN WITNESS WHEREOF, intending to be legally bound, the parties
have executed and delivered this Stock Purchase Agreement as of the
date first written above.
Attest: HALIFAX CORPORATION, as Seller
__________________________ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Authorized Officer President
Attest: U.S. FACILITIES, INC.,as Buyer
____________________________ By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Authorized Officer Chairman
SCHEDULE 2.6
Allocation of Purchase Price Allocated to Shares
Net Assets $ 2,500,000
Covenant Not to Compete $ 117,000
Goodwill, Government Contracts $ 2,883,000
and other Intangible Assets