Exhibit 99.1
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SUBORDINATED NOTE AND SERIES A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
Between
ANALEX CORPORATION
and
PEQUOT PRIVATE EQUITY FUND III, L.P.
and
PEQUOT OFFSHORE PRIVATE EQUITY PARTNERS III, L.P.
Dated July 18, 2003
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TABLE OF CONTENTS
1. Purchase and Sale of the Notes, Warrants and Shares........................................2
1.1 Sale and Issuance of the Notes, Warrants and Shares...............................2
1.2 Use of Proceeds...................................................................2
1.3 Closing...........................................................................2
1.4 Definitions.......................................................................3
2. Term of the Notes; Security for the Notes; Subordination; Collateral Agent.................3
2.1 General...........................................................................3
2.2 Security..........................................................................3
2.3 Subordination.....................................................................3
2.4 Subsidiary Security Arrangements..................................................3
2.5 Collateral Agent..................................................................4
3. Representations and Warranties of the Company..............................................4
3.1 Organization and Qualification....................................................4
3.2 Certificate of Incorporation and Bylaws...........................................4
3.3 Corporate Power and Authority.....................................................4
3.4 Capitalization....................................................................5
3.5 Authorization.....................................................................6
3.6 Title to Properties and Assets; Leases; Insurance.................................6
3.7 Related-Party Transactions........................................................7
3.8 Permits; Compliance with Applicable Law...........................................7
3.9 Proprietary Rights................................................................7
3.10 Material Contracts................................................................8
3.11 Absence of Conflicts.............................................................10
3.12 Litigation.......................................................................10
3.13 Consents.........................................................................10
3.14 Labor Relations; Employees.......................................................11
3.15 Employee Benefit Plans...........................................................11
3.16 Tax Returns, Payments and Elections..............................................12
3.17 Brokers or Finders...............................................................12
3.18 Offering Exemption...............................................................13
3.19 Environmental Matters............................................................13
3.20 Offering of Notes, Warrants and Shares...........................................14
3.21 Disclosure.......................................................................14
3.22 Financial Statements.............................................................14
3.23 No Suspension or Debarment.......................................................15
3.24 Liability for Cost and Pricing Data..............................................15
3.25 Government Contracts.............................................................15
3.26 Changes..........................................................................17
3.27 Existing Registration Rights.....................................................18
3.28 Suppliers and Customers..........................................................18
3.29 Foreign Corrupt Practices Act....................................................18
3.30 Work in Progress.................................................................19
3.31 Warranty and Related Matters.....................................................19
3.32 Export Controls..................................................................19
3.33 Termination of ESOP..............................................................19
4. Representations and Warranties of the Purchasers..........................................19
4.1 Authorization....................................................................19
4.2 Purchase Entirely for Own Account................................................20
4.3 Disclosure of Information........................................................20
4.4 Investment Experience............................................................20
4.5 Accredited Investor..............................................................20
4.6 Restricted Securities; Legends...................................................20
4.7 No General Solicitation..........................................................21
4.8 Absence of Conflicts.............................................................21
4.9 Brokers or Finders...............................................................21
4.10 Investigation by Purchaser.......................................................22
5. Conditions of the Parties at Closing......................................................22
5.1 Conditions of Purchasers' Obligations at Closing.................................22
5.2 Conditions of Company's Obligations at Closing...................................25
6. Events of Default and Remedies............................................................26
6.1 Events of Default................................................................26
6.2 Exercise of Remedies.............................................................29
6.3 Waiver of Defaults...............................................................29
7. Affirmative Covenants.....................................................................29
7.1 Financial Statements.............................................................29
7.2 Additional Certificates..........................................................30
7.3 Certain Other Reports and Information............................................30
7.4 Further Information; Further Assurances..........................................30
7.5 Notice of Certain Events.........................................................31
7.6 Visitation; Verification.........................................................32
7.7 Payment of Loan Obligations......................................................32
7.8 Insurance........................................................................33
7.9 Payment of Taxes and Other Potential Charges and Priority Claims.................33
7.10 Preservation of Corporate Status.................................................33
7.11 Governmental Approvals and Filings...............................................34
7.12 Maintenance of Properties........................................................34
7.13 Financial Accounting Practices...................................................34
7.14 Additional Credit Parties........................................................34
7.15 Maintenance of Certain Accounts with Collateral Agent............................35
7.16 Future Subsidiaries..............................................................35
8. Negative Covenants........................................................................35
8.1 Financial Covenants..............................................................35
8.2 Change of Operations.............................................................36
8.3 Liens............................................................................36
8.4 Indebtedness and Guaranty Obligations............................................37
8.5 Loans, Advances and Investments..................................................38
8.6 Dividends and Related Distributions..............................................38
8.7 Sale-Leasebacks..................................................................38
8.8 Mergers, Acquisitions, etc.......................................................39
8.9 Dispositions of Properties.......................................................39
8.10 Dealings with Affiliates.........................................................39
8.11 Limitation on Other Restrictions on Liens........................................39
8.12 Limitation on Other Restrictions on Amendment of the Transaction Documents.......40
8.13 Avoidance of Other Conflicts.....................................................40
9. Indemnification...........................................................................40
9.1 General Indemnification..........................................................40
9.2 Indemnification Principles.......................................................40
9.3 Claim Notice; Right to Defend....................................................41
9.4 Limitations on Indemnification...................................................42
9.5 Subrogation......................................................................42
9.6 No Double Recovery; Use of Insurance.............................................42
9.7 Mitigation.......................................................................42
10. Certain Definitions.......................................................................42
11. Post-Closing Covenants....................................................................54
11.1 Registration of Common Stock Underlying Securities...............................54
11.2 Filing of Financing Statements...................................................54
11.3 Filing of Patent, Trademark and Copyright Recordation Forms......................54
11.4 Landlord Waivers.................................................................54
12. Purchaser Right of First Refusal..........................................................55
12.1 Initial Offer....................................................................55
12.2 Acceptance Period................................................................55
12.3 Company Sale.....................................................................55
13. Transferability...........................................................................56
14. Pre-Closing Covenants.....................................................................56
14.1 Proxy; Shareholders Meeting......................................................56
14.2 Operation of Business Prior to Closing...........................................56
14.3 Government Contracts and Government Bids.........................................56
14.4 Restriction on Issuance of Options and Warrants..................................56
15. Miscellaneous.............................................................................57
15.1 Survival of Representations and Warranties.......................................57
15.2 Successors and Assigns...........................................................57
15.3 Governing Law....................................................................57
15.4 Counterparts.....................................................................57
15.5 Titles and Subtitles.............................................................57
15.6 Notices..........................................................................57
15.7 Expenses.........................................................................58
15.8 Amendments and Waivers...........................................................58
15.9 Severability.....................................................................59
15.10 Entire Agreement.................................................................59
15.11 Delays or Omissions..............................................................59
15.12 Facsimile Signatures.............................................................59
15.13 Other Remedies...................................................................59
15.14 Further Assurances...............................................................60
15.15 Exchanges; Lost, Stolen or Mutilated Stock Certificates, Notes and Warrants......60
15.16 Confidentiality..................................................................60
15.17 Break-Up Fee.....................................................................61
15.18 Termination......................................................................61
15.19 Most Favored Nations.............................................................61
Exhibit & Schedules List
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - List of ▇▇▇▇▇ Family Members and Securities Owned
Exhibit D - Form of Security Agreement
Exhibit E - Form of Pledge Agreement
Exhibit F - Form of Subsidiary Security Agreement
Exhibit G - Form of Intercreditor Agreement
Exhibit H - Form of Subsidiary Guarantee
Exhibit I - Form of Amended Charter of Company
Exhibit J - Form of Bylaws of Company
Exhibit K - Pro Forma Capitalization Table of the Company
Exhibit L - Form of Stockholders' Agreement of the Company
Exhibit M - Form of Registration Rights Agreement of the Company
Exhibit N - Form of Company Counsel Opinion
Exhibit O - Form of ▇▇▇▇▇ Stock Repurchase Agreement
Exhibit P - Form of ▇▇▇▇▇ Termination Agreement
Exhibit Q - Form of Voting Termination Agreement
Exhibit R - Form of Registration Rights Termination Agreement
Exhibit S - Form of Joinder
Exhibit T - Use of Proceeds
Schedule I - Schedule of Purchasers
Disclosure Schedule of the Company
Exhibit 99.1
ANALEX CORPORATION
SUBORDINATED NOTE AND SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
THIS SUBORDINATED NOTE AND SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT is made on the 18th day of July, 2003, by and among Analex
Corporation, a Delaware corporation (the "Company"), and the purchasers listed
on Schedule I hereto, each of which is herein referred to as a "Purchaser" and,
collectively, as the "Purchasers" (the "Agreement").
W I T N E S S E T H:
WHEREAS the Company wishes to issue and sell to the Purchasers (i)
convertible secured subordinated promissory notes in the aggregate principal
amount of $10,000,000 maturing on the fourth anniversary of the date of issuance
thereof (each, a "Note" and, collectively, the "Notes") which are convertible in
accordance with their terms into shares of the Company's Series A convertible
preferred stock, $.02 par value per share (the "Series A Preferred Stock") and
(ii) detachable warrants to purchase up to that number of shares of common
stock, $.02 par value per share, of the Company (the "Common Stock") that is
equal to twenty percent (20%) of the aggregate number of shares of Common Stock
issued or issuable upon conversion of the Notes (each, a "DCS Warrant" and,
collectively, the "DCS Warrants"), and the Purchasers wish to purchase the Notes
and the DCS Warrants from the Company on the terms and conditions set forth
herein;
WHEREAS the Company wishes to issue and sell to the Purchasers (i) an
aggregate of 6,726,457 shares of Series A Preferred Stock (the "Shares") and
(ii) detachable warrants to purchase up to that number of shares of Common Stock
that is equal to twenty percent (20%) of the aggregate number of shares of
Common Stock issued or issuable upon conversion of the Shares (each, a "PCS
Warrant" and, collectively, the "PCS Warrants"), and the Purchasers wish to
purchase the Shares and the PCS Warrants from the Company on the terms and
conditions set forth below;
WHEREAS the Company and the Purchasers are executing and delivering
simultaneously herewith a voting agreement with a majority in interest of its
stockholders pursuant to which such stockholders have agreed, among other
things, to vote in favor of the transactions contemplated hereby;
WHEREAS it is the intent of the parties that the entire equity
interest in the Company owned directly or indirectly by ▇▇▇ ▇. ▇▇▇▇▇ and various
members of his family, (other than as set forth in Exhibit O hereto, shall be
repurchased by the Company in connection with the closing of the transactions
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and agreements
contained in this Agreement, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, THE PARTIES HEREBY
AGREE AS FOLLOWS:
1. Purchase and Sale of the Notes, Warrants and Shares.
1.1 Sale and Issuance of the Notes, Warrants and Shares. On or prior
to the Closing, the Company shall have authorized the issuance and sale to the
Purchasers of (i) the Notes, substantially in the form attached hereto as
Exhibit A, (ii) the DCS Warrants and the PCS Warrants (together, the
"Warrants"), substantially in the form attached hereto as Exhibit B and (iii)
the Shares.
(a) Subject to the terms and conditions of this Agreement, each
Purchaser, severally and not jointly, agrees to purchase at the Closing, and the
Company agrees to sell and issue to each such Purchaser at the Closing, (i) a
Note, dated as of the Closing Date, in an original principal amount equal to the
dollar amount set forth opposite such Purchaser's name under the heading
"Principal Amount and Purchase Price of Note" on Schedule I hereto and (ii)
detachable DCS Warrants for the number of shares of Common Stock set forth
opposite such Purchaser's name under the heading "Number of DCS Warrant Shares"
on Schedule I hereto, both in exchange for the payment of the amount set forth
opposite such Purchaser's name under the heading "Principal Amount and Purchase
Price of Note" on Schedule I hereto (the "Note Purchase Price").
(b) Subject to the terms and conditions of this Agreement, each
Purchaser, severally and not jointly, agrees to purchase at the Closing, and the
Company agrees to sell and to issue to each such Purchaser at the Closing, (i)
the number of shares of Series A Preferred Stock set forth opposite such
Purchaser's name under the heading "Number of Shares of Series A Preferred
Stock" on Schedule I hereto and (ii) detachable PCS Warrants for the number of
shares of Common Stock set forth opposite such Purchaser's name under the
heading "Number of PCS Warrant Shares" on Schedule I hereto, both in exchange
for the amount set forth opposite such Purchaser's name under the heading "Stock
Purchase Price" on Schedule I hereto (the "Stock Purchase Price").
(c) The Company shall be reimburse the Purchasers for the costs and
expenses described Section 15.7 by wire transfer of immediately available funds
on the Closing Date. An invoice for all such costs and expenses shall be
furnished by the Purchasers to the Company prior to the Closing Date.
1.2 Use of Proceeds. The Company agrees to use the net proceeds from
the sale and issuance of Notes and the Shares pursuant to this Agreement for (a)
the acquisition of shares of Common Stock, options and warrants owned directly
or indirectly by ▇▇▇ ▇. ▇▇▇▇▇ or the family members of ▇▇. ▇▇▇▇▇ and listed on
Exhibit C hereto ("▇▇▇▇▇ Stock"), (b) for the purposes set forth on Exhibit T
hereto and (c) other general corporate purposes.
1.3 Closing. The purchase and sale of the Notes, the Warrants and the
Shares shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, promptly upon the satisfaction or waiver
of the closing conditions set forth in Section 5, or on such other date and at
such other time as the Company and Purchasers hereto mutually agree upon orally
or in writing (which time and place are designated as the "Closing"). The date
of the Closing is referred to herein as the "Closing Date." At the Closing, the
Company shall deliver to each Purchaser (i) its respective Note, in the
principal amount equal
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to the amount set forth opposite such Purchaser's name under the heading
"Principal Amount and Purchase Price of Notes" on Schedule I hereto, and its
respective detachable DCS Warrants, for the number of shares of Common Stock set
forth opposite such Purchaser's name under the heading "Number of DCS Warrant
Shares" in Schedule I hereto, against such Purchaser's payment of the Note
Purchase Price therefor and (ii) certificates for the number of Shares set forth
opposite such Purchaser's name under the heading "Number of Shares of Series A
Preferred Stock" on Schedule I hereto, and its respective detachable PCS
Warrants, for the number of shares of Common Stock set forth opposite such
Purchaser's name under the heading "Number of PCS Warrant Shares" in Schedule I
hereto, against payment of the Stock Purchase Price therefor. The Note Purchase
Price and the Stock Purchase Price shall be paid by wire transfer of immediately
available funds to such account as the Company designates. The Company shall pay
any documentary stamp or similar issue or transfer taxes due as a result of the
issuance and sale of the Notes, the Warrants and the Shares (together, the
"Securities").
1.4 Definitions. Capitalized terms used in this Agreement and not
defined in the text hereof shall have the meanings given such terms in Section
10 hereof.
2. Term of the Notes; Security for the Notes; Subordination; Collateral
Agent.
2.1 General. The Notes shall be issued in the aggregate principal
amount of $10,000,000 and shall bear interest, be subject to conversion into
shares of Series A Preferred Stock and otherwise be in the form attached hereto
as Exhibit A.
2.2 Security. The Notes shall be equally and ratably secured by all of
the assets of the Company and the Subsidiaries pursuant to a Security Agreement
in the form set forth as Exhibit D hereto (the "Security Agreement"), Pledge
Agreements in the form set forth as Exhibit E hereto (the "Pledge Agreements")
and a Subsidiary Security Agreement in the form set forth as Exhibit F hereto
(the "Subsidiary Security Agreement"). The parties hereto acknowledge and agree
that the schedules attached to the Security Agreement and the Subsidiary
Security Agreement shall be complete and true in all respects on or prior to the
Closing Date and not as of the date hereof.
2.3 Subordination. The right of repayment of principal of and interest
on the Notes and the security interest of the Purchasers in the assets of the
Company shall be subordinated to (a) the rights and security interest of Bank of
America, N.A. under the Credit Agreement dated as of November 2, 2001, by and
among the Company (formerly Hadron, Inc.), Bank of America, N.A. and the
Company's subsidiaries (including, without limitation, such other subsidiaries
of the Company as from time to time become party thereto) (the "Senior Credit
Agreement"), in accordance with an Intercreditor and Subordination Agreement in
the form set forth as Exhibit G hereto (the "Intercreditor Agreement"), (b) the
rights of any Senior Lender in connection with any Senior Credit Facility
pursuant to an intercreditor agreement containing terms no less favorable, as a
whole, to the Purchasers than the terms of the Intercreditor Agreement, and (c)
the rights of the United States Department of Justice pursuant to the Settlement
Agreement.
2.4 Subsidiary Security Arrangements. The payment of the principal of
and interest on the Notes by the Company shall be guaranteed by each Subsidiary
(each a
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"Subsidiary Guarantor" and together, the "Subsidiary Guarantors") listed in
Section 3.4 of the Disclosure Schedule attached hereto (the "Disclosure
Schedule") in accordance with a Subsidiary Guaranty in the form set forth as
Exhibit H hereto (each a "Subsidiary Guarantee" and together, the "Subsidiary
Guarantees") and by the Collateral pursuant to a Security Agreement, Pledge
Agreements, Mortgages, if any, and a Subsidiary Security Agreement.
2.5 Collateral Agent. Pequot Private Equity Fund III, L.P. (or, in its
discretion, its investment advisor) shall act as collateral agent for the
Purchasers under the Collateral Documents (the "Collateral Agent") in accordance
with the terms and subject to the conditions to the obligations of the
collateral agent as provided in this Agreement and in the Security Agreement.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Purchaser the following, except as set forth on
the Disclosure Schedule, specifically identifying or cross-referencing the
relevant subparagraph(s) hereof, which Disclosure Schedule shall be deemed to be
part of the representations and warranties as if made hereunder:
3.1 Organization and Qualification. Each of the Company and the
Subsidiaries are duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation of organization as set
forth in Section 3.1 of the Disclosure Schedule and has the requisite power and
authority to own, lease and operate its assets, properties and business and to
carry on its business as it is now being conducted or proposed to be conducted.
Each of the Company and the Subsidiaries is duly qualified as a foreign
corporation to transact business, and is in good standing, in each jurisdiction
where it owns or leases real property or maintains employees or where the nature
of its activities make such qualification necessary, except where such failure
to qualify would not have a Material Adverse Effect.
3.2 Certificate of Incorporation and Bylaws. The Company has delivered
to the Purchasers true, correct, and complete copies of the Company's
certificate of incorporation, including all certificates of amendment and the
Certificate of Designation, Powers, Preferences and Rights of Series A Preferred
Stock in the form attached hereto as Exhibit I (the "Amended Charter") and the
Company's Bylaws in the form attached hereto as Exhibit J (the "Bylaws"), in
each case, as amended through the Closing Date.
3.3 Corporate Power and Authority. Each of the Company and the
Subsidiary Guarantors has all requisite power and authority to execute and
deliver the Transaction Documents to which it is a party. The Company has all
requisite legal and corporate power and authority to issue and sell the
Securities to the Purchasers hereunder. The Company and each Subsidiary
Guarantor has all requisite power and authority to carry out and perform its
obligations under the terms of the Transaction Documents. The Company has all
requisite legal and corporate power and authority to sell and issue the Series A
Preferred Stock issuable on conversion of the Notes and the Common Stock
issuable upon conversion of such Series A Preferred Stock, exercise of the
Warrants and conversion of the Shares (such Series A Preferred Stock and Common
Stock are, together, the "Conversion Shares"). The Conversion Shares have
4
been duly reserved for issuance and when issued will be duly and validly issued,
fully paid and nonassessable.
3.4 Capitalization. Immediately prior to the date hereof, the
authorized capital stock of the Company consists of 35,000,000 shares, of which
30,000,000 are designated as Common Stock, 14,994,698 shares of which are issued
and outstanding, and 5,000,000 are designated as Preferred Stock, none of which
are issued and outstanding. Shares of the authorized Common Stock have been
reserved as follows: (i) 645,000 shares of the authorized Common Stock have been
reserved for issuance pursuant to the exercise of stock options granted or to be
granted after the date hereof under the 1994 Stock Option Plan of the Company
(formerly Hadron, Inc.), (ii) 600,000 shares of the authorized Common Stock have
been reserved for issuance pursuant to the exercise of stock options granted or
to be granted after the date hereof under the 2000 Stock Option Plan of the
Company (formerly Hadron, Inc.), (iii) 2,000,000 shares of the authorized Common
Stock have been reserved for issuance pursuant to the exercise of stock options
granted or to be granted after the date hereof under the 2002 Stock Option Plan
of the Company (formerly Hadron, Inc.) and (iv) 875,725 shares of the authorized
Common Stock have been reserved for issuance pursuant to the exercise of stock
options granted pursuant to the Hadron, Inc. Non-Qualified Stock Option
Agreement, dated January 16, 2001, by and between the Company (formerly Hadron,
Inc.) and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., (the stock options described in clauses
(i), (ii), (iii), and (iv), collectively, the "Options"), 500,000 shares of the
authorized Common Stock have been reserved for issuance pursuant to the exercise
of awards granted or to be granted after the date hereof under the Analex
Corporation Employee Stock Purchase Plan and 1,970,535 shares of Common Stock
have been reserved for issuances pursuant to warrants outstanding on the date
hereof. As of the date hereof, all issued and outstanding shares of the
Company's capital stock are duly authorized and validly issued, are fully paid
and nonassessable and are owned of record, and to the Company's Knowledge,
beneficially, by the stockholders and in the amounts set forth in Section 3.4 of
the Disclosure Schedule and have been issued in accordance with applicable
federal and state securities laws; a pro forma capitalization table reflecting
the foregoing on a fully diluted basis immediately after the Closing Date
(assuming no additional issuances of securities between the date hereof and the
Closing Date) is attached hereto as Exhibit K. Except as set forth in Section
3.4 of the Disclosure Schedule or as provided in the Amended Charter, the Notes
or the Warrants, there are no options, warrants, conversion privileges, or
preemptive or other rights or agreements presently outstanding to purchase or
otherwise acquire from the Company any shares of the capital stock or other
securities of the Company. Except as set forth in Section 3.4 of the Disclosure
Schedule, the Company has not entered into any agreements with any of its
stockholders with respect to the voting of capital shares of the Company and to
the Knowledge of the Company none of its stockholders are parties to such
agreements. Any such voting agreements shall be terminated on or prior to the
Closing Date. Except as aforesaid and as contemplated in the Transaction
Documents, the Company is not a party to any agreement or understanding, and to
its Knowledge, no stockholders are a party to such an agreement or
understanding, that affects or relates to the voting or giving of written
consents with respect to any security, or the voting by a director, of the
Company. Except as aforesaid, to the Company's Knowledge, no stockholder has
granted options or other rights to any entity (other than the Company) to
purchase any shares of Common Stock or other equity securities of the Company
from such stockholder. Except as aforesaid or as set forth in Section 3.4 of the
Disclosure Schedule or in the Amended Charter, the Notes or the Warrants, the
Company is not subject to any obligation (contingent or otherwise) to
5
repurchase or otherwise to acquire or retire any shares of its capital stock.
Except as set forth in Section 3.4 of the Disclosure Schedule, the Company has
not declared or paid any dividend or made any other distribution of cash, stock
or other property to its stockholders. The Company has no subsidiaries
(including the Subsidiaries) other than as set forth in Section 3.4 of the
Disclosure Schedule.
3.5 Authorization. The execution, delivery and performance by the
Company and each Subsidiary of the Transaction Documents to which it is a party,
the sale, issuance and delivery of the Securities and the performance of all of
the obligations of the Company and the Subsidiaries under each of the
Transaction Documents have been authorized or will be authorized prior to the
Closing, and, other than stockholder approval and approvals required by the
American Stock Exchange no other corporate action on the part of the Company or
any Subsidiary and no other corporate or other approval or authorization is
required on the part of the Company, any Subsidiary or any person by Law or
otherwise in order to make the Transaction Documents the valid, binding and
enforceable obligations (subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies)
of the Company and each Subsidiary that is a party thereto. Each of the
Transaction Documents, when executed and delivered by each of the Company and
each Subsidiary that is a party thereto, will constitute a valid and legally
binding obligation of the Company and each Subsidiary that is a party thereto,
enforceable against the Company and such Subsidiaries that are parties thereto
in accordance with its respective terms, subject to (i) laws of general
application relating to bankruptcy, insolvency, and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief, or other
equitable remedies.
3.6 Title to Properties and Assets; Leases; Insurance.
(a) Neither the Company nor any Subsidiary currently owns any real
property and has not owned any real property since March 31, 2000. Each of the
Company and each Subsidiary has good and marketable title to or has, or will
have, concurrently with the execution hereof, a valid leasehold interest in, or
license to use, all of the property or assets used by it or located on its
premises and necessary for the conduct of business as presently conducted, free
and clear of all Liens, other than (x) as set forth on Section 3.6(a) of the
Disclosure Schedule and (y) the permitted encumbrances set forth in Section 8.3
hereof (the "Permitted Liens") which, together do not have a Material Adverse
Effect.
(b) With respect to the insurance policies and fidelity bonds covering
the assets, business, equipment, properties, operations, employees, officers and
directors of the Company and each Subsidiary, there is no claim by the Company
pending under any of such policies or bonds as to which coverage has been denied
or disputed by the underwriters of such policies or bonds which would have a
Material Adverse Effect. All premiums due and payable under all such policies
and bonds have been paid and the Company and each Subsidiary is otherwise in
compliance in all material respects with the terms of such policies and bonds.
The Company has no Knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies. The Company and each
Subsidiary maintains insurance in such amounts, including (as applicable)
self-insurance, retainage and deductible arrangements, and of such a character
as is reasonable for companies engaged in the same or similar business similarly
6
situated. Section 3.6(b) of the Disclosure Schedule sets forth a list of all
insurance coverage carried by the Company and each Subsidiary, identifying the
carrier and the amount of coverage.
3.7 Related-Party Transactions. Except as set forth in Section 3.7 of
the Disclosure Schedule, no employee, officer, stockholder, director or
consultant of the Company or any Subsidiary or member of the immediate family
(defined as parents, spouse, siblings or lineal descendants) of any such officer
or director is indebted to the Company or any Subsidiary for borrowed money, and
neither the Company nor any Subsidiary is indebted for borrowed money (or
committed to make loans or extend or guarantee credit) to any of them other than
for reimbursement of expenses incurred in connection with their service to the
Company, and amounts accrued but not yet due to employees and other service
providers. To the Company's Knowledge, except as provided for in the Transaction
Documents and except as set forth in Section 3.7 of the Disclosure Schedule, (a)
no employee, officer, stockholder, director or consultant of the Company or any
Subsidiary or any member of the immediate family of any such officer or director
is, directly or indirectly, interested in any Material Contract or has any other
material business relationship with the Company or any Subsidiary, except stock
ownership in and employment by the Company and (b) no officer, director of the
Company or any Subsidiary or any member of the immediate family of such officer
or director has any material business relationship with any competitor of the
Company or any Subsidiary.
3.8 Permits; Compliance with Applicable Law. Except as set forth on
Section 3.8 of the Disclosure Schedule, the Company and each Subsidiary has all
material franchises, permits, licenses, authorizations, approvals, registrations
and any similar authority ("Permits") necessary for the conduct of its business
as now being conducted by it and believes it can obtain any similar authority
for the conduct of its business as currently planned by the Company and the
Subsidiaries to be conducted. The Permits shall include, without limitation,
export control-related licenses and registrations and industrial security
clearances (facility and personnel clearances) as appropriate for conduct of the
Company's and Subsidiaries' businesses the absence of which would have a
Material Adverse Effect. Neither the Company nor any Subsidiary is in violation
in any material respect of, or default in any material respect under, any such
Permits. All such Permits are in full force and effect, and to the Company's
Knowledge, no violations in any material respect have been recorded in respect
of any such Permits; no proceeding is pending or, to the Company's Knowledge,
threatened to revoke or limit any such Permit; and no such Permit will be
suspended, cancelled or adversely modified as a result of the execution and
delivery of Transaction Documents. The Company and each Subsidiary is in
compliance in all respects with all applicable laws, except where the failure to
so comply would not have a Material Adverse Effect.
3.9 Proprietary Rights.
(a) The Company and the Subsidiaries are the sole owners, free and
clear of any Liens, other than (x) as set forth on Section 3.6(a) of the
Disclosure Schedule and (y) Permitted Liens which shall not have a Material
Adverse Effect, or have a valid license, without the payment of any royalty
(except with respect to off-the-shelf software that is licensed by the Company
or a Subsidiary) and otherwise on commercially reasonable terms, to, all
material Proprietary Rights. As used herein, the term "Proprietary Rights" means
the Company's or the Subsidiaries' patents, trademarks, trade names, service
marks, logos, designs, formulations,
7
copyrights, and other trade rights and all registrations and applications
therefor, all know-how, trade secrets, technology or processes, research and
development, all Internet domain addresses, Web sites and computer programs,
data bases and software documentation and all other intellectual property owned,
licensed or otherwise used by the Company and the Subsidiaries (other than
off-the-shelf software that is licensed by the Company or a Subsidiary). Set
forth in Section 3.9(a) of the Disclosure Schedule is a true and correct list of
all patents, trademarks, trade names, service marks, logos, and registered
copyrights, as well as a list of all material proprietary software owned or
licensed by the Company and the Subsidiaries. Section 3.9(a) of the Disclosure
Schedule also indicates which of such items have been patented or registered or
are in the process of application for the same. The Company and each Subsidiary
has taken all reasonable actions to protect its rights in material Proprietary
Rights owned by it. The rights of the Company and each Subsidiary in the
material Proprietary Rights are valid and enforceable. Except as disclosed in
Schedule 3.9(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary has received any written demand, claim, notice or inquiry from any
person or entity in respect of the material Proprietary Rights which challenges,
threatens to challenge or inquires as to whether there is any basis to
challenge, the validity of, or the rights of the Company and the Subsidiaries in
the material Proprietary Rights, and the Company has no Knowledge of any basis
for any such challenge. To the Company's Knowledge, neither the Company nor any
Subsidiary is in violation or infringement of, and has not violated or
infringed, any intellectual property rights of any other person or entity. To
the Company's Knowledge, except as set forth in Section 3.9(a) of the Disclosure
Schedule, no third party is infringing on the rights of the Company and the
Subsidiaries in and to the material Proprietary Rights. Except on an
arm's-length basis for value and other commercially reasonable terms, neither
the Company nor any Subsidiary has granted any license with respect to the
material Proprietary Rights to any person or entity.
(b) Also set forth in Section 3.9(b) of the Disclosure Schedule is a
true and complete list of all material software currently licensed or used by
the Company and the Subsidiaries in operating and maintaining its business,
excluding all off-the-shelf or shrink-wrap licensed software (collectively the
"Company Software"). All computer software developed by the Company was
developed under Government Contracts. Current as of May 30, 2003, all computer
software developed by the Company under Government Contracts is set forth in
Section 3.9(b) of the Disclosure Schedule, identified by the particular
Government Contract under which such computer software was developed. The
Company and the Subsidiaries either own or have valid, royalty free and fully
paid licenses for all of the Company Software; provided, that Government
entities may have ownership rights in some of the Company Software because such
Company Software was paid for in whole or in part by Government entities under
Government Contracts.
(c) Section 3.9(c) of the Disclosure Schedule contains a complete and
accurate list of all license and other agreements relating to the material
Proprietary Rights.
3.10 Material Contracts. (a) Set forth in Section 3.10(a) of the
Disclosure Schedule is a true and complete list of all material vendor and
customer agreements, licenses, distribution agreements, confidentiality
agreements, agreements prohibiting or limiting the ability of the Company and
the Subsidiaries to freely complete purchase and sales orders, powers of
attorney, undertakings, commitments, notes, indentures, Mortgages, guarantees,
pledges, instruments, lease, decrees or obligations to which the Company and any
of the Subsidiaries is a
8
party and which relate to the business of the Company and the Subsidiaries or
agreements by which the Company and the Subsidiaries are bound, including,
without limitation, (i) any agreement which requires future expenditures by the
Company or any Subsidiary in excess of $100,000 or which might result in
payments to the Company or any Subsidiary in excess of $100,000, (ii) any
purchase or task order which might result in payments to the Company or any
Subsidiary in excess of $200,000, (iii) any employment and consulting
agreements, (iv) any material agreement with any current or former stockholder
(except for the Transaction Documents), officer or director of the Company or
any Subsidiary, or any "affiliate" or "associate" of such persons (as such terms
are defined in the rules and regulations promulgated under the Securities Act of
1933, as amended (the "Securities Act")), including, without limitation, any
agreement or other arrangement providing for the furnishing of services by,
rental of real or personal property from, or otherwise requiring payments to,
any such person or entity, (v) any agreement relating to the development,
manufacture, marketing or distribution of the products or services of the
Company and the Subsidiaries and (vi) any other agreement material to the
business of the Company or any Subsidiary, regardless of the dollar value of the
amounts receivable by or payment obligations of the Company or any Subsidiary
thereunder; provided, however, that the agreements and purchase or task orders
that are less than the amounts referred to in clauses (i) and (ii) shall not, in
the aggregate, require future expenditures by the Company and its Subsidiaries
in excess of $400,000 or result, in the aggregate, in payments to the Company
and its Subsidiaries in excess of $400,000 (collectively, the "Material
Contracts"). Set forth on Section 3.10(a) of the Disclosure Schedule is a list,
complete and accurate in all material respects of the current assets and current
liabilities of the Company and all financing arrangements of the Company
relating to current assets or current liabilities of the Company.
(b) Assuming the due execution and delivery by the other parties
thereto, each of such Material Contracts is as of the date hereof legal, valid
and binding, and in full force and effect, and enforceable in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency, and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief, or other equitable remedies. There is no
material breach, violation or default by the Company or any of the Subsidiaries
(or, to the Company's Knowledge, any other party) under any such Material
Contract, and no event (including, without limitation, the transactions
contemplated by this Agreement) has occurred which, with notice or lapse of time
or both, would (A) constitute a material breach, violation or default by the
Company or any Subsidiary (or, to the Company's Knowledge, any other party)
under any such Material Contract, or (B) give rise to any Lien (other than a
Permitted Lien) or right of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration against the Company or any
Subsidiary under any such Material Contract. Except as set forth in Section
3.10(b) of the Disclosure Schedule, neither the Company nor any Subsidiary is
and, to the Company's Knowledge, no other party to any of such Material Contract
is in arrears in respect of the performance or satisfaction of any material
terms or conditions on its part to be performed or satisfied under any of such
Material Contract, and neither the Company nor any Subsidiary has and, to the
Company's Knowledge, no other party thereto has granted or been granted any
material waiver or indulgence under any of such Material Contract or repudiated
any provision thereof.
(c) The Company has provided or made available (to the extent it may
do so to Persons without applicable security clearances and in compliance with
Law and its Material
9
Contracts) to the Purchasers complete copies of each of the Material Contracts,
including all schedules, exhibits and attachments thereto.
3.11 Absence of Conflicts. The Company is not in violation of or
default under any provision of its Amended Charter or Bylaws. No Subsidiary is
in violation of or default under any provision of its articles or certificate of
incorporation or by-laws or, if such Subsidiary is not a corporation, similar
organizational and formation documents. The execution, delivery, and performance
of, and compliance with the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, have not and will not:
(a) violate, conflict with or result in a breach of any provision of
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
(other than a Permitted Lien) upon any of the assets, properties or business of
the Company and the Subsidiaries under, any of the terms, conditions or
provisions of (i) the Amended Charter or the Bylaws, or (ii) any Material
Contract; or
(b) violate any judgment, ruling, order, writ, injunction, award,
decree, or any Law or regulation of any court or federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority which is applicable to the Company or any Subsidiary or any of their
assets, properties or businesses, which violation would have a Material Adverse
Effect.
3.12 Litigation. Except as set forth in Section 3.12 of the Disclosure
Schedule, there is no action, claim, litigation, tax or compliance audit, suit
or proceeding, regulatory or administrative enforcement action or governmental
inquiry or investigation (including, without limitation, a defective pricing
investigation or claim or other proceeding in connection with the Company's
contracts), pending, or, to the Company's Knowledge, any threat thereof, against
the Company or any Subsidiary or any of their officers or directors or the
assets of the Company or any Subsidiary. To the Company's Knowledge, there is no
reason to believe that any of the foregoing may occur which, in the aggregate,
would have a Material Adverse Effect. Neither the Company nor any Subsidiary is
subject to any outstanding judgment, order or decree directed against the
Company or any Subsidiary or any officer or director of any thereof. There is no
action, suit, proceeding or investigation into the possibility thereof by the
Company or any Subsidiary currently pending or that the Company or any
Subsidiary presently intends to initiate against a third party.
3.13 Consents. No consent, approval, waiver or authorization, or
designation, declaration, notification, or filing with any person or entity
(governmental or private), on the part of the Company or any Subsidiary is
required in connection with the valid execution, delivery and performance of the
Transaction Documents, the offer, sale or issuance of the Securities or the
consummation of any other transaction contemplated hereby or by the Shares, the
Notes or the Warrants (other than such notifications or filings required under
applicable federal or state securities laws, if any), except for such consents,
approvals, waivers, authorizations, designations, declarations, notifications,
or filings that will be received prior to or as of the Closing Date.
10
3.14 Labor Relations; Employees. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. is the
Chief Executive Officer of the Company. Set forth in Section 3.14 of the
Disclosure Schedule is a true and correct list of the employees of the Company
and each Subsidiary, which list provides, among other things, the name, title,
job description and salary information concerning each such employee, as well a
true and correct list of each employee who holds an H-1B "Specialty Occupation"
Visa, if any, all as of June 30, 2003. Except as set forth in Section 3.14 of
the Disclosure Schedule, neither the Company nor any Subsidiary is delinquent in
payments with respect to any such employee, for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
the date hereof or amounts required to be reimbursed to any employee as of the
date hereof. The Company and each Subsidiary is in compliance in all material
respects with all laws and orders relating to the employment of labor and
classification of persons as employees, including, without limitation, all such
laws and orders relating to wages, hours, discrimination, civil rights, safety
and the collection and payment of withholding and/or Social Security taxes and
similar taxes and the provision of employee benefits. To the Company's
Knowledge, no officer, division leader or other significant employee of the
Company or any Subsidiary has any current plans to terminate his employment with
the Company or such Subsidiary. Except as set forth in Section 3.14 of the
Disclosure Schedule, to the Company's Knowledge neither the Company nor any
Subsidiary employs members of any labor union. Except as set forth in Section
3.14 of the Disclosure Schedule, to the Company's Knowledge, each employee of
the Company and each Subsidiary is party to a memorandum of agreement with the
Company or such Subsidiary and is subject to the confidentiality provisions
thereof. The Company routinely conducts background checks (consisting of a
background check of credit records, driving records, criminal records,
bankruptcy and drug testing) on each prospective employee of the Company and
each Subsidiary prior to making an offer of employment to each such employee and
expects to continue to follow either its current background check procedure or
some other procedure to its reasonable satisfaction after the date hereof.
3.15 Employee Benefit Plans. (a) Except as set forth in Section 3.10
or Section 3.15(a) of the Disclosure Schedule, the Company and the Subsidiaries
have no employment agreements, labor or collective bargaining agreements and
there are no employee benefit or compensation plans, agreements, arrangements or
commitments (including "employee benefit plans," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
maintained by the Company or any Subsidiary for any employees of the Company or
any Subsidiary or with respect to which the Company or any Subsidiary has
liability, or makes or has an obligation to make contributions (each a "Company
Employee Plan" and together the "Company Employee Plans").
(b) Except as set forth in Section 3.15(b) of the Disclosure Schedule,
each Company Employee Plan that is an employee welfare benefit plan as defined
under Section 3(l) of ERISA is funded through an insurance company contract.
Except as set forth in Section 3.15(b) of the Disclosure Schedule, each Company
Employee Plan by its terms and operation is in compliance in all material
respects with all applicable laws and all required filings, if any, with respect
to such Company Employee Plan has been made. Except as set forth in Section
3.15(b) of the Disclosure Schedule, neither the Company nor any entity that is
or was at any time treated as a single employer with the Company under Section
414(b), (c), (m) or (o) of the Code has at any time maintained, contributed to
or been required to contribute to or has any liability
11
with respect to, any plan subject to Title IV of ERISA (including, without
limitation, any Multiemployer Plan). The Company's Deferred Compensation Plan
satisfies the requirements of Section 201(2) of ERISA. Except as set forth in
Section 3.15(b) of the Disclosure Schedule, the events contemplated by this
Agreement (either alone or together with any other event) will not (i) entitle
any employees to severance pay, unemployment compensation, or other similar
payments under any Company Employee Plan or law, (ii) accelerate the time of
payment or vesting or increase the amount of benefits due under any Company
Employee Plan or compensation to any employees of the Company or any Subsidiary
or (iii) result in any payments (including parachute payments) under any Company
Employee Plan or Law becoming due to any employee.
There are no pending or, to the Company's Knowledge, threatened
strikes, job actions or other labor disputes affecting the Company or any
Subsidiary or their employees and there have been no such disputes for the past
three years.
3.16 Tax Returns, Payments and Elections. Since December 31, 1998, the
Company and each Subsidiary has filed all tax returns and reports (including
information returns and reports) as required by law except to the extent that
the failure to so file did not and does not have a Material Adverse Effect.
These returns and reports are true and correct in all material respects. The
Company and each Subsidiary has paid or made provision for payment of all taxes
and other assessments shown as due on such returns. The provision for taxes of
the Company and the Subsidiaries as shown in the Financial Statements (as
hereinafter defined) is adequate in all material respects for all taxes,
assessments and governmental charges due or accrued as of the date thereof with
respect to its business, properties and operations. Neither the Company nor any
Subsidiary has elected pursuant to the Internal Revenue Code of 1986, as amended
(the "Code"), to be treated as a Subchapter S corporation pursuant to Section
1362(a) or a collapsible corporation pursuant to Section 341(f) of the Code, nor
has the Company or any Subsidiary made any other elections pursuant to the Code
(other than elections that relate solely to methods of accounting, depreciation
or amortization) that would have a Material Adverse Effect. Since December 31,
1998, neither the Company nor any Subsidiary has had any tax deficiency proposed
or assessed against it by the Internal Revenue Service or any other foreign,
federal, state or local taxing authority and none have been asserted in writing
or, to the Company's Knowledge, threatened at any time for additional taxes.
Since March 31, 2000, neither the Company nor any Subsidiary has executed any
waiver of any statute of limitations on the assessment or collection of any tax
or governmental charge. Since December 31, 1998, none of the foreign, federal,
state or local income or franchise tax or sales or use tax returns have ever
been audited by governmental authorities. Since the date of the Financial
Statements, neither the Company nor any Subsidiary has incurred any taxes,
assessments or governmental charges other than in the ordinary course of
business. Since March 31, 2000, the Company and each Subsidiary has withheld or
collected from each payment made to each of its respective employees, the amount
of all taxes (including, but not limited to, federal income taxes, Federal
Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes) and
foreign taxes required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositories.
3.17 Brokers or Finders. Except as set forth in Section 3.17 of the
Disclosure Schedule, neither the Company or any Subsidiary has incurred, or will
incur, directly or
12
indirectly, as a result of any action taken by the Company or any Subsidiary,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or the issuance of the
Securities or any transaction contemplated hereby or thereby. The Company agrees
to indemnify and hold harmless each Purchaser from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company, any Subsidiary or any of their respective officers, employees or
representatives is responsible.
3.18 Offering Exemption. Assuming the truth and accuracy of the
representations and warranties contained in Section 4, the offer and sale of the
Securities as contemplated hereby and the issuance and delivery to the
Purchasers of the Securities and, if applicable, the Conversion Shares, are
exempt from registration under the Securities Act, and will be registered or
qualified (or exempt from registration or qualification) under applicable state
securities and "blue sky" laws, as currently in effect.
3.19 Environmental Matters. (a) The Company complies and has at all
times since March 31, 2000 complied with all federal, state and local laws,
judgments, decrees, orders, consent agreements, authorizations, permits,
licenses, rules, regulations, common or decision law (including, without
limitation, principles of negligence and strict liability) relating to the
protection, investigation or restoration of the environment (including, without
limitation, natural resources) or the health or safety matters of humans and
other living organisms, including the Resource Conservation and Recovery Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Federal Clean Water Act, as amended, the Federal Clean Air
Act, as amended, the Toxic Substances Control Act, or any state and local
analogue (hereinafter "Environmental Laws"), except where the failure to comply
would not reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in Section 3.19(b) of the Disclosure Schedule,
(i) the Company has no Knowledge of any claim, and has not received notice of a
written complaint, order, directive, claim, request for information or citation,
and to the Company's Knowledge no proceeding has been instituted raising a claim
against the Company or any predecessor or any of their respective real
properties now or since March 31, 2000 formerly owned, leased or operated or
other assets indicating or alleging any damage to the environment or any
liability or obligation under or violation of any Environmental Law and (ii) the
Company is not subject to any order, decree, injunction or other directive of
any Governmental Authority.
(c) Except as set forth in Section 3.19(c) of the Disclosure Schedule,
(i) the Company has not used and, to the Company's Knowledge, no other person
has used any portion of any property currently or since March 31, 2000 owned,
operated or leased by the Company for the generation, handling, processing,
treatment, storage or disposal of Hazardous Materials except in accordance with
applicable Environmental Laws; (ii) the Company does not own or operate any
underground tank or other underground storage receptacle for Hazardous
Materials, any asbestos-containing materials or polychlorinated biphenyls, and,
to the Company's Knowledge, no underground tank or other underground storage
receptacle for Hazardous Materials, asbestos-containing materials or
polychlorinated biphenyls are located on any portion of any property currently
owned, operated or leased by the Company and (iii) to the Company's
13
Knowledge, the Company has not caused or suffered to occur any Releases or
threatened Releases of Hazardous Materials on, at, in, under, above, to, from or
about any property currently or since March 31, 2000 owned, operated or leased
by the Company.
(d) The execution, delivery and performance of this Agreement is not
subject to any Environmental Laws which condition, restrict or prohibit the
sale, lease or other transfer of property or operations, including any so-called
"environmental cleanup responsibility acts" or requirements for the transfer of
permits, approvals, or licenses. To the Company's Knowledge, there have been no
environmentally related audits, studies, reports, analyses (including soil and
groundwater analyses), or investigations of any kind performed with respect to
the currently or since March 31, 2000 owned, leased, or operated properties of
the Company.
3.20 Offering of Notes, Warrants and Shares. No form of general
solicitation or general advertising was used by the Company or any of its agents
or representatives in connection with the offer and sale of the Securities.
Neither the Company nor any agent acting on the Company's behalf has, directly
or indirectly, offered the Securities of the Company for sale to or solicited
any offers to buy the Securities of the Company from, or otherwise approached or
negotiated with respect thereto with any other potential purchaser.
3.21 Disclosure. Except as set forth in Section 3.21 of the Disclosure
Schedule, none of (a) this Agreement (including, without limitation, the
Disclosure Schedule and the Schedules and Exhibits attached hereto), (b) any
other Transaction Documents, or (c) any statements, documents or agreements
filed by the Company with the Securities and Exchange Commission (the "SEC")
pursuant to the requirements of the Securities Exchange Act of 1934, as amended
(the " '34 Act") contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
in light of the circumstances under which they were made not misleading. There
is no fact which, to the Knowledge of the Company, has not been disclosed to the
Purchasers, which could be expected to have a Material Adverse Effect on the
ability of the Company and each Subsidiary to perform its obligations under the
Transaction Documents. The Company's "Board Case Financial Projections dated
January 29, 2003" contain certain projections and forward looking statements
which are based on the assumptions set forth in the Company Business Plan and
which have been prepared by Company management in good faith and upon the belief
that there is a reasonable basis for them.
3.22 Financial Statements. The Company has delivered to each Purchaser
the audited financial statements of the Company and its Subsidiaries as at and
for the years ended December 31, 2000, 2001 and 2002 and unaudited financial
statements as at and for the fiscal quarter ended March 31, 2003 and the months
ended April 30, 2003 and May 31, 2003 (the "Financial Statements"). Except as
set forth on Schedule 3.22 of the Disclosure Schedule, the Financial Statements
have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") and fairly present the financial condition and
operating results of the Company and its Subsidiaries as of the date, and for
the period, indicated therein, except that the unaudited financial statements as
at and for the fiscal quarter ended March 31, 2003 and the months ended April
30, 2003 and May 31, 2003 are subject to normal year-end adjustments and do not
contain all notes required under GAAP. Except as set forth in the Financial
Statements, the Company and its Subsidiaries have no liabilities, obligations or
commitments of
14
any nature (whether accrued, absolute, contingent, unliquidated or otherwise,
due or to become due and regardless of when addressed), which are required to be
included in the Financial Statements in accordance with GAAP other than (a)
liabilities that are listed on Section 3.22 of the Disclosure Schedule, (b)
liabilities that have arisen in the ordinary course of business since May 31,
2003 and have not had and could not reasonably be expected to have a Material
Adverse Effect and (c) obligations to perform after the date hereof any
contracts or agreement which have been disclosed on Section 3.10 of the
Disclosure Schedule or which are not required to be disclosed Section 3.10 of
the Disclosure Schedule because such contracts and agreements do not meet the
disclosure thresholds under Section 3.10 of the Disclosure Schedule. Except as
disclosed in the Financial Statements, neither the Company nor any Subsidiary is
a guarantor or indemnitor of any indebtedness of any other person or entity.
3.23 No Suspension or Debarment. Neither the Company nor any
Subsidiary during the last five (5) years has been and, to the Company's
Knowledge, none of their respective employees, consultants or agents during the
last five years has been suspended or debarred from eligibility for award of
contracts with the Government or any other Governmental Authority or is or was
the subject of a finding of non-responsibility or ineligibility for Government
contracting. During the past five (5) years, no government contracting
suspension or debarment action has been threatened or commenced against the
Company or a Subsidiary, or, to the Company's Knowledge, any of its officers or
employees. The Company does not have Knowledge of a valid basis, nor specific
circumstances that are or, with the passage of time, would likely become a basis
for the Company's or a Subsidiary's suspension or debarment from award of
contracts with the Government.
3.24 Liability for Cost and Pricing Data. There exists no basis for a
claim of any material liability of the Company or a Subsidiary by any Government
entity as a result of defective, inaccurate, incomplete or out-of-date cost or
pricing data submitted to the Government or a Government contractor or
subcontractor including, without limitation, any such data relating to
liabilities accrued on the Company's books or in its financial accounts for
deferred compensation to any Company employees. To its Knowledge, neither the
Company nor any Subsidiary is in violation, or currently alleged to be in
violation, of the Truth in Negotiations Act, as amended. Neither the Company nor
any Subsidiary has submitted to the Government or a Government contractor or
subcontractor a materially inaccurate certification regarding cost or pricing
data.
3.25 Government Contracts.
(a) A true and correct list of each Government Contract which is in
effect as of the date of this Agreement and Government Bid to which the Company
or a Subsidiary is a party, is set forth in Section 3.25 of the Disclosure
Schedule. Prior to the Closing Date, the Company shall amend Section 3.25 of the
Disclosure Schedule to include a true and correct list of each Government
Contract and Government Bid which is entered into by the Company or a Subsidiary
between the date of this Agreement and the Closing Date.
(b) Except as set forth in Section 3.25 of the Disclosure Schedule,
(A) the Company and each Subsidiary has fully complied with all material terms
and conditions of each Government Contract and Government Bid to which it is a
party as required; (B) the Company
15
and each Subsidiary has complied with all material requirements of any Law
pertaining to such Government Contract or Government Bid; (C) all
representations and certifications made by the Company and each Subsidiary with
respect to such Government Contract or Government Bid were accurate, current and
complete in every material respect as of their effective date and, the Company
and each Subsidiary has fully complied with all such representations and
certifications in all material respects; (D) neither the Company nor any
Subsidiary is in violation, or currently alleged to be in violation, in any
material respect, of the False Statements Act, as amended, the False Claims Act,
as amended, or any other federal requirement relating to the communication of
false statements or submission of false claims to the Government; and (E) no
termination or default notice, cure notice or show cause notice has been issued
to the Company or any Subsidiary and remains unresolved, and the Company has no
Knowledge of any plan or proposal of any entity to issue any such notice.
(c) Except as set forth in Section 3.25 of the Disclosure Schedule,
(A) to the Company's Knowledge, none of the Company's or a Subsidiary's
employees, consultants or agents is (or during the last five years has been)
under administrative, civil or criminal investigation or indictment by any
Governmental Authority with respect to the conduct of the business of the
Company or a Subsidiary; (B) to the Company's Knowledge, there is no pending
audit or investigation of the Company or any of its officers, employees or
representatives or a Subsidiary or any of its officers, employees or
representatives nor within the last five years has there been any audit or
investigation of the Company or any of its officers, employees or
representatives or a Subsidiary or any of its officers, employees or
representatives resulting in a material adverse finding with respect to any
material alleged irregularity, misstatement or omission arising under or
relating to any Government Contract or Government Bid; and (C) during the last
five years, neither the Company nor any Subsidiary has made any voluntary
disclosure in writing to the Government or any other Governmental Authority with
respect to any material alleged irregularity, misstatement or omission arising
under or relating to a Governmental Contract or Government Bid that has led to
any of the consequences set forth in clause (A) or (B) of the immediately
preceding sentence or any other material damage, penalty assessment, recoupment
of payment or disallowance of cost.
(d) Except as set forth in Section 3.25 of the Disclosure Schedule,
there are (A) no outstanding written claims against the Company, either by the
Governmental Authority or any other Government or by any prime contractor,
subcontractor, vendor or other third party arising under or relating to any
Government Contract or Government Bid, and (B) to the Company's Knowledge, no
outstanding disputes (y) between the Company or a Subsidiary, on the one hand,
and the Government or any Governmental Authority, on the other hand, under the
Contract Disputes Act or any other Federal statute or (z) between the Company or
a Subsidiary, on the one hand, and any prime contractor, subcontractor or
vendor, on the other hand, arising under or relating to any Government Contract
or Government Bid.
(e) Except as set forth in Section 3.25 of the Disclosure Schedule,
the rates and rate schedules submitted to the Government with respect to the
Government Contracts have been audited and closed out for all years prior to
1997.
(f) Except as set forth in Section 3.25 of the Disclosure Schedule,
all Government Contracts have been awarded, and all Government Bids have been
submitted, under
16
a full and open competitive procurement process without preferential treatment
of any kind. None of the Government Contracts listed on Schedule 3.25 of the
Disclosure Schedule are subject to termination by a Governmental Authority as a
result of the consummation of the transactions contemplated by this Agreement.
3.26 Changes. Except as expressly contemplated by the Transaction
Documents or as set forth in Section 3.26 of the Disclosure Schedule, since
December 31, 2002, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company and the Subsidiaries from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not created, in the aggregate, a Material Adverse Effect,
(b) any intentional waiver or cancellation of any material right of
the Company or any Subsidiary, or the cancellation of any material debt or claim
held by the Company or any Subsidiary,
(c) any payment, discharge or satisfaction of any material claim,
liability or obligation of the Company or any Subsidiary other than in the
ordinary course of business,
(d) any Lien (other than Permitted Liens) upon the assets of the
Company or any Subsidiary that would be prohibited by the terms of the Amended
Charter if it were to arise after the Closing Date,
(e) any declaration or payment of dividends on, or other distribution
with respect to, or any direct or indirect redemption or acquisition of, any
securities of the Company or any Subsidiary,
(f) any sale, assignment or transfer of any material, tangible or
intangible assets of the Company or any Subsidiary except in the ordinary course
of business,
(g) any loan by the Company or any Subsidiary to any officer,
director, employee, consultant or stockholder of the Company or any Subsidiary
(other than advances to such persons in the case of travel, entertainment or
other similar advances in the ordinary course of business),
(h) any material increase, direct or indirect, in the compensation
paid or payable to any officer or director of the Company or any Subsidiary or,
other than in the ordinary course of business, to any other employee, consultant
or agent of the Company or any Subsidiary,
(i) any material change in the accounting methods, practices or
policies of the Company or any Subsidiary,
(j) any indebtedness incurred for borrowed money by the Company or any
Subsidiary other than in the ordinary course of business,
17
(k) any material adverse change in the manner of business or
operations of the Company or any Subsidiary (including, without limitation, any
accelerations or deferral of the payment of any material accounts payable or
other current, material liabilities or deferral of the collection of any
material accounts or notes receivable),
(l) any capital expenditures or commitments therefor by the Company or
any Subsidiary that aggregate in excess of $100,000 for any twelve-month period,
(m) other than as disclosed in the capitalization table attached to
this Agreement, any issuance of any stock, bonds or other securities of the
Company or any Subsidiary,
(n) any amendment to the Amended Charter, Bylaws or other
organizational documents of the Company or any amendment of the organizational
or formation documents of any Subsidiary, or
(o) any agreement or commitment (contingent or otherwise) by the
Company or any Subsidiary to do any of the foregoing.
3.27 Existing Registration Rights. Except as set forth in Section 3.27
of the Disclosure Schedule the Company has not granted or agreed to grant rights
to require the registration of the Company's equity securities under the
Securities Act, including piggyback rights, to any person or entity.
3.28 Suppliers and Customers. Except as set forth in Section 3.28 of
the Disclosure Schedule, since December 31, 2002, none of the Company's or any
Subsidiaries' suppliers, vendors, or customers has: (i) terminated or cancelled
a Material Contract or material business relationship; (ii) threatened in
writing to terminate or cancel a Material Contract or material business
relationship; (iii) expressed dissatisfaction in writing with the performance of
the Company or any Subsidiary with respect to a Material Contract or material
business relationship; or (iv) demanded in writing any material modification,
termination or limitation of a Material Contract or material business
relationship with the Company or any Subsidiary (excluding any contracts or
business relationship which, if so terminated, cancelled, modified or limited,
would not result in a Material Adverse Effect), nor does the Company have
Knowledge that any of the events described in clauses (i) - (iv), whether in
writing or otherwise, will occur after the Closing Date. Set forth in Section
3.28 of the Disclosure Schedule is a list describing the revenue derived from
each of the Company's largest customers for the period of March 31, 2002 through
March 31, 2003 (determined by amount of revenue) and such list is true and
correct in all material respects.
3.29 Foreign Corrupt Practices Act. Neither the Company, any
Subsidiary nor, to the Company's Knowledge after reasonable inquiry by each of
the individuals named in the definition of the term "Knowledge" in Section 10,
any employee of the Company or any Subsidiary has violated the United States
Foreign Corrupt Practices Act, as amended, in any material respect. To the
Company's Knowledge, no stockholder, director, officer, employee or agent of the
Company or of a Subsidiary has, directly or indirectly, made or agreed to make,
any unlawful or illegal payment, gift or political contribution to, or taken any
other unlawful or
18
illegal action, for the benefit of any customer, supplier, governmental employee
or other Person who is or may be in a position to assist or hinder the business
of the Company or a Subsidiary.
3.30 Work in Progress. Section 3.30 of the Disclosure Schedule
contains a complete list of all contracts on which the Company and its
Subsidiaries are currently working or which have not been completed, the
customer for whom the work is being performed, and the amount and basis for
payment and the status of the contract and the work being performed thereunder.
There is currently no work being performed for which there is either (i) no
written agreement signed by the customer, or (ii) no funding available and
committed by the customer, in the case of contracts with a Governmental
Authority.
3.31 Warranty and Related Matters. Section 3.31 of the Disclosure
Schedule sets forth a complete list of all outstanding product and service
warranties and guarantees on any of the products or services that the Company or
its Subsidiaries distributes, services, markets or sells for itself, a customer
or a third party (each such product or service shall be referred to herein as a
"Company Product"). There are no existing or, to the Company's Knowledge,
threatened in writing, product liability, warranty or other similar claims
against the Company or any of its Subsidiaries alleging that any Company Product
is defective or fails to meet any product or services warranties except as set
forth in Section 3.31 of the Disclosure Schedule.
3.32 Export Controls. None of the Company, a Subsidiary or, to the
Company's Knowledge, the Company's or a Subsidiary's employees have violated, in
any material respect, any Law pertaining to export controls, technology transfer
or industrial security including, without limitation, the Export Administration
Act, as amended, the International Emergency Economic Powers Act, as amended,
the Arms Export Control Act, as amended, the National Industrial Security
Program Operating Manual, as amended, or any regulation, order, license or other
legal requirement issued pursuant to the foregoing (including, without
limitation, the Export Administration Regulations and the International Traffic
in Arms Regulations). Neither the Company, any Subsidiary nor, to the Company's
Knowledge, any employee of the Company or any Subsidiary is the subject of an
action by a Governmental Authority that restricts such person's ability to
engage in export transactions.
3.33 Termination of ESOP. The Analex Corporation Employee Stock
Ownership Plan and Trust ("ESOP") was terminated effective as of November 5,
2001 and the Company has received a favorable determination letter from the
Internal Revenue Service with respect to such termination. Section 3.33 of the
Disclosure Schedule sets forth the number of shares of the Company's capital
stock held by the ESOP pending distribution to the participants thereof as of
the date hereof.
4. Representations and Warranties of the Purchasers. Each Purchaser hereby
represents and warrants that:
4.1 Authorization. The execution, delivery and performance by such
Purchaser of the Transaction Documents to which it is a party, and the
performance of all of the obligations of such Purchaser under each of such
Transaction Documents have been duly and validly authorized, and no other
action, approval or authorization is required on the part of such Purchaser or
any Person by Law or otherwise in order to make the Transaction Documents the
19
valid, binding and enforceable obligations (subject to (i) laws of general
application relating to bankruptcy, insolvency, and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief, or other
equitable remedies) of such Purchaser that is a party thereto. Each of the
Transaction Documents, when executed and delivered by such Purchaser that is a
party thereto, will constitute a valid and legally binding obligation of such
Purchaser that is a party thereto, enforceable against such Purchaser that is a
party thereto in accordance with its terms subject to: (i) laws of general
application relating to bankruptcy, insolvency, and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief, or other
equitable remedies.
4.2 Purchase Entirely for Own Account. The Securities and the
Conversion Shares (collectively, the "New Securities") will be acquired for
investment for such Purchaser's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof. Such Purchaser's
principal office is located in the State of Connecticut for purposes of state
securities laws. Such Purchaser is aware that the Company is issuing the New
Securities pursuant to Section 4(2) of the Securities Act and Regulation D
promulgated thereunder without complying with the registration provisions of the
Securities Act or other applicable federal or state securities laws. Such
Purchaser is also aware that the Company is relying upon, among other things,
the representation and warranties of the Purchasers contained in this Agreement
for purposes of complying with Regulation D.
4.3 Disclosure of Information. Such Purchaser has received and
carefully reviewed all the information it considers necessary or appropriate for
deciding whether to purchase the New Securities. Such Purchaser further
represents that the Company has made available to such Purchaser, at a
reasonable time prior to the date of this Agreement, an opportunity to (a) ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the New Securities and the business, properties
and financial condition of the Company, all of which questions (if any) have
been answered to the reasonable satisfaction of such Purchaser, and (b) obtain
additional information, all of which was furnished by the Company to the
reasonable satisfaction of such Purchaser. The foregoing, however, does not
limit or modify the representations and warranties of the Company in Section 3
of this Agreement or the right of the Purchasers to rely thereon.
4.4 Investment Experience. Such Purchaser acknowledges that it is able
to fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in investing in companies similar to the Company and in
financial or business matters such that it is capable of evaluating the merits
and risks of the investment in the New Securities. Such Purchaser has made the
determination to enter into this Agreement and the other agreements contemplated
hereby and to acquire the New Securities based upon its own independent
evaluation and assessment of the value of the Company and its present and
prospective business prospects.
4.5 Accredited Investor. Such Purchaser is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
4.6 Restricted Securities; Legends. Such Purchaser recognizes that the
New Securities will not be registered under the Securities Act or other
applicable federal or state
20
securities laws. Such Purchaser understands that the New Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering. Such Purchaser agrees not to sell
or transfer the New Securities unless such New Securities are registered under
the Securities Act and under any other applicable securities laws. The
certificates evidencing the Securities may bear the following legend:
THIS SECURITY HAS AND THE SHARES OF STOCK WHICH MAY BE PURCHASED PURSUANT
TO THE EXERCISE OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION UNDER THE ACT AND THE RULES AND
REGULATIONS THEREUNDER.
4.7 No General Solicitation. Such Purchaser acknowledges that the New
Securities were not offered to such Purchaser means of: (a) any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar medium, or broadcast over television or radio, or (b) any other form of
general solicitation or advertising.
4.8 Absence of Conflicts. Such Purchaser's execution, delivery, and
performance of, and compliance with the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby, have not and
will not:
(a) violate, conflict with or result in a breach of any provision of
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
upon any of the assets, properties or business of such Purchaser under, any of
the terms, conditions or provisions of (i) its certificate/articles of formation
or organization or any of its other formation or organizational documents, or
(ii) any material contract to which it is a party; or
(b) violate any judgment, ruling, order, writ, injunction, award,
decree, or any Law or regulation of any court or federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority which is applicable to such Purchaser or any of its assets, properties
or businesses, which violation would have a Material Adverse Effect.
4.9 Brokers or Finders. Such Purchaser has not incurred, nor will it
incur, directly or indirectly, as a result of any action taken by such
Purchaser, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or the issuance of the
Securities or any transaction contemplated hereby or thereby. Such Purchaser
agrees to indemnify and hold harmless the Company and each Subsidiary from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which such Purchaser, or any of its respective officers,
employees or representatives is responsible.
21
4.10 Investigation by Purchaser. Such Purchaser acknowledges that,
except for the representations and warranties of Company contained in Section 3
of this Agreement, the Disclosure Schedules hereto or in any other Transaction
Document or schedules thereto, (i) none of the Company, its Subsidiaries or any
of their directors, officers, employees, Affiliates, controlling persons,
agents, advisors or representatives, makes or shall be deemed to have made any
representation or warranty, either express or implied, and (ii) none of the
Company, its Subsidiaries or any of their directors, officers, employees,
Affiliates, controlling persons, agents, advisors or representatives, makes, or
shall be deemed to have made, any representation or warranty, express or
implied, as to the accuracy or completeness of any of the information or
documents, financial or otherwise (including, without limitation, any estimates,
projections, forecasts, budgets or other forward-looking information) provided
or otherwise made available to such Purchaser or any of its directors, officers,
employees, Affiliates, controlling persons, agents, advisors or representatives
(including, without limitation, in any management presentations, information or
offering memorandum, supplemental information or other materials or information
with respect to any of the above). With respect to any such estimate,
projection, budget or forecast delivered by or on behalf of the Company, such
Purchaser acknowledges that (i) there are uncertainties inherent in attempting
to make such estimates, projections, budgets and forecasts, and (ii) such
Purchaser is aware that actual results may differ materially.
5. Conditions of the Parties at Closing.
5.1 Conditions of Purchasers' Obligations at Closing. The obligations
of each Purchaser under Section 1.1 of this Agreement are subject to the
satisfaction by the Company on or before the Closing of each of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in Section 3 shall be true and correct on and as of the
Closing with the same force and effect as though such representations and
warranties had been made on and as of the date of such Closing except as a
result of events and changes thereto that do not result in a Material Adverse
Effect (except where such representation is made as of a specific date, it shall
be true and correct as of such date except as a result of events and changes
thereto that do not result in a Material Adverse Effect).
(b) Performance. The Company shall have performed and complied with
all conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.
(c) No Default. Immediately prior to the issuance of the Securities
and after giving effect thereto, no Event of Default, or event which, with the
passage time or the giving of notice would constitute an Event of Default, shall
have occurred and be continuing.
(d) No Material Adverse Effect; Compliance Certificate. No Material
Adverse Effect shall have occurred between the date hereof and the Closing Date
and the President and/or Chief Executive Officer of the Company shall deliver to
each Purchaser at the Closing a certificate stating that the conditions
specified in Sections 5.1(a), (b) and (c) have been fulfilled and stating that
no Material Adverse Effect has occurred between the date hereof and the Closing
Date.
22
(e) Consents and Approvals. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state or any other Person (including the consent of the Company's
stockholders and any authorizations, consents, approvals or permits of the
American Stock Exchange) that are required in connection with the lawful
issuance and sale of the Securities pursuant to this Agreement shall be duly
obtained and effective as of the Closing and the purchase and payment of the
Securities to be purchased by the Purchasers at the Closing on the terms and
conditions as provided herein shall not violate any applicable Law.
(f) Notes. The Company shall deliver to each Purchaser its respective
Note.
(g) Warrants. The Company shall deliver to each Purchaser its
respective DCS Warrant and PCS Warrant.
(h) Shares. The Company shall deliver to each Purchaser a certificate
representing that number of Shares as set forth opposite such Purchaser's name
under the heading "Shares" on Schedule I hereto.
(i) Stockholders' Agreement; Registration Rights Agreement; etc. The
Company shall have executed (i) a Stockholders' Agreement, substantially in the
form attached hereto as Exhibit L (the "Stockholders' Agreement"), (ii) a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit M (the "Registration Rights Agreement") and (iii) a management rights
agreement between the Company and Pequot Private Equity Fund III, L.P.
reasonably satisfactory to the parties thereto.
(j) Security Agreement; Subsidiary Security Agreements; Pledge
Agreement; Intercreditor Agreement and Subsidiary Guarantees. The Company shall
execute and deliver to the Purchasers the Security Agreement, the Pledge
Agreement, and the Intercreditor Agreement. Each Subsidiary Guarantor shall
execute and deliver to the Purchasers the Subsidiary Security Agreement and a
Subsidiary Guarantee.
(k) Amended Charter. On or prior to the Closing, there shall have been
filed with the Secretary of State of the State of Delaware, the Amended Charter
and the Amended Charter shall be in full force and effect.
(l) Good Standing; Qualification to do Business. The Company shall
have delivered to the Purchasers certificates of good standing from the
following jurisdictions with respect to the Company and each Subsidiary
Guarantor dated as of a date no earlier than 15 days prior to the Closing:
(i) With respect to the Company, from the State of Delaware and
each jurisdiction in which it has qualified to do business.
(ii) With respect to SyCom Services Inc., from the State of
Delaware each jurisdiction in which it has qualified to do business.
(iii) With respect to Advanced Biosystems, Inc., from the State
of Delaware and each jurisdiction in which it has qualified to do business.
23
(m) Secretary's Certificate. The Company shall have delivered to the
Purchasers:
(i) a certificate executed by its Secretary certifying with
respect to a copy of its Amended Charter (as amended through the date hereof)
and the Bylaws, (ii) board resolutions authorizing the transactions contemplated
by this Agreement and the Transaction Documents, (iii) copies of all minutes of
all meetings (or excerpts thereof) and all actions by written consent of the
stockholders of the Company authorizing the transactions contemplated in this
Agreement and the Transaction Documents and (iv) incumbency matters.
(ii) A certificate executed by the Secretary of each Subsidiary
Guarantor certifying with respect to (i) a copy of such Subsidiary's articles or
certificate of incorporation and bylaws, (ii) board resolutions authorizing the
transactions contemplated by the Transaction Documents to which such Subsidiary
is a party, (iii) copies of all minutes of all meetings (or excerpts thereof)
and all actions by written consent of the stockholders of the Company
authorizing the transactions contemplated by the Transaction Documents to which
such Subsidiary is a party and (iv) incumbency matters.
(n) Opinion of Company Counsel. Each Purchaser shall have received
from Holland and Knight LLP, counsel to the Company, an opinion, dated the
Closing Date, in the form attached hereto as Exhibit N.
(o) Cross-Receipts of the Purchasers. The Company and the Purchasers
shall have executed and delivered a cross-receipt acknowledging the Company's
delivery to the Purchasers of the Notes, Warrants and certificates representing
the Shares to the Purchasers and the Purchasers' payment therefor.
(p) No Acceleration of Vesting, etc. The board of directors of the
Company shall not have made any determination that could result in the
acceleration of the vesting or rights to exercise Options or warrants or cause
an accelerated pay-out of any such Options.
(q) Election of Directors. The Company shall have taken all necessary
corporate action to effect the appointment of the Purchasers' designees (as
identified in the Stockholders' Agreement) as directors of the Company to take
office at the Closing.
(r) Governmental Approvals for Collateral Assignment of Government
Contracts. The Company and each Subsidiary shall have obtained all consents,
waivers and approvals from any Governmental Authority and any other Person
necessary in connection with the assignments contemplated by the Security
Agreements and shall have provided copies thereof to the Purchasers; provided,
that the Company and the Subsidiaries shall not be required to obtain approvals
in connection with the Assignment of Claims Act to the extent obtaining such
approvals would constitute a Default (as defined in the Senior Credit Agreement)
under the Senior Credit Agreement or a default under the Senior Credit Facility.
(s) Amendment of By-Laws. On or prior to the Closing, the Company
shall have taken all necessary corporate action to amend its Bylaws to ensure
that the Bylaws do not conflict with and are not inconsistent with any
Transaction Document.
24
(t) Closing Capitalization Table. The Company shall have delivered to
the Purchasers revised Exhibit K accurately reflecting any additional issuances
of securities between the date hereof and the Closing Date.
(u) ▇▇▇▇▇ Stock Repurchase Agreement. The Company shall have delivered
to the Purchasers evidence of (i) the execution, delivery and performance of the
▇▇▇▇▇ Stock Repurchase Agreement, dated as of the date hereof, by and among the
Company, ▇▇▇ ▇. ▇▇▇▇▇ and those other Persons listed on Exhibit C hereto, in
substantially the form attached hereto as Exhibit O (the "▇▇▇▇▇ Stock Repurchase
Agreement") and (ii) payment by the Company to ▇▇. ▇▇▇▇▇ and such other Persons
in connection therewith, which payment may be made with the proceeds received by
the Company from the sale of the Securities.
(v) Termination of ▇▇▇▇▇ Employment. The Company shall have delivered
to the Purchasers evidence of the termination of the employment of ▇▇▇ ▇. ▇▇▇▇▇
with the Company in accordance with the Employment Termination Agreement, dated
as of the Closing Date, by and between the Company and ▇▇. ▇▇▇▇▇, in
substantially the form attached hereto as Exhibit P.
(w) Termination of Voting Agreement; Registration Rights Agreement.
The Company shall have delivered to the Purchasers evidence of the execution,
delivery and performance the Voting Termination Agreement providing for the
termination of the Hadron, Inc. Voting Agreement, dated March 30, 2000 by and
among the Company and certain of its stockholders listed on the signature pages
thereto in substantially the form attached hereto as Exhibit Q and evidence of
the execution, delivery and performance of the Registration Rights Termination
Agreement providing for the termination of the Registration Rights Agreement,
dated as of March 30, 2000 by and among the Company and certain of its investors
in substantially the form attached hereto as Exhibit R.
(x) Fairness Opinion. The Company shall have delivered to the
Purchasers a copy of the fairness opinion rendered by Houlihan, Lokey, ▇▇▇▇▇▇ &
▇▇▇▇▇ to the Company with respect to the transactions contemplated by this
Agreement and any bringdowns and supplements to such opinion; provided, that the
Company shall not be required to obtain any such bringdowns or supplements.
(y) UCC-1 Financing Statements. The Company shall have prepared in
form and substance reasonably satisfactory to the Purchasers copies of the
financing statements on Form UCC-1 to be filed in accordance with Section 11.2
and delivered copies of the same to the Purchasers.
(z) Termination of Liens. Each Lien with an asterisk set forth
opposite its description in Section 3.6(a) of the Disclosure Schedule shall have
been validly terminated in accordance with applicable law and the Company shall
have furnished to the Purchasers a copy of the filed termination statement with
respect thereto.
5.2 Conditions of Company's Obligations at Closing. The obligations of
the Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction by the Purchasers on or before the Closing of each
of the following conditions:
25
(a) Representations and Warranties. The representations and warranties
of the Purchasers contained in Section 4 shall be true and correct in all
material respects on and as of the Closing (except where another date or period
of time is specifically stated herein for a representation or warranty and in
such case such representation or warranty shall be true and correct in all
material respects on and as of such date) with the same force and effect as
though such representations and warranties had been made on and as of the date
of such Closing; provided, however, that representations and warranties that
contain a materiality qualification shall be true and correct in all respects.
(b) Performance. The Purchasers shall have performed and complied with
all conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.
(c) Consents and Approvals. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state or any other Person (including the consent of the Company's
stockholders and any authorizations, consents, approvals or permits of the
American Stock Exchange) that are required in connection with the lawful
issuance and sale of the Securities pursuant to this Agreement shall be duly
obtained and effective as of the Closing and the purchase and payment of the
Securities to be purchased by the Purchasers at the Closing on the terms and
conditions as provided herein shall not violate any applicable Law.
(d) Stockholders' Agreement and Registration Rights Agreement. The
Purchasers shall have executed (i) the Stockholders' Agreement, and (ii) the
Registration Rights Agreement.
(e) Cross-Receipts of the Purchasers. The Company and the Purchasers
shall have executed and delivered a cross-receipt acknowledging the Company's
delivery to the Purchasers of the Notes, Warrants and certificates representing
the Shares to the Purchasers and the Purchasers' payment therefor.
(f) Purchase Price. The Purchasers shall have delivered to the Company
the Note Purchase Price and the Stock Purchase Price.
6. Events of Default and Remedies.
6.1 Events of Default. An Event of Default shall mean the occurrence
or existence of one or more of the following events or conditions (for any
reason, whether voluntary, involuntary or effected or required by Law):
(a) The Company shall fail to pay when due the principal of any Note.
(b) The Company shall fail to pay when due the interest on any Note,
or any Credit Party shall fail to pay any other amount payable by such Credit
Party in respect of the Note Indebtedness and such failure shall have continued
for a period of three Business Days; provided, however, that for the avoidance
of doubt, any accrual of interest permitted under the Notes or other Transaction
Documents (in lieu of payment thereof) shall not constitute an Event of Default.
26
(c) Any representation or warranty made by any Credit Party in or
pursuant to or in connection with this Agreement or any other Transaction
Document, shall prove to have been inaccurate in any material respect as of the
time when made; provided, that neither the Security Agreement nor the Subsidiary
Security Agreement shall be deemed to be inaccurate prior to the Closing Date
solely by reason of the failure to attach completed schedules prior to the
Closing Date.
(d) Any Credit Party shall default in the performance or observance in
any material respect of any covenant or agreement contained in Sections 7.1
through 7.6 and Section 8 of this Agreement and such default shall have
continued for a period of 10 days following notice from the Purchasers.
(e) Any Lien created or purported to be created in any Collateral
pursuant to any of the Security Agreements shall fail to be a valid, enforceable
and perfected (subject to the Intercreditor Agreement) Lien in favor of the
Purchasers securing the Note Indebtedness, any Transaction Document or material
term or provision thereof shall cease to be in full force and effect or any
Credit Party shall default in the performance or observance in any material
respect of any covenant or agreement contained in this Agreement or any other
Transaction Document (except as provided in Section 6.1(a),(b) or (d)), and such
failure, cessation or default shall have continued for a period of 30 days
following notice from the Purchasers.
(f) The occurrence of any default, event or condition which (i) causes
or which would with the giving of notice or the passage of time or both, permit
the Senior Lender to cause all or any part of the Senior Credit Facility to
become due (by acceleration, mandatory prepayment or repurchase, or otherwise)
before its otherwise stated maturity, or a failure to pay all or any part of the
Senior Credit Facility at its stated maturity and (ii) has not been waived by
the Senior Lender within 180 days of the occurrence thereof.
(g) Any Credit Party is in default and no valid defense exists under
any contract or agreement, financial or otherwise, between such Credit Party and
any other Person, such default involves claimed actual damages in excess of Two
Million and 00/100 Dollars ($2,000,000.00), the other party thereto commences
litigation or arbitration proceedings to exercise its rights and remedies under
such contract or agreement as a consequence of such default and such default is
not waived or cured within 180 days of the occurrence thereof.
(h) One or more judgments for the payment of money shall have been
entered against any one or more of the Credit Parties which judgment or
judgments, exceed One Million and 00/100 Dollars ($1,000,000.00) in the
aggregate, and such judgment or judgments shall have remained unvacated,
undischarged and unstayed for a period of 30 consecutive days.
(i) One or more writs or warrants of attachment, garnishment,
execution, distraint or similar process exceeding in value the aggregate amount
of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) shall have been
issued against any one or more of the Credit Parties or any of their respective
properties and shall have remained unvacated, undischarged and unstayed for a
period of 30 consecutive days.
27
(j) Any Governmental Approval now or hereafter made by or with any
Governmental Authority in connection with this Agreement or any other
Transaction Document is not obtained or shall have ceased to be in full force
and effect or shall have been modified or amended or held to be illegal or
invalid, and such event or condition, either individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect or would
materially adversely affect any Credit Party's rights in and to the Collateral.
(k) A proceeding shall have been instituted in respect of the Company
or any Material Subsidiary (each, a "Material Credit Party"):
(i) seeking to have an order for relief entered in respect of
such Material Credit Party, or seeking a declaration or entailing a finding that
such Material Credit Party is insolvent or a similar declaration or finding, or
seeking dissolution, winding-up, charter revocation or forfeiture, liquidation,
reorganization, arrangement, adjustment, composition or other similar relief
with respect to such Material Credit Party, its assets or its debts under any
Law relating to bankruptcy, insolvency, relief of debtors or protection of
creditors, termination of legal entities or any other similar Law now or
hereafter in effect, or
(ii) seeking appointment of a receiver, trustee, liquidator,
assignee, sequestrator or other custodian for such Material Credit Party or for
all or any substantial part of its property, and such proceeding shall result in
the entry, making or grant of any such order for relief, declaration, finding,
relief or appointment, or such proceeding shall remain undismissed and unstayed
for a period of 60 consecutive days.
(l) Any Material Credit Party shall voluntarily suspend transaction of
its business; shall make a general assignment for the benefit of creditors;
shall institute (or fail to controvert in a timely and appropriate manner) a
proceeding described in Section 6.1(k)(i), or (whether or not any such
proceeding has been instituted) shall consent to or acquiesce in any such order
for relief, declaration, finding or relief described therein; shall institute
(or fail to controvert in a timely and appropriate manner) a proceeding
described in Section 6.1(k)(ii), or (whether or not any such proceeding has been
instituted) shall consent to or acquiesce in any such appointment or to the
taking of possession by any such custodian of all or any substantial part of its
property; shall dissolve, wind-up, revoke or forfeit its charter or liquidate
itself or any substantial part of its property; or shall take any action in
furtherance of any of the foregoing.
(m) (i) the Company is (A) debarred from contracting with any part of
the Government, (B) suspended from contracting with any part of the Government
for more than 60 days or (C) subject to a suspension which prevents the Company
from being granted an award, extension or renewal of a material Government
Contract sought by the Company; (ii) a notice of termination for default shall
have been issued under any material Government Contract and such notice has not
been withdrawn in 60 days; (iii) a Government investigation shall have been
commenced in connection with any Government Contract or the Company which is
reasonably likely to result in criminal liability, suspension or debarment; or
(iv) the termination of any material Government Contract due to fraud or willful
misconduct.
(n) An event or condition shall have occurred which the Purchasers
reasonably believe creates a Material Adverse Effect.
28
6.2 Exercise of Remedies. If an Event of Default has occurred and is
continuing hereunder:
(a) the Collateral Agent, shall, upon being directed to do so in
writing by the Majority Purchasers, declare the entire unpaid Note Indebtedness,
immediately due and payable, without presentment, notice or demand, all of which
are hereby expressly waived by the Company;
(b) upon the occurrence of any Event of Default specified in Section
6.1(k), above, and notwithstanding the lack of any declaration by the Collateral
Agent under preceding clause, the entire unpaid Note Indebtedness, shall become
automatically and immediately due and payable;
(c) the Collateral Agent shall, upon being directed to do so in
writing by the Majority Purchasers, demand immediate delivery of cash
collateral, and the Company agrees to deliver such cash collateral upon demand,
in an amount equal to the Note Indebtedness due and payable;
(d) the Collateral Agent shall, if directed to do so by the Majority
Purchasers (subject to the terms hereof), exercise any remedy permitted by this
Agreement, or the Transaction Documents or at law or in equity; and
(e) during the continuance of any default described in Sections 6.1(a)
or (b) and subject to the terms of Section 2.1(c) of the Stockholders'
Agreement, the Majority Purchasers shall have the rights set forth in Section
2.1(c) of the Stockholders' Agreement.
6.3 Waiver of Defaults. No Event of Default shall be waived by the
Purchasers except in a writing signed by an officer of the Collateral Agent with
the consent of the Majority Purchasers in accordance with Section 15.8 hereof.
No waiver of any Event of Default shall extend to any other or further Event of
Default. The Company expressly agrees that this Section and Sections 15.11 or
15.12 may not be waived or modified by the Purchasers or the Collateral Agent by
course of performance, estoppel or otherwise.
7. Affirmative Covenants.
The Company covenants and agrees that it will, and, as applicable, it
will cause each of the Subsidiaries to comply, until the final payment in full
of the Note Indebtedness (provided that the covenants and agreements in Sections
7.1, 7.3, 7.4, 7.6 and 7.8 through 7.13 shall survive the final payment in full
of the Note Indebtedness until the date that less than 10% of the Series A
Preferred Stock issued on the Closing Date remains outstanding) with each of the
following covenants.
7.1 Financial Statements. The Company shall furnish to the Collateral Agent
and each Purchaser:
(a) As soon as practicable, and in any event by the date of filing
thereof by the Company with the SEC pursuant to the Company's reporting
requirements under the '34 Act, the Company shall furnish to the Collateral
Agent Consolidated and Consolidating statements of
29
income, cash flows and changes in stockholders' equity of the Company for such
fiscal year and a Consolidated and Consolidating balance sheet of the Company as
of the close of such fiscal year, and notes to each, all in reasonable detail,
setting forth in comparative form the corresponding figures for the preceding
calendar year. Such financial statements shall be accompanied by an opinion of
independent certified public accountants of recognized national standing
selected by the Company and reasonably satisfactory to the Collateral Agent.
Such opinion shall be free of exceptions or qualifications not acceptable to the
Majority Purchasers and in any event shall be free of any exception or
qualification which is of "going concern" or like nature or which relates to a
limited scope of examination. Such opinion in any event shall contain a written
statement of such accountants substantially to the effect that (i) such
accountants examined such financial statements in accordance with GAAP and
accordingly made such tests of accounting records and such other auditing
procedures as such accountants considered necessary in the circumstances and
(ii) in the opinion of such accountants such financial statements present fairly
in all material respects the financial position of the Company as of the end of
such fiscal year and the results of its operations and its cash flows and
changes in stockholders' equity for such fiscal year, in conformity with GAAP;
and
(b) As soon as practicable, and in any event within by the date of
filing thereof by the Company with the SEC pursuant to the Company's reporting
requirements under the '34 Act, the Company shall furnish to the Collateral
Agent unaudited Consolidated and Consolidating statements of income and cash
flows of the Company for such fiscal quarter and for the period from the
beginning of such fiscal year to the end of such fiscal quarter and an unaudited
Consolidated and Consolidating balance sheet of the Company as of the close of
such fiscal quarter, all in reasonable detail, setting forth in comparative form
the corresponding figures for the same periods or as of the same date during the
preceding fiscal year. Such financial statements shall be certified by a
Responsible Officer of the Company as presenting fairly in all material respects
the financial position of the Company as of the end of such fiscal quarter and
the results of its operations and its cash flows for such fiscal quarter, in
conformity with GAAP (but without physical inventory), subject to normal and
recurring year-end audit adjustments and the lack of complete footnotes.
7.2 Additional Certificates. The Company shall deliver to the
Collateral Agent, at the same time it delivers the same to the Senior Lender,
any such additional certificates (including, without limitation borrowing base
and non-default certificates) at such time specified therein that it is provided
to such Senior Lender.
7.3 Certain Other Reports and Information. The Company shall deliver
to the Collateral Agent, within 30 days of issuance, all accountants' management
letters (including a management letter stamped "draft") pertaining to, all other
reports submitted by accountants in connection with any audit of, and all other
reports from outside accountants with respect to, the Company and its
Subsidiaries (and, in any event, any independent auditors' annual management
letters, if issued, will be delivered to the Collateral Agent concurrently with
the financial statements referred to in Section 7.1(a)).
7.4 Further Information; Further Assurances. The Company will, with
reasonable promptness, provide to the Collateral Agent such further assurances
and additional information, reports and statements respecting its business,
operations, properties and financial
30
condition and respecting its Affiliates and investments, as the Collateral Agent
may from time to time reasonably request.
7.5 Notice of Certain Events. Promptly upon becoming aware of any of
the following, the Company shall give the Collateral Agent notice thereof,
together with a written statement of a Responsible Officer of the Company
setting forth the details thereof and any action with respect thereto taken or
proposed to be taken by the Company:
(i) Any Default.
(ii) Any pending action, suit, proceeding or investigation by or
before any Governmental Authority against or affecting the Company (or any such
action, suit, proceeding or investigation threatened in writing).
(iii) Any material violation, breach or default by the Company or
any of its Subsidiaries of or under any agreement or instrument material to its
business, assets, properties, operations, condition, financial or otherwise (it
being expressly understood and agreed that the Company need not provide notice
to the Collateral Agent pursuant to this Section 7.5(iii) of the termination of
any such agreement or instrument in accordance with its terms).
(iv) Any Pension-Related Event. Such notice shall be accompanied
by: (A) a copy of any notice, request, return, petition or other document
received by the Company or any Controlled Group Member from any Person, or which
has been or is to be filed with or provided to any Person (including the
Internal Revenue Service, the PBGC or any Plan participant, beneficiary,
alternate payee or employer representative), in connection with such Pension
Related Event, and (B) in the case of any Pension-Related Event with respect to
a Plan, the most recent Annual Report (5500 Series), with attachments thereto,
and the most recent actuarial valuation report, for such Plan.
(v) (A) Any Environmental Claim made or threatened in writing
against the Company or any of its Environmental Affiliates, or (B) the Company's
becoming aware of any past or present acts, omissions, events or circumstances
(including any Release, disposition, removal, abandonment or escape of any
Hazardous Materials on, at, in, under, above, to, from or about any facility or
property now or previously owned, operated or leased by the Company, its
Subsidiaries or any of their respective Environmental Affiliates) which could
form the basis of any such Environmental Claim, which Environmental Claim, in
the case of either clause (A) or (B), if adversely resolved, would reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect.
(vi) (A) Any claim, action, investigation or audit brought or
threatened overtly or in writing by or against the Company or a Subsidiary in
connection with one or more Government Contracts or Government Bids, including,
but not limited to, (v) a claim that the Company or a Subsidiary supplied
defective, inaccurate, incomplete or out-of-date cost or pricing data, (w) a
claim that the Company or a Subsidiary violated the Truth in Negotiations Act,
as amended, the False Statements Act, as amended, or the False Claims Act, as
amended, (x) an action to suspend or debar the Company or a Subsidiary or one of
its officers or employees from eligibility for award of contracts with the
Government, (y) any dispute under the Contract
31
Disputes Act or between the Company or a Subsidiary, on the one hand, and a
prime contractor, subcontractor or vendor, on the other hand, or (z) any
termination or default notice, cure notice or show cause notice, or (B) the
Company's becoming aware of any past or present acts, omissions, events or
circumstances which could form the basis of any claim, action, investigation or
audit described by clause (A), which, in the case of either clause (A) or (B),
if adversely resolved, would reasonably be expected, either individually or in
the aggregate, to have a Material Adverse Effect.
7.6 Visitation; Verification. The Company and its Subsidiaries shall
permit such Persons as the Purchasers or the Collateral Agent may designate from
time to time to visit and inspect any of the properties of the Company and its
Subsidiaries to examine their respective books and records and take copies and
extracts therefrom and to discuss their affairs with their directors, officers,
employees and independent accountants at such times and as often as the
Purchasers or the Collateral Agent may reasonably request; provided that prior
to the occurrence and continuation of an Event of Default, (i) any such Person
shall provide at least two days' prior advance notice to the Company of its
intention to visit or inspect any of the properties of the Company and its
Subsidiaries; and (ii) all such visits or inspections shall be conducted during
the normal business hours of the Company and without undue interference with the
conduct of the Company's business. Following and during the continuation of an
Event of Default, the Company shall reimburse the Collateral Agent for
reasonable costs and expenses of for all inspections in any calendar year; for
all other times all such visits or inspections shall be at the sole cost and
expense of the Purchasers. If the Collateral Agent at any time has a reasonable
basis to believe that there may be a violation of any federal, state or local
laws, rules or regulations relating to or governing the use, storage, disposal,
research or testing of anthrax and/or other biological or microbial agents which
could reasonably be expected to have a Material Adverse Effect, then the Company
shall, upon Collateral Agent's written request, (i) cause the performance of
such environmental audits, and preparation of such environmental reports, at the
Company's expense, as Collateral Agent may from time to time reasonably request,
which shall be conducted by reputable environmental consulting firms reasonably
acceptable to Collateral Agent and shall be in form and substance reasonably
acceptable to Collateral Agent, and (ii) permit Collateral Agent or its
representatives to have access to all property for the purpose of conducting
such environmental audits and testing. The Company shall reimburse Collateral
Agent for the costs of such audits and tests.
Subject to the limitations required due to the nature of any
classified work, contracts or customer relationships, the Collateral Agent shall
have the right to examine and verify accounts, inventory and other properties
and liabilities of the Company and its Subsidiaries from time to time, and the
Company shall cooperate with Collateral Agent in such verification. Without
limitation of the foregoing, subject to limitations required due to the nature
of any classified work, contracts or customer relationships, the Company hereby
authorizes its officers, employees and independent accountants to discuss with
the Purchasers and the Collateral Agent the affairs of the Company and its
Subsidiaries.
7.7 Payment of Loan Obligations. The Credit Parties will duly and
punctually pay all sums to be paid to the Collateral Agent in accordance with
the terms and conditions of the Transaction Documents, and will comply with,
perform and observe all of the terms thereof.
32
7.8 Insurance.
(a) The Company shall, and shall cause each of its Subsidiaries to (i)
maintain with financially sound and reputable insurers insurance with respect to
its properties and business and against such liabilities, workers' compensation,
casualties and contingencies and of such types and in such amounts as are
customary in the case of corporations engaged in the same or similar businesses
or having similar properties similarly situated and naming the Collateral Agent
as an additional insured and a loss payee, (ii) furnish to the Collateral Agent
from time to time upon request copies of the policies under which such insurance
is issued, original certificates of insurance and such other information
relating to such insurance as the Collateral Agent may reasonably request, and
(iii) provide such other insurance and endorsements as are required by this
Agreement and the other Transaction Documents.
(b) The Company shall maintain in effect an errors and omissions
insurance policy for the Company and its Subsidiaries with (i) coverage
extending to all officers and directors of the Company, (ii) policy limits not
less than those maintained by the Company and Subsidiaries on the date hereof,
and (iii) deductibles not greater than those as are reasonable for companies
engaged in the same or similar businesses and similarly situated.
7.9 Payment of Taxes and Other Potential Charges and Priority Claims.
The Company shall, and shall cause each of its Subsidiaries to, pay or
discharge:
(i) on or prior to the date on which material penalties attach
thereto, all taxes, assessments and other governmental charges imposed upon it
or any of its properties;
(ii) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like Persons
which, if unpaid, might result in the creation of a material Lien upon any such
property; and
(iii) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien upon any such property
or which, if unpaid, might give rise to a claim entitled to priority over
general creditors of such Credit Party in a case under Title 11 (Bankruptcy) of
the United States Code, as amended;
provided that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced it need not pay or discharge any such tax,
assessment, charge or claim so long as (x) the validity thereof is contested in
good faith and by appropriate proceedings diligently conducted, and (y) such
reserves or other appropriate provisions as may be required by GAAP shall have
been made therefor.
7.10 Preservation of Corporate Status. The Company shall, and shall
cause each of its Material Subsidiaries to, maintain its status as a corporation
or other entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or formation, and to be duly qualified
to do business as a foreign entity and in good standing in all jurisdictions in
which the ownership of its properties or the nature of its business or both make
such qualification necessary.
33
7.11 Governmental Approvals and Filings. The Company shall, and shall
cause each of its Subsidiaries to obtain, keep and maintain in full force and
effect all Governmental Approvals necessary in connection with or to facilitate
the execution and delivery of this Agreement or any other Transaction Document,
consummation of the transactions herein or therein contemplated, performance of
or compliance with the terms and conditions hereof or thereof or to ensure the
legality, validity, binding effect, enforceability or admissibility in evidence
hereof or thereof; provided, that the Company and the Subsidiaries shall not be
required to obtain approvals in connection with the Assignment of Claims Act to
the extent obtaining such approvals would constitute a Default (as defined in
the Senior Credit Agreement) under the Senior Credit Agreement or a default
under the Senior Credit Facility.
7.12 Maintenance of Properties. The Company shall, and shall cause
each of its Material Subsidiaries to (a) maintain or cause to be maintained in
good repair, working order and condition the properties now or hereafter owned,
leased or otherwise possessed by it (and make or cause to be made all needed and
proper repairs, renewals, replacements and improvements thereto) which are
necessary so that the business carried on in connection therewith may be
properly conducted at all times and (b) maintain and hold in full force and
effect all franchises, licenses, permits, certificates, authorizations,
qualification, accreditations and other rights, consents and approvals (whether
issued, made or given by a Governmental Authority or otherwise), necessary to
own and operate its properties and to carry on its business as presently
conducted and as presently planned to be conducted, except for any failure to
comply with any of the foregoing which would not, either individually or in the
aggregate, have a Material Adverse Effect. The Company shall not cause or permit
a Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the property where such Release would violate in any respect, or form the
basis for any Environmental Claims under, any Environmental Laws, where such
Release could reasonably be expected to have a Material Adverse Effect.
7.13 Financial Accounting Practices. The Company shall, and shall
cause each of its Subsidiaries to, make and keep books, records and accounts
which, in reasonable detail, accurately and fairly reflect its transactions and
dispositions of its assets and maintain systems of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorization, (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with GAAP and (ii) to maintain accountability for
assets, (c) access to assets is permitted only in accordance with management's
general or specific authorization and (d) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
7.14 Additional Credit Parties. As soon as practicable and in any
event within 30 days after any Person becomes a direct or indirect Subsidiary of
the Company, the Company shall provide the Collateral Agent with written notice
thereof setting forth information in reasonable detail describing all of the
assets of such Person and shall (a) cause such Person to execute a Joinder
Agreement in substantially the same form as Exhibit S, (b) so long as no Senior
Indebtedness is outstanding, cause certificates representing all of the capital
stock held by such Person to be delivered to the Collateral Agent (together with
undated stock powers signed in blank) and pledged to the Collateral Agent
pursuant to an appropriate pledge agreement in substantially the form of the
Pledge Agreement and otherwise in form acceptable to the
34
Collateral Agent and (c) cause such Person to (i) if such Person has any
Subsidiaries, (A) so long as no Senior Indebtedness is outstanding, deliver
certificates representing all of the capital stock held by such Subsidiaries
(together with undated stock powers signed in blank) to the Collateral Agent and
(B) execute a pledge agreement in substantially the form of the Pledge Agreement
and otherwise in form acceptable to the Collateral Agent, and (ii) deliver such
other documentation as the Collateral Agent may reasonably request in connection
with the foregoing, including appropriate UCC-1 financing statements, certified
resolutions and other organizational and authorizing documents of such Person,
all in form, content and scope reasonably satisfactory to the Collateral Agent.
In addition, at the request of the Collateral Agent, the Company will use
reasonable efforts to obtain and deliver landlord's waivers.
7.15 Maintenance of Certain Accounts with Collateral Agent. The
Company shall maintain all its primary operating accounts, including all
depository accounts (time and demand), collection accounts and disbursement
accounts, with the Senior Lender or, in the absence of a Senior Lender, with a
bank selected by the Company and such bank shall enter into a control agreement
with the Collateral Agent with respect to all of such accounts.
7.16 Future Subsidiaries. The Company shall promptly (but in any case
within 10 days) notify the Purchasers of the creation or acquisition, whether by
purchase, merger or otherwise, of any new Subsidiary and shall cause any such
Subsidiary to execute and deliver to the Purchasers a Subsidiary Guarantee, a
Pledge Agreement, if applicable, Mortgages, if applicable, and to become party
to the Subsidiary Security Agreement, and to perform all of the obligations of a
Subsidiary thereunder.
8. Negative Covenants. The Company covenants and agrees that, until the
final payment in full of the Note Indebtedness, it will and will cause the
Subsidiaries to comply with the covenants set forth below.
8.1 Financial Covenants. The Company hereby covenants to the
Purchasers and the Collateral Agent as follows, which covenants shall be based
upon the Consolidated financial statements of the Company:
(a) Total Funded Debt to EBITDA Ratio. The Company will maintain at
all times during the following periods a Total Funded Debt to EBITDA ratio of
not greater than the following:
------------------------------------------------------------------------------
Date hereof until September 30, 2004 4.0 to 1.0
------------------------------------------------------------------------------
October 1, 2004 until payment in full of the Note Indebtedness or 3.5 to 1.0
conversion of all of the Notes into equity securities
------------------------------------------------------------------------------
35
(b) Fixed Charge Coverage Ratio. The Company will maintain at all
times during the following time periods a Fixed Charge Coverage Ratio of not
less than the following:
-------------------------------------------------------------------------------
Date hereof until December 31, 2004 1.05 to 1.0
-------------------------------------------------------------------------------
January 1, 2004 until September 30, 2004 1.10 to 1.0
-------------------------------------------------------------------------------
October 1, 2004 until payment in full of Note Indebtedness or 1.20 to 1.0
conversion of all of the Notes into equity securities
-------------------------------------------------------------------------------
The financial covenants referenced in this Section 8.1 shall be calculated and
tested on a quarterly basis as of the last day of each quarter, for the four
fiscal quarter periods then ended. Unless otherwise defined, all financial terms
used in this Section 8.1 shall have the meanings attributed to such terms in
accordance with GAAP (to the extent that such terms are defined by GAAP);
provided, however, that for the avoidance of doubt, regardless of how the Series
A Preferred Stock is characterized under GAAP, the Company's Series A Preferred
Stock shall not constitute Indebtedness as defined in this Agreement.
8.2 Change of Operations. The Company shall not, and shall not permit
any of its Subsidiaries to, change the general character of its business as
conducted on the date hereof or as presently proposed to be conducted, or engage
in any type of business not directly related to such business as presently and
normally conducted or as presently proposed to be conducted.
8.3 Liens. The Company shall not, and shall not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its
property, or agree, become or remain liable (contingently or otherwise) to do
any of the foregoing, except for the following ("Permitted Liens"):
(a) Liens at any time granted in favor of the Senior Lenders;
(b) Liens pursuant to the Security Documents in favor of the
Collateral Agent to secure the Note Indebtedness;
(c) Liens arising from taxes, assessments, charges or claims described
in Section 7.9 that are not yet due or that remain payable without penalty or to
the extent permitted to remain unpaid under the proviso to such Section 7.9;
(d) Deposits or pledges of cash or securities in the ordinary course
of business to secure (i) worker's compensation, unemployment insurance or other
social security obligations, (ii) performance of bids, tenders, trade contracts
(other than for payment of money) or leases, (iii) stay, surety or appeal bonds,
or (iv) other obligations of a like nature incurred in the ordinary course of
business;
(e) Title exceptions or encumbrances granted in the ordinary course of
business, affecting real property owned by the Company or any of its
Subsidiaries, provided that such exceptions do not in the aggregate materially
detract from the value of such property or
36
materially interfere with its use in the ordinary conduct of the Company's or
such Subsidiary's business;
(f) Liens with respect to judgments, attachments and the like which do
not constitute Events of Default hereunder;
(g) Liens arising from leases or subleases granted to others which do
not interfere in any material respects with the business of the Company or its
Subsidiaries;
(h) Liens securing Indebtedness permitted by Section 8.4(c) and (d),
provided, however, that such Liens shall only extend to the property financed by
the Indebtedness securing the same; and
(i) Liens existing on the date hereof and specified on Section 3.6(a)
of the Disclosure Schedule other than those with asterisks set forth opposite
their descriptions which the Company shall have terminated on or prior to the
Closing Date in accordance with Section 5.1(z).
"Permitted Lien" shall in no event include any Lien imposed by, or required to
be granted pursuant to, ERISA or any Environmental Law. Nothing in this Section
8.3 shall be construed to limit any other restriction on Liens imposed by the
Security Agreement or otherwise in the Transaction Documents.
8.4 Indebtedness and Guaranty Obligations. The Company shall not, and
shall not permit any of its Subsidiaries to, create, incur, assume or suffer to
exist any Indebtedness or Guaranty Obligations, or agree, become or remain
liable (contingently or otherwise) to do any of the foregoing, except:
(a) Senior Indebtedness;
(b) Indebtedness and Guaranty Obligations to or in favor of the
Collateral Agent pursuant to this Agreement and the other Transaction Documents;
(c) Indebtedness of the Company or any of its Subsidiaries existing on
the date hereof and listed in Section 8.4 of the Disclosure Schedule (and
extensions, renewals and refinancings thereof on terms no less favorable in any
material respect than those existing before such extension, renewal or
refinancing);
(d) Purchase money Indebtedness (including Capitalized Leases)
hereafter incurred by the Company or any of its Subsidiaries to finance the
purchase of fixed assets provided that (i) the total of all such Indebtedness
for all such Persons taken together shall not exceed an aggregate principal
amount of $500,000 during any fiscal year; (ii) such Indebtedness when incurred
shall not exceed the purchase price of the assets(s) financed; and (ii) no such
Indebtedness shall be refinanced for a principal amount in excess of the
principal balance outstanding thereon at the time of such refinancing;
37
(e) Indebtedness that is expressly subordinate to the monetary
obligations arising under this Agreement pursuant to a written subordination
agreement in form and substance reasonably acceptable to the Purchasers;
(f) Contingent liabilities arising out of endorsements of checks and
other negotiable instruments for deposit or collection in the ordinary course of
business;
(g) To the extent not mentioned above, accruals and accounts payable
in the ordinary course of business not for borrowed money; and
(h) Intercompany Debt.
8.5 Loans, Advances and Investments. The Company shall not, and shall
not permit any of its Subsidiaries to, make or suffer to exist or remain
outstanding any loan or advance to, or purchase, acquire or own (beneficially or
of record) any stock, bonds, notes or securities of, or any partnership interest
(whether general or limited) in, or any other interest in, or make any capital
contribution to or other investment in, any other Person, or agree, become or
remain liable (contingently or otherwise) to do any of the foregoing, except:
(a) Loans and investments existing on the date hereof and listed in
Section 8.5 of the Disclosure Schedule (and extensions, renewals and
refinancings thereof on terms no less favorable in any material respect than
those existing immediately before such extension, renewal or refinancing);
(b) Receivables owing to the Company or any of its Subsidiaries
arising from sales of inventory under usual and customary terms in the ordinary
course of business;
(c) Advances to officers and employees of the Company to reimburse
expenses incurred by such officers and employees in the ordinary course of
business;
(d) Intercompany Debt; and
(e) Cash Equivalent Investments.
8.6 Dividends and Related Distributions. Company shall not, and shall
not permit any of its Subsidiaries to, declare or make any Stock Payment, or
agree, become or remain liable (contingently or otherwise) to do any of the
foregoing, except for dividends and required redemption payments payable to
holders of Series A Preferred Stock or to a Credit Party.
8.7 Sale-Leasebacks. The Company shall not, and shall not permit any
of its Subsidiaries to, enter into or suffer to remain in effect any transaction
to which the Company or any of its Subsidiaries is a party involving the sale,
transfer or other disposition by the Company or any of its Subsidiaries of any
property, with a view directly or indirectly to the leasing back of any part of
the same property or any other property used for the same or a similar purpose
or purposes, or agree, become or remain liable (contingently or otherwise) to do
any of the foregoing.
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8.8 Mergers, Acquisitions, etc. Other than Permitted Acquisitions, the
Company shall not, and shall not permit any of its Subsidiaries to (a) merge
with or into or consolidate with any other Person, provided, however, (i) the
Company may merge or consolidate with any of its Subsidiaries provided that the
Company is the surviving corporation, and (ii) any Credit Party (other than the
Company) may merge or consolidate with any other Credit Party (other than the
Company), (b) liquidate, wind-up, dissolve or divide (provided that the Company
may permit the Subsidiaries to liquidate, wind-up, and dissolve), (c) acquire
any capital stock (or other equity interest) of any Person or all or any
substantial portion of the properties of any going concern or going line of
business, or (d) agree, become or remain liable (contingently or otherwise) to
do any of the foregoing.
8.9 Dispositions of Properties. The Company shall not, and shall not
permit any of its Subsidiaries to, sell, convey, assign, lease, transfer,
abandon or otherwise dispose of, voluntarily or involuntarily, any material part
of its properties, or agree, become or remain liable (contingently or otherwise)
to do any of the foregoing, except (a) the Company and any of its Subsidiaries
may (i) sell inventory in the ordinary course of business, (ii) sell or dispose
of equipment in the ordinary course of business that is obsolete or no longer
useable by or no longer useful to the Company or such Subsidiary in its business
or (iii) sell or exchange any equipment so long as the purpose of such sale or
exchange is to acquire replacement items of equipment which are the functional
equivalent of the items of equipment so sold or exchanged, and (b) the Company
may sell all or any portion of the ABS Interest pursuant to Section 12.
By way of illustration, and without limitation, it is understood that
the following are dispositions of property subject to this Section 8.9: any
disposition of accounts, chattel paper or general intangibles, with or without
recourse. For purposes of this provision, any transaction involving the
disposition of properties having a value in excess of One Hundred Fifty Thousand
and 00/100 Dollars ($150,000.00) shall be deemed to be material. Nothing in this
Section 8.9 shall be construed to limit any other restriction on dispositions of
property imposed by the Security Agreement or otherwise in the Transaction
Documents.
8.10 Dealings with Affiliates. Except for the sale of all or any
portion of the ABS Interest pursuant to Section 12, the Company shall not, and
shall not permit any of its Subsidiaries to, enter into or carry out any
transaction with (including purchase or lease property or services from, sell or
lease property or services to, loan or advance to, or enter into, suffer to
remain in existence or amend any contract, agreement or arrangement with) any
Affiliate of such Company or Subsidiary, directly or indirectly, or agree,
become or remain liable (contingently or otherwise) to do any of the foregoing,
unless either (a) such transaction is entered into in good faith and on terms no
less favorable to the Company or any such Subsidiary than those that could have
been obtained in a comparable transaction on an arm's-length basis from an
unrelated Person or (b) the board of directors of the Company or a Subsidiary
(including a majority of the directors having no direct or indirect interest in
such transaction) approves the same.
8.11 Limitation on Other Restrictions on Liens. The Company shall not,
and shall not permit any of its Subsidiaries to, enter into, become or remain
subject to any agreement or instrument, except for the Transaction Documents and
the Loan Documents (as such term is defined in the Senior Credit Agreement),
that would prohibit the grant of any Lien upon any of its properties.
39
8.12 Limitation on Other Restrictions on Amendment of the Transaction
Documents. The Company shall not, and shall not permit any of its Subsidiaries
to, enter into, become or remain subject to any agreement or instrument, except
for the Transaction Documents, that would prohibit or require the consent of any
Person to any amendment, modification or supplement to any of the Transaction
Documents.
8.13 Avoidance of Other Conflicts. The Company shall not, and shall
not permit any of its Subsidiaries to, violate or be in conflict with, or be or
remain subject to any liability (contingent or otherwise) on account of any
violation or conflict with
(i) any Law,
(ii) its articles of incorporation or by-laws (or other
constituent documents), or
(iii) any agreement or instrument to which it is a party or by
which it is a party or by which it or any of its respective properties may be
subject or bound,
which violation or conflict, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
9. Indemnification.
9.1 General Indemnification. The Company shall indemnify, defend and
hold each Purchaser, its affiliates and their respective officers, directors,
partners (general and limited), employees, agents, attorneys successors and
assigns (each a "Purchaser Entity") harmless from and against all Losses
incurred or suffered by a Purchaser Entity as a result of (a) the breach of any
of the representations, warranties, covenants or agreements made by the Company
in this Agreement or any of the other Transaction Documents or (b) the
transactions contemplated by the ▇▇▇▇▇ Stock Repurchase Agreement, except to the
extent that such Losses are the result of the gross negligence, willful
misconduct or fraud of such Purchaser Entity. Each Purchaser, severally and not
jointly, shall indemnify, defend and hold the Company, its affiliates, their
respective officers, directors, employees, agents, attorneys, successors and
assigns (each a "Company Entity") harmless against all Losses as a result of the
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser in this Agreement or any of the other Transaction Documents,
except to the extent that such Losses are a result of the gross negligence,
willful misconduct or fraud of such Company Entity.
9.2 Indemnification Principles. For purposes of this Section 9,
"Losses" shall mean each and all of the following items: claims, losses
(including, without limitation, losses of earnings), liabilities, obligations,
payments, damages (actual, punitive or consequential to the extent provided in
this Section 9.2), charges, judgments, fines, penalties, amounts paid in
settlement, costs and expenses (including, without limitation, interest which
may be imposed in connection therewith, costs and expenses of investigation,
actions, suits, proceedings, demands, assessments and reasonable fees, expenses
and disbursements of counsel, consultants and other experts). Any payment (or
deemed payment) by the Company to a Purchaser pursuant to this Section 9 shall
be treated for federal income tax purposes as an adjustment to the price paid by
such Purchaser for its respective Note pursuant to this Agreement. Each
Purchaser and the
40
Company hereby agrees that Losses shall not include punitive or consequential
damages except to the extent that such Losses are the result of the gross
negligence, willful misconduct or fraud of the party from whom the
indemnification is being sought (the "Indemnifying Party").
9.3 Claim Notice; Right to Defend. A party seeking indemnification
(the "Indemnified Party") under this Section 9 shall promptly upon becoming
aware of the facts indicating that a claim for indemnification may be warranted,
give to the Indemnifying Party a claim notice relating to such Loss (a "Claim
Notice"). Each Claim Notice shall specify the nature of the claim, the
applicable provision(s) of this Agreement or other instrument under which the
claim for indemnity arises, and, if possible, the amount or the estimated amount
thereof. No failure or delay in giving a Claim Notice (so long as the same is
given prior to expiration of the representation or warranty upon which the claim
is based) and no failure to include any specific information relating to the
claim (such as the amount or estimated amount thereof) or any reference to any
provision of this Agreement or other instrument under which the claim arises
shall affect the obligation of the Indemnifying Party unless such failure
materially and adversely prejudices the Indemnifying Party. If such Loss relates
to the commencement of any action or proceeding by a third person, the
Indemnified Party shall give a Claim Notice to the Indemnifying Party regarding
such action or proceeding and the Indemnifying Party shall be entitled to
participate therein to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. After the delivery of notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such action or proceeding, the Indemnifying Party shall not be liable
(except to the extent the proviso to this sentence is applicable, in which event
it will be so liable) to the Indemnified Party under this Section 9 for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, provided that each Indemnified Party shall have the right to
employ separate counsel to represent it and assume its defense (in which case,
the Indemnifying Party shall not represent it) if (i) upon the advice of
counsel, the representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, (ii)
in the event the Indemnifying Party has not assumed the defense thereof within
10 days of receipt of notice of such claim or commencement of action, and in
which case the fees and expenses of one such separate counsel shall be paid by
the Indemnifying Party or (iii) if such Indemnified Party who is a defendant in
any action or proceeding which is also brought against the Indemnifying Party
reasonably shall have concluded that there may be one or more legal defenses
available to such Indemnified Party which are not available to the Indemnifying
Party. If any Indemnified Party employs such separate counsel it will not enter
into any settlement agreement which is not approved by the Indemnifying Party,
such approval not to be unreasonably withheld. If the Indemnifying Party so
assumes the defense thereof, it may not agree to any settlement of any such
claim or action as the result of which any remedy or relief, other than monetary
damages for which the Indemnifying Party shall be responsible hereunder, shall
be applied to or against the Indemnified Party, without the prior written
consent of the Indemnified Party. In any action hereunder as to which the
Indemnifying Party has assumed the defense thereof with counsel reasonably
satisfactory to the Indemnified Party, the Indemnified Party shall continue to
be entitled to participate in the defense thereof, with counsel of its own
choice, but, except as set forth above, the Indemnifying Party shall not be
obligated hereunder to reimburse the Indemnified Party for the costs thereof.
41
9.4 Limitations on Indemnification. Other than with respect to any
indemnification claim made with respect to Losses arising from a claim, action
or proceeding by a third Person pursuant to this Section 9, for which
indemnification obligations hereunder shall be unlimited, neither Company nor
any Purchaser shall have any indemnification payment obligations with respect to
Section 9.1 for Losses in excess of $25,000,000 in the aggregate.
9.5 Subrogation. Upon making an indemnity payment pursuant to this
Agreement, the Indemnifying Party will, to the extent of such payment, be
subrogated to all rights of the Indemnified Party against any third Person in
respect of the Losses to which the payment related. Without limiting the
generality of any other provision hereof, each such Indemnified Party and
Indemnifying Party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation rights.
9.6 No Double Recovery; Use of Insurance. Notwithstanding anything
herein to the contrary, neither Company nor any Purchaser shall be entitled to
indemnification or reimbursement under any provision of this Agreement for any
amount to the extent such party or any Affiliate has been indemnified or
reimbursed for such amount under any other provision of this Agreement or any
other Transaction Document. Furthermore, in the event any Losses related to a
claim by an Indemnified Party are covered by insurance, the Indemnified Party
agrees to use commercially reasonable efforts to seek recovery under such
insurance and the Indemnified Party shall refund to the Indemnifying Party
amounts of insurance actually received up to the amount of indemnification
payments actually received with respect to such Losses to the extent the
Indemnified Party recovers from the insurance.
9.7 Mitigation. The Company and each Purchaser each agrees to use
reasonable efforts to mitigate any Loss which forms the basis of a claim under
this Section 9.
10. Certain Definitions. For the purposes of this Agreement the following
terms will have the following meanings:
"ABS Interest" shall have the meaning ascribed to it in Section 12.1.
"Acceptance Date" shall have the meaning ascribed to it in Section
12.2.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and executive officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation for the purposes of this definition if such Person possesses,
directly or indirectly, the power (i) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such corporation
or (ii) to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall have the meaning ascribed to it in the preliminary
paragraph.
"Amended Charter" shall have the meaning ascribed to it in Section
3.2.
"Approval" shall have the meaning ascribed to it in Section 15.8(a).
42
"Associate" shall have the meaning ascribed to it in Section 3.10(a).
"Break Up Fee" shall have the meaning ascribed to it in Section 15.17.
"Business Day" shall mean any day other than a Saturday, Sunday,
public holiday under the laws of the State of New York or any other day on which
banking institutions are authorized to close in New York City.
"Bylaws" shall have the meaning ascribed to it in Section 3.2.
"Capital Expenditures" shall mean, for any period and with respect to
any Person, all expenditures during such period by such Person which would be
classified as capital expenditures in accordance with GAAP or are made in
property which are the subject of a Synthetic Lease to which such Person becomes
a lessee party during such period.
"Capital Lease" of any Person shall mean any lease which is, or is
required under GAAP to be, capitalized on the balance sheet of the lessee at
such time.
"Capital Lease Obligations" shall mean the aggregate amount which is,
or is required under GAAP to be, reported as a liability on the balance sheet of
such Person at such time as lessee under a Capital Lease.
"Cash Equivalent Investments" shall mean any of the following: (a)
obligations fully backed by the full faith and credit of the United States of
America maturing not in excess of one year from the date of acquisition, (b)
commercial paper maturing not in excess of one hundred and eighty (180) days
from the date of acquisition and rated "P-1" by ▇▇▇▇▇'▇ Investors Service or
"A-1" by Standard & Poor's Corporation on the date of acquisition, and (c) the
following obligations of any domestic commercial bank having capital and surplus
in excess of Five Hundred Million and 00/100 Dollars ($500,000,000.00), which
has, or the holding company of which has, a commercial paper rating meeting the
requirements specified in clause (b) above: (i) time deposits, certificates of
deposit and acceptances maturing not in excess of one (1) year from the date of
acquisition, or (ii) repurchase obligations with a term of not more than 30 days
for underlying securities of the type referred to in clause (a) above. In no
event shall any investment as to which the Company is an issuer or a direct or
indirect obligor be deemed a Cash Equivalent Investment.
"Claim Notice" shall have the meaning ascribed to it in Section 9.3.
"Closing" shall have the meaning ascribed to it in Section 1.3.
"Closing Date" shall have the meaning ascribed to it in Section 1.3.
"Code" shall have the meaning ascribed to it in Section 3.16.
"Collateral" shall mean all property or rights in which a security
interest, mortgage, lien or other encumbrance for the benefit of the Purchasers
is or has been granted or arises or has arisen, under or in connection with this
Agreement, the other Transaction Documents, or otherwise.
43
"Collateral Agent" shall have the meaning ascribed to it in Section
2.5.
"Collateral Documents" shall mean the Security Agreements, the
Subsidiary Guarantees, the Mortgages, the Pledge Agreements and all of the other
acknowledgments, certificates, stock powers, financing statements, instruments
and other security documents executed by Company or any Subsidiary in favor of
the Collateral Agent for the benefit of the Purchasers and delivered to the
Collateral Agent, as security for the Note Indebtedness, in each case as of the
Closing Date or, from time to time, subsequent thereto, in connection with such
Security Agreements, the Guarantees, the Mortgages, the Pledge Agreements, this
Agreement and the other Transaction Documents, in each case, as such collateral
documents may be amended or otherwise modified from time to time.
"Company" shall have the meaning ascribed to it in the preliminary
paragraph.
"Company Business Plan" shall have the meaning ascribed to it in
Section 3.21.
"Company Employee Plans" shall have the meaning ascribed to it in
Section 3.15.
"Company Entity" shall have the meaning ascribed to it in Section 9.1.
"Company Software" shall have the meaning ascribed to it in Section
3.9(b).
"Company Product" shall have the meaning ascribed to it in Section
3.31.
"Common Stock" shall have the meaning ascribed to it in the recitals.
"Consolidated" or "Consolidating" shall mean, when used with reference
to any financial term in this Agreement, the aggregate for two or more Persons
of the amounts signified by such term for all such Persons determined on a
consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to consolidated financial statements or data of Company includes
consolidation with its Subsidiaries in accordance with GAAP.
"Controlled Group Member" shall mean each trade or business (whether
or not incorporated) which together with the Company is treated as a single
employer under Section 4001(a)(14) or 4001(b)(1) of ERISA or Section 414(b),
(c), (m) or (o) of the Code.
"Conversion Shares" shall have the meaning ascribed to it in Section
3.3.
"Credit Parties" shall mean the Company and each of the Subsidiary
Guarantors.
"DCS Warrants" shall have the meaning ascribed to it in the recitals.
"Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP, including without limitation, any items so classified on a
balance sheet and any reimbursement obligations in respect of letters of credit,
obligations in respect of Purchasers acceptances, provided, however that for
purposes of calculating the
44
aggregate Debt of such Person and its Subsidiaries (if any), the direct and
indirect and absolute and contingent obligations of such Person (whether direct
or contingent) shall be determined without duplication.
"Default" shall mean an event which, with the passage of time or
giving of notice, will constitute an Event of Default.
"Disclosure Schedule" shall have the meaning ascribed to it in Section
2.4.
"Dollars" and the sign "$" shall mean lawful money of the United
States of America.
"EBITDA" for any period shall mean the net earnings (or loss) after
taxes of the Company for such period, (a) plus the sum of (i) the Interest
Expense of the Company for such period to the extent deducted in calculating net
earnings for such period, (ii) all charges against income for foreign, federal,
state and local income taxes of the Company for such period, to the extent
deducted in calculating net earnings for such period, (iii) the aggregate
depreciation expense of the Company for such period, (iv) the aggregate
amortization expense of the Company for such period, (v) losses from
discontinued operations and extraordinary items and (vi) all other non-cash
charges deducted in determining such net earnings, (b) minus the sum of (i)
income from discontinued operations and extraordinary items and (ii) all
non-cash items (other than accrual basis revenues) included in determining such
net earnings, all as determined on a Consolidated basis in accordance with GAAP.
"Environmental Affiliate" shall mean, with respect to any Person whose
liability (contingent or otherwise) for any Environmental Claim such Person has
retained, assumed or otherwise is liable for (by Law, agreement or otherwise).
"Environmental Claim" shall mean, with respect to any Person, any
action, suit, proceeding, notice, claim, complaint, demand, request for
information or other communication (written or oral) against, of or to such
Person by or from any other Person (including any Governmental Authority,
citizens' group or present or former employee of such Person) alleging,
asserting or claiming any actual or potential (a) violation of or liability
under any Environmental Laws or (b) liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, personal
injuries, fines or penalties arising out of, based on or resulting from the
presence, or release into the environment, of any Hazardous Materials at any
location, whether or not owned by such Person.
"Environmental Laws" shall have the meaning ascribed to it in Section
3.19.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code and the regulations in effect
from time to time thereunder.
"ESOP" shall have the meaning ascribed to it in Section 3.33.
"Event of Default" shall mean each of the Events of Default specified
in Section 6.1 hereof.
45
"Financial Statements" shall have the meaning ascribed to it in
Section 3.22.
"Fixed Charge Coverage Ratio" for any period shall mean the ratio of
(a) EBITDA minus Capital Expenditures and cash taxes for such period to (b)
Fixed Charges for such period.
"Fixed Charges" for any period shall mean the sum of (a) Interest
Expense for such period, plus (b) preferred stock cash dividends actually paid
or required to be paid, plus (c) the aggregate amount of all non-compete
payments made by the Company for such period, plus (d) without duplication,
scheduled payments of principal on Indebtedness and Capital Lease Obligations of
the Company for such period, all as determined on a Consolidated basis in
accordance with GAAP. For the avoidance of doubt, the Company's payment of
$280,000 to ▇▇▇ ▇. ▇▇▇▇▇ related to the termination of ▇▇. ▇▇▇▇▇'▇ employment
agreement shall not constitute a Fixed Charge.
"GAAP" shall have the meaning ascribed to it in Section 3.22.
"Government" shall mean the government of the United States of
America, its agencies and instrumentalities.
"Governmental Approval" shall mean any approval, order, consent,
waiver, authorization, certificate, license, permit or validation of, or
exemption or other action by, or filing, recording or registration with, or
notice to, any Governmental Authority.
"Governmental Authority" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Government Bid" shall mean any offer to sell made by the Company or a
Subsidiary prior to the Closing Date which, if accepted, would result in a
Government Contract and for which an award has not been issued 30 days or more
prior to the date of this Agreement.
"Government Contract" shall mean any prime contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering agreement,
pricing agreement, letter contract, grant, cooperative agreement or other
similar arrangement of any kind, between the Company or a Subsidiary on one
hand, and (i) any Governmental Authority, (ii) any prime contractor of a
Governmental Authority in its capacity as a prime contractor, or (iii) any
subcontractor at any tier with respect to a contract with a Governmental
Authority if such subcontractor is acting in its capacity as a subcontractor, on
the other hand. A task, purchase or delivery order under a Government Contract
shall not constitute a separate Government Contract, for purposes of this
definition, but shall be part of the Government Contract to which it relates.
"Guaranty Obligations" shall mean with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collections) guaranteeing or intended to guarantee any Indebtedness of any other
Person in any manner, whether direct or indirect, and including without
limitation any obligation, whether or not contingent, (i) to purchase any such
46
Indebtedness or any property constituting security therefor, (ii) to advance or
provide funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance sheet
condition of such other Person (including keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (iii) to lease or
purchase property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The amount of
any Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be in amount equal to the outstanding principal amount of
the Indebtedness in respect of which Guaranty Obligation is made.
"Hazardous Material" shall mean any element, compound, substance or
other material (including, without limitation, any pollutant, contaminant,
hazardous waste, hazardous substance, chemical substance, or product) that is
listed, classified or regulated pursuant to any Environmental Law, including,
without limitation, any petroleum product, by-product or additive, asbestos,
presumed asbestos-containing material, asbestos-containing material, medical
waste, chlorofluorocarbon, hydrochlorofluorocarbon, lead-containing paint,
polychlorinated biphenyls, radioactive material or radon.
"Hereof", "hereto", "hereunder" and similar terms shall refer to this
Agreement and not to any particular paragraph or provision of this Agreement.
"Indebtedness" of a Person shall mean:
(a) all obligations on account of money borrowed by, or credit
extended to or on behalf of, or for or on account of deposits with or advances
to, such Person (other than trade payables and accrued liabilities in the
ordinary course);
(b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments;
(c) all obligations of such Person for the deferred purchase price of
property or services;
(d) all obligations secured by a Lien on property owned by such
Person, whether or not assumed (except inchoate Liens securing obligations not
yet due and payable); and all Capital Lease Obligations or obligations under
Synthetic Leases (without regard to any limitation on the rights and remedies of
the holder of such Lien or the lessor under such Capital Lease or Synthetic
Lease to repossession or sale of such property);
(e) the face amount of all letters of credit issued for the account of
such Person and, without duplication, the unreimbursed amount of all drafts
drawn thereunder, and all other payment or monetary indemnification obligations
of such Person associated with such letters of credit or draws thereon;
(f) All obligations of such Person in respect of acceptances or
similar obligations issued for the account of such Person; and
47
(g) all obligations of such Person under any interest rate or currency
protection agreement, interest rate or currency future, interest rate or
currency option, interest rate or currency swap or cap or other interest rate or
currency hedge agreement.
"Indemnified Party" shall have the meaning ascribed to it in Section
9.3.
"Indemnifying Party" shall have the meaning ascribed to it in Section
9.2.
"Intercompany Debt" shall mean any indebtedness owing by a Credit
Party to another Credit Party.
"Intercreditor Agreement" shall have the meaning ascribed to it in
Section 2.3.
"Interest Expense" for any period shall mean the total cash interest
expense of the Company (including amortization of deferred financing fees,
premiums or interest rate protection agreements and original issue discounts)
for such period determined in accordance with GAAP.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and the regulations promulgated thereunder.
"Knowledge" shall mean with respect to the Company, the actual
knowledge of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Law" shall mean the Company's certificate of incorporation, as
amended, the By-laws and any foreign, federal, state or local law, statute,
rule, regulation, ordinance, code, directive, writ, injunction, decree, judgment
or order applicable to the Company or the Subsidiaries.
"Losses" shall have the meaning ascribed to it in Section 9.2.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including any conditional sale or title retention arrangement, and
any assignment, deposit arrangement or lease intended as, or having the effect
of, security.
"LOI" shall have the meaning ascribed to it in Section 12.1.
"Majority Purchasers" shall mean the Purchasers owning New Securities,
the original purchase price of which constitutes a majority of the amount
invested by all of the Purchasers in all of the then outstanding New Securities.
"Material Adverse Effect" shall mean an effect which is materially
adverse to the business, assets, properties, operations, results of operations
or condition (financial or otherwise) of the Company individually or of the
Company and the Subsidiaries taken as a whole (excluding general economic
conditions or acts of war or terrorism).
"Material Contracts" shall have the meaning ascribed to it in Section
3.10.
48
"Material Credit Party" shall have the meaning ascribed to it in
Section 6.1(k).
"Material Subsidiary" shall mean, at any time, each Subsidiary of the
Company other than those that are not party to any Material Contract or are not
conducting any business operations at such time.
"Merger Agreement" shall mean that certain Agreement and Plan of
Merger dated October 31, 2001 among Analex Corporation, the sellers identified
therein, Analex Corporation Employee Stock Ownership Plan and Trust and the
Company.
"Mortgages" shall mean all mortgages executed and delivered after the
date hereof by the Company, any Subsidiary or any Person who becomes a
Subsidiary after the date hereof, executed and delivered to the Collateral Agent
on behalf of the Purchasers as of the date hereof by the Company and other
Material Subsidiaries granting the Collateral Agent and the Purchasers first
priority Liens, subject to the Intercreditor Agreement and Liens existing on the
date of such Mortgage, on all of the real property owned by the Company and each
of the Material Subsidiaries subject only to the Liens held by the Banks,
Permitted Liens and such other encumbrances as are acceptable to the Collateral
Agent and the Purchasers.
"Multiemployer Plan" shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Company or any Controlled Group Member has or had an obligation to
contribute.
"New Securities" shall have the meaning ascribed to it in Section 4.2.
"Notes" shall have the meaning ascribed to it in the recitals.
"Note Indebtedness" shall mean without duplication principal,
interest, fees, expenses and other charges related to the Collateral Documents
and the Notes whether arising under the Collateral Documents or the Notes or
under Section 15.7 hereof (other than the last sentence of Section 15.7), and
indemnification obligations with respect to any of the foregoing, whether direct
or indirect, absolute or contingent, of the Company to any of the Purchasers or
to the Collateral Agent, in any manner and at any time, whether evidenced by the
Notes or arising under this Agreement, due or hereafter to become due, now owing
or that may be hereafter be incurred by Company to, any of the Purchasers or by
the Collateral Agent, and any judgments that may hereafter be rendered on such
indebtedness or any part thereof, with interest according to the rates and terms
specified, or as provided by law, and any and all consolidation, amendments,
renewals, replacements, substitutions or extensions of any of the foregoing.
"Note Purchase Price" shall have the meaning ascribed to it in Section
1.1(a).
"Options" shall have the meaning ascribed to it in Section 3.4.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under Title IV of ERISA or any other governmental agency, department or
instrumentality succeeding to the functions of said corporation.
"PCS Warrants" shall have the meaning ascribed to it in the recitals.
49
"Pension-Related Event" shall mean any of the following events or
conditions:
(a) Any action is taken by any Person (i) to terminate, or which would
result in the termination of, a Plan, either pursuant to its terms or by
operation of Law (including any amendment of a Plan which would result in a
termination under Section 4041(e) of ERISA), or (ii) to have a trustee appointed
for a Plan pursuant to Section 4042 of ERISA;
(b) The PBGC notifies any Person of its determination that an event
described in Section 4042 of ERISA has occurred with respect to a Plan, that a
Plan should be terminated, or that a trustee should be appointed for a Plan;
(c) Any Reportable Event occurs with respect to a Plan;
(d) Any action occurs or is taken which would reasonably be expected
to result in the Company or any Controlled Group Member becoming subject to
liability for a complete or partial withdrawal by any Person from a
Multiemployer Plan (including seller liability incurred under Section 4204(a)(2)
of ERISA), or the Company or any Controlled Group Member receives from any
Person a notice or demand for payment on account of any such alleged or asserted
liability;
(e) (i) There occurs any failure to meet the minimum funding standard
under Section 302 of ERISA or Section 412 of the Code with respect to a Plan, or
any tax return is filed showing any tax payable under Section 4971(a) of the
Code with respect to any such failure, or the Company or any Controlled Group
Member receives a notice of deficiency from the Internal Revenue Service with
respect to any alleged or asserted such failure, or (ii) any request is made by
any Person for a variance from the minimum funding standard, or an extension of
the period for amortizing unfunded liabilities, with respect to a Plan, or (iii)
the Company or any Controlled Group Member fails to pay the PBGC premium with
respect to a Plan when due and it remains unpaid for more than 30 days
thereafter; or
(f) There occurs any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code involving a Plan.
"Permits" shall have the meaning ascribed to it in Section 3.8.
"Permitted Acquisition" shall mean one or a series of related
acquisitions (whether by asset purchase, stock purchase, merger, consolidation
or otherwise) involving the payment by the Company and one or more Subsidiaries
of consideration of less than $10 million.
"Permitted Liens" shall have the meaning ascribed to it in Section
8.3.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated organization, joint
venture, joint stock company, or a government or any agency or political
subdivision thereof or other entity of any kind.
"Plan" shall mean (a) any employee pension benefit plan within the
meaning of Section 3(2) of ERISA (other than a Multiemployer Plan) covered by
Title IV of ERISA by
50
reason of Section 4021 of ERISA, of which the Company or any Controlled Group
Member is or has been within the preceding five years a "contributing sponsor"
within the meaning of Section 4001(a)(13) of ERISA, or which is or has been
within the preceding five years maintained for employees of the Company or any
Controlled Group Member and (b) any employee pension benefit plan within the
meaning of Section 3(2) of ERISA (other than a Multiemployer Plan) which is
subject to Title I of ERISA by reason of Section 4 of ERISA and is subject to
the minimum funding requirements of Section 302 of ERISA or Section 412 of the
Code, of which the Company or any Controlled Group member is or has been within
the preceding five years an employer liable for contributions within the meaning
of Section 302(c)(11) of ERISA or Section 412(c)(11) of the Code, or which is or
has been within the preceding five years maintained for employees of the Company
or any Controlled Group Member.
"Pledge Agreements" shall mean the pledge agreement dated as of the
Closing Date, and all pledge agreements executed and delivered after the Closing
Date, pursuant to which Company and any Subsidiary grants to the Collateral
Agent and the Purchasers a first priority security interest in all of the issued
and outstanding stock of its Subsidiaries, as may be amended from time to time.
"Pro Rata Share" shall have the meaning ascribed to it in Section
15.17.
"Proprietary Rights" shall have the meaning ascribed to it in Section
3.9.
"Purchaser(s)" shall have the meaning ascribed to it in the
preliminary paragraph.
"Purchaser Entity" shall have the meaning ascribed to it in Section
9.1.
"Registration Rights Agreement" shall have the meaning ascribed to it
in Section 5.1(i).
"Release" shall mean any past or present release, spill, leak,
leaching, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping.
"Reportable Event" shall mean (a) a reportable event described in
Section 4043 of ERISA and regulations thereunder, (b) a withdrawal by a
substantial employer from a Plan to which more than one employer contributes, as
referred to in Section 4063(b) of ERISA, (c) a cessation of operations at a
facility causing more than twenty percent (20%) of Plan participants to be
separated from employment, as referred to in Section 4063(e) of ERISA, or (d) a
failure to make a required installment or other payment with respect to a Plan
when due in accordance with Section 412 of the Code or Section 302 of ERISA
which causes the total unpaid balance of missed installments and payments
(including unpaid interest) to exceed One Hundred Fifty Thousand and 00/100
Dollars ($150,000.00).
"Responsible Officer" shall mean the Chief Executive Officer, Chief
Operating Officer, Vice President of Finance or Chief Financial Officer of the
Company.
"Restrictive Covenant" shall have the meaning ascribed to it in
Section 15.20.
"SEC" shall have the meaning ascribed to it in Section 3.21.
51
"Securities" shall have the meaning ascribed to it in Section 1.3.
"Securities Act" shall have the meaning ascribed to it in Section
3.10.
"Security Agreements" shall mean security agreements dated as of the
Closing Date, and all security agreements executed and delivered after the
Closing Date by any Person which becomes a Subsidiary after the Closing Date,
pursuant to which Company and each Subsidiary grants to the Collateral Agent and
Purchasers a first priority security interest, to the extent therein provided,
subject to Liens existing on the date of such security agreements, in all of the
Collateral described herein.
"Senior Credit Agreement" shall have the meaning ascribed to it in
Section 2.3.
"Senior Credit Facility" shall mean, at any time, the credit facility
evidencing Senior Indebtedness.
"Senior Debt" shall mean as of any date of determination all Total
Debt as of such date less the Note Indebtedness and all Subordinated Debt.
"Senior Indebtedness" means Indebtedness and obligations under the
Senior Credit Facility in effect on the date hereof, and Indebtedness under any
future Senior Credit Facility so long as such future Senior Credit Facility
consists of (a) borrowings determined on the basis of not more than 90% of the
Company's accounts receivable, even though such facility may be secured by all
of the Company's assets, (b) an additional amount not to exceed $1 million and
(c) only one Senior Credit Facility is in effect at any time.
"Senior Lender" means each holder of Senior Indebtedness.
"Series A Preferred Stock" shall have the meaning ascribed to it in
the recitals.
"Settlement Agreement" means that Settlement Agreement made by Analex
Corporation, Xanalex Corporation, Analex Systems, Inc., and the United States of
America effective as of July 12, 1994, as amended by the First Modification to
Settlement Agreement dated August 30, 1999.
"Shares" shall have the meaning ascribed to it in recitals.
"Stock Payment" shall mean by any Person shall mean any dividend,
distribution, distribution or payment of any nature (whether in cash,
securities, or other property) on account of or in respect of any shares of the
capital stock (or warrants, options or rights therefor) of such Person,
including any payment on account of the purchase, redemption, retirement,
defeasance or acquisition of any shares of the capital stock (or warrants,
options or rights therefore) of such Person, in each case regardless of whether
required by the terms of such capital stock (or warrants, options or rights) or
any other agreement or instrument.
"Stock Purchase Price" shall have the meaning ascribed to it in
Section 1.1(b).
"Stockholders' Agreement" shall have the meaning ascribed to it in
Section 5.1(i).
52
"▇▇▇▇▇ Stock Repurchase Agreement" shall have the meaning ascribed to
it in Section 5.1(u).
"Subordinated Debt" shall mean Debt of Company or a Subsidiary which
has been subordinated in right of payment and priority to the Note Indebtedness,
all on terms and conditions satisfactory to the Collateral Agent and the
Purchasers.
"Subsidiary(ies)" shall mean any other corporation, limited liability
company, association, joint stock company, joint venture or business trust of
which, as of the date hereof or hereafter, (i) more than fifty percent (50%) of
the outstanding voting stock, share capital or other equity interests is owned
either directly or indirectly by any Person or one or more of its Subsidiaries,
or (ii) the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by any Person and/or its
Subsidiaries. Unless otherwise specified to the contrary herein, Subsidiary(ies)
shall refer to the Company's Subsidiary(ies).
"Subsidiary Guarantee" shall have the meaning ascribed to it in
Section 2.4.
"Subsidiary Guarantor(s)" shall have the meaning ascribed to it in
Section 2.4.
"Subsidiary Security Agreement" shall have the meaning ascribed to it
in Section 2.2.
"Supermajority Purchasers" shall mean the Purchasers owning
Securities, the original purchase price of which constitutes at least 66-2/3% of
the dollars invested by all of the Purchasers in all of the then outstanding
Securities.
"Synthetic Lease" shall mean any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing
product of such Person where the transaction is considered Indebtedness for
borrowed money for federal income tax purposes but is classified as an operating
lease in accordance with GAAP for financial reporting purposes.
"'34 Act" shall have the meaning ascribed to it in Section 3.21.
"Total Funded Debt" shall mean all Indebtedness (excluding
Indebtedness consisting of obligations described in item (g) of the definition
of Indebtedness), plus contingent and unconditional earn-out liabilities and
contingent and unconditional non-compete liabilities, excepting any cash bonus
payments to employees of the Company related to the Expendable Launch Vehicle
Integrated Services contract with the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Space Center, NASA as
defined in and described in Section 2.2(e) of the Merger Agreement until such
cash bonus payments are earned.
"Transaction Documents" shall mean, collectively, this Agreement, the
Securities, the Security Agreements, the Subsidiary Security Agreements, the
Subsidiary Guarantees, the Pledge Agreements, the Mortgages, the Intercreditor
Agreement, the Amended Charter, the Bylaws, the Stockholders' Agreement, the
Registration Rights Agreement and all other agreements and instruments and any
other documents, certificates, instruments or
53
agreements executed pursuant to or in connection with any such document or this
Agreement, as such documents may be amended from time to time.
"UCC" shall mean the Uniform Commercial Code, as in effect from time
to time in the State of Delaware.
"Warrant(s)" shall have the meaning ascribed to it in the recitals.
11. Post-Closing Covenants.
11.1 Registration of Common Stock Underlying Securities. Subject to
the terms of the Registration Rights Agreement, the Company shall file with the
SEC within 30 days of the Closing Date a registration statement in respect of
the Common Stock (i) underlying the Shares, (ii) underlying the shares of Series
A Preferred Stock issuable upon conversion of the Notes and (iii) issuable upon
exercise of the Warrants, and shall use its reasonable best efforts to cause
such registration statement to become effective within 90 days of the Closing
Date and to remain effective until all of such Common Stock is sold or the
Purchasers are entitled to sell all of such unsold Common Stock under Rule
144(k) or any successor provision.
11.2 Filing of Financing Statements. The Company shall have filed,
within 10 days of the Closing Date, appropriately completed and duly executed
copies of the financing statements on Form UCC-1 with the Secretary of State of
the State of Delaware in form and substance reasonably satisfactory to the
Purchasers.
11.3 Filing of Patent, Trademark and Copyright Recordation Forms. The
Company shall have filed, within 90 days of the Closing Date, recordation forms
with the United States Patent and Trademark Office to secure the Purchasers'
security interest in the Patents and Trademarks pledged as Collateral (as such
term is defined in the Security Agreement) in the Security Agreement and with
the United States Copyright Office to perfect the Purchasers' security interest
in the Copyrights pledged as Collateral in the Security Agreement, in each case
in form and substance reasonably satisfactory to the Purchasers.
11.4 Landlord Waivers. The Company will use all reasonable commercial
efforts to obtain, within 45 days after the Closing Date, and provide to the
Collateral Agent, in form and substance satisfactory to the Collateral Agent,
such estoppel letters, waivers and consents as may be required by the Collateral
Agent from landlords of each leased location of Collateral.
11.5 Insurance Coverage. If and to the extent that the liability of
the Company disclosed in item 1 of Section 3.10(a) of the Disclosure Schedule,
is not covered by the Company's existing insurance described in Section 3.6(b)
of the Disclosure Schedule, the Company shall obtain, within 60 days of the
Closing Date, and provide to the Purchasers evidence of coverage for such
liability, if and to the extent that such coverage is commercially available.
54
12. Purchaser Right of First Refusal
12.1 Initial Offer. If the Company desires to sell all or a majority
of its interest in Advanced Biosystems, Inc., its wholly-owned subsidiary ("ABS
Interest") and the Company receives any written offer, whether by way of a term
sheet, letter of intent, otherwise (such written offer, "LOI"), the Company
shall promptly (and in event no later than 24 hours after it receives such LOI)
provide a copy of such offer to the Purchasers.
12.2 Acceptance Period. Within 20 Business Days following the delivery
to the Purchasers of a bona fide LOI that the Company is willing to accept (such
later date, the "Acceptance Date"), the Purchasers shall have the right to elect
to purchase all of the ABS Interest to be sold, at the price and on other terms
set forth in the LOI. If the Purchasers desire to make such purchase, the
Purchasers shall so notify the Company in writing prior to the Acceptance Date.
12.3 Company Sale. If the Purchasers elect not to purchase all of the
ABS Interest, or fail to make an affirmative election prior to the Acceptance
Date, the Company shall thereafter be free to sell the ABS Interest described in
the LOI to any other Person so long as (a) the purchase price is equal to or
greater than the purchase price set forth in the LOI, (b) the terms of the sale
are not materially more favorable to the purchaser thereof than the terms set
forth in the LOI, (c) the purchase occurs within 180 days after the delivery of
the applicable the LOI and (d) the Company receives a fairness opinion from a
recognized investment banker or similar entity with respect thereto if the Board
of Directors of the Company so determines; provided, that, the 180-period
described in clause (c) above may be extended by 90 days in the event that a
filing or filings are required with a Governmental Authority in order to
effectuate the purchase and the Purchasers are reasonably satisfied that the
parties intend to make any such filing(s) and consummate the purchase following
the effectiveness of such filing(s). If the Company wishes to sell the ABS
Interest after the Purchasers elect not to purchase the ABS Interest or fail to
make an affirmative election prior to the Acceptance Date and the conditions set
forth in clauses (a), (b) and (c) are not met or if the Company proposes to sell
additional material assets of Advanced Biosystems, Inc. in a bona fide
transaction in connection with the sale of the ABS Interest, the Company shall
be obligated to offer the Purchasers the right to acquire the ABS Interest or
such additional assets in the manner set forth above.
The Purchasers and the Collateral Agent hereby agree that in the event
of a sale of the ABS Interest or any additional material assets of Advanced
Biosystems, Inc. pursuant to this Section 12, the Purchasers and the Collateral
Agent shall release Advanced Biosystems, Inc. from its obligations pursuant to
its Subsidiary Guaranty, terminate the security interests in its assets granted
pursuant to the Subsidiary Security Agreement and execute and deliver any
further instruments or documents (including, without limitation, termination
statements with respect to any previously filed UCC-1 financing statements with
respect to the assets of Advanced Biosystems, Inc.) and to take all such further
action as the Company or Advanced Biosystems, Inc. may reasonably request in
order to evidence or effectuate or otherwise carry out such release and
termination.
55
13. Transferability. Each Purchaser may transfer the Shares, Notes and
Warrants, shares of Series A Preferred Stock issuable upon conversion of the
Notes and the shares of Common Stock issuable upon exercise of the Warrants and
conversion of the Series A Preferred Stock, and the rights and obligations
attached thereto, so long as (a) any such transfer(s) comply with applicable
securities Laws and (b) unless such securities have been registered under any
applicable securities Laws and transferred pursuant to a non-private, open
market transaction on the securities exchange on which the Company's Common
Stock is listed, if such transferee is not a United States citizen or an entity
formed under the laws of a U.S. jurisdiction, such Purchaser obtains the
Company's consent for such transfer (which shall not be unreasonably withheld).
14. Pre-Closing Covenants
14.1 Proxy; Shareholders Meeting. As soon as practicable after the
date hereof, the Company shall use its best efforts to call a meeting of the
Company's stockholders to approve the transactions contemplated hereby and shall
make all appropriate filings related thereto (including, without limitation, the
filing of an effective proxy statement) with the SEC to give effect thereto. The
Company shall use its best efforts to deliver to the Purchasers a copy of such
proxy statement and any amendments and supplements thereto at least 10 days
prior to the filing thereof with the SEC.
14.2 Operation of Business Prior to Closing. The Company shall operate
its business and the business of its Subsidiaries in the ordinary course and in
a manner consistent with past practices between the date hereof and the Closing
Date.
14.3 Government Contracts and Government Bids. From the date hereof
until the Closing Date, the Company and each Subsidiary shall notify the
Purchasers within five days of the date on which it:
(a) enters into or amend any (i) Government Contract involving annual
expenditures or liabilities in excess of $100,000 or (ii) purchase or task order
under existing Government Contract, involving annual expenditures or liabilities
in excess of $150,000 or which is not cancelable within six months without
penalty, cost or liability or which is otherwise material to the Company; or
(b) submits any new Government Bid which, if accepted, is expected to
result in a loss to the Company or would result in a Government Contract with a
backlog value in excess of (i) $100,000, if a new Government Bid, or (ii)
$150,000, if a purchase or task order under an existing Government Contract.
14.4 Restriction on Issuance of Options and Warrants. From the date
hereof until the Closing Date, the Company shall not authorize the issuance of
any capital stock of the Company except for shares of capital stock issuable (i)
upon the exercise of Options and warrants outstanding as of the date hereof, as
set forth in Section 3.4, or granted after the date hereof and approved by the
Board of Directors of the Company and (ii) as consideration for an acquisition
or a series of acquisitions by the Company in which the net issue price per
share is greater than the quotient of the aggregate Stock Purchase Price divided
by the aggregate number
56
of shares of Series A Preferred Stock purchased hereunder; provided, that, any
and all such issuances do not constitute in a Material Adverse Effect.
15. Miscellaneous.
15.1 Survival of Representations and Warranties. The representations
and warranties of the Company and Purchasers contained in or made pursuant to
this Agreement (other than those made in Sections 3.16 and 3.19) shall survive
the execution and delivery of this Agreement and the other Transaction Documents
and the Closing until April 30, 2005 and the representations and warranties of
the Company made in Sections 3.16 and 3.19 shall survive the execution and
delivery of this Agreement and the other Transaction Documents and the Closing
for a period of six months after the applicable statute of limitations has
expired, and, in each case, such representations and warranties shall in no way
be affected by any investigation of the subject matter thereof made by or on
behalf of the Purchasers or the Company.
15.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
15.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware, excluding the application of any
conflicts of laws principles which would require the application of the laws of
another state.
15.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
15.6 Notices. All notices and other communications required or
permitted hereunder shall be in writing. Notices shall be delivered personally,
via recognized overnight courier (such as Federal Express, DHL or Airborne
Express) or via certified or registered mail. Notices may be delivered via
facsimile or e-mail, provided that by no later than two days thereafter such
notice is confirmed in writing and sent via one of the methods described in the
previous sentence. Notices shall be addressed as follows:
(a) if to a Purchaser, to such Purchaser's address set forth on
Schedule I hereto, or at such other address or facsimile number as such
Purchaser shall have furnished to the Company in writing, with a copy to ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: E. ▇▇▇ ▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇ or
(b) if to the Company, to Analex Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer,
facsimile number
57
(▇▇▇) ▇▇▇-▇▇▇▇, or at such other address or facsimile number as the Company
shall have furnished in writing to the Purchasers, with a copy to Holland and
Knight LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇.
All notices shall be effective upon receipt.
15.7 Expenses. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby and shall reimburse the Purchasers for the
reasonable out-of-pocket expenses (including legal fees and disbursements paid
to counsel to the Purchasers), which the Purchasers have incurred with respect
to the negotiation, execution, delivery and performance of this Agreement, the
other Transaction Documents and the transactions contemplated hereby and thereby
in an amount not exceeding seventy-five thousand dollars ($75,000). The Company
shall pay all costs and expenses (including reasonable legal fees and expenses)
incurred by the Purchasers in connection with the enforcement of this Agreement
and the Transaction Documents and in connection with any filing pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, that may be
incurred by the Purchasers as a result of the purchase or ownership of the
Securities. The Company shall pay all reasonable expenses incurred by the
directors designated pursuant to Section 2.1(a), (b) and (c) of the
Stockholders' Agreement in connection with their attendance at meetings of the
Company's Board of Directors (including all reasonable travel and lodging
expenses related thereto).
15.8 Amendments and Waivers(a) . (a) Subject to the terms of Sections
15.8(b) and (c), and except to the extent expressly provided in Section 9, to
the extent that (i) the terms of this Agreement require a Credit Party to obtain
the consent or approval of the Purchasers, (ii) the terms of this Agreement
require or permit a Credit Party to take any action, including but not limited
to declaring a payment default or other Event of Default, (iii) a Credit Party
seeks an amendment to or termination of any of the terms of this Agreement, or
(iv) a Credit Party seeks a waiver of any right to the Purchasers under this
Agreement, such consent, approval, action, termination, amendment or waiver
(each, an "Approval") shall be made by the Majority Purchasers.
(b) Notwithstanding anything to the contrary contained in Section
15.8(a), the Purchasers shall not, without the prior written consent and
approval of at least the Supermajority Purchasers, amend, modify, terminate or
obtain a waiver of any provision of this Agreement, which will have the effect
of (i) reducing the principal amount of any Notes or of any payment required to
be made to the holders thereof, or modifying the terms of a payment or
prepayment thereof or (ii) reducing the rate or extending the time for payment
of interest under any Notes or (iii) releasing any Collateral.
(c) Notwithstanding anything to the contrary contained in Section
15.8(a), following a default pursuant to Section 6.1(a) hereof (a) each holder
shall be permitted to exercise all of its rights and remedies under this
Agreement, the Note held by such holder, and the Transaction Documents
individually, and (b) the Company shall be required to seek any and all
consents, approvals, waivers, terminations or amendments pursuant to this
Agreement from
58
each such holder individually, as provided in this Agreement. Each Purchaser
agrees that, for the benefit of the other holders, any proceeds received by such
holder as a result of the exercise of rights and remedies under this Agreement
pursuant to this Section 15.8(c) will be divided, pro rata, among all holders of
the Notes.
15.9 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable Law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction to the greatest extent
possible to carry out the intentions of the parties hereto.
15.10 Entire Agreement. Each party hereby acknowledges that no other
party or any other person or entity has made any promises, warranties,
understandings or representations whatsoever, express or implied, not contained
in the Transaction Documents and acknowledges that it has not executed the
Transaction Documents in reliance upon any such promises, representations,
understandings or warranties not contained herein or therein and that the
Transaction Documents supersede all prior agreements and understandings between
the parties with respect thereto. There are no promises, covenants or
undertakings other than those expressly set forth or provided for in the
Transaction Documents.
15.11 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such nonbreaching or nondefaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring.
15.12 Facsimile Signatures. Any signature page delivered by a fax
machine shall be binding to the same extent as an original signature page, with
regard to any agreement subject to the terms hereof or any amendment thereto.
Any party who delivers such a signature page agrees to deliver promptly an
original counterpart to each party to whom the faxed signature page was sent.
15.13 Other Remedies. In addition to those remedies specifically set
forth herein and in the Transaction Documents, if any, each party may proceed to
protect and enforce its rights under this Agreement and the Transaction
Documents either by suit in equity and/or by action at law, including, but not
limited to, an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained in
this Agreement or in the Transaction Documents. No right or remedy conferred
upon or reserved to any party under this Agreement or the Transaction Documents
is intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to every other right and remedy given
under this Agreement and the Transaction Documents or now and hereafter existing
under applicable law.
59
15.14 Further Assurances. At any time or from time to time after the
Closing, the Company, on the one hand, and the Purchasers, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby relating to
the purchase contemplated herein and to otherwise carry out the intent of the
parties hereunder.
15.15 Exchanges; Lost, Stolen or Mutilated Stock Certificates, Notes
and Warrants. Upon surrender by any Purchaser to the Company of any stock
certificate, Note, DCS Warrant or PCS Warrant, the Company at its expense shall
issue in exchange therefor, and deliver to such Purchaser, a replacement stock
certificate, Note, DCS Warrant or PCS Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
stock certificate, Note, DCS Warrant or PCS Warrant and in case of any such
loss, theft or destruction, upon delivery of an indemnity agreement,
satisfactory to the Company, or in case of any such mutilation, upon surrender
and cancellation of such stock certificate, Note, DCS Warrant or PCS Warrant,
the Company at its expense shall issue and deliver to such Purchaser a new stock
certificate, Note, DCS Warrant or PCS Warrant of like tenor, in lieu of such
lost, stolen or mutilated stock certificate, Note, DCS Warrant or PCS Warrant.
15.16 Confidentiality. The Collateral Agent and each Purchaser agree
that it will not disclose without the prior written consent of the Company
(other than to its employees, its Affiliates, to the Collateral Agent or another
Purchaser or to its auditors or counsel who have a legitimate need to receive
such information) any information with respect to the Company and its
Subsidiaries, which is furnished to a Purchaser in such Purchaser's capacity as
an investor in the Company (but not in such Purchaser's capacity as director, if
applicable) pursuant to this Agreement or any of the Transaction Documents;
provided, that the Collateral Agent and any Purchaser may disclose such
information (a) as has generally become available to the public or has been
lawfully obtained by the Collateral Agent or such Purchaser from any third party
under no duty of confidentiality to the Company, (b) as may be required in any
report, statement or testimony submitted to, or in respect to any inquiry, by,
any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Purchaser, including the Board of Governors of the
Federal Reserve System of the United States, the Office of the Comptroller of
the Currency or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors
(provided the Company is given reasonable prior written notice of such
disclosure to the extent reasonably practicable), (c) as may be required in
respect to any summons or subpoena or in connection with any litigation or
arbitration (provided the Company is given reasonable prior written notice of
such disclosure to the extent reasonably practicable), (d) in order to comply
with any law, order regulation or ruling applicable to such Purchaser (provided
the Company is given reasonable prior written notice of such disclosure to the
extent reasonably practicable), and (e) to any permitted transferee or assignee
or to any approved participant of, or with respect to, the Securities. If the
transactions contemplated hereby are not consummated for any reason, each
Purchaser shall return to the Company, without retaining any copies thereof, any
schedules, documents or other written information obtained from the Company in
connection with this Agreement and the transactions contemplated hereby and
shall cause all of its representatives to whom it may have disclosed such
information to do the same.
60
15.17 Break-Up Fee.(a) In the event that the Company is unable to
consummate the transactions contemplated in Section 1.3 hereof on the Closing
Date due to a determination by the board of directors of the Company that the
consummation of such transactions conflict with its exercise of its fiduciary
duties under applicable Law including, without limitation, the Delaware General
Corporation Law, the Company shall pay to the Purchasers a "break-up" fee in the
amount of seven hundred fifty thousand dollars ($750,000) (the "Break Up Fee").
The Break Up Fee shall by paid by the Company to the Purchasers by certified
check, made payable to each Purchaser, or wire transfer of immediately available
funds to such account as each Purchaser designates, in an amount equal to each
Purchaser's pro rata share (based on the Note Purchase Price and Stock Purchase
Price paid by such Purchaser over the aggregate Note Purchase Price and Stock
Purchase Price paid by all Purchasers ("Pro Rata Share")) of the Break Up Fee.
If the Purchasers are unable to consummate the transactions contemplated in
Section 1.3 on the Closing Date for any reason other than as a result of the
failure of the Company to comply with its obligations hereunder or to satisfy
the closing conditions set forth in Section 5.1, each Purchaser shall pay to the
Company its Pro Rata Share of the Break Up Fee. The Break Up Fee referenced in
the immediately preceding sentence shall by paid by the Purchasers to the
Company by certified check, made payable to the Company, or wire transfer of
immediately available funds to such account as the Company designates.
(b) The Company and the Purchasers agree that if the Break Up Fee is
payable hereunder, the right of the Company or the Purchasers, as the case may
be, to receive such amount shall constitute the sole and exclusive remedy for,
and such amount shall constitute liquidated damages in respect of, termination
of this Agreement regardless of the circumstances giving rise to such
termination.
15.18 Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to or on the
Closing Date by the Purchasers if approval of the transactions contemplated
hereby is not obtained by the Company from its stockholders within 90 days after
the date hereof. This Agreement may be terminated at any time prior to the
Closing by mutual agreement of the Company and all Purchasers set forth in
writing. Each provision hereof expressly stated to survive the termination,
shall survive the termination of this Agreement.
15.19 Most Favored Nations. If the Company refinances or renegotiates
its Senior Credit Facility so that one or more of the covenants set forth in
Section 7 or Section 8 of this Agreement are more restrictive upon the Company
than any covenant(s) set forth in the Senior Credit Facility (each, a
"Restrictive Covenant"), then, notwithstanding anything to the contrary in this
Agreement (including Section 15.8) or in any of the other Transaction Documents,
each Purchaser hereby agrees to amend this Agreement so that the Restrictive
Covenant(s) are replaced with covenants that are the same as those set forth in
such Senior Credit Facility as refinanced or renegotiated. In connection with
and prior to any such amendment to this Agreement, the Company shall provide
each Purchaser with a copy of the new Senior Credit Facility and the amendment
to this Agreement. Thereafter, so long as such Senior Credit Facility is
approved by the Board of Directors, such amendment to this Agreement which will
be effective whether or not signed by the Purchasers.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
61
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
The Company:
ANALEX CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Chief Executive Officer
Signature Page to Stock and Note Purchase Agreement
The Purchasers:
PEQUOT PRIVATE EQUITY FUND III, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Principal
PEQUOT OFFSHORE PRIVATE EQUITY
PARTNERS III, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Principal
Signature Page to Stock and Note Purchase Agreement
Schedule I
Schedule of Purchasers
=======================================================================================================================
NAME AND ADDRESS PRINCIPAL
OF AMOUNT AND PURCHASE NUMBER OF NUMBER OF
PURCHASER PRICE OF NOTE DCS WARRANT SHARES/1/ PCS WARRANT SHARES/2/
-----------------------------------------------------------------------------------------------------------------------
Pequot Private Equity Fund III, L.P. $ 8,764,491.00 582,261 1,179,079
c/o Pequot Capital Management, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇ ▇▇▇▇▇
c/o Pequot Capital Management, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------------------------------------------------------------------------------------
Pequot Offshore Private Equity Partners III, L.P. $ 1,235,509.00 82,080 166,212
c/o Pequot Capital Management, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇ ▇▇▇▇▇
c/o Pequot Capital Management, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------------------------------------------------------------------------------------
Totals $10,000,000.00 664,341 1,345,291
=======================================================================================================================
==========================================================================================
NAME AND ADDRESS NUMBER OF SHARES
OF OF SERIES A STOCK PURCHASE
PURCHASER PREFERRED STOCK PRICE ($2.23/share)
------------------------------------------------------------------------------------------
Pequot Private Equity Fund III, L.P. 5,895,397 $13,146,735.31
c/o Pequot Capital Management, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇ ▇▇▇▇▇
c/o Pequot Capital Management, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------------------------------------
Pequot Offshore Private Equity Partners III, L.P. 831,060 $ 1,853,263.80
c/o Pequot Capital Management, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇ ▇▇▇▇▇
c/o Pequot Capital Management, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------------------------------------
Totals 6,726,457 $14,999,999.11
==========================================================================================
----------
/1/ Subject to the adjustments described in the Notes, DCS Warrants and the
Amended Charter.
/2/ Subject to the adjustments described in the PCS Warrants and the Amended
Charter.