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STOCK AND ASSET PURCHASE AGREEMENT
DATED AS OF AUGUST 11, 1998
BY AND AMONG
MCTI ACQUISITION CORPORATION
MICRODYNE CORPORATION
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
AND
THE OTHER STOCKHOLDERS NAMED HEREIN
AND
DIGITAL TELCOM, INC.
AND
ACCELERATION SYSTEMS, INC.
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TABLE OF CONTENTS
Page No.
STOCK PURCHASE AGREEMENT..........................................................................................1
ARTICLE I: DEFINITIONS............................................................................................1
1.01 CERTAIN DEFINITIONS....................................................................................1
1.02 OTHER DEFINITIONS......................................................................................9
1.02 INTERPRETATION........................................................................................10
ARTICLE 11: SALE OF PURCHASED STOCK AND ASSETS; CLOSING..........................................................10
2.01 PURCHASE AND SALE.....................................................................................10
2.02 PURCHASE PRICE........................................................................................12
2.03 CLOSINGS..............................................................................................12
2.04 ESCROW................................................................................................13
2.05 EFFECT OF FAILURE OF ANY SELLER TO DELIVER............................................................14
2.06 EARN OUT AMOUNT.......................................................................................14
2.07 MICRODYNE'S GUARANTEE OF THE PURCHASER................................................................16
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SELLERS.....................................................16
3.01 ORGANIZATION AND QUALIFICATION........................................................................16
3.02 CAPITAL STOCK.........................................................................................16
3.03 AUTHORITY.............................................................................................17
3.04 SUBSIDIARIES; OFFICERS AND DIRECTORS; CHARTER AND BYLAWS..............................................17
3.05 NO CONFLICTS..........................................................................................17
3.06 GOVERNMENTAL APPROVALS AND FILINGS....................................................................18
3.07 MINUTE BOOKS AND RECORDS..............................................................................18
3.08 FINANCIAL STATEMENTS AND RECORDS......................................................................18
3.09 ABSENCE OF CHANGES....................................................................................20
3.10 NO UNDISCLOSED LIABILITIES............................................................................22
3.11 TAXES.................................................................................................22
3.12 LEGAL PROCEEDINGS.....................................................................................24
3.13 COMPLIANCE WITH LAWS AND ORDERS.......................................................................24
3.14 PLANS.................................................................................................24
3.15 REAL PROPERTY.........................................................................................26
3.16 TANGIBLE PERSONAL PROPERTY............................................................................27
3.17 INTELLECTUAL PROPERTY RIGHTS..........................................................................27
3.18 CONTRACTS AND ACQUIRED BUSINESSES.....................................................................28
3.19 PERMITS AND LICENSES..................................................................................31
3.20 INSURANCE.............................................................................................32
3.21 AFFILIATE TRANSACTIONS................................................................................32
3.22 EMPLOYEES, LABOR RELATIONS............................................................................33
3.23 ENVIRONMENTAL MATTERS.................................................................................33
3.24 SUBSTANTIAL CUSTOMERS AND SUPPLIERS...................................................................34
3.25 ACCOUNTS RECEIVABLE...................................................................................34
3.26 INVENTORY.............................................................................................34
3.27 BROKERS...............................................................................................34
3.28 RESTRICTIONS ON CONDUCT OF BUSINESS...................................................................34
3.29 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS........................................................35
3.30 WARRANTIES............................................................................................35
3.31 BUSINESS PLAN.........................................................................................35
3.33 CERTAIN PRACTICES.....................................................................................35
3.34 DISCLOSURE............................................................................................35
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MICRODYNE.....................................36
4.01 ORGANIZATION..........................................................................................36
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4.02 AUTHORITY.............................................................................................36
4.03 NO CONFLICTS..........................................................................................36
4.04 GOVERNMENTAL APPROVALS AND FILINGS....................................................................37
4.05 LEGAL PROCEEDINGS.....................................................................................37
4.06 BROKERS...............................................................................................37
ARTICLE V: CERTAIN AGREEMENTS OF THE PARTIES.....................................................................37
5.01 CONDUCT OF BUSINESS PRIOR TO THE CLOSING..............................................................37
5.02 ACCESS TO INFORMATION.................................................................................40
5.03 BOOKS AND RECORDS.....................................................................................40
5.04 CONFIDENTIALITY.......................................................................................41
5.05 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.........................................................41
5.06 NO SOLICITATION OF OFFERS, ETC........................................................................42
5.07 NOTICE OF CERTAIN MATTERS.............................................................................42
5.08 INTERIM FINANCIAL STATEMENTS..........................................................................43
5.09 SELLERS' OBLIGATIONS..................................................................................43
5.10 FURTHER ACTION........................................................................................43
5.11 ALLOCATION OF PURCHASE PRICE..........................................................................43
5.12 HSR FILING............................................................................................43
5.13 CERTAIN EMPLOYEE AND SELLER MATTERS...................................................................43
5.14 CERTAIN PERFORMANCE BONUSES...........................................................................44
5.15 BULK SALES LAWS.......................................................................................44
5.16 USE AND CHANGE OF NAMES...............................................................................44
5.17 ESTOPPEL CERTIFICATES FOR LEASED REAL PROPERTY........................................................44
5.18 SELLING COMPANY ARTICLES OF TRANSFER..................................................................44
5.19 SECTION 1445..........................................................................................44
5.20 RELEASE OF LEASED PROPERTY LIENS......................................................................44
5.21 CERTAIN ASSUMED LIABILITIES, CERTAIN PAYMENTS.........................................................45
ARTICLE VI: CONDITIONS TO CLOSING................................................................................45
6.01 CONDITIONS TO OBLIGATIONS OF SELLERS..................................................................45
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENT...............................................45
(b) NO ORDER OR SUIT......................................................................................45
(c) GOVERNMENTAL FILINGS AND CONSENTS.....................................................................45
(d) LEGAL OPINION.........................................................................................46
(e) INCUMBENCY CERTIFICATE................................................................................46
(f) PROCEEDINGS...........................................................................................46
(g) NON-COMPETITION AGREEMENT.............................................................................46
(h) PAY-OFF OF TARGET COMPANY LOAN........................................................................46
(i) THIRD PARTY CONSENTS..................................................................................46
(j) ORGANIZATIONAL DOCUMENTS..............................................................................46
(k) GOOD STANDING.........................................................................................46
(l) NO MATERIAL ADVERSE EFFECT............................................................................46
(m) EMPLOYMENT AGREEMENTS..............................................................................47
6.02 CONDITIONS TO OBLIGATIONS OF THE PURCHASER............................................................47
(a) REPRESENTATIONS AND WARRANTIES, COVENANTS.............................................................47
(b) NO ORDER OR SUIT......................................................................................47
(c) GOVERNMENTAL FILINGS AND CONSENTS.....................................................................47
(d) THIRD PARTY CONSENTS..................................................................................48
(e) PURCHASER FINANCING...................................................................................48
(f) LEGAL OPINION.........................................................................................48
(g) RESIGNATION OF DIRECTORS AND OFFICERS OF TARGET COMPANIES.............................................48
(h) ORGANIZATIONAL DOCUMENTS..............................................................................48
(i) GOOD STANDING.........................................................................................48
(j) NO MATERIAL ADVERSE EFFECT............................................................................48
(k) INCUMBENCY CERTIFICATE................................................................................48
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(l) MINUTE AND STOCK BOOKS................................................................................48
(m) ASSIGNMENT AND RELEASE OF CLAIMS...................................................................48
(n) CERTAIN EMPLOYMENT MATTERS............................................................................48
(o) REPAYMENT OF INDEBTEDNESS.............................................................................49
(p) DISCHARGE OF LIENS....................................................................................49
(q) NON-COMPETITION AGREEMENT.............................................................................49
(r) PROCEEDINGS...........................................................................................49
(s) NON-FOREIGN CERTIFICATE...............................................................................49
(t) USE AND CHANGE OF NAMES...............................................................................49
(u) SELLING COMPANY ARTICLES OF TRANSFER..................................................................49
(v) ESTOPPEL CERTIFICATES.................................................................................49
ARTICLE VII: SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS...................................50
7.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.....................................50
ARTICLE VIII: INDEMNIFICATION....................................................................................50
8.01 INDEMNIFICATION.......................................................................................50
8.02 METHOD OF ASSERTING CLAIMS............................................................................51
ARTICLE IX: TERMINATION..........................................................................................53
9.01 GROUNDS FOR TERMINATION...............................................................................53
9.02 EFFECT OF TERMINATION.................................................................................54
ARTICLE X: SELLERS' REPRESENTATIVE...............................................................................55
10.01 APPOINTMENT OF SELLERS' REPRESENTATIVE................................................................55
10.02 LIMITATION OF LIABILITY...............................................................................55
10.03 ACTIONS BINDING.......................................................................................55
ARTICLE XI: ARBITRATION OF DISPUTES..............................................................................55
11.01 ARBITRATION...........................................................................................55
11.02 PROCEDURE FOR ARBITRATION.............................................................................55
11.03 LIMITATION ON POWERS OR ARBITRATORS...................................................................56
ARTICLE XII: MISCELLANEOUS.......................................................................................56
12.01 NOTICES...............................................................................................56
12.02 ENTIRE AGREEMENT, AMENDMENT...........................................................................58
12.03 EXPENSES..............................................................................................58
12.04 CUMULATIVE REMEDIES...................................................................................58
12.05 WAIVER................................................................................................58
12.06 NO ASSIGNMENT, BINDING EFFECT.........................................................................58
12.07 INVALID PROVISIONS....................................................................................58
12.08 GOVERNING LAW.........................................................................................59
12.09 CONSTRUCTION..........................................................................................59
12.10 TIME PERIODS..........................................................................................59
12.11 COUNTERPARTS..........................................................................................59
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE DESCRIPTION
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1.01 Certain Liens
2.03(b) Shareholder Percentage; Shares, Options and Loan Accounts to be Sold
3.01 Jurisdictions in which the Company is Qualified to do Business
3.02(b) Material Terms of Options to Acquire Target Company Stock
3.04 Directors and Officers of the Companies
3.05 Conflicts, Violations and Breaches
3.06 Governmental Approvals and Filings
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3.08(a) Financial Statements
3.08(c) Accounting Principles for Certain Determinations
3.09 Absence of Changes
3.10 Certain Liabilities
3.11 Taxes
3.12 Legal Proceedings and Attorneys' Letters
3.14 Plans
3.15 Real Property
3.16 Tangible Personal Property
3.17 Intellectual Property
3.18 Contracts
3.18(e) Orders on Hand on Effective Date
3.19 Permits and Licenses
3.20 Insurance
3.21(a) Affiliate Transactions
3.21(b) Non-Arms Length Transactions
3.21(c) Inter-Company Transaction
3.22 Employees; Labor Relations
3.23 Environmental Matters
3.24 Largest Customers and Suppliers
3.26 Inventory
3.29 Bank and Brokerage Accounts; Investment Assets
3.30 Warranties
3.31 Business Plan
4.04 Purchaser Governmental Approvals and Filings
5.11 Allocation of Purchase Price
6.02(d) Required Consents - Purchaser Condition
EXHIBIT DESCRIPTION
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Exhibit A Assignment and Release of Claims
Exhibit B Assignment of Options
Exhibit C Escrow Agreement
Exhibit D Non-Competition Agreement
Exhibit E Opinion of McGuire, Woods, Battle & ▇▇▇▇▇▇ LLP
Exhibit F Employment Agreement and Employees
Exhibit F-1: Form of Employment Agreement
Exhibit F-2: Certain Employees
Exhibit F-3: Form of Employee Non-Disclosure, Development and
Assignment of Proprietary Rights Agreement
Exhibit F-4: Certain Employees
Exhibit G Opinion of ▇▇▇▇▇▇, Flyer & ▇▇▇▇▇
Exhibit H Names and Addresses of Other Stockholders
Exhibit I ▇▇▇▇ of Sale and Assignment
Exhibit J Instrument of Assumption of Certain Liabilities
Exhibit J-1: ASI
Exhibit J-2: DTI
Exhibit K Performance Bonus Plan
Exhibit L Certificate of Non-Foreign Status
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STOCK AND ASSET PURCHASE AGREEMENT
This STOCK AND ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
August 11, 1998, is entered into by and among MCTI Acquisition Corporation, a
Maryland corporation ("Purchaser"), Microdyne Corporation, a Maryland
corporation ("Microdyne"); ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("▇▇▇. ▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇.
▇▇▇▇▇▇▇▇"), and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇▇▇▇▇▇") (collectively the
"Principal Stockholders" and each a "Principal Stockholder"); and those
individuals listed under the heading "Other Stockholders" on the signature pages
hereto (the "Other Stockholders", and collectively with the Principal
Stockholders, the "Individual Sellers" and each an "Individual Seller"), Digital
Telcom, Inc., a Maryland corporation ("DTI"), and Acceleration Systems, Inc., a
Maryland corporation ("ASI", and collectively with DTI, the "Selling Companies")
(the Individual Sellers and the Selling Companies being collectively referred to
as the "Sellers" and each a "Seller").
BACKGROUND
The Individual Sellers collectively own and desire to sell to the
Purchaser all of the issued and outstanding shares of capital stock of Apcom,
Inc., a Maryland corporation ("Apcom") consisting of 3,091,030 shares of common
stock of par value $0.01 per share (the "Apcom Stock") and of Celerity Systems
Incorporated, a California corporation ("Celerity," and with Apcom, the "Target
Companies" and each a "Target Company") consisting of 2,293,800 shares of common
stock of no par value per share, (the "Celerity Stock", and with the Apcom
Stock, the "Purchased Stock") (the Target Companies and the Selling Companies
being collectively referred to as the "Companies" and each a "Company"),
together with all rights or options to acquire any shares of capital stock of
the Target Companies and any and all shareholder loan accounts or other claims
of any of the Sellers or their Affiliates against the Target Companies. The
Selling Companies own and desire to sell to Purchaser their entire business,
assets and undertaking (the "Purchased Assets"). The Purchaser desires to
purchase the Purchased Stock and Purchased Assets from Sellers. The Purchaser
and the Sellers wish to make the economic benefits of the purchase and sale
transactions contemplated hereby effective (if the closings hereunder occur in
accordance herewith) as and from the close of business on May 31, 1998, such
that the Target Companies and the businesses of the Selling Companies shall be
considered to have been operated for the economic benefit of the Purchaser as
and from such date.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I: DEFINITIONS
1.01 CERTAIN DEFINITIONS. As used in this Agreement, the following
defined terms shall have the meanings set forth below:
"Acquired Businesses" means the businesses conducted by the
Target Companies and the businesses of the Selling Companies comprised of and
conducted with the Purchased Assets acquired by, and the Assumed Liabilities
assumed by, the Purchaser from the Selling Companies, at and as of the Closing
Date, together with, in the case of the determination of the Earn Out Amount,
any internally generated expansion of or growth in such businesses but excluding
therefrom any lines of business or products or services conducted or sold by the
Purchaser as of the Closing Date (to the extent not conducted by the Target
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Companies or the Selling Companies as of the Closing Date) and any lines of
business, products or services introduced to such businesses after the Closing
Date by acquisition from any Person after the Closing Date.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly controlling, controlled by or under common control
with such Person, (b) any other Person that owns or controls 5% or more of any
class of equity securities (including any equity securities issuable upon the
exercise of any option or convertible security) of such Person or any of its
Affiliates, or (c) any director, partner, officer, agent, employee or relative
of such Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities or
by contract or otherwise.
"Agreement" means this Stock and Asset Purchase Agreement, the
Exhibits and the Disclosure Schedule and the certificates delivered in
connection herewith, as the same may be amended from time to time in accordance
with the terms hereof.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Assignment and Release of Claims" means the assignment and
release of claims executed and delivered by each of the Individual Sellers
(other than those Individual Sellers transferring solely Purchased Options),
substantially in the form and to the effect of Exhibit A hereto, as such
assignment and release of claims may be amended, modified or restated from time
to time.
"Associate" means, with respect to any Person, (a) any
corporation or other business organization of which such Person is an officer or
partner or is the beneficial owner, directly or indirectly, of ten percent (10%)
or more of any class of equity securities, any trust or estate in which such
Person has a substantial beneficial interest or as to which such Person serves
as a trustee or in a similar capacity or (b) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as such Person.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Companies, including without
limitation financial statements, Tax Returns and related work papers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Permits, customer lists, computer files and programs, retrieval
programs, computerized records, operating data and plans, associated software
and documentation, and environmental studies, audits, reports and plans.
"Business Combination" means, with respect to any Person, any
(a) merger, amalgamation, consolidation or combination to which such Person is a
party, (b) any sale, dividend, split or other disposition of any capital stock
or other equity interests of such Person, (c) any tender offer (including
without limitation a self-tender), exchange offer, recapitalization,
liquidation, dissolution or similar transaction, (d) any sale
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(including, without limitation, a bulk sale), dividend or other disposition of
all or a material portion of the Assets and Properties of such Person or (e) the
entering into of any agreement or understanding, or the granting of any rights
or options, with respect to any of the foregoing.
"Business or Condition of the Company" means the business,
operations, assets, Liabilities, condition (financial or otherwise), results of
operations, Assets and Properties and prospects of a Company.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in Richmond, Virginia are authorized or obligated to
close.
"Cash Equivalents" of any Person means any investment in (i)
direct obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard and Poors and P-1 by ▇▇▇▇▇'▇, (iii) time deposits
with, including certificates of deposit issued by, any office located in the
United States of any bank or trust company which is organized under the laws of
the United States or any state thereof and has capital, surplus and undivided
profits aggregating at least $500,000,000 or (iv) repurchase agreements with
respect to securities described in clause (i) above entered into with an office
of a bank or trust company meeting the criteria specified in clause (iii) above;
provided in each case that such investment matures within one year from the date
of acquisition thereof by such Person.
"Claim Notice" means written notification pursuant to Section
8.02(a) of a Third Party Claim as to which indemnity under Section 8.01 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
on the Indemnified Party and otherwise describing the Indemnified Party's claim
against the Indemnifying Party under Section 8.01.
"Company" or "Companies" has the meaning ascribed to it in the
forepart of this Agreement (and, unless the context otherwise requires, shall
include any predecessor of such Company).
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract,
commitment or understanding (whether written or oral).
"Disclosure Schedule" means the schedules delivered to
Purchaser by or on behalf of the Sellers, and the schedules delivered by or on
behalf of Purchaser to the Sellers, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) calendar
days following receipt by an Indemnifying Party of an Indemnity Notice.
"$" or "Dollars" means lawful currency of the United States of
America.
"EBIT" of any Person means earnings, before interest and
taxes, as determined by excluding from earnings (a) all extraordinary gains and
losses and all fees and expenses relating thereto, and (b) all gains and losses
from the disposition of assets other than in the ordinary course of business.
"Effective Date" means the close of business on May 31, 1998.
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"Environment" means all air, surface water (including, without
limitation, navigable waters and ocean waters), groundwater, drinking water
supplies, stream sediments or land (including land surface or subsurface),
including all fish, wildlife, biota and all other natural resources.
"Environmental Claim" means any administrative or judicial
action, suit, order, claim, lien, notice, notice of violation, investigation,
complaint, request for information, proceeding, or other communication (written
or oral), whether criminal, penal or civil, pursuant to or relating to any
applicable Environmental Law by any Person (including but not limited to any
Governmental or Regulatory Authority, private person or citizens' group) based
upon, alleging, asserting, or claiming any actual or potential (a) violation of
or Liability under any Environmental Law, (b) violation of any Environmental
Permit, or (c) Liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property damage,
personal injury, fines or penalties arising out of, based on, resulting from or
related to the presence, Release, or threatened Release into the Environment of
any Hazardous Substances at any location, including but not limited to any
off-Site location to which Hazardous Substances or materials containing
Hazardous Substances were sent for handling, storage, treatment, or disposal.
"Environmental Law" means any and all current and future
United States federal, state and local, civil, penal and criminal Laws
(including administrative and judicial interpretations of these Laws by any
Governmental or Regulatory Authority), statutes, ordinances, orders, codes,
treaties, rules, regulations, Environmental Permits, policies, guidance
documents, judgments, decrees, injunctions, or agreements with any Governmental
or Regulatory Authority, relating to the protection of health and the
Environment, worker health and safety, and/or governing the handling, use,
generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or Release of Hazardous
Substances, whether now existing or subsequently amended or enacted, and the
foreign analogies thereof, all as amended or superseded from time to time; and
any common law doctrine, including but not limited to, negligence, nuisance,
trespass, personal injury, or property damage related to or arising out of the
presence, Release, or exposure to a Hazardous Substance.
"Environmental Liabilities" means Liabilities of a Person that
arise under any Environmental Law, including, but not limited to, all financial
responsibility under any Environmental Law for site assessments, investigatory
and testing costs, clean-up costs or corrective actions (including, without
limitation, for any removal, remedial or other response actions), and any other
costs, fines or penalties.
"Environmental Permit" means any United States federal, state,
or local permits, licenses, approvals, consents or authorizations required by
any Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Escrow Agent" means Crestar Bank, N.A., a national banking
association, or another financial institution satisfactory to Purchaser and the
Sellers' Representative.
"GAAP" means United States generally accepted accounting
principles (as defined by the United States Financial Accounting Standards
Board), consistently applied.
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"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, ministry, department, commission,
official or other instrumentality or regulatory body or governmental authority,
or of any state, territorial, provincial, county, city or other political
subdivision, of the United States or any foreign country and shall include,
without limitation, any stock exchange, quotation service and the National
Association of Securities Dealers.
"Government Contract" means any Contract pursuant to which any
products (including without limitation Intellectual Property) or services are to
be produced for or sold or supplied to any United States federal, state or local
or foreign Governmental or Regulatory Authority, including without limitation to
any other Person under a Contract pursuant to the terms of which compliance with
the rules and regulations of the relevant United States federal, state or local
or foreign Governmental or Regulatory Authority is required in connection with
the sale or supply to such other Person in connection with the resale or supply
of such products or services to such United States federal, state or local or
foreign Governmental or Regulatory Authority.
"Hazardous Substances" means all contaminants, pollutants,
chemicals, deleterious substances, wastes or industrial, toxic or hazardous
wastes or substances including, without limitation, petroleum and petroleum
products, asbestos in any form that is or could become friable, urea,
formaldehyde, foam insulation and transformers or other equipment that contain
dielectric fluid levels of polychlorinated biphenyls ("PCBs"), flammable
material, radioactive materials, (or any other chemical, material, substance or
waste, exposure to which is now or hereafter prohibited, limited or regulated by
any Governmental or Regulatory Authority), issued or discharged into the
Environment in a greater quantity or concentration than that provided for in any
Environmental Law or the presence of which in the Environment is prohibited
pursuant to any Environmental Law. For the purposes of this definition,
"contaminants" means any solid, liquid or gaseous matter, microorganism, sound,
vibration, ray, heat, water, radiation or a combination of any of them that
adversely alters the quality of the Environment.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976.
"Indebtedness" of any Person means, at any date, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services (other than trade accounts payable
arising in the ordinary course of business), (d) all capital lease obligations
of such Person, (e) all obligations of such Person to purchase securities or
other property which arise out of or in connection with the sale of the same or
substantially similar securities or property, (f) all obligations of such Person
to reimburse any bank or other Person in respect of amounts paid under a letter
of credit, bankers' acceptance or similar instrument, (g) all obligations of
others secured by a Lien on any asset of such Person, whether or not such
obligation is assumed by such Person or for which such Person would be liable
therefor under applicable law or any agreement or instrument by virtue of such
Person's ownership interest in or other relationship with such entity, (h) all
obligations of others guaranteed by such Person, and (i) with respect to any
swaps, puts calls, collars, caps or other derivative transactions with respect
to or in connection with any of the foregoing.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article VIII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VIII.
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"Indemnity Notice" means written notification pursuant to
Section 8.02(c) of a claim for indemnity under Article VIII by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"Intellectual Property" means all United States, and foreign
trademarks and trademark rights, trade names and trade name rights, service
marks and service ▇▇▇▇ rights, service names and service name rights, copyrights
and copyright rights, patents and patent rights, mask works, brand names, trade
dress, industrial or product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions (whether
or not patentable), invention disclosures, processes, formulae, industrial
models, designs, specifications, data, databases and data collections,
technology, methodologies, computer programs (including all source codes, object
codes, firmware, development tools, files, records and data), and any other
confidential and proprietary right or information, whether or not subject to
statutory registration, and all related technical information, manufacturing,
engineering and technical drawings, know-how and all common law and world-wide
rights to, pending United States, and foreign applications for and registrations
of, patents (including all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations in part), trademarks, service
marks and copyrights, and the right to ▇▇▇ for past infringement, if any, in
connection with any of the foregoing, and all documents, disks and other media
on which any of the foregoing is stored.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, financial assets, security entitlements,
securities (including rights to purchase and securities convertible into or
exchangeable for other securities), interests in joint ventures, limited
liability companies and general and limited partnerships, mortgage loans and
other investment or portfolio assets owned of record or beneficially by any
Company.
"IRS" means the Internal Revenue Service of the United States.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements of any Governmental or Regulatory Authority
having the effect of law in the United States or, any foreign country or any
state, county, province, territory, city or other political subdivision thereof.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due), including,
without limitation, fines, penalties, judgments, awards, settlements respecting
any judicial, administrative or arbitration proceedings, damages, losses, claims
or demands with respect to any Law.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any damage, fine, fee, penalty, deficiency,
diminution in value of investment, loss or expense, including without
limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation, arbitration or other proceedings or of any claim,
default or assessment (such fees and expenses to include
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without limitation all fees and expenses of attorneys incurred in connection
with (a) the investigation or defense of any Third Party Claim or (b) asserting
or disputing any right under this Agreement against any party hereto or
otherwise).
"Operative Agreements" means this Agreement, the Escrow
Agreement, the ▇▇▇▇▇▇▇ Non-Competition Agreement, the Employment Agreements, the
Assignment and Release of Claims, the Assignment of Options, and the Employee
Non-Disclosure, Development and Assignment of Proprietary Rights Agreement.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (a) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (b) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Permitted Liens" means (a) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (b) statutory Liens of landlords and Liens of carriers,
contractors, warehousemen, mechanics, material men and other similar Persons
imposed by applicable Law and incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith and which, in the case
of Owned Real Property, shall have been discharged before the Closing; (c) Liens
relating to deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
or to secure the performance of leases, trade contracts or other similar
agreements; (d) Liens specifically identified in the Effective Date Balance
Sheet; (e) Liens securing executory obligations under any lease that constitutes
an "operating lease" under GAAP; and (f) other Liens set forth in Section 1.01
of the Disclosure Schedule; provided, however, that (X) with respect to each of
the foregoing clauses (a) through (f), to the extent that any such Lien arose on
or prior to the date of the Effective Date and relates to, or secures the
payment of, a Liability that is required to be accrued under GAAP, such Lien
shall not be a Permitted Lien unless adequate accruals for such Liability have
been established therefor on the Effective Date Balance Sheet in conformity with
GAAP, and (Y) with respect to the foregoing clause (f), to the extent that any
such Lien secures any Indebtedness (other than a lease of tangible personal
property secured only by, or with respect to which there exists only a notice
filing that relates only to the, the tangible personal property so leased and
proceeds thereof) has been discharged as of the Effective Date, such Lien shall
not be a Permitted Lien. Notwithstanding the foregoing, no Lien arising under
the Internal Revenue Code (other than as expressly referred to in (a) above)
shall be a Permitted Lien.
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"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any employee pension plan, and any bonus,
incentive compensation, deferred compensation, profit sharing, retirement,
savings, stock purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, leave of absence, layoff, vacation, day or dependent
care, legal services, cafeteria, life, medical, dental, health, accident,
disability, workers' compensation or other insurance, severance, separation or
other employee benefit plan, practice, policy, program or arrangement of any
kind providing money (other than as current salary or wages), services, property
or other benefits, written or oral, funded or unfunded, and including all that
have been frozen or terminated, and all trust, escrow or similar agreements
related thereto, funded or unfunded, which are maintained by any Company with
respect to any of its present or former employees, independent contractors,
directors, officers or shareholders or with respect to which any Company has
made or is required to make payments, transfers or contributions or is required
to administer and make regulatory filings.
"Purchased Loan Accounts" means any and all Indebtedness of
the Target Companies to the Sellers or their Affiliates.
"Purchased Options" means the Options of the Individual
Sellers to acquire shares of capital stock in or other securities of the Target
Companies.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Substance into the Environment.
"Representatives" means Purchaser and its Affiliates and each
of their respective officers, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives.
"Resolution Period" means the period ending thirty (30)
calendar days following receipt by an Indemnified Party of an Arbitration
Notice.
"Seller's Knowledge" means to the best of the knowledge and
belief of the Individual Sellers and the directors and officers of the Companies
after making reasonable and prudent inquiry and investigation in connection
therewith.
"Securities Act" means the (United States) Securities Act of
1933, as amended, and the rules and regulations thereunder.
"Site" means any of the real properties currently or
previously owned, leased or operated by any Company, any predecessors of any
Company or any entities previously owned by any Company, including all soil,
subsoil, surface waters and groundwater thereat.
"Subsidiary" means, with respect to any Company, (a) any other
corporation as to which more than 10% of the outstanding stock having ordinary
voting rights or power (and excluding stock having voting rights only upon the
occurrence of a contingency unless and until such contingency occurs and such
rights may be exercised) is owned or controlled, directly or indirectly, by such
Company, and (b) any partnership, joint venture or other similar relationship
between such Company (or any Subsidiary thereof) and any other Person (whether
pursuant to a written agreement or otherwise) and any limited liability company,
in each case if such Company has a 10% or more equity interest therein.
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"Tax" or "Taxes" means all United States and foreign federal,
state, territorial, provincial or local net or gross income, gross receipts, net
proceeds, sales, use, franchise, ad valorem, real or personal property (tangible
and intangible), value added, transfer, franchise, stamp, leasing, lease, user,
transfer, fuel, excess profits, undistributed profits, windfall profits, blank
share, issued share, bearer share, capital stock, customs duties, recapture,
license, employee income withholding, dividend withholding, interest
withholding, other withholding, payroll, employment, unemployment, social
security, pension, health, old age security, unemployment, excise, property,
disability, severance, alternative or add-on minimum, environmental, or other
taxes, assessments, duties, fees, levies or other charges of any nature whatever
imposed by any Governmental Authority, whether disputed or not, together with
any interest, penalties, additions to tax or additional amounts with respect
thereto.
"Tax Returns" means any and all United States and foreign
federal, state, territorial, provincial or local returns, reports or statements
(including any information returns) required to be filed for purposes of a
particular Tax.
"Taxing Authority" means the IRS and any other governmental or
Regulatory Authority in the United States federal, foreign jurisdiction, or any
state, country, province, territory, or local jurisdiction therein, having or
purporting to exercise jurisdiction with respect to any Tax.
1.02 OTHER DEFINITIONS. As used in this Agreement, the following
defined terms shall have the meanings set forth in the sections of this
Agreement referred to opposite each such defined term:
"AAA"..................................................................Section 11.01.
"Arbitration Notice"...................................................Section 11.02(b).
"Arbitrators' Report"..................................................Section 11.02(c).
"Assumed Liabilities"..................................................Section 2.01(c).
"Audited Financial Statements".........................................Section 3.08.
"Business Plans".......................................................Section 3.31
"Closing"..............................................................Section 2.03(a).
"Closing Date".........................................................Section 2.03(a).
"Disputes".............................................................Section 11.01.
"Earn Out Amount"......................................................Section 2.02.
"Effective Date Balance Sheet".........................................Section 3.08(a).
"Employees"............................................................Section 3.14(a).
"Employee Non-Competition Agreements"..................................Section 5.13(b).
"Employee Non-Disclosure, Development and
Assignment of Proprietary Rights Agreement"...................Section 5.13(b).
"Employment Agreements"................................................Section 5.13(a).
"Escrow Agreement".....................................................Section 2.04.
"Escrow Amount"........................................................Section 2.04.
"Escrow Fund"..........................................................Section 2(a) of the Escrow Agreement.
"Evaluation Material"..................................................Section 5.04(a).
"Excluded Assets"......................................................Section 2.01(d)
"Financial Statements".................................................Section 3.08.
"▇▇▇▇▇▇▇ Non-Competition Agreement"....................................Section 5.13(c).
"Individual Seller" or "Individual Sellers"............................the forepart of this Agreement.
"Initiating Party".....................................................Section 11.02(b)
"Intellectual Property License Agreements".............................Section 3.17(a).
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"Leased Real Property".................................................Section 3.15(a).
"Other Stockholders"...................................................the forepart of this Agreement.
"Owned Real Property"..................................................Section 3.15(a)
"Principal Stockholder" or "Principal Stockholders"....................the forepart of this Agreement.
"Purchase Price".......................................................Section 2.02.
"Purchased Stock"......................................................the forepart of this Agreement.
"Purchaser"............................................................the forepart of this Agreement.
"Purchaser Indemnities"................................................Section 8.01(a).
"Real Property"........................................................Section 3.15(a)
"Real Property Leases".................................................Section 3.15(a).
"Reviewed Financial Statement".........................................Section 3.08.
"Rules"................................................................Section 11.02(b).
"Seller" or "Sellers"..................................................the forepart of this Agreement.
"Seller Indemnities"...................................................Section 8.01(b).
"Sellers' Representative"..............................................Section 10.01.
"Selling Company" or "Selling Companies"...............................the forepart of this Agreement.
"Shareholder Percentage"...............................................Section 2.03.
"Target Company" or "Target Companies".................................the forepart of this Agreement.
"Third Party Claim"....................................................Section 8.02(a).
"Warranty Obligations".................................................Section 3.30.
1.03 INTERPRETATION. As used in this Agreement, the word "including"
means without limitation; the word "or" is not exclusive; and the words
"herein", "hereof', "hereby", "hereto" and "hereunder" refer to this Agreement
as a whole. Any reference to any applicable Law shall be deemed also to refer to
all rules and regulations promulgated thereunder unless the context otherwise
requires. Whenever required by the context, any gender shall include any other
gender, the singular shall include the plural and the plural shall include the
singular. Unless the context otherwise requires, references herein: (a) to
Articles, Sections, Exhibits and Schedules mean the Articles and Sections of and
the Exhibits and Schedules attached to this Agreement; and (b) to an agreement,
instrument or other document means such agreement, instrument or other document
as amended, supplemented and modified through the date hereof unless the context
otherwise requires and thereafter from time to time to the extent permitted by
this Agreement. The Schedules and Exhibits referred to herein shall be construed
with and as an integral part of this Agreement to the same extent as if they
were set forth verbatim herein. The Table of Contents and titles to Articles and
headings of Sections or Schedules are inserted for convenience of reference only
and shall not be deemed a part of or to affect the meaning or interpretation of
this Agreement.
ARTICLE II: SALE OF PURCHASED STOCK AND ASSETS; CLOSING
2.01 PURCHASE AND SALE.
(a) The Individual Sellers agrees to sell to Purchaser, and Purchaser
agrees to purchase from the Individual Sellers, the Purchased Stock, the
Purchased Options and the Purchased Loan Accounts owned by the Individual
Sellers, and the Selling Companies each agree to sell to Purchaser, and the
Purchaser agrees to purchase from each Selling Company, the Purchased Assets
free and clear of all Liens other than Permitted Liens, and in connection
therewith to assume the Assumed Liabilities all on the terms and subject to the
conditions set forth in this Agreement.
(b) The Purchased Assets shall include, without limitation (other than
as expressly set forth in Section 2.01(d), all of the following assets of the
Selling Companies:
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(i) all Owned Real Property, together with the fixtures and
other improvements thereto and the appurtenances belonging thereto;
(ii) all machinery, equipment, furniture, vehicles, tools,
supplies, fuel, spare parts and other tangible personal property;
(iii) all raw materials, work-in-process and finished goods;
(iv) all Permits which are assignable;
(v) all Environmental Permits which are assignable;
(vi) all Intellectual Property;
(vii) the rights and interests of Selling Companies in, to and
under all Contracts;
(viii) all accounts receivable and notes receivable;
(ix) all Books and Records, wherever located;
(x) all forms, labels, stationery, shipping materials,
catalogues, brochures, art work, photographs and advertising materials;
(xi) all prepaid expenses and deferred charges;
(xii) all other Assets and Properties.
(c) Except to the extent set forth below, at the Closing the Purchaser
shall assume (X) all obligations of the Selling Companies under all Contracts,
to the extent that such obligations are to be performed after Closing in
accordance with their respective provisions; (Y) all such existing liabilities
and obligations of the Selling Companies as are reflected in the Effective Date
Balance Sheet, but only to the extent of the accrual therefor in the Effective
Date Balance Sheet; and (Z) those Liabilities of the Selling Companies whose
incurrence after the Effective Date would not breach the provisions of Section
3.10(b), including without limitation those set forth in Section 5.21 (the
"Assumed Liabilities"). Notwithstanding the preceding sentence, the following
Liabilities of the Selling Companies are expressly excluded from the Assumed
Liabilities:
(i) all Liabilities for Taxes (A) incurred by either Selling
Company prior to or payable with respect to any period preceding the
Effective Date, except to the extent that provision is made therefor in
the Effective Date Balance Sheet, or (B) incurred by the Selling
Companies with respect to any of the transactions contemplated hereby;
(ii) all Liabilities, whether civil or criminal in nature,
arising out of any actual or alleged violation by either Selling
Company, or by any previous owner of any of the Purchased Assets, of
any Laws or Permits.
(iii) all Liabilities arising from a breach of any Contract by
either Selling Company before the Closing;
(iv) all Liabilities arising from litigation pending or
threatened against either Selling Company at the time of the Closing;
(v) except to the extent expressly provided in Article VII
hereof, any liability or obligation in respect of severance or
separation pay or employee benefits for present or former employees of
either Selling Company; and
(vi) all present or future Liabilities to the Sellers and
their Affiliates, including without limitation to ▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇.
▇▇▇▇▇▇ for any commissions or bonuses, except as otherwise set forth in
Section 5.21.
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(d) The Selling Companies shall retain, and the Purchased Assets shall
not include, the following properties, assets and other rights of the Selling
Companies (collectively, the "Excluded Assets"):
(i) the consideration to be paid to the Selling Companies by
Purchaser pursuant to this Agreement;
(ii) the Selling Companies' rights arising under this
Agreement or any other Operative Agreement;
(iii) all claims, defenses, choses in action, causes of action
and judgment in respect of any Actions or proceedings identified in
Section 3.12 of the Disclosure Schedule, or with respect to any other
liability not assumed by Purchaser; and
(iv) all insurance policies other than those that are part of
or associated with any Plan; and
(v) the outstanding balance of not more than $95,000 on the
receivable of $178,769 owed to DTI by CSI and ASI as a commission for
products sold by and shipped by CSI and ASI prior to the Effective
Date, being the receivable referred to in Section 3.09(d)(ii)(A).
2.02 PURCHASE PRICE. The aggregate purchase price payable at the
Closing for the Purchased Stock, the Purchased Options, the Purchased Loan
Accounts, and the Purchased Assets is Fifteen Million Nine Hundred Thousand
Dollars ($15,900,000) (the "Purchase Price). In addition to the Purchase Price,
and in consideration for the sale by the Sellers to the Purchaser of the
Purchased Stock, the Purchased Options, the Purchased Loan Accounts, and the
Purchased Assets, the Purchaser shall, subject to the conditions and at the time
set forth in Section 2.06, pay to the Sellers an additional and contingent
amount of One Million Dollars ($1,000,000) (the "Earn Out Amount"), which, if
earned and payable pursuant to Section 2.06, shall be part of the Purchase
Price. The Purchase Price other than the Earn-Out Amount is payable in the
manner provided in Sections 2.03 and 2.04 and the Earn-Out Amount, if earned and
payable, is payable in the manner provided in Section 2.06. The Purchase Price,
including the Earn-Out Amount if earned and payable, is allocated between the
Purchased Stock, the Purchased Options, the Purchased Loan Accounts and the
Purchased Assets as provided in Section 5.11.
2.03 CLOSINGS.
(a) The closing (the "Closing") for the purchase and sale contemplated
hereunder will take place at the offices of McGuire, Woods, Battle & ▇▇▇▇▇▇ LLP,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, at
10:00 A.M. local time, on August 11, 1998 or such other date as the Purchaser
and the Sellers' Representative shall mutually agree (the date and time of the
Closing are herein referred to as the "Closing Date").
(b) At the Closing:
(i) Purchaser will pay an aggregate of Thirteen Million Nine
Hundred Thousand Dollars ($13,900,000) of the Purchase Price to the
Sellers by wire transfer of immediately available funds to such account
as each Seller may reasonably direct by written notice delivered to
Purchaser by such Seller at least three (3) Business Days before the
Closing Date, payable to each Seller in the amount obtained by
multiplying $13,900,000 by the percentage set forth opposite such
Seller's name
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in Section 2.03(b) of the Disclosure Schedule (the "Shareholder
Percentage"); provided, however, that with respect to any such payment
to any Individual Seller which would constitute actual or deemed
compensation to such Individual Seller in connection with such
Individual Seller's employment with a Company or with respect to which
withholding is otherwise reflected in Section 2.03(b) of the Disclosure
Schedules, the Purchaser shall withhold from such payment all
withholding required in connection therewith under applicable federal
and state Tax or other relevant Laws, and such withheld amount shall be
deemed for all purposes hereunder to have been paid to such Individual
Seller. Any amounts so withheld by the Purchaser shall be paid by the
Purchaser to the Target Companies, as applicable. In addition, of the
amount of the Purchase Price payable to ▇▇. ▇▇▇▇▇▇ on the Closing Date
as reflected in in Section 2.03(a) of the Disclosure Schedule, ▇▇.
▇▇▇▇▇▇ hereby authorizes the Purchaser to pay to ▇▇. ▇▇▇▇▇▇▇ on his
behalf, and on the Closing Date the Purchaser shall pay to ▇▇. ▇▇▇▇▇▇▇
on ▇▇. ▇▇▇▇▇▇'▇ behalf, an amount of $850,000 in complete satisfaction
of the amount owed by ▇▇. ▇▇▇▇▇▇ to ▇▇. ▇▇▇▇▇▇▇, which amount shall for
all purposes hereunder be deemed to have been received by ▇▇. ▇▇▇▇▇▇ as
part of the Purchase Price. The balance of the Purchase Price other
than the Earn Out Amount, comprising $2,000,000, will be paid in the
manner provided for in Section 2.04.
(ii) Simultaneously, each Individual Seller will sell to
Purchaser those shares of Purchased Stock, those Purchased Options, and
those Purchased Loan Accounts set forth opposite the name of each such
Individual Seller on Schedule 2.03(b) of the Disclosure Schedule
(representing, in the aggregate, 100% of each class of outstanding
capital stock of each Target Company, all Options to acquire any
capital stock or other securities of each Target Company, and all
Liabilities of each Target Company to the Sellers and their
Affiliates), in each case free and clear of all Liens, and the Selling
Companies will sell the Purchased Assets to Purchaser free and clear of
all Liens other than Permitted Liens, by delivering to Purchaser (i)
stock certificates or stock indemnities evidencing all of the Purchased
Stock duly endorsed by the Individual Sellers in blank or accompanied
by stock powers duly executed by the Individual Sellers (and also, in
the case of any married (by Law, common law or otherwise) Individual
Seller resident in a community of property state, executed by the
spouse of such Individual Seller) in blank, with all required stock
transfer tax stamps affixed or provided for, (ii) assignments of all of
the Purchased Options in the form of Exhibit B, duly executed by the
Individual Sellers, reflecting the Purchaser as the assignee, (iii)
assignments of all of the Purchased Loan Accounts in the form of
Exhibit A, duly executed by every Seller on its own behalf and on
behalf of every Affiliate of every such Seller, and (iv) a ▇▇▇▇ of sale
and assignment in the form of Exhibit I hereto duly executed by each
Selling Company.
(iii) The Purchaser shall deliver to the Selling Companies an
instrument of assumption of liabilities in the form of Exhibit J-1
hereto with respect to ASI and Exhibit J-2 hereto with respect to DTI,
and shall deliver the Escrow Amount to the Escrow Agent and there shall
also be delivered by Purchaser and Sellers the opinions, certificates
and other agreements, documents and instruments to be delivered under
Sections 6.01 and 6.02.
2.04 ESCROW. On the Closing Date, the Purchaser, as collateral security
for the payment of the outstanding balance of the Purchase Price of Two Million
Dollars ($2,000,000) not paid to the Sellers at the Closing, shall execute and
deliver an Escrow Agreement in the form annexed hereto as Exhibit C (the "Escrow
Agreement") and Purchaser shall execute and deliver to and deposit with the
Escrow Agreements the sum of Two Million Dollars ($2,000,000) (the "Escrow
Amount"). The Escrow Amount shall be payable to the Sellers at the end of the
eighteenth month following the month in which the Closing occurs, pursuant to
the terms of the Escrow Agreement and subject to the right of the Purchaser and
Microdyne to indemnification hereunder pursuant to Article VIII hereof and the
provisions of the Escrow Agreement;
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provided, however, that with respect to any such payment to any Individual
Seller which would constitute actual or deemed compensation to such Individual
Seller in connection with such Individual Seller's employment with a Company or
with respect to which withholding is otherwise reflected in Section 2.03(b) of
the Disclosure Schedules, the Escrow Agent shall, in accordance with the terms
of the Escrow Agreement, withhold from such payment all withholding required in
connection therewith under applicable federal and state Tax or other relevant
Laws, and such withheld amount shall be deemed for all purposes hereunder to
have been paid to such Individual Seller. Sellers shall not be entitled at the
time of deposit thereof with the Escrow Agent to any of the Escrow Amount
deposited by the Purchaser with the Escrow Agent, and shall be entitled to such
of the Escrow Amount that becomes payable to Sellers only at such time when such
amounts become payable to Sellers pursuant to the terms of the Escrow Agreement.
Any amounts paid or released by the Escrow Agent to the Purchaser under Section
4(a) of the Escrow Agreement, including without limitation following an
arbitration and an arbitrators report or on the order of a court, shall be
treated in the manner contemplated by Section 8.02(f) hereof or, if such
treatment is not proper and permissible as contemplated by Section 8.02(f), as
though such amount had been paid to the Sellers on account of the Purchase Price
and then returned by the Sellers to the Purchaser under Article VIII hereof.
2.05 EFFECT OF FAILURE OF ANY SELLER TO DELIVER. If any Individual
Seller shall fail to deliver on the Closing Date any shares of Purchased Stock
to be sold by him or her hereunder, such failure or refusal shall not relieve
any other Seller of his, her or its obligations hereunder, and Purchaser, at its
option and without prejudice to its rights against such defaulting Seller or
Sellers, shall have the right either to accept delivery of the remainder of the
shares of Purchased Stock and Purchased Assets that it is entitled to have
delivered to it hereunder with a reduction in the Purchase Price for such
undelivered securities, or to give notice of its refusal to accept delivery of
those shares of Purchased Stock and those Purchased Assets tendered, thereby
terminating all its obligations and liabilities to such tendering Sellers.
2.06 EARN OUT AMOUNT.
(a) The Purchaser shall, if the conditions in subsection (b) below are
met, pay the Earn Out Amount to the Sellers on September 1, 1999, by wire
transfer of immediately available funds to such account as each Seller may
reasonably direct by written notice delivered to the Purchaser by such Seller at
least three (3) Business Days before September 1, 1999, payable to each Seller
in the amount obtained by multiplying the Earn Out Amount by each Sellers'
Shareholder Percentage; provided, however, that with respect to any such payment
to any Individual Seller which would constitute actual or deemed compensation to
such Individual Seller in connection with such Individual Seller's employment
with a Company or with respect to which withholding is otherwise reflected in
Section 2.03(b) of the Disclosure Schedules, the Purchaser shall withhold from
such payment all withholding required in connection therewith under applicable
federal and state Tax or other relevant Laws, and such withheld amount shall be
deemed for all purposes hereunder to have been paid to such Individual Seller.
(b) The Earn Out Amount shall be payable if the Acquired Businesses,
during the twelve (12) calendar month period commencing June 1, 1998 and ending
May 31, 1999, achieve an EBIT of $3,923,000 or more and revenues of $19,615,000
or more, both determined in accordance with GAAP as historically implemented by
the Target Companies, consistently applied, and both achieved by the operation
of the business in a manner not materially inconsistent with the Business Plans,
including with respect to research and development and capital and marketing
expenditure, except as otherwise provided for the next sentence.
(i) The EBIT shall be determined: (A) without any amortization
of goodwill or write up of intangibles associated with the transactions
contemplated hereby; (B) without any charge against the Acquired
Businesses for any costs associated with the transactions contemplated
by this
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Agreement; (C) without any deduction or charge for any deemed
compensation attributed to any Individual Seller arising in connection
with the sale of the Purchased Stock or Purchased Options to the
Purchaser under this Agreement; (D) without any charge against the
Acquired Businesses for any general corporate or head office overhead
charge by Microdyne; (E) with costs for employee benefits taken into
account at whichever is the lower of the per employee (or, where a
percentage of salary, at the same percentage) levels that existed prior
to the Closing or the actual costs, provided however that if employee
benefits are increased after the Closing with the approval of ▇▇.
▇▇▇▇▇▇ and such increase in benefits causes the costs per employee to
exceed the pre-Closing costs per employee, then the costs per employee
shall be taken into account at their actual amount; (F) after deduction
of all incentive compensation, bonuses and commissions paid (not
accrued) from June 1, 1998 through May 31, 1999 to employees and
executives of the Acquired Businesses; and (G) with a charge against
the Acquired Businesses for actual expenses incurred by Microdyne on
behalf of the Acquired Businesses, including without limitation for
insurance and other items purchased by Microdyne for its operating
subsidiaries on a group wide basis.
(ii) The EBIT shall be determined after excluding the effect
on the Acquired Businesses of any material changes to the Acquired
Businesses caused or made by the Purchaser to which the Principal
Stockholders then employed by the Acquired Businesses took exception or
objected to at the time thereof. If the Purchaser makes or causes any
material change to the Acquired Business to which the Principal
Stockholders then employed by the Acquired Businesses take exception or
object at the time thereof, and if it is reasonably likely that the
Earn Out Amount would have been earned but for such change, then the
Purchaser shall be obligated to pay the Earn Out Amount. Nothing herein
shall be construed as in any way constraining the right of the
Purchaser to make changes to the Acquired Businesses, subject to the
Purchaser's obligation to pay the Earn Out Amount if so required under
this paragraph (ii).
(iii) Any revenues, earnings and expenses derived from or
related to (A) the exploitation by the Purchaser in its other
facilities of any of the products or technology of the Acquired
Businesses in markets or applications not being exploited by the
Acquired Businesses on the Closing Date shall be excluded from the
revenues and EBIT hereunder, and (B) any products or product lines that
are transferred to the Acquired Businesses from Microdyne or its
Affiliates or that are acquired for the Acquired Businesses by
Microdyne.
(iv) The EBIT, revenue and balance sheet determinations will
be determined in accordance with GAAP (except as otherwise set forth in
this Section 2.06(b)) subject to all reserves with respect thereto, and
may be adjusted retrospectively at any time up to the date on which the
Earn-Out Amount is to be paid to reflect any matter or circumstance
relevant to the determination thereof for the relevant period,
including without limitation any receivables generated during such
period which are unpaid at the end of such period and with respect to
which a reserve is required to be made prior to the date on which the
Earn-Out Amount is to be paid.
(v) If any one of the EBIT or revenue criteria are not met or
achieved, then no Earn Out Amount shall be payable.
(c) During the month of June, 1999, the Purchaser and those Principal
Stockholders who are employed by the Purchaser or the Target Companies at that
time shall prepare a balance sheet, statement of operations and cash flow for
the Acquired Businesses at and for the twelve (12) month period ending May 31,
1999. If the Purchaser and the Sellers' Representative do not agree on whether
or not the conditions to
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the payment to Earn Out Amount have been met, then the disagreement shall be
resolved pursuant to the arbitration provisions set forth in Article XI.
2.07 MICRODYNE'S GUARANTEE OF THE PURCHASER. Microdyne shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by Purchaser.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated herein, and except as set forth in the
Disclosure Schedule (with Section references corresponding to those set forth
below), each of the Sellers hereby represents, warrants, covenants and agrees,
jointly and severally (subject to Article VIII), to and with Purchaser as
follows:
3.01 ORGANIZATION AND QUALIFICATION. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, in the case of Apcom, DTI and ASI, or California in the case of
Celerity, and has full corporate power and authority to conduct its business as
and to the extent now conducted and to own, use and lease its Assets and
Properties. Each Company is duly qualified, licensed or admitted to do business
and is in good standing in the jurisdictions listed in Section 3.01 of the
Disclosure Schedule, which are the only jurisdictions in which the ownership,
use or leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except
where the failure to be so qualified, licensed or admitted would not have a
material adverse effect on such Company. The business now being conducted by
each Company has not been conducted under any other name.
3.02 CAPITAL STOCK.
(a) The authorized capital stock of:
(i) Apcom consists of twenty million (20,000,000)
shares of shares of common stock, par value $0.01 per share; and
(ii) Celerity consists of five million (5,000,000)
shares of common stock without par value.
(b) The only issued and outstanding shares of common stock of
the Target Companies are the shares of Purchased Stock, all of which are validly
issued, fully paid and nonassessable, and the issuance of all of which was in
compliance with all applicable Laws. The only Options to acquire shares of stock
in the Target Companies are the Purchased Options, all of the material terms of
which are set forth in Section 3.02(b) of the Disclosure Schedule. The share
ledger of each Target Company accurately reflects all issuances and transfers of
such Target Company's capital stock since the incorporation of such Target
Company.
(c) Except for the Purchased Stock and for shares of common
stock of the Target Companies issuable upon exercise of the Purchased Options,
no shares of the capital stock of the Target Companies have been issued or
reserved for issuance. Except for the Purchased Options, there are no
outstanding Options with respect to the capital stock of the Target Companies,
or agreements, arrangements or understandings to issue Options with respect to
the capital stock of the Target Companies and there are
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no preemptive rights or agreements, arrangements or understandings to issue
preemptive rights with respect to the issuance or sale of the Target Companies'
capital stock.
(d) The Individual Sellers are the record and beneficial
owners of the Purchased Stock, the Purchased Options and the Purchased Loan
Accounts as set forth in Section 2.03(b) of the Disclosure Schedule free and
clear of all Liens. The delivery to the Purchaser at the Closing of the
certificates representing the Purchased Stock accompanied by a share transfer
form reflecting the Purchaser as the transferee and an assignment of the
Purchased Options reflecting the Purchaser as the assignee, executed in each
case by the Individual Seller identified in Section 2.03(b) of the Disclosure
Schedule as the owner thereof, will transfer to Purchaser good and valid title
to the Purchased Stock, the Purchased Options and the Purchased Loan Accounts,
free and clear of all Liens.
3.03 AUTHORITY. Each of the Sellers has the full legal capacity to
execute and deliver this Agreement and the Operative Agreements to which he, she
or it is a party and to perform his, her or its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Operative
Agreements by the Selling Companies and the consummation by the Selling
Companies of the transactions contemplated hereby and thereby have been duly and
validly approved by each of the Selling Companies, and no other action on the
part of any of the Selling Companies is necessary to authorize the execution,
delivery and performance of this Agreement and the Operative Agreements and the
consummation by each of them of the transactions contemplated hereby and
thereby. This Agreement has been duly and validly executed and delivered by each
of the Sellers and this Agreement constitutes, and each of the Operative
Agreements to which such Seller is a party (when so executed and delivered) will
constitute, legal, valid and binding obligations of each of the Sellers
enforceable against him, her or it in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
3.04 SUBSIDIARIES; OFFICERS AND DIRECTORS; CHARTER AND BYLAWS.
(a) No Company has any Subsidiaries.
(b) The name of each director and officer of each Company on the date
hereof, and the position with such Company is listed in Section 3.04 of the
Disclosure Statement.
(c) The Sellers, prior to the execution of this Agreement, have
delivered to Purchaser true and complete copies of the Certificate or Articles
of Incorporation and By-laws of each Company.
3.05 NO CONFLICTS. The execution and delivery by each of the Sellers of
this Agreement do not, and the execution and delivery by each of the Sellers of
the Operative Agreements to which he, she or it is a party, the performance by
each of the Sellers of his, her or its respective obligations under this
Agreement and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Certificate or Articles of
Incorporation or By-laws of any Company or of any agreement of the
shareholders of any Company;
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(b) subject to obtaining the consents and approvals and making
the filings and giving the notices referred to in Section 3.06 below or
described in Section 3.06 of the Disclosure Schedule, if any, conflict
with or result in a violation or breach of any term or provision of any
Law or Order applicable to any Company or any of their respective
Assets and Properties, the effect of which, individually or in the
aggregate, would reasonably be expected to have a material adverse
effect on the ability of the Sellers to consummate the transactions
contemplated by this Agreement or to materially hinder or delay such
consummation or would reasonably be expected to have a material adverse
effect on the assets, business, operations or financial performance of
the Acquired Businesses after the Closing; or
(c) except as described in Section 3.05 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default
under, (iii) require any Company or any of the Individual Sellers to
obtain any consent, approval or action of, make any filing with, or
give any notice to, any Person as a result or under the terms of, (iv)
result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or
give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under, or (vi) result in
the creation or imposition of any Lien upon the Purchased Stock or any
Company or any of their respective Assets and Properties (including
without limitation the Purchased Assets) under, any Contract or Permit
to which any Company or any of the Sellers is a party or by which any
of their respective Assets and Properties is bound, the effect of
which, individually or in the aggregate, would reasonably be expected
to have a material adverse effect on the ability of the Sellers to
consummate the transactions contemplated by this Agreement or to
materially hinder or delay such consummation or would reasonably be
expected to have a material adverse effect on the assets, business,
operations or financial performance of the Acquired Businesses after
the Closing.
3.06 GOVERNMENTAL APPROVALS AND FILINGS. Except for the applicable
requirements of the HSR Act and as described in Section 3.06 of the Disclosure
Schedule, no material permits, consents or approvals by, or filing with or
notice to, any Governmental or Regulatory Authority, including, without
limitation, any consents or approvals under any Environmental Law, is required
on the part of any Company or any of the Individual Sellers in connection with
the execution, delivery and performance of this Agreement or any of the
Operative Agreements to which he, she or it is a party or the consummation of
transactions contemplated hereby or thereby, for which purpose any permit
consent, approval, filing or notice required in connection with any Government
Contract shall be deemed to be material.
3.07 MINUTE BOOKS AND RECORDS. The minute books and other similar
records of each Company provided to Purchaser prior to the execution of this
Agreement contain a true and complete record, in all material respects, of all
action taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the boards of directors and committees of the boards of
directors of such Company.
3.08 FINANCIAL STATEMENTS AND RECORDS.
(a) Attached hereto as Section 3.08(a) of the Disclosure Schedule are
true and complete copies of the following financial statements:
(i) the audited balance sheets of Apcom as of October 31, 1996
and 1997, and the related statements of operations and cash flow for
each year then ended, in each case with the report thereon of Apcom's
Accountants, and the unaudited balance sheet of Apcom as of the
Effective Date
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and the related statements of operations and cash flow for the seven
month interim period then ended;
(ii) the audited balance sheets of Celerity as of December 31,
1996 and 1997 and the related statements of operations and cash flow
for each year then ended, in each case with the report thereon of
Celerity's Accountants, and the unaudited balance sheet of Celerity as
of the Effective Date and the related statements of operations and cash
flow for the five month interim period then ended;
(iii) the unaudited balance sheets of DTI as of December 31,
1996 and 1997 and the Effective Date, and the related statements of
operations and cash flow for each year or interim period then ended;
(iv) the unaudited balance sheets of ASI as of December 31,
1996 and 1997 and the Effective Date, and the related statements of
operations and cash flow for each year or interim period then ended.
Such unaudited balance sheets and related statements of operations and cash flow
are referred to herein as the "Unaudited Financial Statement", such audited
balance sheets of Apcom and Celerity and related statements of operations and
cash flow are referred to herein as the "Audited Financial Statements", and the
Unaudited Financial Statement together with the Audited Financial Statements,
the "Financial Statements". The balance sheets of the Companies as of the
Effective Date are herein referred to collectively as the "Effective Date
Balance Sheet".
(b) All such Financial Statements (i) were prepared from the books of
account or other financial records of the Companies , (ii) were prepared in
accordance with GAAP (except, in the case of the Unaudited Financial Statements,
for the absence of footnotes and audit adjustments) consistently applied
throughout the periods involved, and (iii) fairly present the financial
condition, results of operations, cash flow and EBIT of the Companies in all
material respects as of the dates thereof and for the periods covered thereby.
(c) On the Effective Date, determined in accordance with the accounting
requirements and principles set forth in Section 3.08(c) of the Disclosure
Schedule, and in each case as confirmed by and as set forth in the Effective
Date Balance Sheet, (i) the aggregate shareholders equity of the Companies
(comprising, for the purposes hereof, assets minus liabilities, for which
purpose any tax deduction, tax carry back or deferred tax asset arising from or
associated with the treatment of any part of the Purchase Price as deemed
compensation to any Seller shall be deemed to have zero value) shall be
$4,045,000 or greater, (ii) the aggregate Indebtedness of the Companies
(excluding all intercompany amounts due or payable where the debits and credits
offset one another other ) shall not exceed $400,000, and (iii) the aggregate
cash and Cash Equivalents of the Companies shall not be less than $234,000.
(d) The Companies each maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
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3.09 ABSENCE OF CHANGES. Except as set forth in Section 3.09 of the
Disclosure Schedule, since the Effective Date, each Company has been operated in
the ordinary course of business consistent with past practice and there has not
been any material adverse change, or any event or development which,
individually or together with other such events or developments, could
reasonably be expected to result in a material adverse change, in the Business
or Condition of the Company. None of the other representations or warranties set
forth in this Agreement shall be deemed to limit the foregoing. In addition,
without limiting the foregoing, except as disclosed in Section 3.09 of the
Disclosure Schedule, there has not occurred since the Effective Date:
(a) any amendment or change to the Articles or Certificate of
Incorporation of any Company or the by-laws of any Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of any Company, or any direct or
indirect redemption, purchase or other acquisition by any Company of any capital
stock or any other securities of, or any Options with respect to any capital
stock or other securities of, such Company or any other Company, or any payment
or discharge of or the giving of any security for the payment or discharge of
any Liability of any Company to any Individual Seller or his or her Affiliate,
other than for (i) salary as permitted by Section 5.01(f)(v), (ii) the payment
of the commissions referred to in Section 3.09(d)(ii)(A), (iii) the payment of
the bonuses referred to in Section 3.09(d)(i)(A), and (iv) the assignment by
Apcom to ▇▇. ▇▇▇▇▇▇▇ of a split dollar life insurance policy carried on the
books of Apcom at a value of $94,000;
(c) any authorization, issuance, sale or other disposition by each
Company of any shares of capital stock of each Company, or any Option relating
to such capital stock or any modification or amendment of any right of any
holder of any outstanding shares of capital stock of any Company;
(d) (i) any payment of a regular, special or year end bonus to any
employee or officer or director of any Company, or any increase in salary, rate
of commissions or rate of consulting fees of any director, officer, employee or
consultant of any Company, other than (A) the payment of profit sharing bonuses
by CSI to its employees in July 1998 in an amount not exceeding $193,000, and
(B) salary increases to non-management employees in the ordinary course of
business and consistent with past practices; (ii) any payment of consideration
of any nature whatsoever to any officer, director, stockholder (including the
Individual Sellers), employee or consultant of any Company, other than (A) the
payment of commissions by ASI and Celerity to DTI for products sold and shipped
by ASI and Celerity prior to the Effective Date, accrued as a liability of ASI
and Celerity to DTI as of the Effective Date, in an aggregate amount not
exceeding $178,769 in respect of which the unpaid balance of DTI's receivable
for such commission is an Excluded Asset, and (B) salary paid in the ordinary
course of business consistent with past practices; (iii) any establishment or
modification of (A) targets, goals, pools, formula or similar provisions under
any Plan, employment contract or other employee compensation arrangement of any
Company, or (B) salary ranges, guidelines or similar provisions in respect of
any Plan, employment contract or other employee compensation arrangement of any
Company; (iv) any grant of any severance, continuation or termination pay to any
director, officer, stockholder (including the Individual Sellers) or employee of
any Company; or (v) any adoption, entering into, amendment, modification or
termination (partial or complete) of any Plan or employment contract of any
Company;
(e) (i) incurrences by any Company of Indebtedness or (ii) any
voluntary purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled payment date with respect to, or waiver of any right of
any Company under, any Indebtedness of or owing to any Company;
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(f) any change in or incurrence of any Liability of any Company other
than as permitted by Section 3.10(b);
(g) any physical damage, destruction or other casualty loss (whether or
not covered by insurance) affecting any of the Assets and Properties of any
Company in an aggregate amount exceeding $10,000;
(h) any write-off or write-down of or any determination to write off or
write down any of the Assets and Properties of any Company (other than the
assignment to ▇▇. ▇▇▇▇▇▇▇ referred to in Section 3.09(b)(iv)) in an aggregate
amount exceeding $10,000;
(i) any purchase of any Assets and Properties of any Person or any
sale, license or other disposition of, or incurrence of a Lien (other than a
Permitted Lien) on, any Assets and Properties of any Company, other than
acquisitions or dispositions in the ordinary course of business of a Company
consistent with past practice and the terms of this Agreement and the Operative
Agreements;
(j) any entering into, amendment, modification, termination (partial or
complete) or granting of a waiver under or giving any consent with respect to
(i) any Contract which is required (or had it been in effect on the date hereof
would have been required) to be disclosed in the Disclosure Schedule pursuant to
Section 3.18, (ii) any Permit held by any Company, or (iii) any Intellectual
Property owned, held or used by any Company;
(k) any capital expenditures or commitments for additions to property,
plant, equipment or Intellectual Property of any Company in an aggregate amount
exceeding $10,000;
(l) any commencement or termination by any Company of any line of
business;
(m) any transaction by any Company with any other Company or with any
officer, director, stockholder (including any Individual Seller), Affiliate or
Associate of any Company, other than pursuant to a Contract in effect on the
Effective Date and disclosed to Purchaser pursuant to Section 3.18(a)(viii) or
other than pursuant to any contract of employment listed pursuant to Section
3.18(a)(I) of the Disclosure Schedule;
(n) the commencement or notice or threat of commencement of any lawsuit
or proceedings against, or investigation of, any Company or its affairs;
(o) any notice of any claim of ownership by a third party of the
Intellectual Property of any Company or notice of infringement by any Company of
any third party's Intellectual Property rights;
(p) any change in pricing or royalties set or charged by any Company to
clients, customers or licensees or in pricing or royalties set or charged by
Persons who have licensed Intellectual Property to any Company;
(q) any loan or advance by any Company to any Person, except for
advances to employees for travel and business expenses in the ordinary course of
business consistent with past practice;
(r) any change in the accounting methods or procedures of any Company;
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(s) any other material transaction involving or development affecting
any Company outside the ordinary course of business consistent with past
practice; or
(t) any entering into of an agreement to do or engage in any of the
foregoing, including without limitation with respect to any Business Combination
not otherwise restricted by the foregoing paragraphs.
3.10 NO UNDISCLOSED LIABILITIES.
(a) Except as specifically reflected or reserved against in
the Effective Date Balance Sheet or as described in Section 3.10 of the
Disclosure Schedule or as otherwise disclosed as liabilities in the other
sections of the Disclosure Schedules hereto, there are at the Effective Date no
liabilities or to the Seller's Knowledge contingent liabilities, whether or not
required to be reflected in financial statements in accordance with GAAP, of,
relating to or affecting any Target Company or any of its Assets and Properties
or any of the Purchased Assets or Assumed Liabilities.
(b) Except as set forth in Section 3.10(b) of the Disclosure
Schedule, no Company has since the Effective Date incurred any Liability other
than (i) Liabilities incurred in the ordinary course of business consistent with
past practice in connection with the purchase of goods and services for resale
(but excluding any purchases which constitute capital expenditure) and which in
aggregate amount outstanding from time to time do not exceed the amount
outstanding at the Effective Date, (ii) Liabilities accrued consistent with past
practice for United States federal and state income taxes and sales taxes for
profits accruing after the Effective Date and sales after the Effective Date,
(iii) other Liabilities incurred in the ordinary course of business consistent
with past practice which in the aggregate are not material to the Business or
Condition of such Company and are not for tort or for breach of contract and
which do not in the aggregate among all Companies exceed $50,000, and (iv)
Liabilities incurred in accordance with and as specifically permitted by the
provisions of this Agreement and the Operative Agreements, which do not in the
aggregate among all Companies exceed $50,000.
3.11 TAXES.
(a) All Tax Returns required to have been filed by or with respect to
any Company have been duly and timely filed, and such Tax Returns shall be duly
and timely filed through the period from the date hereof to the Closing Date,
and each such Tax Return correctly and completely reflects the Tax Liability and
all other information required to be reported thereon. All Taxes due and payable
by any Company have been paid (whether or not shown on any Tax Return),
including all payments of estimated Taxes and withholding Taxes (taking into
account any duly obtained extensions).
(b) The provisions for Taxes due by any Company (including those for
which Tax Returns are not yet required to be filed) in the Financial Statements
for the period ended on the Effective Date, determined without credit, offset or
deduction for any tax deduction, tax carry back or deferred tax asset arising
from or associated with the treatment of any part of the Purchase Price as
deemed compensation to any Seller, are sufficient for all unpaid Taxes of such
Company through the Effective Date or, if required by GAAP to have been accrued
on or before the Effective Date, after the Effective Date.
(c) No Company is a party to any agreement extending the time within
which to file any Tax Return. No claim has ever been made by any jurisdiction in
which any Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
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(d) Each Company has either (i) withheld or deducted all Taxes required
by Law to have been withheld or deducted in connection with amounts paid or
owing to any present or former employee, officer, director, shareholder,
creditor, licensor, licensee, distributor, independent contractor or other third
party, or (ii) if the Company did not itself make payments from which it could
withhold such amounts, has contractually required the Purchaser pursuant hereto
to transfer funds to such Company equal to the withholding amounts set forth in
Section 2.03(b) of the Disclosure Schedules; and each Company has duly paid all
amounts so withheld or deducted to the proper recipients thereof within the
times and in the manner required by such Laws, if such payment was required to
have been paid over as of the Closing.
(e) Section 3.11 of the Disclosure Schedule indicates those Tax
Returns, if any, of the Companies that have been audited by the IRS or any other
Taxing Authority, and indicates those Tax Returns of the Companies that are
currently the subject of audit. No deficiencies, adjustments or changes in
assessments for any Taxes have been proposed, asserted or assessed against any
Company, and no Company expects any Taxing Authority to assess additional Taxes
against or in respect of it for any past period. Except as disclosed in Section
3.1 1 of the Disclosure Schedule, (i) there are no investigations, examinations,
reassessments, claims, actions, suits or proceedings pending or to the Seller's
Knowledge threatened against any Company in respect of any Taxes, nor are there
any matters under discussion with the IRS or any other Taxing Authority relating
to any Taxes imposed, levied or assessed by any such Taxing Authority; and (ii)
there is no dispute concerning any Tax Liability of any Company claimed or
raised or to the Seller's Knowledge threatened by any Taxing Authority. There
are no Liens (other than Liens for Taxes or governmental assessments, charges or
claims the payment of which is not yet due) for Taxes upon the Assets and
Properties of any Company. Sellers have delivered to Purchaser complete and
correct copies of all Tax Returns filed by any Company and all Tax examination
reports since January 1, 1996. No issue has been raised since that date by the
IRS or any other Taxing Authority in any audit of any Company which, by
application of similar principles, could be expected to result in a material
proposed deficiency for any period prior to Closing not yet audited or under
audit.
(f) No Company has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(g) No Company has received any written ruling related to Taxes or
entered into any written and legally binding agreement with the IRS or any other
Taxing Authority relating to Taxes.
(h) No Company has any Liability for Taxes of any Person other than
such Company (i) as a transferee or successor, (ii) by reason of Section
1.1502-6 of the United States Treasury Regulations or any similar provision of
any other Law, (iii) by contract, or (iv) otherwise.
(i) Except as set forth in Section 3.11 of the Disclosure Schedule, no
Company has been a member of a consolidated, combined, affiliated or unitary
group and no Company has filed or consented to the filing of any consolidated,
combined, affiliated or unitary or similar return with any entity with respect
to any Tax. No Company is a party to or is bound by any obligations under any
Tax sharing, Tax indemnity or similar agreement or arrangement.
(j) No Company is a party to any joint venture, partnership or other
arrangement that is treated as a partnership for the purposes of any Tax or Tax
Return.
(k) No Company has made any payments, or is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payment, that would be nondeductible by reason of Section 280G of the Internal
Revenue Code. No payment made by any Principal Stockholder, which payment is or
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will be considered to have been paid by any Company for federal income tax
purposes under Section 83 of the Internal Revenue Code, will be nondeductible by
reason of Section 280G of the Internal Revenue Code.
(l) No Company has filed a consent under Section 341(f) of the Internal
Revenue Code.
(m) Immediately prior to the Closing, the Target Companies will be
corporations described in Section 280G(b)(5)(A)(i) of the Internal Revenue Code
3.12 LEGAL PROCEEDINGS.
(a) Except as disclosed in Section 3.12(a) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below):
(i) there are no Actions or Proceedings pending or, to the
Seller's Knowledge, threatened against, relating to or affecting any
Company or any Individual Seller (in his, her or its capacity as a
stockholder of a Company), or any of their respective Assets and
Properties or this Agreement and the transactions contemplated hereby;
(ii) there are no facts or circumstances known to any Company
or any Individual Seller that could reasonably be expected to give rise
to any Action or Proceeding that would be required to be disclosed
pursuant to clause (a) (i) above; and
(iii) neither any Company nor any Individual Seller has
received notice, or is aware, of any Orders outstanding against any
Company or any Individual Seller (relating to any Company or this
Agreement).
(b) Prior to the execution of this Agreement, the Companies have
delivered all responses of counsel for any Company to auditors' requests for
information regarding Actions or Proceedings pending or threatened against,
relating to or affecting any Company for the periods covered by the Audited
Financial Statements. Section 3.12(b) of the Disclosure Schedule sets forth all
Actions or Proceedings relating to or affecting any Company, any Individual
Seller (in his, her or its capacity as a stockholder of the Company) or any of
their respective Assets and Properties since January 1, 1995.
3.13 COMPLIANCE WITH LAWS AND ORDERS. No Company is, nor has any
Company been at any time, in any material violation of or in any material
default under any Law or Order applicable to any Company or any of its
respective Assets and Properties. In furtherance and not limitation of the
foregoing, no Company has violated any Law in any material way in connection
with the offer, sale or purchase of any securities.
3.14 PLANS.
(a) Set forth in Section 3.14(a) of the Disclosure Schedule is a
complete and correct list of all Plans maintained or contributed to by any
Company, Plans pursuant to which any Company may have any Liability, and Plans
covering employees or former or retired employees of any Company ("Employees")
with respect to their employment with any Company. Except as disclosed in
Section 3.14(a) of the Disclosure Schedule, each Plan is in writing or has been
properly summarized in writing and true and complete copies of the following
items relating to each Plan, where applicable, have heretofore been delivered to
Purchaser: (i) the Plan and any trust, custodial or other funding agreement,
including all amendments thereto; (ii) the three most recent actuarial reports
and annual reports filed with any Governmental or Regulatory Authority
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for the three most recent Plan years; (iii) the most recent summary plan
description, all summaries of material modifications to such summary plan
descriptions and all material Employee communications relating to such Plans
distributed within the last twelve (12) months, and (iv) the most recent
custodian or trustee reports or other financial statement for funded Plans.
(b) Each of the Plans that is a retirement, savings or other pension
plan as defined in Section 3(2) of ERISA has been determined by the IRS to be
tax-qualified under Section 401 of the Internal Revenue Code, and, each Company
has complied, in all material respects, with all applicable Laws in
administering such Plans, including specifically the provisions of ERISA. To the
Seller's Knowledge, no non-exempt prohibited transaction, as defined in Section
4975 of the Internal Revenue Code, has occurred with respect to any such Plans,
and no such Plan has incurred any accumulated funding deficiency, as defined in
Section 412 of the Internal Revenue Code, whether or not waived. There has not
been, with regard to any such Plan, any reportable event, as defined in Section
4043(b) of ERISA, that is required to be reported to the PBGC by any Law. The
fair market value of the assets of each such Plan that is subject to Title IV of
ERISA equals or exceeds the present value of all benefits accrued under such
Plan, whether or not vested, based on the actuarial assumptions that would be
used by the PBGC if the Plan were terminated as of the date of this Agreement or
as of the Closing Date. As to each of the Plans that is a health, severance,
insurance, disability and other employee welfare Plan, and all other employee
benefit plans and programs as defined in Section 3(1) of ERISA, except as set
forth in Section 3.14(b) of the Disclosure Schedule, the Company has complied,
in all material respects, with all applicable Laws in the administration thereof
including, without limitation, the provisions of ERISA when applicable. The
Company has not terminated any Plan or incurred any material liability to the
PBGC under Title IV of ERISA and, to the Seller's Knowledge, no condition exists
that could reasonably be expected to cause the Purchaser to incur any such
liability. All premiums payable to the PBGC have been paid when due. No
compensation or benefit that is or will be payable as a result of the
transactions contemplated by this Agreement will be characterized as an "excess
parachute payment" within the meaning of Section 280G of the Internal Revenue
Code.
(c) All required employer contributions, premium payments and
source-deducted Employee contributions under the Plans have been made or will be
timely made and remitted to the funding agents thereunder. All such
contributions to the Plans for any period ending before the Closing Date that
are not yet, but will be, required to be made are properly accrued and reflected
on the Effective Date Balance Sheet or are disclosed in Section 3.14 (c) of the
Disclosure Schedule. No oral or written promise, commitment or representation
has been made by any Individual Seller or any Company (i) to amend any of the
Plans or to provide increased benefits thereunder to any of the Companies
present or former employees, independent contractors, directors, officers or
shareholders, except pursuant to the requirements, if any, of the Plans or any
collective bargaining agreements, (ii) to establish any new Plans, or (iii) to
fund or continue any Plan beyond the Closing Date. Except as set forth in
Section 3.14 (c) of the Disclosure Schedule, each Plan can be terminated on the
Closing Date without making any additional contribution to such Plan other than
normal contributions with respect to the current plan year.
(d) Except as set forth in Section 3.14(d) of the Disclosure Schedule,
each Plan has been maintained, operated and administered in compliance with its
terms and all related documents or agreements and in compliance with all
applicable Laws. Except as set forth in Section 3.14(d) of the Disclosure
Schedule, any non-compliance or failure to properly administer a Plan or related
trust or fund has not exposed such Plan or related trust or fund or any Company,
nor could it result in any exposure of the Purchaser, to any Taxes, penalties or
Liabilities to any Person, or expose the Plan to disqualification or the trust
or fund to loss of tax exempt status.
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(e) There is no pending or, to the Seller's Knowledge threatened claim
(other than claims for benefits in the ordinary course), assessment, complaint,
proceeding or investigation of any kind before any Governmental or Regulatory
Authority with respect to any Plan.
(f) All insurance premiums required with respect to any Plan up to the
Closing Date have been or shall be paid on or prior to the Closing Date, and,
with respect to any such insurance policy, there shall be no Liability of any
Company or the Purchaser in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent Liability arising wholly or
partially out of events occurring prior to the Closing Date.
(g) All benefits, expenses and other amounts due and payable to or
under any Plan, and all contributions, transfers or payments required to be made
to any Plan, have been paid when due.
(h) No Plan provides benefits, including without limitation death or
medical benefits, beyond termination of service or retirement other than (i)
coverage mandated by Law, (ii) deferred compensation benefits reflected on the
books of a Company and described in Section 3.14(h) of the Disclosure Schedule
or (iii) a pension plan as defined in Section 3(2) of ERISA.
(i) Neither any Company nor any Plan has agreed to guarantee or
indemnify the performance of any Person with respect to any Plan.
(j) As a result of the purchase of the Purchased Stock and the
Purchased Assets by the Purchaser, neither any Company nor the Purchaser shall
be obligated to make a payment to any individual with respect to severance or
compensation for personal services (other than salary and benefits at current
rates for services performed), nor shall any benefit under any Plan be
accelerated or become vested, including any stock options or similar rights to
stock.
3.15 REAL PROPERTY.
(a) Section 3.15(a) of the Disclosure Schedule contains a true and
correct list of (i) all real property owned by any Company ("Owned Real
Property"), (ii) all real property leased, subleased or otherwise occupied by
any Company (as lessor or lessee), together with a brief description of the
terms thereof (the "Leased Real Property", and the leases relating thereto are
herein called the "Real Property Leases" and the Leased Real Property and Owned
Real Property collectively the "Real Property"), and (iii) all Liens relating to
or affecting any Real Property Lease.
(b) Each Company has a fee simple title in and to, and is the record
owner of, the Owned Real Property, free of any Lien other than Permitted Liens.
Subject to the terms of the Real Property Leases, each Company has a valid and
subsisting leasehold estate in and the right to quiet enjoyment and use of each
of the Leased Real Properties leased by it for the full term of the lease
thereof. Each Real Property Lease is in full force and effect and is a legal,
valid and binding agreement, enforceable in accordance with its terms against
the parties thereto, and except as set forth in Section 3.15(b) of the
Disclosure Schedule, there is no, and no Company or Individual Seller has
received notice of any, default (or any condition or event which, after notice
or lapse of time or both, would constitute a default) thereunder. No Company
owes brokerage, commissions or finders fees with respect to any such Real
Property Lease or Leased Real Property, except to the extent that a Company may
renew the term of any such Real Property Lease, in which case, any such
commissions and fees would be in amounts that are reasonable and customary for
premises similar to those leased, given their intended use and terms. No Company
has assigned, sublet, transferred, hypothecated or
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otherwise disposed of any interest in any Real Property Lease, except as
otherwise set forth in Section 3.15(b) of the Disclosure Schedule..
(c) Each Company has delivered to Purchaser prior to the execution of
this Agreement true and complete copies of all Real Property Leases (including
any amendments and renewal letters).
(d) The improvements on the Leased Real Property subject to the Real
Property Leases and the Owned Real Property are in good operating condition and
in a state of good maintenance and repair, ordinary wear and tear excepted.
(e) Except as disclosed in Section 3.15(e) of the Disclosure Schedule,
the current use and operation of all Real Property is in material compliance
with all Real Estate Leases to which such Real Property is subject.
3.16 TANGIBLE PERSONAL PROPERTY. Each Company is in possession of and
has good and marketable title to, or has valid leasehold interests in or valid
rights under Contract to use (in each case subject only to Permitted Liens), all
tangible personal property used in the conduct of its businesses, including all
tangible personal property reflected on the Financial Statements for the period
ending on the Effective Date and tangible personal property acquired since that
date, other than property disposed of since such date in the ordinary course of
business consistent with past practice and the terms of this Agreement and the
Operative Agreements. Except as otherwise set forth in Section 3.16 of the
Disclosure Schedule, the principal items of such tangible personal property
(which for the purpose of this Agreement shall mean those having an original
purchase price of $2,000 or more) are listed in Section 3.16 of the Disclosure
Schedule. All tangible personal property owned or used the Companies is free and
clear of all Liens, other than Permitted Liens and other Liens disclosed in
Section 3.16 of the Disclosure Schedule and, in the case of leased tangible
personal property, Liens which exists pursuant to the terms of the Contract
under which such property is leased, and are in good working order and
condition, ordinary wear and tear excepted, and their use complies in all
material respects with all applicable Laws.
3.17 INTELLECTUAL PROPERTY RIGHTS.
(a) The only Intellectual Property owned or licensed for use or
otherwise used by any Company is disclosed in Section 3.17(i) of the Disclosure
Schedule. No other Intellectual Property is used in the conduct of the business
of any Company. The Companies own all right, title and interest in each item of
Intellectual Property disclosed in Section 3.17(i) of the Disclosure Schedule
(none of which constitutes "work-made-for-hire" for customers or clients),
except for those items of software identified in Section 3.17(i) of the
Disclosure Schedule which have been exclusively (other than "shrink-wrap" or
similar commercial end user licenses) and irrevocably licensed to a Company in
perpetuity under valid and binding license agreements, true and correct copies
of which have been provided to Purchaser, which license agreements are in full
force and effect and which, in the case of lease agreements in favor of the
Selling Companies, will be validly and enforceably assigned to the Purchaser as
part of the Purchased Assets (the "Intellectual Property License Agreements").
The consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of the Intellectual Property License Agreements, and each Company is
in compliance with, and has not breached (or would breach after notice or lapse
of time) any term of, the Intellectual Property License Agreements and, to the
Seller's Knowledge, all of the other parties to such Intellectual Property
License Agreements are in compliance with, and have not breached, any of the
terms thereof. There is no dispute between any Company and any licensor of such
Intellectual Property regarding the scope of the license or
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performance under any applicable Intellectual Property License Agreement,
including with respect to any payments to be made by a Company thereunder.
(b) Except as disclosed in Section 3.17(ii) of the Disclosure Schedule,
all such Intellectual Property disclosed in Section 3.17(i) of the Disclosure
Schedule as owned by a Company is owned free and clear of any and all Liens,
other than Permitted Liens. Section 3.17(ii) of the Disclosure Schedule lists
all of the Companies' United States and foreign registrations or applications
issued by, filed with or recorded by any Governmental Regulatory Authority with
respect to the Intellectual Property listed in Section 3.17(i) of the Disclosure
Schedule (including patent, trademark, copyright and other registrations and
applications), and all of such registrations and applications are valid and in
full force and effect and all necessary registration, maintenance and renewal
fees in connection therewith have been made and all necessary documents and
certificates in connection therewith have been filed with the relevant patent,
copyright, trademark or other authority in the United States or foreign
jurisdictions, as the case may be, for the purpose of maintaining the
registrations or applications for registration of such Intellectual Property.
Except as described in Section 3.17(ii) of the Disclosure Schedule, (i) there
are no restrictions on the direct or indirect transfer of any such Intellectual
Property subject to the terms of any license described in Section 3.17(i) of the
Disclosure Schedule, (ii) the Companies have made available to Purchaser prior
to the execution of this Agreement documentation with respect to any invention,
process, design, computer software and program or other know-how or trade secret
or proprietary information included in such Intellectual Property, which
documentation is accurate in all material respects and reasonably sufficient in
detail and content to identify and explain such invention, process, design,
computer software and programs or other know-how or trade secret or proprietary
information, (iii) the Companies have taken reasonable security measures to
protect the secrecy, confidentiality and value of their trade secrets and
proprietary information (including the enforcement by the Companies of a policy
requiring each employee or contractor to execute proprietary information and
confidentiality agreements substantially in the Companies' standard form, and
all current and former employees and contractors of each Company have executed
such an agreement), and (iv) no Company has granted to any Person any license,
agreement or other permission to use such Intellectual Property. To the Seller's
Knowledge, no such Intellectual Property is being infringed by any other Person,
and no Company is infringing any Intellectual Property of any other Person. No
claim is pending or, to the Seller's Knowledge, has been threatened to such
effect or with respect to the ownership, validity, license or use of, or any
infringement resulting from, any Company's Intellectual Property, or the sale of
any products or services by any Company.
(c) The information systems (including all computer hardware and
software) owned, licensed or otherwise used by any Company upon which the
Acquired Businesses are materially dependent, all products and services
presently being purchased or acquired by the Companies or which the Companies
have any Contract to purchase or acquire or are planning to purchase or acquire,
and all products and services which the Companies currently produce, sell or
supply or are planning to produce, sell or supply, and all products or services
which the Companies have previously produced, sold or supplied subject to any
guaranty or warranty of freedom from any such problem (whether by Contract, Law
or otherwise), are free of any "Year 2000 Problem" and any "9/9/99 Problem" and
any "leap year problem" such that such systems, products and services do not and
will not, without requiring any modifications, experience any malfunctions or
other usage problems in connection with (i) the year 2000 (and later years) as
distinct from 1900's years, (ii) the premature cancellation or expiration of
contractual rights or deletion of data on September 9, 1999, or (iii) any leap
year.
3.18 CONTRACTS AND ACQUIRED BUSINESSES.
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(a) Section 3.18 of the Disclosure Schedule (with paragraph references
corresponding to those set forth below) contains a true and complete list of
each of the following Contracts or other arrangements (true and complete copies
or, if not in writing, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been delivered to Purchaser prior to the execution of
this Agreement), to which any Company (or any Individual Seller on behalf of any
Company) is a party or by which any of their respective Assets and Properties is
bound:
(i) (A) all Contracts (excluding Plans which are
listed on Section 3.14 of the Disclosure Schedule) providing for a
commitment of employment or consultation services for a specified or
unspecified term, specifying the name, position and rate of
compensation of each Person party to such a Contract and the expiration
date of each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses of
conduct involving an obligation of any Company to make severance or
other payments (with or without notice, passage of time or both) to any
Person in connection with, or as a consequence of, the transactions
contemplated hereby or by the Operative Agreements or to any employee
who is disclosed on Section 3.22(a) of the Disclosure Schedule, other
than with respect to salary payments in the ordinary course of business
consistent with past practice;
(ii) all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of any
Company or any Individual Seller (to the extent the restriction
directly or indirectly affects any Company) to engage in any business
activity or compete with any Person or prohibiting or limiting the
ability of any Person to compete with any Company (including, without
limitation, any restriction respecting the provision of services to
customers or potential customers or any class of customers, in any
geographic area, during any period of time or in any segment of the
market), or prohibiting or limiting disclosure of confidential or
proprietary information;
(iii) all partnership, joint venture, shareholders'
or other similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of any
Company and all guarantees of any Indebtedness or other obligations by
any Company of any third Person;
(v) all Contracts with independent contractors,
distributors, dealers, manufacturers' representatives, sales agencies
or franchisees;
(vi) all Contracts with respect to or in connection
with any Intellectual Property;
(vii) all Contracts relating to (A) the future
disposition or acquisition of any Assets and Properties, and (B) any
Business Combination;
(viii) all Contracts between or among any Company, on
the one hand, and any current or former officer, director, stockholder
(including any Individual Seller), Affiliate or Associate of such
Company or any other Company or any Associate of any such officer,
director, stockholder or Affiliate (other than a Company), on the other
hand, other than Contracts disclosed pursuant to Section 3.18(a)(i);
(ix) all collective bargaining or similar labor
Contracts;
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(x) all leases of personal property which involved or
which any Company anticipates will involve the payment of more than
$5,000 in 1998 or 1999 or which extends beyond 1999;
(xi) any Contract for the sale, purchase or lease of
goods, services or capital assets which involved or which any Company
anticipates will involve the payment of more than $25,000 in 1998 or
1999 or which extends beyond 1999;
(xii) any fidelity or surety bond or completion bond;
(xiii) all Contracts that (A) limit or contain
restrictions on the ability of any Company to declare or pay dividends
on, to make any other distribution in respect of, or to issue or
purchase, redeem or otherwise acquire, its capital stock, to incur
Indebtedness, to incur or suffer to exist any Lien, to purchase or sell
any Assets and Properties, to change the lines of business in which it
participates or engages or to engage in any Business Combination, (B)
require any Company to maintain specified financial ratios or levels of
net worth or other indicia of financial condition or (c) require any
Company to maintain insurance in certain amounts or with certain
coverages;
(xiv) all powers of attorney or comparable
delegations of authority;
(xv) all Contracts which are not in the ordinary
course of business or which are material to any Company; and
(xvi) all other Contracts, including but not limited
to Contracts with clients or customers, that involve the payment or
potential payment pursuant to the terms of any such Contract by or to a
Company of more than $10,000 or which is not cancelable without penalty
within thirty (30) days.
(b) Except for the need to obtain the third party consents identified
in Sections 3.05 and 3.06 of the Disclosure Schedule, each Contract required to
be disclosed in Section 3.18 of the Disclosure Schedule is in full force and
effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of each party thereto; and neither any Company nor
any Individual Seller, or to the Seller's Knowledge any other party to such
Contract, is or has received notice that it is in violation or breach of or
default in any material respect under any such Contract (or with notice or lapse
of time or both, would be in violation or breach of or default in any material
respect under any such Contract).
(c) Section 3.18 of the Disclosure Schedule contains a true and
complete list of all Contracts to which the Companies have been a party during
the thirty-six (36) month period preceding the Closing in which the Companies
have received or have had available to them any preferential or advantaged
category of business or business status, including without limitation as a small
business, identifying in each case the relevant preferential or advantaged
category.
(d) The execution, delivery and performance of this Agreement and the
Operative Agreements by the Sellers and the consummation by the Sellers of the
transactions contemplated hereby and thereby will not result in any material
increase in the costs associated with the conduct of the Acquired Businesses by
the Purchaser after such execution, delivery, and performance, including without
limitation costs associated with regulatory compliance or compliance with the
contracting requirements of any customer of the Companies that is a Governmental
or Regulatory Authority, associated with the status of the Companies or the
Acquired
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Businesses, or the loss of any such status as a small business or as any other
preferential or advantaged category of business or business ownership, and will
not result in the loss of any business associated with such status.
(e) Section 3.18(e) of the Disclosure Schedule contains a true and
complete list of all orders on hand of the Companies as at the Effective Date
and as of the fifth (5th) Business Day prior to the date of execution of this
Agreement. Each such order is, except as otherwise set forth on Section 3.18(e)
of the Disclosure Schedule, a fixed and firm order that is not changeable or
cancelable or subject to reduction or postponement or to any other material
change at the instance of the customer without the consent of the relevant
Company, and the Company is not obligated to give any such consent.
(f) From and after the Effective Date and at all times thereafter
through the completion of the Closing, the Sellers and the Target Companies have
not taken or allowed any act or action, and nor has any omission or circumstance
occurred, which act, action, omission or circumstance would, if taken, allowed
or occurred after the date of execution hereof, constitute a breach of Section
5.01.
(g) With respect to any Government Contract, there are no (A) past,
pending or to the Seller's Knowledge threatened (i) claims by any Governmental
or Regulatory Authority against any Company relating to any such Government
Contract; (ii) suspension or debarment actions by any Governmental or Regulatory
Authority against any Company; (iii) default terminations by any Governmental or
Regulatory Authority or Person who is a prime contractor with respect to any
Government Contract for the ultimate resale of products or services to any
Governmental or Regulatory Authority; or (B) civil or criminal investigations of
any Company by any Governmental or Regulatory Authority, including, but not
limited to, any federal agency Inspector General (IG), the Defense Criminal
Investigative Service (DCIS), the Defense Contract Audit Administration (DCAA),
and the General Accounting Office (GAO) of which the Target Companies have been
notified in writing or of which the Sellers have been notified or which are to
the Seller's Knowledge threatened.
(h) To the Seller's Knowledge, each Company and all current and former
employees, consultants and agents while employed or retained by or acting on
behalf of any Company and each Individual Seller has been and is in compliance
with and have not violated the conflict of interest law (18 U.S.C. 207),
Procurement Integrity Act (41 U.S.C. 423 et seq.), bribery and gratuity statute
(18 U.S.C. 201), Major Fraud Act (18 U.S.C. 1031), Anti-Kickback Act (41 U.S.C.
51 et seq.), ▇▇▇▇ Amendment (31 U.S.C. 1352), False Statements statute (18
U.S.C. 1001), Truth in Negotiations Act (10 U.S.C. 2306a), civil False Claims
Act (31 U.S.C. 3729 et seq.); criminal False Claims Act (18 U.S.C. 287); Program
Fraud Civil Remedies Act (31 U.S.C.3801 et seq.) or the Covenant Against
Contingent Fees (48 C.F.R. Subpart 3.4). Each Company, and the activities of
each Company, have been and are in compliance with the requirements of the
National Industrial Security Program Operations Manual.
3.19 PERMITS AND LICENSES. Section 3.19 of the Disclosure Schedule
contains a true and complete list of all Permits issued to or used in the
business or operations of any Company, setting forth the owner, the function and
the expiration and renewal date of each. Prior to the execution of this
Agreement, each Company has delivered to Purchaser true and complete copies of
all such Permits. Except as disclosed in Section 3.19 of the Disclosure
Schedule:
(a) the Companies own or validly hold all Permits that are required to
conduct, or are material to, their respective business or operations as
currently conducted or to own their respective Assets and Property;
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(b) each Permit listed in Section 3.19 of the Disclosure Schedule is
valid, binding and in full force and effect; and
(c) no Company is, nor has it received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any material provision of any such Permit.
3.20 INSURANCE. Section 3.20 of the Disclosure Schedule contains a true
and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the annual premiums and payment terms thereof, the
period of time covered thereby and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, fidelity, directors'
and officers' liability and other insurance policies currently in effect that
insure the business, operations or employees of each Company or affect or relate
to the ownership, use or operation of any of the Assets and Properties of the
Companies and that (i) have been issued to any Company or (ii) have been issued
to any Person (other than a Company) for the benefit of a Company. The insurance
coverage provided by the policies described in clause (i) above will not
terminate or lapse by reason of any of the transactions contemplated by this
Agreement or the Operative Agreements. Each policy listed in Section 3.20 of the
Disclosure Schedule is valid and binding and in full force and effect, all
premiums due thereunder have been paid when due and neither any Company nor any
Individual Seller, nor the Person to whom such policy has been issued, has
received any notice of cancellation or termination in respect of any such policy
or is in default thereunder (or would be in default with notice or upon lapse of
time), and neither any Company nor any Individual Seller knows of any reason or
state of facts that could reasonably lead to the cancellation of such policies.
Section 3.20 of the Disclosure Schedule contains a list of all claims made under
any insurance policies covering any Company since January 1, 1995. Neither any
Company nor any Individual Seller has received notice that any insurer under any
policy referred to in this Section is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause. Since the later of
January 1, 1995 or, in the case of each Company, the date on which such Company
commenced business, each Company has, in light of its business, location,
operations, Assets and Properties, maintained at all times without interruption
appropriate insurance, in scope and amount of coverages.
3.21 AFFILIATE TRANSACTIONS.
(a) Except as disclosed in Section 3.21 (a) of the Disclosure Schedule
(i) there are no Liabilities between any Company on the one hand, and any
current or former officer, director, stockholder (including any Individual
Seller), Affiliate (other than a Company) or Associate of any Company or any
Associate of any such officer, director, stockholder or Affiliate on the other
hand, (ii) no Company provides or causes to be provided any assets, services or
facilities to any such current or former officer, director, stockholder
(including any Individual Seller), or any such Affiliate or Associate, (iii) no
such current or former officer, director, stockholder (including any Individual
Seller) and no such Affiliate or Associate has any interest, directly or
indirectly, in any Person which furnishes or sells any goods or services or
provides any facilities to any Company, except that ownership of no more than 2%
of the outstanding capital stock of a publicly traded corporation shall not be
deemed to be an interest for the purposes of this Section 3.21(a), and (iv) no
Company beneficially owns, directly or indirectly, any Investment Assets of any
such current or former officer, director, stockholder (including any Individual
Seller), Affiliate or Associate.
(b) Except as disclosed in Section 3.21 (b) of the Disclosure Schedule,
each of the Liabilities and transactions listed in Section 3.21 (a) of the
Disclosure Schedule was incurred or engaged in, on an arm's-length basis on
competitive terms.
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(c) Except as disclosed in Section 3.21 (c) of the Disclosure Schedule
(i) there are no Liabilities of any Company to any other Company, (ii) no
Company provides or causes to be provided any assets, services or facilities to
any other Company, and (iii) no Company has any interest, directly or
indirectly, in any other Company.
3.22 EMPLOYEES, LABOR RELATIONS.
(a) Section 3.22(a) of the Disclosure Schedule contains a list of the
name of each officer, employee and consultant of each Company, together with
such person's position or function, years of employment, annual base salary or
wages and any incentives or bonus arrangement with respect to such person.
Neither any Company nor any Individual Seller has received any information that
would lead him, her or it to believe that any such individual will or may cease
to be engaged by a Company, or will refuse offers of engagement by a Company or
the Purchaser for any reason, including, without limitation, because of the
consummation of the transactions contemplated by this Agreement and the
Operative Agreements.
(b) Except as disclosed in Section 3.22(b) of the Disclosure Schedule,
(i) to the Seller's Knowledge, there are no material controversies between any
Company, on the one hand, and any employee or consultant of any Company, on the
other hand, (ii) no Company is a party to or bound by any collective bargaining
agreement or any other agreement with, or commitment to, any union of employees,
and, to the Seller's Knowledge, there are no threatened or contemplated attempts
to organize for collective bargaining purposes any of the employees of any
Company, and (iii) no unfair labor practice complaint or sex or age
discrimination or harassment claim has been brought against any Company before
any Governmental or Regulatory Authority and there are no facts or circumstances
known to any Company or any Individual Seller that could reasonably be expected
to give rise to such complaint or claim. There has been no work stoppage, strike
or other concerted action by employees of any Company. Each Company has complied
in all material respects with all applicable Laws relating to the employment of
labor, including without limitation those relating to wages, hours and
collective bargaining.
3.23 ENVIRONMENTAL MATTERS.
Except as set forth in Section 3.23 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below):
(a) Each Company has obtained and holds all necessary Environmental
Permits.
(b) Each Company, and the activities of each Company, have been and are
in compliance with all material terms, conditions and provisions of all
applicable (i) Environmental Permits and (ii) Environmental Laws.
(c) There are no past, pending or threatened Environmental Claims or
Environmental Liabilities against any Company, and neither any Company nor any
Individual Seller is aware of any facts or circumstances which could reasonably
be expected to form the basis for any Environmental Claim or Environmental
Liability against any Company.
(d) Neither any Company nor any predecessor of any Company nor any
entity previously owned by any Company has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substances to any off-Site location which could result in an Environmental Claim
or an Environmental Liability against any Company.
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3.24 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. Section 3.24(a) of the
Disclosure Schedule lists the ten (10) largest customers or clients of each
Company on the basis of revenues for goods sold or services provided in each of
1996, 1997 and 1998 (on an annualized basis). Section 3.24(b) of the Disclosure
Schedule lists the ten (10) largest suppliers of the Companies collectively on
the basis of cost of goods or services purchased in each of 1996, 1997 and 1998
(on an annualized basis). Except as set forth in Section 3.24(a) of the
Disclosure Schedule, no current customer, client or supplier has ceased or
materially reduced its purchases from or sales or provision of services to any
Company since the Effective Date, or to the Seller's Knowledge, has threatened
to cease or materially reduce such purchases or sales or provision of services
after the date hereof or by reason of this Agreement. To the Seller's Knowledge,
no such customer or supplier is threatened with bankruptcy or insolvency. Except
as set forth in Section 3.24 of the Disclosure Schedule, and except for deposits
or other non-material amounts paid in the ordinary course of business consistent
with past practice, no Company has accepted any prepayment of any sales price or
fee or license fee from any client or customer that relates to products not yet
delivered or services not yet performed by such Company.
3.25 ACCOUNTS RECEIVABLE. The accounts and notes receivable of each
Company reflected on the Effective Date Balance Sheet and all accounts and notes
receivable arising subsequent to the Effective Date, (i) arose from bona fide
sales transactions in the ordinary course of business consistent with past
practice and are payable on ordinary trade terms, (ii) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their respective terms, (iii) are not subject to any valid set-off or
counterclaim, (iv) do not represent obligations for goods sold on consignment,
on approval or on a sale-or-return basis or subject to any other repurchase or
return arrangement, (v) are collectible in the ordinary course of business
consistent with past practice in the aggregate recorded amounts thereof, net of
any applicable reserve reflected in the Effective Date Balance Sheet, as such
reserve has been adjusted on the books of the Companies since the Effective Date
in the ordinary course of business consistent with past practices, (vi) are not
the subject of any Actions or Proceedings brought by or on behalf of any Company
or by the account debtor, and (vii) have not been pledged as collateral by any
Company
3.26 INVENTORY. All inventory of each Company reflected on the
Effective Date Balance Sheet consisted, and all such inventory acquired since
the date of the Effective Date Balance Sheet consists, of a quality and quantity
usable and salable in the ordinary course of business consistent with past
practice and industry standards, except to the extent of the reserve with
respect thereto set forth on the Effective Date Balance Sheet. Except as set
forth on Section 3.26 of the Disclosure Schedule, all items included in the
inventory of each Company are the property of such Company, free and clear of
any Lien other than Permitted Liens, have not been pledged as collateral, are
not held by such Company on consignment from others and conform in all material
respects to all standards applicable to such inventory or its use or sale
imposed by any Governmental or Regulatory Authority.
3.27 BROKERS. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with the transactions contemplated by this Agreement
or the Operative Agreements on the basis of any act or statement made by any
Company, any Individual Seller, any of their respective Affiliates, or any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of any Company, any Individual Seller or
any Affiliate.
3.28 RESTRICTIONS ON CONDUCT OF BUSINESS. No Company is prohibited or
otherwise restricted from conducting its business as presently conducted or
intended to be conducted by any Contract, any Governmental or Regulatory
Authority or any Law.
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3.29 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS. Section 3.29 of
the Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which any Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship; (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of each
Company having signatory power with respect thereto; and (c) a list of each
Investment Asset, the name of the record and beneficial owner thereof, the
location of the certificates, if any, therefor, the maturity date, if any, and
any stock or bond powers or other authority for transfer granted with respect
thereto.
3.30 WARRANTIES. Section 3.30 of the Disclosure Schedule sets forth (i)
all written warranties, guarantees and warranty policies of each Company with
respect to its products and services (the "Warranty Obligations"), and the
duration of each such Warranty Obligation, (ii) those Warranty Obligations which
are subject to any dispute or, to the Seller's Knowledge, threatened dispute and
(iii) the claims experience of each Company since January 1, 1997 with respect
to warranties, guarantees and warranty policies. Except as set forth in Section
3.30 of the Disclosure Schedule, (x) there have not been any material deviations
from the Warranty Obligations, and salesmen, employees and agents of the
Companies are not authorized to undertake obligations to any customer or other
third parties in excess of such Warranty Obligations and (y) the Effective Date
Balance Sheet reflects adequate reserves for such Warranty Obligations.
3.31 BUSINESS PLAN. Attached hereto as Section 3.31 of the Disclosure
Schedule are the Sellers' current business plans (the "Business Plans") for the
planned operations of the Companies during the remainder of calendar year 1998
and during calendar years 1999 and 2000, which includes, without limitation, a
description of the capital requirements and staffing needs of each Company and a
pro forma income statement. The Sellers and the Companies used reasonable care
in preparing such business plan and the assumptions and projections therein are
reasonable having regard to the facts and circumstances which to the Sellers'
Knowledge exist or prevail at the time of the preparation of the plan; provided,
however, that no representation or warranty is made or given that the Companies
or the Acquired Businesses will in fact achieve or comply with any specific
figure or projection contained in the Business Plans; and that the information
in the Business Plans contains forward-looking statements that involve risks and
uncertainties. Important factors that could cause actual results to differ
materially include: rapid changes in products and technology that may displace
products sold by the Companies or Purchaser; the competitive industries within
which the Companies or Purchaser operate; the Companies' or Purchaser's success
in identifying, acquiring and incorporating commercially reasonable technology,
products or businesses, and in identifying and taking advantage of growth
opportunities; the effect on cash flow and liquidity of differences between the
expected and the actual timing of collection of accounts receivable; limited
product lines and service offerings relative to other suppliers; and
fluctuations in the Companies' or Purchaser's quarterly results of operations
and the timing of orders from customers.
3.32 CERTAIN PRACTICES. No shareholder, director, officer or, to the
Seller's Knowledge, employee or agent of any Individual Seller or any Company
has, directly or indirectly, made or agreed to make, any improper or illegal
payment, gift or political contribution to, or taken any other improper or
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 any Company.
3.33 DISCLOSURE. To the knowledge and belief of the Principal
Stockholders and of those other Individual Sellers who are directors and
officers of any of the Companies, no representation or warranty of Sellers
contained in this Agreement, and no statement contained in the Disclosure
Schedule (including without limitation in the Financial Statements attached
hereto as part of the Disclosure Schedule) contains
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any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading. The Principal
Stockholders and those other Individual Sellers who are directors or officers of
any of the Companies shall for the purpose of the preceding sentence only be
deemed to have knowledge or belief of any fact, matter or circumstance, or act
or omission if they would have had such knowledge or belief but for their
reckless disregard with respect thereto.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MICRODYNE
As an inducement to the Sellers to enter into this Agreement and to
consummate the transactions contemplated herein, and except as set forth in the
Disclosure Schedule (with Section references corresponding to those set forth
below), Purchaser and Microdyne hereby represent, warrant, covenant and agree to
and with the Sellers as follows:
4.01 ORGANIZATION. Purchaser and Microdyne are corporations duly
organized, validly existing and in good standing under the laws of the state of
Maryland, and have full corporate power and authority to conduct their business
as and to the extent now conducted..
4.02 AUTHORITY. Purchaser and Microdyne have full corporate power and
authority to enter into this Agreement and the Operative Agreements to which
each is a party and to perform their obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Operative Agreements to which
each is a party by Purchaser and Microdyne and the consummation by Purchaser and
Microdyne of the transactions contemplated hereby and thereby have been duly and
validly approved by their boards of directors and no other corporate proceedings
on the part of Purchaser and Microdyne are necessary to authorize the execution,
delivery and performance of this Agreement and the Operative Agreements to which
each is a party by Purchaser and Microdyne and the consummation by Purchaser and
Microdyne of the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by Purchaser and Microdyne and
constitutes, and the Operative Agreements to which Purchaser and Microdyne are a
party (when so executed and delivered) will constitute, the legal, valid and
binding obligation of Purchaser and Microdyne respectively, enforceable against
Purchaser and Microdyne in accordance with their respective terms, except as
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
4.03 NO CONFLICTS. The execution and delivery by Purchaser and
Microdyne of this Agreement do not, and the execution and delivery by Purchaser
and Microdyne of the Operative Agreements to which each is a party, the
performance by Purchaser and Microdyne of their obligations under this Agreement
and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach
of any of the terms, conditions or provisions of the Certificate of
Incorporation or By-laws of the Purchaser or Microdyne;
(b) conflict with or result in a violation or breach
of any term or provision of any Law or Order applicable to the
Purchaser or Microdyne or any of their Assets and Properties, the
effect of which, individually or in the aggregate, would reasonably be
expected to have a
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materially adverse effect on the ability of Purchaser to consummate the
transactions contemplated hereby or would materially hinder or delay
such consummation; or
(c) (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or
both) a default under or (iii) require Purchaser or Microdyne to obtain
any consent, approval or action of, make any filing with or give any
notice (other than filings, if any, with the Securities and Exchange
Commission and the National Association of Securities Dealers Automated
Quotation System and filings required under the HSR Act) to the extent
applicable to any Person as a result or under the terms of, any
Contract or Permit to which the Purchaser or Microdyne is a party or by
which their Assets and Properties are bound, the effect of which,
individually or in the aggregate, would reasonably be expected to have
a material adverse effect on the ability of the Purchaser to consummate
the transactions contemplated by this Agreement or would materially
hinder or delay such consummation.
4.04 GOVERNMENTAL APPROVALS AND FILINGS. Except for the applicable
requirement of the HSR Act and as disclosed in Section 4.04 of the Disclosure
Schedule, or as referred to in Section 4.03(c), no permits, consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of the Purchaser or Microdyne is required in connection with the
execution, delivery and performance of this Agreement or the Operative
Agreements to which they are a party or the consummation of the transactions
contemplated hereby or thereby.
4.05 LEGAL PROCEEDINGS. There are no Actions or Proceedings pending or,
to the knowledge of Purchaser or Microdyne, threatened against, relating to or
affecting Purchaser or Microdyne or any of their Assets and Properties which (i)
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Operative
Agreements or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the ability of the Purchaser to consummate the transactions
contemplated by this Agreement or would materially hinder or delay such
consummation.
4.06 BROKERS. Except for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, all of whose fees, expenses
and commissions will be paid by Microdyne, no agent, broker, finder, investment
banker, financial advisor or other similar Person will be entitled to any fee,
commission or other compensation in connection with the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by Microdyne or the Purchaser or their Affiliates, or any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of Microdyne or the Purchaser or any
Affiliate.
ARTICLE V: CERTAIN AGREEMENTS OF THE PARTIES
5.01 CONDUCT OF BUSINESS PRIOR TO THE CLOSING.
(a) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and the Closing Date,
they shall cause each Company to conduct its business in the ordinary course and
consistent with prior practice.
(b) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and prior to the
Closing Date, and without making any commitment on
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Purchaser's behalf, they will cause each Company to use all reasonable efforts
to preserve substantially intact the business organization of each Company, to
keep available to Purchaser the services of all of the employees of each Company
and to preserve the current relationships of each Company with its clients,
customers, suppliers and other persons with which each Company has significant
business relationships.
(c) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and prior to the
Closing Date, they will cause each Company to maintain their Books and Records
in the usual, regular and ordinary manner consistent with past practices; to use
all reasonable efforts to continue in full force and effect the policies of
insurance listed in Section 3.20 of the Disclosure Schedule or comparable
substitute policies and will promptly notify Purchaser of any cancellation or
non-renewal of such insurance; and to use all reasonable efforts to maintain all
of each Company's Assets and Properties in good repair, working order and
operating condition (subject only to ordinary wear and tear).
(d) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and prior to the
Closing Date, they will not permit any Company to amend its Certificate or
Articles of Incorporation or By-laws or merge, amalgamate or consolidate or sell
all or substantially all of its Assets and Property, or obligate itself to do
so, with or into or to any other Person, without the prior written consent of
Purchaser.
(e) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and prior to the
Closing Date, they will cause each Company to (i) comply with all material
applicable Laws, (ii) file all Tax Returns required to be filed and make timely
payments of applicable Taxes when due; and (iii) take all reasonable actions
necessary to be in compliance with, and to maintain the effectiveness of, all
material Permits.
(f) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that without the prior written consent of
Purchaser, they will not permit any Company between the date hereof and prior to
the Closing Date to:
(i) amend its Articles or Certificate of
Incorporation or Bylaws;
(ii) change its accounting methods, principles or
practices, except to the extent required by GAAP and concurred
in by such Company's independent accountants;
(iii) declare, set aside or pay any dividend or other
distribution (whether in cash, stock, property or any
combination thereof) in respect of the capital stock of such
Company or any other securities or redeem, repurchase or
otherwise acquire any equity or other securities of, or
Options with respect to any equity or other securities of,
such Company, or pay or discharge or give security for the
payment or discharge of any Liability to any Individual Seller
or his or her Affiliate, other than for salary as permitted by
(v) below;
(iv) revalue any of its Assets and Properties,
including, without limitation, writing off notes or accounts
receivable, other than in the ordinary course of business
consistent with past practice;
(v) establish any new, or amend or modify any
existing, Plan; pay any bonus or other payment to any
employee, officer or director except salary payments at the
rates prevailing on January 1, 1998 the payment of which has
not previously been deferred; or increase the compensation
payable or to become payable to any directors, officers or
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employees of such Company, except salary increases as may be
required by Law, and salary increases to non-management
employees in the ordinary course of business consistent with
past practice and not in excess or $5,000 per annum in the
aggregate for all such employees
(vi) enter into any employment or severance Contract
with any of its directors, officers or employees (whether new
hires or existing employees) or establish, adopt or enter into
any collective bargaining agreement, or enter into any
Contract or transaction any other Company or with any officer,
director, stockholder (including any Individual Seller),
Affiliate or Associate of any Company which, if it existed on
the date hereof, would be required to be listed in the
Disclosure Schedule;
(vii) create, incur, assume, maintain or permit to
exist any Lien on any of the Assets and Properties of such
Company other than Permitted Liens;
(viii) create, incur or assume any Indebtedness,
including obligations in respect of capital leases, or
guarantee any Indebtedness or any other obligation of any
other Person;
(ix) pay or discharge any material claim, Liability
or Lien (whether absolute, accrued, contingent or otherwise),
or waive any right, other than in the ordinary course of
business consistent with past practice or pursuant to binding
contractual obligations of such Company in existence on the
date hereof;
(x) transfer to any Person any rights to the
Intellectual Property of such Company, other than as
reasonably necessary in the ordinary course of business
consistent with past practice in rendering services to clients
and customers;
(xi) enter into any Contract granting marketing,
distribution or similar rights of any type or scope with
respect to any products or services of such Company;
(xii) commence any litigation;
(xiii) hire any new employees, agents or consultants,
except employees earning less than $50,000 per annum to
replace employees who have left the employ of such Company;
(xiv) authorize or make any capital expenditure in
excess of an aggregate of $10,000;
(xv) issue or agree to issue any shares of its
capital stock or Options with respect to such stock;
(xvi) become a party to any Contract which, if it
existed on the date hereof, would be required to be listed in
the Disclosure Schedule, or amend or terminate any Contact
listed on the Disclosure Schedule;
(xvii) acquire or agree to acquire by merging,
amalgamating or consolidating with, or by purchasing any
assets or equity securities of, or by any other manner, any
business or any corporation, limited liability company,
partnership or other business
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organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually
or in the aggregate, to its business;
(xviii) sell, lease, license, or otherwise dispose of
any material item of its Assets and Properties or any item of
Intellectual Property (except as described in subsection (x)
above);
(xix) make or change any material election in respect
of Taxes, adopt or change any accounting method in respect of
Taxes, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(xx) abandon, modify, waive, terminate or otherwise
change any of the Permits described in Section 3.19 of the
Disclosure Schedule;
(xxi) settle or compromise any material claims
against such Company;
(xxii) take any action or course of action
inconsistent with compliance with the covenants and agreements
contained in this Agreement; or
(xxiii) take or agree to commit to take any action
that would make any representation or warranty of the Sellers
contained herein inaccurate in any material respect at the
Closing or omit to take any action necessary to prevent any
such representation or warranty from being inaccurate in any
material respect at such time or which would diminish the
value of such Company as a going concern.
5.02 ACCESS TO INFORMATION. From the date hereof until the Closing,
upon reasonable notice, the Principal Stockholders shall, and shall cause each
Company's officers, directors, employees, auditors and agents to, (i) afford the
Representatives of Purchaser reasonable access, during normal business hours, to
the offices, properties, Books and Records of each Company and to each Company's
officers, employees, agents, accountants and actuaries, and (ii) furnish to the
Representatives of the Purchaser such additional financial and operating data
and other information regarding the assets, properties, goodwill and business of
each Company as Purchaser may from time to time reasonably request; provided,
however, that such investigation shall not unreasonably interfere with the
business or operations of any Company. No investigation or access to information
pursuant to this Section 5.02 shall affect any representation or warranty made
by Sellers to Purchaser hereunder or otherwise affect the rights and remedies
available to Purchaser hereunder.
5.03 BOOKS AND RECORDS.
(a) Purchaser agrees that it shall preserve and keep all material books
and records of each Selling Company for the period up to and including the
Closing Date in the possession of Purchaser or a Target Company for a period of
at least three (3) years from the Closing Date. After such three-year period,
before Purchaser or a Target Company shall dispose of any of such books and
records, at least ninety (90) calendar days' prior written notice to such effect
shall be given by Purchaser to the Sellers' Representative and the Sellers'
Representative, on his behalf and on behalf of any of the other Sellers, shall
be given an opportunity, at Sellers' cost and expense, to remove and retain all
or any part of such books and records as such Sellers' Representative may
select. During such three-year period, duly authorized representatives of the
Sellers' Representative shall, upon reasonable notice, have access thereto
during normal business hours
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to examine, inspect and copy such books and records, with any out-of-pocket
costs being borne by the Sellers, and such access shall be limited to such
pre-Closing Date books and records.
(b) If, in order properly to prepare documents required to be filed
with Governmental or Regulatory Authorities or financial statements, it is
necessary that any party hereto or any successors be furnished with additional
information relating to any Company, and such information is in the possession
of the other parties hereto, such possessing party agrees to use all reasonable
efforts to furnish such information to such other parties, at the cost and
expense of the party making the request, and excluding from any party's
obligation any information which is subject to a confidentiality agreement with
any third Person. In addition, the Sellers' Representative shall have the right
to review any and all work papers and work product in connection with the
Purchaser's determination of the Earn Out Amount.
5.04 CONFIDENTIALITY.
(a) The information which Purchaser acquires about any Company
as a result of the investigations permitted by this Agreement is termed
"Evaluation Material." Purchaser agrees that neither it nor any of its
Representatives will use any Evaluation Material for any purpose not related to
the transactions contemplated by this Agreement and will not disclose any
Evaluation Material to anyone except its Representatives who may need such
information to perform their respective duties and have been informed of its
confidential nature and directed to treat it confidentially. If the transactions
contemplated by this Agreement are not consummated, Purchaser agrees that it and
its representatives will return any written Evaluation Material in their
possession, or will destroy and will not retain any written Evaluation Material,
any copies thereof or any notes or memoranda made using such written Evaluation
Material.
(b) The confidentiality agreement contained herein will
terminate upon the earlier of five years after the date hereof or upon the
Closing.
(c) Notwithstanding the foregoing, the Purchaser and its
Representatives may use and disclose Evaluation Material and information
obtained from the Evaluation Material to the extent that (i) they acquired such
information on a non-confidential basis prior to receipt thereof from the
Sellers or a Company or their Representative, (ii) such information has become
generally available to the public, or (iii) such information is provided to the
Person using or disclosing it by a Person who obtained such information or may
disclose such information other than as a result of a breach of or in breach of
this Agreement or any other Contract between the Purchaser and the Selling
Companies or the Target Companies. Furthermore, the Purchaser and its
Representatives may disclose such information to the extent that they are
required to do so to comply with an Order, but upon receiving notice that any
such Order has been issued or is being sought, they will promptly notify Sellers
and will, at Sellers' expense, cooperate with Sellers' or Company's efforts to
contest the issuance of such Order.
5.05 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) Each of the Sellers and the Purchaser will use all reasonable
efforts to obtain all authorizations, consents, Orders and approvals of all
Governmental or Regulatory Authorities that may be or become necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement, and will cooperate fully with the other parties in promptly
seeking to obtain all such authorizations, consents, orders and approvals,
subject to the proviso in Section 5.05(b).
(b) Purchaser and Sellers will use all their respective reasonable
efforts to assist one another in obtaining the consents referred to in Sections
5.05(a), 6.01(c), 6.02(c) and, if any, the consents referred to
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in Section 6.02(d); provided, however, that Purchaser shall not be obligated
with respect to such assistance (i) to expend any funds except the payment of
the fees and expenses of any applicable attorneys, consultants or other advisors
retained by it and applicable filing fees or (ii) to take any actions with
respect to its business or the business of any Company which, in its reasonable
judgement, is materially adverse.
5.06 NO SOLICITATION OF OFFERS, ETC.
(a) Prior to the termination of this Agreement in accordance with its
terms, the Sellers and their Affiliates, including the Target Companies, shall
not, nor shall they authorize or permit any officer, director, employee,
investment banker, attorney, accountant or other representative of or Person
retained by them to, directly or indirectly, take any action to knowingly
solicit, encourage or facilitate any action that might lead to, or accept any
offers, initiate or participate in negotiations or discussions with, or provide
any non-public information to, or enter into any letter of intent, preliminary
agreement or definitive agreement with any Person with respect to, any possible
Business Combination of or with respect to any Company. Sellers and the Target
Companies shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect thereto or in connection therewith.
(b) Sellers acknowledge and agree that a violation by it of Section
5.06(a) will cause irreparable damage to Purchaser. Accordingly, each of the
Sellers agrees that, in the event of a breach of Section 5.06(a), Purchaser
shall be entitled to a temporary or permanent injunction or restraining order to
prevent breaches of Section 5.06(a) and to specifically enforce the terms and
provisions thereof without the need to post any security or bond, such rights to
be cumulative and in addition to whatever other remedies at law or in equity or
otherwise the Purchaser may have pursuant to this Agreement.
5.07 NOTICE OF CERTAIN MATTERS.
(a) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree to give prompt notice in writing to Purchaser of:
(i) any information that indicates that any representation or warranty of the
Sellers contained herein was not true and correct as of the date hereof or will
not be true and correct as of the Closing Date, (ii) the occurrence of any event
which will result, or has a reasonable prospect of resulting, in the failure to
satisfy a condition specified in Article VI hereof, (iii) any notice or other
communication from any third Person alleging that the consent of such third
Person is or may be required in connection with the transactions contemplated by
this Agreement, (iv) any notice of, or other communication relating to, any
default or event which, with notice or lapse of time or both, would become a
default under any Contract listed on the Disclosure Schedule, and (v) any change
in the officers or directors of any Company.
(b) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree to (i) promptly advise Purchaser of any fact,
condition or change that, individually or in the aggregate, has or results in a
material adverse effect on the Business or Condition of any Company, and (ii)
notify Purchaser of any governmental complaint, investigation or hearing (or
communications indicating that the same may be contemplated) or other Action or
Proceeding involving any Company or any of its respective Assets and Properties,
and will keep the Purchaser fully informed of such events and permit Purchaser's
Representatives reasonable access to all materials prepared in connection
therewith.
(c) The giving of any such notice under this Section 5.07 or the
providing of the financial statements contemplated by Section 5.08 shall in no
way change or modify the Sellers' representations and warranties or the
conditions to Purchaser's obligations contained herein or otherwise affect the
remedies available to Purchaser hereunder.
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5.08 INTERIM FINANCIAL STATEMENTS. The Principal Stockholders and the
Selling Companies shall, as soon as available, but no later than fifteen (15)
days after the end of the relevant month or quarter, as the case may be, deliver
promptly to Purchaser any and all final monthly (including without limitation as
of and for the period ended June 30, 1998) and quarterly financial statements
for each Company, audited or unaudited, prepared for the management of such
Company after the date of this Agreement and prior to the Closing Date, and the
Principal Stockholders shall cause the Companies to prepare such financial
statements.
5.09 SELLERS' OBLIGATIONS. Each Seller hereby agrees that in each
instance in this Agreement where any Company is obligated to act or refrain from
acting under this Agreement during the period prior to the Closing, such Seller
individually, or together with the other Sellers, shall cause such Company to
fulfill such obligations.
5.10 FURTHER ACTION. Each of the parties hereto shall execute and
deliver such documents and other papers and take such further actions as may be
reasonably required to carry out the provisions hereof and give effect to the
transactions contemplated hereby. Each Individual Seller hereby transfers,
conveys, assigns and delivers to the Purchaser, free and clear of all Liens,
except (other than in the case of Purchased Stock, Purchased Loan Accounts and
Purchased Options) for Permitted Liens and Assumed Liabilities all of such
Seller's respective Assets and Properties (other than the Excluded Assets) , if
any, used, held for use or related to the business or operations of the
Companies.
5.11 ALLOCATION OF PURCHASE PRICE. The Purchase Price has been agreed
upon by the parties and the values assigned to the various Purchased Assets and
Purchased Stock are listed in Section 5.11 of the Disclosure Schedule. Sellers
and the Purchaser agree that the values were separately established as a result
of good faith bargaining and that, in reporting the transactions contemplated by
this Agreement to the Internal Revenue Service, as is required by Section 1060
of the Internal Revenue Code they will use such prices.
5.12 HSR FILING. Within fifteen (15) days of the date hereof, the
Sellers, and the Purchaser will, if any such filing is required by Law, each
file with the United States Federal Trade Commission and the Antitrust Division
of the United States Department of Justice, pursuant to the HSR Act,
Notification and Report Forms with respect to the transactions contemplated by
this Agreement and respond as promptly as is practicable to all inquiries
received from either agency for additional information or documentation.
5.13 CERTAIN EMPLOYEE AND SELLER MATTERS
At the Closing, the Target Companies will enter into employment
agreements substantially in the form of the employment agreement attached hereto
as Exhibit F-1 with those employees identified in Exhibit F-2, in each case for
the duration of employment period set forth opposite the name of each such
employee in Exhibit F-2 ("Employment Agreements").
At the Closing, (i) the Purchaser will offer employment to all of the employees
of the Selling Companies on substantially the same terms and conditions as those
upon which such employees are employed by the Selling Companies, (ii) every
employee of each Company (including without limitation all of the employees of
the Selling Companies to whom the Purchaser so offers employment) and every
Individual Seller shall execute a confidentiality, non-disclosure, and
assignment agreement in favor of the Target Companies and the Purchaser in the
form of the agreement attached hereto as Exhibit F-3 (the "Employee
Non-Disclosure, Development and Assignment of Proprietary Rights Agreement"),
and (iii) those employees identified in
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Exhibit F-4 hereto shall execute the post-employment non-competition agreement
in the form of the agreement attached hereto as Exhibit F-4, in each case for
the period set forth opposite the name of each such employee in Exhibit F-4
hereto (the "Employee Non-Competition Agreements")
(b) At the Closing, ▇▇. ▇▇▇▇▇▇▇, in furtherance of his stated objective
of retiring, shall resign his employment with each Company and shall execute a
Non-Competition Agreement in favor of the Target Companies and the Purchaser in
the form of Exhibit D hereto (the "▇▇▇▇▇▇▇ Non-Competition Agreement"), and the
Purchaser shall pay to ▇▇. ▇▇▇▇▇▇▇ the consideration therefor as set forth in
the ▇▇▇▇▇▇▇ Non-Competition Agreement.
5.14 CERTAIN PERFORMANCE BONUSES. The Purchaser will implement a
performance bonus plan substantially in compliance with the factors and
parameters set forth in Exhibit K hereto, in which those employees of the Target
Companies identified in Exhibit K hereto may participate and receive benefits
pursuant to the terms thereof.
5.15 BULK SALES LAWS The Selling Companies and the Purchaser have
chosen to waive compliance with the provisions of any "bulk sales" Laws or any
other similar Laws which may be applicable to the purchase by the Purchaser of
the Purchased Assets. The Principal Stockholders and the Selling Companies
agree, covenant and undertake to pay promptly after the Closing, in full, and
without set-off or deduction, any and all Liabilities of the Selling Companies
which are not included among the Assumed Liabilities.
5.16 USE AND CHANGE OF NAMES. The Sellers confirm and agree that the
names "Digital Telcom" and "Acceleration Systems" are included among the
Purchased Assets, and pursuant thereto, the Sellers agree and undertake that the
Selling Companies will, at the Closing, change their names to names that are not
in any way similar to or possible of being confused with that the names "Digital
Telcom" and "Acceleration Systems" and to provide to the Purchaser confirmation
thereof in form and substance reasonably satisfactory to the Purchaser.
5.17 ESTOPPEL CERTIFICATES FOR LEASED REAL PROPERTY. The Sellers shall
obtain and deliver to the Purchaser executed estoppel certificates reasonably
satisfactory in form and substance to the Purchaser with respect to the Leased
Real Property.
5.18 SELLING COMPANY ARTICLES OF TRANSFER The Selling Companies and
Purchaser shall duly execute and shall file with the Maryland State Department
of Assessments and Taxation articles of transfer with respect to the sale of the
Purchased Assets to the Purchaser, pursuant to and in compliance with the
requirements of the Maryland General Corporation Law.
5.19 SECTION 1445 The parties shall comply with the provisions of
Section 1445 of the Internal Revenue Code and Treasury Regulations issued
thereunder. If any of the stockholders of the Target Companies provides to
Purchaser a certification of non-foreign status meeting the requirements of
Treas. Reg. Section 1.1445-2(b)(2) on or prior to the Closing Date in the form
of the certification attached as Exhibit L hereto, and if the Purchaser is
otherwise permitted to rely on such certificate under those Regulations, the
Purchaser shall not withhold under Section 1445 with respect to payments to such
stockholder.
5.20 RELEASE OF LEASED PROPERTY LIENS. Following the Closing, the
Sellers shall use reasonable efforts to obtain the release of all Liens that
secure or constitute notice filings with respect to leases of
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tangible personal property with respect to which such lease has at the Closing
been fully discharged or concluded and with respect to which the Companies have
no Liability at the Closing.
5.21 CERTAIN ASSUMED LIABILITIES, CERTAIN PAYMENTS. The Assumed
Liabilities shall include, to the extent not discharged prior to Closing,
commissions owed by ASI to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ in an
aggregate amount not exceeding $4,300. The Liabilities of the Target Companies
at the time of Closing shall include interest accrued from the Effective Date to
the Closing on certain Indebtedness of the Target Companies to ▇▇.▇▇▇▇▇▇ in an
amount not exceeding $650 and to ▇▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ in an aggregate
amount not exceeding $950, which shall, notwithstanding the provisions of
Article 2 and the Assignment and Release of Claims, continue to be owed after
the Closing. The Purchaser undertakes to pay, or to cause the Target Companies
to pay, such commissions and interest within one week after the Closing.
ARTICLE VI: CONDITIONS TO CLOSING
6.01 CONDITIONS TO OBLIGATIONS OF SELLERS . The obligations of the
Sellers to consummate the transactions contemplated by this Agreement at the
Closing shall be subject to the fulfillment, at or prior to the Closing, of each
of the following conditions unless waived in writing prior to the Closing or
waived at the Closing by Sellers:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS. The
representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects as of the Closing Date, with the same
force and effect as if made on and as of the Closing Date, other than such
representations and warranties as are made as of another date, which shall be
true and correct as of such date; provided, however, that if any such portion of
any representation or warranty is already qualified by materiality, for purposes
of determining whether this Section 6.01(a) has been satisfied with respect to
such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects; and all the agreements, undertakings, covenants and obligations
contained in this Agreement to be complied with by Purchaser on or before the
Closing Date or at the Closing shall have been complied with in all material
respects, and Sellers shall have received a certificate of Purchaser to such
effect signed by a duly authorized officer thereof.
(b) NO ORDER OR SUIT. No Governmental or Regulatory Authority shall
have enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions or which would have a material
adverse effect on the Business or Condition of any Company or the Acquired
Businesses; in addition, no Action or Proceeding before any Governmental or
Regulatory Authority shall be pending or threatened and no investigation by any
Governmental or Regulatory Authority shall have commenced seeking to restrain or
prohibit (or questioning the validity or legality of) the transactions
contemplated by this Agreement or seeking to restrict in any material respect
the effective operation of the business of any Company after the Closing or
seeking material damages from any Company or seeking material damages from the
Purchaser in connection with this Agreement, which Purchaser, in good faith and
with the advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby; provided, however, that
the parties hereto shall use their reasonable best efforts to have any such
Order vacated.
(c) GOVERNMENTAL FILINGS AND CONSENTS. All governmental orders,
approvals and consents to the transactions contemplated by this Agreement shall
have been obtained and be in effect on the Closing
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Date, in form and substance reasonably acceptable to the Sellers except to the
extent that the failure to obtain any such consent would not have the effect of
making the transactions contemplated by this Agreement illegal or otherwise
restrain or prohibit consummation of such transactions or result in a material
liability to Sellers. The waiting period (if any), including extensions thereof,
applicable to the consummation of the transactions contemplated hereunder
required pursuant to the provisions of the HSR Act shall have either expired or
been previously terminated, and all statutory periods in connection with
notification procedures required under any Environmental Law (to the extent
applicable) for the purposes of the consummation of the transactions
contemplated hereby, shall have lapsed prior to the Closing Date.
(d) LEGAL OPINION. Sellers shall have received from McGuire, Woods,
Battle & ▇▇▇▇▇▇, LLP, counsel to Purchaser, a legal opinion addressed to Sellers
and dated the Closing Date in the form annexed hereto as Exhibit E.
(e) INCUMBENCY CERTIFICATE. Sellers shall have received a certificate
of the Secretary or an Assistant Secretary of Purchaser certifying the names and
signatures of the officers of Purchaser authorized to sign this Agreement, the
Operative Documents to which Purchaser is a party and any other document
required to be delivered hereunder.
(f) PROCEEDINGS. All proceedings, corporate or otherwise, taken by
Purchaser in connection with the transactions contemplated hereby and all
instruments and documents incident thereto shall be reasonably satisfactory in
form and substance to the Sellers and their counsel.
(g) NON-COMPETITION AGREEMENT. The Purchaser shall have paid to ▇▇.
▇▇▇▇▇▇▇ the consideration for the ▇▇▇▇▇▇▇ Non-Competition Agreement as such
consideration is set forth therein.
(h) PAY-OFF OF TARGET COMPANY LOAN. The Purchaser shall have repaid the
Indebtedness of the Target Companies to Mellon Bank, N.A., in an aggregate
amount not in excess of $825,000 owed by the Target Companies to Mellon Bank,
N.A. under a line of credit and under an equipment lease.
(i) THIRD PARTY CONSENTS. Sellers shall have received the third Person
consents, approvals, authorizations or actions to the transactions contemplated
by this Agreement, if any, in form and substance reasonably satisfactory to the
Sellers from the Persons listed in Section 6.02(i) of the Disclosure Schedule.
(j) ORGANIZATIONAL DOCUMENTS. Sellers shall have received a copy of (i)
the Certificate or Articles of Incorporation of the Purchaser, certified by the
Maryland State Department of Assessments and Taxation, as of a date not earlier
than ten (10) Business Days prior to the Closing Date, and accompanied by a
certificate of the Secretary or an Assistant Secretary of the Purchaser, dated
or of the Closing Date, stating that no amendments have been made to such
document since such date, and (ii) the By-laws of the Purchaser, certified by
the Secretary or an Assistant Secretary of the Purchaser.
(k) GOOD STANDING. The Sellers shall have received a Certificate of
Good Standing for the Purchaser from the Maryland State Department of
Assessments and Taxation dated as of a date not earlier than ten (10) Business
Days prior to the Closing Date.
(l) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, no
events or circumstances shall have occurred which individually or in the
aggregate have had or may reasonably be expected to have a material adverse
effect on the Business or Condition of the Companies.
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(m) EMPLOYMENT AGREEMENTS. Apcom and Celerity shall have executed
Employment Agreements with the Principal Stockholders other than ▇▇▇▇▇▇▇ who are
referred to in Exhibit F-2.
6.02 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement at the
Closing shall be subject to the fulfillment, at or prior to the Closing, of each
of the following conditions unless waived in writing prior to the Closing or
waived at the Closing by the Purchaser:
(a) REPRESENTATIONS AND WARRANTIES, COVENANTS. Without giving effect to
any matter disclosed to Purchaser between the date hereof and the Closing Date,
the representations and warranties of Sellers contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same force and effect as if made on and as of the Closing Date, other than such
representations and warranties as are made as of another date, which shall be
true and correct as of such date; provided, however, that if any portion of any
representation or warranty is already qualified by materiality, for purposes of
determining whether this Section 6.02(a) has been satisfied with respect to such
portion of such representation or warranty, such portion of such representation
or warranty as so qualified must be true and correct in all respects; and all
the agreements, undertakings, covenants and obligations contained in this
Agreement to be complied with by Sellers and the Companies on or before the
Closing Date or at the Closing shall have been complied with in all material
respects, and Purchaser shall have received certificates of Sellers and the
Companies to such effect signed by a duly authorized officer of each Company and
by each Seller.
(b) NO ORDER OR SUIT. No Governmental or Regulatory Authority shall
have enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions or which would have a material
adverse effect on the Business or Condition of any Company or the Acquired
Businesses; in addition, no Action or Proceeding before any Governmental or
Regulatory Authority shall be pending or threatened and no investigation by any
Governmental or Regulatory Authority shall have commenced seeking to restrain or
prohibit (or questioning the validity or legality of) the transactions
contemplated by this Agreement or seeking to restrict in any material respect
the effective operation of the business of any Company after the Closing or
seeking material damages from any Company or seeking material damages from the
Purchaser in connection with this Agreement, which Purchaser, in good faith and
with the advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby; provided, however, that
the parties hereto shall use their reasonable best efforts to have any such
Order vacated.
(c) GOVERNMENTAL FILINGS AND CONSENTS. All governmental Orders,
approvals and consents to the transactions contemplated by this Agreement shall
have been obtained and be in effect on the Closing Date, in form and substance
reasonably acceptable to the Purchaser and the waiting period (if any),
including extensions thereof, applicable to the consummation of the transactions
contemplated hereunder required pursuant to the provisions of the HSR Act shall
have either expired or been previously terminated, all statutory periods in
connection with any Environmental Laws (to the extent applicable) for the
purposes of the consummation of the transactions contemplated hereby shall have
lapsed prior to the Closing Date, and such approvals as shall have been obtained
shall not impose upon Purchaser or any Target Company or the Acquired Businesses
any conditions or other requirements which would cause any material additional
costs or materially interfere with the continued operations of the business of
Purchaser or any Company or materially and adversely affect the Business or
Condition of any Company or the Acquired Businesses.
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(d) THIRD PARTY CONSENTS. Purchaser shall have received the third
Person consents, approvals, authorizations or actions to the transactions
contemplated by this Agreement, if any, in form and substance reasonably
satisfactory to the Purchaser from the persons listed in Section 6.02(d) of the
Disclosure Schedule.
(e) PURCHASER FINANCING. The Purchaser shall have obtained financing in
such amount and on such terms and conditions as the Purchaser, in its sole
discretion, shall consider necessary or desirable in connection with the
consummation of the transactions contemplated hereby.
(f) LEGAL OPINION. Purchaser shall have received from ▇▇▇▇▇▇, Flyer &
▇▇▇▇▇, counsel to the Companies, a legal opinion addressed to Purchaser and
dated the Closing Date, in the form of Exhibit G.
(g) RESIGNATION OF DIRECTORS AND OFFICERS OF TARGET COMPANIES.
Purchaser shall have received the resignations, effective as of the Closing
Date, of all the directors and all the officers of each of the Target Companies,
except ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, and shall have received the
resignation, effective as of the Closing Date, of ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as an
employee of the Target Companies.
(h) ORGANIZATIONAL DOCUMENTS. Purchaser shall have received a copy of
(i) the Certificate or Articles of Incorporation of each Company, certified by
the Secretary of State or another appropriate official of the States of Maryland
or California, as the case may be, as of a date not earlier than ten (10)
Business Days prior to the Closing Date and accompanied by a certificate of the
Secretary or an Assistant Secretary of each such Company, dated as of the
Closing Date, stating that no amendments have been made to such document since
such date, and (ii) the By-laws of each Company, certified by the Secretary or
an Assistant Secretary of each Company, respectively.
(i) GOOD STANDING. The Purchaser shall have received a Certificate of
Good Standing for each Company from the appropriate official of the States of
Maryland and California dated as of a date not earlier than ten (10) Business
Days prior to the Closing Date.
(j) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, no
events or circumstances shall have occurred which, individually or in the
aggregate, have or that may be reasonably expected to have a material adverse
effect on the Business or Condition of the Companies.
(k) INCUMBENCY CERTIFICATE. Purchaser shall have received a certificate
of an officer of each Company certifying the names and signatures of the
officers of such Company authorized to sign any document required to be
delivered by each such Company hereunder.
(l) MINUTE AND STOCK BOOKS. Purchaser shall have received evidence
reasonably satisfactory to it that the complete and correct minute books and
stock certificate and transfer books (with all canceled and unused stock
certificates attached) and the corporate seal of each Target Company are in the
possession of the individual designated by Purchaser to the Sellers'
Representative in writing at least two (2) Business Days prior to the Closing
Date.
(m) ASSIGNMENT AND RELEASE OF CLAIMS. Each Seller shall have executed
and delivered to Purchaser and each Target Company the Assignment and Release of
Claims in the form of Exhibit A.
(n) CERTAIN EMPLOYMENT MATTERS. The Employment Agreements shall have
been executed by each of the employees of the Target Companies referred to in
Exhibit F-2, every employee of the Target
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Companies and every Individual Seller shall have executed an Employee
Development and Assignment of Proprietary Rights and Non-Disclosure Agreement in
the form of Exhibit F-3 hereto, and those employees of the Target Companies
referred to in Exhibit F-4 hereto shall also have executed the Employee
Non-Competition Agreements, in each case for the period set forth opposite the
name of each such employee in Exhibit F-4 hereto.
(o) REPAYMENT OF INDEBTEDNESS. All Sellers who are indebted to any
Company shall have repaid such indebtedness in full with interest thereon to the
date of payment.
(p) DISCHARGE OF LIENS. All Liens on the Assets and Properties of each
Company, other than Permitted Liens, shall have been fully satisfied, terminated
and discharged as evidenced by releases or satisfactions satisfactory to
Purchaser, or the Lien holders shall have furnished undertakings satisfactory to
the Purchaser to satisfy, terminate and discharge such Liens. Without limiting
the foregoing, Mellon Bank N.A., First ▇▇▇▇▇▇▇▇▇▇ Bank (or its successor) and
Citibank shall have furnished undertakings satisfactory to the Purchaser to
satisfy, terminate and discharge such Liens.
(q) NON-COMPETITION AGREEMENT. ▇▇. ▇▇▇▇▇▇▇ shall have executed and
delivered to each Target Company and Purchaser the Non-Competition Agreement in
the form of Exhibit D hereto.
(r) PROCEEDINGS. All proceedings, corporate or otherwise, taken by
Sellers and the Companies in connection with the transactions contemplated
hereby and all instruments and documents incident thereto shall be reasonably
satisfactory in form and substance to Purchaser and its counsel.
(s) NON-FOREIGN CERTIFICATE. Each Seller shall have executed and
delivered to Purchaser a certificate in the form attached hereto as Exhibit L
hereto with respect to Section 1445 of the Internal Revenue Code stating that
each such Seller is not a "foreign person" as defined in said Section 1445 and
applicable regulations thereunder.
(t) SECTION 1445. The parties shall have complied with the provisions
of Section 1445 of the Internal Revenue Code and Treasury Regulations issued
thereunder and Purchaser shall have received such certificates as it deems
necessary with respect to and in support of Purchaser's not withholding,
pursuant to Section 1445, amounts otherwise due stockholders.
(u) USE AND CHANGE OF NAMES. The Principal Stockholders and the Selling
Companies shall provide to the Purchaser confirmation in form and substance
reasonably satisfactory to the Purchaser that the Selling Companies have changed
their names to names that are not in any way similar to or possible of being
confused with that the names "Digital Telcom" and "Acceleration Systems".
(v) SELLING COMPANY ARTICLES OF TRANSFER. The Selling Companies shall
have duly executed and shall have filed with the Maryland State Department of
Assessments and Taxation, and such department shall have accepted for filing,
articles of transfer with respect to the sale of the Purchased Assets to the
Purchaser, pursuant to and in compliance with the requirements of the Maryland
General Corporation Law.
(w) ESTOPPEL CERTIFICATES. The Sellers shall have obtained and
delivered to the Purchaser executed estoppel certificates reasonably
satisfactory in form and substance to the Purchaser with respect to the Leased
Real Property.
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ARTICLE VII: SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
7.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any right of Purchaser and its Affiliates (whether or not
exercised) to investigate the affairs of each Seller and each Company or any
right of any party (whether or not exercised) to investigate the accuracy of the
representations and warranties of the other party contained in this Agreement or
the waiver of any provision hereof, each Seller, on the one hand, and Purchaser,
on the other, shall have the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.
The representations, warranties, covenants and agreements of Sellers and
Purchaser contained in this Agreement shall survive the Closing (a) indefinitely
with respect to the representations and warranties contained in Sections 3.01,
3.02 and 4.01; (b) until sixty (60) calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension, whether
automatic or permissive) with respect to representations and warranties
contained in Sections 3.14, 3.17, 3.23, and 3.27 and with respect to all
covenants and agreements which by their terms require performance after the
Closing Date; (c) the representations and warranties in Section 3.11 respecting
the Liability of the Companies for Taxes shall continue to survive until the
later of (x) the time at which all taxable periods to and including the Closing
Date shall be closed to any further assessment of Taxes or to any assessment of
any penalties or interest charges in respect of any such Taxes, by receipt of a
final assessment, in form and substance reasonably satisfactory to Purchaser,
from the appropriate Taxing Authorities, or (y) sixty (60) days following the
expiration of the applicable statute of limitations or any extension thereof, by
waiver or otherwise; (d) the representations and warranties in Section 3.18(d)
shall expire at the Closing; and (e) until November 15, 2000 with respect to all
other representations and warranties and any covenant or agreement to be
performed in whole or in part on or prior to the Closing, except that any
representation, warranty, covenant or agreement that would otherwise terminate
in accordance with clauses (b), (c) (d) or (e) above will continue to survive if
a Claim Notice or Indemnity Notice (as applicable) shall have been timely given
under Article VIII on or prior to such termination date, until the related claim
for indemnification has been satisfied or otherwise resolved as provided in
Article XI, but only with respect to matters described in the Claim Notice or
Indemnity Notice.
ARTICLE VIII: INDEMNIFICATION
8.01 INDEMNIFICATION.
(a) From and after the Closing Date and subject to the limitation on
indemnity provided in Section 8.01(c) and to the proviso at the end of this
Section 8.01(a), each of the Sellers shall indemnify the Target Companies, the
Purchaser, Microdyne and their respective stockholders and the general partners,
limited partners, officers, directors, employees, agents and Affiliates of each
of them (in each case, other than the Sellers) (collectively, the "Purchaser
Indemnities"), in respect of, and hold each of them harmless from and against,
and shall pay the full amount of, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation or breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of any Company or Seller contained in this Agreement or any Assignment and
Release of Claims or any Assignment of Options (including, without limitation,
any certificate delivered in connection herewith or therewith) during any
applicable survival period pursuant to Section 7.01 above; provided, however,
that (i) with respect to any Losses paid from the Escrow Agreement or which may
be deducted from or offset against the Earn-Out Amount, the indemnification
obligations of each Seller shall be limited to the extent of the pro rata
portion thereof that she, he or it would have received (as set forth in Schedule
A to the Escrow Agreement) were such amount to have been paid to the Sellers
absent such Losses; (ii) subject to the
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limitation on indemnity provided in Section 8.01(c) below and to (iii) below,
with respect to any Losses that exceed the Escrow Amount and the Earn-Out Amount
(if earned), the indemnification obligations of the Principal Stockholders and
the Selling Companies shall be joint and several for the full amount thereof and
each of the Other Stockholders shall not be liable therefor; and (iii) the
maximum amount of the indemnification obligations of each Principal Stockholder
shall be limited to the portion of the Purchase Price received by, or receivable
from the Escrow Amount by, each such Principal Stockholder, for which purpose
the entire Escrow Amount shall, notwithstanding the provisions of Section
8.02(f), be deemed to be part of the Purchase Price, and, as set forth in the
proviso to Section 2.01(a)(i), any amount of the Purchase Price withheld from a
Principal Stockholder under applicable Tax or other Laws shall be deemed to have
been paid to such Principal Stockholder.
(b) From and after the Closing Date and subject to the limitation on
indemnity provided in Section 8.01(d), Purchaser shall indemnify the Individual
Sellers and their respective heirs, executors, personal representatives,
successors and assigns, and the Selling Companies and their respective
stockholders, officers, directors, employees, agents and Affiliates (the "Seller
Indemnities"') in respect of, and hold each of them harmless from and against,
and shall pay the full amount of, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation or breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of Purchaser contained in this Agreement or any Assignment and Release of Claims
or any Assignment of Options (including, without limitation, any certificate
delivered in connection herewith or therewith) and the Assumed Liabilities
during any applicable survival period pursuant to Section 7.01 above.
(c) No amounts of indemnity shall be payable as a result of a claim
under Section 8.01(a) in respect of a misrepresentation or breach of warranty
(other than a claim based upon fraud or willful or criminal misconduct or any
claim pursuant to Sections 3.01 (first sentence) or 3.02 in which case the
following clauses (i) and (ii) shall not apply) (i) unless and until the
Purchaser Indemnities have suffered, incurred, sustained or become subject to
Losses with respect thereto in excess of $170,000 in the aggregate, in which
case the Purchaser Indemnities shall be entitled to seek indemnity for the
entire amount of such Losses, or (ii) to the extent that the Purchaser
Indemnities have suffered, incurred, sustained or become subject to Losses by
reason of all such claims in excess of the Purchase Price (for which purpose the
entire Escrow Amount shall, notwithstanding the provisions of Section 8.02(f),
be deemed to be part of the Purchase Price).
(d) No amounts of indemnity shall be payable as a result of a claim
under Section 8.01(b) in respect of a misrepresentation or breach of warranty
(other than a claim based upon fraud or willful or criminal misconduct or
pursuant to Section 4.01, in which case the following clauses (i) and (ii) shall
not apply) (i) unless and until the Seller Indemnities have suffered, incurred,
sustained or become subject to Losses with respect thereto in excess of $170,000
in the aggregate, in which case the Seller Indemnities shall be entitled to seek
indemnity for the entire amount of such Losses, or (ii) to the extent that the
Seller Indemnities have suffered, incurred, sustained or become subject to
Losses by reason of all such claims in excess of $2,000,000.
8.02 METHOD OF ASSERTING CLAIMS. All claims for indemnification by any
Indemnified Party under Section 8.01 will be asserted and resolved as follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 8.01 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
must deliver
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a Claim Notice to the Indemnifying Party within thirty (30) Business Days after
receipt by such Indemnified Party of written notice of the Third Party Claim;
provided, however, that failure to give such Claim Notice shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually prejudiced as a result of such failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party, provided that all Indemnifying Parties with respect to such
Third Party Claim jointly acknowledge to the Indemnified Party its right to
indemnity pursuant hereto in respect of the entirety of such claim (as such
claim may be modified through written agreement of the parties or arbitration
hereunder) and provide assurances reasonably satisfactory to the Indemnified
Party that the Indemnifying Parties will be financially able to satisfy such
claim in full if it is decided adversely. Should the Indemnifying Party so elect
to assume the defense of a Third Party Claim, the Indemnifying Party shall not
be liable to the Indemnified Party for legal expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof (except as
hereinafter provided), but shall continue to pay for any expenses of
investigation or any Loss suffered. If the Indemnifying Party assumes such
defense, the Indemnified Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense (except as hereinafter
provided), separate from the counsel employed by the Indemnifying Party.
Notwithstanding the foregoing, if (i) the Indemnifying Party shall not assume
the defense of a Third Party Claim with counsel satisfactory to the Indemnified
Party within five (5) Business Days of any Claim Notice, or (ii) legal counsel
for the Indemnified Party notifies the Indemnifying Party that there are or may
be legal defenses available to the Indemnified Party or to other Indemnified
Parties which are different from or additional to those available to the
Indemnifying Party, which, if the Indemnified Party and the Indemnifying Party
were to be represented by the same counsel, would constitute a conflict of
interest for such counsel or prejudice prosecution of the defenses available to
such Indemnified Party, or (iii) the Indemnifying Party shall assume the defense
of a Third Party Claim and fail to diligently and vigorously prosecute such
defense in a timely manner, then in each such case the Indemnified Party, by
notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party; and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party controls the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of all Indemnified Parties, and (ii) provides for no
relief other than the payment of monetary damages and such monetary damages are
paid in full by the Indemnifying Party, and in all other cases may not so settle
without the prior written consent of the Indemnified Party.
(c) In the event any Indemnified Party should have a claim under
Section 8.01 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been actually
prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described in such Indemnity Notice or fails
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to notify the Indemnified Party within the Dispute Period as to whether the
Indemnifying Party disputes the claim described in such Indemnity Notice, the
Loss in the amount specified in the Indemnity Notice will be conclusively deemed
a Liability of the Indemnifying Party under Section 8.01 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its Liability with respect to such
claim, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
arbitration as provided in Article 11.
(d) The indemnification provisions of this Article VIII shall
constitute the sole and exclusive remedy of the parties hereto, for any
inaccuracy, untruth, incompleteness or other breach of any representation or
warranty contained in or made pursuant to this Agreement or for any breach of or
failure to perform any covenant or agreement made in this Agreement or otherwise
arising out of the contemplated transactions, and the parties each waive any
other remedy, which they or any other Person entitled to indemnification
hereunder may have at law or in equity with respect thereto. The amount of
Losses suffered by any Person entitled to indemnification shall be reduced by an
amount equal to any insurance recovery received by such Person with respect to
such Loss and shall be reduced or increased by any Tax benefit or detriment
attributable to the realization of such Loss and any Tax benefit or detriment
attributable to the proper accounting of the Tax consequences of the receipt of
any indemnification payment payable hereunder.
(e) Notwithstanding anything contained in this Agreement to the
contrary, at and after the Closing, no Seller shall be entitled to any
indemnification, right of contribution or other right of recovery from either
Target Company in connection with any claim made by or which could be made by an
Indemnified Party against a Target Company or which a Target Company could be
liable for, all of which are irrevocably waived and released by each Seller.
(f) Any payment under this Article VIII shall be treated for tax
purposes as an adjustment of the Purchase Price to the extent such
characterization is proper and permissible under relevant Tax Laws, or,
alternatively, by Purchaser as an offset to a Tax benefit item, if such
characterization is proper under such Tax Laws.
ARTICLE IX: TERMINATION
9.01 GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing under the following provisions:
(a) by mutual written agreement of the Purchaser and the Sellers'
Representative;
(b) by Purchaser after written notice to Sellers' Representative if
Purchaser is not then in material breach of any material provision of this
Agreement and there has been any one or more material misrepresentations in or
breaches of the representations or warranties made by Sellers herein that, if
not cured on or prior to the Closing Date, could be reasonably expected to give
Purchaser grounds not to close under Section 6.02 when taken into account with
all other uncured misrepresentations in or breaches of such representations or
warranties as to which Purchaser shall have given notice to Sellers'
Representative as provided in this paragraph (b); a termination pursuant to this
paragraph (b) shall become effective (i) fifteen (15) days after such notice
with respect to such a misrepresentation or breach that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
with respect to such a misrepresentation or breach that is capable of being
cured, but is not cured, on or prior to the Closing Date;
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(c) by Purchaser if Purchaser is not then in material breach of any
provision of this Agreement after written notice to Sellers' Representative of
the failure by Sellers to perform and satisfy in any material respect any of
their material obligations required to be performed and satisfied by Sellers on
or prior to the Closing Date, if the aggregate of all such failures shall be
material; a termination pursuant to this paragraph (c) shall become effective
(i) fifteen (15) days after such notice with respect to such a failure that is
not capable of being cured on or prior to the Closing Date, or (ii) immediately
prior to the Closing with respect to such a failure that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(d) by Sellers after written notice by Sellers' Representative to
Purchaser if Sellers are not then in material breach of any material provision
of this Agreement and there has been one or more material misrepresentations in
or material breaches of the representations or warranties made by Purchaser
herein which, if not cured on or prior to the Closing Date, could be reasonably
expected to give Sellers grounds not to close under Section 6.01 when taken into
account with all other uncured misrepresentations in or breaches of such
representations or warranties as to which Sellers' Representative shall have
given notice to Purchaser as provided in this paragraph (d); a termination
pursuant to this paragraph (d) shall become effective (i) fifteen (15) days
after such notice with respect to such a misrepresentation or breach that is not
capable of being cured on or prior to the Closing Date, or (ii) immediately
prior to the Closing Date with respect to such a misrepresentation or breach
that is capable of being cured, but is not cured, on or prior to the Closing
Date;
(e) by Sellers if Sellers are not then in material breach of any
material provision of this Agreement after written notice by Sellers'
Representative to Purchaser of Purchaser's failure to perform and satisfy in any
material respect any of its material obligations under this Agreement required
to be performed and satisfied by Purchaser on or prior to the Closing Date, if
the aggregate of all such failures shall be material; a termination pursuant to
this paragraph (e) shall become effective (i) fifteen (15) days after such
notice with respect to such a failure that is not capable of being cured on or
prior to the Closing Date, or (ii) immediately prior to the Closing Date with
respect to such a failure that is capable of being cured, but is not cured, on
or prior to the Closing Date;
(f) by Purchaser or by Sellers' Representative, if the Closing shall
not have been consummated by September 30, 1998; provided, however, that neither
Purchaser nor Sellers may terminate this Agreement pursuant to this paragraph
(f) if the Closing shall not have been consummated within such time period by
reason of the failure of such party or any of its Affiliates to perform in all
material respects any of its covenants or agreements contained in this
Agreement; and
(g) by Purchaser or Sellers' Representative if any Law or Order shall
hereafter be enacted or become applicable that makes the transactions
contemplated hereby or the consummation of the Closing illegal or otherwise
prohibited, or if any Order enjoining any party hereto from consummating the
transactions contemplated hereby is entered and such Order shall become final
and nonappealable.
The party desiring to terminate this Agreement pursuant to the
foregoing provisions shall give written notice of such termination to the other
party.
9.02 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 9.01, such termination shall be without liability of any
party to any other party to this Agreement except as hereinafter expressly
provided in this Section 9.02. If such termination shall result from the breach
by any party of its representations, warranties or covenants contained in this
Agreement, such party shall be fully liable for any and all Losses incurred or
suffered by the other parties as a result of such failure or breach and such
termination shall not be deemed to be an election of remedies. The provisions of
Sections 5.04, this Section
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9.02 and Articles X, XI, and XII shall survive any termination of this Agreement
pursuant to this Article IX, and each party hereto shall be fully responsible
for any breach of Section 5.04, whether or not such breach occurs prior to the
termination of this Agreement.
ARTICLE X: SELLERS' REPRESENTATIVE
10.01 APPOINTMENT OF SELLERS' REPRESENTATIVE. ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇ is
hereby appointed as agent and attorney-in-fact (the "Sellers' Representative")
for each Seller, to give and receive notices and communications; to authorize
delivery to Purchaser of payments from the Escrow Fund in satisfaction of claims
by Purchaser; to object to such deliveries; to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with Orders
with respect to, any claims; to amend this Agreement (subject to Section 12.02)
or the Escrow Agreement; to take all other actions set forth in this Agreement
to be taken by the Sellers' Representative; and to take all actions necessary or
appropriate in the judgment of the Sellers' Representative for the
accomplishment of the foregoing. Such agency may be changed by the Sellers from
time to time upon not less than thirty (30) days prior written notice to
Purchaser and the Escrow Agent; provided that the Sellers' Representative may
not be removed unless Sellers holding Shareholder Percentages totaling more than
50% agree to such removal and select a substituted agent. No bond shall be
required of the Sellers' Representative, and the Sellers' Representative shall
not receive compensation for services as such. Notices or communications to or
from the Sellers' Representative shall constitute notice to or from each of the
Sellers or their permitted transferees.
10.02 LIMITATION OF LIABILITY. The Sellers' Representative shall not be
liable for any act done or omitted hereunder as Sellers' Representative while
acting in good faith and in the exercise of reasonable judgment. The Sellers
shall severally indemnify the Sellers' Representative and hold him or her
harmless against any loss, liability or expense incurred without negligence or
bad faith on the part of the Sellers' Representative and arising out of or in
connection with the acceptance or administration of the Sellers'
Representative's duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Sellers' Representative.
10.03 ACTIONS BINDING. A decision, act, consent or instruction of the
Sellers' Representative shall constitute a decision of all the Sellers and shall
be final, binding and conclusive upon each of such Sellers, and the Escrow Agent
and Purchaser may rely upon any such decision, act, consent or instruction of
the Sellers' Representative as being the decision, act, consent or instruction
of each and every such Seller. The Escrow Agent and Purchaser are hereby
relieved from any Liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction of the Sellers'
Representative.
ARTICLE XI: ARBITRATION OF DISPUTES
11.01 ARBITRATION. The parties agree that, except as provided in
Section 5.06(b) hereof arbitration shall be the exclusive and final means for
resolving any and every dispute, controversy, claim, or difference ("Disputes")
related to or arising out of or in connection with this Agreement, or any
commercial relationship or dealings of the parties that are related to or arise
out of or in connection with the subject matter of this Agreement (including
without limitation any questions concerning the scope and application of this
arbitration clause or the arbitrability of any Dispute under this clause), which
arbitration shall be conducted according to the rules then in effect of the
American Arbitration Association (the "AAA"), or such other rules as the AAA may
designate.
11.02 PROCEDURE FOR ARBITRATION
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(a) The right of any party to require the arbitration of any Dispute
hereunder and the arbitration of any Dispute hereunder shall be governed by the
Federal laws of the United States (including expressly, but without limitation,
the Federal Arbitration Act).
(b) The arbitration shall be held in Fairfax, Virginia and shall be
administered by the rules (the "Rules") then in effect of the AAA. Demand for
arbitration (an "Arbitration Notice") shall be delivered by the party demanding
arbitration under this Agreement (the "Initiating Party") to the party (or
parties) with whom arbitration is sought in accordance with the procedure set
forth in the Rules. The parties shall agree upon an arbitrator within thirty
(30) calendar days after the demand for arbitration is served. If they fail to
do so within such time, the arbitrator, or a panel of three arbitrators if so
requested by any party to the Dispute, shall be appointed by the AAA. If the
arbitrator dies, becomes disqualified or incapacitated, or fails or refuses to
act before the matter or matters subjected to such arbitration have been
determined, then, in place of such arbitrator, a new arbitrator shall promptly
be appointed in the same manner as such arbitrator. The arbitrator or
arbitration panel shall decide any matter before him or it in accordance with
this Agreement, including without limitation the law chosen by the parties in
Section 12.08 to govern this Agreement, which law shall also be the applicable
law to govern the arbitration proceedings. The arbitrator shall have the power
and the discretion to order discovery and the taking of depositions.
(c) The arbitrator or arbitration panel shall proceed promptly and
diligently and render his or its decision as soon as practicable. The decision
of the arbitrator or arbitration panel shall be in writing and presented in
separate findings of fact and conclusions of law (the "Arbitrators' Report")
which shall be a final and binding award on the parties from which no appeal may
be taken, and an order confirming the award or judgment upon the award may be
entered in any court having jurisdiction thereto.
(d) All fees, costs and expenses (including reasonable attorneys' fees
and expenses) incurred by a party that prevails on any issue in any arbitration
commenced hereunder or in any judicial proceeding seeking to enforce this
agreement to arbitrate disputes or seeking to enforce any order or award of any
arbitration hereunder shall be assessed against the party or parties that do not
prevail on such issue or issues.
11.03 LIMITATION ON POWERS OR ARBITRATORS. Notwithstanding the
foregoing, it is hereby agreed that the arbitrator or arbitration panel shall
only have the power to order or grant relief in a manner that is directly
related to the subject matter of the dispute before the arbitrator or
arbitration panel, that the relief or order that may be granted by the
arbitrator or arbitration panel shall be limited to that which a court of
competent jurisdiction would have had the power to order or grant were the
dispute to have been heard before such court, and that no arbitrator or
arbitration panel shall have any power to add to, alter or modify the terms and
conditions of this Agreement or any other agreement executed and delivered in
connection herewith or to decide any issue which does not arise from the
interpretation or application of the provisions of this Agreement.
ARTICLE XII: MISCELLANEOUS
12.01 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission or mailed by
prepaid first class certified mail, return receipt requested, or delivered by a
nationally recognized overnight courier service prepaid, to the parties at the
following addresses or facsimile numbers:
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(a) If to Purchaser, to:
MCTI Acquisition Corporation
c/o Microdyne Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Fax ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Clive ▇.▇. ▇'▇▇▇▇▇
McGuire, Woods, Battle & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to Microdyne, to:
Microdyne Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Fax ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Clive ▇.▇. ▇'▇▇▇▇▇
McGuire, Woods, Battle & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(c) If to the Sellers' Representative to:
▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
or
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇, Flyer & ▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ ▇▇▇
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Washington, D.C. 20036-5610
Fax ▇▇▇-▇▇▇-▇▇▇▇
(d) If to any other Seller to the address as it appears on Exhibit
H hereto.
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided for in this Section, be deemed given upon receipt, (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given on the earlier of the fourth Business Day
following mailing or upon receipt and (iv) if delivered by overnight courier to
the address as provided for in this Section, be deemed given on the earlier of
the first Business Day following the date sent by such overnight courier or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other
parties hereto.
12.02 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the Exhibits hereto,
the Disclosure Schedule and the Operative Agreements supersede all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof and thereof. This
Agreement may be amended, supplemented or modified only by a written instrument
duly executed by or on behalf of the Purchaser and the Sellers' Representative,
except that the consent of all Sellers shall be required to change the Purchase
Price. The terms and provisions of this Agreement are intended solely for the
benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights, and this Agreement does not confer any such rights, upon any
other Person other than any Person entitled to indemnity under Article VIII.
12.03 EXPENSES. Except as otherwise expressly provided in this
Agreement (including without limitation as provided in Article VIII), each party
will pay its own costs and expenses incurred in connection with this Agreement,
the Operative Agreements, and the transactions contemplated hereby and thereby.
12.04 CUMULATIVE REMEDIES. The rights, remedies, powers and privileges
herein provided are cumulative.
12.05 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term.
12.06 NO ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by Sellers or by Purchaser without the prior written consent of
Purchaser or the Seller's Representative, respectively, and any attempt to do so
will be void. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective heirs, executors, personal representatives, successors and assigns.
12.07 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable,
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(b) this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance here from and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
12.08 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the Commonwealth of Virginia without
giving effect to any choice of law or conflict of law provision or rule (whether
of the Commonwealth of Virginia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Virginia.
12.09 CONSTRUCTION.
(a) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
(b) The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
12.10 TIME PERIODS. When any provision of this Agreement provides for
the expiration of a time period or requires the giving of a notice on a day
which is other than a Business Day, such time period or day shall be extended to
the next succeeding Business Day.
12.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be duly executed as of the day and year first above written.
PURCHASER: MCTI ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Ceo
MICRODYNE: MICRODYNE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Ceo
PRINCIPAL STOCKHOLDERS:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------- ----------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
---------------------- -----------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
SELLING COMPANIES:
DIGITAL TELCOM, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ACCELERATION SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
THE OTHER STOCKHOLDERS:
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