Exhibit 2.1
STOCK PURCHASE AGREEMENT
by and between
SETECH, INC.
("SELLER")
and
SERCO, INC.
("BUYER")
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (including the Exhibits and the
Schedule (hereinafter defined) collectively, the "Agreement") dated
as of October ___, 1996, is by and between SETECH, INC., formerly
known as Aviation Education Systems, Inc., a Delaware corporation
("Seller") and SERCO, INC., a New Jersey corporation ("Buyer").
WHEREAS, the Seller is the owner of all of the issued and
outstanding capital stock (the "Capital Stock") of ▇▇▇▇▇▇ ATC,
Inc., a Delaware corporation ("ATC") and ▇▇▇▇▇▇ ATC International,
Inc., a Tennessee corporation ("International") (ATC and
International collectively, the "Companies"), and wishes to sell,
transfer and convey all of such Capital Stock to the Buyer, and the
Buyer desires to acquire all of such Capital Stock of the
Companies, upon and subject to the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements and upon the terms and
conditions hereinafter set forth, the parties hereto, intending to
be legally bound, hereby agree as follows:
I. Sale and Purchase of Capital Stock.
A. Sale of Capital Stock.
1. Upon the terms and subject to the conditions of this
Agreement, the Seller will sell, transfer, assign and deliver to
the Buyer at the Closing all of the issued and outstanding shares
of Capital Stock of the Companies, and the Buyer will buy all such
shares at the Closing.
2. All stock and other transfer taxes including sales taxes
and document recording fees, if any, imposed in connection with the
transfer of the Capital Stock to the Buyer shall be paid by the
Seller, and all applicable stock transfer tax stamps shall be
provided by the Seller at the Closing.
B. Purchase Price. Subject to adjustment as provided in Sections
1.3 and 1.4 below, and adjustment for any "Loss" as provided in
Article 12 hereof, the aggregate purchase price (the "Purchase
Price") for all of the outstanding shares of Capital Stock shall
equal Two Million One Hundred Fifty Thousand Dollars ($2,150,000).
C. Adjustment to Purchase Price. The Purchase Price shall be
adjusted as follows:
1. The Purchase Price shall be reduced if, and to the same
extent that, the combined shareholders' equity of the Companies as
finally determined in the Closing Date Balance Sheet (hereinafter
defined) is less than One Million Five Hundred Fifty Thousand
Dollars ($1,550,000).
2. The adjustment provided in paragraph (a) above shall be
calculated and determined pursuant to a combined balance sheet for
the Companies prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied which
eliminates all intercompany transactions (the "Closing Date Balance
Sheet") and which shall be prepared by the Buyer promptly (but in
no event more than fifteen (15) Business Days) following the
Closing. (For purposes of this Agreement, "Business Day" means any
day other than (i) a Saturday or Sunday or (ii) a day when the
Federal Government offices in Washington, D.C. are not open.) The
Seller shall be furnished a Closing Date Balance Sheet promptly
upon its preparation by the Buyer. After receipt of the Closing
Date Balance Sheet, the Seller shall have a reasonable period not
to exceed fifteen (15) Business Days in which to review the Closing
Date Balance Sheet. The Seller shall have full access to the
financial records and other information used in the preparation of
the Closing Date Balance Sheet. The determination of the Closing
Date Balance Sheet and the adjustment to the Purchase Price
determined under paragraph (a) of Section 1.3, as calculated by the
Buyer, shall become final and be binding on the Seller, unless the
Seller delivers written notice of its objection to the Closing Date
Balance Sheet to the Buyer within fifteen (15) Business Days
following the date of the Buyer's delivery of the Closing Date
Balance Sheet to the Seller. The written notice shall set forth in
detail the items and calculations objected to (individually, a
"Disputed Item" and collectively, the "Disputed Items") and the
factual and the technical basis for each Disputed Item, and the
Buyer and the Seller will seek in good faith, for a period of
fifteen (15) Business Days following delivery of the written
notice, to resolve the Disputed Items. In the event such
differences are not resolved during such fifteen (15) Business Day
period, the Buyer and the Seller shall promptly deliver the Closing
Date Balance Sheet to the Nashville, Tennessee office of KPMG Peat
Marwick LLP (the "Reviewing ▇▇▇▇"), which firm shall be engaged for
the purpose of conducting a review of the Closing Date Balance
Sheet (the fees and expenses of the Reviewing Firm to be shared
equally between the Buyer and the Seller), and such review shall be
limited to the Disputed Items which have not been resolved by the
parties. The Reviewing Firm shall issue a written report as
promptly as possible, setting forth in reasonable detail its
determination regarding the Disputed Items. The determination of
the Reviewing Firm as to the Disputed Items concerning the Closing
Date Balance Sheet and adjustment to Purchase Price shall be final
and binding on the parties on the date said written report is
delivered to the Seller and the Buyer and the Closing Date Balance
Sheet shall become final and binding on the Buyer and the Seller on
such date. Failure by the Seller to notify the Buyer of an
objection to the Closing Date Balance Sheet during the time
provided above shall result in it being final upon the expiration
of that time period.
3. Notwithstanding the provisions of the foregoing paragraph
(b) or of GAAP, in determining the Closing Date Balance Sheet it is
hereby expressly agreed by the parties hereto that the "Fixed
Assets" in the balance sheet of the Companies as are attached
hereto as Schedule 1.3(c) are accepted as accurate and that no
adjustment shall be made based on the value of such Fixed Assets.
D. Payment of the Purchase Price.
1. On the Closing Date, the Buyer shall pay to the Seller an
amount in cash equal to One Million Nine Hundred Thousand Dollars
($1,900,000).
2. On the Closing Date, the Buyer shall deliver in escrow to
CoreStates Bank, N.A., as Escrow Agent, an amount in cash equal to
the sum of Two Hundred Fifty Thousand Dollars ($250,000) (the
"Escrow") pursuant to an Escrow Agreement of even date herewith in
the form of Exhibit 1.4 (b) hereto.
3. International presently has a contract with the Federal
Aviation Administration ("FAA") (the "FAA Contract"), which has a
termination date of September 30, 1998. If, and only if, on October
1, 1998, International, the Buyer or a company then controlled by,
controlling or under common control with International or the Buyer
(collectively, the "Contracting Entity") has an agreement in force
with the FAA authorizing the Contracting Entity to operate at least
thirty (30) air traffic control towers (the "1998 Agreement"), then
the Buyer shall pay the Seller in cash One Million Dollars
($1,000,000) on or before October 10, 1998. If on October 1, 1998,
the 1998 Agreement authorizes the Contracting Entity to operate
less than thirty (30) air traffic control towers, then on or before
October 10, 1998, the Buyer shall pay the Seller in cash Thirty-
Three Thousand Three Hundred Thirty-Three and 33/100 Dollars
($33,333.33) for each air traffic control tower (but not more than
thirty (30)) which the Contracting Entity is authorized to operate
under the 1998 Agreement.
4. The sum of the amounts paid pursuant to subparagraphs (a),
(b) and (c) is hereinafter referred to as the "Aggregate Purchase
Price."
E. Initial Purchase Price Adjustment. When the Closing Date
Balance Sheet becomes final in accordance with Section 1.3(b), if
there is an adjustment to the Purchase Price to be made (the
"Initial Purchase Price Adjustment"), the Escrow shall be reduced
by the amount of the Initial Purchase Price Adjustment (the
"Adjusted Escrow") and the Escrow Agent shall, within ten (10)
Business Days after receipt of notice of the Closing Date Balance
Sheet becoming final and the amount of any Initial Purchase Price
Adjustment, pay the Buyer out of the Escrow the amount of the
Initial Purchase Price Adjustment and pay the Seller the amount of
the Adjusted Escrow.
F. The Escrow.
1. The purpose of the Escrow provided in Section 1.4(b) shall
be to serve as a convenient vehicle (but not as a limitation) for
adjustments to the Purchase Price contemplated under this
Agreement.
2. In the event that the Escrow has been exhausted and Buyer
has a claim for an adjustment to the Purchase Price pursuant to
this Agreement (including a portion of the Initial Purchase Price
Adjustment which was not paid out of the Escrow) then the Buyer may
offset against any amounts remaining unpaid under Section 1.4(c).
Alternatively, Buyer shall have the right as set forth in Section
1.6(a) to reimbursement for any Aggregate Purchase Price
Adjustment.
G. Method of Payment. All payments from one party to another
under this Agreement shall be made by wire transfer of immediately
available federal funds to an account designated in writing not
less than two (2) days prior to the payment date by an individual,
firm, corporation, partnership, trust, government or political
subdivision or agency or instrumentality thereof, association,
unincorporated organization or any other entity ("Person")
designated to receive such payment.
II. Closing.
A. Time and Place of Closing.
1. The closing of the sale and purchase of the Capital Stock
(the "Closing") shall take place at a date and time to be agreed
upon, but no later than thirty (30) days following the satisfaction
or waiver of all conditions to Closing at the offices of ▇▇▇▇▇▇
Potter ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., ▇▇▇▇ ▇ ▇▇▇▇▇▇,
▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, D.C., or at such other time and place
as the parties shall mutually agree in writing (the "Closing
Date").
2. For purposes of preparation of the Closing Date Balance
Sheet, the books of the Companies shall be closed as of the close
of business on the Closing Date at which time the Companies' assets
and liabilities shall be computed.
B. Action at Closing.
1. At the Closing and as of the Closing Date, the Seller will
deliver to the Buyer the written resignations of all the directors
and officers of the Companies effective as of the Closing, and all
minute books, stock record books and all corporate seals of the
Companies and shall cause to be made immediately available to the
Buyer all books of account, leases, contracts, agreements,
securities, customer lists, personnel records, files and other
documents, instruments and papers belonging to the Companies.
2. At the Closing, the Seller shall deliver, free and clear
of all liens, encumbrances, restrictions, claims and other charges
thereon of every kind, the certificates evidencing the shares of
Capital Stock to be sold by the Seller in negotiable form, duly
endorsed in blank, or with separate stock transfer powers attached
thereto and signed in blank, with signature guarantees by United
States commercial banks or trust companies having assets in excess
of One Billion Dollars ($1,000,000,000), upon delivery by the Buyer
to the Seller of the Initial Payment. The shares of Capital Stock
to be delivered by the Seller at the Closing shall constitute all
of the issued and outstanding shares of Capital Stock of ATC and
International.
3. At the Closing, the parties shall exchange and deliver the
certificates and other evidence as to the accuracy of the
representations and warranties contained herein as of the date
hereof and as of the Closing Date and compliance with the covenants
and agreements contained herein which are required to be delivered
by such party as herein provided.
4. At the Closing, all other documents, instruments and
writings required to be delivered by a party at or prior to the
Closing Date pursuant to this Agreement will be delivered to the
party entitled thereto.
III. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Buyer as follows:
A. Organization, Powers and Qualification of the Companies. ATC
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and International
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee. Neither of the
Companies has any Subsidiaries (a "Subsidiary" shall mean a
corporation where fifty percent (50%) or more of the voting power
of such corporation is owned directly or indirectly by another
corporation). Each of the Companies has all requisite corporate
power and authority to own or lease its properties and assets and
carry on its business as now conducted and is qualified as a
foreign corporation authorized to do business and is in good
standing in each jurisdiction in which either of the Companies has
entered into a written contract to provide services, all of which
jurisdictions are disclosed in Section 3.1 of the Schedule to this
Agreement delivered by the Seller to the Buyer contemporaneously
with the execution of this Agreement (the "Schedule").
B. Capital Stock. ATC has authorized Capital Stock consisting of
shares of common stock, par value $_____ per share, of which shares
are issued and outstanding. International has authorized Capital
Stock consisting of shares of common stock, par value $____ per
share, of which _______ shares are issued and outstanding. Neither
Company has issued and outstanding any other classes of equity
securities. All of the issued and outstanding shares of Capital
Stock of the Companies have been duly authorized and validly
issued, are fully paid and nonassessable and were not issued in
violation of any pre-emptive rights. There are no (a) outstanding
securities convertible into or exchangeable for the Capital Stock
of either of the Companies; (b) options, warrants or other rights
to purchase or subscribe for Capital Stock or any other security of
either of the Companies or securities convertible into or
exchangeable for Capital Stock of either of the Companies; or (c)
contracts, commitments, agreements, understandings or arrangements
of any kind to which either of the Companies or the Seller is a
party relating to the issuance, sale or other disposition, or
purchase, redemption, acquisition or voting, of any Capital Stock
or other securities of either of the Companies, any such
convertible or exchangeable securities or any such options,
warrants or rights.
C. Share Ownership.
1. The Seller is the lawful owner of record of ____ shares
of Capital Stock of ATC and _____ shares of Capital Stock of
International consisting of all of the issued and outstanding
shares of Capital Stock in the Companies, all of which are, or on
the Closing Date will be, free and clear of all liens, pledges,
encumbrances, restrictions, claims, options, rights of first
refusal, equitable interests and other charges of every kind, with
no defects of title whatsoever. Upon delivery of such shares of
Capital Stock to the Buyer pursuant to this Agreement and payment
of the Initial Payment therefor as contemplated in this Agreement,
at the Closing the Buyer will receive good and marketable title to
all of the issued and outstanding shares of Capital Stock of the
Companies, free and clear of all liens, pledges, encumbrances,
restrictions, claims, options, rights of first refusal, equitable
interests and other charges of every kind, with no defects in title
whatsoever.
2. The Seller has the exclusive right, power and authority to
vote the shares of Capital Stock of the Companies owned by the
Seller.
D. Authority and Binding Effect.
1. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to conduct its
business as it is now conducted and to own and operate its assets,
properties and business.
2. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Seller and the Seller has full corporate power and authority to
execute and deliver this Agreement, and carry out the transactions
contemplated hereby. This Agreement constitutes the legal, valid
and binding obligation of the Seller enforceable in accordance with
its terms, and no other corporate proceedings or actions on the
part of the Seller is necessary to authorize this Agreement or the
carrying out of the transactions contemplated hereby.
E. Articles of Incorporation, Bylaws, Minute Books and Stock
Books. True and complete copies of the current articles of
incorporation and all amendments thereto and of the bylaws, as
amended, of each of the Companies are attached as Exhibit 3.5
hereto. The minutes books of the Companies contain true and
complete records of all meetings and consents in lieu of meetings
of the boards of directors (and any committee thereof) and voting
shareholders of each of the Companies and accurately reflect all
transactions referred to or required to be contained in such
minutes and consents in lieu of meeting, as well as those matters
customarily contained in records of such type; except as reflected
in such minute books, there are no minutes of meetings or consents
in lieu of meetings of the boards of directors (or any committee
thereof) or of shareholders of the Companies. The stock books of
the Companies contain complete and accurate records of all
issuances and transfers of record of the Capital Stock of the
Companies.
F. Conflict with Other Agreements, Approvals. With respect to
the following:
1. the articles of incorporation or bylaws of the Seller and
the Companies;
2. any applicable law, statute, rule or regulation;
3. any material written contract, agreement (including,
without limitation, the FAA Contract, the agreement with the
Department of Defense (the "DOD Contract") and any agreements with
other governmental agencies (collectively with the FAA Contract and
the DOD Contract, the "Government Contracts")), lease, mortgage or
commitment to which either of the Companies is a party or may be
bound, to which the Companies or the Seller is a party or may be
bound and any other contracts relating to the Capital Stock, except
as disclosed in Section 3.6 of the Schedule;
4. any judgment order, injunction, decree or ruling of any
court or governmental authority to which the Companies or the
Seller is a party or subject;
the execution and delivery by the Seller of this Agreement and the
consummation of the transactions contemplated hereby will not (i)
result in any violation, conflict, breach or default (or event
which with notice or passage of time or both would constitute a
breach or default), give to others any interest or rights,
including rights of termination, cancellation or acceleration,
require the consent of any other party, or result in the creation
or imposition of any material lien, restriction, security interest,
charge or encumbrance upon any of the properties or assets of
either of the Companies or the Seller, or (ii) except for the
requirements of any applicable state securities laws, require any
authorization, consent, approval, exemption or other action by any
court or administrative or government body which has not been
obtained or will not be obtained prior to the Closing, or any
notice to or filing with any court or administrative or
governmental body which has not been given or done. At or prior to
the Closing, the Seller will deliver to the Buyer copies of all
consents received by the Companies or the Seller with respect to
any Contract requiring consent pursuant to this Section. In the
event of a breach of this Section 3.6 by the Seller or the
Companies, Buyer specifically waives any and all right to claim
acquisition and due diligence costs incurred prior to the Closing
Date.
G. Transfer Claims. No prior offer, issue, redemption, call,
purchase, sale, transfer,
negotiation or other transaction of any nature or kind with respect
to any Capital Stock (including shares, offers, options, warrants,
or debt convertible into shares, options or warrants) of the
Companies, or any corporation which has been merged into the
Companies or any Subsidiary of the Companies, has given or will
give rise to any valid claim or action by any Person which is
enforceable against any of the Companies, or the Seller (to the
extent it affects their ability to transfer the Capital Stock to
the Buyer free of encumbrances) or Buyer.
H. Books and Records. The books and records of the Companies
completely and accurately reflect in all material respects all
transactions to which the Companies are a party or by which their
respective assets are subject or bound, and such books and records
have been properly kept and maintained.
I. Compliance with Law.
1. The Companies and their use and occupancy of their assets,
wherever located, are and have been in compliance with and have not
(by virtue of any action, omission to act, contract to which any of
them are parties, or any occurrence or state of facts whatsoever)
been and are not in material violation of any applicable federal,
state, local or other governmental laws or ordinances, foreign or
domestic, or any order, rule or regulation of any federal, state,
local or other governmental agency or body, foreign or domestic
(including, without limitation, all environmental, energy, federal
aviation, safety, health, zoning, anti-discrimination, antitrust,
wage and hour and price and wage control laws, ordinances, orders,
rules or regulations); and, neither of the Companies nor the Seller
has received any claim or notice of violation with respect thereto.
The Seller does not have any basis to expect, nor has the Seller
received any actual or threatened order, notice or other
communication from (i) any governmental body, agency or private
citizen acting in the public interest, or (ii) the current or prior
owner or operator of any of the Assets (hereinafter defined), of
any actual or potential violation or failure to comply with any
environmental law, or if any actual or threatened obligation to
undertake or bear the cost of any investigation, corrective action,
remediation, cleanup, removal, containment with respect to any of
the Assets in which Seller currently or has previously had an
interest, or with respect to any property or Assets at which
Hazardous Substances (hereinafter defined) were generated,
manufactured, refined, transferred, imported, used, or processed by
the Seller, or any other person for whose conduct they are or may
be held responsible, or from which Hazardous Substances have been
transported, treated, stored, handled, transferred, disposed,
recycled, or received.
2. Each of the Companies or the Seller has obtained or filed all
notices which are required to be obtained or filed by any of the
Companies or the Seller for the operation of the business of the
Companies under federal, state and local laws including, but not
limited to, those relating to federal aviation and to pollution or
protection of the environment.
3. Each of the Companies and the Seller is in compliance in all
material respects with all terms and conditions of any required
permits, licenses, contracts and authorizations which may have been
awarded or issued to them.
4. Each of the Companies and the Seller is in compliance in
all material respects with all other applicable limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those laws or
contained in any law, regulation, code, plan, order, decree,
judgment, notice or demand letter issued, entered into,
promulgated, or approved thereunder.
5. No Hazardous Substances are present or stored on the
property or plants of the Companies except as set forth in Section
3.9(e) of the Schedule. The properties and plants do not contain
asbestos or polychlorinated biphenyls in any form. The properties
and plants have not and do not currently have above- or underground
storage tanks or lines of any type. There are no surnps,
impoundments or related storage devices or conveyances on the
properties or plants that hold or have held Hazardous Substances.
6. None of the buildings or improvements owned or utilized by
the Companies is constructed of, or contains as a component part
thereof, any material which, either in its present form, or as such
material may ▇▇▇▇▇▇▇▇▇▇.▇▇ expected to change through aging and
nominal use and service, releases any substance, whether gaseous,
liquid or solid, which is or may be, either in a single dose or
through repeated and prolonged exposure, a pollutant, contaminant,
or hazardous or toxic material or waste or is otherwise injurious
or hazardous to the health of persons who may from time to time be
in or about such buildings or improvements ("Hazardous
Substances").
7. There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent continued compliance with
environmental laws, or which may give rise to any common-law or
statutory liability, or otherwise form the basis of any claim,
action, suit, proceeding, hearing or investigation based on or
related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the
emission, discharge, release or threatened release into the
environment, of any Hazardous Substances with respect to any of the
Companies or its businesses.
8. The Companies and the Seller have fully complied with all
applicable requirements of the Federal Aviation Act of 1958, as
amended, and as revised and codified in 1994 under the name
"Revision of Title 49, Transportation, United States Code," and
regulations promulgated pursuant thereto (the "FAA Requirements"),
the requirements imposed by statute and regulation upon persons
contracting with the Department of Defense (the "DOD Requirements")
and the requirements imposed upon persons contracting with other
governmental agencies (collectively with the FAA Requirements and
the DOD Requirements, the "Governmental Requirements"). There is no
pending or to the knowledge of either of the Companies or the
Seller, threatened investigation or regulatory action by the FAA,
DOD or any government agency affecting or involving either of the
Companies or the Seller.
9. Each of the Companies is in compliance with all applicable
laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and occupational
safety and health. There is no unfair labor practice,.charge or
complaint or any other matter against or involving either of the
Companies pending or, to the knowledge of either of the Companies
or the Seller, threatened, before the National Labor Relations
Board or any court of law.
10. Except as disclosed in Section 3.090) of the Schedule,
there are no charges, investigations, administrative proceedings or
formal complaints of discrimination (including discrimination based
upon sex, age, marital status, race, national origin, sexual
preference, handicap or veteran status) pending or, to the
knowledge of either of the Companies or the Seller, threatened,
before the Equal Employment Opportunity Commission or any federal,
state or local agency or court against the Companies and, to the
knowledge of the Seller, no basis for any claim in connection
therewith exists.
11. Except as disclosed in Section 3.09(k) of the Schedule,
there have been no governmental audits of the equal employment
opportunity practices of any of the Companies.
J. OSHA; Governmental Requirements and Other Filings. The Seller
has previously delivered or made available to the Buyer all reports
and filings made or filed by either of the Companies or the Seller
(in the case of the Governmental Requirements) pursuant to the
Occupational Safety and Health Act, Resource Conservation and
Recovery Act and Executive Order 11246 (relating to equal
employment opportunity), the Governmental Requirements or similar
state and local laws, regulations and orders.
K. Financial Statements. Attached as Exhibit 3.11 (a) hereto are
true and complete copies of the balance sheets of ▇▇▇▇▇▇ ATC, Inc.
and ▇▇▇▇▇▇ ATC International, Inc. as of June 30, 1996, and the
related statements of operations, stockholders equity and cash
flows for the year then ended (the "1996 Financial Statements").
The notes to the financial statements are an integral part thereof.
These financial statements have been audited by ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
Co., P.C., Certified Public Accountants. Such financial statements
present fairly the financial position of the respective companies
as of June 30, 1996, and the results of their operations and their
cash flows for the year then ended, in accordance with GAAP,
consistently applied (except for the effects of any change in
accounting principles disclosed therein).
L. Liabilities and Obligations.
1. The Companies do not have any liabilities or obligations
(whether direct or indirect, matured or unmatured, contingent or
otherwise) of any nature, except (i) liabilities and obligations
disclosed in the 1996 Financial Statements, (ii) liabilities and
obligations not specifically reflected, reserved against or given
effect to in the 1996 Financial Statements which are disclosed
specifically in Section 3.12(a) of the Schedule, (iii) liabilities
and obligations incurred in the ordinary course of business of the
Companies between June 30, 1996 (the "Balance Sheet Date" and the
date hereof, and (Iv) liabilities and obligations fully covered by
insurance except for deductible amounts of the policies as set
forth in Section 3.20 of the Schedule.
2. The Companies do not have any liability or obligation
(whether direct or indirect) to make any charitable or political
contribution, whether in cash or other property.
M. Absence of Adverse Changes or Events. Since the Balance Sheet
Date,
1. there has been no material adverse change in the Assets
(as hereinafter defined), financial condition, results of
operations, performance, business or prospects of either of the
Companies ("Material Adverse Change"), or in the ability of the
Companies to conduct their business as now conducted;
2. the Companies have been operated only in the ordinary
course of business;
3. neither of the Companies has failed to manage their
working capital, including cash, receivables, prepaid expenses,
other current assets, trade payables and other current liabilities,
in a fashion consistent with past practice, including paying
outstanding obligations, trade accounts and other indebtedness as
and in the order in which they become due;
4. neither of the Companies has failed to maintain all of the
properties used or useful in the business of the Companies in the
Companies' customary repair, order and condition, reasonable wear
and tear excepted;
5. neither of the Companies has created any new Plans or
amended any Plan, as defined in Section 3.23, accrued or paid to
officers or directors any unaccrued bonus, profit sharing,
retirement pay, insurance, death benefit, fringe benefit or other
compensation; increased the salary or other compensation level of
any officer or director; entered into any employment contract; or
given any general compensation increase to employees, except normal
"step" pay increases;
6. neither of the Companies has issued any substitute stock
certificate to replace any stock certificate which was lost or
otherwise irretrievable;
7. neither of the Companies has sold or disposed of any of
their Assets; (h) neither of the Companies has made any loan or
advance to any Person or become committed to do so;
8. neither of the Companies has made any loan or advance to
any Person or become committed to do so;
9. neither of the Companies has subjected any Asset to a
mortgage or other lien, or committed to do so, except liens of
current income, gross receipts, gains, sales, use, employment,
franchise, license, school, payroll, profits, property, ad valorem,
excise or other taxes, estimated, import duties, fees, stamps,
taxes and assessments or charges of any kind whatsoever (whether
payable directly or by withholding), together with any additional
charges, interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority with respect thereto, or
any charges, interest or penalties imposed by any taxing authority
as the result of the failure to file any return ("Taxes") not yet
due and payable, or mechanic's or materialmen's liens; or
10. neither of the Companies has (i) without adequate
consideration released or waived any claims or rights, canceled any
debts or discharged any liens; or (ii) paid any obligations other
than those for liabilities shown on the 1996 Financial Statements
and those incurred since the Balance Sheet Date in the ordinary
course of business.
N. Certain Tax Matters.
1. All returns and reports (including without limitation,
information returns and reports) ("Tax Returns") relating to any
Taxes which are required to be filed by or with respect to either
of the Companies for any period ending on or prior to the Closing
Date, have been or will be duly and timely filed, and all Taxes
which have become due pursuant to such returns have been or will be
fully paid prior to the Closing. Except as disclosed in
Section 3.14(a) of the Schedule, no deficiency in the payment of
Taxes by the Seller or the Companies for any period has been
asserted against the Seller or the Companies, by any taxing
authority and remains unsettled at the date of this Agreement.
There is not in force any extension of time with respect to the
date on which any Tax Return with respect to either of the
Companies is due to be or has been filed, or any waivers or
agreements by or with respect to either of the Companies of or for
an extension of time for the assessment or payment of any Tax.
There are no pending, or to the knowledge of either of the
Companies or the Seller, threatened examinations of Tax Returns
previously filed or Tax claims asserted against either of the
Companies or any other company that joined in the filing of a
consolidated return with either of the Companies, or their
respective properties. There are no Tax liens on any of the
properties or assets of either of the Companies, except for liens
for current Taxes not yet due and payable and to the knowledge of
either of the Companies or the Seller, no such liens are pending or
threatened. The Tax Returns of the Companies and the Seller have
been audited or closed by applicable statutes of limitations and
satisfied for all fiscal years prior to and including the fiscal
year ended June 30, 1994. All of the Tax Returns have been
previously delivered or made available to the Buyer. Neither of the
Companies has filed any consents pursuant to the Internal Revenue
Code of 1986, as amended (the "Code"). Neither of the Companies,
nor any predecessor in interest of either of them, has filed, or
may be deemed to have filed, any election under Section 338 of the
Code. No assets of either of the Companies or of any "Related
Person," as that term is defined in Section 144(a)(3) of the Code,
whether owned or leased pursuant to a capital lease, have, since
January 1, 1984, been financed by private activity bonds within the
meaning of Section 141 of the Code (or industrial development bonds
within the meaning of Section 103(b) of the 1954 Code), and neither
of the Companies nor any Related Person is a "principal user," as
that term is used in the context of Section 144(a) of the Code of
any building which has been so financed. Neither of the Companies
has made any payment which constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code, no payment
by either of the Companies required to be made under any contract
presently in existence or entered into on or prior to Closing will,
if made, constitute an "excess parachute payment" within the
meaning of Section 280G of the Code. Any Tax Returns arising from
periods prior to and including the Closing Date shall be the
property of Seller.
2. A tax basis fixed asset list (the "List") has been
prepared and maintained by the Companies in the ordinary course of
business record keeping for purposes of preparing federal and
applicable state income Tax returns. The List, set forth in Section
3.14(b) of the Schedule, has been delivered to the Buyer. The List
completely sets forth, as of the year end of the taxable year
preceding the Closing Date, with respect to the depreciable or
amortizable assets of the Companies: (i) the assets' adjusted basis
as used by the Companies in the preparation of their federal income
Tax returns (and any difference in such basis and the basis for
state income Tax returns); (ii) the original Tax costs used by the
Companies to determine the adjusted basis of the assets; and (iii)
the Tax depreciation or amortization deduction taken by the
Companies in arriving at the assets' adjusted basis.
O. Dividends and Stock Purchases. Since the Balance Sheet Date,
neither of the Companies has repurchased or redeemed any of its
stock, and neither of the Companies has declared, set aside, or
made payment of any dividend or distribution of assets to the
holders of its stock.
P. Assets.
1. Section 3.16(a) of the Schedule sets forth a complete and
accurate list and description of all the real and personal property
that the Companies own or lease, have agreed (or have an option) to
purchase, sell or lease, or may be obligated to purchase, sell or
lease (the "Assets"), the net book value of each of which as of
June 30, 1996 (on an individual item-by-item basis, using for such
purpose the value of the fee simple, unencumbered title to such
property) exceeds One Thousand Dollars ($1,000); provided that for
purposes hereof any capitalized lease shall be valued at its net
book value and any other lease shall be included in Section 3.16(a)
of the Schedule only to the extent the aggregate payments required
to be made thereunder exceed One Thousand Dollars ($1,000). Except
as disclosed in Section 3.16(b) of the Schedule, each of the
Companies is the sole owner of and has good and marketable title to
the Assets, including without limitation those assets and
properties reflected in the 1996 Financial Statements in the
amounts and categories reflected therein, free and clear of all
mortgages, liens, pledges, charges or encumbrances or other third-
party interests of any nature whatsoever. Assets are not subject to
any rights of way, building use restrictions, exceptions,
variances, reservations or limitations of any nature whatsoever,
not of record or any governmental decree or order (or threatened or
proposed order to the knowledge of the Seller) to be sold or taken
by public authority, except (i) liens for current Taxes not yet due
and payable, (ii) Assets (other than current assets) described in
Section 3.16(b) of the Schedule which have been disposed of by the
Companies since the Balance Sheet Date whether or not in the
ordinary course of business, to the extent that the aggregate net
book value of such Assets so disposed of exceeds One Thousand
Dollars ($1,000); (iii) such secured indebtedness as is disclosed
in Section 3.16(b) of the Schedule, and (iv) such imperfections of
title, easements and other minor encumbrances, if any, as are not
substantial in character, amount or extent and do not materially
detract from the value, or interfere with the present or proposed
use, of the Assets subject thereto. All Assets of the Companies are
in the possession or control of the Companies, and no other person
is entitled to possession of any of such Assets.
2. The fixed assets comprising a part of the Assets are in
good operating condition and repair, ordinary wear and tear
excepted, are sufficient and adequate to carry on the Companies'
business as presently conducted and meet all applicable contractual
or federal, state and local governmental statutory, regulatory and
other requirements.
3. All Assets owned by either of the Companies which are
subject to title registration or recording are properly registered
or recorded in the name of their owners, and no title registration
or recording fees or taxes remain unpaid.
Q. Contracts. A list of all written and a detailed description
of all oral contracts, agreements (including the Government
Contracts), leases, mortgages and commitments to which either of
the Companies is a party or may be bound ("Contracts"), except
contracts that involve payments in the aggregate of less than One
Thousand Dollars ($1,000) per year or that can be terminated by
either of the Companies without penalty within thirty (30) days
after written notice, is set forth in Section 3.17 of the Schedule
and true copies of the Contracts listed in Section 3.17 of the
Schedule have been delivered to the Buyer. All Contracts required
to be listed in Section 3.17 of the Schedule are valid and in full
force and effect on the date hereof, and neither the Companies nor
the Seller, to the knowledge of either of the Companies or the
Seller, nor any other parties have violated any material provision
of, or committed or failed to perform any act, which with notice,
lapse of time or both, would constitute a material default under
the provisions of any such Contract. Except as disclosed on Section
3.17 of the Schedule, to the knowledge of the Companies or the
Seller, no party has any intention to terminate any Contract.
Except as disclosed on Section 3.17 of the Schedule, neither of the
Companies has any outstanding contract, written or oral, with any
officer or director, or with any employee, agent, consultant,
advisor, representative, dealer, contractor or broker that is not
cancelable on notice of not longer than thirty (30) days and
without liability, penalty or premium of any kind, or any agreement
or arrangement providing for the payment of any bonus or commission
based on earnings; neither of the Companies has (i) any outstanding
loan or loan commitment to any Person or (ii) any line of credit or
subordination agreement; there are no contracts or agreements of
either of the Companies with any director, officer or shareholders
of the Companies or the Seller or with any relative of any such
Person or with any company or other organization in which any
director, officer, or shareholder of either of the Companies or the
Seller or relative of any such Person, has, to the knowledge of
either of the Companies or the Seller, a direct or indirect
financial interest (excluding for such purposes the ownership of
less than one percent (1%) of the outstanding equity of any
publicly-traded corporation of which such Person is neither an
officer nor a director); and neither of the Companies is subject to
any contract or agreement containing covenants limiting the freedom
of any of the Companies to compete in either line of business in
any geographic area.
R. Receivables.
1. All accounts receivable whether payable by written or oral
agreement or otherwise ("Accounts Receivable") of the Companies
owing by any director, officer or shareholder of any of the
Companies or any relative of any such Person and Accounts
Receivable in excess of One Thousand Dollars ($1,000) owing by any
employee (whether or not reflected on the Financial Statements)
have been paid in full prior to the date hereof or shall have been
paid in full prior to the Closing Date.
2. All Accounts Receivable of any of the Companies which will
be reflected on the Closing Date Balance Sheet (i) will be valid,
existing and fully collectible (subject to any reserve on the
Closing Date Balance Sheet) within ninety (90) days following the
Closing Date without resorting to legal proceedings or collection
agencies, (ii) will represent monies due for amounts due under
Contracts, or for services rendered, goods sold and delivered in
the ordinary course of business, and (iii) will not be subject to
any refunds or adjustment or any defenses, rights of set-off,
assignment, restrictions, security interests or other encumbrances.
Since 1990, neither of the Companies has ever factored any of its
Accounts Receivable.
S. Limitation. Except as disclosed in Section 3.19 of the
Schedule, no claim, action, suit, arbitration, inquiry,
examination, audit, investigation (including, to the knowledge of
either of the Companies or the Seller, Grand Jury investigations),
indictment, formation or other proceeding is pending or, to the
knowledge of the Companies or the Seller, threatened against either
of the Companies, any of the Assets, or the business of either of
the Companies or the transactions contemplated hereby, or to which
either of the Companies is a party before any court, governmental
agency, authority or commission, arbitrator, or "impartial
mediator," and neither of the Companies is subject to any
unsatisfied judgment or outstanding court order. Section 3.19 of
the Schedule indicates which of such litigation matters are being
defended by an insurance carrier, which list is current as of the
date which is three (3) Business Days prior to the date hereof or
to the Closing Date, as appropriate. No present or former officer
or director of the Companies has or will have any claim for
indemnification from the Companies related to any act or omission
prior to the Closing by such present or former officer or director.
T. Insurance. Section 3.20 of the Schedule lists completely and
accurately all policies or binders of insurance held by or on
behalf of the Companies and all outstanding claims under those
policies or binders. Except as set forth in Section 3.20 of the
Schedule, all such policies or binders of insurance are in full
force and effect and none of the Companies has received any notice
of any pending or threatened cancellation or any material premium
increase (retroactive or otherwise), and the Companies are in
compliance with all material conditions contained therein. There
are no pending claims against such insurance as to which insurers
are defending under reservation of rights or have denied liability,
and there exists no claim under such insurance that has not been
properly filed by the Companies.
U. Labor Matters. There are no Collective Bargaining Agreements
to which either of the Companies is bound at the date of Closing.
Seller is aware that labor organizing activities are currently in
progress at the Rickenbacker site and may be in progress at any or
all of Seller's other sites.
V. Contracts for Personal Services. Except as disclosed in
Section 3.22 of the Schedule, neither of the Companies is a party
to or bound by any material Contract with any Person for or related
to personal services rendered or to be rendered by any Person to
the Companies.
W. Employee Benefit Plans and Arrangements.
1.a. Section 3.23(a) of the Schedule sets forth a true and
complete list of each Plan that either of the Companies currently
maintains or has in effect or as to which it is required to make
contributions. The term "Plan" shall mean any "Plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), any stock purchase, stock
option, performance, bonus, incentive, or savings plan, any
voluntary employee beneficiary association, or any other
obligation, arrangement or practice, whether or not a plan under
Section 3(3) of ERISA, to provide benefits, other than a salary, as
compensation for services rendered. All of the Plans are currently
in effect.
b. Section 3.23(a)(ii) of the Schedule identifies all Plans
which are pension plans, as defined in Section 3(2) of ERISA.
c. The assets of the Plans which are intended to be qualified
are held in trusts established under the Plans. True, complete and
accurate copies of all written Plans referred to in Section 3.23(a)
of the Schedule (including all applicable documents governing
obligations, trust agreements, summary plan descriptions, annuity
contracts, determination letters, the most recently available
annual reports, valuation or actuarial reports, and Internal
Revenue Service Form 5500s (or 5500-C or 5500-R) for any year
requested by Buyer relating to any Plan) have heretofore been
delivered to Buyer. Since the date such documents were made
available to Buyer, no plan amendments have been adopted nor will
any such amendments be adopted prior to the Closing Date, except as
Buyer reasonably may request to assist in the transition of the
Plans to Buyer's control upon the consummation of the Closing.
2. Except as disclosed in Section 3.23(b) of the Schedule, (i)
in terms of their structure and operation and in all other
respects, all Plans and related and all reports filed with respect
thereto in all material respects conform to and are being
administered in compliance with all applicable laws, including,
without limitation, the requirements of ERISA and the Code; (ii)
each of the Plans and their related trusts is (or, if terminated,
has been) "qualified" within the meaning of Section 401(a) and
Section 501 of the Code and each trust which is intended to be
exempt from taxation under Section 501 (a) of the Code is so
exempt, and each such Plan has received a favorable determination
from the Internal Revenue Service that such Plan is so qualified
and that each such trust is so exempt, and each such Plan and trust
has been operated in such manner as to preserve such qualification
and such qualification remains in effect; (iii) none of the Plans
or related trusts has incurred any accumulated funding deficiency
as defined in Section 412 of the Code or Section 302 of ERISA,
whether or not waived and regardless of the reason arising; (iv)
there are not now, nor have there been within the last five (5)
years, any transactions involving or related to any Plan or any
trust created thereunder which are prohibited under Part IV of
ERISA or Section 4975 of the Code nor is there any transaction in
connection with any Plan whereby either of the Companies could be
subject to a civil penalty assessed pursuant to Section 502 of
ERISA; (v) there are no pending or, to the knowledge of either of
the Companies or the Seller, threatened claims by or on behalf of
such Plans or related trusts or by any participant or beneficiary
thereunder with respect to any of the Plans, including, without
limitation, any claim alleging a breach or breaches of fiduciary
duties on the part of the Companies, the Companies' officers,
directors, employees or any other fiduciary (as defined in Section
3(21) of ERISA) with respect to any Plan maintained by the
Companies under ERISA or any other law, nor, to the knowledge of
either of the Companies or the Seller, is there any basis for such
a claim except for benefits to participants or beneficiaries in
accordance with the terms of the Plans; (vi) none of the Plans has
been terminated or partially terminated nor have the contributions
to any such Plans been discontinued, within the meaning of Section
411 of the Code, nor have there been any events with regard to such
Plans or their related funding instruments which might constitute
grounds for such a termination, partial termination or
discontinuance of contributions; (vii) no such Plan or related
trust owns any notes or securities issued by, or owns or leases any
property of, to or from, the Companies or the Seller or any
officer, director, controlling shareholder or affiliate of any of
them, nor is there any agreement or commitment to do so in the
future; (viii) each of the Companies has in all material respects
complied with all of their respective obligations with respect to
all Plans, including the payment of all contributions required or
due to be paid, the satisfaction of all reporting requirements to
federal, state and local governments and governmental agencies and
to all Plan participants and beneficiaries, and the payment or
accrual of all expenses for all periods, including the period
between the end of the previous Plan year and the Closing Date; and
(ix) the levels of insurance reserves and accrued liabilities with
regard to all the Plans are sufficient to provide for all incurred
but unreported claims and any retroactive premium adjustments.
3. Except as disclosed in Section 3.23(b) of the Schedule,
(i) neither of the Companies, nor any trade or business under
common control with either of the Companies (within the meaning of
Section 414(c) of the Code) has contributed to any pension plan
which is a multiemployer plan, as defined in Section 3(37) of ERISA
since the enactment of the Multiemployer Pension Act in 1980 and
the Companies have no liability under such Act as a result of any
prior acquisition by them of any entity or assets; and (ii) there
is no contract or arrangement covering any officer, director or
employee or former officer, director or employee of any of the
Companies that would result in the payment of any amount that would
not be deductible by operation of Section 280G of the Code, or,
other than the Employment Agreements referred to in Section 9.8,
provide separation, severance, termination or any other benefit or
payment as a result of the transactions contemplated by this
Agreement.
4. No statement, either written or oral, has been made by
either of the Companies to any person with regard to any Plan that
was not in accordance with the Plan and that could have an adverse
economic consequence to the Company or to Buyer. Except to the
extent required under Section 601 of ERISA, et seq., and Section
4980B of the Code, neither Company provides health or welfare
benefits for any retired or former employee or is obligated to
provide health or welfare benefits to any active employee following
such employee's retirement or other termination of service. The
Companies have materially complied with the provisions of Section
601 of ERISA, et seq., and Section 4980B of the Code. The Companies
have the right to modify and terminate each of the plans upon
giving no more than thirty (30) days' notice. The consummation of
the sale of the stock in the Companies will not result in payment,
vesting or acceleration of any benefit under the Plans.
5. Except as described in Section 3.23(e) of the Schedule,
neither of the Companies hereto has any binding agreement,
arrangement or commitment to create any additional Plan or to
increase the rate of benefit accrual or contribution requirement
under any of the Plans; to modify or change in any material
respect, or terminate any existing Plan; or, except as required by
law, to continue any Plan or any provisions thereunder for any
period of time.
6. Except as described in Section 3.23(f) of the Schedule,
none of the Plans is currently under investigation, audit or review
by the Department of Labor, the Internal Revenue Service or any
other federal or state agency.
X. Government Contracts. International has a contract with the
FAA enabling it to operate air traffic control towers on those
airports which are listed on Section 3.24 of the Schedule which
fully enables International to operate its business as presently
conducted, and ATC has contracts with other Governmental Agencies
enabling it to operate the air traffic control towers on those
airports which are listed on Section 3.24 of the Schedule which
fully enables ATC to operate its business as presently conducted.
The Companies have, in all material respects, operated in
compliance, are not in default, and neither of the Companies nor
the Seller has received any notice of any claim of default with
respect to the Governmental Agencies, or any notice of any other
claim or proceeding or threatened proceeding relating to a
Government Contract or claimed lack of any necessary authorization,
or the ability of the Companies to engage in the activities
contemplated by the Government Contracts. Neither of the Companies
nor the Seller, has received any notice from the FAA or other
Governmental Agencies to the effect that (a) the Government
Contracts will not be kept fully in force; (b) the Government
Contracts will not be transferred to the Buyer or otherwise not
continue so that the Buyer, upon acquisition of the Capital Stock,
can conduct the business of the Companies as fully as it is now
conducted, and (c) the FAA Contract will not be renewed. Where
joint application for consent relating to the Government Contracts
is required by the Government Agencies, the Seller will join in the
joint application.
Y. Catastrophic Loss. Since the Balance Sheet Date, the
Companies have not suffered any loss or damage due to or arising
out of fire, flood, explosion, hurricane or other casualty,
calamity, accident or act of God that is a Material Adverse Change
or will have a material adverse effect upon the Assets, financial
condition, results of operations, performance, business or
prospects of either of the Companies ("Material Adverse Effect").
Z. Guarantees. Except as disclosed in Section 3.26 of the
Schedule, there are no contracts or commitments by either of the
Companies as guarantor of payment or performance, surety,
consigner, endorser, co-maker or indemnitor in respect of the
contract or commitment of any other Person or whereby, except for
the endorsement of checks in the regular and ordinary course of
their respective businesses, the Companies in any way are or will
be liable with respect to obligations of any other Person. There
are no outstanding powers of attorney granted by either of the
Companies.
AA. Brokerage. No broker, finder or similar agent has been
employed by or on behalf of either of the Companies or the Seller
and no Person with which the Companies or the Seller have had
dealings or communications of any kind is entitled to a commission
or other similar compensation in connection with the transactions
contemplated by this Agreement.
AB. Officers and Directors and Certain Authorized Persons.
Section 3.28 of the Schedule sets forth a complete and accurate
list of:
1. the names of all directors of the Companies;
2. the names of all officers of each of the Companies and a
listing of the offices held by them;
3. the names of all Persons authorized to borrow money or
incur or guarantee
indebtedness on behalf of the Companies;
4. all safes, vaults and safety deposit boxes maintained by
or on behalf of the Companies or in which property of the Companies
is held, and the names of all Persons authorized to have access
thereto; and
Persons who are authorized signatories with respect to such
accounts, the capacities in which they are authorized signatories
and the terms of their authorizations.
AC. Transactions with Affiliates. Except as disclosed in
Section 3.29 of the Schedule, as of the Closing, neither the Seller
nor any director, officer or employee or representative of the
Companies, nor, to the knowledge of either of the Companies or the
Seller, any relative of the Seller or any such director, officer,
employee or representative, i) is a party to any material Contract
with the Companies, (ii) is (except as disclosed in the Financial
Statements or in the ordinary course of business, for any employee
or representative of the Companies, other than any employee or
representative who is also a director or officer, or any relative
thereof) indebted to any of the Companies, or (iii) (to the
knowledge of either of the Companies or the Seller, as to any
employee or representative of the Companies, other than any
employee or representative who is also a director or officer, or
relative thereof), has an ownership interest in any business,
corporate or otherwise, that is a party to, or in any property
which is the subject of, material. business arrangements or
relationships of any kind with the Companies.
AD. Major Suppliers. Section 3.30(a) of the Schedule sets
forth a complete, true and correct list of the Companies' ten
largest suppliers in terms of dollar volume during each of the
years ended June 30, 1996. To the knowledge of either of the
Companies or the Seller, no supplier of either of the Companies
intends to terminate or materially reduce its supplier relationship
with the Companies whether by reason of the transactions
contemplated hereby or otherwise, where such termination or
material reduction would have a Material Adverse Effect, and no
supplier is otherwise involved in a dispute with any of the
Companies, the outcome of which if adverse to the Companies. would
have a Material Adverse Effect.
AE. Disclosure. No representation, warranty, undertaking or
agreement of the Seller made under this Agreement and no statement,
certificate, list or other document furnished or to be furnished to
the Buyer pursuant to this Agreement or in connection with the
transactions contemplated hereby contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary in order to make the statements contained
therein not misleading.
IV. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:
A. Organization and Good Standing. The Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of New Jersey, with full corporate power and
authority to conduct its business as it is now being conducted and
to own and operate its assets, properties and business.
B. Authorization. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby has
been duly authorized by all necessary action on the part of the
Buyer and the Buyer has full corporate authority to execute and
deliver this Agreement and subject to the terms of this Agreement
to carry out the transactions contemplated hereby. No other
corporate proceedings on the part of the Buyer other than as
contemplated by this Agreement, is necessary to authorize this
Agreement or the carrying out of the transactions contemplated
hereby.
C. Agreement Binding. This Agreement constitutes the legal,
valid and binding agreement of the Buyer, enforceable in accordance
with its terms.
D. Conflict with Other Agreements, Approvals. With respect to
the following:
1. the Certificates of Incorporation or Bylaws of the Buyer;
2. any applicable law, statute, rule or regulation;
3. any material contract to which the Buyer is a party or is
bound; or
4. any judgment, order, injunction, decree or ruling of any
court or governmental authority to which the Buyer is a party or
subject;
the execution and delivery by the Buyer of this Agreement and the
consummation of the transactions contemplated hereby will not (i)
result in any violation, conflict or default (or event which with
notice or passage of time or both would constitute a breach or
default) or require the consent of any other party or (ii) except
for the requirements of applicable state securities laws, require
any authorization, consent, approval, exemption or other action by
any court or administrative or governmental body (other than the
authorizations or consents contemplated by this Agreement) which
has not been obtained, or any notice to or filing with any court or
administrative or governmental body that has not been given or
made. At or prior to the Closing, the Buyer will deliver to the
Seller copies of all consents received by the Buyer with respect to
any contract requiring consent pursuant to this Section 4.4.
E. Buyer's Intent. The Buyer is purchasing the Capital Stock
solely for its own account and not with a view to public
distribution. The Buyer agrees that it will not transfer any of the
Capital Stock, except pursuant to an effective registration
statement under the applicable state securities laws and the
Securities Act of 1933 or in a transaction which is exempt under
such applicable state securities laws and the Securities Act of
1933.
F. Brokerage. No broker, finder or similar agent has been
employed by or on behalf of the Buyer and no Person with which the
Buyer has had dealings or communications of any kind is entitled to
a commission or other similar compensation in connection with the
transactions contemplated by this Agreement.
G. Disclosure. No representation, warranty, undertaking or
agreement of the Buyer made under this Agreement and no statement,
certificate, list or other document furnished or to be furnished to
the Seller pursuant to this Agreement or in connection with the
transactions contemplated hereby contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary in order to make the statements contained
therein not misleading.
V. Conduct of Business of the Companies Prior to Closing. From
and after the date hereof to the Closing Date or the date of
termination of the parties' obligation to close under this
Agreement, whichever first occurs, the Seller covenants to the
Buyer that, except as the Seller may specifically notify the Buyer
in writing, the Seller will cause the Companies to conduct and
operate their respective businesses only in the ordinary course of
business consistent with the Companies' past practice, not make or
institute any new methods of purchase, sale, lease, management,
accounting or operation except in the ordinary course of business
and consistent with the prior practice of the Companies, and use
their best efforts to (i) preserve intact their present business
operations, (ii) keep available the services of their present
officers and employees, and (iii) preserve their contractual
relationships with the Governmental Agencies, suppliers, and others
having business dealings with them. In the event of a violation of
a provision of this Section 5 prior to the date of Closing which
becomes known by Buyer prior to the date of Closing, the sole and
exclusive remedy of Buyer shall be to terminate this Purchase
Agreement. By way of illustration and not by way of limitation of
the foregoing:
A. Working Capital Management. The Companies shall manage their
working capital, including cash, receivables, prepaid expenses,
other current assets, trade payables and other current liabilities,
in a fashion consistent with past practice, and paying outstanding
obligations, trade accounts and other indebtedness as and in the
order in which they come due.
B. Adverse Changes. The Companies will not take or omit to take
any action which action or omission will cause any Material Adverse
Change, or waive any statute of limitations so as to expand any Tax
or other liability of the Companies.
C. Maintenance of Properties, etc. The Companies will, at their
own expense, maintain all of the properties used or useful in the
business of the Companies in customary repair, order and condition
consistent with past practice, except for reasonable wear and tear
and damage by fire and unavoidable casualty.
D. Maintain Corporate Existence. The Companies will maintain
their corporate existence in good standing in their respective
jurisdictions of incorporation and their due qualification in good
standing in all jurisdictions in which they are so qualified.
E. Capital Stock. The Companies will not make any change in
their authorized, issued or outstanding capital stock, and will not
grant any options or other rights of any kind to acquire, whether
directly or contingently, any of their capital stock or any
security convertible into or exchangeable for their capital stock.
F. Dividends, Distributions and Stock Repurchases. The Companies
will not declare, set aside, or pay any dividend or make any other
distribution in respect of their capital stock or directly or
indirectly redeem, retire, repurchase or otherwise acquire any of
their shares of capital stock.
G. Employment. Except as agreed to in writing by the Buyer, the
Companies will not enter into any employment contracts with,
otherwise hire or commit to hire, or terminate, any employee.
Except pursuant to the express written terms of any contract
entered into prior to the date hereof and disclosed in Section 5.7
of the Schedule, the Companies will not increase the rate of
compensation payable or to become payable by them to, and will not
enter into any new arrangements for severance or termination with,
any director, officer or any other employee, and will not make any
general increase in compensation or rate of compensation payable or
to become payable to hourly employees or salaried employees, except
where required by law. Excepted herefrom are normal "step" pay
increases for employees (other than directors, officers or
executive employees) made in the ordinary course of business.
H. Compensation. The Companies will not accrue or pay to any of
their officers, directors or employees any bonus, profit sharing,
retirement pay, insurance, death benefit, fringe benefit or other
compensation, except those which shall have accrued under existing
Plans and which are disclosed in Section 5.8 of the Schedule in the
ordinary course of the operation of such Plans. The Companies also
shall not establish, amend or terminate any bonus, profit sharing,
thrift, stock option, restricted stock, pension, retirement,
deferred compensation, or other Plan, policy or arrangement unless
such action is taken to conform such Plan, policy or arrangement to
the requirements of ERISA or the Code.
I. Liabilities and Obligations. The Companies will not incur,
assume, guarantee or otherwise become liable for any material
liabilities or obligations (direct or indirect, matured or
unmatured, contingent or otherwise) of any nature, or exchange,
refund or revise any outstanding indebtedness in such a manner as
to reduce the principal amount of such indebtedness and increase
the interest rate, except (a) trade payables, other current
liabilities or deferred taxes incurred between the date hereof and
the Closing Date that are incurred in the ordinary course of
business, and (b) liabilities and obligations fully covered by
insurance except for deductible amounts set forth in the policies
listed in Section 5.9 of the Schedule or policies issues in
replacement thereof.
J. Capital Expenditures. Except as agreed to by the Buyer in
writing, no contract or commitment of any kind relating to any
material single capital expenditure by the Companies shall be
entered into. Without limiting the generality of the foregoing, the
Companies shall not acquire or agree to acquire the stock or any
substantial portion of the assets of any business enterprise.
K. Sale of Assets. Except as agreed to in writing by the Buyer,
the Companies will not sell or dispose of any of their material
assets.
L. Leases, Contracts. Except as agreed to in writing by the
Buyer, the Companies will not enter into any lease as lessor or
lessee, or enter into any contract or commitment.
M. Insurance. The Companies will either maintain in full force
and effect all policies of insurance in force on the date hereof or
with prior notice to the Buyer obtain equivalent satisfactory
substitute insurance policies and will notify the Buyer in the
event of any material increase in costs insuring against the risks,
damages and losses covered by policies currently in force. If any
of the assets or properties of the Companies are damaged or
destroyed by fire or other casualty whether insured or uninsured,
then, subject to the rights, if any, of the lessors or mortgagees
thereof, the Companies will promptly proceed with the repair,
restoration or replacement thereof in such manner and location as
the Companies in good faith shall determine to be in the best
interests of the business of the Companies.
N. Contracts. The Companies and the Seller will not do any act
or omit to do any act, or permit any act or omission, which act or
omission will cause a breach of, or default in, any of the
Contracts, including the Government Contracts, disclosed in Section
5.14 of the Schedule or required to be disclosed in this Agreement,
and will not amend or terminate or consent to such amendment or
termination of any such Contract.
O. Books and Records: Accounting. The Companies will maintain
their books and records in the ordinary course of business in
accordance with GAAP, consistently applied, and will not make any
change in any accounting method or principle.
P. Loans, etc. The Companies will not make any investment
(whether by acquisition of stock, capital contribution or
otherwise) in, or loan or advance to, any Person or become
committed so to do.
Q. Encumbrances. The Companies will not mortgage, pledge or
otherwise subject to any lien, security interest, encumbrance or
charge of any nature ("Lien"), any of the Assets, or become
committed to do so, or permit or suffer any of the Assets to become
subject to any Lien or become committed so to do, other than Liens
of current Taxes not yet due and payable or mechanic's or
materialmen's Liens.
R. Tax Returns and Taxes. Between the date hereof and the
Closing Date, the Companies and the Seller will timely file all Tax
Returns required to be filed and will make timely payment of all
Taxes required to be paid (other than, if the Closing occurs after
the fifteenth day and prior to the last day of any month, the
amount of any estimated Taxes). The Companies and the Seller will
not obtain extensions to file any such Tax Returns, contest the
payment of any such Taxes, or settle any Tax claims against or
affecting the Companies or related to the business or activities of
the Companies, without the consent of the Buyer, which consent
shall not unreasonably be withheld.
S. Amendment to Articles of Incorporation and Bylaws. The
Companies will not amend their Articles of Incorporation or Bylaws.
T. Waiver or Release of Claims. The Companies will not, without
adequate consideration, (i) release or waive any claims or rights,
(ii) cancel any debts or discharge any liens, or (iii) pay any
obligations other than those for liabilities shown on the 1996
Financial Statements and those incurred since the Balance Sheet
Date in the ordinary course of business.
U. No Breach. Neither of the Companies nor the Seller shall do
any act, omit to do any act, or permit any act within the Seller's
or the Companies' control which will cause a breach of any
representation, warranty or obligation contained in this Agreement
or any obligations contained in any contract.
V. Replacement Stock Certificates. The Companies shall not issue
substitute stock certificates to replace certificates which have
been lost, misplaced, destroyed, stolen or are otherwise
irretrievable, unless an adequate bond or indemnity agreement
approved by the Buyer has been duly executed and delivered.
VI. Updating of Schedules: Duty to Notify.
1. Between the date hereof and the Closing Date, the Seller
will promptly disclose to the Buyer in writing any information set
forth in any Schedule hereto that is no longer accurate for any
reason and any information of the nature of that set forth in the
Schedule that arises after the date hereof and that would have been
required to be included in the Schedule if such information had
been obtained on the date hereof.
2. If between the date hereof and the Closing Date, either
the Seller or the Buyer determines that they or it cannot or will
not close the transactions contemplated by this Agreement, they
will immediately so notify the other in writing stating why the
transaction will not close.
VII. Third Party Consents. The Seller and the Buyer shall each
use their reasonable best efforts to file all applications, notices
and other documents, obtain all third-party consents, permits or
other approvals, including those of the Governmental Agencies
pursuant to the Government Contracts, that may be necessary or
reasonably required of them in order to effect the transactions
contemplated by this Agreement and will assist the other in every
reasonable way to secure such consents, permits or other approvals
as expeditiously as reasonably possible.
VIII. Access to Business and Records; Confidential Information.
1. Between the date hereof and the Closing Date, the Seller
agrees to grant to the Buyer and its officers, employees,
attorneys, accountants and agents, the right, during normal
business hours and upon reasonable written notice, to inspect and
copy the books, records and properties of the Companies and to
consult with officers, employees, attorneys, accountants, and
agents of the Companies and the Seller (at the Buyer's expense),
for the purpose of investigating the business of the Companies and
determining the accuracy of the representations and warranties made
by the Seller. After the Closing Date, the Buyer agrees to grant to
the Seller and their employees, attorneys, accountants and agents,
the right for the purposes of responding to any audit or other
assertion of deficiency or as otherwise required in connection with
the determination of the Purchase Price (including Accounts
Receivable), during normal business hours and upon reasonable
written notice, to inspect and copy (at Seller's expense), the
books, records, properties and inventory of the Companies and to
consult with the officers, employees, attorneys, accountants and
agents of the Companies, the Buyer and its affiliates (at the
Seller's expense). After the Closing, the Buyer agrees to grant to
the Reviewing Firm access to the books, records, properties and
inventory of the Companies and the right to consult with the
officers, employees, attorneys, accountants and agents of the
Companies (such expense to be the cost of the Buyer) for the
purpose of completing its work as the Reviewing Firm.
2. Between the date hereof and the Closing, if any, and if
there is no Closing, then thereafter, the Buyer shall keep
confidential, and shall cause all of its representatives to keep
confidential, any information obtained from the Companies or the
Seller concerning the operation and business of the Companies other
than information which is public information or which the Buyer
obtained or could have obtained from a source other than the
Companies or the Seller.
3. After the Closing Date, the Seller and its
representatives, and their respective heirs, estates, successors
and assigns, will not keep or take any proprietary information,
know-how, logos, labels, or trade secrets which constitute a part
of the business and operations of the Companies or keep or take any
documents or any other things embodying any such proprietary
information or trade secret, and shall not use for their own
purpose or advantage or publish or disclose to any third person any
proprietary information or trade secret constituting a part of the
business or operations of the Companies.
IX. Conditions to Obligation of the Buyer to Consummate the
Acquisition. The obligation of the Buyer to consummate the Capital
Stock purchase provided for in this Agreement shall be subject to
the following conditions:
A. Representations, Warranties and Covenants of the Seller. The
representations and
warranties of the Seller herein contained and the information
contained in the Schedules delivered on the date hereof by the
Seller and any Closing documents delivered by the Seller in
connection with this Agreement shall be true and correct in all
material respects when made and at the Closing Date with the same
effect as though made at such time except to the extent that any
such representation and warranty speaks as of a specified date in
which case at the Closing Date such representation and warranty
shall be true and correct in all material respects as of such
specified date and except to the extent waived hereunder in
writing; the Seller shall have performed all obligations and
complied with all agreements, undertakings, covenants and
conditions required by this Agreement to be performed or complied
with by it at or prior to the Closing Date; and the Seller shall
have delivered to the Buyer a certificate in form and substance
reasonably satisfactory to the Buyer dated the Closing Date and
signed by authorized officers of the Seller to all such effects.
B. Pending Litigation. There shall not be any material
litigation or proceeding pending or threatened against or affecting
the Companies, the Government Contracts or the business of the
Companies or to restrain or invalidate the transactions
contemplated by this Agreement.
C. Third Party Consents. The consent to or authorization or
approval of, the transactions contemplated by this Agreement from
each Person relating to the Contracts, including authorizations
required by this Agreement shall have been obtained.
D. Opinion of Counsel for the Seller. The Buyer shall have
received an opinion dated the Closing Date of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, counsel for the Seller, satisfactory to the Buyer in the
form of Exhibit 9.4. In providing such opinion, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ may rely on the opinion(s) of other counsel reasonably
satisfactory to the Buyer.
E. Closing Documents. The Buyer shall have received such
certificates and other
Closing documentation as it shall reasonably request.
F. Environmental Matters. The Buyer shall have received Phase I
Environmental Audits at its own expense and such other
environmental assurances that it may require showing that the
Assets are in compliance with all environmental laws and do not
contain any Hazardous Substances.
G. Cooperation and Non-Compete Agreement. The Seller shall have
executed the Continuing Cooperation, Assistance and Non-Compete
Agreement in the form attached hereto as Exhibit 9.7.
H. Employment Agreements. The employees listed on Exhibit 9.8,
as it may be supplemented following the execution of this Agreement
by a written document signed by the Seller and the Buyer, shall
have executed an Employment Agreement substantially in the form
attached hereto as Exhibit 9.8.
I. Record Searches. The record searches made by or on behalf of
the Buyer on or before the Closing Date shall not have indicated
the existence of any material litigation, claim, lien, mortgage,
encumbrance or judgment against any of the Companies or any of
their material Assets, except as permitted by this Agreement; or,
if any such litigation, claim, lien, mortgage, encumbrance or
judgment has been indicated, the Seller shall have provided
evidence satisfactory to the Buyer of the removal, prior to the
Closing, of any such litigation, claim, lien, mortgage, encumbrance
or judgment.
J. Government Contracts. The Buyer shall have received evidence
satisfactory to it that the Government Agencies will consent to the
acquisition of the Companies by the Buyer pursuant to this
Agreement and that the Companies' ability to bid for new, extended
or expanded agreements with the Government Agencies will not be
adversely affected by the acquisition of the Companies by the
Buyer.
K. Serco Board Approval. The purchase of all of the issued and
outstanding shares of Capital Stock of the Companies shall have
been approved by the Board of Directors of the Buyer.
L. Absence of Material Adverse Change. There shall have been no
Material Adverse Change with respect to the Seller or either of the
Companies since the date of this Agreement or compared to the
undated twelve (12) month financial projection attached hereto as
Exhibit 9.12.
X. Conditions to Obligations of the Seller to Consummate the
Acquisition. The obligation of the Seller to consummate the Capital
Stock sale provided for in this Agreement shall be subject to the
following conditions:
A. Representations, Warranties and Covenants of the Buyer. The
representations and warranties of the Buyer contained herein and
the information contained in any Closing documents delivered by the
Buyer in connection with this Agreement shall be true and correct
in all material respects when made and at the Closing Date with the
same effect as though made at such time except to the extent that
any such representation and warranty speaks as of a specified date
in which case at the Closing Date such representation and warranty
shall be true and correct in all material respects as of such
specified date and except to the extent waived hereunder in
writing, and the Buyer shall have performed all obligations and
complied with all agreements, undertakings, covenants and
conditions required hereunder to be performed and complied with by
it prior to or at the Closing Date, and the Buyer shall have
delivered to the Seller a certificate of the Buyer in form and
substance satisfactory to the Seller dated the Closing Date and
signed by its authorized officers to all such effects.
B. Pending Litigation. There shall not be any litigation or
proceeding pending or
threatened to restrain or invalidate the transactions contemplated
by this Agreement.
C. Third Party Consents. All filings, if any, required under all
applicable securities laws shall have been made, the applicable
waiting periods, if any, thereunder shall have expired or been
terminated and the consent to or authorization of or approval of,
the transactions contemplated by this Agreement from each Person
relating to the Contracts, including authorizations required by
this Agreement and shall have been obtained.
D. Opinion of Counsel for the Buyer. The Seller shall have
received an opinion dated the Closing Date of ▇▇▇▇▇▇ Potter
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.P.P., counsel for the Buyer,
satisfactory to the Seller, in the form of Exhibit 10.4. In
providing such opinion, ▇▇▇▇▇▇ Potter ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, L.L.P. may rely on the opinion(s) of other counsel
reasonably satisfactory to the Sellers.
E. Closing Documents. The Shareholders shall have received such
certificates and other documentation as the Seller may reasonably
request.
XI. Tax Matters.
A. Short Period Income Tax Returns. The Seller will prepare and
file any required Tax Returns for the Companies for the period
beginning July 1, 1996 and ending on or before the Closing Date
("Short Period Return").
B. Post-Closing Responsibility for Taxes Arising Out of the
Short Period and any Prior Periods. It is the intent of the parties
that the Seller be economically responsible for all income Taxes
for the Short Period and all prior periods of or attributable to
the Companies (whether shown on the returns therefor or resulting
from subsequent audit or adjustment) by such income Taxes having
been paid prior to Closing. Accordingly, if the amount of the total
Tax shown on the Short Period Return, as filed or upon audit, plus
any deficiency of income Tax for any period ending on or before the
Closing Date resulting from audit or amended return from any such
prior period, exceeds the sum of the income Taxes actually paid and
the amount accrued for income Tax liabilities on the Closing Date
Balance Sheet, then the Seller shall indemnify the Buyer and pay to
the appropriate taxing authorities, within the time prescribed by
any taxing authorities, an amount equal to the additional taxes as
may be due. Seller reserves the right to contest and dispute any
such taxes as are asserted to be due, so long as it fully
indemnities, and holds Buyer harmless from such Taxes and no liens
are asserted by any such taxing authorities.
C. Post-Closing Tax Procedures.
1. No amended or substituted return for or affecting the
Companies for the Short Period or any earlier period shall be filed
after Closing without the written consent of the Buyer; provided,
however, that in determining whether to give such consent, the
Buyer shall not act unreasonably.
2. Before execution of any extensions of the statutes of
limitation for or affecting the Companies for the Short Period or
any earlier period, the Seller shall obtain the consent of Buyer;
provided, however, that in determining whether to give such
consent, the Buyer shall not act unreasonably.
3. Buyer agrees to cooperate with Seller by providing access
to any records of the Companies (as existed at Closing and are then
in its possession) and which are necessary to contest any
subsequent assertion of additional tax liability.
D. Tax Sharing Matters. On or before the Closing Date, all
income Tax amounts then owed by the Companies to the Seller or by
the Seller to the Companies pursuant to any Tax sharing agreement
or method, formal or informal, shall be paid in full.
E. Section 338 Election. If the Buyer determines in its sole
discretion that it should make an election under Section 338 of the
Code that requires Seller to join in such election, Seller agrees
that it will so join in such election upon request of Buyer, but
expressly subject to the condition that the Buyer hereby agrees. In
accordance with the procedures set forth in Section 13 hereof, to
fully indemnify and hold Seller free and harmless from any adverse
tax consequences resulting from such election and from any and all
costs, expenses, legal fees, and accounting fees that result from
such election being implemented. Should Buyer make such a 338
election, it shall notify Seller in writing of its determination to
do so, and acknowledge its obligations hereunder. Any amounts due
to Seller as a result of the indemnification herein given shall be
paid to Seller within five (5) days of Seller's request to Buyer.
XII. Purchase Price Adjustments for Losses.
A. Losses. Subject to the provisions of this Article 12, the
Aggregate Purchase Price shall be reduced (such reduction to be
borne by the Seller) by any and all damage (including fines,
penalties, and criminal or civil judgments and settlements), loss,
expenses (including reasonable attorneys' fees), liability or
deficiency that results in monetary or economic loss, damage or
liability to the Buyer or the Companies (other than consequential
damages) and any payments required to be made to officers,
directors, employees or agents under duly and lawfully enacted
charter provisions or bylaws, board resolutions or undertakings,
commitments or other understandings (in each case as in effect on
the Closing Date) or under applicable corporate law, that results
in monetary or economic loss, damage or liability to the Buyer or
the Companies, including interest pursuant to Section 12.3(e)
(referred to individually in this Agreement as a "Loss" or in the
aggregate as "Losses") from or with respect to:
1. any misrepresentation, breach of warranty or non-fulfillment
of any covenant or agreement on the part of the Seller under this
Agreement or from any misrepresentation in or omission from any
Schedule or any closing certificate, with respect to matters
existing on or prior to the Closing Date (other than Losses
relating to income Taxes (which Losses are dealt with in 12.1 (b)
below));
2.(i) any breach of warranty regarding income Taxes as set
forth in Section ___). 14, (ii) any non-fulfillment of the covenant
regarding income Taxes as set forth in Section 5.18, or (iii)
without regard to any representation or warranty as set forth in
Section 3.14 or the covenant as set forth in Section 5.18, any
failure of Seller to perform its obligations regarding income Taxes
as set forth in Section 11 hereof; and
3. any actions, suits, claims, proceedings, investigations,
audits, demands, assessments, fines, penalties, judgments, costs
(including court costs) and other expenses (including, without
limitation, reasonable audit and legal fees) incident to any of the
foregoing.
B. Survival of Representations, etc. All representations,
warranties and covenants of the Seller set forth herein shall
survive the Closing. No investigation or other examination by the
Buyer or its designee or representatives shall affect the survival
of the representations, warranties and covenants set forth above.
C. Method of Asserting Claims, etc. All claims for adjustment of
the Aggregate Purchase Price under this Section shall be asserted
and resolved as follows:
1. In the event that any claim or demand potentially
constituting a Loss hereunder is asserted against or sought to be
collected from the Buyer or any of the Companies by a &&d party
(hereinafter a "Third Party Claim"), the Buyer shall in writing
promptly notify the Seller of such claim or demand, specifying the
nature of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall
not be conclusive of the final amount of such claim and demand)
(the "Claim Notice"). The Seller shall have thirty (")O) days from
the receipt of the Claim Notice (the "Notice Period") to notify the
Buyer (i) whether or not it disputes that any or all of the Third
Party Claim or demand would result in an adjustment to the
Aggregate Purchase Price and (ii) whether or not it desires, at the
sole cost and expense of the Seller, to defend the Buyer against
such claim or demand. In the event that the Seller notifies the
Buyer within the Notice Period that it desires to defend the Buyer
against such claim or demand and except as hereinafter provided,
Seller shall have the absolute right to defend by appropriate
proceedings, which proceedings shall be promptly settled or
prosecuted by it to a final conclusion. If the Buyer desires to
participate in, but not control, any such defense or settlement, it
may do so at its sole cost and expense. If the Seller has not
notified the Buyer that it disputes that all or any part of the
Third Party Claim or demand would result in an adjustment to the
Aggregate Purchase Price, then (a) if the Seller elects not to
defend the Buyer against such claim or demand, the amount of any
such claim or demand, or, (b) if such claim or demand be contested
by the Seller or by the Buyer (but the Buyer shall have no
obligation to contest any such claim or demand), that portion
thereof as to which a court of competent jurisdiction has finally
determined, from which no appeal has been taken, that such defense
is unsuccessful, shall be a Loss hereunder and the Aggregate
Purchase Price shall be adjusted accordingly; provided, however,
that nothing hereunder shall be deemed to impair or restrict any
right or remedy available to Buyer to claim for a Purchase Price
adjustment with respect to such disputed Third Party Claim or
demand or any portion thereof, including the right to assert that
the same is a Loss hereunder.
2. In the event the Buyer should have a claim for Loss requiring
adjustment of the Aggregate Purchase Price hereunder that does not
involve a claim or demand being asserted against or sought to be
collected from the Buyer or any of the Companies by a third party,
the Buyer shall promptly send a Claim Notice with respect to such
claim to the Seller. If the Seller does not notify the Buyer within
the Notice Period that it disputes such claim, the amount of such
claim shall be conclusively deemed a Loss requiring adjustment of
the Aggregate Purchase Price hereunder.
3. Nothing herein shall be deemed to prevent the Buyer from
making a claim for adjustment of the Aggregate Purchase Price
hereunder for potential or contingent claims or demands provided
the Claim Notice sets forth the specific basis for any such
potential or contingent claim or demand to the extent then feasible
and the Buyer has reasonable grounds to believe that such a claim
or demand may be made.
4. All Losses, as such term is defined in Section 12.1, shall
be treated as an adjustment to the Aggregate Purchase Price
exclusively as follows: (i) To the extent that the Closing Date
Balance Sheet as finally determined in accordance with Section
1.3(b) exceeds One Million Five Hundred Fifty Thousand Dollars
($1,550,000) (a "Positive Balance Sheet Difference"), there shall
be no adjustment to the Aggregate Purchase Price until the sum of
the Losses exceeds the Positive Balance Sheet Difference; (ii)
thereafter, if there are any remaining Losses in excess of the
Positive Balance Sheet Difference chargeable as adjustments to the
Aggregate Purchase Price, then such excess Losses shall be
satisfied first against the Escrow in accordance with the
provisions of Article 1, resulting in a reduction of the Escrow (as
of the date of such offset) equal to the amount of the reduction of
the Aggregate Purchase Price to which Buyer is entitled. When the
Escrow is reduced to zero, Buyer shall next claim against amounts
remaining unpaid under the Renewal Payment and thereafter the
Seller shall reimburse Buyer for any remaining Losses.
5. All adjustments to the Aggregate Purchase Price resulting
from Losses whether offset against the Escrow, the Renewal Payment
or otherwise payable to the Buyer, shall bear interest at ten
percent (10%) per annum accruable with respect to the amount of the
Loss or Losses from the date such Loss was paid by Buyer to the
date of offset or payment to the Buyer.
▇. ▇▇▇▇▇ Differences To Be Ignored. In determining whether an
adjustment to the Aggregate Purchase Price is to be made under this
Section 12, individual differences or changes of less than One
Thousand Dollars ($1,000) for each misrepresentation, breach of
warranty or nonfulfillment of any covenant to be performed by the
Seller (each an "Event") shall be ignored. Adjustments of greater
One Thousand Dollars ($ 1,000) per Event shall be ignored until the
total of such differences or changes in the cumulative, when added
to those differences or changes described in Section 1.3 equal
Twenty-Five Thousand Dollars ($25,000). If the total of such
differences or changes for Section 1.3 and this Section 12
cumulatively exceed Twenty-Five Thousand Dollars ($25,000), then
the Aggregate Purchase Price shall be adjusted to the extent the
total of such differences or changes exceed Twenty-Five Thousand
Dollars ($25,000).
XIII. Indemnification by the Buyer.
A. Indemnification. The Buyer shall reimburse and indemnity and
hold the Seller
harmless against any and all damage (including fines, penalties,
and c or civil judgments and settlements), loss, expenses
(including reasonable attorneys' fees), liability or deficiency,
that results in a monetary or economic loss, damage or liability to
the Seller (other than consequential damages), and any payments
required to be made to officers, directors, employees or agents
under duly and lawfully enacted charter provisions or bylaws, board
resolutions or other undertakings, commitments or other
understandings (in each case as in effect on the Closing Date),
together with interest thereon from the date such loss was incurred
to the date of payment at ten percent (10%) per annum, resulting
from or with respect to:
1. any misrepresentation, breach of warranty or non-fulfillment
of any covenant or agreement on the part of the Buyer under this
Agreement or any Closing certificate, with respect to matters
existing on or prior to the Closing Date; and
2. any and all actions, suits, claims, proceedings,
investigations, audits, demands, assessments, fines, penalties,
judgments, costs (including court costs) and other expenses
(including, without limitation, reasonable audit and legal fees)
incident to any of the foregoing.
B. Survival of Representations, etc. All representations,
warranties and covenants of the Buyer set forth herein shall
survive the Closing.
C. Method of Asserting Claims, etc. All claims for
indemnification by the Seller against the Buyer under this Article
shall be asserted and resolved as follows:
1. In the event that any claim or demand for which the Buyer
would be liable to the Seller hereunder is asserted against or
sought to be collected from the Seller by a third party, the Seller
shall promptly notify the Buyer of such claim or demand, specifying
the nature of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall
not be conclusive of the final amount of such claim and demand)
(the "Claim Notice"). The Buyer shall have thirty (30) days from
the receipt of the Claim Notice (the "Notice Period") to notify the
Seller (i) whether or not it disputes the liability of the Buyer to
the Seller hereunder in whole or in part with respect to such claim
or demand and (ii) whether or not it desires, at the sole cost and
expense of the Buyer, to defend Seller against such claim or
demand. In the event that the Buyer notifies the Seller within the
Notice Period that it desires to defend the Seller against such
claim or demand and except as hereinafter provided, the Buyer shall
have the absolute right to defend by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by it to a
final conclusion. If the Seller desires to participate in, but not
control, any such defense or settlement, it may do so at its sole
cost and expense. If the Buyer elects not to defend the Seller
against such claim or demand, then the amount of any such claim or
demand, or, if such claim or demand is contested by the Buyer or by
the Seller (but the Seller shall have no obligation to contest any
such claim or demand), then that portion thereof as to which a
court of competent jurisdiction has finally determined that such
defense is unsuccessful, shall be a liability of the Buyer
hereunder.
2. In the event the Seller should have a claim against the Buyer
hereunder that does not involve a claim or demand being asserted
against or sought to be collected from the Seller by a third party,
the Seller shall promptly send a Claim Notice with respect to such
claim to the Buyer. If the Buyer does not notify the Seller within
the Notice Period that it disputes such claim, the amount of such
claim shall be conclusively deemed a liability of the Buyer
hereunder.
3. Nothing herein shall be deemed to prevent the Seller from
making a claim hereunder for potential or contingent claims or
demands provided the Claim Notice sets forth the specific basis for
any such potential or consequent claim or demand to the extent then
feasible and the Seller has reasonable grounds to believe that such
a claim or demand may be made.
XIV. Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice
of termination at any time before the Closing Date only as follows:
1. by mutual consent of the Buyer and the Seller, without
liability;
2. by the Buyer, without liability to the Buyer, upon written
notice to the Seller,
given on or before November 30, 1996 if the Buyer's due diligence
determines that the Companies' Assets, properties, liabilities,
financial performance and financial prospects are materially
unsatisfactory;
3. by the Buyer, without liability to the Buyer, upon written
notice to the Seller given at any time before the Closing Date if
the representations and warranties contained in Article 3 hereof
were materially incorrect when made, if the Seller has materially
violated any covenants contained in this Agreement, if any of the
conditions precedent set forth in Article 9 hereof have not been
met due to failure of the Seller and such breach or failure is not
cured within ten (I 0) Business Days of such notification of intent
to terminate or if any other obligation of the Companies or the
Seller contained herein and required to be performed by the
Companies or the Seller on or prior to the Closing has not been
performed;
4. by the Seller, without liability to the Seller, upon written
notice to the Buyer by the Seller given at any time before the
Closing Date if the representations and warranties of the Buyer
contained in Article 4 hereof were materially incorrect when made,
if the Buyer has materially violated any covenants contained in
this Agreement, or if any of the conditions precedent set forth in
Article 11 hereof have not been met due to failure of the Buyer and
such breach or failure is not cured within ten (10) Business Days
of such notification of intent to terminate or if any other
obligation of the Buyer contained herein and required to be
performed by the Buyer on or prior to Closing has not been
performed;
5. By either the Seller or the Buyer in writing, without
liability, if there shall be any order, writ, injunction, or decree
of any court or governmental or regulatory agency binding on the
Buyer or the Seller, which prohibits or restrains the Buyer or the
Seller from consummating the transactions contemplated hereby,
provided that the Buyer and the Seller shall have used their best
efforts to have any such order, writ, injunction or decree lifted
and the same shall not have been lifted within thirty (30) days
after entry, by any such court or governmental or regulatory
authority; or
6. By either the Seller or the Buyer, in writing, without
liability, if for any reason the Closing has not occurred by
November 30, 1996, and automatically on March 31, 1997.
XV. Waiver of Terms. Any of the terms or conditions of this
Agreement may be waived at any time by the party which is entitled
to the benefit thereof but only by a written notice signed by its
president or a vice president. No waiver of any of the provisions
of this Agreement shall be deemed to or shall constitute a waiver
of any other provision hereof (whether or not similar).
XVI. Amendment of Agreement. This Agreement may be amended,
supplemented or modified at any time only by written instrument
duly executed by the Buyer and the Seller.
XVII. Payment of Expenses. The Seller and the Buyer shall each
pay their or its own expenses, including, without limitation, the
expenses of its own counsel and accountants, financial advisors and
brokers, incurred in connection with this Agreement and the
t=actions contemplated hereby.
XVIII. Cooperation. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, such action, to execute and
deliver, or cause to be executed and delivered, such governmental
and other notifications and additional documents and instruments
and to do, or cause to be done, all things necessary, proper or
advisable under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions
contemplated by this Agreement.
XIX. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
such counterparts together shall be deemed to be one and the same
instrument. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any
of the other counterparts.
XX. Contents of Agreement, Binding Effect, Parties in Interest,
Assignment.
1. This Agreement (including the Schedule and Exhibits) sets
forth the entire understanding of the parties with respect to the
subject matter hereof and terminates the Letter of Intent dated
July 17, 1996 between the Seller and the Buyer. Any previous
agreements or understandings between the parties regarding the
subject matter hereof are merged into and superseded by this
Agreement. There are no representations, warranties, covenants,
terms or conditions, direct or indirect, relied upon by either the
Buyer or the Seller other than those specifically set forth in this
Agreement and the Schedule.
2. The terms, conditions and obligations of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by
the successors and assigns of the parties hereto.
3. Nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any Person, other than the
Buyer and the Seller and their respective successors and assigns,
any rights or remedies under or by reason of this Agreement.
4. The Buyer may assign this Agreement to a new or existing
corporation owned
or controlled by or under common control with it. Otherwise,
without the prior written consent of the other party hereto,
neither the Seller nor the Buyer may assign their rights, duties or
obligations hereunder or any part thereof to any other Person.
XXI. Headings and Gender. The article and section headings
herein have been inserted for convenience of reference only and
shall in no way modify or restrict any of the terms or provisions
hereof. The use of the masculine or any other pronoun herein when
referring to any party has been for convenience only and shall be
deemed to refer to the particular party intended regardless of the
actual gender of such party.
XXII. Notices. AH notices, consents, waivers or other
communications which are required or permitted hereunder shall be
sufficient if given in writing and delivered personally, by
confirmed telefax or by prepaid overnight U.S. Mail or delivery
service, signature of recipient required, as follows (or to such
other address or addresses as shall be set forth in a notice given
in the same manner):
If to the Seller: SETECH, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. Eisemnan
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer: SERCO, INC.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a required copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President
Serco Aviation Services, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ 6A9
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a required copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ Potter ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Joselow & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices shall be deemed to have been given on the date
delivered or faxed or the day after having been given to the
overnight mail or delivery service in the manner provided above.
XXIII. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement
is held to be invalid, illegal or unenforceable under any
applicable law or rule in any jurisdiction, such provision will be
ineffective only to the extent of such invalidity, illegality or
unenforceability in such jurisdiction, such provision will be
ineffective only to the extent of such invalidity, illegality or
unenforceability in such jurisdiction, without invalidating the
remainder of this Agreement in such jurisdiction or any provision
hereof in any other jurisdiction.
XXIV. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware.
XXV. Public Announcements. No public announcement shall be made
with regard to the transactions contemplated by this Agreement
without the prior written consent of the other parties hereto;
provided that either party may make such disclosure if advised in
writing by counsel that it is legally required to do so.
XXVI. Acquisition Proposals. Prior to Closing or termination of
this Agreement, the Seller and the Companies shall not, nor shall
they permit any officer, director, employee or agent of the
Companies (a) to solicit, initiate or encourage submission of
proposals or offers, or accept any offers, from any Person relating
to any acquisition or purchase of all or a material amount of the
assets of, or any equity interest in, or any merger, consolidation,
or business combination with the Companies (collectively, an
"Acquisition Proposal"), or (b) to participate in any discussions
or negotiations regarding, or furnish to any other Person any
information with respect to, or otherwise cooperate in any way with
or assist, facilitate or encourage any Acquisition Proposal by any
other Person. The Seller shall promptly notify the Buyer of any
Acquisition Proposal of which the Seller becomes aware and shall
disclose to Buyer afl material information regarding such
Acquisition Proposal.
XXVII. Included Matters. Words of inclusion shall not be
construed as terms of limitation herein, so that references to
included matters shall be regarded as non-exclusive, non-
characterizing illustrations.
XXVIII. References. Whenever reference is made in this Agreement
to any Article, Section, Schedule or Exhibit, such reference shall
be deemed to apply to the specified Article or Section of this
Agreement or the specified Schedule or Exhibit to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement, effective on the date herein provided.
SELLER:
SETECH, INC.
a Delaware corporation
By:__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
BUYER:
SERCO, INC.
a New Jersey corporation
By:________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Director