EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
Dated as of June 4, 2007
by and among
VSE CORPORATION,
KONIAG, INC.,
KONIAG DEVELOPMENT CORPORATION,
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ LIVING TRUST,
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
AND
INTEGRATED CONCEPTS AND RESEARCH CORPORATION
TABLE OF CONTENTS
Page
ARTICLE 1 CERTAIN MATTERS OF CONSTRUCTION AND DEFINITIONS 1
ARTICLE 2 THE PURCHASE AND SALE OF THE SHARES 1
2.1 Purchase of the Shares 1
2.2 Purchase Price 2
2.2.1 General 2
2.2.2 Payment of Purchase Price 2
2.2.3 Estimated Closing Statements 2
2.2.4 Adjustments to Purchase Price 3
2.2.4.1 Projected AC Net DCF; Projected 2008 All Other
EBITDA; and Adjusted Stockholders Equity 3
2.2.4.2 Review of Closing Statements 3
2.2.4.3 Disputes 3
2.2.4.4 Final Closing Statements 3
2.2.4.5 Adjustment Amount 4
2.2.4.6 Adjustments to the Purchase Price 4
2.3 Certain Acknowledgments 4
2.4 The Closing 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
SELLERS 5
3.1 Corporate Status of the Company 5
3.2 Capital Stock of the Company 5
3.2.1 Authorized Stock and Ownership 5
3.2.2 Options and Convertible Securities of the Company 5
3.3 No Subsidiaries 5
3.4 Authority for Agreement; Noncontravention 6
3.4.1 Authority 6
3.4.2 No Conflict 6
3.5 Financial Statements 6
3.6 Absence of Material Adverse Changes 7
3.7 Absence of Undisclosed Liabilities 7
3.8 Books and Records 7
3.9 Accounts Receivable 7
3.10 Compliance with Applicable Laws, Organizational Documents 7
3.11 Litigation and Audits 8
3.12 Tax Matters 8
3.12.1 Filing of Returns 8
3.12.2 Payment of Taxes 8
3.12.3 Withholding 8
3.12.4 Assessments 9
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3.12.5 Access to Returns 9
3.12.6 Miscellaneous Items 9
3.12.7 No Tax Sharing Agreement 9
3.12.8 Certain Income Items and Deductions 9
3.12.9 Certain Stock Distributions 10
3.12.10 Affiliated Group 10
3.12.11 Certain Disputes and Claims 10
3.12.12 Code Section 382 Ownership Change 10
3.12.13 Unclaimed Property 10
3.13 Employee Benefit Plans 10
3.13.1 List of Plans 10
3.13.2 ERISA 11
3.13.3 Plan Determinations 11
3.13.4 Funding 12
3.13.5 Certain Other Matters 12
3.13.6 Welfare Plans 12
3.14 Employment-Related Matters 13
3.14.1 Labor Relations 13
3.14.2 Employee List 13
3.15 Environmental 13
3.15.1 Environmental Laws 13
3.15.2 Environmental Claims 14
3.15.3 No Basis for Claims 14
3.15.4 Disclosure of Information 14
3.15.5 Encumbrances 14
3.15.6 Transportation of Materials of Environmental
Concern 14
3.16 No Broker's or Finder's Fees 14
3.17 Assets Other Than Real Property 14
3.17.1 Title 14
3.17.2 Closing Date Assets 15
3.17.3 Condition 15
3.18 Real Property 15
3.18.1 Company Real Property 15
3.18.2 Company Leases 15
3.18.3 Condition 16
3.19 Contracts, Agreements and Commitments 16
3.19.1 Company Contracts 16
3.19.2 Validity 18
3.19.3 Third-Party Consents 18
3.20 Intellectual Property 18
3.20.1 Right to Intellectual Property 18
3.20.2 No Conflict 18
3.20.3 Employee Agreements 20
3.21 Insurance Contracts 20
3.22 Banking Relationships 20
3.23 No Contingent Liabilities 20
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3.24 Absence of Certain Relationships 20
3.25 Foreign Corrupt Practices 20
3.26 Government Contracts 21
3.26.1 Generally 21
3.26.2 Bids and Awards 21
3.26.3 Compliance with Law and Regulation and
Contractual Terms; Inspection and Certification 21
3.26.4 Disputes, Claims and Litigation 22
3.26.5 Sanctions 23
3.26.6 Terminations 23
3.26.7 Within the Scope 23
3.26.8 Assignments 23
3.26.9 Property 23
3.26.10 DCAA Audits 24
3.26.11 National Security Obligations 24
3.26.12 Facility Security Clearances 24
3.26.13 Credentials 24
3.26.14 Export Compliance 24
3.26.15 No Contingent Fees 24
3.27 Cumulative Exceptions 24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER 25
4.1 Corporate Status of Buyer 25
4.2 Authority for Agreement; Noncontravention 25
4.2.1 Authority of Buyer 25
4.2.2 No Conflict 25
4.3 Compliance with Applicable Laws 25
4.4 Investment Intent 25
ARTICLE 5 CONDUCT PRIOR TO THE CLOSING DATE 26
5.1 Conduct of Company's Business 26
ARTICLE 6 ADDITIONAL AGREEMENTS 28
6.1 Exclusivity 28
6.2 Expenses 28
6.3 Indemnification 28
6.3.1 Indemnification of Buyer Indemnified Parties 28
6.3.2 Indemnification of Seller Indemnified Parties 29
6.3.3 Claims for Indemnification 29
6.3.4 Defense by Indemnifying Party 29
6.3.5 Limitation on Liability for Indemnification 31
6.3.5.1 Buyer Indemnity Deductible 31
6.3.5.2 Certain Caps on Indemnification Liability 31
6.3.6 Claims Period 31
6.3.7 Subrogation 32
6.3.8 Exclusive Remedies 32
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6.3.9 Right of Offset 32
6.3.10 Treatment of Indemnity Payments Between
the Parties 32
6.4 Access and Information 32
6.5 Public Disclosure and Confidentiality 32
6.6 Termination of Company Plans 33
6.7 Further Assurances 33
6.7.1 Generally 33
6.7.2 Consents 33
6.8 Tax Matters 33
6.8.1 Code Section 338(h)(10) Election 33
6.8.2 Responsibility for Filing Tax Returns for
Periods through Closing Date 35
6.8.3 Audits 35
6.8.4 Carrybacks 35
6.8.5 Retention of Carryovers 35
6.8.6 Prior Ownership 36
6.8.7 Tax-Sharing Agreements 36
6.8.8 Tax Indemnification 36
6.8.9 Straddle Period 36
6.8.10 Cooperation on Tax Matters 36
6.8.11 Certain Taxes 37
6.9 Release 37
6.10 Regulatory Filings 37
6.11 Exchange Information 37
6.12 Notification 38
6.13 Employee Benefits 38
6.14 Sellers Representative 38
6.14.1 Appointment 38
6.14.2 Authority 38
6.15 Certain Post-Closing Covenants 39
6.15.1 Non-Competition 39
6.15.2 Noninterference with Business 39
6.15.3 Confidentiality 39
6.15.4 Injunctive Relief For Breach 40
6.16 Seller's Right of Audit 40
6.17 Fiscal Year 2007 Company Audit 40
6.18 Termination of JL's Employment Agreement 40
6.19 Termination of Second Amended and Restated
Shareholders Agreement 40
ARTICLE 7 CONDITIONS PRECEDENT 41
7.1 Conditions Precedent to the Obligations of Each Party 41
7.1.1 No Illegality 41
7.1.2 Government Consents 41
7.1.3 No Injunction 41
7.1.4 Escrow Agreement 41
7.2 Conditions Precedent to Buyer's Obligation to
Consummate the Closing 41
7.2.1 Representations and Warranties 41
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7.2.2 Agreements and Covenants 41
7.2.3 Closing Documents 42
7.2.4 Third-Party Consents 42
7.2.5 Employment Agreements 42
7.2.6 Material Adverse Effect 42
7.2.7 Updated Employee List 42
7.2.8 Non-Foreign Affidavit 42
7.2.9 Release From Tax Sharing Agreement 42
7.2.10 IRS Form 8023 42
7.2.11 Delivery of Shares 42
7.3 Conditions to Obligations of the Company and Sellers
to Consummate the Closing 42
7.3.1 Representations and Warranties 42
7.3.2 Agreements and Covenants 43
7.3.3 Closing Documents 43
7.3.4 Payment of Purchase Price 43
ARTICLE 8 SURVIVAL OF REPRESENTATIONS AND COVENANTS 43
8.1 The Company's, Sellers' and Parent's Representations
and Covenants 43
8.2 Buyer's Representations and Covenants 43
ARTICLE 9 OTHER PROVISIONS 44
9.1 Termination 44
9.1.1 Termination Events 44
9.1.2 Effect of Termination 44
9.2 Notices 45
9.3 Entire Agreement 47
9.4 Assignability 47
9.5 Validity 47
9.6 Specific Performance 47
9.7 Joint and Several Liability 47
9.8 U.S. Currency 47
9.9 Governing Law 47
9.10 Counterparts 47
9.11 Waiver 47
EXHIBITS
A Form of Escrow Agreement
B Form of Employment Agreement with ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
C Form of Employment Agreement with ▇▇▇▇ ▇▇▇▇▇▇▇▇
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SHARE PURCHASE AGREEMENT
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Share Purchase Agreement, dated as of June 4, 2007 ( "Agreement"), by and
among VSE Corporation, a Delaware corporation ("Buyer"), Koniag, Inc., a
regional corporation organized under the Alaska Native Claims Settlement Act of
1971 ("Parent"), Koniag Development Corporation, an Alaska corporation wholly
owned by Parent ("KDC"), ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Living Trust dated August 8, 2005,
("NLT"), ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. ("JL") (KDC, NLT and JL, each a "Seller" and
collectively, "Sellers"), and Integrated Concepts and Research Corporation, a
District of Columbia corporation (the "Company").
RECITALS
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R.1 The Company is engaged in the business of providing specialized
technological, technical support and engineering services primarily for the
United States Government.
R.2 KDC and NLT own all of the Company's outstanding capital stock.
KDC and NLT, respectively, own 206,689.25 shares (or 80%) and 51,671.75 shares
(or 20%) of the Company's outstanding common stock, par value $1.00 per share
(collectively the "Shares").
R.3 Buyer desires to purchase all of the Company's outstanding
capital stock from Sellers and Sellers desire to sell such capital stock to
Buyer.
R.4 NLT and the respective boards of directors of Buyer, Parent, KDC
and the Company have determined that it is advisable that in connection with the
above referenced purchase and sale of Shares, to consummate certain other
transactions (collectively with such sale and purchase of the Shares, the
"Transactions"), all on the terms and conditions set forth herein.
R.5 The Parties desire to make certain representations, warranties,
covenants and other agreements in connection with the Transactions.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties, intending to be legally bound, agree
as follows:
ARTICLE 1
CERTAIN MATTERS OF CONSTRUCTION AND DEFINITIONS
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Certain matters of construction of this Agreement and the definition of
capitalized terms used herein but not otherwise defined in Articles 1 through 9
are set forth in Schedule 1.
ARTICLE 2
THE PURCHASE AND SALE OF THE SHARES
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2.1 Purchase of the Shares. Upon the terms and subject to the
conditions set forth herein, at the closing of the Transactions (the "Closing"),
Buyer shall purchase and acquire from each Seller, and each Seller shall sell
and transfer to Buyer all of such Seller's Shares for the consideration
specified in Section 2.2, in each case, free and clear of any and all
Encumbrances.
2.2 Purchase Price.
2.2.1 General. On the terms and subject to the conditions
set forth herein, as full consideration for the Shares, Buyer shall pay the sum
of:
(a) an amount, up to a maximum of $1,817,711, equal
to 27% of the Projected AC Net DCF;
(b) $8,600,000;
(c) an amount equal to the Adjusted Stockholders'
Equity (the amounts referenced in this clause (c) and in clauses
(a) and (b) above, the "Initial Purchase Price"); and
(d) the amounts, up to an aggregate maximum of
$7,559,036, payable, if any, pursuant to Section 2.2.2(b) and
(c) (collectively, the "Earnout Payments") (the Initial Purchase
Price, subject to adjustments pursuant to Section 2.2.4, plus
any Earnout Payments paid or payable hereunder are collectively
referred to as the "Purchase Price").
2.2.2 Payment of Purchase Price. Buyer shall pay the
Purchase Price as follows:
(a) At the Closing, Buyer shall pay the Initial
Purchase Price as follows:
(i) $1,670,000 of the Initial Purchase Price
to the Escrow Agent to hold and disburse pursuant to
Section 6.3 and the Escrow Agreement ("Escrow Amount");
and
(ii) the balance of the Initial Purchase
Price to Sellers based on their Percentage Ownership.
(b) Within 90 days after each of the first six
Closing Date Anniversaries, Buyer will pay Earnout Payments to
Sellers based on their Percentage Ownership until an aggregate
cumulative amount of $6,059,036, less the amount paid pursuant
to Section 2.2.1(a), has been paid pursuant to this Section
2.2.2(b)(i), an amount equal to 1.81% of the AC Revenues for the
most recently completed Post-Closing Year, except that if the
Billable Fee under the AC for such Post-Closing Year varies by
more than 10% from the projected 5% fee indicated in Schedule
1.3-B, i.e. such Billable Fee is not within the 4.5% to 5.5%
range, the Earnout Payment shall equal 50% of the after-tax
Billable Fee for such Post-Closing Year, using a combined
federal and state tax rate corporate rate of 39%.
(c) Within 90 days after the sixth Closing Date
Anniversary, Buyer will pay to Sellers based on their Percentage
Ownership an amount, up to a maximum of $1,500,000, equal to
0.90% of the AC Revenues in excess, if any, of $334,793,836 for
the six-year period commencing on April 1, 2007 and ending on
March 31, 2013.
2.2.3 Estimated Closing Statements. At least five Business
Days prior to the Closing Date, the Company shall provide to Buyer in reasonable
detail statements of (a) an estimate of the amount equal to 27% of the Projected
AC Net DCF (the "Estimated 27% of the Projected AC Net DCF"), (b) an estimated
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Closing Balance Sheet (the "Estimated Closing Balance Sheet") and (c) an
estimate of the Adjusted Stockholders' Equity (the "Estimated Adjusted
Stockholders' Equity").
2.2.4 Adjustments to Purchase Price.
2.2.4.1 Projected AC Net DCF; Closing Balance Sheet;
and Adjusted Stockholders' Equity. As soon as reasonably possible after the
Closing Date (but not later than 90 days thereafter), Buyer shall prepare or
cause to be prepared and shall deliver to Sellers Representative in reasonable
detail (a) a statement of the amount equal to 27% of the Projected AC Net DCF,
(b) the Closing Balance Sheet and (c) statement of Adjusted Stockholders' Equity
(statements referenced in foregoing clauses (a), (b) and (c), collectively the
"Closing Statements").
2.2.4.2 Review of Closing Statements. Sellers
Representative, upon receipt of the Closing Statements, shall (a) review the
Closing Statements and, (b) to the extent Seller Representative may deem
necessary, make reasonable inquiry of Buyer and its accountants (if any are
used) in respect of the preparation of the Closing Statements. Sellers
Representative and its advisors shall have access upon prior notice and during
normal business hours to books, papers and records of the Company and its
accountants (if any are used), relating to the preparation of the Closing
Statements in connection with such inquiry. The Closing Statements shall be
final, binding and conclusive upon, and deemed accepted by, Sellers unless
Sellers Representative shall have notified Buyer in reasonable detail of any
Seller objections thereto within 30 days after receipt of the Closing Statements
(the "Seller Objection").
2.2.4.3 Disputes. In the event of a Seller
Objection, Buyer shall have 20 days to review and respond to the Seller
Objection, and Buyer and Sellers Representative shall attempt to resolve the
differences underlying the Seller Objection within 20 days following completion
of Buyer's review of the Seller Objection. Disputes between Buyer and Sellers
Representative which are not resolved by them within such 20-day period shall
be referred no later than such 20th day for decision to an independent
accounting firm of national reputation mutually acceptable to Buyer and Sellers
Representative (the "Arbiter") who shall act as arbitrator and determine, based
solely on presentations by Sellers Representative and Buyer and only with
respect to the remaining differences so submitted. If Buyer and Sellers
Representative cannot agree upon the selection of the Arbiter within five
Business Days, PricewaterhouseCoopers LLP shall serve as the Arbiters hereunder.
The Arbiter shall deliver its written determination as to whether and to what
extent, if any, the Closing Statements requires adjustment to Buyer and Sellers
Representative no later than the 30th day after the remaining differences
underlying the Seller Objection are referred to the Arbiter, or such longer
period of time as the Arbiter determines is necessary. The Arbiter's determina-
tion pursuant to this Section 2.2.4 shall be final, conclusive and binding upon
the Parties. The fees and disbursements of the Arbiter shall be allocated
equally between Buyer on one hand and Sellers on the other hand. Buyer and
Sellers Representative shall make readily available to the Arbiter all relevant
information, books and records and any work papers relating to the Closing
Statements and all other items reasonably requested by the Arbiter, In no event
may the Arbiter's resolution of any difference be for an amount which is outside
the range of Buyer's and Sellers Representative's disagreement.
2.2.4.4 Final Closing Statements. Each of the
Closing Statements shall become final, conclusive and binding upon the Parties
upon the earliest of (a) Sellers Representative's failure to object thereto
within the period permitted under Section 2.2.4.2, (b) the agreement between
Buyer and Sellers Representative with respect thereto, and (c) the decision by
the Arbiter with respect to any disputes under Section 2.2.4.3. The Closing
Statements (a) as submitted to Sellers Representative with its failure to object
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thereto within the period permitted under Section 2.2.4.2, or (b) as adjusted
pursuant to the agreement of Sellers Representative and Buyer or (c) the
decision of the Arbiter, shall constitute the final, conclusive and binding
Closing Statements referred to herein as the "Final Closing Statements."
2.2.4.5 Adjustment Amount. The Purchase Price shall
be adjusted as follows:
(a) If the Final Closing Statement of 27% of
Projected AC Net DCF ("Final 27% of Projected AC Net DCF") is
less than each of (i) $1,817,711 and (ii) the Estimated 27% of
Projected AC Net DCF, the Initial Purchase Price shall be
decreased by the amount by which the Final 27% of Projected AC
Net DCF is less than the Estimated 27% of Projected AC Net DCF.
(b) If the Final 27% of Projected AC Net DCF is
more than the Estimated 27% of Projected AC Net DCF and the
Estimated 27% of Projected AC Net DCF was less than $1,817,711,
the Initial Purchase Price shall be increased by the lesser of
(i) the amount by which the Final 27% of Projected AC Net DCF
exceeded the Estimated 27% of Projected AC Net DCF and (ii) the
amount by which the Estimated 27% of Projected AC Net DCF was
less than $1,817,711.
(c) If the Final Closing Statements reflect
Adjusted Shareholders' Equity ("Final Adjusted Shareholders'
Equity") less than the Estimated Adjusted Shareholders' Equity,
the Initial Purchase Price shall be decreased by the amount the
Final Adjusted Shareholders' Equity is less than the Estimated
Adjusted Shareholders' Equity; and
(d) If the Final Adjusted Shareholders' Equity
is more than the Estimated Adjusted Shareholders' Equity, the
Initial Purchase Price shall be increased by the amount the
Final Adjusted Shareholders' Equity is more than the Estimated
Adjusted Shareholders' Equity.
2.2.4.6 Adjustments to the Purchase Price. As soon
as practicable (but not more than five Business Days) after the date on which
the Final Closing Statements shall have been determined in accordance with this
Section 2.2.4, (a) Sellers Representative shall pay to Buyer by wire transfer
the amount, if any, by which the adjustments to the Purchase Price pursuant to
Section 2.2.4.5 result in a net decrease of the Purchase Price, which shall
constitute an immediate decrease of the Purchase Price in such amount, or (b),
as the case may be, Buyer shall pay to Sellers by wire transfer based on their
Percentage Ownership, the amount, if any, by which the adjustments to the
Purchase Price pursuant to Section 2.2.4.5 result in a net increase of the
Purchase Price, which shall constitute an immediate increase of the Purchase
Price in such amount.
2.3 Certain Acknowledgments. Nothing herein obligates Buyer or the
Company after the Closing to conduct its business in a manner to maximize the
possibility that the Earnout Payments will be earned hereunder and nothing
herein creates a fiduciary duty on the part of Buyer or the Company to Sellers
in respect of the Earnout Payments. Without limiting the effect of the
immediately preceding sentence or of any of Buyer's rights hereunder, Buyer will
exercise reasonable commercial efforts to generate AC Revenues during the first
six Post-Closing Years.
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2.4 The Closing. Subject to the satisfaction (or waiver) of all of
the conditions precedent to the obligations of the Parties to consummate the
Closing set forth in Article 7 (the "Closing Conditions"), the Closing shall
take place at the offices of Arent Fox LLP located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, commencing at 10 a.m. local time (a) on May 31,
2007, or (b) if the Closing Conditions have not been satisfied in full (or
waived) by such date, on such other date that is the first Business Day after
the date on which all of the Closing Conditions (other than such conditions
to be satisfied on the Closing Date) are satisfied (or waived) or (c) on such
other date as the Parties may agree after the satisfaction (or waiver) of all
the Closing Conditions ("Closing Date").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
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The Company and each Seller, jointly and severally, represent and warrant
to Buyer as follows:
3.1 Corporate Status of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
District of Columbia with the requisite corporate power to own, operate and
lease its properties and to carry on its business as currently being conducted.
The Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing in all jurisdictions in which the character
of the properties owned or held under lease by the Company or the nature of the
business transacted by the Company makes qualification, respectively, necessary,
except where failure to be so qualified would not have a Company Material
Adverse Effect. All jurisdictions in which the Company is qualified to do
business are set forth on Schedule 3.1.
3.2 Capital Stock of the Company.
3.2.1 Authorized Stock and Ownership. The authorized capital
stock of the Company consists of 500,000 shares of common stock, par value $1.00
per share (the "Common Stock"), of which 258,361 shares are issued and
outstanding. All of the outstanding Common Stock has been duly authorized and
validly issued, was not issued in violation of any Person's preemptive rights,
and is fully paid and nonassessable. KDC and JL, respectively, own of record
and beneficially 206,689.25 and 51,671.75 Shares. Upon consummation of the
Closing, Buyer will own all of the Company's outstanding capital stock, free and
clear of any and all Encumbrances.
3.2.2 Options and Convertible Securities of the Company.
Except as set forth on Schedule 3.2.2, (a) there are no outstanding
subscriptions, options, warrants, conversion rights or other rights, securities,
agreements or commitments obligating the Company to issue, sell or otherwise
transfer any of its capital stock, or any securities or obligations convertible
into, or exercisable or exchangeable for, any Common Stock or other capital
stock of the Company, (b) since December 31, 2000, the Company has not issued,
sold, or otherwise transferred of any of its capital stock and (c) there are no
voting trusts or other agreements or understandings to which the Company or
either Seller is a party with respect to the voting of Common Stock, and the
Company is not a party to or bound by any outstanding restrictions, options or
other obligations, agreements or commitments to sell, repurchase, redeem or
acquire any outstanding Common Stock or other equity securities of the Company.
3.3 No Subsidiaries. The Company does not have any Subsidiaries and
does not otherwise own or have a contractual right or obligation to acquire any
capital stock or other securities of any Person.
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3.4 Authority for Agreement; Noncontravention.
3.4.1 Authority. Each of KDC, Parent and the Company has the
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions to the
extent of its obligations hereunder. Each of NLT and JL has full power and
authority to enter into and deliver this Agreement, to perform its or his
obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by KDC, Parent and the Company and their consummation
of the Transactions, to the extent of their obligations hereunder, has been duly
and validly authorized by the board of directors of KDC, Parent and the Company
and no other corporate proceedings on the part of KDC, Parent and the Company
are necessary to authorize the execution and delivery of this Agreement and the
consummation of the Transactions, to the extent of their obligations hereunder.
This Agreement and, when executed and delivered, the other agreements
contemplated hereby to be signed by the Company, Parent and Sellers have been,
or with respect to such other agreements, will be duly executed and delivered
by the Company, Parent and Sellers and constitute valid and binding obligations
of the Company, Parent and Sellers enforceable against the Company, Parent and
Sellers in accordance with their terms.
3.4.2 No Conflict. Except as set forth on Schedule 3.4.2,
neither the execution and delivery of this Agreement or the other agreements
contemplated hereby to be signed by the Company, Sellers and the Parent, nor the
performance by the Company, Sellers and the Parent of their respective
obligations hereunder or thereunder, nor the consummation by the Company,
Sellers and the Parent of the Transactions, to the extent of their respective
obligations hereunder or thereunder, will (a) in respect of the Company, KDC and
Parent, conflict with or result in a violation of any provision of their
articles or certificates of incorporation or by-laws (collectively,
"Organizational Documents"), (b) with or without the giving of notice or the
lapse of time, or both, conflict with, or result in any violation or breach of,
or constitute a default under, or result in any right to accelerate or result in
the creation of any Encumbrance pursuant to, or right of termination under, any
provision of any note, mortgage, indenture, lease, instrument or other
agreement, permit, concession, grant, franchise, license, judgment, order,
decree, statute, ordinance, rule or regulation to which the Company is a party
or by which it or any of its assets or properties is bound or which is
applicable to it or any of its assets or properties. No authorization, consent
or approval of, or filing with or notice to, any Governmental Entity is
necessary for the execution and delivery of this Agreement or any or the other
agreements contemplated hereby to be signed by the Company, Sellers or Parent or
for the consummation of the Transactions by the Company, Sellers and Parent.
3.5 Financial Statements. Schedule 3.5 sets forth the balance
sheets of the Company as of March 31, 2006 (the "Audited Balance Sheet") and
2005, statements of operations, changes in stockholders' equity, and cash flow
of the Company for the fiscal years ended March 31, 2006 and 2005, as audited by
KPMG LLP, certified public accountants, and the unaudited balance sheet of the
Company as of March 31, 2007 (the "Balance Sheet Date") and the unaudited
statements of operations, changes in stockholders' equity, and cash flow for the
Company's fiscal year then ended, and such balance sheets and statements of
operations, changes in equity, and cash flow are accurate and complete.
Collectively, the financial statements referred to in the immediately preceding
sentence are sometimes referred to herein as the "Company Financial Statements,"
and the Company's balance sheet as of March 31, 2007 is referred to herein as
the "Company Balance Sheet." Each of the balance sheets included in the Company
Financial Statements (including any related notes) fairly presents in all
material respects the financial position of the Company as of its date, and the
other statements included in the Company Financial Statements (including any
related notes) fairly present in all material respects the statements of
operations, changes in stockholders' equity, and cash flow, as the case may be,
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of the Company for the periods therein set forth, in each case in accordance
with GAAP subject, in the case of the Company's unaudited balance sheet as of
March 31, 2007, to normal year-end audit adjustments (all except as otherwise
stated therein).
3.6 Absence of Material Adverse Changes. Since the Balance Sheet
Date, the Company has not suffered any Company Material Adverse Effect, nor has
there occurred or arisen any event, condition or state of facts of any character
that could reasonably be expected to result in a Company Material Adverse
Effect. Except as set forth on Schedule 3.6, since the Balance Sheet Date,
there have been no dividends or other distributions declared or paid in respect
of, or any repurchase or redemption by the Company of, any Common Stock or other
capital stock of the Company, or any commitment relating to any of the
foregoing.
3.7 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 3.7, the Company has no liabilities or obligations, fixed, accrued,
contingent or otherwise (collectively, "Liabilities"), that are material and
not fully reflected or provided for on, or disclosed in the notes to, the
Company Balance Sheet, except (a) Liabilities incurred in the ordinary course
of business since the Company Balance Sheet Date, none of which individually or
in the aggregate has had or could reasonably be expected to have a Company M
aterial Adverse Effect, and (b) Liabilities expressly disclosed in Schedule 3.7.
3.8 Books and Records. The books of account, minute books, stock
record books and other records of the Company, all of which have been made
available to Buyer, are complete and correct in all material respects and have
been maintained in accordance with sound business practices. The actions
reflected in the Company's minute books are accurate and complete records of the
meetings reported in such minute books, and, except where the failure to do so
will not have a Company Material Adverse Effect, no meeting of any Company
stockholders, the Company's board of directors (the "Company Board") or
committee of the Company Board has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the Company's possession.
3.9 Accounts Receivable. All accounts receivable of the Company
that are reflected on the Company Balance Sheet, the Closing Balance Sheet or on
the Company's accounting records as of the Closing Date (collectively, the
"Accounts Receivable") represented or represent valid obligations arising from
sales actually made or services actually performed in the ordinary course of
business. Unless paid prior to the Closing Date, the Accounts Receivable as
shown on the Closing Balance Sheet are, or will be as of the Closing Date, to
the Company's Knowledge and Seller's Knowledge, collectible in an amount of not
less than ninety-nine percent thereof. As of the Closing Date, the average
"days aged" of Accounts Receivable shall not have increased by more than five
percent since March 31, 2007. There is no contest, claim or right of set-off,
other than returns in the ordinary course of business, under any Company
Contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable. Schedule 3.9 contains a complete and
accurate list of all Accounts Receivable as of May 25, 2007, which list sets
forth the aging of such Accounts Receivable.
3.10 Compliance with Applicable Laws, Organizational Documents. The
Company has all requisite licenses, permits and certificates from all
Governmental Entities (collectively, "Permits") necessary to conduct its
business as currently conducted, and to own, lease and operate its properties in
the manner currently held and operated, except as set forth on Schedule 3.10 and
except for any Permits the absence of which, in the aggregate, do not and could
not reasonably be expected to have a Company Material Adverse Effect or prevent
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or materially delay the consummation of the Transactions. All of the Company's
Permits are in full force and effect. The Company is in compliance in all
material respects with all the terms and conditions related to such Permits.
There are no proceedings in progress, pending or, to the Company's Knowledge
and Sellers' Knowledge, threatened, which may result in revocation,
cancellation, suspension, or any material adverse modification of any of such
Permits. The Company's business has not been since December 31, 2000, and is
not currently being conducted in violation of any Applicable Laws, Permits or
other authorizations of any Governmental Entity. The Company is not in default
or violation of any provision of its Organizational Documents.
3.11 Litigation and Audits. Except for any claim, action, suit or
proceeding set forth on Schedule 3.11, (a) there is no investigation by any
Governmental Entity with respect to the Company pending or, to the Company's
Knowledge and Sellers' Knowledge, threatened, nor has any Governmental Entity
indicated to the Company an intention to conduct the same; (b) there is no
claim, action, suit, arbitration or proceeding pending or, to the Company's
Knowledge and Sellers' Knowledge, threatened against or involving the Company,
or any of its assets or properties, at law or in equity, or before any
arbitrator or Governmental Entity and (c) there are no judgments, decrees,
injunctions or orders of any Governmental Entity or arbitrator outstanding
against the Company.
3.12 Tax Matters.
3.12.1 Filing of Returns. The Company has prepared and filed
on a timely basis with all appropriate Governmental Entities all returns in
respect of Taxes that the Company is required to file on or prior to the
Closing, and all such returns are correct and complete in all material respects.
No claim has been made by any Governmental Entity in a jurisdiction (domestic or
foreign) where the Company does not file returns in respect of Taxes that the
Company is or may be subject to taxation in such jurisdiction.
3.12.2 Payment of Taxes. The Company has paid in full all
Taxes due on or before the Closing (whether or not shown on any Tax return) and,
in the case of Taxes accruing for the period ending on or before the Closing
that are not due on or before the Closing, the Company has made adequate
provision (not including any provision for deferred Taxes established to reflect
timing differences between book and Tax income) in the Company's books and
records and on the face of its financial statements (rather than in any notes
thereto) for such payment. There are no Encumbrances on any of the assets of
the Company that arose in connection with any failure (or alleged failure) to
pay any Tax. Since March 31, 2006, the Company has not incurred any Liability
for Taxes arising from extraordinary gain or loss as that term is used in GAAP,
outside the ordinary cause of its business. There is no material dispute or
claim concerning any Tax Liability of the Company claimed or raised by any
Governmental Entity in writing or, to the Company's Knowledge or Sellers'
Knowledge, orally.
3.12.3 Withholding. The Company has withheld from each payment
made or owing to any of its current or former employees, officers, directors,
independent contractors, creditors, Sellers, or other third party all amounts
required by Applicable Laws to be withheld and has, where required, remitted
such amounts within the applicable periods to the appropriate Governmental
Entities. All Forms W-2 and 1099 required to be filed by or on behalf of the
Company have been properly completed and timely filed. The Company has timely
paid all amounts required by Applicable Laws to be paid by the Company to any
Governmental Entity in respect of taxation of any Seller on its or his
distributive share of the Company's income. No portion of the Purchase Price is
subject to the Tax withholding provision of Section 3406 or Subchapter A of
chapter 3 of the Code or of any other Tax law.
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3.12.4 Assessments. There are no assessments of the Company
with respect to Taxes that have been issued and are outstanding. Since
December 31, 2000, no Governmental Entity has examined or audited the Company in
respect of Taxes. Except as set forth on Schedule 3.12.4, since December 31,
2000, the Company has received no indication in writing from any Governmental
Entity (a) indicating an interest to open an audit or review in respect of
Taxes, (b) requesting information relating to Tax matters, (c) noticing a
deficiency or proposed adjustment for any amount of Taxes proposed, asserted or
addressed. The Company has not executed or filed any agreement extending the
period of assessment or collection of any Taxes.
3.12.5 Access to Returns. Buyer has been provided with a copy
of or access to all federal, state, local and foreign Tax returns filed by the
Company since January 1, 2000. Buyer has been provided with a copy of or access
to all assessments, extensions and waivers resulting from any audits of the
Company by a Governmental Entity in respect of Taxes, and all such assessments
and related penalties and interest have been paid in full, except for immaterial
amounts being contested in good faith by the Company.
3.12.6 Miscellaneous Items. The Company is not a party to any
agreement, contract, arrangement or plan that has resulted or could result
(determined regardless of whether or not the Company is or has been otherwise
subject to the Code Sections 280G or 162(m)), separately or in the aggregate, in
the payment of (a) any "excess parachute payment" within the meaning of Code
Section 280G (or any corresponding provision of state, local or foreign law) and
(b) any amount that will not be fully deductible as a result of Code Section
162 (m) (or any corresponding provisions of state, local or foreign Tax law).
The Company is not and has not been a member of an affiliated group filing a
consolidated federal income tax return other than the group the common parent of
which is Parent. The Company has no Liability for the Taxes of any Person other
than itself under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by contract, or
otherwise. Parent has filed a consolidated federal income Tax return with the
Company for the taxable year immediately preceding the current taxable year and
is eligible to make a Code Section 338(h) (10) election as contemplated by
Section 6.8.1.
3.12.7 No Tax Sharing Agreement. Except as set forth on
Schedule 3.12.7, the Company is not and never has been a party to or otherwise
bound by any tax sharing agreement or similar agreement. Any Tax-sharing
Contract to which the Company is, was or may have been a party shall be
terminated as of the Closing Date and shall have no further effect for any
taxable year (whether the current year, a future year or a past year) so that
after the Closing the Company shall not, except as set forth on the face of the
Closing Balance Sheet, have any Liability under any Tax sharing or similar
Contract.
3.12.8 Certain Income Items and Deductions. Except as set
forth on Schedule 3.12.8, the Company will not be required to include any item
of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result
of any:
(a) change in method of accounting for a taxable
period ending on or prior to the Closing Date;
(b) "closing agreement" as described in Code
Section 7121 (or any corresponding or similar provision of
state, local or foreign income Tax law) executed on or prior to
the Closing Date;
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(c) intercompany transactions or any excess loss
account described in Treasury Regulations under Code Section
1502 (or any corresponding or similar provision of state, local
or foreign income Tax law);
(d) installment sale or open transaction
disposition made on or prior to the Closing Date; or
(e) prepaid amount received on or prior to the
Closing Date.
3.12.9 Certain Stock Distributions. The Company has not
distributed stock of another Person, nor has had its stock distributed by
another Person, in a transaction that was purported or intended to be governed
in whole or in part by Code Sections 355 or 361.
3.12.10 Affiliated Group. Each Affiliated Group of which the
Company is or was a member has filed all income Tax Returns that it was required
to file for each taxable period during which the Company was a member of the
group. All such Tax Returns were correct and complete (a) in respects in so far
as they relate to the Company and (b) in all material respects in so far as they
do not relate to the Company. All income Taxes owed by any Affiliated Group
(whether or not shown on any Tax Return) have been paid for each taxable period
during which the Company was a member of the Affiliated Group.
3.12.11 Certain Disputes and Claims. Neither the Company,
Sellers or Parent expects any Governmental Entity to assess any additional
income Taxes against any Affiliated Group for any taxable period during which
the Company was a member of the Affiliated Group. There is no dispute or claim
concerning any income Tax Liability of any Affiliated Group for any taxable
period during which the Company was a member of the Affiliated Group either
(a) claimed or raised by any Governmental Entity in writing or (b) as to which
any Seller, Parent or the Company has knowledge based upon personal contact with
any agent of such Governmental Entity. Except as disclosed on Schedule 3.12.11,
no Affiliated Group has waived any statute of limitations in respect of any
income Taxes or agreed to any extension of time with respect to a income Tax
assessment or deficiency for any taxable period during which the Company was a
member of the Affiliated Group.
3.12.12 Code Section 382 Ownership Change. Neither the Company
nor Parent has undergone a Code Section 382 ownership change since December 31,
1999.
3.12.13 Unclaimed Property. The Company has no assets that may
constitute unclaimed property under Applicable Laws. Without limiting the
generality of the foregoing, the Company has established and followed procedures
to identify any unclaimed property and, to the extent required by Applicable
Laws, remit such unclaimed property to the respective Governmental Entity. The
Company's records are adequate to permit Governmental Entities or outside
auditors to confirm the foregoing representations and warranties on this Section
3.12.13.
3.13 Employee Benefit Plans.
3.13.1 List of Plans. Schedule 3.13.1 contains a correct and
complete list of all pension, profit sharing, retirement, deferred compensation,
welfare, legal services, medical, dental or other employee benefit or health
insurance plans, life insurance or other death benefit plans, disability, stock
option, stock purchase, stock compensation, bonus, vacation pay, severance pay
and other similar plans, programs or agreements, and every material written
personnel policy, relating to any Persons employed by the Company or in which
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any Person employed by the Company is eligible to participate and which is
currently maintained or that was maintained at any time since December 31, 2000,
by the Company or any ERISA Affiliate (collectively, the "Company Plans"). The
Company has made available to Buyer complete copies, as of the date hereof, of
all of the Company Plans that have been reduced to writing, together with all
documents establishing or constituting any related trust, annuity contract,
insurance contract or other funding instrument, and summaries of those that have
not been reduced to writing. The Company has made available to Buyer complete
copies of current plan summaries, employee booklets, personnel manuals and other
material documents or written materials concerning the Company Plans that are in
the possession of the Company as of the date hereof. The Company does not have
and has never had any "defined benefit plans" as defined in ERISA Section 3(35).
3.13.2 ERISA. Neither the Company nor any ERISA Affiliate of
the Company has incurred any "withdrawal liability" calculated under Code
Section 4211 and there has been no event or circumstance which would cause them
to incur any such Liability. Neither the Company nor any ERISA Affiliate of the
Company has ever maintained a Company Plan providing health or life insurance
benefits to former employees, other than as required pursuant to Code
Section 4980B or to any state law conversion rights. No plan previously
maintained by the Company or its ERISA Affiliates which was subject to ERISA has
been terminated; no proceedings to terminate any such plan have been instituted
within the meaning of Subtitle C of Title IV of ERISA; and no reportable event
within the meaning of Section 4043 of said Subtitle C of Title IV of ERISA with
respect to which the requirement to file a notice with the Pension Benefit
Guaranty Corporation has not been waived has occurred with respect to any such
Company Plan, and no Liability to the Pension Benefit Guaranty Corporation has
been incurred by the Company or its ERISA Affiliates. With respect to all the
Company Plans, the Company and every ERISA Affiliate of the Company is in
material compliance with all requirements prescribed by all Applicable Laws, and
has in all material respects performed all obligations required to be performed
by it. Neither the Company nor any ERISA Affiliate of the Company, nor any of
their directors, officers, employees or agents, nor any trustee or administrator
of any trust created under the Company Plans, has engaged in or been a party to
any "prohibited transaction" as defined in Code Section 4975 which could subject
the Company or its Affiliates, directors or employees or the Company Plans or
the trusts relating thereto or any party dealing with any of the Company Plans
or trusts to any tax or penalty on "prohibited transactions" imposed by Code
Section 4975. Neither the Company Plans nor the trusts created thereunder have
incurred any "accumulated funding deficiency," as such term is defined in Code
Section 412 and regulations issued thereunder, whether or not waived.
3.13.3 Plan Determinations. Each Company Plan intended to
qualify under Code Section 401(a) has been determined by the Internal Revenue
Service ("IRS") to so qualify, and the trusts created thereunder have been
determined to be exempt from Tax under Code Section 501(a); copies of all
determination letters which have been received by the Company have been
delivered to Buyer, and neither Parent nor any Seller has taken any action,
or received any notification of any action taken by any other Person since the
date of such determination letters which might cause the loss of such
qualification or exemption. With respect to each Company Plan which is a
qualified profit sharing plan, all employer contributions accrued for plan
years ending prior to the Closing under the Company Plan terms and Applicable
Laws have been made.
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3.13.4 Funding. Except as set forth on Schedule 3.13.4:
(a) all contributions, premiums or other payments
due or required to be made to the Company Plans as of the date
hereof have been made as of the date hereof or are properly
reflected on the Company Balance Sheet;
(b) there are no actions, liens, suits or claims
(other than routine claims for benefits) pending or, to the
Company's Knowledge and Sellers' Knowledge, threatened with
respect to any Company Plan;
(c) no event has occurred, and there exists no
condition or set of circumstances, which presents a material
risk of a partial termination (within the meaning of Code
Section 411(d)(3)) of any Company Plan;
(d) each Company Plan that is a "group health
plan" (as defined in Section 607(1) of ERISA) has been operated
at all times in substantial compliance with the provisions of
COBRA and any applicable, similar state law; and
(e) with respect to any Company Plan that is
qualified under Code Section 401(k), individually and in the
aggregate, no event has occurred, and there exists no condition
or set of circumstances in connection with which the Company
could be subject to any Liability (except Liability for benefits
claims and funding obligations payable in the ordinary course)
that is reasonably likely to have a Company Material Adverse
Effect under ERISA, the Code or any other Applicable Laws.
3.13.5 Certain Other Matters. Except as reserved for on the
Company Balance Sheet or the Final Closing Balance Sheet, the Company has no
Liability or potential Liability and the Company will not have Liability or
potential Liability, with regard to any Company Plan, as a result of any failure
to perform non-discrimination testing on a Company Plan or any failure to amend
a Company Plan pursuant to the legislation commonly known as "GUST" or the
legislation commonly known as "EGTRRA." All employee contributions, including
elective deferrals, to the Company's 401(k) plan(s) have been segregated from
the Company's general assets and deposited into the trust(s) established
pursuant to the 401(k) plan(s) in a timely manner in accordance with the "plan
asset" regulations of the Department of Labor.
3.13.6 Welfare Plans. With respect to any Company Plan that
is an employee welfare benefit plan (within the meaning of Section 3(1) of
ERISA) (a "Welfare Plan"), (a) each Welfare plan for which contributions are
claimed by the Company as deductions under any provision of the Code is in
material compliance with all applicable requirements pertaining to such
deduction, (b) with respect to any welfare benefit fund (within the meaning
of Code Section 419 related to a Welfare Plan, there is no disqualified benefit
(within the meaning of Code Section 4976(b) that would result in the imposition
of a Tax under Code Section 4976(a), (c) any Company Plan that is a group health
plan (within the meaning of Code Section 4980B(g)(2) complies, and in each and
every case has complied, with all of the applicable material requirements of
COBRA, the Family Medical Leave Act of 1993, the Health Insurance and
Portability and Accountability Act of 1996, the Women's Health and Cancer Rights
Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996, and any
similar provisions of state law or foreign law applicable to employees of the
Company or any ERISA Affiliate of Company. None of the Company Plans promises
or provides retiree medical or other retiree welfare benefits to any Person
except as required by Applicable Laws, and neither the Company nor ERISA
Affiliate of the Company has represented, promised or contracted (whether in
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oral or written form) to provide such retiree benefits to any employee, former
employee, director, consultant or other Person, except to the extent required
by statue. No Company Plan or employment agreement provides health benefits
that are not insured through an insurance contract. Except as set forth on
Schedule 3.13.6, each Company Plan is amendable and terminable unilaterally by
the Company at any time without Liability to the Company as a result thereof and
no Company Plan, plan documentation or agreement, summary plan description or
other written communication distributed generally to employees by its terms
prohibits the Company from amending or terminating any such Company Plan.
3.14 Employment-Related Matters.
3.14.1 Labor Relations. Except to the extent set forth on
Schedule 3.14.1: (a) the Company is not a party to any collective bargaining
agreement or other contract or agreement with any labor organization or other
representative of any of the employees of the Company; (b) there is no labor
strike, dispute, slowdown, work stoppage or lockout that is pending or, to the
Company's Knowledge and Sellers' Knowledge, threatened against or otherwise
affecting the Company, and the Company has not experienced the same; (c) except
as has occurred in the ordinary course of the Company's business without any
resulting material Liability of the Company, the Company has not closed any
plant or facility, effectuated any layoffs of employees or implemented any early
retirement or separation program at any time, nor has the Company planned or
announced any such action or program for the future with respect to which the
Company has any material Liability; and (d) all salaries, wages, vacation pay,
bonuses, commissions and other compensation due from the Company to the
employees of the Company before the date hereof have been paid or accrued as of
the date hereof.
3.14.2 Employee List. Set forth on Schedule 3.14.2 is a list
containing the name of each employee of the Company, whether full-time or part
time, and each such employee's position, starting employment date and annual
salary ("Employee List"). The Employee List is correct and complete as of the
date of the Employee List. No third party has asserted in writing any claim,
or, to the Company's Knowledge and Sellers' Knowledge, has any reasonable basis
to assert any valid claim, against the Company that either the continued
employment by, or association with, the Company of any of the current officers
or employees of, or consultants to, the Company contravenes any agreements or
Applicable Laws regarding unfair competition, trade secrets or proprietary
information.
3.15 Environmental.
3.15.1 Environmental Laws. Except for matters which,
individually or in the aggregate, would not have a Company Material Adverse
Effect, (a) the Company is in compliance with all applicable Environmental Laws
in effect on the date hereof; (b) the Company has not received any written
communication that alleges that the Company is not in compliance in all material
respects with all applicable Environmental Laws in effect on the date hereof;
(c) there are no circumstances that may prevent or interfere with compliance in
the future with all applicable Environmental Laws; (d) all material Permits and
other Governmental Entity authorizations currently held by the Company pursuant
to the Environmental Laws are in full force and effect, the Company is in
compliance with all of the terms of such Permits and authorizations, and no
other Permits or authorizations are required by the Company for the conduct of
its business on the date hereof; and (e) the management, handling, storage,
transportation, treatment, and disposal by the Company of all Materials of
Environmental Concern has been in compliance with all applicable Environmental
Laws.
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3.15.2 Environmental Claims. Except as set forth on Schedule
3.15.2, there is no Environmental Claim pending or, to the Company's Knowledge
and Sellers' Knowledge, threatened against or involving the Company or against
any Person whose Liability for any Environmental Claim the Company has or may
have retained or assumed either contractually or by operation of law.
3.15.3 No Basis for Claims. Except for matters which,
individually or in the aggregate, would not have a Company Material Adverse
Effect, to the Company's Knowledge and Sellers' Knowledge, there are no past or
current actions or activities by the Company, or any circumstances, conditions,
events or incidents, including the storage, treatment, release, emission,
discharge, disposal or arrangement for disposal of any Material of Environmental
Concern, whether or not by the Company, that could reasonably form the basis of
any Environmental Claim against the Company or against any Person whose
Liability for any Environmental Claim the Company may have retained or assumed
either contractually or by operation of law, including the storage, treatment,
release, emission, discharge, disposal or arrangement for disposal of any
Material of Environmental Concern or any other contamination or other hazardous
condition, whether caused by the Company or not related to the premises at any
time occupied by the Company. Without limiting the generality of the foregoing,
the Company has not received any notices, demands, requests for information,
investigations pertaining to compliance with or Liability under Environmental
Law or Materials of Environmental Concern, nor, to the Company's Knowledge and
Sellers' Knowledge, are any such notices, demands, requests for information or
investigations threatened.
3.15.4 Disclosure of Information. The Company has made, and
during the Pre-Closing Period will continue to make, available to Buyer all
environmental investigations, studies, audits, tests, reviews and other analyses
conducted in relation to Environmental Laws or Materials of Environmental
Concern pertaining to the Company or any property or facility now or previously
owned, leased or operated by the Company that are in the possession, custody,
or control of the Company.
3.15.5 Encumbrances. No Encumbrance relating to or in
connection with any Environmental Claim, Environmental Law, or Materials of
Environmental concern has been filed or has been attached to any of the property
or assets which are owned, leased or operated by the Company.
3.15.6 Transportation of Materials of Environmental Concern.
Since December 31, 2000, the Company has not used, handled, generated, produced,
manufactured, treated, stored, disposed of, recycled or transported any
Materials of Environmental Concern, whether on behalf of the Company or any
other Person, in violation of any Environmental Laws, and there has been no
Release or threatened Release of any Materials of Environmental Concern beneath
or from any real property operated or formerly owned or operated by the Company.
3.16 No Broker's or Finder's Fees. The Company has not paid or
become obligated to pay any fee or commission to any broker, finder, financial
advisor, intermediary or other Person in connection with the Transactions and
giving effect to the consummation of the Closing will not cause the Company to
be so obligated.
3.17 Assets Other Than Real Property.
3.17.1 Title. The Company has good, valid and marketable
title to all of the tangible assets shown on the Company Balance Sheet, in each
case, free and clear of any Encumbrance, except for (a) assets disposed of since
Balance Sheet Date in the ordinary course of business and in a manner consistent
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with past practices, (b) Liabilities and Encumbrances reflected in the Company
Balance Sheet or otherwise in the Company Financial Statements, (c) Permitted
Encumbrances, and (d) Liabilities and Encumbrances set forth on Schedule 3.17.1.
3.17.2 Closing Date Assets.
(a) As of the Closing Date, the Company will have
good, valid and marketable title to all of its assets, including
those assets shown on the Final Closing Balance Sheet, in each
case free and clear of any Encumbrances other than Permitted
Encumbrances.
(b) The Company's inventory has been paid for by
the Company, consists of a quality and quantities which are
usable and saleable upon customary terms and conditions in the
ordinary course of business and meet all customer and warranty
standards and requirements. Schedule 3.17.2 lists by stock
keeping unit and quantity all inventory purchased by the Company
without the manufacturer's standard warranty.
(c) Schedule 3.17.2(c) lists all tangible personal
property (other than Inventory) which is owned by the Company
and the location thereof. All of such personal property is in
good operating condition, subject to ordinary wear and tear.
(d) The Company's assets includes all right, title
and interest in and to all assets that are used in or that are
being held for use or are otherwise necessary in the operation,
as currently conducted by the Company, of its business.
(e) Schedule 3.17.2(e) contains a complete and
correct list of all Governmental Entity-owned property or
Governmental Entity-furnished equipment, including tooling and
test equipment, provided under, necessary to perform the
obligation under, or for which the Company could be held
accountable under, the Government Contracts and such
Governmental Entity-owned property is maintained by the Company
in accordance with government-approved property management
system.
3.17.3 Condition. All material facilities, equipment and
personal property owned by the Company and regularly used in its business is in
good operating condition and repair, ordinary wear and tear excepted, which wear
and tear, taken in the aggregate, is not material to the Company and does
not affect the Company's obligations to consummate the Transactions and
otherwise perform under this Agreement.
3.18 Real Property.
3.18.1 Company Real Property. The Company does not own and
has never owned any real property.
3.18.2 Company Leases. Schedule 3.18.2 lists all of the
Company Leases. Complete copies of the Company Leases, and all material
amendments thereto (which are identified on Schedule 3.18.2) have been made
available by the Company to Buyer. The Company Leases grant leasehold estates
free and clear of all Encumbrances (except Permitted Encumbrances) granted by or
caused by the actions of the Company. The Company Leases are in full force and
effect and are binding and enforceable against each of the parties thereto in
accordance with their respective terms and conditions. Neither the Company nor,
to the Company's Knowledge and Sellers' Knowledge, any other Person to a Company
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Lease, has committed a material breach or default under any Company Lease, nor
has there occurred any event that with the passage of time or the giving of
notice or both would constitute such a breach or default. Schedule 3.18.2
identifies each Company Lease the provisions of which would be materially and
adversely affected by the Transactions and each Company Lease that requires the
consent of any third Person in connection with the Transactions. No material
construction, alteration or other leasehold improvement work with respect to
the real property covered by any of the Company Leases remains to be paid for
or to be performed by the Company. Except as set forth on Schedule 3.18.2, no
Company Leases have an unexpired term which, including any renewal or extensions
of such term provided for in the Company Lease, could exceed 365 days.
3.18.3 Condition. All leasehold improvements and fixtures, or
parts thereof, used by the Company in the conduct of its business are in good
operating condition and repair, ordinary wear and tear excepted, and are insured
with coverages that are usual and customary for similar properties and similar
businesses or are required, pursuant to the Company Leases, to be insured by
third Persons.
3.19 Contracts, Agreements and Commitments.
3.19.1 Company Contracts. Except as set forth on Schedule
3.19.1, the Company is not a party to:
(a) any bonus, deferred compensation, pension,
severance, profit-sharing, stock option, employee stock purchase
or retirement plan, Contract or arrangement or other employee
benefit plan or arrangement;
(b) any employment Contract with any current
employee, officer, director or consultant (or former employees,
officers, directors and consultants to the extent there remain
at the date hereof obligations to be performed by the Company);
(c) any Company Contract for personal services or
employment with a term of service or employment specified in the
Contract or any Contract for personal services or employment in
which the Company has agreed on the termination of such Contract
to make any payments greater than those that would otherwise be
imposed by Applicable Laws;
(d) any Company Contract of guarantee or
indemnification;
(e) any Company Contract containing a covenant
limiting or purporting to limit the freedom of the Company
to compete with any Person in any geographic area or to
engage in any line of business;
(f) any lease other than the Company Leases under
which the Company is lessee that involves, in the aggregate,
payments of $10,000 or more per annum, or of $50,000 or more
for the remaining term of the Company Lease or is material to
the conduct of the Company's business;
(g) any joint venture or profit-sharing Company
Contract or similar Contract ;
(h) except for trade indebtedness incurred in the
ordinary course of business and equipment leases entered into in
the ordinary course of business, any loan or credit Contract
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providing for the extension of credit to the Company or any
instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or
indebtedness for borrowed money by way of direct loan, sale of
debt securities, purchase money obligation, conditional sale,
guarantee, or otherwise that individually is in the amount of
$10,000 or more;
(i) any license Contract, either as licensor or
licensee, involving payments (including past payments) of
$10,000 in the aggregate or more, or any material distributor,
dealer, reseller, franchise, manufacturer's representative, or
sales agency or any other similar material Contract;
(j) any Company Contract granting exclusive rights
to, or providing for the sale of, all or any portion of the
Company Proprietary Rights;
(k) any Company Contract or arrangement providing
for the payment of any commission or similar payment based on
sales or contract awards other than to employees of the Company;
(l) any Company Contract for the sale by the
Company of materials, products, services or supplies that
involves future payments to the Company of more than $10,000;
(m) any Company Contract for the purchase by the
Company of any materials, equipment, services, or supplies that
either (i) involves a binding commitment by the Company to make
future payments in excess of $10,000 and cannot be terminated by
it without penalty upon fewer than 30 days' notice or (ii) was
not entered into in the ordinary course of business;
(n) any Company Contract or arrangement with any
third Person for such third party to develop any intellectual
property or other asset expected to be used or currently used or
useful in the Company's business;
(o) any Company Contract or commitment for the
acquisition, construction or sale of fixed assets owned or to be
owned by the Company that involves future payments by it of
more than $10,000;
(p) any Company Contract or commitment to which
current or former directors, officers or Affiliates of the
Company (or directors or officers of an Affiliate of the
Company) are also parties;
(q) any Company Contract not described above
(ignoring, solely for this purpose, any dollar amount thresholds
in those descriptions) involving the payment or receipt by the
Company of more than $25,000, other than the Company Leases;
(r) any Company Contract not described above that
was not made in the ordinary course of business and that is
material to the Company's financial condition, business,
operations, assets, results of operations or prospects; or
(s) any Company Contract that provides for any
continuing or future obligation of the Company, involving
Liability of the Company of more than $10,000, actual or
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contingent, including any continuing representation or warranty
and any indemnification obligation, in connection with the
disposition of any business or assets of the Company.
3.19.2 Validity. All Company Contracts, including the Company
Contracts required to be set forth on Schedule 3.19.1 are valid and in full
force and effect, the Company has not, nor has any other party thereto, breached
any provision of, or defaulted under the terms of any such Contract except as
set forth on Schedule 3.19.2 and for any breaches or defaults that, in the
aggregate, would not be expected to have a Company Material Adverse Effect or
have been cured or waived, and the Company has not received any "notice to cure"
or a similar notice from any Governmental Entity requesting performance under
any Contract between the Company and such Governmental Entity.
3.19.3 Third-Party Consents. Schedule 3.19.3 identifies each
Contract and other document that requires the consent of a third Person,
including Governmental Entities, in connection with the Transactions.
3.20 Intellectual Property.
3.20.1 Right to Intellectual Property. Except as set forth on
Schedule 3.20.1, the Company owns, or has, fully paid, rights to use, all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefore, maskworks, net lists, schematics, technology, know-how,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material (excluding
Commercial Software) that are used in the business of the Company as currently
conducted (the "Company Proprietary Rights"). The Commercial Software used in
the Company's business has been acquired and used by the Company on the basis of
and in accordance with a valid license from the manufacturer or the dealer
authorized to distribute such Commercial Software, free and clear of any claims
or rights of any third parties. The Company is not in breach of any of the terms
and conditions of any such license and has not been infringing upon any rights
of any third parties in connection with its acquisition or use of the Commercial
Software.
3.20.2 No Conflict.
(a) Set forth on Schedule 3.20.2 is a complete list
of all patents, trademarks, registered copyrights, trade names
and service marks, and any applications therefore, included in
the Company Proprietary Rights, specifying, where applicable,
the jurisdictions in which each such Company Proprietary Right
has been issued or registered or in which an application for
such issuance and registration has been filed, including the
respective registration or application numbers and the names of
all registered owners.
(b) None of the Company's currently marketed
software products has been registered for copyright protection
with the United States Copyright Office or any foreign offices
nor has the Company been requested to make any such
registration.
(c) Set forth on Schedule 3.20.2(c) is a complete
list of all material licenses, sublicenses and other Contracts
as to which the Company is a party and pursuant to which the
Company or any other Person is authorized to use any Company
Proprietary Right (excluding "end-user licenses") or other trade
secret material to the business of the Company, and includes the
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identity of all parties thereto, a description of the nature and
subject matter thereof, the applicable royalty and the term
thereof.
(d) The Company is not in violation of any license,
sublicense or other Contract described on such list except such
violations as do not materially impair the Company's rights
under such license, sublicense or agreement.
(e) The execution and delivery of this Agreement by
the Company, and the consummation of the Transactions, will
neither cause the Company to be in violation or default under
any such license, sublicense or other Contract, nor entitle any
other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or other Contract.
(f) Except as set forth on Schedule 3.20.2(f), the
Company is the sole and exclusive owner or licensee of, with all
right, title and interest in and to (free and clear of any and
all Encumbrances), the Company Proprietary Rights, and has sole
and exclusive rights (and is not contractually obligated to pay
any compensation to any third party in respect thereof) to the
use thereof or the material covered thereby in connection with
the services or products in respect of which the Company
Proprietary Rights are being used.
(g) Except as set forth on Schedule 3.20.2(g), no
claims with respect to the Company Proprietary Rights have been
asserted or, to the Company's Knowledge and Sellers' Knowledge,
are threatened by any Person nor, to the Company's Knowledge and
Sellers' Knowledge, are there any valid grounds for any bona
fide claims to the effect that the manufacture, sale, licensing
or use of any of the products of the Company as currently
manufactured, sold or licensed or used or proposed for
manufacture, use, sale or licensing by the Company infringes on
any copyright, patent, trademark, service ▇▇▇▇ or trade secret,
against the use by the Company of any trademarks, service marks,
trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in
the Company's business as currently conducted or as proposed to
be conducted by the Company, or challenging the ownership by the
Company, or the validity or effectiveness of any of the Company
Proprietary Rights.
(h) Except as set forth on Schedule 3.20.2(h), all
material registered trademarks, service marks and copyrights
held by the Company are valid and subsisting in the
jurisdictions in which they have been filed.
(i) There is no material unauthorized use,
infringement or misappropriation of any of the Company
Proprietary Rights by any third party, including any employee or
former employee of the Company.
(j) No Company Proprietary Right or product of the
Company is subject to any outstanding decree, order, judgment,
or stipulation restricting in any manner the licensing thereof
by the Company.
(k) Except as set forth on Schedule 3.20.2(k), the
Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise
-19-
distributing any of its products to any class of customers, in
any geographic area, during any period of time or in any segment
of the market.
(l) The Company's products, packaging and
documentation contain copyright notices sufficient to maintain
copyright protection on the copyrighted portions of the Company
Proprietary Rights.
3.20.3 Employee Agreements. Except as set forth on Schedule
3.20.3(a), each employee, officer and consultant of the Company has executed a
confidentiality agreement and each officer has executed a non-competition
agreement in substantially the form of Schedule 3.20.3(b). No employee, officer
or consultant of the Company is in violation of any employment or consulting
contract, proprietary information and inventions agreement, non-competition
agreement, or any other contract or agreement relating to the relationship of
any such employee, officer or consultant with the Company or any previous
employer.
3.21 Insurance Contracts. Schedule 3.21 lists all contracts of
insurance and indemnity in force at the date hereof with respect to the Company.
Such contracts of insurance and indemnity and those shown in other Schedules
(collectively, the "Company Insurance Contracts") insure against such risks, and
are in such amounts, as are appropriate and reasonable considering the Company's
property, business and operations. All of the Company Insurance Contracts are
in full force and effect, and to the Company's Knowledge and Sellers' Knowledge,
there are no defaults thereunder by the Company which could permit the insurer
to deny payment of claims thereunder. The Company has not received notice from
any of its insurance carriers that any insurance premiums will be materially
increased in the future or that any insurance coverage provided under the
Company Insurance Contracts will not be available in the future on substantially
the same terms as now in effect. The Company has not received or given a notice
of cancellation with respect to any of the Company Insurance Contracts.
3.22 Banking Relationships. Schedule 3.22 shows the names and
locations of all banks, trust companies and other financial institutions in
which the Company has accounts, lines of credit or safety deposit boxes and,
with respect to each account, line of credit or safety deposit box, the names of
all Persons authorized to draw thereon or to have access thereto.
3.23 No Contingent Liabilities. The Company has no contingent or
conditional Liabilities of any kind arising from or in connection with any
acquisition of a Person or a line of business by the Company.
3.24 Absence of Certain Relationships. Except as set forth on
Schedule 3.24, to the Company's Knowledge and Sellers' Knowledge none of (a) the
Company, (b) any officer of the Company, (c) Sellers, or (d) any member of the
immediate family of the persons listed in clauses (b) or (c) of this Section
3.24, has any financial or employment interest in any subcontractor, supplier,
or customer of the Company (other than holdings in publicly held companies of
less than two percent of the outstanding capital stock of any such publicly held
company).
3.25 Foreign Corrupt Practices. Neither the Company nor any
Affiliate of the Company, nor any other Person associated with or acting for or
on behalf of the any of the foregoing, has directly or indirectly taken any
action which would cause the Company to be in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended. Neither the Company, nor any
Affiliate of the Company, nor any other Person associated with or acting for or
on behalf of any of the foregoing, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kick-back, or
-20-
other payment to any Person, private or public, regardless of form, whether in
money, property or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Company or any Affiliate of the Company, or (iv) in violation
of any Applicable Laws, or (b) established or maintained any fund or asset that
has not been recorded in the Company's books and records.
3.26 Government Contracts.
3.26.1 Generally. Each Company Contract and other Company
Engagement that is a Government Contract (each an "Active Government Contract")
is listed on Schedule 3.26.1(a) and identified as a Government Contract. Each
Company Completed Engagement that is or was a Government Contract is referred to
herein as a "Completed Government Contract." Also listed on Schedule 3.26.1(a)
and identified as a Government Bid is each outstanding quotation bid or proposal
for a Government Contract involving the Company's business. Listed on Schedule
3.26.1(b) is each Active Government Contract under which to the Company's
Knowledge and Sellers' Knowledge, the Company currently is experiencing, or is
likely to experience in any material respect either cost, schedule, technical
or quality problems.
3.26.2 Bids and Awards. To the Company's Knowledge and
Sellers' Knowledge, (a) each Active Government Contract and each Completed
Government Contract (collectively, the "Government Contracts") was legally
awarded, (b) no such Active Government Contract (or, where applicable, the prime
contract with the United States Government under which such Government Contract
was awarded) is the subject of bid or award protest proceedings, and (c) no such
Active Government Contract (or, where applicable, the prime contracts with the
United States Government under which such Government Contract was awarded) is
reasonably likely to become the subject to bid or award protest proceedings.
Except as set forth on Schedule 3.26.2, to the Company's Knowledge and Sellers'
Knowledge, no facts exist which could give rise to a material claim for price
adjustment under the Truth in Negotiations Act or to any other request for a
material reduction in the price of any Government Contracts.
3.26.3 Compliance with Law and Regulation and Contractual
Terms; Inspection and Certification. The Company has complied in all materials
respects with all applicable statutory and regulatory requirements pertaining to
the Government Contracts to which it is a party, including the Armed Services
Procurement Act, the Federal Procurement and Administrative Services Act, the
Federal Acquisition Regulation (the "FAR"), the FAR cost principles, and the
Cost Accounting Standards. To the Company's Knowledge and Sellers' Knowledge,
the Company has complied in all material respects with all terms and conditions,
including all clauses, provisions, specifications, and quality assurance,
testing and inspection requirements of the Government Contracts, whether
incorporated expressly, by reference or by operation of law. To the Company's
Knowledge and Sellers' Knowledge, all facts set forth in or acknowledged by any
representations, certifications or disclosure statements made or submitted by or
on behalf of the Company in connection with any Government Contract and its
quotations, bids and proposals for Government Contracts were current, accurate
and complete in all material respects as of the date of their submission. To
the Company's Knowledge and Sellers' Knowledge, the Company has complied in all
material respects with all applicable representations, certifications and
disclosure requirements under all Government Contracts and each of its
quotations, bids and proposals for Government Contracts. The Company has
developed and implemented a government contracts compliance program which
includes corporate policies and procedures to ensure compliance with applicable
United States Government procurement statutes, regulations and contract
-21-
requirements. To the Company's Knowledge and Sellers' Knowledge, no facts exist
which could reasonably be expected to give rise to Liability to the Company
under the False Claims Act which would reasonable be expected to result in a
material Company Liability. Except as described in Schedule 3.26.3, the Company
has not undergone and is not undergoing any, review, inspection, investigation,
survey or examination of records relating to any Government Contract (where such
audit is either outside the ordinary course of business or would reasonably be
expected to result in a material Company Liability). No audit, review,
inspection, investigation, survey or examination of records described in
Schedule 3.26.3 has revealed any fact, occurrence, or practice which could
affect the assets, business or financial statement of the Company, or its
continued eligibility to receive and perform Government Contracts. To the
Company's Knowledge and Sellers' Knowledge, the Company has not made any
payment, directly or indirectly, to any Person in violation of Applicable Laws,
including laws relating to bribes, gratuities, kickbacks, lobbying expenditures,
political contributions and contingent fee payments. To the Company's Knowledge
and Sellers' Knowledge, the Company has complied in all material respects with
all applicable requirements under each Government Contract relating to the
safeguarding of an access to classified information. The Company's cost
accounting, purchasing, inventory and quality control systems are in material
compliance with all applicable government procurement statutes and regulations
and with the requirements of the Government Contracts (or any of them).
3.26.4 Disputes, Claims and Litigation. Except as described
in Schedule 3.26.4, to the Company's Knowledge and Sellers' Knowledge, there
are neither any outstanding material claims or disputes against the Company
relating to any Government Contract nor any facts or allegations that could
give rise to such a claim or dispute in the future. Except as described in
Schedule 3.26.4, to the Company's Knowledge and Sellers' Knowledge, there are
neither any outstanding material claims or disputes relating to any Government
Contract which, if resolved unfavorably to the Company, would increase by five
percent or more the Company's cost to complete performance of any task order
under such Government Contract above the amounts set forth in the estimates to
complete previously prepared by the Company and delivered to Buyer for the
Government Contract, nor any reasonably foreseeable expenditures which would
increase by five percent or more the cost to complete performance of any task
order under Government Contract above the amounts set forth in the estimates to
complete described above. The Company has not been nor is currently under any
administrative, civil or criminal investigation or indictment disclosed to the
Company involving alleged false statements, false claims or other misconduct
relating to any Government Contract or quotations, bids and proposals for
Government Contracts, and to the Company's Knowledge and Sellers' Knowledge,
there is no basis for any such investigation or indictment. The Company has
not been nor is currently a party to any administrative or civil litigation
involving alleged false statements, false claims or other misconduct relating
to any Government Contract or quotations, bids and proposals for Government
Contracts, and to the Company's Knowledge and Sellers' Knowledge, there is no
basis for any such proceeding. Except as described in Schedule 3.26.4, neither
the United States Government nor any prime contractor or higher-tier
subcontractor under a Government Contract has withheld or set off, or attempted
to withhold (other than the hold-backs pursuant to contracts in the ordinary
course of business) or set-off, material amounts of money otherwise acknowledged
to be due to the Company under a Government Contract. Except as described in
Schedule 3.26.4, neither the United States Government nor any prime contractor
or higher-tier subcontractor under an outstanding Government Contract has
questioned or disallowed any material costs claimed by the Company under any
Government Contract, and to the Company's Knowledge and Sellers' Knowledge,
there is no fact or occurrence that could be a basis for disallowing any such
costs.
-22-
3.26.5 Sanctions. Neither the United States Government nor
any prime contractor or higher-tier subcontractor under a Government Contract
nor any other Person has notified the Company, of any actual or alleged
violation or breach of any statute, regulation, representation, certification,
disclosure obligation, contract term, condition, clause, provision or
specification except where such violation or breach would reasonably be expected
to be immaterial. Except as set forth on Schedule 3.26.5, the Company has not
received any show cause, cure, deficiency, default or similar notices relating
to any Government Contract. Neither the Company nor any director, officer,
employee, consultant or Affiliate thereof has been or is not currently
suspended, debarred or, to the Company's Knowledge and Sellers' Knowledge,
proposed for suspension or debarment from government contracting, and to the
Company's Knowledge and Sellers' Knowledge, no facts exist which could cause
or give rise to such suspension or debarment or proposed suspension or
debarment. No determination of non-responsibility has ever been issued against
the Company with respect to any quotation, bid or proposal for a Government
Contract.
3.26.6 Terminations. Except as set forth on Schedule 3.26.6,
no Company Government Contract relating to the Company's business has been
terminated for default or convenience since December 31, 2001. The Company has
not received any notice in writing terminating or indicating an intent to
terminate any active Government Contract for convenience.
3.26.7 Within the Scope. Except as set forth in Schedule
3.26.7,
(a) the Company is not a party, and since
December 31, 2000, has not been a party, to any task order or
delivery order, under a multiple award schedule contract or any
other Government Contract, where the goods or services
purchased, or identified to be purchased, by a Government Entity
under such task order or delivery order are or were not in any
material respect clearly described in the statement of work
contained in the multiple award schedule contract or other
government Contract under which the task order or delivery order
was issued;
(b) the Company does not sell, and since
December 31, 2000 has not sold, any goods or services to any
Government Entity that are, or were, not clearly described in
the statement of work of a valid Government Contract pursuant to
which the goods or services were delivered to the Government
Entity; and
(c) there has been no allegation, charge, finding,
investigation or report (internal or external to the Company) to
the effect that the Company has been, or may have been, a party
to a task order or delivery order under the circumstances
described in clause (a) above, or sold goods or services to a
Government Entity under the circumstances described in clause
(b) above.
3.26.8 Assignments. Except as set forth on Schedule 3.26.8,
the Company has not made any assignment of any Government Contract or of any
right, title or interest in or to any Company Government Contract to any Person.
The Company has not entered into any financing arrangements with respect to the
performance of any Government Contract.
3.26.9 Property. The Company is in compliance with all
Applicable Laws with respect to the possession and maintenance of all
government-furnished property (as defined in the FAR).
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3.26.10 DCAA Audits. The Company has been audited by the
Defense Contracting Audit Agency through December 31, 2003. The Company has not
had any material adjustments arising out of Defense Contracting Audit Agency's
audits and, except as set forth in Schedule 3.26.10, there are no facts, events
or circumstances that would reasonably indicate that the Company is likely to be
subject to a claim or assertion by DCCA that the Company has a Liability for a
material adjustment for any services or products provided by the Company before
the Closing Date.
3.26.11 National Security Obligations. The Company is in
compliance with all Applicable Laws regarding national security, including those
obligations specified in the National Industrial Security Program Operating
Manual, DOD 5220.22-M (January 1995), and any supplements, amendments or revised
editions thereof.
3.26.12 Facility Security Clearances. Except to the extent
prohibited by Applicable Laws, Schedule 3.26.12 sets forth all material facility
security clearances held by the Company.
3.26.13 Credentials. To the Company's Knowledge and Sellers'
Knowledge, each Company employee performing services related to a Company
Government Contract possessed (during the time of such perform) all of the
required credentials (e.g., education and experience) and security clearances
specified in or required by such Company Government Contract. To the Company's
Knowledge and Sellers' Knowledge, there is no existing information, fact,
condition or circumstance that would cause the Company to lose its facility
security clearances.
3.26.14 Export Compliance. To the Company's Knowledge and
Sellers' Knowledge, the Company is in compliance with all Applicable Laws
regarding US export control, including in respect of US Department of State
International Trafficking in Arm Regulations, US Department of Commerce Export
Administration regulations, US/Canada Joint Certification Program and US Customs
requirements.
3.26.15 No Contingent Fees. No facts, events or other
circumstances exist that violates or otherwise constitutes a basis on which the
United States Government or any other Person might reasonably claim to violate,
the covenant against contingent fees under any Company Government Contract or
Company Engagement, or 10 U.S.C. section 1506, 41 U.S.C. section 254 or
FAR 52.303-5.
3.27 Cumulative Exceptions. The exceptions and qualifications to the
representations and warranties in this Article 3 which are based upon such
exceptions and qualifications not being "material" or being "in all material
respects," or not having or would or could not reasonably be expected to result
in a Company Material Adverse Effect, or any similar exception or qualification,
have not and will not, individually or in the aggregate, have a Company Material
Adverse effect (collectively, "Materiality Qualifications").
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Sellers as follows:
4.1 Corporate Status of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with the requisite corporate power to own, operate and lease its
properties and to carry on its business as currently being conducted.
4.2 Authority for Agreement; Noncontravention.
4.2.1 Authority of Buyer. Buyer has the corporate power and
authority to enter into this Agreement, to consummate its obligations hereunder
and to consummate the Transactions. The execution, delivery and performance of
this Agreement and the consummation of the Transactions have been duly and
validly authorized by Buyer's board of directors and no other corporate
proceedings on the part of Buyer is necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
Transactions. This Agreement and, when executed and delivered, the other
agreements contemplated hereby to be signed by Buyer have been or, when executed
and delivered, will be duly executed and delivered by Buyer as the case may be,
and constitute valid and binding obligations of Buyer as the case may be,
enforceable against Buyer in accordance with their terms.
4.2.2 No Conflict. Neither execution and delivery of this
Agreement by Buyer nor the performance by Buyer of its obligations hereunder,
nor the consummation by Buyer of the Transactions will (a) conflict with or
result in a violation of any provision of Buyer's certificate of incorporation
or by-laws, or (b) with or without the giving of notice or the lapse of time, or
both, conflict with, or result in any violation or breach of, or constitute a
default under, or result in any right to accelerate or result in the creation of
any Encumbrance pursuant to, or right of termination under, any provision of any
note, mortgage, indenture, lease, instrument or other agreement, Permit,
concession, grant, franchise, license, judgment, order, decree, statute,
ordinance, rule or regulation to which Buyer is a party or by which any of its
assets or properties is bound or which is applicable to Buyer or any of its
assets or properties. No authorization, consent or approval of, or filing with
or notice to, any Governmental Entity is necessary for the execution and
delivery of this Agreement by Buyer or the consummation by Buyer of the
Transactions, except for such consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a Buyer Material
Adverse Effect.
4.3 Compliance with Applicable Laws. Buyer is in compliance in all
material respects with all Applicable Laws and with all rules and regulations of
all national securities exchanges upon which Buyer's stock is listed. All
filings and disclosures made by Buyer pursuant to the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended, or the rules or regulations of such national
securities exchanges were true and correct in all material respects as of the
time that they were made, except to the extent any were discovered to be
incorrect and have been corrected by Buyer in the manner required by the
Applicable Law or exchange.
4.4 Investment Intent.
(a) Buyer is acquiring the Shares for its own
account for investment and not for distribution, assignment or
resale to others;
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(b) Buyer acknowledges that the issuance of the
Shares has not been registered under the Securities Act in
reliance upon an exemption therefrom for nonpublic offerings,
acknowledges that the Shares may not be sold or otherwise
transferred unless such sale or other transfer is registered
under the Securities Act or an exemption from registration is
available (and a legend evidencing such restrictions will be
placed on any certificates evidencing the Shares); and
(c) Buyer is an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
ARTICLE 5
CONDUCT PRIOR TO THE CLOSING DATE
---------------------------------
5.1 Conduct of Company's Business. Except as set forth on Schedule
5.1, between the date hereof and the Closing Date or the date, if any, on which
this Agreement is earlier terminated pursuant to its terms ("Pre-Closing
Period"), the Company shall, (a) carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, pay
its debts and Taxes when due subject to good faith disputes over such debts or
Taxes, pay or perform other material obligations when due, except when subject
to good faith disputes over such obligations, and use all commercially
reasonable efforts consistent with past practices and policies to preserve
intact the Company's current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business relationships with it, to the
end that the Company's goodwill and ongoing business be unimpaired at the
Closing Date, and (b) promptly notify Buyer of any event or occurrence which
will have or could reasonably be expected to have a Company Material Adverse
Effect. In addition, during the Pre-Closing Period, the Company, except as set
forth on Schedule 5.1, shall not:
(a) amend its Organizational Documents;
(b) declare or pay any dividends or distributions
on the Company's outstanding of capital stock nor purchase,
redeem or otherwise acquire for consideration any of the
Company's capital stock or other securities;
(c) issue or sell any of its capital stock, effect
any stock split or otherwise change its capitalization as it
exists on the date hereof, or issue, grant, or sell any options,
stock appreciation or purchase rights, warrants, conversion
rights or other rights, securities or commitments obligating it
to issue or sell any of its capital stock, or any securities or
obligations convertible into, or exercisable or exchangeable
for, any of its capital stock;
(d) borrow or agree to borrow any funds or
voluntarily incur, or assume or become subject to, whether
directly or by way of guaranty or otherwise, any Liability,
except obligations incurred in the ordinary course of business
consistent with past practices;
(e) pay, discharge or satisfy any claim or
Liability in excess of $10,000 (in any one case) or $25,000 (in
the aggregate), other than the payment, discharge or
satisfaction in the ordinary course of business of obligations
reflected on or reserved against in the Company Balance Sheet,
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or incurred since the Balance Sheet Date in the ordinary course
of business consistent with past practices or in connection with
this Transaction;
(f) except as required by Applicable Laws, adopt or
amend in any material respect, any agreement or plan (including
severance arrangements) for the benefit of its employees;
(g) sell, mortgage, pledge or otherwise encumber or
dispose of any of its assets which are material, individually or
in the aggregate, to the business of the Company, except in the
ordinary course of business consistent with past practices;
(h) a cquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the
assets of, any business or any other Person, or otherwise
acquire any assets which are material, individually or in the
aggregate, to the business of the Company, except in the
ordinary course of business consistent with past practices;
(i) increase the following amounts payable or to
become payable: (i) the salary of any of its directors or
officers, other than increases in the ordinary course of
business consistent with past practices and not exceeding, in
any case, five percent of the director's or officer's salary on
the date hereof, (ii) any other compensation of its directors or
officers, including any increase in benefits under any bonus,
insurance, pension or other benefit plan made for or with any of
those persons, other than increases that are provided in the
ordinary course of business consistent with past practices to
broad categories of employees and do not discriminate in favor
of the aforementioned persons, and (iii) the compensation of any
of its other employees, consultants or agents except in the
ordinary course of business consistent with past practices;
(j) dispose of, permit to lapse, or otherwise fail
to preserve the rights of the Company to use the Company
Proprietary Rights or enter into any settlement regarding the
breach or infringement of, any Company Proprietary Rights, or
modify any existing rights with respect thereto, other than in
the ordinary course of business consistent with past practices,
and other than any such disposal, lapse, failure, settlement or
modification that does not have and could not reasonably be
expected to have a Company Material Adverse Effect;
(k) sell, or grant any right to exclusive use of,
all or any part of the Company Proprietary Rights;
(l) enter into any contract or commitment or take
any other action that is not in the ordinary course of its
business or could reasonably be expected to have an adverse
impact on the Transactions or that would have or could
reasonably be expected to have a Company Material Adverse
Effect;
(m) amend in any material respect any agreement to
which the Company is a party the amendment of which will have or
could reasonably be expected to have a Company Material Adverse
Effect;
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(n) waive, release, transfer or permit to lapse any
claim or right (i) that has a value, or involves payment or
receipt by it, of more than $10,000 or (ii) the waiver, release,
transfer or lapse of which would have or could reasonably be
expected to have a Company Material Adverse Effect;
(o) take any action that would materially decrease
the Adjusted Stockholders' Equity;
(p) make any change in any method of accounting or
accounting practice other than changes required to be made so
that the Company's financial statements comply with GAAP; or
(q) agree or otherwise commit, whether in writing
or otherwise, to take any action described in this Section 5.1.
ARTICLE 6
ADDITIONAL AGREEMENTS
---------------------
6.1 Exclusivity. During the Pre-Closing Period neither Parent, the
Company nor any Seller will, directly or indirectly, through its respective
Affiliates, agents, officers and directors, directly or indirectly, solicit,
initiate, or participate in discussions, negotiations or otherwise cooperate in
any way with, or provide any information, to any Person or group concerning, or
enter into any letter of intent, agreement in principle or agreement, definitive
or otherwise, with respect to, any tender offer, exchange offer, merger,
business combination, sale of substantial assets, sale of the Shares or any
other capital stock of the Company, or similar transaction involving the
Company.
6.2 Expenses. Except as otherwise provided in Sections 6.3 and
9.1.2, each Party shall be responsible for its own costs and expenses in
connection with the Transactions, including fees and disbursements of
consultants, investment bankers and other financial advisors, counsel and
accountants ("Expenses").
6.3 Indemnification.
6.3.1 Indemnification of Buyer Indemnified Parties. Subject
to this Section 6.3, from and after the Closing Date, Sellers shall, severally
and jointly indemnify, defend and hold harmless Buyer and the Company and their
respective directors, officers, employees, representatives, successor and
assigns (collectively "Buyer Indemnified Parties") in respect of, and Buyer
Indemnified Parties shall be entitled to payment and reimbursement from Sellers,
jointly and severally (collectively the "Buyer Indemnifying Parties") of the
amount of, all Losses suffered, incurred by any Buyer Indemnified Party, by
reason of, in whole or in part, or arising from, in whole or in part, (a) any
breach by any Seller or Parent of any covenant, agreement or obligation in this
Agreement (whether to be performed before, on or after the Closing Date) or by
the Company of any covenant, agreement or obligation in this Agreement to be
performed by the Closing Date, (b) in respect of any DCAA Claim, or (c) any
misrepresentation or inaccuracy in, or breach of, any representation or warranty
made by the Company, any Seller or Parent in this Agreement or the certificates
delivered pursuant Section 7.2.1. Notwithstanding anything herein to the
contrary, in determining if there is a misrepresentation or inaccuracy in, or a
breach of, a representation or warranty in Article 3 or a certificate given
pursuant to Section 7.2.1, each representation or warranty referenced in clause
(c) of the immediately preceding sentence shall read as if (a) made by such
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Buyer Indemnifying Party, and (b) all Materiality Qualifications and
qualifications as to Company's Knowledge and Sellers' Knowledge contained in any
such representation or warranty shall be ignored.
6.3.2 Indemnification of Seller Indemnified Parties. Subject
to this Section 6.3 from and after the Closing Date, Buyer shall indemnify,
defend and hold harmless each Seller (collectively "Seller Indemnified Parties")
in respect of, and Seller Indemnified Parties shall be entitled to payment and
reimbursement from Buyer and its respective successors and assigns (collectively
the "Buyer Indemnifying Parties") of the amount of, all Losses suffered,
incurred or paid by any Seller Indemnified Party by reason of, in whole or in
part, or arising from, in whole or in part, (a) any breach by Buyer of any
covenant, agreement or obligation of Buyer in this Agreement to be performed
after the Closing and (b) any misrepresentation or inaccuracy in, or breach of
any, representation or warranty contained in Section 4.2 or in the certificate
delivered pursuant to Section 7.3.1.
6.3.3 Claims for Indemnification. Upon a Person entitled to
indemnification under Section 6.3 ("Indemnified Person") obtaining reasonably
sufficient knowledge of any facts, claim or demand which has given rise to, or
would reasonably give rise to, a claim for indemnification hereunder (referred
to herein as an "Indemnification Claim"), such Indemnified Party shall promptly
thereafter give notice of such facts, claim or demand ("Notice of Claim") to the
Party from whom indemnification is sought under this Section 6.3 (the
"Indemnifying Party"). So long as the Notice of Claim is given by the
Indemnified Party in the Claims Period specified in Section 6.3.6, no failure or
delay by the Indemnified Party in the giving of a Notice of Claim shall reduce
or otherwise affect the Indemnified Party's right to indemnification except to
the extent, if any, that the Indemnifying Party has been materially prejudiced
thereby.
6.3.4 Defense by Indemnifying Party.
(a) If a claim or demand is asserted by a third
Person against an Indemnified Person (a "Third Party Claim"),
the Indemnifying Party shall, except as otherwise provided in
Section 6.3.4(b), have the right, but not the obligation,
exercisable by notice to the Indemnified Party within 10 days
of the date of the Notice of Claim concerning the commencement
or assertion of any Third Party Claim, to assume the defense of
such Third Party Claim.
(b) The Buyer Indemnifying Parties shall not have
such right or opportunity to assume and control the defense of
any such Third Party Claim, but shall have the right to
participate in the defense of such Third Party Claim and shall
pay the reasonable fees and expenses of counsel retained by the
Buyer Indemnified Party in respect of the Third Party Claim if
(i) such Third Party Claim relates to, or arises in connection
with, any criminal proceeding, civil action, indictment, or
investigation by any Governmental Entity other than inquiries or
audits in the ordinary course of business, (ii) such Third Party
Claim alleges Losses in excess of the then available funds held
in Escrow (after deducting the full amount of all pending
Indemnification Claims), (iii) the Buyer Indemnified Party
reasonably believes that an adverse determination with respect
to such Third Party Claim would be detrimental to the Buyer
Indemnified Party's reputation or continuing business interests,
(iv) such Third Party Claim seeks an injunction or other
equitable relief against the Buyer Indemnified Party, or (v) the
Buyer Indemnifying Parties fail to conduct the defense of such
Third Party Claim actively and diligently.
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(c) If the Buyer Indemnified Party assumes and
controls the defense of a Third Party Claim pursuant to Section
6.3.4(b), the Buyer Indemnified Party shall permit the Buyer
Indemnifying Parties to participate in the defense of such
claim, to have reasonable access to all documents and personnel
involved in such claim and to discuss its views and positions
with the Buyer Indemnified Party. The Buyer Indemnified Party
agrees, in connection with any such Third Party Claim, to work
cooperatively and in good faith with the Buyer Indemnifying
Parties consistent with the best interest of the Buyer
Indemnified Party.
(d) If the Indemnifying Party is entitled under
this Section 6.3.4 to assume the defense of the respective Third
Party Claim and gives such notice of intent to defend, the
Indemnifying Party shall assume the defense thereof as follows:
(i) the Indemnifying Party will defend the Indemnified Party
against the matter with counsel compensated by and chosen by
Indemnifying Party, which choice of counsel is subject to the
reasonable satisfaction of Indemnified Party; (ii) the
Indemnified Party may retain separate co-counsel at the sole
cost and expense of Indemnified Party; (iii) the Indemnified
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the
consent of the Indemnifying Party; and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect
to the matter, or enter into any settlement that does not
include a provision whereby the plaintiff or claimant in the
matter releases the Indemnified Party from all Liability with
respect thereto, without the consent of the Indemnified Party,
which consent shall not be unreasonably withheld or delayed if
such settlement only requires the payment by one or more
Indemnifying Parties of a monetary amount, does not include a
statement as to admission of fault, culpability or failure to
act by or on behalf of such Indemnified Party, and the
Indemnified Party could not reasonably believe that the
settlement would be detrimental to the Indemnified Party's
reputation or continuing business.
(e) If a Third Party Claim is made and no
Indemnifying Party notifies the Indemnified Party within 10 days
after the Indemnified Party has given notice of the matter that
the Indemnifying Party is assuming the defense thereof, the
Indemnified Party shall defend against, or enter into any
settlement with respect to the matter. The Indemnified Party
shall not settle such Third Party Claim without the prior
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.
(f) If the Indemnifying Party gives such notice of
intent to defend, the Indemnifying Party shall assume the
defense thereof as follows: (i) the Indemnifying Party will
defend the Indemnified Party against the matter with counsel
compensated by and chosen by Indemnifying Party, which choice of
counsel is subject to the reasonable satisfaction of Indemnified
Party; (ii) the Indemnified Party may retain separate co-counsel
at the sole cost and expense of Indemnified Party; (iii) the
Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the matter without
the consent of the Indemnifying Party; and (iv) the
Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement that
does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all Liability
with respect thereto, without the consent of the Indemnified
Party. If, however, no Indemnifying Party notifies the
Indemnified Party within 10 days after the Indemnified Party has
given notice of the matter, that the Indemnifying Party is
assuming the defense thereof, then the Indemnified Party shall
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defend against, or enter into any settlement with respect to the
matter. The Indemnified Party shall not settle such Third Party
Claim without the prior consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed.
6.3.5 Limitation on Liability for Indemnification.
6.3.5.1 Buyer Indemnity Deductible.. Except for Share
Ownership Claims, the Buyer Indemnified Parties shall not be entitled to
indemnification pursuant to this Section 6.3 in respect of a misrepresentation
or inaccuracy in, or breach of, a representation or warranty in Article 3 until
the aggregate amount of all Losses suffered, incurred or paid by one or more
Buyer Indemnified Parties exceeds $100,000 (the " Buyer Indemnity Deductible")
whereupon the Buyer Indemnified Parties shall be entitled to indemnification for
all Losses in excess of the Buyer Indemnity Deductible.
6.3.5.2 Certain Caps on Indemnification Liability.
Except for Share Ownership Claims and claims based on intentional acts, willful
misconduct or fraud, the aggregate Liability of Sellers under this Section 6.3
in respect of a misrepresentation or inaccuracy in, or breach of, any
representation or warranty in Article 3 shall not exceed the sum of (i)
$6,000,000 plus 50% of the Earn Out Payments paid, or earned but not yet paid,
pursuant to Section 2.2.2(b) or (c) and (ii) the amount, if any, paid or payable
from the Escrow for any one or more Share Ownership Claims or for claims based
on intentional acts or fraud. Furthermore, until the Escrow Fund, minus the
amount of pending Indemnification Claims against such funds under this Section
6.3 is not greater than zero, Buyer Indemnified Parties shall only be entitled
under this Section 6.3 in respect of a misrepresentation or inaccuracy in, or
breach of, any representation or warranty in Article 3 for the satisfaction of
their Indemnification Claims to payments from the Escrow, except if any amounts
are paid or are payable from the Escrow for Share Ownership Claims or for claims
based on intentional acts, willful misconduct or fraud, Sellers shall also be
jointly and severally personally liable in an aggregate amount not to exceed
such payments or payables, in respect of a misrepresentation or inaccuracy in,
or breach of, any representation or warranty in Article 3. Provided the
Indemnification Claim is made before the expiration of the applicable statute of
limitations, any Buyer Indemnified Party shall be entitled to the amount of
indemnification to which such Buyer Indemnified Party is entitled under this
Section 6.3 in respect of (a) a Share Ownership Claim, (b) Indemnification
Claims in respect of Sections 3.12, 3.13 , 3.15 or 3.26.10 or in any
certificate given hereunder in respect or one or both of such Sections, (c)
DCAA Claims or (d) claims based on intentional acts, willful misconduct or in
any equitable remedies to which a Party may be entitled.
6.3.6 Claims Period and Escrow Amount.
(a) Except for (i) Share Ownership Claims, (ii)
Indemnification Claims in respect of Sections 3.12, 3.13, 3.15
or 3.26.10, (iii) DCAA Claims and (iv) Indemnification Claims
based on intentional acts, willful misconduct or fraud, any
Indemnification Claim in respect of a misrepresentation or
inaccuracy in, or breach of, any representation or warranty in
Article 3 or Section 4.2 must be asserted by notice on or before
the second Closing Date Anniversary. Any (i) Share Ownership
Claim, (ii) Indemnification Claims in respect of Sections 3.12,
3.13, 3.15 or 3.26.10, (iii) DCAA Claims and (iv)
Indemnification Claims based on intentional acts, willful
misconduct or fraud must be made before the expiration of the
applicable statute of limitation for the respective claims.
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(b) Any Buyer Indemnified Party entitled to payment
for an Indemnification Claim shall be entitled to such payment
from the Escrow Amount provided, that as of 5:00 p.m. Washington
D.C. time on the 15th Business Day after the second Closing Date
Anniversary, any remaining balance of the Escrow Amount, less
the amount of any pending Indemnification Claim of one or more
Buyer Indemnified Parties, shall be disbursed and released to
Sellers Representative pursuant to the Escrow Agreement.
6.3.7 Subrogation. Upon making an indemnity payment pursuant
to this Section 6.3, the Indemnifying Party will, to the extent of such payment,
be subrogated to all rights of the Indemnified Party against any third party in
respect of the damages to which the payment is related. Without limiting the
generality of any other provision hereof, each such Indemnified Party and
Indemnifying Party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above described subrogation rights.
6.3.8 Exclusive Remedies. If the Closing occurs, the
remedies provided for in this Section 6.3 shall be, except as otherwise provided
in Section 6.8, the sole and exclusive remedies of the Parties and their
respective officers, directors, employees, agents, representatives, successors
and assigns for any breach of or inaccuracy in any representation or warranty
contained in this Agreement or any certificate delivered at Closing, provided,
however, that nothing herein is intended to waive any claims for intentional
acts, willful misconduct or fraud or waive any equitable remedies to which a
Party may be entitled.
6.3.9 Right of Offset. Buyer may offset any amount to which
Buyer is entitled under this Article 6 against any amounts otherwise payable
hereunder by Buyer to one or both Sellers, including Earnout Payments and any
and all other payments pursuant to Section 2.2.
6.3.10 Treatment of Indemnity Payments Between the Parties.
Unless otherwise required by Applicable Laws, all indemnification payments shall
constitute adjustments to the Purchase Price for all Tax purposes, and no Party
shall take any position inconsistent with such characterization.
6.4 Access and Information. The Company shall afford to Buyer and
its officers, employees, accountants, counsel and other authorized
representatives and advisors full and complete access, upon during regular
business hours, throughout the Pre-Closing Period, to the Company's offices,
properties, books and records, and shall use reasonable efforts to cause its
representatives and independent public accountants to furnish to Buyer such
additional financial and operating data and other information as to its
business, customers, vendors and properties as Buyer may from time to time
reasonably request. Notwithstanding the foregoing, all visits to any Company
office will be coordinated and conducted so as to not be disruptive to the
Company's operations and to preserve the confidentiality of the Transactions.
In addition, with the Company's prior consent, Buyer shall be permitted to meet
with the Company's significant customers.
6.5 Public Disclosure and Confidentiality. Except as otherwise
required by Applicable Laws and, with respect to Buyer, the applicable rules,
policies and procedures of a national securities exchange, no Party shall
announce or disclose to any other Person (other than those employees, agents,
advisors or representatives who have a need to know to effectuate the
Transactions) the existence or the terms or conditions of this Agreement or the
Transactions without the prior consent of the other Parties (which shall not be
unreasonably withheld). Except as disclosure may be required by Applicable
Laws, any press release or other public disclosure of information regarding the
proposed Transactions (including the negotiations with respect to the
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Transactions and the terms and existence of this Agreement) shall be developed
by Buyer, subject to the Company's review.
6.6 Termination of Company Plans. The Company, Parent and KDC shall
not terminate the participation of the Company and its employees in KDC's Cigna
group medical and dental insurance plan (the "KDC Health Plan") before January
1, 2008. Except for the payment of premiums thereunder as set forth on Schedule
6.6, the Company shall have no payment Liability with respect to any Liability
arising under the KDC Health Plan after Closing, and shall have no Liability in
respect of any employee contributions that were made prior to Closing.
Notwithstanding anything herein to the contrary, the amounts due Sellers for the
Purchase Price shall be offset by the amount of any additional Liability or
other Losses incurred by Company as the result of such continuance of the KDC
Health Plan for the Company's employees through December 31, 2007 over the cost
of the health and dental insurance plan which Buyer would have caused Company to
adopt, but for the provisions of this Section 6.6.
6.7 Further Assurances.
6.7.1 Generally. Subject to terms and conditions herein
provided and to the fiduciary duties of the board of directors and officers or
representatives of any Party, each of the Parties agrees to use its commercially
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under Applicable Laws to
consummate and make effective this Agreement and the Transactions. In case at
any time any further action, including the obtaining of any required
Governmental Entity approvals, and waivers and consents under any agreements,
material contracts or leases and the execution and delivery of any licenses or
sublicenses for any software, is necessary, proper or advisable to carry out the
purposes of this Agreement, the proper officers and directors or representatives
of each Party to this Agreement are hereby directed and authorized to use their
reasonable best efforts to effectuate all required action.
6.7.2 Consents. Each Party agrees to use its best reasonable
efforts to obtain the Consents before the Closing, and further agrees to provide
all documentation necessary to effect each Consent, including all instruments,
certifications, requests, legal opinions, audited financial statements, and
other documents required or appropriated to obtain Consents. In particular and
without limiting the generality of the foregoing, the Company shall continue to
communicate with responsible officers of the United States Government from time
to time as may be appropriate and permissible, to request speedy action on any
and all requests for the Consents.
6.8 Tax Matters.
6.8.1 Code Section 338(h)(10) Election.
(a) At Buyer's option, Parent and any of Sellers
that Buyer requests shall join Buyer in making an election under
Code Section 338(h)(10) (and any corresponding election under
state, local or foreign law) with respect to the purchase and
sales of Shares hereunder (the "Section 338(h)(10) Election").
If the Section 338(h)(10) Election is made, the Purchase Price
and Liabilities of the Company (plus other relevant items) will
be allocated by Buyer to the Company's assets for all purposes
in a manner consistent with Code Sections 338 and 1060. Buyer,
the Company and Sellers shall file all Tax Returns (including
any amended returns and claims for refund) and information
reports consistent with such allocation. Parent and each Seller
shall, at least 10 Business Days before the Closing Date provide
Buyer with such information as is necessary for, execute and
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return an election under Code Section 338(h)(10) with respect to
the Transactions on IRS Form 8023 (and on any analogous forms
under state, local or foreign law) as prepared by Buyer. Parent
will pay any Tax attributable to the making of the Section
338(h)(10) Election and will indemnify Buyer and the Company
against any adverse consequences arising out of any failure to
pay such Tax. Parent will also pay any state, local, or foreign
Tax (and indemnify Buyer and the Company against any adverse
consequences arising out of any failure to pay such Tax)
attributable to an election under state, local, or foreign law
similar to the election available under Code Section 338(g) (or
that results from the making of an election under Code Section
338(g)) with respect to the purchase and sale of the stock of
the Company.
(b) (i) If Buyer makes the Section 338(h)(10)
Election, Buyer shall, as compensation to KDC for the resulting
additional Taxes arising as a result of the Section 338(h)(10)
Election, make a payment to KDC on the due date for filing such
Section 338 (h)(10)Election with the IRS equal to the amount
derived from the application of the following formula:
0.1254CP + 0.1190DPV - 0.00794B inside, the
results under which formula are further
adjusted as follows to reflect the effect of
differences between B outside and B inside:
1. If B outside and B inside are
equal, there is no adjustment to the
results under the formula;
2. If B inside is greater than B
outside, the results under the formula
are reduced by an amount equal to
[0.37 (B inside - B outside)]/0.63; and
3. If B outside is greater than B
inside, the results under the formula
are increased by an amount equal to
[0.375 (B outside - B inside)]/0.63;
where:
(w) "CP" equals the aggregate amount paid to
Sellers at Closing pursuant to Section 2.2.2(a)(ii) increased or
decreased, as the case may be, by the adjustments to the
Purchase Price made pursuant to Section 2.2.4;
(x) "DPV" equals the fair market value as of the
Closing Date of the rights of Sellers, in the aggregate, to
receive payments of the Escrow Funds pursuant to Section 6.3
and the Escrow Agreement and to receive Earnout Payments
pursuant to Sections 2.2.2(b) and 2.2.2(c); and
(y) "B inside" equals the excess as of the Closing
Date of the sum of the Company's (i) aggregate Tax basis for
federal income Tax purposes in its assets and (ii) current and
carried forward net capital losses and net operating losses for
federal income tax purposes over its liabilities that are
recognized for such Tax purposes; and
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(z) "B outside" equals the Tax basis for federal
income Tax purposes of KDC in the stock of the Company.
(ii) Within 90 days after Closing, Buyer
shall propose to Sellers' Representative the values to be used
for DPV, B inside and B outside in the foregoing formula,
together with a detailed explanation and back-up sufficient to
permit Sellers' Representative and its advisers to review and
evaluate the same. Sellers' Representative shall provide such
information and cooperation as Buyer may reasonably request from
time to time in developing its proposal. The Parties shall
thereupon endeavor in good faith to come to an agreement
regarding those values. If, however, the Parties are unable to
reach such agreement within 20 days after presentation by Buyer
of its proposal, the Parties shall submit the dispute to the
Arbiter pursuant to Section 2.2.4.3. The Arbiter's
determination of the values to be used for DPV and B resulting
from the Arbiter's resolution of the dispute shall be final,
conclusive and binding upon the Parties.
6.8.2 Responsibility for Filing Tax Returns for Periods
through Closing Date. Parent shall include the income of the Company (including
any deferred items triggered into income by Reg. section 1.1502-13 and any
excess loss account taken into income under Reg. section 1.1502-19) on Parent's
consolidated federal income Tax Returns for all periods through the Closing Date
and pay any federal income Taxes attributable to such income. For all taxable
periods ending on or before the Closing Date, Parent shall cause the Company to
join in Parent's consolidated federal income tax return and, in jurisdictions
requiring separate reporting from Parent, to file separate company, state and
local income tax returns. All such Tax Returns shall be prepared and filed in a
manner consistent with prior practice, except as required by a change in
Applicable Laws. Buyer shall have the right to review and comments on any such
Tax Returns prepared by Parent. Buyer shall cause the Company to furnish
information to Parent as reasonably requested by Parent to allow Parent to
satisfy its obligations under this Section 6.8.2 in accordance with past custom
and practice. The Company and Buyer shall consult and cooperate with Parent as
to any elections to be made on Tax returns of the Company for periods ending on
or before the Closing Date. Buyer shall cause the Company to file income Tax
returns, or shall include the Company in its combined or consolidated income Tax
returns, for all periods other than periods ending on or before the Closing
Date.
6.8.3 Audits. Parent shall allow the Company and its counsel
to participate in any audit of Parent's consolidated federal income Tax returns
to the extent that such Tax returns relate to the Company. Parent shall not
settle any such audit in a manner that would adversely affect the Company after
the Closing Date without the Buyer's prior consent, which consent shall not be
unreasonably withheld.
6.8.4 Carrybacks. Parent shall immediately pay to Buyer any
Tax refund (or reduction in Tax Liability) resulting from a carryback of a post-
Closing Tax attribute of the Company into Parent's consolidated Tax return when
such refund (or reduction) is realized by Parent's Group. At Buyer's request,
Parent will cooperate with the Company in obtaining such refund (or reduction),
including through the filing of amended Tax returns or refund claims. Buyer
agrees to indemnify Parent for any Taxes resulting from the disallowance of such
post-Closing Tax attribute on audit or otherwise.
6.8.5 Retention of Carryovers. If the Section 338(h)(10)
Election is not made, Parent shall not elect to retain any net operating loss
carryovers or capital loss carryovers of the Company.
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6.8.6 Intentionally Left Blank.
6.8.7 Tax-Sharing Agreements. All tax-sharing agreements or
similar agreements with respect to or involving the Company shall be terminated
as of the Closing Date and, after the Close Date, the Company shall not be bound
thereby or have any Liability thereunder.
6.8.8 Tax Indemnification. Parent and each Seller shall
jointly and severally indemnify the Buyer Indemnified Parties and hold them
harmless from and against any Loss attributable to (a) any Taxes (or the non-
payment thereof) of the Company for all the taxable periods ending on or before
the Closing Date and the portion through the end of the Closing Date for any
taxable period that includes (but does not end on) the Closing Date ("Pre-
Closing Tax Period"), (b) all Taxes of any member of an affiliated,
consolidated, combined or unitary group of which the Company is or was a member
on or prior to the Closing Date, including pursuant to Treasury Regulation
section 1.1502-6 or any analogous or similar state, local, or foreign law or
regulation, and (c) any and all Taxes of any Person (other than the Company)
imposed on the Company as a transferee or successor, by contract or pursuant to
any law, rule or regulations, which Taxes relate to an event or transaction
occurring before the Closing; provided, however, that in the case of clauses
(a), (b) and (c) above, Parent and Sellers shall be liable only to the extent
that such Taxes exceed the amount, if any, reserved for such Taxes (excluding
any reserve for deferred Taxes established to reflect timing difference between
book and Tax income) on the face of the Closing Balance Sheet (rather than in
any notes thereto) and taken into account in determining the Purchase Price
adjustment provided in Sections 2.2.4. Sellers shall reimburse for any Taxes of
the Company that are the responsibility of Sellers within five Business Days
after payment of such Taxes by any one or more the Buyer Indemnified Parties.
6.8.9 Straddle Period. If any taxable period includes (but
does not end on) the Closing Date (a "Straddle Period"), the amount of any Taxes
based on or measured by income or receipts of the Company for the Pre-Closing
Tax Period shall be determined based on an interim closing of the books as of
the close of business on the Closing Date and the amount of other Taxes of the
Company for a Straddle Period that relates to the Pre-Closing Tax Period shall
be deemed to be the amount of such Tax for the entire taxable period multiplied
by a fraction in the numerator of which is the number of days in the taxable
period ending on the Closing Date and the denominator of which is the number of
days in such Straddle Period.
6.8.10 Cooperation on Tax Matters
(a) The Parties shall cooperate fully, as and to
the extent reasonably requested by the other Party, in
connection with the filing of Tax returns and any audit,
litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other
Party's request) the provision of records and information
reasonably relevant to any such audit, litigation, or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. The Company,
Parent and Sellers agree (i) to retain all books and records
with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until
expiration of the statute of limitations (and any extensions
thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing
authority, and (ii) to give Sellers reasonable notice prior to
transferring, destroying or discarding any such books and
records and, if Sellers Representative so requests, allow
Sellers Representative to take possession of such books and
records.
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(b) Subject to Applicable Laws, the Parties further
agree, upon request, to use their best efforts to obtain any
certificate or other document from any Governmental Entity or
any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including with respect
to the Transactions).
6.8.11 Certain Taxes. All transfer, documentary, sales, use,
stamp, registration Taxes and fees payable in respect of the purchase and sale
of the Shares hereunder shall be paid by Sellers.
6.9 Release. Subject to and effective as of consummation of the
Closing, each Seller and Parent hereby remises, releases and forever discharges
the Company and its successors and assigns of and from any and all manner of
action and actions, cause and causes of actions, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, executions, claims and demands of any kind and nature whatsoever
in law or in equity known or unknown against the Company which Sellers or Parent
ever had, may have up until immediately preceding the Closing, or may thereafter
having, including any claims to any commissions or any portion of the revenue or
profits of the Company or any equity interest in the Company, except to the
extent of any obligation of the Company to JL (a) under his employment
agreement contemplated by Section 7.2.5 and (b) except in respect of any breach
by the Company, Parent or one or more Sellers of any representations,
warranties, covenants, obligations or agreements contained herein, any and all
indemnification and other rights, benefits and claims of JL under the Company's
Organizational Documents.
6.10 Regulatory Filings. During the Pre-Closing Period, each of the
Parties shall coordinate and cooperate with one another and shall each use best
efforts to comply with, and shall refrain from taking any action that would
impede compliance with, all Applicable Laws, and, as promptly as practicable
after the date hereof, each of the Parties shall make all filings, notices,
petitions, statements, registrations, submissions or information, application or
submission of other documents required by any Government Entity in connection
with the Transactions, including any filing or registration necessary to obtain
any material consent, authorization or approval or otherwise required or
advisable to consummate the Transactions. Each Party shall cause all documents
that it is responsible for filing with any Government Entity under this Section
6.10 to comply in all material respects with all Applicable Laws.
6.11 Exchange Information. During the Pre-Closing Period, each of the
Parties shall promptly supply the others with any information which may be
required to effectuate any filings or application pursuant to Sections 6.10 or
6.12. Except where prohibited by Applicable Laws, each of the Parties shall
consult with the other Parties prior to taking a position with respect to any
such filing, shall permit the other to review and discuss in advance, and
consider in good faith the views of the other in connection with any analyses,
appearances, presentations, memoranda, briefs, white papers, arguments, opinions
and proposals before making or submitting any of the foregoing to any
Governmental Entity by or on behalf of any Party in connection with any
investigations or proceedings in connection with this Agreement or the
Transactions (including under any antitrust or fair trade Applicable Laws),
coordinate with the other in preparing and exchanging such information and
promptly provide the other (and its counsel) with copies of all filings,
presentations or submissions (and a summary of any oral presentations) made by
such party with any Governmental Entity in connection with this Agreement or the
Transactions; provided that, with respect to any such filing, presentation or
submission, no Party need supply the other (or its counsel) with copies (or, in
case of oral presentations, a summary) to the extent that Applicable Laws
require such Party to restrict or prohibit access to any such properties or
information.
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6.12 Notification. During the Pre-Closing Period, each of the Parties
will notify the other promptly upon the receipt of: (a) any comments from any
officials of any Governmental Entity in connection with any filings made
pursuant hereto, and (b) any request by any officials of any Governmental Entity
for amendments or supplements to any filings made pursuant to, or information
provided to comply in all material respects with, any Applicable Laws. Whenever
any event occurs that is required to be set forth in an amendment or supplement
to any filing made pursuant to Sections 6.10, the respective Party will promptly
inform the other Party of such occurrence and cooperate in filing with the
applicable Governmental Entity such amendment or supplement.
6.13 Employee Benefits. Buyer hereby agrees that, with the approval
of the plan administrator of Buyer's tax-qualified 401(k) plan (the "Buyer's
401(k) Plan"), Buyer will consider causing the Buyer's 401(k) Plan to accept
rollovers or direct rollovers of "eligible rollover distributions" within the
meaning of Code Section 402(c) made with respect to the Company's employees
pursuant to the Company's fund or otherwise provide benefits accrued on or
before the Closing Date by the employees under the Company's 401(k) Plan.
Buyer shall have no Liability with respect to the Company's qualified retirement
Plans, provided that nothing in this Agreement shall prohibit rollovers pursuant
to Code Section 402(c) made with respect to the Company's employees pursuant to
the Company's 401(k) Plan by reason of the Transactions.
6.14 Sellers Representative.
6.14.1 Appointment. To administer efficiently the defense or
settlement of any claims for which one or both Sellers may be required to
indemnify pursuant to Section 6.3, and any other actions required to be taken by
either Seller in connection herewith after the Closing, each Seller after the
Closing Date hereby designates and appoints KDC as its or his representative and
attorney-in-fact (in such capacity, "Sellers Representative"). Sellers will,
based on their Percentage Ownership, reimburse Sellers Representative for its
costs in performing its duties hereunder.
6.14.2 Authority. By their execution of this Agreement, each
Seller, among other things, agrees that:
(a) Buyer Indemnified Parties shall be able to rely
conclusively without further inquiry on the instructions and
decisions of Sellers Representative acting in such capacity as
to the settlement of any claims for indemnification by any one
or more Buyer Indemnified Parties pursuant to Section 6.3 and as
to any other action taken by Sellers Representative hereunder,
and neither Seller shall have any cause of action against Buyer
Indemnified Parties for any action taken by any one or more
Buyer Indemnified Parties in reliance upon the instructions or
decisions of Sellers Representative;
(b) all actions, decisions and instructions of
Sellers Representative shall be conclusive and binding upon both
Sellers; and
(c) without limiting the foregoing, Sellers
Representative is authorized:
(i) to receive and to accept on each
Seller's behalf any notice from any Person claiming to
be a Buyer Indemnified Party given in accordance with
Section 6.3 (and any notice given Sellers
Representative shall be deemed to have been given to
each Seller);
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(ii) to give on the Company's and each
Seller's behalf any notice, representation, demand, or
other communication that it may be necessary,
desirable, or otherwise appropriate to give to secure
and to preserve for the Company's and each Seller the
benefit of any policy or policies of insurance,
surety, indemnification, or other reimbursement for any
amount for which any Seller may be liable directly or
indirectly under this Agreement; and
(iii) to cooperate with any and all Buyer
Indemnified Parties to investigate, negotiate, settle,
and compromise any claim of any Buyer Indemnified Party
asserted under this Agreement, and to execute on any
Seller's behalf any agreement, instrument, or other
document that, in the sole discretion of Sellers
Representative, is necessary, desirable, or otherwise
appropriate to effect any such settlement or
compromise; provided, however, Sellers Representative
shall have no Liability to any Buyer Indemnified Party
otherwise than and to the extent of its individual
Liability as a Seller hereunder.
6.15 Certain Post-Closing Covenants.
6.15.1 Non-Competition. Subject to the terms and conditions
hereof, each of Parent and KDC covenants and agrees that, during the period from
the Closing Date to and including the fifth anniversary thereof (the "Restricted
Period"), neither such Party nor any Subsidiary thereof shall engage in a
Competitive Activity nor be Associated with a Competitive Activity.
6.15.2 Noninterference with Business. During the Restricted
Period, each of Parent and KDC agrees that neither such Party nor any Subsidiary
thereof shall directly or indirectly:
(a) solicit, induce or attempt to induce any
employee, consultant or independent contractor to terminate or
breach an employment, contractual or other relationship with the
Company or Buyer;
(b) contact any customer who was a customer of the
Company as of the Closing Date for the purpose of diverting or
taking away business from the Company or Buyer; or
(c) (i) directly or indirectly contact any of the
Company's or Buyer's then current customers for the purpose of
diverting or taking away business from the Company or Buyer; or
(ii) otherwise interfere with, impair, disrupt or damage the
Company's or Buyer's relationship with any of its then current
customers for the purpose of diverting or taking away from the
Company or Buyer.
6.15.3 Confidentiality. If the Closing occurs, Parent and
each Seller agrees that during the period from the Closing Date to and including
the second Closing Date Anniversary such Party will not disclose or use,
directly or indirectly, any Confidential Information, except pursuant to a
subpoena, order or request issued by a court of competent jurisdiction or by
another Government Entity, or as otherwise required by Applicable Laws. If this
Agreement terminates without the Closing occurring, each Party agrees that
during the period commencing with the date of such termination and ending on the
second anniversary thereof it shall not, except to the extent otherwise required
by Applicable Law, directly or indirectly disclose or use any Confidential
Information obtained from another Party pursuant hereto. If a receiving Party
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becomes legally compelled to disclose any of the Confidential Information, such
Party will provide the disclosing Party with prompt notice so that the
disclosing Party may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this Section 6.15.3. If such protective
order or other remedy is not obtained, or the disclosing Party waives compliance
with the provisions of this Section 6.15.3, the receiving Party will furnish
only that portion of the Confidential Information which, in the judgment of its
counsel, is legally required and will exercise reasonable efforts to obtain
assurance that confidential treatment will be accorded the Confidential
Information.
6.15.4 Injunctive Relief For Breach. Parent's and each
Seller's obligations under this Section 6.15 are of a unique character that
gives them particular value, and a breach of any of such obligations will
result in irreparable and continuing damage to the Company and Buyer for which
there will be no adequate remedy at law. Accordingly, without limiting Parent's
or any Seller's obligations under Section 6.3, in the event of such breach,
Parent and each Seller agrees that the Company and Buyer will be entitled to
injunctive relief and a decree for specific performance, and such other and
further relief as may be proper (including monetary damages if appropriate).
6.16 Seller's Right of Audit. Sellers Representative and its
advisors shall have access upon prior notice and during normal business hours
to the books, papers and records of the Company and its accountants (if any are
used) relating to the calculation of any amount due Seller pursuant to Section
2.2.2 (b) or (c). Also, upon reasonable notice to the Company, Sellers
Representative, with the assistance of its advisors, may conduct an examination
of Company's books and records in respect to the calculation of any amount due
to Sellers pursuant to Section 2.2.2(b) or (c). Such rights of access and
examination set forth above in this Section 6.16 shall terminate in respect of
any payment paid or payable pursuant to Section 2.2.2 (b) or (c) on the 180th
day after the earlier of the date such payment was due or paid pursuant to
Section 2.2.2 (b) or (c).
6.17 Fiscal Year 2007 Company Audit. The Company shall cause the
pending audit of its financial records for the Company's fiscal year ended
March 31, 2007 to be completed by KPMG, LLP. Such audit shall be conducted in
accordance with generally accepted audit procedures and, subject to GAAP, in a
manner consistent in all material respects with the prior audits of the Company,
which have been conducted by KPMG, LLP. Except to the extent required by GAAP,
no material departure from the accounting principles and elections, which have
been customarily and consistently followed by the Company, shall occur in the
statement of the Company's audited balance sheet for fiscal year 2007.
6.18 Termination of JL's Employment Agreement. JL and the Company
agree that concurrently with the execution and delivery of the employment
agreement contemplated by Section 7.2.5 between Buyer and JL, the employment
agreement made effective as of July 1, 2006, between the Company and JL shall
be, without any further action, terminated and null and void for all purposes,
so that the Company has no Liability thereunder.
6.19 Termination of Second Amended and Restated Shareholder
Agreement. Sellers and the Company agree that, effective immediately prior to
the Closing, the Second Amended and Restated Shareholder Agreement of Integrated
Concepts and Research Corporation dated April 1, 2006 (as amended) among KDC,
the Company and JL shall be, without any further action, terminated and null and
void for all purposes.
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ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Conditions Precedent to the Obligations of Each Party. The
obligations of the Parties to consummate the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any of
which conditions may be waived in writing prior to Closing by the Party for
whose benefit such condition is imposed:
7.1.1 No Illegality. There shall not have been any action
taken, and no Applicable Laws shall have been enacted, by any Governmental
Entity since the date hereof that would prohibit or materially restrict the
consummation of the Transactions.
7.1.2 Government Consents. All filings with and
notifications to, and all approvals and authorizations of, third parties,
including Governmental Entities, required for the consummation of the
Transactions shall have been made or obtained and all such approvals and
authorizations obtained shall be effective and shall not have been suspended,
revoked or stayed by action of any Governmental Entity.
7.1.3 No Injunction. No injunction or restraining or other
order issued by a court of competent jurisdiction that prohibits or materially
restricts the consummation of the Transactions shall be in effect (each Party
agreeing to use all reasonable efforts to have any injunction or other order
immediately lifted), and no action or proceeding shall have been commenced or
threatened in writing seeking any injunction or restraining or other order that
seeks to prohibit, restrain, materially restrict, invalidate or set aside
consummation of the Transactions.
7.1.4 Escrow Agreement. Each of the Parties, together with the
Escrow Agent, shall have entered into the Escrow Agreement.
7.2 Conditions Precedent to Buyer's Obligation to Consummate the
Closing. Buyer's obligations to consummate the Closing shall be subject to the
satisfaction at or prior to the Closing of the following additional conditions,
any of which conditions may be waived in writing by Buyer prior to Closing:
7.2.1 Representations and Warranties. The representations and
warranties of the Company and Sellers contained in this Agreement shall be true
and correct, disregarding any Materiality Qualifications, in all material
respects on and as of the Closing Date, except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, and the Company and each Seller shall have
delivered to Buyer a certificate to that effect, dated the Closing Date and
signed on behalf of the Company by the Company's President and Chief Financial
Officer and signed by each Seller.
7.2.2 Agreements and Covenants. The Company and Sellers shall
have performed in all material respects all of its agreements, obligations and
covenants set forth herein that are required to be performed at or prior to the
Closing Date; and the Company and Sellers shall have delivered to Buyer a
certificate to that effect, dated as of the Closing Date and signed on behalf of
the Company by the Company's President and Chief Financial Officer and signed by
each Seller.
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7.2.3 Closing Documents. The Company and Sellers shall have
delivered to Buyer the Company Closing certificate described hereafter in this
Section 7.2.3 and such Closing documents as the Buyer shall reasonably request.
The Company Closing certificate, dated as of the Closing Date, duly executed by
the Company's secretary, shall certify as to (a) the signing authority and
incumbency of the signatories of this Agreement and other documents signed on
the Company's behalf in connection herewith; (b) the resolutions adopted by the
Company's Board authorizing and approving the execution, delivery and
performance of this Agreement and the other documents executed in connection
herewith and the consummation of the Transactions and state that such
resolutions have not been modified, amended, revoked or rescinded and remain in
full force and effect; and (c) the Company's Organizational Documents.
7.2.4 Third-Party Consents. All third Person consents or
approvals listed in Schedule 7.2.4 shall have been obtained by the Company and
shall be effective and shall not have been suspended, revoked, or stayed by
action of any such third party.
7.2.5 Employment Agreements. Buyer shall have entered into
employment agreements in the form of Exhibits B and C with JL and ▇▇▇▇ ▇▇▇▇▇▇▇▇,
respectively.
7.2.6 Material Adverse Effect. Since the date of this
Agreement, the Company shall not have suffered a Company Material Adverse
Effect.
7.2.7 Updated Employee List. The Company shall have delivered
to Buyer a list setting forth, as of the Closing Date, the name of each Company
employee and such employee's position and annual salary.
7.2.8 Non-Foreign Affidavit. The Company shall deliver to
Buyer a non-foreign affidavit as of the Closing Date, sworn under penalty of
perjury and in form and substance required under Treasury Regulations issued
pursuant to Code Section 1445 stating that the Company is not a "foreign
person" as defined in Code Section 1445.
7.2.9 Release From Tax Sharing Agreement. The Company shall
have been irrevocably and fully released from the Tax Sharing Agreement pursuant
to an instrument in form and substance subject to Buyer's satisfaction.
7.2.10 IRS Form 8023. Parent shall have executed, completed
and delivered to Buyer IRS Form 8023 in respect of the Section 338(h)(10)
Election.
7.2.11 Delivery of Shares. Each Seller shall have delivered to
Buyer the one or more stock certificates presenting all of his or its Shares,
endorsed in blank or accompanied by duly executed assignment documents, all
sufficient to convey, transfer and assign to Buyer sole and exclusive record and
beneficial right, title and interest in and to such Seller's Shares, free and
clear of all Encumbrances.
7.3 Conditions to Obligations of the Company and Sellers to
Consummate the Closing. The obligations of the Company and the Sellers to
consummate the Closing shall be subject to the satisfaction at or prior to the
Closing of the following additional conditions, any of which may be waived in
writing by Sellers Representative prior to Closing:
7.3.1 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date, except for those
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representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), with the same force
and effect as if made on and as of the Closing Date and Buyer shall have
delivered to the Company a certificate to that effect, dated the date of the
Closing and signed on behalf of Buyer by Buyer's President and Chief Financial
Officer.
7.3.2 Agreements and Covenants. Buyer shall have performed in
all material respects all of its agreements and covenants set forth herein that
are required to be performed at or prior to the Closing Date; and Buyer shall
have delivered to the Company a certificate to that effect, dated as of the
Closing Date and signed on behalf of Buyer by Buyer's President and Chief
Financial Officer.
7.3.3 Closing Documents. Buyer shall have delivered to the
Company closing certificates of Buyer and such other closing documents as the
Company shall reasonably request (other than additional opinions of counsel).
Each of the Closing certificates of Buyer, dated as of the Closing Date, duly
executed by the secretary of Buyer, respectively, shall certify as to (a) the
signing authority and incumbency of the signatories of this Agreement and other
documents signed on behalf of Buyer in connection herewith; (b) the resolutions
adopted by Buyer's board of directors authorizing and approving the execution,
delivery and performance of this Agreement and the other documents executed in
connection herewith and the consummation of the Transactions and state that such
resolutions have not been modified, amended, revoked or rescinded and remain in
full force and effect; and (c) Buyer's certificate of incorporation and by-laws.
7.3.4 Payment of Purchase Price. Buyer shall have tendered
the Initial Purchase Price pursuant to Section 2.2.2 (a).
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND COVENANTS
-----------------------------------------
8.1 The Company's, Sellers' and Parent's Representations and
Covenants. All representations and warranties made by the Company, Sellers and
Parent in this Agreement, or any certificate or other writing delivered by the
Company, Sellers or any of their Affiliates pursuant hereto or in connection
herewith, shall survive the Closing and any investigation at any time made by or
on behalf of Buyer and shall terminate on the second anniversary of the Closing
Date, except that (a) Buyer Indemnified Party claims pending on such date shall
continue until resolved and (b) the representations and warranties in Sections
3.2, 3.12, 3.13, 3.15 and 3.26.10, which shall survive until the expiration of
the applicable statute of limitation for the respective Indemnification Claims,
except that Buyer Indemnified Party claims pending on such date in respect of
any of such Sections shall continue until resolved. The covenants and other
agreements made by the Company, Parent or any Seller in this Agreement or any
certificate or other writing delivered by the Company or any of its Affiliates
pursuant hereto or in connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of Buyer until the expiration of
the applicable statute of limitations.
8.2 Buyer's Representations and Covenants. All representations and
warranties made by Buyer in this Agreement or any certificate or other writing
delivered by Buyer or any of its Affiliates pursuant hereto or in connection
herewith shall survive the Closing until the second Closing Date Anniversary,
except that Company or Sellers claims pending on such date shall continue until
resolved. The covenants and other agreements made by Buyer in this Agreement or
any certificate or other writing delivered by the Buyer pursuant hereto or in
connection herewith shall survive the Closing and any investigation at any time
-43-
made by or on behalf of the Company or Sellers until the expiration of the
applicable statute of limitations.
ARTICLE 9
OTHER PROVISIONS
9.1 Termination
9.1.1 Termination Events. This Agreement may be terminated
and the Transactions abandoned at any time prior to the Closing as follows:
(a) by mutual consent of Buyer and Sellers
Representative;
(b) by Buyer if there has been a breach of any
representation, warranty, covenant, obligation or agreement
contained in this Agreement on the part of the Company, any
Seller or Parent and such breach has not been cured within 30
days after notice to the Company (provided that Buyer is not in
material breach of this Agreement, and provided further, that no
cure period shall be required for a breach which by its nature
cannot be cured with such 30 days) such that the conditions set
forth in Section 7.2.1 or Section 7.2.2, as the case may be,
will not be satisfied;
(c) by Sellers Representative if there has been a
breach of any representation, warranty, covenant, obligation or
agreement contained in this Agreement on the part of Buyer, and
such breach has not been cured within 30 days after notice to
Buyer (provided, that neither the Company nor any Seller is in
material breach of this Agreement, and provided further, that no
cure period shall be required for a breach which by its nature
cannot be cured within such 30 days) such that the conditions
set forth in Section 7.3.1 or Section 7.3.2, as the case may be,
will not be satisfied;
(d) by any Party hereto if: (i) there shall be a
final, non-appealable order of a federal or state court in
effect preventing consummation of the Transactions; (ii) there
shall be any final action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the Transactions by any Governmental Entity which
would make consummation of the Transaction illegal or which
would prohibit Buyer's ownership of the Shares or operation of
the Company, or compel Buyer to dispose of or hold separate all
or a material portion of the business or assets of the Company
or Buyer as a result of the Transaction; or
(e) by any Party if the Transaction shall not have
been consummated by 90th day after the date hereof, provided
that the right to terminate this Agreement under this Section
9.1(e) shall not be available to any Party whose failure to
fulfill any material obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing Date to
occur on or before such date.
9.1.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1.1, all of the obligations of the Parties under this
Agreement shall terminate, except for such obligations under Sections 6.5 and
6.15.3. Notwithstanding the immediately preceding sentence, termination of this
Agreement pursuant to either Section 9.1.1(b) or (c) shall neither limit or
impair any remedies that a Party may have with respect to a misrepresentation or
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inaccuracy in, or breach of, any representations, warranties, agreements,
covenants or obligations hereunder by another Party before the Closing, nor
release any Liability that a Party may have with respect to a misrepresentation
or inaccuracy in, or breach of, any representations, warranties, agreements,
covenants or obligations of such Party hereunder before the Closing.
9.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered by hand sent via a
reputable nationwide courier service or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a Party as shall be specified by like notice) and shall be
deemed given on the date on which so hand-delivered or on the third business day
following the date on which so mailed or sent:
To Buyer:
VSE Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: CEO
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with copy to (which shall not constitute notice):
Carter Strong, Esq.
Arent Fox LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To the Company before the Closing:
Integrated Concepts and Research Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., Chief Executive Officer and
President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with copy to (which shall not constitute notice):
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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To Sellers:
Koniag Development Corporation
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer and
President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Living Trust
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., Sole Trustee
Fax: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To Sellers Representative:
Koniag Development Corporation
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer and
President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To Parent:
Koniag, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to (which shall not constitute notice):
Koniag Inc.
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Senior Vice President, Finance and Chief Financial
Officer
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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9.3 Entire Agreement. Unless otherwise herein specifically provided,
this Agreement, including the Schedules and Exhibits, and the documents and
instruments and other agreements among the Parties as contemplated by or
referred to herein constitute the entire agreement among the Parties with
respect to the subject matter hereof, and supersede all other prior agreements
and understandings, both written and oral, between the Parties with respect to
the subject matter hereof, including the letter of intent dated December 8, 2006
among Buyer, the Company and Sellers, as amended.. Each Party acknowledges
that, in entering this Agreement and consummating the Closing, such Party is not
relying on any representation, warranty, covenant, obligation or agreement not
expressly stated in this Agreement or in the certificates of or agreements among
the Parties contemplated by or referred to herein.
9.4 Assignability. This Agreement is not intended to confer upon any
Person other than the Parties any rights or remedies hereunder, except as
otherwise expressly provided herein. Neither this Agreement nor any of the
rights and obligations of the Parties hereunder shall be assigned or delegated
without the consent of all Parties, except that Buyer may assign its rights to
indemnification hereunder to its one or more lenders.
9.5 Validity. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
9.6 Specific Performance. The Parties acknowledge that damages alone
may not adequately compensate a Party for violation by another Party of this
Agreement. Accordingly, in addition to all other remedies that may be available
hereunder or under Applicable Laws, any Party shall have the right to any
equitable relief that may be appropriate to remedy a breach or threatened breach
by any other Party hereunder, including the right to enforce specifically the
terms and conditions of this Agreement by obtaining injunctive relief in respect
of any violation or non-performance hereof.
9.7 Joint and Several Liability. Notwithstanding anything herein to
the contrary, for all purposes of this Agreement, each Seller agrees that he or
it shall be deemed to have made herein all of the representations and warranties
made by the other Seller herein or otherwise pursuant hereto and is jointly and
severally liable for the obligations, agreements and covenants of the other
Seller herein. Parent agrees that it shall be jointly and severally liable for
the representations, warranties, obligations, agreements and covenants of KDC
hereunder.
9.8 U.S. Currency. All amounts payable hereunder shall be paid in
United States dollars.
9.9 Governing Law. This Agreement shall take effect and shall be
construed as a contract under the laws (excluding conflict of law rules and
principles) of the State of Delaware.
9.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same agreement.
9.11 Waiver. The rights and remedies of the Parties are cumulative
and not alternative. Neither the failure nor any delay by any Party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
-47-
privilege. To the maximum extent permitted by Applicable Laws, (a) no claim or
right arising out of this Agreement can be discharged by one Party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other Party, (b) no waiver that may be given by a Party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one Party will be deemed to be a waiver of any obligation
of such Party or of the right of the Party giving such notice or demand to take
further action without notice of demand as provided in this Agreement or the
documents referred to in this Agreement.
[The Signature Page follows this page.]
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IN WITNESS WHEREOF, the Parties have duly executed this Share
Purchase Agreement under seal as of the date first above written.
VSE CORPORATION,
a Delaware corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman, Chief Executive Officer
and President
KONIAG, INC.,
an Alaska corporation organized under the
Alaska Native Claims Settlement Act of 1971
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
_________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
Chief Executive Officer and President
KONIAG DEVELOPMENT CORPORATION,
an Alaska corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer and President
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ LIVING TRUST dated August 8,
2005, as amended
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
__________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. Sole Trustee
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
__________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
INTEGRATED CONCEPTS AND RESEARCH CORPORATION,
a District of Columbia corporation
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Chief Executive Officer and President
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KONIAG DEVELOPMENT CORPORATION, an Alaskan
corporation, as Sellers Representative
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Executive and President
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