STOCK PURCHASE AGREEMENT
by and between
ENGINEERED SYSTEMS AND ELECTRONICS, INC.
Buyer,
and
DEFENSE HOLDING CORP.
and
ESCO ELECTRONICS CORPORATION,
Sellers,
Dated August 23, 1999
Relating to the Sale of the Outstanding Shares
of
Systems & Electronics Inc.
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS 1
1.1. Affiliate. 1
1.2. Bid. 1
1.3. Code. 1
1.4. Comtrak Business. 1
1.5. Emerson. 1
1.6. Environmental Law. 1
1.7. ESCO Retirement Plan. 2
1.8. Estimates at Completion. 2
1.9. Field Offices. 2
1.10. Government. 2
1.11. Government Contract. 2
1.12. HSR. 2
1.13. Income Taxes. 2
1.14. Intellectual Property. 2
1.15. knowledge. 2
1.16. Law. 3
1.17. Lien. 3
1.18. Material Adverse Effect. 3
1.19. Party and Parties. 3
1.20. Person. 3
1.21. Spin-Off. 3
1.22. Tax Returns. 3
1.23. Taxes. 3
1.24. Transferred Employee. 3
1.25. U.S. Government. 3
1.26. Other Terms. 4
ARTICLE II. PURCHASE AND SALE 6
2.1. The Shares. 6
2.2. Purchase Price. 6
2.3. Closing; Cooperation. 6
2.4. Deliveries of Sellers at Closing. 6
2.5. Deliveries of Buyer at Closing. 6
2.6. Closing Financial Statements. 7
2.7. Settlement of Intercompany Transactions. 9
2.8. 338(h)(10) Election. 10
2.9. Excluded Assets; Excluded Liabilities. 10
2.10. Additional Assets; Additional Liabilities. 12
2.11. Employees. 12
2.12. The Business. 13
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS 13
3.1. Authorization; Stock Ownership. 13
3.2. Capitalization and Related Matters. 13
3.3. Corporate Existence and Qualification. 14
3.4. Financial Statements. 14
3.5. Property. 14
3.6. Stock Record and Minute Books; Officers and
Directors. 15
3.7. Taxes. 15
3.8. Accounts Receivable. 16
3.9. Inventories. 16
3.10. Absence of Certain Changes. 16
3.11. No Breach of Law or Governing Document. 17
3.12. Litigation. 17
3.13. Environmental Matters. 18
3.14. Contracts. 18
3.15. Government Contracts. 19
3.16. Intellectual Property. 22
3.17. Labor Matters. 23
3.18. Employee Benefit Matters. 24
3.19. Product Liability. 25
3.20. Governmental Approvals and Filings. 25
3.21. Brokers, Finders. 25
3.22. Certain Unlawful Practices 25
3.23. Bank Accounts 26
3.24. Insurance 26
3.25. Back Charges, Rebates, etc. 26
3.26. Quote Log. 26
3.27. Sales Tax Refund Expenses. 26
3.28. Year 2000 Plan 26
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER 27
4.1. Authorization. 27
4.2. Investment Representation. 27
4.3. Governmental Approvals and Filings. 27
4.4. Brokers, Finders. 27
4.5. Financing. 27
4.6. WARN Act. 28
4.7. Investigation by Buyer. 28
ARTICLE V. CONDITIONS TO BUYER'S OBLIGATIONS 28
5.1. Representations and Warranties. 28
5.2. Performance of Agreement. 28
5.3. Approvals. 28
5.4. No Adverse Proceeding. 28
5.5. Certificate. 29
5.6. Resignations. 29
5.7. Opinion of Counsel for Sellers. 29
5.8. Good Standing Certificates. 29
5.9. Bank of America Financing 29
5.10. License. 29
ARTICLE VI. CONDITIONS TO SELLERS' OBLIGATIONS 29
6.1. Representations and Warranties. 29
6.2. Performance of Agreement. 29
6.3. Approvals. 30
6.4. No Adverse Proceeding. 30
6.5. Certificate. 30
6.6. Transition Services Agreement. 30
6.7. Government Contract Guarantees; LOCs/ Bonds. 30
6.8. Emerson Guarantees. 31
6.9. Opinion of Counsel for Buyer. 31
6.10. Good Standing Certificates. 31
ARTICLE VII. ADDITIONAL COVENANTS OF THE PARTIES 31
7.1. Conduct of Business Before Closing. 31
7.2. Access to Records. 31
7.3. HSR Filing. 32
7.4. Exon-▇▇▇▇▇▇ Amendment. 33
7.5. Public Announcements; Confidentiality. 33
7.6. Further Assurances. 33
7.7. Knowledge of Breach; Current Information. 34
7.8. Tax Matters. 34
7.9. Noncompetition; Nonsolicitation. 36
7.10. Excluded Assets and Excluded Liabilities. 37
7.11. Intercompany Arrangements. 38
7.12. Other Seller Guarantees. 39
7.13. Plans; Employee Benefits. 39
7.14. Additional Emerson Guaranteed Contracts. 40
7.15. Closing Out of Government Contracts. 40
7.16. Audited Financial Statements of the Company. 40
7.17. EMERLEC-30 41
ARTICLE VIII. INDEMNIFICATION 41
8.1. Indemnification by Sellers. 41
8.2. Limitations on Liability of Sellers . 42
8.3. Indemnification by Buyer. 43
8.4. Notice of Claim. 44
8.5. Right to Contest Claims of Third Persons. 44
8.6. Exclusive Remedy. 44
ARTICLE IX. MISCELLANEOUS PROVISIONS 45
9.1. Termination of the Agreement. 45
9.2. Notice. 45
9.3. Entire Agreement. 46
9.4. Assignment; Binding Agreement. 46
9.5. Counterparts. 46
9.6. Headings; Interpretation. 46
9.7. Expenses. 47
9.8. Governing Law. 47
9.9. Jurisdiction. 47
9.10. Third Party Beneficiaries. 47
9.11. Amendments and Waivers. 47
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the" Agreement") is entered
into as of August 23, 1999, by and between Engineered Systems and
Electronics, Inc.,
a Missouri corporation ("Buyer"), and ESCO Electronics
Corporation, a Missouri corporation ("ESCO"), and Defense Holding
Corp., a Delaware corporation ("DHC") (ESCO and DHC are sometimes
hereinafter collectively referred to as the "Sellers").
RECITALS
A. Buyer desires to purchase from Sellers, on the terms and
conditions set forth in this Agreement, one thousand (1,000)
shares of the common stock, $1 par value per share (the
"Shares"), of Systems & Electronics Inc., a Delaware corporation
("Company") which is a direct wholly-owned subsidiary of DHC and
an indirect wholly-owned subsidiary of ESCO; and
B. The Shares constitute all of the issued and outstanding
shares of common stock, $1 par value per share of the Company;
and
▇. ▇▇▇▇▇▇▇ desire to sell the Shares to Buyer on the terms and
conditions set forth in this Agreement; and
D. Certain terms used herein have the meanings given in
Article I.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE I.
DEFINITIONS
The following terms used in this Agreement shall have the
meanings given below:
1.1.AFFILIATE.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or
under common control with such Person; provided, however, that
the Company shall not be considered to be an Affiliate of Sellers
unless expressly so provided.
▇.▇.▇▇▇.
"Bid" means any written offer by the Company in connection
with the Business that, if accepted, would lead to a Government
Contract.
1.3.CODE.
"Code" means the Internal Revenue Code of 1986, as amended.
1.4.COMTRAK BUSINESS.
"Comtrak Business" means the business carried on by the
Comtrak Division as of the Closing Date as described on Schedule
7.9(b).
1.5. EMERSON.
"Emerson" means ▇▇▇▇▇▇▇ Electric Co., a Missouri corporation,
which was the parent corporation of ESCO until the Spin-Off.
1.6. ENVIRONMENTAL LAW.
"Environmental Law" means any federal, state, or local
statute, rule, ordinance, code, license, permit, regulation or
order, as in effect on the Closing Date, relating to the
protection of the environment or to the regulation of any toxic,
radioactive, ignitable, corrosive, reactive or otherwise
hazardous substances, materials, contaminants, pollutants or
wastes (including, without limitation, asbestos, PCB's and
infectious substances).
1.7. ESCO RETIREMENT PLAN.
"ESCO Retirement Plan" means ESCO's defined benefit plan which
includes participants employed by ESCO, as well as several of
ESCO's direct and indirect subsidiaries.
1.8. ESTIMATES AT COMPLETION.
"Estimates at Completion" means the total estimated cost
incurred and to be incurred to perform the work required under a
contract, including the cost of labor, material, related overhead
and other direct costs but not including selling, general or
administrative expenses.
1.9. FIELD OFFICES.
"Field Offices" means the field offices listed on Schedule
1.9.
1.10. GOVERNMENT.
"Government" means the United States or any other nation,
state, or bilateral or multilateral governmental authority, any
local governmental unit or subdivision thereof, or any branch,
agency, or judicial body thereof.
1.11. GOVERNMENT CONTRACT.
"Government Contract" means any prime contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering
agreement, letter contract, purchase order, delivery order,
change order, or other arrangement of any kind in writing either
(a) between Company in connection with the Business and any of
(i) the U.S. Government (acting on its own behalf or on behalf of
another country or international organization), (ii) any prime
contractor of the U.S. Government, or (iii) any subcontractor
with respect to any contract described in clauses (i) or (ii)
above, or (b) financed by the U.S. Government in connection with
the Business and subject to the rules and regulations of the U.S.
Government concerning procurement.
1.12. HSR.
"HSR" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
1.13. INCOME TAXES.
"Income Taxes" means any foreign, federal, state or local Tax
imposed on or measured by net income.
1.14. INTELLECTUAL PROPERTY.
"Intellectual Property" means all of the following (in
whatever form or medium) which are owned by or licensed to the
Company for use in connection with the Business, except for the
Excluded Assets: (a) patents, trademarks, service marks and
copyrights, (b) applications for patents and for registration of
trademarks, service marks and copyrights, (c) trade secrets and
trade names, and (d) all other items of proprietary know-how or
intellectual property.
1.15. KNOWLEDGE.
"knowledge" means actual knowledge (i.e., the conscious
awareness of facts or other information), or belief, without
undertaking any investigation, and not constructive knowledge.
The words "know", "knowing" and "known" shall be construed
accordingly. In the case of the Sellers, knowledge means the
knowledge of the persons listed on Schedule 1.15.
1.16. LAW.
"Law" means any applicable statute, law, treaty, convention,
ordinance, decree, order, injunction, rule, directive, or
regulation of any Government.
1.17. LIEN.
"Lien" means a mortgage, deed of trust, security interest,
claim, restriction or other material encumbrance.
1.18. MATERIAL ADVERSE EFFECT.
"Material Adverse Effect" means any change in or effect on the
Business that is materially adverse to the condition (financial
or otherwise), business, properties, liabilities, or results of
operations of the Business; provided that (a) changes that affect
the defense industry generally, (b) changes in general economic
conditions, and (c) changes resulting from the transactions
contemplated by this Agreement or the announcement thereof shall
not be taken into account in determining whether there has been a
Material Adverse Effect.
1.19. PARTY AND PARTIES.
"Party" means the Buyer or the Sellers, as the case may be,
and "Parties" means the Buyer and the Sellers together.
1.20. PERSON.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or
organization, including a Government or political subdivision or
agency or instrumentality thereof.
1.21. SPIN-OFF.
"Spin-Off" means the distribution of the shares of ESCO to the
shareholders of Emerson which occurred on October 19, 1990.
1.22. TAX RETURNS.
"Tax Returns" means any returns required to be filed with
Federal, state or other applicable taxing authorities (including
foreign returns) in respect of any Taxes.
1.23. TAXES.
"Taxes" means all taxes, charges, fees, levies, or other like
assessments, including without limitation, taxes on intangibles
and income, capital gain, gross receipts, ad valorem, value
added, excise, real property, personal property, windfall profit,
sales, use, transfer, license, withholding, employment, payroll
and franchise taxes imposed by any Government, and shall include
any interest, fines, penalties, assessments, or additions to tax
resulting from, attributable to, or incurred in connection with
any such Taxes or any contest or dispute thereof.
1.24. TRANSFERRED EMPLOYEE.
"Transferred Employee" means (a) all active employees and
former employees, including terminated employees, employees on
leave or disability, retirees and laid-off employees of the
Company or any predecessor thereof, except for the Excluded
Employees, and (b) the Additional Employees.
1.25. U.S. GOVERNMENT.
"U.S. Government" means the United States Government and any
agencies, instrumentalities and departments thereof.
1.26. OTHER TERMS.
The following terms shall have the meanings set forth in the
below-referenced sections of this Agreement:
Term Defined In
"Accounting Principles" Section
2.6(a)
"Additional Assets" Section
2.10(a)
"Additional Employees" Section
2.11(b)
"Agreement" Paragraph 1
"Appraiser" Section
2.8(b)
"CAS" Schedule
7.13(b)
"CAS Actuarial Report" Schedule
7.13(b)
"Arbiter" Section
2.6(b)
"Closing Earnings Statement" Section
2.6(a)
"Bank Lien" Section 3.1
(b)
"Business" Section 2.12
"Buyer" Paragraph 1
"Buyer Indemnified Person" Section 8.1
"Buyer's Pension Plan" Schedule
7.13(b)
"Cash Distribution Amount" Section
2.7(a)
"Closing and Closing Date" Section 2.3
"Closing Financial Statements" Section
2.6(a)
"Closing Statement Period" Section
2.6(a)
"Company" Recitals
"Company's Assumption Agreement" Section
2.10(b)
"Comtrak Division" Section
2.9(a)
"Confidentiality Agreement" Section
7.5(b)
"Credit Agreement" Section
3.1(b)
"days" Section 9.6
"Deductible" Section
8.2(c)
"DHC" Paragraph 1
"Effective Time" Section 2.3
"Emerson Guarantees" Section 6.8
"ESCO" Paragraph 1
"ESCO Savings Plan" Section
7.13(c)
"Excluded Assets" Section
2.9(a)
"Excluded Employees" Section
2.11(a)
"Excluded Liabilities" Section
2.9(b)
"Exon-▇▇▇▇▇▇ Amendment" Section 4.3
"Field Office Assets" Section
2.10(a)
"Field Office Liabilities" Section
2.10(b)
"Financial Statements" Section
3.4(a)
"Government Contract Guarantees" Section
6.7(a)
"Indemnified Party" Section 8.4
"Indemnifying Party" Section 8.4
"Intercompany Purchase Orders" Section 7.11
"know", "knowing" and "known" Section 1.15
"LOCs/Bonds" Section
6.7(b)
"Material Contracts" Section
3.14(a)
"NID(s)" Section 7.4
"Notice of Dispute" Section
2.6(b)
"June 30, 1999 Balance Sheet" Section
3.4(a)
"June 30, 1999 Balance Sheet Date" Section
3.5(a)
"June 30, 1999 Financial Statements" Section
3.4(a)
"Offset Obligations" Section
3.14(c)
"Other Seller Guarantees" Section 7.12
"Plan" and "Plans" Section
3.18(a)
"Plan Assets" Section
2.10(a)
"Plan Liabilities" Section
2.10(b)
"Pre-Closing Tax Period" Section
7.8(b)
"Purchase Price" Section 2.2
"Restricted Business" Section
7.9(a)
"Section 338(h)(10) Election" Section
2.8(a)
"Sellers" Paragraph 1
"Seller Group" Section
7.8(a)
"Seller Indemnified Persons" Section 8.3
"Sellers' Assumption Agreement" Section
2.9(b)
"Shares" Recitals
"Tax Asset" Section
7.8(a)
"Terminating Party" Section 9.1
"Third Person" Section 8.5
"Third-Person Claim" Section 8.5
"Transfer Taxes" Section
7.8(j)
"Transferred Amount" Schedule
7.13(b)
"Transition Services Agreement" Section
6.6(a)
"Winter Springs, Florida Property" Schedule
2.9(a)(i)
ARTICLE II.
PURCHASE AND SALE
2.1.THE SHARES.
On the terms and subject to the conditions set forth in this
Agreement, at Closing, Sellers shall sell and deliver the Shares
to Buyer and Buyer shall purchase and accept the Shares from
Sellers.
2.2.PURCHASE PRICE.
The purchase price for the Shares and the other rights of
Buyer hereunder shall be Eighty-Five Million U.S. Dollars
($85,000,000) ("Purchase Price").
2.3.CLOSING; COOPERATION.
The consummation of the transactions contemplated hereby
("Closing") shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other
place as the Parties may mutually agree. The Closing shall be on
September 30, 1999, subject to postponement by either the Sellers
or the Buyer, upon at least five business days advance notice to
the other Party, to a date not later than October 31, 1999 (the
date on which the Closing occurs, being hereinafter the "Closing
Date"); provided that,
(a)unless otherwise agreed by the Buyer, the conditions
specified in Article V shall have been satisfied by such date
(other than conditions intended to be fulfilled by actions taken
at Closing),
(b)unless otherwise agreed by the Sellers, the conditions
specified in Article VI shall have been satisfied by such date
(other than conditions intended to be fulfilled by actions taken
at Closing), and
(c)this Agreement has not been terminated pursuant to Section
9.1.
The Closing shall be effective as of close of business on the
Closing Date ("Effective Time"). Subject to the provisions of
Section 9.1, failure to effect the Closing on a scheduled Closing
Date will not result in the termination of this Agreement and
will not relieve any Party of any obligation under this
Agreement.
2.4.DELIVERIES OF SELLERS AT CLOSING.
Subject to the conditions to Sellers' obligations in
Article VI, at Closing, Sellers shall deliver to Buyer or cause
to be delivered to Buyer:
(a)a certificate or certificates evidencing the Shares, duly
endorsed for transfer to Buyer or accompanied by a stock power
duly executed in blank, and
(b)all of the certificates, resignations, documents and other
instruments set forth in Article V hereof.
2.5.DELIVERIES OF BUYER AT CLOSING.
Subject to the conditions to Buyer's obligations in Article V,
at Closing, Buyer shall
(a)pay the Purchase Price to the Sellers, by wire transfer of
immediately-available funds to an account, which account shall be
designated by Sellers not later than the second business day
preceding the Closing Date, and
(b) deliver to the Sellers all of the certificates,
documents and other instruments set forth in Article VI
hereof, including, without limitation, evidence, satisfactory
to the Sellers of the guarantees, letters of credit and bonds
provided by Buyer and accepted in replacement of the
Government Contract Guarantees, LOCs/Bonds and Emerson
Guarantees.
2.6.CLOSING FINANCIAL STATEMENTS.
(a)As promptly as practicable following the Closing Date, but
in no event later than 60 days after the Closing Date, Sellers
shall prepare and submit to Buyer a statement of earnings of the
Company (the "Closing Earnings Statement") for the period
beginning on October 1, 1998 and ending as of the Effective Time
(such period, hereinafter the "Closing Statement Period") and the
related balance sheet dated the Closing Date (collectively, the
"Closing Financial Statements") in accordance with the provisions
of this Section. The Closing Financial Statements shall be
prepared in accordance with generally accepted accounting
principles (the "Accounting Principles"), provided further, that
the following shall apply:
(i) [Reserved]
(ii) the Closing Financial Statements shall not
include the Excluded Assets or Excluded Liabilities but
shall include the Field Office Assets and the Field Office
Liabilities; provided, however, that the exclusion of such
items shall have no impact on the Closing Earnings
Statement and instead shall be taken directly to equity on
the balance sheet (likewise, if a sale of the Winter
Springs, Florida Property shall occur prior to the
Effective Time, any gain or loss on the sale will not
affect the Closing Earnings Statement);
(iii) the Closing Financial Statements shall not
reflect as a liability or asset any Taxes arising as a
result of the Section 338(h)(10) Election; provided,
however, that the exclusion of such items shall have no
impact on the Closing Earnings Statement and instead shall
be taken directly to equity on the balance sheet;
(iv) the Closing Financial Statements shall reflect as
a liability or asset only 40% of amounts related to the
claim for refund of Missouri sales/use taxes described on
Schedule 2.9(a)(iv); provided, however, that the exclusion
of such items shall have no impact on the Closing Earnings
Statement and instead shall be taken directly to equity on
the balance sheet;
(v) despite the fact that the Closing Financial
Statements shall be dated as of the Closing Date, the
Closing Financial Statements shall be based on the
existing accounting calendar cutoff dates of the Company,
permitting cutoff adjustments of a few days consistent
with past practices; and
(vi) [reserved]
(vii) exceptions shall be made to generally accepted
accounting principles in order to accommodate the
Company's practices as reflected on the June 30, 1999
Financial Statements, and other agreed accounting methods
and practices shall be applied, with respect to the
subject matter of the accounting principles listed on
Schedule 2.6(a).
(b) After the submission of the Closing Financial
Statements to Buyer as provided in Section 2.6(a), Sellers
shall use their best efforts to provide Buyer and its
representatives with reasonable access to worksheets,
schedules and other working papers utilized in preparing the
Closing Financial Statements. In the event either Party
disputes the Closing Financial Statements, such Party shall
provide written notice (a "Notice of Dispute") specifying in
reasonable detail all points of disagreement with the Closing
Financial Statements to the other Party within 30 days after
receipt of the Closing Financial Statements; provided,
however, that neither Party shall dispute, except as necessary
to correct mathematical errors or undisputed omissions of
amounts in the books and records of the Company, either: (i)
any of the Estimates at Completion reflected on the Financial
Statements; or (ii) any amounts with respect to real property
or other fixed assets reflected on the balance sheet (or to
the estimated useful lives of such assets), except to the
extent required to reflect, in accordance with the Accounting
Principles, depreciation and amortization of such assets or
additions to or disposals of such assets. If neither Party
delivers a Notice of Dispute within such 30-day period, then
the Closing Financial Statements as delivered by Sellers shall
be final for purposes of Section 2.7 hereof. If either Party
delivers a Notice of Dispute within such 30-day period, Buyer
and Sellers shall endeavor in good faith to resolve all
specified points of disagreement within 15 days of receipt of
the Notice of Dispute. If the dispute is not resolved within
such 15-day period, either or both Parties may refer the
dispute to a partner in ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP (the "Arbiter"),
as arbitrator to finally determine, as soon as practicable,
and in any event within 20 days after such referral, all
points of disagreement with respect to the Closing Financial
Statements. The Arbiter shall resolve the issues in dispute
but shall not otherwise address issues in the Closing Earnings
Statement nor perform any audit thereof. For purposes of such
arbitration, each Party shall submit proposed Closing
Financial Statements to the Arbiter and to the other Party,
accompanied by such additional information explaining such
Party's position with respect to the Closing Earnings
Statement as it desires to submit. Each Party shall, at the
time of such submission, be free to revise positions they have
maintained in prior drafts of the Closing Financial Statements
and related discussion, but the Parties shall not be permitted
to further modify their proposed Closing Financial Statements
once these are submitted to the Arbiter. The Party initiating
the arbitration shall submit any revised Closing Earnings
Statement no later than 5 days after such referral. The non-
initiating Party shall have 10 days after such referral to
submit its revised Closing Earnings Statement in response.
The Arbiter shall apply the terms of this Section 2.6, and
shall otherwise conduct the arbitration under such procedures
as the Parties may agree or, failing such agreement, under the
Commercial Arbitration Rules of the American Arbitration
Association. The fees and expenses of the arbitration and the
Arbiter incurred in connection with the arbitration of the
Closing Earnings Statement shall be allocated between the
Parties by the Arbiter in proportion to the extent either
Party did not prevail on the points of disagreement in the
Closing Earnings Statement, such allocation to be based on the
pro rata division of the aggregate amounts in dispute in
connection with such points of disagreement; provided, that
such fees and expenses shall not include, so long as a Party
complies with the procedures of this Section 2.6, the other
Party's outside counsel or accounting fees. All
determinations by the Arbiter shall be final, conclusive and
binding with respect to the Closing Earnings Statement and the
allocation of arbitration fees and expenses.
(c)Buyer agrees, at its sole but reasonable cost and expense,
to cause the Company to fully cooperate with and assist Sellers'
in the preparation of the Closing Financial Statements and in the
conduct of resolving any points of disagreement referred to in
Section 2.6(b), including without limitation, making available to
Sellers to the extent requested all books, records, work papers
and personnel, subject to the provisions of Section 7.2 hereof.
2.7.SETTLEMENT OF INTERCOMPANY TRANSACTIONS.
(a)Buyer guarantees that Sellers shall receive a cash
distribution from the Company, for the Closing Statement Period,
in the amount of the lesser of Six Million Five-Hundred Thousand
U.S. Dollars ($6,500,000) or the net income as shown on the
Closing Earnings Statement ("Cash Distribution Amount"). Cash
which has been taken from the Company, or has been provided to
the Company, by Affiliates of the Company through the mechanism
of ESCO's cash pooling system, normally does not appear as cash,
but instead appears as long term debt intercompany. If the net
funds taken by Sellers from the Company during the Closing
Statement Period are less than the Cash Distribution Amount, then
also a cash payment is to be made as provided below. As an
example, if the net income on the Closing Earnings Statement is
at least equal to $6,500,000, and long term debt intercompany on
the Closing Financial Statements had a debit balance of
$5,000,000, then the post-Closing payment to be made to Sellers
shall be $1,500,000. Likewise, if the net income on the Closing
Earnings Statement is $5,000,000, and long term debt intercompany
on the Closing Financial Statements has a debit balance of
$5,000,000, then no post-Closing payment will be made with
respect to the Cash Distribution Amount. Furthermore, if Sellers
have received a net distribution greater than the Cash
Distribution Amount, the Sellers must pay the difference to the
Company as provided below. Thus, as an example, if the net
income on the Closing Earnings Statement is $5,000,000, and long
term debt intercompany on the Closing Financial Statements has a
debit balance of $7,000,000, then Sellers must make a post-
Closing payment of $2,000,000. As a final example, if the net
income on the Closing Earnings Statement is $3,000,000, and long
term debt intercompany on the Closing Financial Statements has a
credit balance of $500,000, then the post-Closing payment to be
made to Sellers shall be $3,500,000. All postings to the long
term debt intercompany account from June 30, 1999 through the
Effective Time will be on a basis consistent with past practices.
This means, among other things, that where charges to be posted
for the period from June 30, 1999 through the Effective Time are
based on predetermined amounts or rates (including pension), such
charges will be continued in a manner consistent with those used
prior to June 30, 1999. Subsequent to July 31, 1999, there will
be no charges to long term debt intercompany related to Income
Taxes. Further, subsequent to September 30, 1999, there will be
no charges to long term debt intercompany related to ESL Limited;
(b)For each successive seven-day period following the Closing,
the total of all checks of the Company issued by the Company
prior to the Effective Time, made payable from accounts of
Affiliates of the Company, which clear such accounts during such
seven-day period, shall be submitted in an invoice by Sellers to
the Company for payment by the Company no later than five (5)
days after submission of such invoice. One hundred eighty (180)
days after Closing, Sellers shall cancel all such checks which
remain outstanding, and the Company will be responsible for any
indebtedness related thereto. The Company shall be liable for
all obligations in connection with such checks originally issued
on accounts of Sellers and their Affiliates, including those
under escheat laws, and shall hold Sellers harmless with respect
thereto;
(c)The Parties shall settle all the intercompany accounts
receivable and payable balances which are comprised of sales and
purchases of inventory items and/or services provided between the
Sellers and its Affiliates, including the Company (excluding long
term debt intercompany, the settlement of which occurs solely
under Section 2.7(a)), reflected in the balance sheet contained
in the Closing Financial Statements, and the Party owing the
aggregate net balance of such outstanding intercompany accounts
as of the Closing Date shall pay to the other Party the amount of
such net balance; and
(d)All final payments required under paragraphs (a) and (c)
above shall be made within ten days of such time as the Closing
Financial Statements have been finally determined pursuant to
Section 2.6(b) hereof. The payment will be the net amount of the
aggregate of the final payments under paragraphs (a) and (c)
above, and such payment shall be made by delivery of a check in
the amount of such net payment within the above-described ten-day
time period.
2.8.338(h)(10) ELECTION.
(a)Sellers and Buyer shall timely file a joint election
pursuant to Section 338(h)(10) (a "Section 338(h)(10) Election")
of the Internal Revenue Code of 1986, as amended (the "Code")
(and any comparable election under state, local, or foreign law)
with respect to the sale of the Shares of the Company and shall
timely file such forms and take such other actions as are
necessary to effectuate such election in accordance with said
Section 338(h)(10).
(b)Buyer and Sellers shall use their best efforts to allocate
the Purchase Price among the Company's assets no later than the
earlier of
(i) 60 days after final determination (by agreement or
otherwise) of the Closing Financial Statements in accordance
with Section 2.6(b), or
(ii) 180 days following the Closing. Such allocation
shall be made in accordance with Section 338 of the Code and
the regulations thereunder.
If Buyer and Sellers are not able to agree upon such allocation
within such period, the allocation shall be determined by the
Arbiter. Each Party shall cooperate in providing information to
the Arbiter, and the costs and expenses for the services of the
Arbiter and any required appraisal shall be borne equally by
Buyer and Sellers.
(c)Buyer and Sellers shall report on any applicable Tax Return
the allocation of the Purchase Price as determined in accordance
with Section 2.8(b) and shall take no position inconsistent with
such allocation of the Purchase Price.
2.9.EXCLUDED ASSETS; EXCLUDED LIABILITIES.
(a)Prior to the Closing, the Sellers shall cause the Company
to assign and transfer to the Sellers or to another Affiliate of
the Sellers the following (the "Excluded Assets"):
(i) certain property located in Winter Springs, Florida
which is described on Schedule 2.9(a)(i) and any proceeds
therefrom if such property shall be sold, in whole or part, by
the Company prior to Closing (the "Winter Springs, Florida
Property");
(ii) the assets reflected on the books of the division of
the Company known as its Comtrak division (which assets, and
the division of the Company which carries on the Comtrak
Business, being referred to herein as the "Comtrak Division")
and the assets utilized by the Comtrak Division which are
listed on Schedule 2.9(a)(ii);
(iii) the patents described on Schedule 2.9(a)(iii);
(iv) all right, title and interest in and to 60% of the
gross amount of any refund or other amount to be received
after Closing in connection with the claim for refund of
Missouri sales/use taxes described on Schedule 2.9(a)(iv);
(v) all right, title and interest in and to the claim
against Crydom Corporation described on Schedule 2.9(a)(v)
(which is estimated at approximately $300,000);
(vi) the shares of Comtrak International Services Inc. and
ESCO Electronica de Mexico, S.A. de C.V., the wholly-owned
subsidiaries of the Company;
(vii) all cash on accounts not solely in the name of the
Company at banks and other financial institutions, and
including cash equivalents;
(viii) all current or deferred income tax assets arising
prior to the Closing, including without limitation any arising
from the Section 338(h)(10) Election and any refund described
in Section 7.8(i); and
(ix) all claims related to Third Person escrow accounts
relating to environmental liabilities arising in connection
with previously owned, leased and occupied properties or off-
site waste disposal facilities.
(b)Prior to the Closing, the Sellers shall cause the Company
to assign and transfer to the Sellers or to another Affiliate of
the Sellers, and for the Sellers or such Affiliate to assume,
pursuant to an Assignment and Assumption Agreement substantially
in the form of Exhibit A hereto or in other form mutually
satisfactory to the Parties (the "Sellers' Assumption
Agreement"), the following liabilities of the Company and all
related rights (the "Excluded Liabilities"):
(i) all liabilities of the Company (including all
environmental liabilities) (x) relating to the ownership and
occupancy of the Winter Springs, Florida Property, including
all obligations in connection with any sale thereof, (y)
relating to any other real property and improvements which at
any time prior to the Closing was owned, leased or occupied by
the Company or any of its predecessors, but as of the Closing
is not or will not be owned, leased or occupied by the
Company, including, without limitation, the properties
described on Schedule 2.9(b)(i), and (z) relating to any off-
site waste disposal facilities, including, without limitation,
the facilities described on Schedule 2.9(b)(i), but only to
the extent of the Company's or any of its predecessors' use of
or involvement with such facilities prior to the Effective
Time;
(ii) all liabilities of the Company in respect of the
assets of the Comtrak Division retained by Sellers;
(iii) all liabilities of the Company relating to its
ownership and operation of Comtrak International Services Inc.
and ESCO Electronica de Mexico, S.A. de C.V, including,
without limitation, any such matters as are set forth in
Schedule 3.11 relating to either of such subsidiaries of the
Company;
(iv) all liabilities of the Company relating to the
prosecution of the Crydom Corporation claim described on
Schedule 2.9(a)(v);
(v) all current or deferred income tax liabilities
arising prior to the Closing, including without limitation any
arising from the Section 338(h)(10) Election;
(vi) all liabilities and obligations relating to the ESCO
Employee Savings Investment Plan (Plan 201), the Executive
Severance Plan for G.A. ▇▇▇▇▇▇▇▇ described on Schedule
3.18(a), the Employees Stock Purchase Plan of ESCO, Plans for
Performance Shares (including accelerated vesting entitlement
therefor) and Stock Options (Executive and Key Manager) as
described on Schedules 3.10 and 3.18(a), and the Transaction
Bonuses and Accelerated Vesting of Stock Options as described
on Schedules 3.14(a) and 3.18(a); and
(vii) all liabilities arising under the consulting and
distributorship agreement between ESCO and ESL Limited dated
October 1, 1997.
In the event any or all of the Excluded Liabilities are
assigned and transferred to an Affiliate of the Sellers
(rather than both of the Sellers directly), the Sellers shall
each be required to guarantee any such Affiliate's assumption
obligations under the Sellers' Assumption Agreement pursuant
to a guarantee agreement in form mutually satisfactory to the
Parties.
2.10. ADDITIONAL ASSETS; ADDITIONAL LIABILITIES.
(a)The Sellers shall assign and transfer
(i) to the Company, on or prior to the Closing Date, the
lease agreements, consulting contracts and furniture and
fixtures described on Schedule 2.10(a)(i), all of which are
used in connection with or relate to the Field Offices (the
"Field Office Assets"),
(ii) to a plan of Buyer or an Affiliate thereof as of the
Effective Time, the assets of the ESCO Retirement Plan, but
only to the extent set forth in Section 7.13(b)(ii) (the "Plan
Assets"), and
(iii) to the Company, the computer software acquired under
volume purchase agreement number V89452 from Parametric
Technology Corporation, costing approximately $125,000 (the
"Software Assets" and collectively with the Plan Assets and
the Field Office Assets, the "Additional Assets").
(b)The Sellers shall assign and transfer
(i) to the Company, and the Sellers shall cause the
Company to assume, on or prior to the Closing Date, pursuant
to an Assignment and Assumption Agreement substantially in the
form of Exhibit B hereto (the "Company's Assumption
Agreement") all liabilities of the Sellers and their
Affiliates relating to the Field Offices (the "Field Office
Liabilities"), and any costs incurred in arranging for
landlord consents to the assignment of Sellers' interests in
the Field Office leases to the Company shall be paid by the
Sellers prior to the Closing,
(ii) to the Buyer as of the Effective Time, all
liabilities relating to the Plan Assets in accordance with
Section 7.13(b)(iii),
(iii) to the Buyer, all of Sellers' obligations under the
Software Assets and the obligation to pay Sellers for the cost
of the Software Assets (the "Software Liability"), and
(iv) to the Buyer as of the Effective Time, all of
Sellers' obligations to Transferred Employees in accordance
with Section 7.13(e) (2.10(b)(ii) and (iv) together, the "Plan
Liabilities" and, collectively with the Field Office
Liabilities and the Software Liabilities, the "Additional
Liabilities").
2.11. EMPLOYEES.
(a)Prior to the Closing, Sellers will cause the Company to
transfer to either of the Sellers, or to an Affiliate thereof,
and Sellers will accept or cause such Affiliate to accept, the
employees (and any and all obligations in respect thereto) listed
on Schedule 2.11(a) (the "Excluded Employees"), each of whom
primarily performs services relating to the Comtrak Division.
(b)Prior to the Closing, the Sellers will transfer to the
Company and cause the Company to accept the employees listed on
Schedule 2.11(b) (the "Additional Employees"), each of whom
performs services relating to the Field Offices.
2.12. THE BUSINESS.
The business to be conducted by the Company as of the Closing
Date, and which is intended to be transferred to the Buyer
hereunder, shall include the Additional Assets and related
operations, the Additional Liabilities and the Additional
Employees, but shall not include the Excluded Assets and related
operations, the Excluded Liabilities, nor the Excluded Employees.
The "Business" of the Company shall mean, for all purposes of
this Agreement, all aspects of the business and operations
conducted by the Company as of the date hereof and all related
assets and liabilities, other than the Excluded Assets, the
Excluded Liabilities and the Excluded Employees.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby jointly and severally make the following
representations and warranties to Buyer, each of which is
accurate on the date hereof and shall be accurate on and as of
the Closing Date:
3.1.AUTHORIZATION; STOCK OWNERSHIP.
(a)Each of the Sellers has all requisite power and authority
to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
This Agreement and all other agreements herein contemplated to be
executed by either of the Sellers constitute (or upon execution
will constitute) valid and binding obligations of the Sellers,
enforceable against the Sellers in accordance with their
respective terms. This Agreement and all other agreements herein
contemplated to be executed by either of the Sellers have been
(or will be prior to Closing) authorized by all necessary action,
corporate or otherwise, by each of the Sellers.
(b)ESCO is the record and beneficial owner of all of the
issued and outstanding shares of common stock of DHC, which is
the record owner of the Shares. The Shares consist of 1,000
shares of common stock of the Company. ESCO is the beneficial
owner of the Shares, free and clear of all Liens except for the
lien (the "Bank Lien") created pursuant to the Credit Agreement
dated September 23, 1990 (as amended) by and among ESCO, DHC, the
banks listed therein and ▇▇▇▇▇▇ Guaranty Trust Company of New
York, as agent (the "Credit Agreement"), in favor of such banks.
ESCO will cause DHC to transfer to the Buyer at Closing good and
marketable title to the Shares, free and clear of all Liens
(including the Bank Lien).
3.2.CAPITALIZATION AND RELATED MATTERS.
The authorized capital stock of the Company consists solely of
10,000 shares of common stock, $1 par value, of which the Shares
are the only shares issued and outstanding. All the Shares were
duly authorized and validly issued and are fully paid and non-
assessable. Except for Buyer's rights hereunder,
(a) there are outstanding
(i) no other securities of the Company (whether of a
debt, equity or hybrid nature), and
(ii) no rights, warrants or options to acquire, exchange
or convert securities of the Company, and
(b) neither the Sellers nor the Company is subject to any
obligation to issue, deliver, redeem, or otherwise acquire or
retire the Shares or any other securities of the Company.
Except for the subsidiaries described in Section 2.9(a)(vi)
or as set forth on Schedule 3.2, the Company does not own,
directly or indirectly, any shares of capital stock or any
equity investment or other financial interest in or have any
commitment to acquire any such interest in, any other
corporation, partnership, limited liability company,
association or other business organization or entity.
3.3.CORPORATE EXISTANCE AND QUALIFICATION.
The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified and in good standing in
the other jurisdictions listed on Schedule 3.3 hereto, which are
the only jurisdictions in which such qualification is required,
except where the failure to so qualify and be in good standing
will not have a Material Adverse Effect. Except for matters
which would not have a Material Adverse Effect, the Company has
the corporate power and authority to own or lease and operate its
properties and assets and conduct the Business as currently
conducted.
▇.▇.▇▇▇▇▇▇▇▇▇ STATEMENTS.
(a)Attached hereto as Schedule 3.4(a) are the following (the
"Financial Statements"):
(i) the balance sheets of the Company as of September 30,
1997 and September 30, 1998, and the related statement of
earnings for the fiscal years then ended, and
(ii) the balance sheet of the Company as of June 30, 1999
(the "June 30, 1999 Balance Sheet"), and the related statement
of earnings for the period then ended (collectively, the "June
30, 1999 Financial Statements").
(b)The Financial Statements
(i) were derived from the accounting books and records of
the Company,
(ii) to the extent the Financial Statements relate to the
Business, present fairly, in all material respects, the
financial position and results of operations of the Business
at the dates and for the periods indicated, except as set
forth on Schedule 3.4(b) or as referred to in Section 2.6(a).
The information reflected in the Financial Statements was
included in the consolidated financial statements of ESCO for
the corresponding periods, which were prepared in accordance
with generally accepted accounting principles; and
(iii) except as set forth on Schedule 3.4(b), there have
been no changes in accounting methods or practices during the
years covered by the Financial Statements.
▇.▇.▇▇▇▇▇▇▇▇.
Except as set forth on Schedule 3.5,
(a)the Company is, the sole owner of all right, title and
interest in and to all assets of the Business reflected on the
June 30, 1999 Balance Sheet or acquired thereafter and, except
for matters which would not have a Material Adverse Effect, has
or will have on the Closing Date good and marketable title to all
material assets, except for assets sold in the ordinary course of
business since the date of the such balance sheet (the "June 30,
1999 Balance Sheet Date"); and
(b)none of such assets of the Business are subject to any
Liens except:
(i) Liens reflected on the June 30, 1999 Balance Sheet or Liens
incurred since the date of the June 30, 1999 Balance Sheet in the
ordinary course of business consistent with past practices;
(ii) Liens for taxes not yet due or being contested in
good faith;
(iii) Liens not securing liabilities for (A) borrowed
money, or (B) the purchase price of assets, which do not
materially interfere with the current use of such assets;
(iv) the Bank Lien (which will be released as of Closing);
and
(v)Liens arising in the ordinary course of business as a
result of progress payments received under Government
Contracts.
Except as set forth on Schedule 3.5, no material assets of
the Business are in the possession of others and the Company
holds no property on consignment in connection with the Business.
Schedule 3.5 lists all of the real property that is owned or
leased by the Company as of June 30, 1999. Except for such
matters as would not, in the aggregate, have a Material Adverse
Effect on the Company, to the knowledge of Sellers: (i) with
respect to such owned real property, there are no imperfections
of title or other encumbrances which materially effect the
marketability of any such property nor impair the use of such
property in the Business as presently conducted; and (ii) with
respect to such leased real property, the company has good, valid
and presently existing leasehold interests to all such leased
real estate, and in each case, such properties are held under
valid enforceable leases, and the Company has performed all
material obligations required to be performed by it to date under
said leases and possesses and quietly enjoys said premises under
said leases. True, correct and complete copies of all the
material terms of the leases pertaining to such leased real
property (including with respect to lease agreements pertaining
to the Field Offices) have been previously delivered to Buyer.
Except as set forth on Schedule 3.5 and except for matters as
would not individually or in the aggregate have a Material
Adverse Effect on the Company, to the Sellers' knowledge, there
is no condition affecting any of the real property or the
improvements located thereon which requires repair or correction
to restore the same to reasonable operating condition.
3.6.STOCK RECORD AND MINUTE BOOKS; OFFICERS AND DIRECTORS.
The stock record books and minute books of the Company are
true and correct in all material respects for the period
subsequent to the Spin-Off and, to the Sellers' knowledge, are
true and correct in all material respects for the period prior to
the Spin-Off. Accurate and complete copies of the articles of
incorporation and bylaws and all amendments thereto of the
Company have been previously provided to Buyer. The officers and
directors of the Company are set forth on Schedule 3.6.
3.7.TAXES.
(a)Except as set forth on Schedule 3.7(a), the Company
(i) has timely filed or caused to be filed with the
appropriate Government entity all income Tax Returns and all
other material Tax Returns which have been required to be
filed prior to the date of this Agreement (taking into account
any extensions of the time for filing such Tax Returns), and
(ii) has paid in full all material Taxes shown as due and
payable on such Tax Returns, except to the extent such
liabilities are reflected on the Financial Statements as
current liabilities. All income and other Tax Returns filed
or caused to be filed by the Company are correct and complete
in all material respects.
(b)The Company has complied in all material respect with all
Laws relating to the withholding of Taxes and the payment thereof
and has timely and properly withheld from employee wages and paid
over to the proper Government entity all amounts required to be
withheld and paid over under applicable Law.
(c)Except as set forth on Schedule 3.7(c), the Company has not
waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to Tax assessment or
deficiency.
(d)Except as set forth on Schedule 3.7(d), the Company has not
received notice of any currently pending and unresolved
examination pertaining to, or claims for, Taxes or assessments
against the Company by any taxing authority in respect of any
period to date.
3.8.ACCOUNTS RECEIVABLE.
Except as set forth on Schedule 3.8 hereto, all the accounts
receivable of the Business reflected in the June 30, 1999 Balance
Sheet and any accounts receivable of the Business arising between
June 30, 1999 and the Closing Date arose or will have arisen in
the ordinary course of business and, to Sellers' knowledge, at
the time created, then represented bona fide indebtedness owing
to the Company from the applicable account debtor. Except as set
forth on Schedule 3.8 hereto, such accounts receivable are not
and will not be on the Closing Date subject to any valid
counterclaim, set-off, defense or Lien, except the Bank Lien
(which will be released as of Closing) and except to the extent
of any reserves shown in respect thereof on the June 30, 1999
Balance Sheet.
3.9.INVENTORIES.
All physical inventories of the Business held by the Company
at any location, except inventories associated with specific sale
contracts or as set forth on Schedule 3.9 or as reflected on the
June 30, 1999 Balance Sheet,
(a)are valued on the June 30, 1999 Balance Sheet at lower of
cost or market,
(b) are merchantable in the ordinary course of business, and
(c) exist in quantities which do not materially exceed levels
which are reasonable in the present circumstances of the Business
and such will be the case on the Closing Date.
3.10. ABSENCE OF CERTAIN CHANGES.
Since the June 30, 1999 Balance Sheet Date, except as set
forth on Schedule 3.10 hereto and except as otherwise disclosed
in this Agreement, there has not been:
(a)Any event, occurrence, development or state of
circumstances or facts which has had a Material Adverse Effect;
(b)Any increase in compensation or other remuneration payable
to or for the benefit of or committed to be paid to or for the
benefit of any shareholder, director, officer, agent, or employee
of the Company in connection with the Business other than in the
ordinary course of business consistent with past practice, or in
any benefits granted under any Plan with or for the benefit of
any such shareholder, director, officer, agent, or employee other
than in the ordinary course of business consistent with past
practice;
(c)Any sale, transfer or other disposition of any of the
Company's material assets (tangible or intangible) or any other
material transaction entered into or carried out by the Company
in connection with the Business other than in the ordinary course
of business;
(d)Any net increase in the amount of indebtedness or
liabilities of the Company in connection with the Business other
than in the ordinary course of business and in amounts and on
terms consistent with past practice; or any endorsement,
assumption, or guarantee of payment or performance of any loan or
obligation of any other Person by the Company in connection with
the Business other than in the ordinary course of business and in
amounts and on terms consistent with past practice;
(e)Any material change made by the Company in connection with
the Business in its methods of doing business or of accounting or
in the manner in which the Company keeps its books and records;
(f)Any declaration or payment of any dividend or the making of
any distribution in respect of the Company's capital stock;
(g)Any cure, show cause or termination notices with respect to
any Material Contract or any Government Contract with a funded
backlog in excess of $500,000; or
(h)Any binding commitment or agreement by Sellers or the
Company to do any of the foregoing items (b) through (f).
3.11. NO BREACH OF LAW OR GOVERNING DOCUMENT.
To the knowledge of Sellers, and except for matters which
would not have a Material Adverse Effect, the Company in
connection with the Business is not in default under or in
material breach or violation of any Law or the provisions of any
Government permit, franchise, or license (except that matters
relating to Environmental Law are covered by Section 3.13 rather
than by this Section), or any provision of its articles of
incorporation or its bylaws. Except as set forth on Schedule
3.11, the Company has not received any written notice during the
past two years alleging any such material default, breach or
violation which has not been finally resolved. Except as
otherwise expressly disclosed in this Agreement, or on any of the
Schedules hereto, to the knowledge of Sellers', neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby do or will constitute or
result in any material (i) violation or conflict with any
provision of the articles of incorporation or bylaws of the
Company; (ii) breach of any of the terms or provisions of, or
violation or default under, or conflict with any Law applicable
to the Company or any judgment, decree, order or award, of any
court, governmental body or arbitrator to which the Company is a
party or may be bound; or (iii) violation, conflict with, default
under, termination of, acceleration of performance required by,
or acceleration of the maturity of, any material liability or
obligation, creation or imposition of any Lien upon the Shares or
the assets of the Company under any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment,
understanding, or other agreement to which the Company is a party
or to which the Company may be bound or affected or to which the
Shares or the assets of the Company may be subject.
3.12. LITIGATION.
Except as set forth on Schedule 3.12, to Sellers' knowledge,
there is no suit, claim, litigation, investigation, proceeding
(administrative, judicial, or in arbitration, mediation or
alternative dispute resolution) or other action pending or, to
the knowledge of Sellers, threatened against the Company in
connection with the Business and which would have a Material
Adverse Effect.
3.13. ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 3.13 hereto, and except for
matters related exclusively to any real property and improvements
which at any time prior to the Closing was owned, leased or
occupied by the Company, but as of Closing is not or will not be
owned, leased or occupied by the Company, and except for matters
related exclusively to any off-site waste disposal facilities
(all of which foregoing exceptions are Excluded Assets and
Excluded Liabilities), and except for such matters as would not
individually or in the aggregate have a Material Adverse Effect
on the Company, to the knowledge of Sellers:
(a)the Company is in compliance with all applicable
Environmental Laws, and the Company has not received any formal
notice or demand from a Government entity, citizens' group or
other Person which is currently pending, alleging a material
violation of any Environmental Law. The Company has not received
from any Government entity any order or demand, which is
currently pending, requiring that steps be taken to remedy any
environmental condition on or at the Company's facilities (or
elsewhere), or claiming that the Company is responsible for
damages, losses, penalties, fines, liabilities, costs and
expenses of any kind or nature (including attorney's fees) as a
result of the existence of hazardous materials or substances
upon, about or underneath any of the Company's current or former
facilities (or elsewhere) or migrating or threatening to migrate
to or from any such facilities;
(b)the Company has all permits and other authorizations
required under the Environmental Laws, and the Company is in
compliance with such permits and other authorizations;
(c)no conditions were created by the Company at any facility
currently or formerly owned, leased or operated by the Company
during the period of the Company's ownership, lease or operation
of such facility that require remediation under any Environmental
Law;
(d) the Company has not received any formal notice or demand
which is currently pending under any Environmental Law as a
result of the off-site disposal of any hazardous material or
waste by the Company; and
(e) the Company has not placed or caused to be placed on any
facilities currently or formerly owned, leased, occupied or
operated by the Company any underground storage tanks nor are the
Sellers or the Company aware of any such underground storage
tanks having been placed on or underneath any of such facilities
by any Person during such times as Sellers or the Company owned,
leased, occupied or operated such facilities.
Notwithstanding anything else in this Agreement to the
contrary, all representations and warranties with respect to
environmental matters are set forth exclusively in this Section,
and all other representations and warranties contained in any
other Section herein shall be deemed not to include any
representations or warranty with respect to such matters.
3.14. CONTRACTS.
(a)Set forth on Schedule 3.14(a) is a list of each written or
oral contract, agreement, lease, indenture and evidence of
indebtedness to which the Company is a party (the "Material
Contracts") which involves outstanding, contingent, or continuing
liability or obligation of or to the Company in connection with
the Business and which
(i) involves
(A) a guarantee or indemnity involving an obligation
in excess of $500,000,
(B) a power of attorney,
(C) a sharing of payments or joint venture,
(D) a sales agency, representation, distributorship or
franchise arrangement which is not terminable on not more
than 60 days notice without penalty,
(E) material restrictions on competition,
(F) collective bargaining or union representation,
(G) a payment obligation in excess of $500,000,
(H) a material lease with an aggregate outstanding
obligation in excess of $300,000, or
(I) employment and consulting agreements to which the
Company is a party, or
(ii) is not in the ordinary course of business. Such
Schedule also lists (and included in the definition of
Material Contracts) all non-government prime sales contracts
with funded backlog over $500,000.
(b)Each of the Material Contracts is a valid, binding and
enforceable obligation of the Company and, to the knowledge of
Sellers, the other parties thereto. Except as indicated on
Schedule 3.14(b),
(i) the Company is not, and
(ii) to the knowledge of Sellers, no other party to a
Material Contract is, in material default under or in material
breach or violation of any Material Contract, and no event has
occurred that, through the passage of time or the giving of
notice, or both, would constitute a material default under any
Material Contract, and neither the execution of this Agreement
nor the Closing hereunder do or will constitute or result in,
such a material default, breach or violation, cause the
acceleration of any obligation of any party thereto or the
creation of a Lien upon any assets of the Business or the
Shares, or require any party's consent or approval thereunder,
or result in a material modification of any Material Contract.
(c) Except as set forth in Schedule 3.14(c), to Sellers'
knowledge, the Company has no material "offset obligations." For
purposes hereof, the term "offset obligations" means any offset,
counter trade or barter obligations arising under or relating to
any contract in favor of any foreign government.
(d) Except for such agreements as may be set forth on
Schedule 3.14(a), the Company is not party to any agreements or
understandings requiring a payment to any Person upon a change of
control of the Company.
(e) True, correct and complete copies of all material terms
of such Material Contracts, if requested by Buyer, have been made
available to Buyer.
3.15. GOVERNMENT CONTRACTS.
Set forth on Schedule 3.15 is a list of each Government
Contract with funded backlog in excess of $500,000.
(a)Schedule 3.15(a) identifies each Government Contract with
funded backlog in excess of $500,000 with respect to which, to
Sellers' knowledge, as of the date hereof:
(i)the Company is in material breach or with the passage of
time or the giving of notice, or both, the Company would be in
material breach;
(ii) the Company expects to recognize a loss at the gross
profit level (determined on a basis consistent with the
Accounting Principles) in connection with such contract or any
option thereof;
(iii) full funding (pursuant to multi-year contract
provisions) has not been established;
(iv) there has been a material amendment since the
June 30, 1999 Balance Sheet Date, other than in the ordinary
course of business;
(v)the other party(ies) to the Government Contract are in
material breach or with the passage of time or the giving of
notice, or both, such other party(ies) would be in material
breach; or
(vi) the consent or approval of the other party(ies) to
the Government Contract is required.
(b)Except as set forth on Schedule 3.15(b), with respect to
each Government Contract with funded backlog in excess of
$500,000 and except for those matters which would not in the
aggregate have a Material Adverse Effect:
(i)to the Sellers' knowledge, there are no audits (other
than those conducted in the ordinary course of business) being
conducted by the U.S. Government, a prime contractor or any
other party to such Government Contract;
(ii) except to the extent finally resolved (and any
liability relating thereto paid or reflected on the June 30,
1999 Balance Sheet), neither Sellers nor the Company has
received during the past two years:
(A)any written cure notice or show cause notice (as
defined in the Federal Acquisition Regulations Part 49)
pursuant to applicable contract default provisions or notice
of default;
(B)any written contract termination, whether for default,
convenience, cancellation or lack of funding or other
reasons;
(C)any written final decision or unilateral modification
assessing a price reduction, penalty or claim for damages or
other remedy;
(D)any written claim based on assertions of defective
pricing or violations of government cost accounting
standards or cost principles; or
(E)any written request for an equitable adjustment of, or
claim concerning, such contracts by any of the Company's
customers, subcontractors or suppliers;
(iii) except to the extent finally resolved (and any
liability relating thereto paid or reflected on the June 30,
1999 Balance Sheet), neither Sellers nor the Company has, with
respect to any Government Contracts, received any written
notice of any investigation or enforcement proceeding of a
criminal, civil or administrative nature by any investigative
or enforcement agency of any Government (including any qui tam
action brought under the Civil False Claims Act alleging any
irregularity, misstatement or omission arising under or
relating to any Government Contract);
(iv) there exists no third party financing in the form of
advance payments or assignments of funds.
(c)Except as set forth on Schedule 3.15(c), neither the
Company, nor to Sellers' knowledge, any of the Company's officers
or employees, is suspended or debarred from doing business with
the U.S. Government or is the subject of a finding of
nonresponsibility or ineligibility for U.S. Government
contracting and, to Sellers' knowledge, there are no
circumstances that would warrant the institution of suspension or
debarment proceedings against the Company or any of its officers
or employees.
(d)Except as set forth on Schedule 3.15(d) and except as would
not have a Material Adverse Effect:
(i) to Sellers' knowledge, neither the Company nor any of
its directors, officers, employees, consultants or agents is
or during the past two years has been under any
administrative, civil or criminal investigation or indictment
by the U.S. Government with respect to any alleged
irregularity, misstatement or omission arising under or
relating to any Government Contract or Bid, and
(ii) during the past two years, neither the Company nor
any Affiliate of the Company has conducted or initiated any
internal investigation or made a voluntary disclosure to the
U.S. Government with respect to any allegation of any
irregularity, misstatement or omission arising under or
relating to a Government Contract or Bid.
(e)Except as set forth on Schedule 3.15(e), and except for
matters which would not have a Material Adverse Effect, there are
not
(i) any material claims pending or, to Sellers' knowledge,
threatened against the Company, either by the U.S. Government
or by any prime contractor, subcontractor, vendor or other
Person, arising under or relating to any material Government
Contract, and
(ii) any pending material disputes before a court or
administrative agency between the Company and the U.S.
Government under the Contract Disputes Act or any other
statute or regulation or between the Company and any prime
contractor, subcontractor or vendor, arising under or relating
to any Government Contract. Except as set forth on Schedule
3.15(e), subsequent to January 1, 1998, the Company in
connection with the Business has not received any material
draft or final post award audit report.
(f)Except as set forth on Schedule 3.15(f), and except for
matters which, in the aggregate, would not have a Material
Adverse Effect, to Sellers' knowledge, all material test and
material inspection results provided by the Company to the U.S.
Government or to any other Person pursuant to any material
Government Contract or as a part of the delivery to the U.S.
Government or to any other Person pursuant to a material
Government Contract of any article designed, engineered or
manufactured by the Company were complete and correct in all
material respects as of the date so provided. Except as set forth
in the Schedule 3.15(f), the Company has provided all material
test and inspection results to the U.S. Government or to any
other Person pursuant to a material Government Contract as
required by U.S. law and the terms of the applicable material
Government Contracts; and
(g)To Sellers' knowledge, with respect to each and every
material Government Contract and material Bid, and, except as
otherwise set forth in any Schedule referenced in this Section
3.15, (i) the Company has not received formal written notice of
default or material breach; (ii) all material representations and
certifications which have been, within the past two years,
executed, acknowledged or set forth in or pertaining to such
material Government Contract or material Bid in all material
respects, are accurate and complete as of their effective date,
and the Company has complied in all material respects with such
representations and certifications including, without limitation,
all such representations and certifications required by or
relating to any and all Laws and the regulations and rules
relating to the submission of progress payment requests;
(h)Except to the extent prohibited by the Industrial Security
Manual for Safeguarding Classified Information, Schedule 3.15(h)
sets forth all facility security clearances held by the Company
and to Sellers' knowledge, all personal security clearances held
by any officer or employee of the Company;
(i)To Sellers' knowledge, the Company's cost accounting and
procurement systems with respect to Government Contracts have
been approved and no CAS non-compliance notices have been or are
issued, pending or threatened;
(j)The Company, to the knowledge of Sellers', has no current
advance agreements with its customers for the allocation and
reimbursement of independent research and development expenses.
(k)True, correct and complete copies of all material terms of
such Government Contracts, if requested by Buyer, have been made
available to Buyer.
Notwithstanding anything else in this Agreement to the
contrary, all representations and warranties with respect to
Government Contracts and Bids are set forth exclusively in this
Section and all other representations and warranties contained in
any other Section herein shall be deemed not to include any
representations or warranty with respect to such matters, except
for such representations and warranties which expressly refer to
Government Contracts or Bids.
3.16. INTELLECTUAL PROPERTY.
(a)Schedule 3.16(a) contains a list of all registered
trademarks, service marks, copyrights and patents, and all
applications therefor, included in the Intellectual Property,
specifying as to each, as applicable:
(i) the nature of such Intellectual Property;
(ii) the owner of such Intellectual Property; and
(iii) the jurisdictions by or in which such Intellectual
Property has been issued or registered or in which an
application for such issuance or registration has been filed,
including the respective registration or application numbers.
Schedule 3.16(a) contains a list of all material licenses,
sublicenses and other agreements as to which the Company in
connection with the Business is a party and pursuant to which any
Person is authorized to use the Intellectual Property or any
other material rights of the Company with respect to intellectual
property.
Any Intellectual Property described on Schedule 2.9(a)(iii)
which is material to the operation of the Business as presently
conducted will be licensed to the Company without charge pursuant
to the license agreement set forth on Exhibit F hereto. The
Company's failure to own any of the Intellectual Property
described on Schedule 2.9(a)(iii) after the Closing Date will not
result in the Company's loss of any current material royalties or
other current material revenue, other than revenues related to
the Comtrak Business, that the Company would otherwise have
derived by reason of its ownership of such Intellectual Property.
(b)To Sellers' knowledge, except as disclosed on
Schedule 3.16(b), and except for matters which, in the aggregate,
would not have a Material Adverse Effect,
(i) since June 30, 1996, there has been no material claim
made against the Company asserting the invalidity, misuse or
unenforceability of any of the Intellectual Property, nor have
there been, since such date, any actions or other judicial or
adversarial proceedings involving the Company concerning the
Intellectual Property, nor is any such action or proceeding
threatened,
(ii) there are no material current infringements or
misappropriations of any of the Intellectual Property, and
(iii) since June 30, 1996, the Company has not infringed or
misappropriated any intellectual property or proprietary right
of any other person, and there are no currently existing
material Liens effecting the Intellectual Property (except as
otherwise expressly disclosed in Section 3.5) and the Company
has the right and authority to use each material item of
Intellectual Property in connection with the conduct of the
Business in the manner presently conducted.
3.17. LABOR MATTERS.
(a)Schedule 3.17(a) is a listing of each collective
bargaining, representation or similar agreement or arrangement to
which the Company is a party or by which it is bound in
connection with the Business. True, correct and complete copies
of all of the agreements listed on Schedule 3.17(a) have been
previously delivered to Buyer.
(b)Except as set forth on Schedule 3.17(b):
(i)There is no currently pending charge before the National
Labor Relations Board (or any counterpart state agency) that
the Company has engaged in any unfair labor practice;
(ii) There is no labor strike, dispute, slowdown, or
stoppage pending or, to the knowledge of Sellers, threatened
against the Company;
(iii) No collective bargaining agreement is currently being
negotiated and, to the knowledge of Sellers, no organizing
effort is currently being made with respect to the Company's
employees;
(iv) To the knowledge of Sellers, no current or former
employee of the Company has any valid claim against the
Company on account of or for
(A)overtime pay, other than overtime pay for the current
payroll period,
(B)wages or salary (excluding current bonus, accruals
and amounts accruing under pension and profit-sharing
plans) for any period other than the current payroll
period,
(C)vacation, time off or pay in lieu of vacation or time
off, other than as may be accrued on the books and records
of the Company in accordance with the Accounting Principles
or earned in respect of the current fiscal year, or
(D)any violation of any Law relating to minimum wages or
maximum hours of work, except to the extent that any of the
foregoing is reflected on the June 30, 1999 Balance Sheet;
and
(v)To the knowledge of Sellers, there is no basis for which
a material claim may be made against the Company under any
collective bargaining agreement to which the Company is a
party.
(c)The Company has provided Buyer with a list of all employees
of the Company employed in the operation of the Business as of
the date indicated thereon, with their respective job titles,
dates of employment and rates of compensation. To Sellers'
knowledge, and except as otherwise disclosed herein, the Company
has complied and is presently complying in all material respects
with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and there is no charge or complaint actually pending or,
to the knowledge of Sellers, threatened against the Company
before the Equal Employment Opportunity Commission or the
Department of Labor, or any state or local agency of similar
jurisdiction.
3.18. EMPLOYEE BENEFIT MATTERS.
(a)Except as set forth on Schedule 3.18(a), the Company does
not have outstanding and is not a party to or subject to
liability under any agreement, arrangement, plan, or policy,
whether or not considered legally binding, that involves
(i) any pension, retirement, deferred compensation,
bonus, stock option, stock purchase, health, welfare, or
incentive plan, or
(ii) welfare or "fringe" benefits, including without
limitation vacation, severance, disability, medical, dental,
life and other insurance, tuition reimbursement plan, company
car, club dues, sick leave or family leave, or other benefits
(Sections 3.18(a)(i) and (ii) together the "Plans" and each
item thereunder a "Plan"). True, correct and complete copies
of all documents creating or evidencing any material Plan
listed on Schedule 3.18(a) have been made available to Buyer.
(b)Except as set forth on Schedule 3.18(b), each Plan has been
administered in material compliance with its terms and, to the
extent applicable, with the Employee Retirement Income Security
Act of 1974, as amended or other Law applicable to any Plan.
Each Plan that is intended to qualify under Section 401(a) or
Section 501(c)(9) of the Code has received a favorable
determination letter from the Internal Revenue Service (a copy of
which has been provided to Buyer) and related trusts have been
determined to be exempt from taxation under Section 501(a) of the
Code. Nothing has occurred that would cause and no action or
proceeding is pending or threatened which, to the knowledge of
Sellers, could result in the loss of such exemption or
qualification.
(c)No Plan is a multiemployer plan (as defined in Section
3(37) of ERISA) and the Company has not contributed to nor ever
has been obligated to contribute to any multiemployer plan.
(d)There have been no prohibited transactions within the
meaning of Sections 406 or 407 of ERISA or Section 4975 of the
Code for which a statutory or administrative exemption does not
exist with respect to any Plan. Except as set forth on Schedule
3.18(d), no reportable event within the meaning of Section 4043
of ERISA (other than those for which reporting is waived) has
occurred with respect to any Plan. With respect to each Plan,
all payments due from the Company to date have been made and all
amounts properly accrued to date as liabilities of Company which
have not been paid have been properly recorded on the books of
the Company and are reflected on the June 30, 1999 Balance Sheet.
(e)Except as specified on Schedule 3.18(e), no Plan provides
benefits, including, without limitation, death or medical
benefits (whether or not insured) with respect to current or
former employees of the Company beyond their retirement or other
termination of services other than:
(i) continuation coverage mandated by Section 4980B of
the Code;
(ii) death or pension benefits under any Plan that is an
employee pension benefit plan;
(iii) deferred compensation benefits accrued as liabilities
on the books of Seller (including the June 30, 1999 Balance
Sheet);
(iv) disability benefits under any Plan that is an
employee welfare benefit plan and which have been fully provided
for by insurance or otherwise; or
(v) benefits in the nature of severance pay.
No tax under Section 4980B of the Code has been incurred in
respect of a Plan that is a group health plan as defined in
Section 5000(b)(1) of the Code.
(f)There has been no act or omission by Company or any of
Sellers with regard to the Plans that has given rise to any
fines, penalties, taxes or related charges under Section 502(c),
Section 4071 of ERISA or Chapter 43 of the Code.
(g)Except as set forth on Schedule 3.18(g), there are no
negotiations, demands or proposals that are pending or have been
made which concern matters now covered, or that would be covered
by any Plan.
(h)Except as set forth on Schedule 3.18(h), neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result in any severance,
termination or other payment becoming due to any former or
current employee of the Company or any of its Affiliates or cause
an increase in the amount of compensation due to any such
employee or former employee; or (ii) increase or affect the
calculation of the amount of any benefits otherwise payable under
any Plan or result in any acceleration of the time of payment or
vesting of any such benefits.
3.19. PRODUCT LIABILITY.
Except as described on Schedule 3.19, or as reflected on the
June 30, 1999 Balance Sheet, or to the extent finally resolved or
to the extent of product warranty claims arising in the ordinary
course of business since June 30, 1997, no material claim or
allegation of personal injury, death, or property or economic
damages, claim for punitive or exemplary damages, claim for
contribution or indemnification, or claim for injunctive relief
in connection with any product manufactured, sold or distributed
by the Business has been asserted in writing against the Company.
3.20. GOVERNMENTAL APPROVALS AND FILINGS.
None of the Sellers nor the Company is required to obtain any
approval, consent, or authorization of, or to make any
declaration or filing with, any Government for the valid
execution and delivery of this Agreement or any other agreement
to be delivered hereunder, the purchase and sale of the Shares,
or the performance or consummation of the respective transactions
contemplated hereby or thereby except for
(a)compliance with the applicable provisions of HSR,
(b)compliance with the Exon-▇▇▇▇▇▇ Amendment, if required,
(c)any necessary approvals of the U.S. Government relating to
Government Contracts as listed on Schedule 3.15(a),
(d)other approvals set forth on Schedule 3.20, and
(e)any other requirements (excluding approvals of the U.S.
Government) as would not prohibit or materially affect the
completion of the transactions contemplated hereby or the
operation of the Business following the Closing.
3.21. BROKERS, FINDERS.
Except as set forth on Schedule 3.21, no finder, broker,
agent, or other intermediary, acting on behalf of Sellers or the
Company, is entitled to a commission, fee or other compensation
in connection with the negotiation or consummation of this
Agreement or any of the transactions contemplated hereby.
3.22. CERTAIN UNLAWFUL PRACTICES
To the knowledge of Sellers, and except for matters which
would not, in the aggregate, have a Material Adverse Effect, in
the three year period preceding the date hereof, the Company has
not nor has any officer, employee or agent of the Company acting
with respect to the Business, nor has any person acting on any of
their behalf with respect to the Business, directly or
indirectly, given or agreed to give any material gift or similar
benefit to any customer, supplier, competitor or governmental
employee or official or has engaged in any other practice
(including, but not limited to, violation of any antitrust law)
or received or retained any such gift or similar benefit, which
in any case would subject the Company to damage or penalty in any
civil, criminal or Governmental litigation or proceeding or which
would be grounds for termination or modification of any
Government Contract or any other Material Contract.
3.23. BANK ACCOUNTS
Schedule 3.23 contains an accurate and complete list of (i)
the names and addresses of each bank in which the Company has an
account; (ii) the account numbers of such accounts; and (iii) the
authorized signatories on each such account.
3.24. INSURANCE
Schedule 3.24 lists each insurance policy, not otherwise
listed on Schedule 3.18(a), held by ESCO with respect to the
Company, each of which will be terminated with respect to the
Company on or after the Closing Date. To the knowledge of
Sellers', there remains no outstanding written requirements or
recommendations of any governmental authority pertaining to any
material repairs or other material work to be done on or with
respect to any of the Company's properties. To the knowledge of
Sellers', there remains no outstanding written requirements of
any insurance company pertaining to any material repairs or other
material work to be done on or with respect to any of the
Company's properties, with respect to such repairs or work such
insurance company has stated in writing its intention to cancel
the insurance coverage, or raise its premium amount with respect
thereto, if such repairs or work are not completed by the
Company.
3.25. BACK CHARGES, REBATES, ETC.
To the knowledge of Sellers, except for matters which are
disclosed in the Financial Statements, with respect to all
Material Contracts, Schedule 3.25 lists all material outstanding
claims by customers for back charges, rebates, price reductions
or settlements, or for breaches of product or service warranties,
or for product liability for products manufactured or sold as of
the date hereof.
3.26. QUOTE LOG.
Included on Schedule 3.26 is the quote log of the Company as
of the date indicated thereon, which quote log contains a list as
of such date of all quotes issued by the Company since the
beginning of the Company's then current fiscal year.
3.27. SALES TAX REFUND EXPENSES.
To Seller's knowledge, there are no material out-of-pocket
expenses that Buyer or the Company will incur in connection with
pursuing the sales/use tax refund claim described on Schedule
2.9(a)(iv).
3.28. YEAR 2000 PLAN
The Company has a Year 2000 plan in place that includes (i) an
assessment of all information technology systems used by the
Company; and (ii) contingency arrangements for non-compliance
with the plan or the failure of suppliers, customers or other
third parties having business relationships with the Company to
adequately address Year 2000 requirements. The Company has, to
the Sellers' knowledge, taken reasonable measures to assure that
the Company's information technology is (or will be by the
Closing Date) Year 2000 compliant.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and
warranties to Sellers, each of which is accurate on the date
hereof and will be accurate as of the Closing Date:
4.1.AUTHORIZATION.
Buyer is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Missouri. Buyer
has all requisite power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement constitutes
a valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms. This Agreement and all other
agreements herein contemplated to be executed by Buyer has been
(or will be prior to the Closing) authorized by all necessary
action, corporate or otherwise, by the Buyer.
4.2.INVESTMENT REPRESENTATION.
Buyer is acquiring the Shares for its own account, for
investment and without any view to resale or distribution of the
Shares or any portion thereof.
4.3.GOVERNMENTAL APPROVALS AND FILINGS.
Except for compliance with the applicable provisions of the
HSR and, if required, any applicable provisions of Sec. 721 of
Title VII of the Defense Production Act of 1950, as amended (50
U.S.C. App. 2170) (the "Exon-▇▇▇▇▇▇ Amendment"), and any other
requirements (excluding approvals of the U.S. Government) as
would not prohibit or materially affect the completion of the
transactions contemplated hereby, Buyer is not required to obtain
any approval, consent, or authorization of, or to make any
declaration or filing with, any Government for the valid
execution and delivery of this Agreement or any other agreement
to be delivered hereunder, the purchase and sale of the Shares,
or the performance or consummation of the respective transactions
contemplated hereby or thereby.
4.4.BROKERS, FINDERS.
Except as set forth on Schedule 4.4, no finder, broker, agent,
or other intermediary, acting on behalf of Buyer, is entitled to
a commission, fee or other compensation in connection with the
negotiation or consummation of this Agreement or any of the
transactions contemplated hereby.
4.5.FINANCING.
Buyer has delivered to Seller true, correct and complete
copies of its Commitment Letter (excluding the Fee Letter portion
thereof) and Summary of Indicative Terms and Conditions
(excluding the fee portion thereof) (collectively, the
"Commitment") pertaining to its proposed $145,000,000 senior
secured credit facility which will be syndicated through Bank of
America, N.A. and Banc of America Securities, L.L.C. (the "BOA
Credit Facility"). Buyer has no knowledge that there are any
factors (other than the conditions set forth in the Commitment)
which would preclude the successful consummation of the BOA
Credit Facility. Buyer shall cooperate with the syndicate of
lending institutions and use its best efforts to obtain the BOA
Credit Facility upon substantially the terms set forth in the
Commitment.
4.6.WARN ACT.
Buyer does not currently contemplate taking any action after
Closing which would require notification under the Worker
Adjustment and Retraining Notification Act of 1988 to have been
given on or prior to the Closing Date or which would create any
material liability to the Sellers or any of their Affiliates
thereunder.
4.7.INVESTIGATION BY BUYER.
Buyer has conducted its own independent review and analysis of
the business, operations, technology, assets, liabilities,
results of operations, financial condition and prospects of the
Company and acknowledges that Sellers have provided Buyer with
access to the personnel, properties, premises and records of the
Company for this purpose. Buyer acknowledges that neither of the
Sellers nor the Company nor any of their Affiliates, directors,
officers, employees, agents or representatives makes or has made
any representation or warranty, either express or implied, as to
the accuracy or completeness of any of the information provided
or made available to Buyer, except as and only to the extent
expressly set forth herein with respect to such representations
and warranties and subject to the limitations and restrictions
contained in this Agreement.
ARTICLE V.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer at Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the
following conditions (unless waived in writing by Buyer):
5.1.REPRESENTATIONS AND WARRANTIES.
Sellers' representations and warranties set forth in Article
III shall have been true and correct in all material respects
when made and shall be true and correct in all material respects
on the Closing Date and as of the Effective Time as though such
representations and warranties were made at and as of such date
and time, without giving effect to modifications to the Schedules
to this Agreement which are delivered by Sellers to Buyer on or
before the Closing Date, provided that upon completion of Closing
and payment of the Purchase Price by Buyer, such modifications to
the Schedules also shall be effective under this Section 5.1 and
fulfillment of this condition shall be deemed effected.
5.2.PERFORMANCE OF AGREEMENT.
Sellers and the Company shall have fully performed and
complied with all covenants, conditions, and other obligations
under this Agreement to be performed or complied with by them at
or prior to Closing.
5.3.APPROVALS.
All required consents and approvals from Governments and under
Material Contracts shall have been obtained and all waiting
periods required by Law shall have expired.
▇.▇.▇▇ ADVERSE PROCEEDING.
No action shall have been instituted by a third party and
remain pending before a grand jury or court or other Government
entity
(a)for the purpose of enjoining or preventing the consummation
of this Agreement or any of the transactions contemplated hereby,
or
(b)which claims that this Agreement, such transactions, or
their consummation, is illegal.
5.5.CERTIFICATE.
Sellers shall have delivered to Buyer at Closing a certificate
of each of the Sellers, dated the Closing Date, and in a form
reasonably acceptable to Buyer, to the effect that the conditions
set forth in Sections 5.1 through 5.4 have been satisfied, after
giving full effect to all modifications to the Schedules to this
Agreement which are delivered by Sellers to Buyer on or before
the Closing Date.
5.6.RESIGNATIONS.
Sellers shall have delivered to Buyer at Closing the
resignations, effective as of the Closing Date, of the officers
of the Company listed on Schedule 5.6 and of all directors of the
Company from all positions held with the Company.
5.7.OPINION OF COUNSEL FOR SELLERS.
Buyer shall have received an opinion of counsel for the
Sellers addressed to Buyer and dated the Closing Date, in
substantially the form attached at Exhibit D hereto. In
rendering such opinion, counsel may rely upon certificates of
public officials and upon certificates of officers of the Sellers
as to factual matters and on opinions of other counsel of good
standing, whom such counsel believes to be reliable.
5.8.GOOD STANDING CERTIFICATES.
Sellers shall have delivered to Buyer certificates of good
standing of the Company from the Secretaries of State of the
following jurisdictions: Delaware, Missouri and Florida.
▇.▇.▇▇▇▇ OF AMERICA FINANCING
Buyer shall have closed on and received the proceeds of the
BOA Credit Facility upon substantially the terms set forth in the
Commitment.
5.10. LICENSE.
Sellers shall have delivered to Company an executed license
agreement in the form of Exhibit F attached hereto.
ARTICLE VI.
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers at Closing shall be subject to the
satisfaction, at or prior to the Closing, of the following
conditions (unless waived in writing by Sellers):
6.1.REPRESENTATIONS AND WARRANTIES.
Buyer's representations and warranties set forth in Article IV
shall have been true and correct in all material respects when
made, and shall be true and correct in all material respects on
the Closing Date and as of the Effective Time as though such
representations and warranties were made at and as of such date
and time.
6.2.PERFORMANCE OF AGREEMENT.
Buyer shall have fully performed and complied with all
covenants, conditions and other obligations under this Agreement
to be performed or complied with by it at or prior to the
Closing.
6.3.APPROVALS.
All required consents and approvals from Governments, under
Material Contracts and from Sellers' lenders shall have been
obtained and all waiting periods required by Law shall have
expired.
▇.▇.▇▇ ADVERSE PROCEEDING.
No action shall have been instituted by a third party and
remain pending before a grand jury or court or other Government
entity
(a)for the purpose of enjoining or preventing the consummation
of this Agreement or any of the transactions contemplated hereby,
or
(b)which claims that this Agreement, such transactions, or
their consummation, is illegal.
6.5.CERTIFICATE.
Buyer shall have delivered to Sellers at the Closing a
certificate of Buyer executed by an executive officer of Buyer,
dated the Closing Date and in a form reasonable acceptable to the
Sellers, to the effect that the conditions set forth in Sections
6.1 through 6.4 have been satisfied.
6.6.TRANSITION SERVICES AGREEMENT.
(a)The Sellers and the Company shall have entered into a
Transition Services Agreement, substantially in the form of
Exhibit C hereto (the "Transition Services Agreement"), pursuant
to which the parties thereto shall agree to provide the services
described therein following the Closing, on the terms and subject
to the conditions set forth therein.
(b)The Transition Services Agreement is intended to ensure
that the separation of the Business from the other operations of
the Sellers and their Affiliates, and the transfer of the
Business to the Buyer, will be accomplished without unnecessary
disruption of the operations of any of the affected parties, and
to confirm that the services and cooperation from each such Party
which is required in this regard will be provided without
interruption and on commercially reasonable terms. The Parties
shall cooperate in finalizing the detailed terms of the
Transition Services Agreement in order to accomplish these
purposes for their mutual benefit.
6.7.GOVERNMENT CONTRACT GUARANTEES; LOCS/ BONDS.
(a)Prior to Closing, Buyer and Sellers shall cooperate in
requesting the beneficiaries of the guarantees described on
Schedule 6.7(a), which have been issued by Sellers in respect of
Government Contracts ("Government Contract Guarantees"), to
accept guarantees of Buyer (or, with the consent of Sellers,
guarantees of one of its Affiliates or other Person) on
substantially the same terms, and to cause Sellers to be released
from all liability under the Government Contract Guarantees. Any
costs incurred in arranging for such substitution and release
shall be paid by the Buyer.
(b)Prior to Closing, Buyer and Sellers shall cooperate in
requesting the beneficiaries of the letters of credit and bonds
described on Schedule 6.7(b), which have been issued to secure
the performance of the Company in respect of contracts and other
obligations of the Company ("LOCs/Bonds") to accept letters of
credit and bonds issued or secured by Buyer, at its cost, on
substantially the same terms, and to cause Sellers to be released
from all liability under the LOCs/Bonds.
(c)Sellers' release from the Government Contract Guarantees
and all LOCs/Bonds, effected in a manner satisfactory to Sellers
in their sole discretion, is a condition to the obligations of
Seller at Closing.
6.8.▇▇▇▇▇▇▇ GUARANTEES.
Prior to Closing, Buyer and Sellers shall cooperate in
requesting the U.S. Government to accept the guarantee of Buyer
(or, with the consent of ▇▇▇▇▇▇▇, guarantees of one of its
Affiliates or other Person) in replacement of the guarantees
which have been issued by ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇ Guarantees") in
connection with the Government Contracts described on Schedule
6.8 on substantially the same terms, and to cause ▇▇▇▇▇▇▇ to be
released from all liability under the ▇▇▇▇▇▇▇ Guarantees. Any
costs incurred in arranging for such substitution and release
shall be paid by the Buyer. ▇▇▇▇▇▇▇'▇ release from the ▇▇▇▇▇▇▇
Guarantees, effected in a manner satisfactory to Sellers in their
sole discretion, is a condition to the obligations of Sellers at
Closing.
6.9.OPINION OF COUNSEL FOR BUYER.
Sellers shall have received an opinion of counsel for the
Buyer addressed to Sellers and dated the Closing Date, in
substantially the form attached at Exhibit E hereto. In
rendering such opinion, counsel may rely upon certificates of
public officials and upon certificates of officers of the Buyer
as to factual matters and on opinions of other counsel of good
standing, whom such counsel believes to be reliable.
6.10. GOOD STANDING CERTIFICATES.
Buyer shall have delivered to Sellers certificates of good
standing from the Secretary of State of Missouri.
ARTICLE VII.
ADDITIONAL COVENANTS OF THE PARTIES
7.1.CONDUCT OF BUSINESS BEFORE CLOSING.
Until the Closing, Sellers shall
(a)cause the Company to operate the Business in the ordinary
course of business, except for such acts which are otherwise
permitted under this Agreement, including without limitation
those provided in Sections 2.7 to 2.10,
(b)not take or permit the Company to take any action which
would require a material change to the disclosures of Sellers
pursuant to subsections 3.10(b) through 3.10(f) (including, if
material, an addition to or deletion from the disclosures set
forth in such subsections), without the prior written consent of
Buyer, and
(c)not permit the Company to amend its Articles of
Incorporation or Bylaws.
Further, until the Closing, and except as would not have a
Material Adverse Effect, Sellers agree to cause the Company to
use its reasonable efforts to preserve intact its present
business organization, keep available the services of its
employees, preserve its relationships with customers, suppliers
and others having business dealings with it, and maintain its
tangible assets and properties in at least their current
condition and repair, reasonable wear and tear excepted.
7.2.ACCESS TO RECORDS.
(a)Until the Closing, Sellers shall cause the Company to
afford to authorized representatives of Buyer reasonable access
during normal business hours to all personnel, premises,
properties, books, records and data of the Company and Sellers
but only insofar as they relate to the operations of the
Business. In particular with respect to Taxes, to the extent
such documents relate solely to the Business, Sellers shall
provide to representatives of Buyer access to all federal and
state income and franchise Tax Returns, and other written
correspondence filed or submitted by the Company with or to the
relative taxing authorities with respect to all periods to which
the applicable statute of limitations remain open, and will
produce for Buyer's inspection all sales, use, property and other
tax and information returns filed by the Company.
(b)From and after the Closing, Buyer shall cause the Company
upon reasonable notice to afford to authorized representatives of
Sellers reasonable access during normal business hours to such
books, records and personnel of the Company as the Sellers may
reasonably require
(i) to determine any matter relating to their rights and
obligations hereunder or to any period ending on or before the
Closing Date, or
(ii) to prosecute or defend any litigation or
investigation by any Government or any Third Person (including
without limitation Tax audits).
(c)Upon Sellers' reasonable request from time to time after
Closing, Buyer shall cause the Company upon reasonable notice to
afford to authorized representatives of Sellers reasonable access
during normal business hours to
(i) any books, records, documents and information
relating to the human resource services performed by the
Company on behalf of the Sellers and their Affiliates prior to
the Closing Date, including payroll records, employee files,
benefit files, workers compensation records and any other
documentation relating to the current or former employees of
Sellers or any of their Affiliates, and
(ii) any books, records, documents and information,
including any financial records, relating to Sellers, their
Affiliates, their businesses, the Excluded Assets or the
Excluded Liabilities.
(d)Upon Buyer's reasonable request from time to time after
Closing, Sellers shall, upon reasonable notice, afford authorized
representatives of the Buyer and the Company reasonable access
during normal business hours to any books, records, documents and
information, including any financial records in Sellers'
possession or under Sellers' control relating solely to the
Company, the Business, the Additional Assets and the Additional
Liabilities or otherwise relating to Buyer's rights and
obligations hereunder or any other obligations of the Company
after the date hereof.
(e)Notwithstanding the foregoing, such books and records in
the possession of one Party but existing solely with respect to
the other Party shall be transferred at such other Party's
request.
(f)Notwithstanding the foregoing, such access and information
shall only be given upon reasonable prior notice to the other
Party, and neither Party shall, by virtue of the obligations set
forth herein, be required to take any actions which would:
(i) unreasonably interfere with the operations of their
respective businesses;
(ii) grant access to any of their proprietary,
confidential or classified information; or
(iii) violate any Law, Material Contract or other
obligation of either of the Parties or their respective
Affiliates.
7.3.HSR FILING.
The Parties shall cooperate with one another
(a)in determining whether an HSR filing is required in
connection with the transactions contemplated by this Agreement,
and
(b)in making any such filing and furnishing information
required in connection therewith. The filing fee for any such
HSR filing shall be paid by Buyer.
7.4.EXON-▇▇▇▇▇▇ AMENDMENT.
If required, Buyer and Sellers agree to use their best efforts
to compile and provide the information and documentation
necessary for filing a joint Exon-▇▇▇▇▇▇ Amendment notification
with the Committee on Foreign Investment in the United States, as
promptly as practicable after the date hereof. Sellers shall,
and shall cause Company to, use all reasonable efforts to
initiate and obtain national interest determinations ("NID(s)")
from each of the Company customers that hold contracts requiring
access to "proscribed" classified information. Buyer agrees to
use all reasonable efforts to advise and assist in obtaining
these NID(s).
7.5.PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY.
(a)Neither Party to this Agreement shall issue any press
release or make any public statement with respect to the terms
hereof or the transactions contemplated hereby without the prior
written consent of the other Party, except as required by Law or
by the rules and regulations of any national securities exchange
on which the securities of a Party is listed.
(b)Buyer's obligations under the Confidentiality Agreement
dated September 15, 1998 between Buyer and ▇.▇. ▇▇▇▇▇▇
Securities, Inc. as agent for Sellers ("Confidentiality
Agreement") remain in full force and effect; provided, however,
that, effective upon the Closing, the Confidentiality Agreement
shall terminate with respect to information relating to the
Business transferred hereunder.
(c)After the Closing, Buyer shall keep confidential, and cause
its Affiliates and instruct its and their officers, directors,
employees and advisors to keep confidential, all information
relating to Sellers, their Affiliates and their respective
business and personnel, except as required by Law or
administrative process and except for information which is
available to the public on the Closing Date, or thereafter
becomes available to the public other than as a result of a
breach of this Section.
(d)After the Closing, Sellers shall keep confidential, and
cause their Affiliates and instruct its and their officers,
directors, employees and advisors to keep confidential, all
information relating to the Business, the Buyer and the Buyer's
Affiliates, except as required by Law or administrative process
and except for information which is available to the public on
the Closing Date, or thereafter becomes available to the public
other than as a result of a breach of this Section.
(e)If either of the Sellers or Buyer shall determine that it
may be required by Law or administrative process to make a
disclosure otherwise prohibited by this Section, it shall
promptly so advise the other Party and shall cooperate with such
other Party and take such actions as shall be reasonably
requested by such other Party in order to prevent or limit such
required disclosure.
7.6.FURTHER ASSURANCES.
From and after the Closing, the Parties shall do such acts and
execute such documents and instruments as may be reasonably
required to make effective the transactions contemplated hereby.
In the event that consents, approvals, other authorizations or
other acts contemplated by this Agreement have not been fully
effected as of Closing, the Parties will continue after the
Closing, without further consideration, to use their best efforts
to carry out such transactions; provided, however, in the event
that certain approvals, consents or other necessary documentation
cannot be secured, then the Party having legal responsibility,
ownership or control shall act on behalf of the other Party,
without further consideration, to effect the essential intention
of the Parties with respect to the transactions contemplated by
this Agreement.
7.7.KNOWLEDGE OF BREACH;CURRENT INFORMATION.
(a)If, at any time prior to Closing, Buyer obtains knowledge
of any facts, circumstances or situation which constitute a
breach, or if known to Sellers would constitute such a breach, or
will with the passage of time or the giving of notice constitute
a breach, of any representation, warranty or covenant of Sellers
hereunder or a failure of any conditions to Buyer's obligations
under this Agreement or the Schedules and Exhibits hereto, Buyer
shall give Sellers prompt notice thereof and provide Sellers a
reasonable opportunity to cure such breach or satisfy such
condition. If Buyer fails to provide Sellers with notice of such
breach within the earlier of ten business days after discovery
thereof or the Closing Date, Buyer shall be precluded from
seeking indemnification with respect to such breach under Article
VIII hereto.
(b)Sellers shall advise Buyer in writing promptly, but in any
event prior to the Closing, of the occurrence of any event known
to the Sellers which renders any of Sellers' representations or
warranties set forth herein inaccurate in any material respect or
the awareness of Sellers that any representation or warranty set
forth herein was not accurate in all material respects when made.
Between the date hereof and the Closing Date, Sellers will also
provide Buyer promptly upon becoming available, copies of all
monthly financial reports normally prepared by the Company. If,
to the knowledge of Sellers, any of the information disclosed on
any Schedules hereto is incorrect (except for matters which, in
the aggregate, would not have a Material Adverse Effect), Sellers
shall promptly prepare and deliver to Buyer updated Schedules at
any time after the date hereof, but prior to the Closing.
▇.▇.▇▇▇ MATTERS.
(a)For purposes of this Section, the following terms have the
following meanings:
"Seller Group" means, with respect to federal income Taxes,
the affiliated group of corporations (as defined in Section
1504(a) of the Code) of which either of the Sellers is a
member and, with respect to state or local income or franchise
Taxes, the consolidated, combined or unitary group of which
either of the Sellers or any of their Affiliates is a member.
"Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable
deduction, claim for refund or any other credit or tax
attribute which could reduce Taxes (including, without
limitation, deductions and credits related to alternative
minimum Taxes), provided, however, that such term shall not
include the Tax basis of the Shares of the Company.
(b)Sellers will prepare and file, or cause to be prepared and
filed, all Tax Returns for the Company required to be filed with
the appropriate United States, state, local and foreign
governmental entities for any taxable period of the Company that
ends on or before the Closing Date (the "Pre-Closing Tax
Period"). Sellers will prepare and, if required to do so by
applicable law, deliver to Buyer for signing and filing any Tax
Returns of the Company with respect to any Pre-Closing Tax Period
(including any short period) that have not been filed prior to
the Closing Date. Sellers will pay all Taxes required to be paid
with respect to any such Tax Returns to the extent not reflected
on the Closing Financial Statements.
(c)Except as otherwise provided in Section 7.8(b) or (d),
Buyer will prepare and file, or caused to be prepared and filed,
all Tax Returns for the Company that are required to be filed
with the appropriate United States, state, local and foreign
governmental entities for all periods as to which such Tax
Returns are due after the Closing Date. Buyer will pay, or cause
to be paid, all Taxes required to be paid with respect to such
Tax Returns.
(d)With respect to any taxable period that would otherwise
include but not end on the Closing Date, to the extent
permissible pursuant to applicable law, Sellers will, and Buyer
will cause the Company to, take all steps as are or may be
reasonably necessary, including, without limitation, the filing
of elections or returns with applicable taxing authorities, to
cause such period to end on the Closing Date. In any case where
applicable law does not permit the Company to close its taxable
year on the Closing Date, then Taxes, if any, attributable to the
taxable period of the Company that includes the Closing Date
shall be allocated to Sellers for that portion of the taxable
period up to and including the Closing Date and to the Buyer for
the portion of the taxable period subsequent to the Closing Date.
(e)In order to assist Sellers in the preparation of all Tax
Returns that Sellers are required to prepare pursuant to Section
7.8(b), Buyer will prepare, or cause the Company to prepare, and
deliver to Sellers, within 90 days following the relevant taxable
period, standard Federal and state tax return data gathering
packages relating to the Company. In addition to providing such
packages, Buyer will promptly provide, or cause to be provided,
to Sellers such other information as Sellers may reasonably
request (including access to books, records and personnel) in
order for the operations of the Company to be properly reported
in such Tax Returns, for the preparation for any Tax audit or for
the prosecution or defense of any claims, suit or proceeding
relating to Taxes.
(f)With respect to any Tax Return of the Company required to
be filed by either Buyer or the Company after the Closing Date
for a taxable period that ends on or before the Closing Date or
includes the Closing Date (whether or not such taxable period
ends on the Closing Date as provided in Section 7.8(d)), Buyer
shall provide Sellers and their authorized representatives with
copies of such completed Tax Return at least 15 days prior to the
due date for filing of such Tax Return, and Sellers and their
authorized representatives shall have the right to review such
Tax Return prior to the filing thereof. Buyer and Sellers agree
to consult and resolve in good faith any issues arising as a
result of the review of such Tax Return by Sellers or their
authorized representatives prior to the filing of such Tax Return
and do mutually consent to the filing of such Tax Return.
(g)Other than to the extent required by Law, Buyer covenants
that it will not cause or permit the Company or any Affiliate of
Buyer to amend any Tax Return or take any Tax position on any Tax
Return, take any action, omit to take any action or enter into
any transaction that results in any material increased tax
liability or material reduction of any Tax Asset of Sellers or
the Seller Group in respect of any Pre-Closing Tax Period. Other
than to the extent required by Law, Sellers covenant that they
will not cause or permit the Company or any Affiliate of Sellers
to amend any Tax Return or take any Tax position on any Tax
Return, take any action or enter into any transaction that
results in any material increased tax liability or material
reduction of any Tax Asset of Buyer or the Company in respect of
any Post-Closing Tax Period.
(h)If, with respect to a Tax Return required to be filed by
the Company, Sellers reasonably determine that the Company is
entitled to file a claim for refund or an amended Tax Return with
respect to a Pre-Closing Tax Period, Buyer shall, upon Sellers'
reasonable request and at Sellers' reasonable expense, cause the
Company to file all such claims or amended Tax Returns. Buyer
shall cooperate with Sellers at Sellers' reasonable expense to
secure claims for refunds pending as of the Closing Date,
excluding, however, actions in connection with the refund
described on Schedule 2.9(a)(iv), which matters will be
diligently pursued by Buyer at Buyer's reasonable expense.
(i)Buyer shall promptly pay or shall cause prompt payment to
be made to Sellers of all refunds of Taxes and interest thereon
received by, or credited against the Tax liability of Buyer, any
Affiliate of Buyer, or the Company attributable to Taxes paid by
Sellers, the Company or any Affiliate of Sellers with respect to
any Pre-Closing Tax Period.
(j)Buyer shall be solely liable for and shall pay all
applicable sales, transfer, use, stamp, conveyance, value added,
real property transfer, recording, stock transfer and other
similar Taxes, if any, together with all recording or filing
fees, notarial fees and other similar costs of Closing, that may
be imposed upon, or payable, collectible or incurred in
connection with any deemed sale of assets pursuant to any Section
338(h)(10) Election (including an election pursuant to Section
338(g) of the Code or a purported Section 338(h)(10) Election
that is determined to be invalid or ineffective) or otherwise as
a result of the transfer of the assets ("Transfer Taxes").
Notwithstanding the foregoing, Sellers shall include in their
federal consolidated income Tax Return or separate state income
Tax Return the income attributable to the deemed sale of assets
pursuant to any Section 338(h)(10) Election or equivalent
election under state law and any income Tax liability resulting
therefrom.
7.9.NONCOMPETITION; NONSOLICITATION.
(a)For a period of five years from the Closing Date, neither
of the Sellers nor any of their Affiliates shall engage in any
business that directly competes anywhere in the world with the
major product lines of the Company as of the Closing Date, which
are described on Schedule 7.9(a) (the "Restricted Business");
provided that
(i) nothing herein shall prohibit
(A) the acquisition by Sellers or any of their
Affiliates of a Person having not more than 10% of its
sales (based on its latest published annual audited
financial statements) attributable to the Restricted
Business, or
(B) Sellers or their Affiliates (including the Comtrak
Division) from continuing to produce and sell products sold
as of the Closing Date or from producing and selling any
extensions or modifications of such products, and
(ii) the provisions of this paragraph shall automatically
and immediately terminate upon the acquisition by a Person of
a controlling interest in ESCO via an acquisition of the
shares of ESCO, a merger of ESCO with or into such Person, an
acquisition of all or substantially all of the ESCO's assets
or any similar transaction, if such Person is engaged in the
Restricted Business immediately prior to such transaction.
(b)For a period of five years from the Closing Date, neither
Buyer nor any of its Affiliates including the Company shall
engage in any business that directly competes anywhere in the
world with the business carried on by the Comtrak Division as of
the Closing Date, which is described on Schedule 7.9(b) (the
"Comtrak Business"); provided that
(i) nothing herein shall prohibit
(A) the acquisition by Buyer or the Company of a
Person having not more than 10% of its sales (based on its
latest published annual audited financial statements)
attributable to the Comtrak Business, or
(B) Buyer or the Company (excluding the Comtrak
Division) from continuing to produce and sell products sold
as of the Closing Date or from producing and selling any
extensions or modifications of such products, and
(ii) the provisions of this paragraph shall automatically
and immediately terminate upon the acquisition by a Person of
a controlling interest in Buyer via an acquisition of the
shares of Buyer, a merger of Buyer with or into such Person,
an acquisition of all or substantially all of the Buyer's
assets or any similar transaction, if such Person is engaged
in the Comtrak Business immediately prior to such
transaction.
(c)Sellers agree that for a period of two years from the
Closing Date, neither they nor any of their Affiliates shall
solicit any employee of the Company to become an employee of
Seller or such Affiliate without the prior written consent of the
Company, such consent not to be unreasonable withheld.
(d)If any provision contained in this Section shall for any
reason be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect
any other provisions of this Section, but this Section shall be
construed as if such invalid, illegal or unenforceable provision
had never been contained herein. It is the intention of the
Parties that if any of the restrictions or covenants contained
herein is held to cover a geographic area or to be for a length
of time which is not permitted by applicable Law, or in any way
construed to be too broad or to any extent invalid, such
provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or
enforceable under applicable Law, a court of competent
jurisdiction shall construe and interpret or reform this Section
to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater
than those contained herein) as shall be valid and enforceable
under such applicable Law. Each Party acknowledges that the other
Party would be irreparably harmed by any breach of this Section
and that there would be no adequate remedy at law or in damages
to compensate such other Party for any such breach. Each Party
agrees that the other Party shall be entitled to injunctive
relief requiring specific performance by such other Party of this
Section, and each Party consents to the entry thereof.
7.10. EXCLUDED ASSETS AND EXCLUDED LIABILITIES.
(a)Buyer and Sellers shall cooperate with each other to give
effect to the intended transfer by the Company to the Sellers or
one of their Affiliates of the Excluded Assets and the Excluded
Liabilities in accordance with the terms of Section 2.9. Without
limiting the above, Buyer shall furnish or cause to be furnished
to Sellers (subject to any reasonable request of
confidentiality), upon request, as promptly as reasonably
practicable, such information (including access to books and
records) and assistance (including assistance from personnel)
relating to the Excluded Assets and the Excluded Liabilities as
is reasonably necessary for the filing of any return, preparation
for any audit, the prosecution or defense of any claim, suit or
proceeding, or otherwise reasonably necessary to allow the
Parties to have the benefit of the assets and rights intended to
be retained by or transferred to them, or to perform the
obligations they are responsible for in respect of the Excluded
Assets and the Excluded Liabilities. Buyer shall give notice to
Sellers prior to the transfer, discarding or destroying of any
such books and records and shall allow Sellers to take possession
of such books and records (subject to any reasonable request of
confidentiality).
(b)Sellers' rights and responsibility for any litigation or
other legal proceedings relating to the Excluded Assets or the
Excluded Liabilities shall include the legal defense or
prosecution, as the case may be, thereof.
(c)Buyer shall cause the Company to use reasonable efforts to
pursue the claim for refund of Missouri sales/use taxes described
on Schedule 2.9(a)(iv) and shall remit to Sellers, immediately
upon receipt, 60% of the gross amount received by Buyer or the
Company in respect of such claim. Buyer further shall deliver to
Sellers on a fiscal-year quarterly basis, within a reasonable
time after the end of each such quarter, an accounting of all
such receipts and the remissions to Sellers.
(d)Buyer and Sellers shall execute and deliver such documents
or other instruments or certificates as are reasonably necessary
to carry out the intent of this Section.
7.11. INTERCOMPANY ARRANGEMENTS.
(a)Schedule 7.11 is a listing of existing purchase orders or
similar documents and arrangements between the Company and the
Sellers or other Affiliates of the Sellers (the "Intercompany
Purchase Orders"). Prior to the Closing, the Intercompany
Purchase Orders shall be converted to contractual arrangements
under which the price to be paid by the purchaser shall be as
follows:
(i)with respect to Intercompany Purchase Orders between the
Company and Rantec Microwave & Electronics, Inc. ("Rantec") or
PTI Technologies Inc., a firm fixed price equal to the current
prices;
(ii) with respect to the Intercompany Purchase Orders
between the Company and Distribution Control Systems, Inc., a
firm fixed price equal to the currently established prices for
the remaining work (backlog) increased by 20%; and
(iii) with respect to the Intercompany Purchase Orders
concerning the Comtrak Business, a price equal to that
calculated as provided in paragraph (c) below.
Such contracts shall, except as to such pricing terms, reflect
the scope of work, delivery schedule and other material terms as
in effect under the Intercompany Purchase Orders and shall
otherwise reflect the standard terms and conditions used by the
purchaser in the ordinary course of business for contractual
arrangements with other third parties.
(b)In addition to the above and for a period of three years
after Closing, Sellers agree, to the extent possible considering
available manpower and expertise, that it shall cause Rantec or
its successors to offer to provide spare parts, repair services
and other technical services in connection with the F5, Combat
Talon and AWADS product lines at prices, terms and schedules to
be reasonably negotiated by Rantec (or its successors) and the
Company. In the event that Rantec (or its successors) is unable
to offer such products and services, Sellers shall require that
Rantec (or its successors) notify the Company and offer the
Company the opportunity to purchase such data, drawings, tooling
and special test equipment in its possession necessary for
production of the Products.
(c)In addition to the above and for a period of three years
after Closing, Buyer agrees, to the extent possible considering
available manpower and expertise, that it shall cause the Company
to offer to Sellers engineering services in connection with the
Sellers operation of the Comtrak Business. The provision of such
engineering services shall be at a price to Sellers of the
Company's fully-burdened cost exclusive of general and
administrative costs, plus an additional 20% and on such other
terms as the Parties may agree from time to time.
7.12. OTHER SELLER GUARANTEES..
As promptly as practicable after Closing, Buyer shall replace,
at its own cost, all guarantees issued by Sellers in connection
with the Business other than the Government Contract Guarantees
(the "Other Seller Guarantees") with guarantees of Buyer (or,
with the consent of Sellers, guarantees of one of its Affiliates
or other Person) on substantially the same terms, and cause
Sellers to be released from all liability under the Other Seller
Guarantees. To the knowledge of Sellers, all of the Other Seller
Guarantees are listed on Schedule 7.12, but the failure to
include a guarantee on Schedule 7.12 shall not relieve Buyer from
its obligations under the foregoing sentence.
7.13. PLANS; EMPLOYEE BENEFITS.
(a)As of the Effective Time, all of the Plans of the Company
described on Schedule 7.13(a), including the assets of such Plans
as described on Schedule 7.13(a), shall be transferred to Buyer,
and Buyer shall assume the Plans and all liabilities relating to
and arising out of such Plans as described on Schedule 7.13(a).
(b)As of the Effective Time, (i) any Transferred Employees who
are participants in the ESCO Retirement Plan shall no longer
participate in such plan, (ii) the assets of the ESCO Retirement
Plan in respect of the Transferred Employees shall be transferred
in accordance with the assumptions set forth on Schedule 7.13(b)
and in compliance with Section 414(1) of the Code and Section
4044 of ERISA to a retirement plan of Buyer or an Affiliate
thereof which is qualified under Code 401, and (iii) Buyer shall
assume all liabilities under the ESCO Retirement Plan in respect
of all of the Transferred Employees except for any liability to
the U.S. Government relating to assets of the ESCO Retirement
Plan not transferred to the Buyer or an Affiliate under the
Federal Acquisition Regulation, the Cost Accounting Standards or
any other government procurement law or regulation and any
liability to Persons arising out of the Sellers' failure to
transfer to Buyer or an Affiliate the legally required quantity
of assets of the ESCO Retirement Plan to be transferred upon sale
of the Company.
(c)As of the Effective Time, (i) any Transferred Employees who
are participants in the ESCO Employee Savings Investment Plan
(the "ESCO Savings Plan") shall no longer actively participate in
such plan. The account balances of such Transferred Employees
will remain in the ESCO Savings Plan and may be distributed
therefrom in accordance with the terms of the plan.
(d)As of the Effective Time, Buyer shall assume all
obligations of Sellers and any of their Affiliates to provide
retiree welfare benefits to Transferred Employees, and Buyer
shall assume all liabilities of Sellers and their Affiliates, as
identified on Schedule 7.13(d), relating to or arising out of
such benefits.
(e)Buyer shall assume, as of the Effective Time, all of
Sellers' obligations to Transferred Employees under the
supplemental pension or welfare plans, arrangements or agreements
with Transferred Employees identified on Schedule 7.13(e) (i.e.,
plans other than those identified on Schedule 3.18(a) and which
are sponsored by Sellers), and neither of the Sellers nor any of
their Affiliates shall have any liability with respect to such
plans, arrangements or agreements. As of the Effective Time,
Transferred Employees who participate in the Sellers'
Supplemental Executive Retirement Plan shall cease accruing
benefits thereunder.
(f)Except as noted below, for a period not less than 120 days
following the Closing Date and not extending beyond September 30,
2000, Seller shall, subject to approval of the carriers,
insurers, reinsurers and providers, as applicable, allow the
Buyer, at Buyer's cost, to continue to provide Transferred
Employees medical and dental benefits under the same medical and
dental plans in which they participated immediately prior to the
Closing Date. To the extent any such Transferred Employees
participated in self-funded medical or dental plans immediately
prior to the Closing Date, such Transferred Employees'
participation therein shall terminate as of the Closing Date,
except that (i) the Sellers shall continue to reimburse such
Transferred Employees, in accordance with the provisions of the
applicable plans, for claims submitted thereunder during the 90-
day period commencing on the Closing Date which relate to
expenses incurred prior to the Closing Date and (ii) the Buyer
shall reimburse such Transferred Employees, in accordance with
the provisions and procedures of the applicable plans, for any
claims submitted after such 90-day period.
(g)As of the Effective Time, Buyer shall assume all
obligations of Sellers and any of their Affiliates to provide
coverage and benefits to Transferred Employees (and any Person
obtaining such coverage and benefits through a Transferred
Employee) under Sections 601-609 of the Employee Retiree Income
Security Act of 1974, as amended, and Section 4980B of the Code,
and Buyer shall assume all obligations and liabilities of Sellers
and their Affiliates relating to or arising out of such coverage
and benefits.
(h)Except as specifically set forth in Sections 7.13(a)-(g)
above, as of the Effective Time,
(i) Transferred Employees (and their beneficiaries and
dependents) shall no longer actively participate in any
employee benefit plan or arrangement maintained by Sellers or
any of their Affiliates, and
(ii) Buyer and the Company shall assume or retain (as
applicable) all liabilities relating to Transferred Employees
(and their beneficiaries and dependents).
(i) Buyer will provide as of the Closing Date, for all
Transferred Employees, compensation, employee benefit plans,
programs and policies and fringe benefits that are comparable on
an aggregate basis with the compensation, employee benefits
plans, programs, policies and fringe benefits
(i) which the Company provided to such Transferred
Employees immediately prior to the Closing Date and the
Sellers provided to such Transferred Employees immediately
prior to the Closing Date under the ESCO Retirement Plan, or
(ii) which are enjoyed by similarly situated employees of
the Buyer.
7.14. ADDITIONAL ▇▇▇▇▇▇▇ GUARANTEED CONTRACTS.
From and after the Closing, the Buyer will not cause or permit
the Company to enter into any Government Contracts or other
agreements, or any extension, renewal or modification thereof,
which would result in any further liability on the part of
▇▇▇▇▇▇▇ in respect thereof, whether under the ▇▇▇▇▇▇▇ Guarantees
or otherwise, except with the prior written consent of ▇▇▇▇▇▇▇
and the Sellers.
7.15. CLOSING OUT OF GOVERNMENT CONTRACTS.
From and after the Closing, the Buyer will cause the Company
to diligently pursue the administrative closing out of all
Government Contracts in respect of which the performance by the
Company has been completed.
7.16. AUDITED FINANCIAL STATEMENTS OF THE COMPANY.
(a)At least five (5) days prior to the Closing Date in the
case of the 1997 and 1998 below-described financial statements
and within sixty (60) days after the Closing in the case of the
1999 below-described financial statements, Sellers shall cause to
be provided to Buyer the following audited financial statements
of the Company, as prepared in accordance with generally accepted
accounting principles consistently applied:
(i)balance sheets of the Company as of September 30, 1998
and September 30, 1999,
(ii) statements of income of the Company for the years
ended September 30, 1997, September 30, 1998 and September 30,
1999,
(iii) statements of cash flows of the Company for the years
ended September 30, 1997, September 30, 1998 and September 30,
1999,
(iv) statements of shareholders equity at September 30,
1997, September 30, 1998 and September 30, 1999, and
(v) all related footnotes to the foregoing financial
statements.
The foregoing financial statements shall be prepared at Buyer's
expense; provided, however, that Sellers shall pay the costs of
the audit of the year-end September 30, 1999 financial statements
except that, to the extent that the costs incurred in connection
with the audit of the Company's fiscal year-end financial
statements as of September 30, 1999, exceed the costs normally
incurred by ESCO in the audit of its fiscal year-end financial
statements which are attributable to the Company, Buyer and
Sellers shall share such excess costs equally.
(b)Payment shall be made by Buyer to Sellers within five days
of submission by Sellers to Buyer of an invoice for Third Party
charges which are billed to Sellers with respect to the costs
associated with paragraph (a) above.
7.17. EMERLEC-30
Within 60 days after Closing, the Company shall provide Seller
with a copy of the EMERLEC-30 drawing package, source-coded ▇▇▇▇
of material and any related technical documentation which will be
utilized by ESL Limited for use on the Vosper\Saudi Minehunter
program.
ARTICLE VIII.
INDEMNIFICATION
8.1.INDEMNIFICATION BY SELLERS.
Subject to the limitations of Section 8.2 below, the Sellers
shall indemnify and hold harmless the Buyer and, from and after
the Closing, the Company and each of their respective Affiliates
and the shareholders, directors, employees, officers, successors,
permitted assigns and agents of each of them (the "Buyer
Indemnified Persons") against all liabilities, losses, damages,
costs and expenses reasonably incurred by them as a result of:
(a)Any misrepresentation, breach of warranty or non-
fulfillment of any agreement on the part of the Sellers under
this Agreement, or any misrepresentation in any certificate or
other instrument furnished or to be furnished by the Sellers to
the Buyer under this Agreement, after giving full effect to all
modifications to the Schedules to this Agreement which are
delivered by Sellers to Buyer on or before the Closing Date;
(b)Any failure or delay on the part of the Sellers in
satisfying the conditions to the Closing as provided herein or in
fulfilling its obligation to sell the Shares in accordance with
this Agreement;
(c)Any Taxes imposed on or asserted against the Company, Buyer
or any of Buyer's Affiliates (including any transferee or
successor liability arising pursuant to Treasury Regulation
Section 1.1502-6 or any comparable provisions of any state or
local law) (or any claim therefor) by any Government authority
for any taxable period (or a portion thereof) ending on or prior
to the Closing Date arising out of the Business conducted or
transactions by the Sellers or the Company occurring prior to the
Closing Date;
(d) The Excluded Liabilities;
(e) Any liability to the U.S. Government relating to assets of
the ESCO Retirement Plan not transferred to Buyer or an Affiliate
under the Federal Acquisition Regulation, the Cost Accounting
Standards or any other government procurement law or regulation,
and any liability (or any claim thereof) to Persons arising out
of Sellers' failure to transfer to Buyer or an Affiliate the
legally required quantity of assets of the ESCO Retirement Plan
to be transferred upon sale of the Company; and
(f)All actions, suits, proceedings, judgments, settlement
payments, costs and expenses (including attorneys' fees and
expenses) reasonably incurred by the Company or the Buyer
incident to any of the foregoing;
provided, that any such amounts shall
(i) be computed considering the Tax benefit to the
indemnified person arising from the indemnified matter, and
(ii) not include or be recoverable by any Person to the
extent covered by insurance available to the indemnified
person.
Buyer, its employees, agents, directors, officers or
shareholders shall not actively seek the involvement of any Third
Person to assert a claim against Buyer, the Company or Sellers
unless required to do so by law.
8.2.LIMITATIONS ON LIABILITY OF SELLERS.
Notwithstanding the foregoing provisions of Section 8.1 and
except as otherwise provided below:
(a)If the Buyer shall fail to disclose to the Sellers its
knowledge of an anticipated claim for indemnification hereunder
which is required to be disclosed prior to the Closing under
Section 7.7, the Buyer shall not have any right to
indemnification under Section 8.1 in respect of such claim.
(b)The Sellers shall not have any liability under Section 8.1
in respect of any individual claim (or group of related claims)
in an amount less than $50,000. For purposes of this paragraph,
claims will be deemed to be part of a "group of related claims"
if all of the claims arise out of a single underlying set of
circumstances.
(c)The Sellers shall not have any liability under Section 8.1
except to the extent that the aggregate amount of the
indemnification obligation of the Sellers thereunder shall exceed
$500,000 (the "Deductible").
(d) The Sellers shall have no liability under Section 8.1
except in respect of matters as to which the Buyer shall have
asserted a claim in the manner set forth in Section 8.4 hereof
prior to the first anniversary of the Closing Date, provided that
claims in respect of environmental matters arising under Section
3.13 may be asserted at any time prior to the fifth anniversary
of the Closing Date and provided further that claims in respect
of Tax matters and the Plans may be asserted at any time prior to
the expiration of the applicable statutes of limitations therefor
(or any extensions thereof in the case of Tax matters).
(e)The aggregate liability of the Sellers under Section 8.1
shall not exceed $17,500,000 (Seventeen Million Five Hundred
Thousand).
The foregoing limitations of liability shall not apply to nor
restrict or limit in any manner a Buyer Indemnified Person's
entitlement to indemnification under Section 8.1 for matters in
respect of the Excluded Liabilities.
8.3.INDEMNIFICATION BY BUYER.
The Buyer shall indemnify and hold harmless the Sellers and
their Affiliates and the shareholders, directors, officers,
employees, successors, permitted assigns and agents of each of
them (the "Seller Indemnified Persons") against all liabilities,
losses, damages, costs and expenses reasonably incurred by them
as a result of:
(a)Any liabilities or obligations of, or claims against, the
Company based on any event occurring at any time after the
Closing Date;
(b)Any claim, liability or obligation which may be incurred by
the Sellers or asserted against the Sellers which are based on
any acts, events, conditions or omissions after the Closing Date
and which are based on the conduct of the Business by the Buyer
or the Company;
(c)Except as otherwise provided in Section 7.8, all
liabilities and claims of or asserted against the Sellers by any
federal, state or local taxing authorities, or relating to any
tax liability of the Buyer or the Company, to the extent that any
such claim shall relate to the operations of or transactions by
Buyer or the Company after the Closing Date;
(d)Any misrepresentation, breach of warranty or non-
fulfillment of any agreement on the part of the Buyer under this
Agreement, or any misrepresentation in any certificate or other
instrument furnished or to be furnished by the Buyer to the
Sellers under this Agreement;
(e)Any failure or delay on the part of the Buyer in satisfying
the conditions to the Closing as provided herein or in fulfilling
its obligations to acquire the Shares in accordance with this
Agreement;
(f)The Additional Liabilities, except to the extent of
Sellers' indemnity obligations under Section 8.1(e) hereof;
(g)Any failure or delay on the part of the Buyer or the
Company in satisfying the obligations and liabilities assumed by
the Buyer or retained by the Company pursuant to Section 7.13;
(h)The loss of any deduction or imposition of any tax or
penalty pursuant to Section 280G of the Code resulting from any
payment or other action by Buyer or the Company (other than the
payment by the Company of the transaction bonuses described on
Schedules 3.10 and 3.14(a) on behalf of the Sellers) in
connection with the transactions contemplated hereby;
(i)Any claim, liability or obligation which may be incurred by
the Sellers or asserted against the Sellers following the Closing
under any Government Contract Guarantees, LOCs/Bonds, Other
Seller Guarantees or any ▇▇▇▇▇▇▇ Guarantees;
(j)Any liability to the U.S. Government relating to assets of
the ESCO Retirement Plan transferred to the Buyer or an Affiliate
under the Federal Acquisition Regulation, the Cost Account
Standards or any other government procurement law or regulation;
and
(k)All actions, suits, proceedings, judgments, settlement
payments, costs and expenses (including reasonable attorneys'
fees and expenses) incident to any of the foregoing;
provided, that any such amounts shall
(i) be computed considering the Tax benefit to the
indemnified person arising from the indemnified matter, and
(ii) not include or be recoverable by any Person to the
extent covered by insurance available to the indemnified
person.
8.4.NOTICE OF CLAIM.
In the event that Buyer seeks indemnification on behalf of a
Buyer Indemnified Person, or Sellers seek indemnification on
behalf of a Seller Indemnified Person, such Party seeking
indemnification (the "Indemnified Party") shall give reasonably
prompt written notice to the Party from which it seeks
indemnification (the "Indemnifying Party") specifying the facts
constituting the basis for such claim and the amount, to the
extent known, of the claim asserted. The Parties shall attempt
for not less than 30 days to negotiate a mutually satisfactory
resolution of such matter. In the event the Parties are not able
to agree on a mutually satisfactory resolution, either Party may
seek to resolve the dispute by litigation in any court of
competent jurisdiction in accordance with Section 9.9.
8.5.RIGHT TO CONTEST CLAIMS OF THIRD PERSONS.
If an Indemnified Party is entitled to indemnification
hereunder because of a claim asserted by any claimant other than
an indemnified person hereunder (a "Third Person"), the
Indemnified Party shall give the Indemnifying Party reasonably
prompt written notice thereof. The Indemnifying Party shall have
the right, upon written notice to the Indemnified Party, and
using counsel reasonably satisfactory to the Indemnified Party,
to investigate, contest or settle the claim alleged by such Third
Person (a "Third-Person Claim"); the Indemnified Party may
thereafter participate in (but not control) the defense of any
such Third-Person Claim with its own counsel at its own expense.
If the Indemnifying Party shall fail to assume the defense of any
such Third-Person Claim,
(a) the Indemnified Party, in good faith, may defend against
such claim, in such manner as it may deem appropriate, including,
but not limited to, settling such claim, after giving at least 30
days advance written notice of any proposed settlement to the
Indemnifying Party and receiving the Indemnifying Party's prior
written consent, which may not be unreasonably withheld, on such
terms as the Indemnified Party, in good faith, may deem
appropriate, and
(b) the Indemnifying Party may participate in (but not
control) the defense of such action, with its own counsel at its
own expense. The Parties shall make available to each other all
relevant information in their possession relating to any such
Third-Person Claim and shall cooperate in the defense thereof.
8.6.EXCLUSIVE REMEDY.
The provisions of this Article VIII shall constitute the
exclusive remedy of the Parties with respect to any claims
resulting from or arising out of the provisions of this Agreement
or the transactions contemplated hereby, whether based on tort,
contract, Law, investigation by Government, or otherwise
resulting from or arising out of the transactions contemplated
hereby which may be asserted after the Closing. Except for the
time periods otherwise provided in Sections 7.9 or 8.2(d) and
except for the Parties' respective obligations and agreements
concerning the Excluded Assets and Excluded Liabilities which
shall survive the Closing indefinitely, the covenants,
agreements, warranties and representations entered into or made
pursuant to this Agreement shall survive the Closing for a period
of one year, unless a claim with respect thereto shall have been
timely asserted, in which case the survival period for any such
matter shall extend until the final resolution of the claim.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
9.1.TERMINATION OF THE AGREEMENT.
This Agreement may be terminated at any time prior to the
Closing Date
(a)by mutual written agreement of the Parties,
(b)by either Party if the Closing shall not have occurred on
or before October 31, 1999,
(c)by either Party (the "Terminating Party") if the other
Party shall violate any of its obligations hereunder in any
material respect and if such violation shall not be corrected
within 10 days following delivery of a written notice of such
violation from the Terminating Party to the other Party, or
(d)by either Party if there shall be any Law that makes
consummation of the transactions contemplated hereby illegal or
otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable, final
judgment, injunction, order or decree of any court or Government
body having competent jurisdiction.
9.2.NOTICE.
All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given and made upon being
delivered to the recipient Party by recognized courier service,
fax delivery (with confirmation of receipt) or by registered or
certified mail (postage prepaid, return receipt requested), and
addressed to the applicable address set forth below or such other
address as may be designated in writing hereafter by the
recipient Party:
If to Buyer or to Engineered Support Systems,
Inc.:
Engineered Systems and Electronics, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Wittner, Poger, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Sellers:
ESCO Electronics Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇ LLP
One Metropolitan Square
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.3.ENTIRE AGREEMENT.
This Agreement, the joinder of Engineered Support Systems,
Inc., the Schedules hereto, the Exhibits hereto and the
Confidentiality Agreement constitute the entire agreement and
understanding between the Parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous
agreements and understandings relative to such subject matter.
9.4.ASSIGNMENT; BINDING AGREEMENT.
This Agreement and the rights and obligations arising
hereunder shall be binding upon and shall inure to the benefit of
the Parties and to their respective successors and permitted
assigns. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be transferred,
delegated, or assigned (by operation of law or otherwise) by
either of the Parties without the prior written consent of the
other Party; provided, however, Buyer may, without the consent of
the Sellers, transfer and assign its rights and interests under
this Agreement, subject to any right of set-off of the Sellers
under Article VIII of the Agreement, to its lender(s) under the
BOA Credit Facility.
9.5.COUNTERPARTS.
This Agreement may be executed simultaneously in multiple
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
9.6.HEADINGS; INTERPRETATION.
The article and section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way
the meaning or interpretation of the Agreement. Each reference
in this Agreement to an Article, Section, Schedule or Exhibit,
unless otherwise indicated, shall mean an Article or a Section of
this Agreement or a Schedule or Exhibit attached to this
Agreement, respectively. References herein to "days," unless
otherwise indicated, are to consecutive calendar days. Material
contained in the Schedules is sometimes below the materiality
threshold applicable to such Schedule, and the inclusion of such
material shall not affect the interpretation of the intended
materiality threshold in the event a dispute arises with respect
such interpretation. Both Parties have participated
substantially in the negotiation and drafting of this Agreement
and agree that no ambiguity herein should be construed against
either Party.
9.7.EXPENSES.
Each of the Parties shall bear its own costs and expenses
incurred in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation,
fees and expenses of attorneys and accountants.
9.8.GOVERNING LAW.
This Agreement shall in all respects be construed in
accordance with and governed by the substantive laws of the State
of Missouri, without reference to its choice of law rules.
9.9.JURISDICTION.
Except as otherwise expressly provided in this Agreement, any
suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be
brought in the United States District Court for the Eastern
District of Missouri or any Missouri state court sitting in St.
Louis County, and each Party consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any
such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been
brought in an inconvenient forum.
9.10. THIRD PARTY BENEFICIARIES.
No provision of this Agreement is intended to confer upon any
Person other than the Parties any rights or remedies hereunder.
9.11. AMENDMENTS AND WAIVERS.
Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each Party, or in the
case of a waiver, by the Party against which the waiver is to be
effective; provided, however, that Sellers may make unilateral
modifications to the Schedules referenced or to be referenced in
Article III (other than with respect to material modifications
concerning subsections 3.10(b) through (g) as prohibited under
Section 7.1(b)), if such modification is delivered to Buyer on or
before the Closing Date.
IN WITNESS WHEREOF, each of the Parties hereto has caused this
Agreement to be executed as of the date first above written.
SELLERS:
ESCO ELECTRONICS CORPORATION
▇▇▇▇▇▇ ▇▇▇▇▇,
Senior Vice President and General
Counsel
DEFENSE HOLDING CORP.
▇▇▇▇▇▇ ▇▇▇▇▇,
Senior Vice President and
Secretary
BUYER:
ENGINEERED SYSTEMS AND ELECTRONICS,
INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Executive Vice President and Chief Financial
Officer
ENGINEERED SUPPORT SYSTEMS, INC. JOINDER
Engineered Support Systems, Inc. ("ESSI"), the parent
corporation of Buyer, hereby joins in this Agreement to guarantee
the due and punctual performance by Buyer of its obligations,
covenants and agreements under this Agreement, including the
obligation of the Buyer to indemnify the Sellers and their
Affiliates under Article VIII of this Agreement. The foregoing
guarantee is absolute and unconditional, is not subject to any
defense or offset, lack of consideration or similar defense and,
in connection herewith, ESSI hereby waives any suretyship
defenses which it otherwise might have or assert in the event of
enforcement hereof, and the obligations of ESSI shall survive the
Closing in the same manner and to the same extent as the
obligations of Buyer hereby guaranteed. ESSI also, inter alia,
expressly joins in this Agreement with respect to the provisions
of Sections 9.8 and 9.9, and hereby consents to such terms,
further acknowledging that Sellers have made the execution of
this joinder a pre-condition to their own execution of this
Agreement.
ENGINEERED SUPPORT SYSTEMS, INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Executive Vice President and Chief Financial
Officer
TABLE OF SCHEDULES AND EXHIBITS
Schedule 1.9 Field Offices
Schedule 1.15 Persons with Knowledge
Schedule 2.6(a) GAAP Exceptions and Agreed
Accounting Methods or Practices
Schedule 2.9(a)(i) Winter Springs, Florida
Property
Schedule 2.9(a)(ii) Assets of the Comtrak
Division
Schedule 2.9(a)(iii) Patents
Schedule 2.9(a)(iv) Sales/Use Tax Asset
Schedule 2.9(a)(v) Claim Against Crydom
Corporation
Schedule 2.9(b)(i) Former and Off-Site
Facilities
Schedule 2.10(a)(i) Field Office Assets
Schedule 2.11(a) Excluded Employees
Schedule 2.11(b) Additional Employees
Schedule 3.2 Equity Investments
Schedule 3.3 States Qualified to do
Business
Schedule 3.4(a) Financial Statements
Schedule 3.4 (b) Financial Statements -
Exceptions
Schedule 3.5 Property
Schedule 3.6 Officers and Directors of
the Company
Schedule 3.7(a) Tax Returns
Schedule 3.7(c) Waiver; Extension of Time
Schedule 3.7(d) Tax Notices
Schedule 3.8 Accounts Receivable
Schedule 3.9 Inventory
Schedule 3.10 Certain Changes
Schedule 3.11 Notices of Material
Default, Etc.
Schedule 3.12 Litigation
Schedule 3.13 Environmental Matters
Schedule 3.14(a) Material Contracts; Employment
Contracts
Schedule 3.14(b) Material Contracts -
Material Defaults
Schedule 3.14(c) Offset Obligations
Schedule 3.15 Government Contracts - Over
$500,000
Schedule 3.15(a) Government Contracts -
Identification
Schedule 3.15(b) Government Contracts -
Audits, Etc.
Schedule 3.15(c) Government Contracts -
Suspensions
Schedule 3.15(d) Government Contracts -
Investigations
Schedule 3.15(e) Government Contracts -
Claims, Etc.
Schedule 3.15(f) Government Contracts - Test
Results
Schedule 3.15(h) Government Contracts --
Clearances
Schedule 3.16(a) List of Certain
Intellectual Property
Schedule 3.16(b) Intellectual Property -
Infringement
Schedule 3.17(a) Labor Matters - Union
Contracts
Schedule 3.17(b) Labor Matters -
Miscellaneous Matters
Schedule 3.18(a) Employee Benefit Matters -
Plans
Schedule 3.18(b) Benefit Plans
Schedule 3.18(d) Reportable Events
Schedule 3.18(e) Retiree Benefits
Schedule 3.18(g) Pending Negotiations
Schedule 3.18(h) Transaction Impacts under
Plans
Schedule 3.19 Product Liability
Schedule 3.20 Other Approvals
Schedule 3.21 Brokers, Finders - Sellers
Schedule 3.23 Bank Accounts
Schedule 3.24 Insurance
Schedule 3.25 Back Charges, Rebates, etc.
Schedule 3.26 Quote Log
Schedule 4.4 Brokers, Finders - Buyer
Schedule 5.6 Resignations
Schedule 6.7(a) Government Contract
Guarantees
Schedule 6.7(b) LOCs/Bonds
Schedule 6.8 ▇▇▇▇▇▇▇ Guarantees
Schedule 7.9(a) Major Product Lines
Schedule 7.9(b) Comtrak Business
Schedule 7.11 Intercompany Purchase Orders
Schedule 7.12 Other Seller Guarantees
Schedule 7.13(a) Company Plans
Schedule 7.13(b) ESCO Retirement Plan -
Assumptions
Schedule 7.13(d) Retiree Welfare Benefits
Schedule 7.13(e) Supplemental Plans
Exhibit A Sellers' Assignment and
Assumption Agreement
Exhibit B Company's Assignment and
Assumption Agreement
Exhibit C Transition Services Agreement
Exhibit D Form of Sellers' Opinion
Exhibit E Form of Buyer's Opinion
Exhibit F License Agreement
SCHEDULE 7.13(a)
COMPANY PLANS
DEFINED BENEFIT PENSION PLANS
- Electronics & Space Corp. Pension Plan for Employees
Represented by Local 1102, IUE, AFL-CIO. The market asset value
of the Plan as of July 31, 1999 is $19,478,938.
- Southwest Mobile Systems Corporation Pension Plan for District
No. 9, International Association of Machinists and Aerospace
Workers. The market asset value of the Plan as of July 31, 1999
is $2,869,745.
LIABILITIES -- DEFINED BENEFIT PLANS
- All liabilities under the Plans listed above shall remain the
obligations of the Company from and after the Closing Date, and
the Sellers shall have no liability in respect thereof.
SCHEDULE 7.13(b)
ESCO RETIREMENT PLAN - PENSION
(a) As of the date immediately following the Closing Date, the
Sellers shall take all necessary actions to cause the ESCO
Retirement Plan to be split into two separate plans (1) a plan
covering Transferred Employees ("Buyer's Pension Plan") and (2) a
plan covering all participants in the ESCO Retirement Plan and
others who are not Transferred Employees respectively and to
provide for the direct trust-to-trust transfer of assets and
assumption of liabilities as provided below to the Buyer's
Pension Plan. The Buyer or its Affiliate shall adopt the Buyer's
Pension Plan as of the date immediately following the Closing
Date. The assets and liabilities associated with any Transferred
Employee shall be transferred from the ESCO Retirement Plan to
Buyer's Pension Plan.
(b) The amount of the assets to be transferred ("Transferred
Amount") shall be equal to the greater of:
(i) Asset Value A (as defined below) plus fifty (50) percent of
the excess, if any, of Asset Value B over Asset Value A (as
defined below), or
(ii) The amount of assets as of the Closing Date necessary to
meet all applicable requirements of Section 414(l) of the
Internal Revenue Code ("Code").
Asset Value A is defined as the sum of the actuarial accrued
liability as of the Closing Date per CAS 413.50(c)(12)(i),
plus the government's full share of any surplus assets as of
the Closing Date as calculated in CAS 413.50(c)(12)(vi). The
actuarial assumptions for calculations of the actuarial
accrued liability per CAS 413.50(c)(12)(i), including, but not
limited to, the interest rate, mortality, termination,
disability, and retirement assumptions, are specified in the
most recent CAS actuarial report covering fiscal year 1999
("CAS Actuarial Report").
Asset Value B is defined as the market value of the assets as
of the Closing Date allocated to the SEI segment, as
referenced in Cost Accounting Standards ("CAS") 413.50(c)(12).
The interest rate utilized for calculations described in
Section 1(b)(ii) shall be the Pension Benefit Guaranty
Corporation interest rate for valuing annuity benefits for
first twenty (20) years as of the Closing Date, plus 25 basis
points. All other actuarial assumptions for calculations
described in Section 1(b)(ii) are specified in the CAS
Actuarial Report.
The assets transferred shall be in the form of cash or other
assets mutually acceptable to the Buyer and the Sellers.
(c) The asset transfer will occur as soon as reasonably
practicable after the Closing Date, and the amount so transferred
shall equal the Transferred Amount and shall be adjusted by
actual investment return (net of plan expenses) earned by the
ESCO Retirement Plan trust from the Closing Date to the date of
actual asset transfer, and decreased by any benefit payments made
with respect to the Transferred Employees.
(d) As soon as reasonably practicable after the Closing Date,
the Sellers shall report, or cause their actuary to report, to
the Buyer the Sellers' calculations of the amount described in
Section 1(b) and Section 1(c) above, and shall provide to the
Buyer such information and data as may be reasonably requested by
the Buyer to permit the Buyer to review the calculations. If the
Sellers and the Buyer cannot agree on the calculations of such
amounts, then the calculations shall be referred to and settled
with final and binding effect by such independent Fellow of the
American Society of Actuaries as the Sellers and the Buyer may
jointly select ("Independent Actuary"). The Independent Actuary
shall perform such calculations in accordance with the applicable
assumptions and methods as described in Section 1(b) and Section
1(c) of this Schedule 7.13(b). The costs of such independent
actuarial determination shall be borne equally by the Sellers and
the Buyer.
(e) All liabilities under the ESCO Retirement Plan in respect
of the Transferred Employees shall be assumed by the Buyer as of
the Closing Date, and the Sellers shall have no further
obligation in respect of any such liabilities, except as provided
in this Agreement.
(f) Unless otherwise mutually agreed to by the Sellers and the
Buyer, the transfer of such assets and liabilities will be
subject to the Buyer's certification to the Sellers, and the
Sellers' certification to the Buyer, that the ESCO Retirement
Plan and the Buyer's Pension Plan are qualified under the
applicable provisions of the Code.
(g) All methodologies used in the calculations required under
this Schedule 7.13(b) for 1999 shall be consistent with those
applied to the comparable calculations made for 1998.
(h) Buyer shall maintain the Buyer's Pension Plan substantially
in the form existing at Closing for a period of at least 24
months beginning with the first full calendar month following
Closing.
SCHEDULE 7.13(d)
RETIREE WELFARE BENEFITS
RETIREE WELFARE PLANS
- SEI Retiree Welfare Plan as described in employee
communications, and pursuant to which generally the employer pays
for a retiree who satisfies the eligibility requirements, 3
percent of his or her medical premium for each year of service up
to a maximum of 85 percent of the premium. In no event does the
employer provided premium for a pre-Medicare-eligible retiree
exceed 200 percent of the fiscal year 1992 company contribution.
Employees hired after July 1, 1992 are not eligible for the pre-
Medicare-eligible benefit. The lifetime benefit for a retiree
eligible for Medicare is $10,000. Optional additional and
dependent coverage may be available at the retiree's (or
beneficiary's) cost.
LIABILITIES - RETIREE WELFARE PLANS
All liabilities relating to the plan described above in respect
of the Transferred Employees shall remain obligations of the
Company after the Closing Date, and the Sellers shall have no
obligation in respect of any such liabilities, except as provided
in this Agreement.
SCHEDULE 7.13(e)
SUPPLEMENTAL PLANS
-Supplemental Executive Retirement Plan of Sellers
-Supplemental retirement benefits to the following Transferred
Employees: ▇. ▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇
-Group Variable Universal Life Insurance with policies
administered by Paragon Life Insurance Company. The death
benefits are offered to Transferred Employees who make $75,000 or
more in annual compensation, and the premiums with respect to
such policies are paid by the Transferred Employees on an after
tax basis.