EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 18, 2007
BY AND AMONG
▇▇▇▇▇▇▇▇▇ CORPORATION,
AS THE COMPANY
THE STOCKHOLDERS PARTY HERETO,
AS THE SELLING STOCKHOLDERS
L-1 IDENTITY SOLUTIONS, INC.,
AS THE PARENT
L-1 IDENTITY SOLUTIONS OPERATING COMPANY,
AS THE MERGER SUB
AND
▇▇▇▇▇ ▇▇▇▇▇
AS STOCKHOLDERS' REPRESENTATIVE
TABLE OF CONTENTS
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Page
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ARTICLE 1 THE TRANSACTIONS; CLOSING........................................2
1.1 Reverse Merger...................................................2
1.2 Closing..........................................................2
1.3 Effective Time of Reverse Merger.................................2
1.4 Effects of Reverse Merger........................................3
1.5 Certificate of Incorporation and Bylaws..........................3
1.6 Board of Directors and Officers..................................3
1.7 Cancellation of Holdings Shares; Merger Consideration
Payable at Closing...............................................3
1.8 Determination of Closing Merger Consideration....................8
1.9 Escrow...........................................................9
1.10 Withholding Rights...............................................9
1.11 Subsequent Merger................................................9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES CONCERNING THE
SELLING STOCKHOLDERS............................................10
2.1 Title; Authority................................................10
2.2 No Conflict.....................................................11
2.3 Validity and Enforceability.....................................11
2.4 Litigation......................................................11
2.5 Investment Representations......................................11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY...........13
3.1 Organization, Power and Standing................................13
3.2 Subsidiaries....................................................13
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3.3 Foreign Qualifications..........................................14
3.4 Due Authorization; No-Conflict..................................14
3.5 Validity and Enforceability.....................................15
3.6 Capitalization..................................................15
3.7 Financial Information...........................................16
3.8 No Material Adverse Effects.....................................17
3.9 Material Contracts..............................................17
3.10 Government Contracts............................................19
3.11 Real Property...................................................22
3.12 Personal Property and Assets....................................23
3.13 Intellectual Property...........................................24
3.14 Accounts and Notes Receivable...................................26
3.15 Warranty Claims.................................................26
3.16 Business Relationships..........................................27
3.17 Regulatory and Legal Compliance.................................27
3.18 Licenses and Permits............................................27
3.19 Tax Matters.....................................................28
3.20 Litigation......................................................29
3.21 Employees and Compensation......................................30
3.22 ERISA; Compensation and Benefit Plans...........................30
3.23 Environmental Matters...........................................32
3.24 Insurance.......................................................33
3.25 Affiliate Transactions..........................................33
3.26 Absence of Material Undisclosed Liabilities.....................34
3.27 Brokers.........................................................34
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3.28 Export Controls.................................................34
3.29 Certain Payments................................................34
3.30 Purchase Commitments............................................34
3.31 Corporate Records...............................................35
3.32 Banks; Power of Attorney........................................35
3.33 Stockholders' Representative....................................35
3.34 Disclaimer of Other Representations and Warranties..............36
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PARENT....................36
4.1 Organization and Authority; Consents; No-Conflict...............36
4.2 Validity and Enforceability.....................................37
4.3 Litigation......................................................37
4.4 Brokers.........................................................38
4.5 Financial Ability...............................................38
4.6 Equity Consideration............................................38
4.7 Financial Statements............................................38
4.8 Parent SEC Reports..............................................38
4.9 Tax Effect......................................................38
4.10 Disclaimer of Other Representations and Warranties..............38
ARTICLE 5 COVENANTS OF THE COMPANY, THE SELLING STOCKHOLDERS AND
HOLDINGS........................................................39
5.1 Conduct of the Business.........................................39
5.2 Access..........................................................43
5.3 Efforts; Cooperation............................................43
5.4 Financial Statements............................................44
5.5 Nonsolicitation.................................................44
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5.6 Confidentiality.................................................45
5.7 Noncompetition..................................................45
5.8 Injunctive Relief...............................................46
5.9 Reasonable Restrictions.........................................46
5.10 Company Intellectual Property...................................47
5.11 General Release.................................................47
5.12 Sale Bonus Plan; Key Employee Noncompetition Agreements.........47
5.13 Notice of Certain Events........................................47
5.14 Employees and Benefit Plans.....................................48
5.15 Registration Rights.............................................48
5.16 Approvals.......................................................49
5.17 Holdings Joinder Agreement......................................50
5.18 Change of Name Agreements.......................................50
5.19 Key Solutions Disposition.......................................50
ARTICLE 6 COVENANTS OF THE PARENT.........................................50
6.1 Representations and Warranties..................................50
6.2 Efforts.........................................................50
6.3 Confidentiality and Non-Solicitation............................50
6.4 Compliance with Rule 144........................................51
6.5 Approvals.......................................................51
6.6 Acquisition Sub Joinder.........................................51
6.7 Subsequent Merger...............................................52
ARTICLE 7 TAX COVENANTS...................................................52
7.1 Consistent Tax Reporting........................................52
7.2 Tax Periods Ending on or Before the Closing Date................52
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7.3 Tax Periods Beginning Before and Ending After the Closing Date..52
7.4 Tax Allocation..................................................53
7.5 Cooperation on Tax Matters......................................53
7.6 Control of Audits...............................................54
7.7 Amended Returns.................................................55
7.8 Refunds and Tax Benefits........................................55
7.9 Certain Taxes...................................................55
7.10 Tax Treatment...................................................55
ARTICLE 8 CONDITIONS TO CLOSING...........................................56
8.1 Conditions to Obligations of the Parent.........................56
8.2 Conditions to Obligations of the Company and the
Selling Stockholders............................................59
ARTICLE 9 TERMINATION.....................................................61
9.1 Termination.....................................................61
9.2 Effect of Termination...........................................62
ARTICLE 10 SURVIVAL; INDEMNIFICATION.......................................63
10.1 Survival........................................................63
10.2 Indemnification Limits..........................................64
10.3 Indemnification by the Selling Stockholders.....................64
10.4 Indemnification by the Parent...................................66
10.5 Procedures for Indemnification..................................66
10.6 Escrow Agreement................................................67
10.7 Adjustment to Purchase Price....................................67
10.8 Limitations on Remedies.........................................67
10.9 Calculation of Amount, Claims and Losses........................68
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ARTICLE 11 MISCELLANEOUS....................................................68
11.1 Notices.........................................................68
11.2 Severability and Governing Law; Forum...........................69
11.3 Amendments, Waivers.............................................70
11.4 Expenses........................................................70
11.5 Successors and Assigns..........................................70
11.6 Entire Agreement................................................70
11.7 Counterparts....................................................71
11.8 Headings........................................................71
11.9 Further Assurances..............................................71
11.10 Third Party Beneficiaries.......................................71
11.11 No Strict Construction..........................................71
11.12 Publicity.......................................................71
11.13 Schedules and Exhibits..........................................71
11.14 Waiver of Jury Trial............................................71
11.15 Exclusive Agent for Selling Stockholders........................72
11.16 Rights and Remedies.............................................75
11.17 Knowledge.......................................................75
11.18 Construction....................................................75
11.19 Waiver by Certain Stockholders..................................75
ARTICLE 12 DEFINITIONS......................................................76
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AGREEMENT AND PLAN OF MERGERThis Agreement and Plan of Merger (this
"Agreement") is entered into as of June 18, 2007 by and among ▇▇▇▇▇▇▇▇▇
Corporation, a Virginia corporation (the "Company"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, The Fairfax Supporting Organization
and The Arlington Supporting Organization (each, a "Selling Stockholder" and
together, the "Selling Stockholders"), L-1 Identity Solutions, Inc. (formerly
known as L-1 Holding Co.), a Delaware corporation (the "Parent"), L-1 Identity
Solutions Operating Company, a Delaware corporation ("Merger Sub"), and ▇▇▇▇▇
▇▇▇▇▇, solely in her capacity as the Stockholders' Representative (as
hereinafter defined).
INTRODUCTION
WHEREAS, the Selling Stockholders own all of the outstanding shares
of common stock, $1.00 par value per share (the "Shares"), of the Company, which
constitute all of the issued and outstanding shares of capital stock of the
Company.
WHEREAS, the Selling Stockholders will effect the following
transactions prior to the Closing (as hereinafter defined): (a) the Selling
Stockholders shall contribute all of their Shares to a newly-formed Delaware
corporation ("Holdings"), (b) Holdings shall elect to be treated as an "S
corporation" as provided in Section 1362(a) of the Internal Revenue Code of
1986, as amended (the "Code"), (c) Holdings shall cause the Company to adopt,
approve and file a plan of entity conversion in accordance with Section
13.1-722.9 of the Code of Virginia pursuant to which the Company will become a
limited liability company, (the transactions described in clauses (a) through
(c), the "Pre-Closing Reorganization") and (d) the Selling Stockholders shall
form a newly-formed entity (the "Sellers Continuing Entity") whose ownership and
beneficial interests will be owned by the Selling Stockholders in the same
proportion as their ownership interests in Holdings, which entity shall assume
certain obligations of the Company and the Selling Stockholders under the terms
of this Agreement, including the Sale Bonus Plan (such transaction, with the
Pre-Closing Reorganization, the "Pre-Closing Transactions").
WHEREAS, the Selling Stockholders and the Company hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Treasury
Regulations Section 1.368-2(g) with respect to the Pre-Closing Reorganization
pursuant to which the Pre-Closing Reorganization is to be treated as a
reorganization under Section 368(a)(1)(F) of the Code.
WHEREAS, upon completion of the Pre-Closing Transactions, the
Selling Stockholders will own all of the issued and outstanding shares of
Holdings (the "Holdings Shares"), and Holdings will own all of the issued and
outstanding membership interests in the Company (the "Company Membership
Interests").
WHEREAS, the Parent owns all of the issued and outstanding shares of
capital stock of Merger Sub.
WHEREAS, the Parent will create a newly formed Delaware corporation
("Acquisition Sub"), of which Parent will own all of the issued and outstanding
shares of capital stock.
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WHEREAS, the Selling Stockholders wish to cause Holdings to be
merged with Acquisition Sub and the Parent wishes to cause Acquisition Sub to be
merged with and into Holdings (the "Reverse Merger"), with Holdings surviving
the Reverse Merger (the "Reverse Merger Surviving Corporation").
WHEREAS, immediately following the Reverse Merger, Parent will cause
the Reverse Merger Surviving Corporation to merge with and into Merger Sub with
Merger Sub surviving the Subsequent Merger (the "Subsequent Merger Surviving
Corporation").
WHEREAS, the Pre-Closing Transactions, the Reverse Merger, the
Subsequent Merger and the other transactions contemplated hereby or by the other
Transaction Documents are sometimes collectively referred to herein as the
"Transactions."
WHEREAS, the parties hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Treasury Regulations Section 1.368-2(g)
with respect to the Reverse Merger and the Subsequent Merger pursuant to which
the Reverse Merger and the Subsequent Merger, taken together, will be treated as
a reorganization under Section 368(a)(2)(D) of the Code.
An index of defined terms used herein is set forth in Article 12.
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE 1
THE TRANSACTIONS; CLOSING
1.1 REVERSE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, Holdings will merge with Acquisition Sub at the
Effective Time. At the Effective Time, the separate corporate existence of
Acquisition Sub will terminate. Holdings will be the Reverse Merger Surviving
Corporation and will continue its existence under the laws of the State of
Delaware.
1.2 CLOSING. The closing of the Reverse Merger and the other
transactions contemplated hereby shall take place at a closing (the "Closing")
to be held at the offices of Sheppard, Mullin, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP located at
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ (or such other place or in such
other manner as the parties may agree) on the date that is five (5) Business
Days after the satisfaction or waiver of the conditions to Closing specified in
Article 8, or on such other date as agreed to in writing by the Company and the
Parent (the "Closing Date").
1.3 EFFECTIVE TIME OF REVERSE MERGER. Subject to the provisions of
this Agreement, in connection with the Closing, Holdings and Acquisition Sub
will duly execute and deliver a certificate of merger substantially in the form
attached hereto as Exhibit 1.3 (the "Certificate of Merger") to the Delaware
Secretary of State. The parties will make all other filings or recordings
required under the Delaware General Corporation Law (as amended from time to
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time, the "DGCL"), and the Reverse Merger will become effective when the
Certificate of Merger is filed in the office of the Delaware Secretary of State,
or at such later date or time as the parties agree and specify in the
Certificate of Merger (the time the Reverse Merger becomes effective being the
"Effective Time").
1.4 EFFECTS OF REVERSE MERGER. The Reverse Merger will have the
effects prescribed by the DGCL and other applicable law.
1.5 CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The certificate of incorporation of Acquisition Sub, as
in effect immediately before the Effective Time, will be the certificate of
incorporation of the Reverse Merger Surviving Corporation as of the Effective
Time, except that the name of the corporation set forth in such certificate of
incorporation shall be changed to the name of Holdings by due action on the part
of the Parent, as the sole stockholder of the Reverse Merger Surviving
Corporation.
(b) The bylaws of Acquisition Sub, as in effect immediately
before the Effective Time, will be the bylaws of the Reverse Merger Surviving
Corporation as of the Effective Time, except that the name of the corporation
set forth in such bylaws shall be changed to the name of Holdings, by due action
on the part of the Reverse Merger Surviving Corporation's board of directors.
1.6 BOARD OF DIRECTORS AND OFFICERS.
(a) The directors of Acquisition Sub immediately prior to
the Effective Time shall be the directors of the Reverse Merger Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
(b) The officers of Acquisition Sub immediately prior to the
Effective Time shall be the officers of the Reverse Merger Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
1.7 CANCELLATION OF HOLDINGS SHARES; MERGER CONSIDERATION PAYABLE
AT CLOSING.
(a) CONVERSION OR CANCELLATION OF HOLDINGS' SHARES. Subject
to the provisions of this Agreement, at the Effective Time, automatically by
virtue of the Reverse Merger and without any action on the part of any Selling
Stockholder:
(i) HOLDINGS SHARES. All Holdings Shares issued and
outstanding immediately prior to the Effective Time shall become,
and be converted into and constitute, the right to receive the
Closing Merger Consideration in accordance with this Article 1.
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(ii) ACQUISITION SUB CAPITAL STOCK. Each issued and
outstanding share of capital stock of Acquisition Sub immediately
prior to the Effective Time shall be converted into and become one
(1) fully paid and non-assessable share of common stock of the
Reverse Merger Surviving Corporation.
(iii) RIGHTS OF SELLING STOCKHOLDERS IN HOLDINGS SHARES.
At the Effective Time, the Holdings Shares shall be canceled and
retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor except as provided in this Article 1,
and the Selling Stockholders shall cease to be, and shall have no
further rights as, stockholders of Holdings other than the right to
receive the consideration provided under this Article 1. After the
Effective Time, there shall be no transfers on the stock transfer
books of Holdings or the Reverse Merger Surviving Corporation of
Holdings Shares.
(iv) FRACTIONAL SHARES. Cash shall be paid in lieu of
fractional shares of Parent Common Stock in an amount calculated
pursuant to Section 1.7(b) and in accordance with Schedule
1.7(b)(i).
(b) CONSIDERATION AT CLOSING. At the Closing, upon the
surrender of certificates (or a duly executed affidavit in a form satisfactory
to Parent in lieu thereof in the case of lost, stolen or destroyed certificates)
representing all of the Holdings Shares to the Parent, the Parent will make or
cause to be made the following distributions and payments of the Estimated
Closing Merger Consideration:
(i) the Parent will issue and deliver to the Selling
Stockholders in the proportions set forth opposite such Selling
Stockholder's name set forth on Schedule 1.7(b)(i), duly executed
stock certificates representing a number of shares of Parent Common
Stock equal to (x) $33,000,000, divided by (y) the average closing
sales price of Parent Common Stock for the twenty (20) trading days
prior to the Closing Date (the "Equity Consideration"); provided,
such stock certificates shall bear the restrictive legends set forth
in Section 2.5(j);
(ii) the Parent will make the following payments of the
cash portion of the Estimated Closing Merger Consideration by wire
transfer of immediately available funds in accordance with such wire
instructions set forth on Schedule 1.7(d)(iii):
A. an amount equal to the outstanding Indebtedness
to the respective holders thereof (to the extent not
previously paid off by the Selling Stockholders or the
Company);
B. an amount equal to the Transaction Expenses
(other than the Transaction Expenses with respect to the
Sale Bonus Plan) to the respective payees thereof (to
the extent not previously paid by the Selling
Stockholders or the Company);
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C. an amount equal to $1,680,275.41 (the "Initial
Sale Bonus Amount") to the Company to be disbursed on
the Closing Date to the beneficiaries of the Sale Bonus
Plan in accordance with the terms of the Sale Bonus
Plan; provided that, if the Selling Stockholders or the
Company elect to pay the Initial Sale Bonus Amount prior
to Closing, the Parent shall make such payment to the
Company or the Selling Stockholders, as the case may be,
as reimbursement of such amount; provided, further,
that, for the avoidance of doubt, if the Company elects
to increase its Indebtedness by the Initial Sale Bonus
Amount in order to make the disbursement to the
beneficiaries prior to Closing, then the payment made by
Parent pursuant to this sub-paragraph (C) shall be
applied, without duplication, to the holders of the
outstanding Indebtedness of the Company as contemplated
by Section 1.7(b)(ii)(A);
D. an amount equal to the balance of the amounts
payable after the Closing Date under the Sale Bonus Plan
to the Sellers Continuing Entity to be disbursed by the
Sellers Continuing Entity in accordance with the terms
of the Sale Bonus Plan;
E. an amount equal to the Escrow Amount to the
Escrow Agent; and
F. an amount equal to the Indemnification Expense
Cash Amount to the Stockholders' Escrow Account held by
the Stockholders' Representative for the account of the
Selling Stockholders;
(iii) the Parent will disburse the balance of the cash
portion of Estimated Closing Merger Consideration remaining after
the disbursements and payments in items (i) and (ii) above to the
Selling Stockholders. For the avoidance of doubt, the payments in
item (ii) shall all be made using the cash portion of the proceeds
of the Estimated Closing Merger Consideration and shall reduce the
Estimated Closing Merger Consideration otherwise payable to the
Selling Stockholders. In no event shall the aggregate payments made
pursuant to this Section 1.7(b) (including the Equity Consideration,
which the Selling Stockholders and Parent agree shall be valued at
$33,000,000) exceed the Estimated Closing Merger Consideration.
(c) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
"Base Merger Consideration" means $66,000,000, consisting of (i)
$33,000,000 in cash, and (ii) the Equity Consideration.
"Base Working Capital" means $3,199,455 as determined in accordance
with Schedule 1.7(c)(i).
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"Business Day" means any day of the year on which national banking
institutions in New York City are open to the public for conducting business and
are not required or authorized to close.
"Closing Merger Consideration" means the sum of the Base Merger
Consideration, plus the amount, if any, by which the Closing Working Capital
exceeds the Base Working Capital or minus the amount, if any, by which the
Closing Working Capital is less than the Base Working Capital, all as finally
determined in accordance with Section 1.8 less all Indebtedness and Transaction
Expenses paid by or behalf of the Company or the Selling Stockholders at the
Closing.
"Closing Working Capital" means (i) the consolidated cash and cash
equivalents, accounts receivable, prepaid expenses and all other current assets
of the Company (but excluding the amount equal to any cash or other current
assets of the Company received in connection with the transfer of the Aspen Lake
Contract in accordance with Section 5.1(a)(x)) as of immediately prior to the
Closing (net of all applicable reserves), minus (ii) the consolidated
liabilities of the Company as of immediately prior to the Closing, excluding for
this purpose all Indebtedness and Transaction Expenses paid by or on behalf of
the Company and the Selling Stockholders at the Closing. The Closing Working
Capital shall be determined in a manner consistent with the Company's past
accounting principles, methods, practices and conventions and calculated in
accordance with Schedule 1.7(c)(i); provided, that the Closing Working Capital
shall in all events be determined in accordance with GAAP consistently applied
by the Company, except as otherwise set forth on Schedule 1.7(c)(i).
"Contract" means any contract, agreement, indenture, note, bond,
loan, instrument, lease, commitment, work order, task order, statement of work
or other arrangement, whether, express or implied, written or oral.
"Escrow Amount" means $3,300,000, which will be deposited at the
Closing with the Escrow Agent pursuant to the Escrow Agreement.
"Escrow Agent" means Computershare Trust Company, N.A.
"Escrow Agreement" means the Escrow Agreement among the Parent, the
Stockholders' Representative and the Escrow Agent, in substantially the form of
Exhibit 1.7(d)(ii).
"Estimated Closing Merger Consideration" means the estimate of the
Closing Merger Consideration set forth on the Estimated Closing Merger
Consideration Certificate.
"GAAP" means generally accepted accounting principles in the United
States of America, consistently applied.
"Indebtedness" means with respect to the Company (i) all principal,
interest, fees, prepayment and redemption premiums or penalties, expenses and
other obligations or amounts in respect of borrowed money, notes, bonds,
debentures and other debt securities, interest rate, currency or other hedging
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arrangements, letters of credit or similar extensions of credit, and/or
installment purchases incurred by the Company prior to the Closing, or required
to be paid in order to discharge fully all such amounts as of the Closing (other
than capital leases and trade payables not overdue by more than ninety (90) days
and incurred in the ordinary course of business); (ii) all obligations of the
type referred to in clause (i) for the payment of which the Company is
responsible or liable, directly or indirectly, as obligor, guarantor, surety or
otherwise, including guarantees of such obligations; and (iii) all obligations
of the type referred to in clauses (i) and (ii) of other Persons secured by (or
for which the holder of such obligations has an existing right, contingent or
otherwise, to be secured by) any Lien on any property or asset of the Company
(whether or not such obligation is assumed by such Person).
"Liens" means liens, charges, claims, deeds of trust, easements,
encumbrances, leases, mortgages, options, pledges, proxies, rights of first
refusal, security interests, voting trusts or agreements and restrictions or
limitations of any kind, including any transfer restrictions.
"Parent Common Stock" means common stock of the Parent, par value
$0.001 per share.
"Transaction Expenses" means the aggregate fees, costs, expenses and
obligations incurred by or on behalf of the Company, or for which the Company is
liable, in connection with the Transactions including all (i) amounts in respect
of legal, accounting, investment banking and other similar fees and expenses
through and including the Closing Date and (ii) employee transaction bonuses and
any other payments becoming due as a result of the Closing, including any
payments made or to be made pursuant to the Sale Bonus Plan substantially in the
form attached hereto as Exhibit 8.1(r) (the "Sale Bonus Plan"), in each case as
more specifically set forth on Schedule 1.7(d)(iii).
"Treasury Regulations" means the U.S. Department of Treasury
regulations promulgated under the Code, as amended, including any successor
provisions thereto.
(d) PRE-CLOSING DELIVERIES. At least three (3) Business Days
prior to the Closing Date, the Company will furnish to the Parent (i) a
certificate signed by the Company setting forth the Company's estimate of the
Closing Working Capital, including an itemization of the components of Closing
Working Capital, calculated in accordance with Schedule 1.7(c)(i), (ii) a
certificate signed by the Company containing the Estimated Closing Merger
Consideration (the "Estimated Closing Merger Consideration Certificate"), and
(iii) a Schedule 1.7(d)(iii), in form and substance reasonably satisfactory to
the Parent, (A) identifying each holder of Indebtedness, indicating the amount
required to discharge in full such Indebtedness at Closing, and setting forth
wire transfer instructions for each such holder, (B) identifying each payee of
any portion of the Transaction Expenses, indicating the amount required to
discharge in full such Transaction Expenses at Closing, and setting forth wire
transfer instructions for each such payee (other than the Company), (C) setting
forth wire transfer instructions for the Company (for amounts payable on behalf
of the Company pursuant to Section 1.7(b)), (D) setting forth wire transfer
instructions for the Escrow Agent, and (E) setting forth wire transfer
instructions for the balance of the cash portion of the Estimated Closing Merger
Consideration payable to the Selling Stockholders pursuant to Section
1.7(b)(vi).
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1.8 DETERMINATION OF CLOSING MERGER CONSIDERATION.
(a) Within sixty (60) days after the Closing Date, the
Parent will deliver to the Stockholders' Representative a certificate (the
"Closing Merger Consideration Certificate"), executed by the Parent, setting
forth an itemized statement of the Closing Working Capital and a statement
setting forth in reasonable detail the calculation of the Closing Merger
Consideration.
(b) If the Stockholders' Representative delivers written
notice (the "Disputed Items Notice") to the Parent within fifteen (15) days
after the delivery of the Closing Merger Consideration Certificate, stating that
the Stockholders' Representative objects to any items on the Closing Merger
Consideration Certificate, specifying the basis for such objection in reasonable
detail and setting forth the Stockholders' Representative's proposed
modifications to the Closing Merger Consideration Certificate, the Stockholders'
Representative and the Parent will attempt to resolve and finally determine and
agree upon the Closing Merger Consideration as promptly as practicable.
(c) If the Stockholders' Representative and the Parent are
unable to agree upon the Closing Merger Consideration within fifteen (15) days
after delivery of the Disputed Items Notice, the Stockholders' Representative
and the Parent will refer the matter to an independent, nationally recognized
independent accounting firm mutually selected by the Parent and the
Stockholders' Representative, to resolve the disputed items specified in the
Disputed Items Notice. If the Parent and the Stockholders' Representative are
unable to agree on the selection of an accounting firm, the accounting firm will
be chosen by the American Arbitration Association, with the expenses of the
American Arbitration Association to be borne fifty percent (50%) by the Selling
Stockholders and fifty percent (50%) by the Parent. The accounting firm shall
address only the disputed items set forth in the Disputed Items Notice and may
not assign a value greater than the greatest value claimed for such item by
either party in the Disputed Items Notice or smaller than the smallest value
claimed for such item by either party in the Disputed Items Notice. The
accounting firm will (i) resolve the disputed items specified in the Disputed
Items Notice and (ii) determine the Closing Merger Consideration, as modified
only by the resolution of such items. The determination of the selected
accounting firm will be made within thirty (30) days after being selected and
will be final and binding upon the parties. The fees, costs and expenses of the
accounting firm so selected will be borne by the party whose positions generally
did not prevail in such determination, or if the accounting firm determines that
neither party could be fairly found to be the prevailing party, then such fees,
costs and expenses will be borne fifty percent (50%) by the Selling Stockholders
and fifty percent (50%) by the Parent.
(d) If the Stockholders' Representative does not deliver the
Disputed Items Notice to the Parent within fifteen (15) days after the delivery
of the Closing Merger Consideration Certificate (or at such earlier time as the
Stockholders' Representative delivers written notice to the Parent stating that
the Stockholders' Representative does not object to any item on the Closing
Merger Consideration Certificate), the calculation of the Closing Merger
Consideration specified in the Closing Merger Consideration Certificate will be
conclusively presumed to be true and correct in all respects and will be final
and binding upon the parties, and the Stockholders' Representative shall be
deemed to have agreed with the calculations of Closing Working Capital and
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Closing Merger Consideration specified in the Closing Merger Consideration
Certificate.
(e) Within five (5) days after the Closing Merger
Consideration is finally determined pursuant to Section 1.8(c) or (d), (i) if
the aggregate amount paid at Closing under Section 1.7(b) exceeds the Closing
Merger Consideration, the Selling Stockholders shall pay to the Parent an
aggregate amount of cash equal to such excess, and (ii) if the aggregate amount
paid at Closing under Section 1.7(b) is less than the Closing Merger
Consideration, the Parent shall pay to the Selling Stockholders an aggregate
amount of cash equal to such difference, in either case by wire transfer of
immediately available funds to the account(s) designated in writing by the
receiving party.
(f) Subject to Section 10.2, the final determination of the
Closing Merger Consideration under this Section 1.8 shall not impair any other
rights of a party under this Agreement, including any rights to indemnification.
(g) After the Closing, the Parent and the Subsequent Merger
Surviving Corporation shall, and shall cause their respective employees to,
provide the Stockholders' Representative, its accountants and any accountant
selected pursuant to Section 1.8(c) reasonable access to the personnel,
properties, books and records of the Parent and the Company in connection with
any dispute under this Section 1.8.
1.9 ESCROW. The Escrow will be deposited at the Closing with the
Escrow Agent, and subject to the terms and conditions of the Escrow Agreement,
shall remain in escrow until the one (1) year anniversary of the Closing Date
(not including any amounts previously distributed and less the aggregate amounts
of any claims that have been asserted on or prior to such date (each, a "Post
Survival Claim")). At such time as any Post Survival Claim is finally resolved,
Parent and Stockholders' Representative will provide joint instructions to pay
to Parent the amount to which it is entitled with respect to such Post Survival
Claim, if any, and to pay to Stockholders' Representative (for the benefit of
the Selling Stockholders) the remaining portion, if any, of the amount remaining
in the escrow account after any such payment is made. If the Parent or any of
its Affiliates is entitled to indemnification under Article 10, then the Parent
shall have the right to submit a claim in accordance with the terms of Article
10 and the Escrow Agreement.
1.10 WITHHOLDING RIGHTS. The Parent shall be entitled to deduct and
withhold from the amounts otherwise payable pursuant to this Agreement such
amounts as the Parent may be required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign Tax law. To the extent that amounts are so deducted and withheld, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to the Person in respect of which such deduction and withholding were
made by the Parent.
1.11 SUBSEQUENT MERGER.
(a) Immediately after the Effective Time, Parent will cause
the Reverse Merger Surviving Corporation to merge with and into the Merger Sub
and the separate corporate existence of the Reverse Merger Surviving Corporation
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shall thereupon cease (the "Subsequent Merger"). The Subsequent Merger shall
become effective upon the filing of a certificate of merger (the "Subsequent
Certificate of Merger"), executed in accordance with the relevant provisions of
the DGCL, with the Secretary of State of the State of Delaware or such later
time as may be specified in the Subsequent Certificate of Merger; provided,
however, that, in any event, the Subsequent Merger shall be effective
immediately after the Effective Time (it being understood that in all events the
Subsequent Merger shall be effective not later than the end of the same day as
the Reverse Merger).
(b) At the effective time of the Subsequent Merger, each
issued and outstanding share of capital stock of the Reverse Merger Surviving
Corporation shall be canceled and no consideration shall be delivered in
exchange therefor.
(c) At the effective time of the Subsequent Merger, each
issued and outstanding share of capital stock of the Merger Sub immediately
prior to such time shall remain issued and outstanding and unaffected by the
Subsequent Merger.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES CONCERNING
THE SELLING STOCKHOLDERS
Each Selling Stockholder severally and not jointly represents and
warrants to the Parent in this Article 2 as follows:
2.1 TITLE; AUTHORITY.
(a) As of the date hereof and until the consummation of the
Pre-Closing Transactions, such Selling Stockholder is the record and beneficial
owner of the Shares set forth opposite such Selling Stockholder's name on
Schedule 3.6(a), free and clear of all Liens, other than restrictions on
transfers under applicable securities laws and other Liens described in such
Schedule 3.6(a). After the Pre-Closing Transactions and until the consummation
of the Merger, the Selling Stockholders will be the record and beneficial owner
of the Holdings Shares set forth opposite such Selling Stockholder's name on
Schedule 3.6(b), free and clear of all Liens, other than restrictions on
transfers under applicable securities laws. Except as set forth on Schedule 2.1,
such Selling Stockholder has not granted any option or right, and is not a party
to any agreement that requires or, upon the passage of time, the payment of
money or occurrence of any other event, would require such Selling Stockholder
to transfer any of the Shares or Holdings Shares set forth opposite such Selling
Stockholder's name on Schedule 3.6(a) or (b). Such Selling Stockholder has as of
the date hereof and until the consummation of the Pre-Closing Transactions, and
Holdings will have after the Pre-Closing Transactions, the power and authority
to sell, transfer, assign, deliver and surrender the Shares and the Holding
Shares, respectively, set forth opposite such Selling Stockholder's name on
Schedule 3.6(a) or (b) as provided in this Agreement.
(b) If such Selling Stockholder is not a natural person, (i)
it is duly formed or organized, validly existing and in good standing under the
laws of its jurisdiction of formation or organization, (ii) it has the requisite
power and authority to execute and deliver this Agreement and the other
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agreements, documents and instruments to be executed and delivered at Closing
pursuant to this Agreement (including for this purpose the Holdings Joinder
Agreement) (collectively with this Agreement, the "Transaction Documents") of
such Selling Stockholder contemplated hereby and to perform its obligations
hereunder and thereunder, and (iii) such execution, delivery and performance by
such Selling Stockholder have been duly and validly authorized by all requisite
action on the part of such Selling Stockholder.
2.2 NO CONFLICT. Except as set forth on Schedule 2.2, no consent,
order, authorization, approval, declaration or filing is required on the part of
such Selling Stockholder for or in connection with the consummation of the
Transactions or the execution, delivery or performance of this Agreement and the
Transaction Documents. Subject to obtaining the Required Consents required to be
specified on Schedule 2.2, the consummation of the Transactions and the
execution, delivery and performance of this Agreement and the Transaction
Documents by such Selling Stockholder will not result in any violation of, be in
conflict with, constitute a default under, or cause or give rise to any right of
acceleration of any obligation or loss or impairment of any rights or benefits
under any Legal Requirement, charter, by-laws, operating agreement, partnership
agreement, organizational document, authorization, franchise, certification,
Contract, material instrument, license or permit to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound.
2.3 VALIDITY AND ENFORCEABILITY. This Agreement is, and each of
the other Transaction Documents to which such Selling Stockholder is to be a
party shall be, when executed and delivered by such Selling Stockholder, the
valid and binding obligation of such Selling Stockholder, enforceable in
accordance with its terms, (a) except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Legal
Requirement of general application affecting the rights and remedies of
creditors and by principles of public policy, and (b) subject to general
principles of equity, and the availability of remedies of specific performance
and injunctive relief that may be subject to the discretion of the court before
which any Legal Proceeding for such remedies may be brought.
2.4 LITIGATION. No action, arbitration, suit, proceeding or
investigation against the Selling Stockholder is pending or, to the knowledge of
such Selling Stockholder, threatened against such Selling Stockholder, in
relation to the affairs of the Company, such Selling Stockholder's ownership of
the Shares required to be set forth opposite such Selling Stockholder's name on
Schedule 3.6(a) or that would materially interfere with the Parent's ability to
consummate the Transactions or to operate the Business after the Closing.
2.5 INVESTMENT REPRESENTATIONS.
(a) The Equity Consideration is being acquired by such
Selling Stockholder solely for such Selling Stockholder's own account, for
investment purposes only and with no present intention of distributing, selling
or otherwise disposing of them in connection with a distribution in violation of
the Securities Act.
(b) Such Selling Stockholder has such knowledge and
experience in financial and business matters that such Selling Stockholder is
capable of evaluating the merits and risks of the proposed investment in the
Equity Consideration.
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(c) Such Selling Stockholder understands that the Equity
Consideration may not be sold, transferred or otherwise disposed of by such
Selling Stockholder without registration under the Securities Act and any
applicable state securities laws, or an exemption therefrom.
(d) Such Selling Stockholder's financial condition is such
it can afford to bear the economic risk of holding the Equity Consideration for
an indefinite period of time and has adequate means for providing for such
Selling Stockholder's current needs and contingencies and to suffer a complete
loss of its investment in the Equity Consideration.
(e) Such Selling Stockholder is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
Such Selling Stockholder is not registered as a broker or dealer under Section
15(a) of the Exchange Act, or a member of the National Association of Securities
Dealers ("NASD").
(f) Such Selling Stockholder has been furnished all
materials relating to the business, finances and operations of the Parent and
its subsidiaries and materials relating to the issuance of the Equity
Consideration that have been requested by such Selling Stockholder. Such Selling
Stockholder has been afforded the opportunity to ask questions of the Parent's
management and has received satisfactory answers to any such inquiries. Such
Selling Stockholder has had access to information concerning, the business,
affairs and financial condition of Parent in order to verify the accuracy of the
Parent SEC Reports.
(g) Such Selling Stockholder understands that no United
States federal or state agency or any other Governmental or Regulatory Authority
has passed upon or made any recommendation or endorsement of the Equity
Consideration.
(h) Such Selling Stockholder understands that the Equity
Consideration is being delivered to such Selling Stockholder from the Parent in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Parent is relying upon the
truth and accuracy of, and the compliance of such Selling Stockholder with, the
representations, warranties, agreements, acknowledgments, and understandings of
such Selling Stockholder set forth in this Section 2.5.
(i) Such Selling Stockholder acknowledges and agrees that
the Parent and its advisors have not provided any advice to such Selling
Stockholder regarding the federal, state, local or foreign Tax implications of
the acquisition, ownership or disposition of the Equity Consideration and that
it has been advised to consult its own tax advisor with respect to such
implications.
(j) Such Selling Stockholder has been advised of and consent
to the placement of a restrictive legends in the following form on the
certificate(s) representing the Parent Common Stock:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
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EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SAID LAWS OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN AGREEMENT
AND PLAN OF MERGER DATED JUNE [--], 2007 BY AND AMONG ▇▇▇▇▇▇▇▇▇
CORPORATION, [HOLDINGS], THE STOCKHOLDERS PARTY THERETO, L-1 IDENTITY
SOLUTIONS, INC., [ACQUISITION SUB] AND L-1 IDENTITY SOLUTIONS OPERATING
COMPANY."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Selling Stockholders and the Company hereby jointly and
severally represent and warrant to the Parent in this Article 3 as follows:
3.1 ORGANIZATION, POWER AND STANDING.
(a) COMPANY. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia, and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as currently conducted (the
"Business"). After giving effect to the Pre-Closing Transactions and at the
Closing, the Company will be a limited liability company duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia,
with all requisite power and authority to own, lease and operate its properties
and to carry on the Business.
(b) HOLDINGS. Upon its execution of the Holdings Joinder
Agreement and at the Closing, Holdings will be a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with all requisite power and authority to own, lease and operate its properties
and to carry on its business.
3.2 SUBSIDIARIES.
(a) COMPANY. The Company has no subsidiaries and the Company
does not directly or indirectly own or have the right to acquire any equity
interest in any other corporation, partnership, limited liability company, joint
venture, trust or other business organization.
(b) HOLDINGS. Upon its execution of the Holdings Joinder
Agreement and immediately prior to the Closing, Holdings will not directly or
indirectly own or have the right to acquire any equity interest in any other
corporation, partnership, limited liability company, joint venture, trust or
other business organization, other than the Shares (and after giving effect to
the Pre-Closing Transactions, the Company Membership Interests).
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3.3 FOREIGN QUALIFICATIONS. The Company is duly qualified and
authorized to do business and in good standing in each of Virginia and Maryland.
The Company is duly qualified to do business in all jurisdictions required by
the nature and extent of its activities or by the character of the assets owned
or leased be it, except those jurisdictions where the failure to qualify does
not have a Company Material Adverse Effect. At and prior to the Closing,
Holdings will be duly qualified to do business in all jurisdictions required by
the nature and extent of its activities or by the character of the assets owned
or leased be it, except those jurisdictions where the failure to qualify does
not have a Material Adverse Effect on Holdings.
3.4 DUE AUTHORIZATION; NO-CONFLICT.
(a) DUE AUTHORIZATION OF THE COMPANY. The Company has full
power and authority, and has taken all required action on its part necessary to
permit it to execute and deliver and to perform its obligations under and to
consummate the Transactions contemplated by the Transaction Documents to which
the Company is or will be a party.
(b) DUE AUTHORIZATION OF HOLDINGS. Upon its execution of the
Holdings Joinder Agreement, Holdings will have full power and authority to and
will have taken all required action on its part necessary to permit it to
execute and deliver and to perform its obligations under and to consummate the
Transactions contemplated by the Transaction Documents to which Holdings is or
will be a party.
(c) NO CONFLICT FOR THE COMPANY. Except as specified on
Schedule 3.4(c), no consent, order, authorization, approval, declaration or
filing, including any consent, approval or authorization of or declaration or
filing with any Governmental or Regulatory Authority or any party to a Material
Contract, is required on the part of the Company, or will be required on the
part of Holdings, for or in connection with the consummation of the
Transactions, the execution, delivery or performance of this Agreement and the
other Transactions Documents to which either of them is or will be a party, or
the conduct of the Business by the Company immediately following the Closing,
including without limitation no filing or approval under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act") (as used herein,
any consent, order, authorization, approval, declaration or filing required to
be set forth on Schedule 2.2 or Schedule 3.4(c) are collectively referred to as
the "Required Consents"). The Selling Stockholders and the Company have no
knowledge, and neither the Company nor any Selling Stockholder has any reason to
believe, that any novation agreement is or will be required in connection with
the consummation of the Transactions. The Company and the Selling Stockholders
believe that all of the Required Consents will be obtained. Subject to obtaining
the Required Consents required to be specified on Schedule 3.4(c), the
consummation of the Transactions, the execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Company is, or
Holdings will be, a party will not result in any violation of, be in conflict
with, constitute a default under, or cause or give rise to any right of
acceleration of any obligation, grant of any license or other rights with
respect to any Company Intellectual Property, or loss or impairment of any
rights (including Intellectual Property rights) or benefits under, any Legal
Requirement, charter, by-laws, operating agreement, partnership agreement,
organizational document, authorization, franchise, certification, Contract,
material instrument, license or permit to which the Company is, or Holdings will
be, a party or by which the Company is, or Holdings will be, bound, or result in
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the creation of any Liens (other than statutory Liens for Taxes incurred in
connection with the Transactions) upon any properties or assets of the Company
or Holdings. As such terms are defined in the HSR Act and the rules promulgated
thereunder, the "person" within which the Company is included does not have
"total assets" (including without limitation the "investment assets, voting
securities and other income producing property" of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇) of $12,000,000 or more.
3.5 VALIDITY AND ENFORCEABILITY.
(a) COMPANY. This Agreement is, and each of the other
Transaction Documents to which the Company is a party shall be, when executed
and delivered by the Company, the valid and binding obligation of the Company
enforceable in accordance with its terms, (a) except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Legal Requirement of general application affecting the rights and
remedies of creditors and by principles of public policy, and (b) subject to
general principles of equity, and the availability of remedies of specific
performance and injunctive relief that may be subject to the discretion of the
court before which any Legal Proceeding for such remedies may be brought.
(b) HOLDINGS. Upon execution of the Holdings Joinder
Agreement by Holdings, this Agreement will be, and each of the other Transaction
Documents to which Holdings will be a party shall be, when executed and
delivered the valid and binding obligation of Holdings, enforceable in
accordance with its terms, (a) except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Legal
Requirement of general application affecting the rights and remedies of
creditors and by principles of public policy, and (b) subject to general
principles of equity, and the availability of remedies of specific performance
and injunctive relief that may be subject to the discretion of the court before
which any Legal Proceeding for such remedies may be brought.
3.6 CAPITALIZATION.
(a) CAPITALIZATION OF THE COMPANY PRIOR TO PRE-CLOSING
TRANSACTIONS. The Company's authorized and aggregate outstanding Shares prior to
the Pre-Closing Transactions are as set forth on Schedule 3.6(a). Prior to the
Pre-Closing Transactions, the Shares constitute all of the Company's outstanding
shares of capital stock and are duly authorized, validly issued, fully paid and
nonassessable. The offer, issuance and sale of the securities listed on Schedule
3.6(a) were made in compliance with all applicable federal and state securities
laws and all applicable preemptive and similar rights. There are no outstanding
options, warrants, convertible or exchangeable securities or other rights that
could, directly or indirectly, obligate the Company to offer, sell or issue
shares of capital stock or other securities of the Company. Except as described
on Schedule 3.6(a) and except for this Agreement (including the Pre-Closing
Transactions), there are no agreements, written or oral, relating to any shares
of capital stock or other securities of the Company, including agreements
relating to the acquisition, disposition, voting or registration under
applicable securities laws of any interests. No Person has any right of first
offer, right of first refusal, preemptive right or other similar right in
connection with the issuance or sale of the securities listed on Schedule
3.6(a), or with respect to any future offer, sale or issuance of shares of
capital stock or other securities of the Company. Except as set forth on
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Schedule 3.6(a), there are no obligations of the Company to provide funds to, or
make any investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the obligations of, any
Person. Except as set forth on Schedule 3.6(a), there are no outstanding stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Company. As used herein, "Person" means any natural person or
corporation, limited liability company, partnership, trust or other entity.
(b) CAPITALIZATION OF HOLDINGS FOLLOWING PRE-CLOSING
TRANSACTIONS. After giving effect to the Pre-Closing Transactions, Holdings'
authorized and outstanding shares of capital stock will be as set forth on
Schedule 3.6(b). The securities listed on Schedule 3.6(b) will constitute all of
Holdings' outstanding equity interests, will be owned beneficially and of record
by the Persons and in the amounts set forth on Schedule 3.6(b) and will be duly
authorized, validly issued, fully paid and nonassessable. The offer, issuance
and sale of the securities listed on Schedule 3.6(b) will be made in compliance
with all applicable federal and state securities laws and all applicable
preemptive and similar rights. After giving effect to the Pre-Closing
Transactions, there will be no outstanding options, warrants, convertible or
exchangeable securities or other rights that could, directly or indirectly,
obligate Holdings to issue its shares of capital stock or other securities.
After giving effect to the Pre-Closing Transactions, other than this Agreement
or any agreement contemplated hereby, there will be no agreements, written or
oral, relating to any interests in Holdings, including agreements relating to
the acquisition, disposition, voting or registration under applicable securities
laws of any interests. No Person has any right of first offer, right of first
refusal, preemptive right or other similar right in connection with the issuance
or sale of the securities listed on Schedule 3.6(b), or with respect to any
future offer, sale or issuance of interests in Holdings.
(c) CAPITALIZATION OF COMPANY AFTER PRE-CLOSING
TRANSACTIONS. After giving effect to the Pre-Closing Transactions, the Company's
authorized and outstanding equity interests will be as set forth on Schedule
3.6(c). The securities listed on Schedule 3.6(c) will constitute all of the
Company's outstanding equity interests, will be owned beneficially and of record
by Holdings, free and clear of all Liens other than restrictions on transfers
under applicable securities laws, and will be duly authorized, validly issued,
fully paid and nonassessable. After giving effect to the Pre-Closing
Transactions, there will be no outstanding options, warrants, convertible or
exchangeable securities or other rights that could, directly or indirectly,
obligate the Company to issue membership interests or other securities. After
giving effect to the Pre-Closing Transactions, other than this Agreement or any
agreement contemplated hereby, there will be no agreements, written or oral,
relating to membership interests or other securities of the Company including
agreements relating to the acquisition, disposition, voting or registration
under applicable securities laws of membership interests or other securities.
3.7 FINANCIAL INFORMATION.
(a) DELIVERY OF COMPANY FINANCIAL STATEMENTS. The Company
has delivered or made available to the Parent (i) the audited, consolidated
balance sheets of the Company as at December 31, 2004, 2005 and 2006 and the
audited, consolidated statements of cash flows, income and stockholders' equity
for the fiscal years then ended (as used in this Agreement, December 31, 2006 is
referred to as the "Latest Audited Financial Statement Date"), and (ii) the
unaudited, condensed, consolidated balance sheets of the Company as at April 27,
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2007, and the unaudited, condensed, consolidated statements of cash flows,
income and stockholders' equity for the fiscal quarter then ended and the
corresponding period for the prior fiscal year.
(b) ACCURACY OF COMPANY FINANCIAL STATEMENTS. As used
herein, "Financial Statements" means the financial statements referenced in
subsection (a) above together with (to the extent delivered at or prior to the
Closing) the financial statements delivered pursuant to Section 5.4. The
Financial Statements and the notes thereto, if any, (i) are (or shall be to the
extent delivered at or prior to Closing pursuant to Section 5.4) complete and
accurate in all material respects and fairly present the financial condition of
the Company at the respective dates thereof and the results of operations and
cash flows for the periods then ended, and (ii) were (or shall be to the extent
delivered at or prior to Closing pursuant to Section 5.4) prepared in accordance
with the books and records of the Company in conformity with GAAP consistently
applied by the Company during the periods covered thereby, except, in the case
of unaudited Financial Statements, for the omission of footnotes and normal
year-end adjustments that are not, individually and in the aggregate, material.
None of the Financial Statements contain any material, non-recurring items,
except as expressly set forth therein. There are no transactions of a material
nature, individually or in the aggregate, that have not been properly recorded
in the accounting records underlying the Financial Statements. Except as
described on Schedule 3.7(b), the Company has no knowledge of any significant
deficiencies or material weaknesses (within the meaning of Auditing Standard No.
2 promulgated by the Public Company Accounting Oversight Board) in the design or
operation of internal controls over financial reporting (as defined in Rule
13a-15(f) and Rule 15d-15(f) of the Exchange Act) of the Company.
(c) HOLDINGS. Upon formation and at all times prior to the
Closing, Holdings will not hold any assets (other than the Shares and, after
giving effect to the Pre-Closing Transactions, the Company Membership Interests)
or have any liabilities, nor will it carry on any business activities, other
than in connection with the Transactions or as contemplated by this Agreement or
any other Transaction Documents.
3.8 NO MATERIAL ADVERSE EFFECTS. Since the Latest Audited
Financial Statement Date, other than as shown on Schedule 3.8, (a) the Company
has operated only in the usual and ordinary course of business, and (b) there
has been no event, change or condition which individually, or together with any
other events, changes or conditions, has had or would reasonably be expected to
have a Material Adverse Effect on the Company (a "Company Material Adverse
Effect"). "Material Adverse Effect" means a material adverse effect on the
business or the affairs, assets, properties, prospects, condition (financial or
otherwise) or results of operations of a Person to which it applies, taken as a
whole, other than (x) changes or effects that are or results from occurrences
relating to the economy in general or the industry of such Person in general and
not specifically relating to such Person or (y) liabilities incurred in
connection with this Agreement, the Transaction Documents, or the Transactions.
3.9 MATERIAL CONTRACTS. Except to the extent provided in the last
paragraph of this Section 3.9 with respect to Redacted Contracts, Schedule 3.9
sets forth a complete and accurate list of all of the following Contracts to
which the Company is a party or to which the Company or any of its assets or
property is subject (except Government Contracts):
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(a) Contracts with respect to which the Company has any
liability or obligation involving more than $50,000, contingent or otherwise;
(b) Contracts that may extend for a term of more than one
(1) year after the Closing Date;
(c) Contracts under which the amount payable by the Company
is dependent on the revenue, income or other similar measure of the Company or
any other Person;
(d) licenses, leases and Contracts with respect to any
property of the Company, including distribution, sales and supply Contracts;
(e) Contracts relating to any Indebtedness or the guarantee
thereof or the imposition of any Liens upon any asset of the Company;
(f) Contracts of the Company with any officer, director,
stockholder or Affiliate of the Company or any of their respective relatives or
Affiliates;
(g) Contracts that contain an express limitation on the
method of conducting, or scope of, the Business, including any Contract that
contains any exclusivity, non-competition, non-solicitation or no-hire
provisions;
(h) employment, severance, consulting, deferred
compensation, collective bargaining, benefits and similar Contracts involving
the Company;
(i) Contracts relating to or involving any franchise,
partnership, strategic alliance, joint venture, or other similar arrangements or
the sharing of profits;
(j) Contracts with respect to mergers or acquisitions, sales
of securities or material assets, or investments by the Company;
(k) Contracts, commitments, plans or other arrangements of
the Company outside of the ordinary course of business;
(l) Contracts that are not billed by the Company on a "time
plus materials basis" (i.e., fixed price Contracts); and
(m) other Contracts, commitments, plans or other
arrangements of the Company that are material to the Business.
All the foregoing, including all amendments or modifications
thereto, all Government Contracts, Personal Property Leases, Real Estate Leases
and all Intellectual Property Licenses are sometimes collectively referred to as
"Material Contracts." Material Contracts and other Contracts (including related
documents) that are classified "Secret," "Top Secret," etc. by any Governmental
or Regulatory Authority are collectively referred to herein as "Classified
Documents." The Company is a party to two (2) Classified Documents. The Company
has provided Parent with access to the Classified Documents. One of the
Classified Documents is a classified security manual (the "Classified Security
Manual"). The Company complies, and at all times has complied, with the terms of
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the Classified Security Manual. The other Classified Document is a classified
statement of work (the "Classified SOW"). The Company provides and has provided
services under the Classified SOW in accordance with, and in a manner consistent
with, such statement of work. The work called for by the Classified SOW is not
of a type that would cause the Company to be viewed as (x) having unequal access
to information, (y) having created bias ground rules, or (z) having impaired
objectivity such that the Company or any current or future Affiliate could be
precluded from work on the basis of an actual or perceived organizational
conflict of interest. Each Material Contract and Classified Document sets forth
the entire agreement and understanding between the Company and the other parties
thereto. Each Material Contract is valid, binding and in full force and effect
in accordance with its terms against the Company and, to the knowledge of the
Company, any other party thereto. Except as set forth on Schedule 3.9, there is
no event or condition that has occurred or exists that constitutes or that, with
or without notice, the happening of any event and/or the passage of time, could
reasonably be expected to constitute a default or breach under any such Material
Contract by the Company or, to the Company's knowledge, any other party thereto,
or could reasonably be expected to cause the acceleration of any obligation or
loss of any rights of the Company or give rise to any right of termination or
cancellation thereof. The Company has not received any written or, to its
knowledge, oral notice that the parties to any Material Contract will not
fulfill their obligations thereunder in all material respects.
3.10 GOVERNMENT CONTRACTS.
(a) As used herein, "Government Contract" means any Contract
to which the Company is a party with any Governmental or Regulatory Authority or
any Contract to which the Company is a party that is a subcontract (at any tier)
with another Person that holds either a prime Contract with any Governmental or
Regulatory Authority or a subcontract (at any tier) under such a prime Contract.
(b) As used herein, "Governmental or Regulatory Authority"
means any court, tribunal, arbitrator, authority, agency, bureau, board,
commission, department, official or other instrumentality of the United States,
any foreign country or any domestic or foreign state, county, city or other
political subdivision, and shall include any stock exchange, quotation service
and the NASD.
(c) Schedule 3.10(c) contains a complete and correct list of
all Government Contracts (including subcontracts) that are either currently
active in performance, or, to the knowledge of the Company, have been active in
the four (4)-year period prior to the date of this Agreement but have not been
closed after receiving final payment, or have been active in performance at any
time during the four (4)-year period prior to the date of this Agreement.
Schedule 3.10(c) accurately reports for each Government Contract the total net
payments made as of the Latest Audited Financial Statement Date, payments due
for work performed, and the Company's good faith estimate of total projected
value and total estimate at completion ("EAC"). The Company has not been
awarded, nor is there any outstanding bid by the Company for, any "small
business set aside Contract," "woman-owned set aside Contract," any other "set
aside Contract" or other order or Contract requiring small business or other
special status at any time during the four (4) year period prior to the date of
this Agreement. To the knowledge of the Company, none of the Company's currently
expected sales or orders will be lost, and the customer relations of the Company
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will not be damaged, as a result of the Company continuing the operations of the
Company as an entity that does not qualify as a small business concern or
maintain any other special status. No Contract termination, default notice or
show cause notice is, or has been at any time during the four (4)-year period
prior to the date of this Agreement, in effect pertaining to any Government
Contract.
(d) The Company is and has been in compliance with all
rules, contract terms, regulations, and laws governing the currently existing
and/or previously existing GSA Multiple Award Schedule Contracts held by the
Company, including GS-35F-0116M (the "IT Schedule"), GS-23F-0069M (the "PES
Schedule"), and GS-10F-0343M (the "MOBIS Schedule") (each, a "GSA Schedule
Contract" and together, the "GSA Schedule Contracts"). Without limiting the
foregoing, the Company has: (i) complied with each GSA Schedule Contract's Price
Reductions Clause and with all other business and sales practices provisions
under each GSA Schedule Contract; (ii) made no offer or sale of any GSA Schedule
Contract products or services at pricing, discounts, terms, conditions, or
concessions that has triggered, or would reasonably be expected to trigger, a
price reduction under any of the GSA Schedule Contracts; and (iii) provided the
General Services Administration ("GSA") in a timely, complete and accurate
manner with all necessary and appropriate notices and reports and all other
information required to be provided to GSA, including without limitation any
information regarding (A) commercial sales practices and any deviations from
such practices by the Company prior to the award of each GSA Schedule Contract,
(B) any modification or extension of such GSA Schedule Contract and (C) any
other event or circumstance that would require such disclosure to be so made to
GSA. No amounts of money (including any payments, penalties, fees or otherwise)
are owing or outstanding by the Company to any Governmental or Regulatory
Authority under any GSA Schedule Contract, and no claim has been made by GSA,
nor, to the knowledge of the Company, does any basis exist for GSA to claim,
that any amounts, penalties or fees are owing by the Company under any GSA
Schedule Contract by virtue of a Price Reductions Clause violation or otherwise.
The experience and education of all individuals provided through its GSA
Schedule Contracts meet or exceed the experience and/or education required by
the terms of the applicable GSA Schedule Contract. The work performed by any
Company employee or pursuant to any subcontract comes within the scope of the
GSA Schedule Contract under which such work is/was performed.
(e) Neither (i) the Company nor any of its stockholders,
officers, or directors, nor (ii) to the knowledge of the Company, any of its
employees nor any of the Company's predecessors has been debarred, suspended,
deemed non-responsible or otherwise excluded from participation in the award of
any Government Contract or for any reason listed on the List of Parties Excluded
from Federal Procurement and Nonprocurement Programs nor has any debarment,
suspension or exclusion proceeding been initiated against the Company or any of
its predecessors, stockholders, officers, directors or employees.
(f) There have been no Legal Proceedings involving or
related to the Company or, to the knowledge of the Company, any of its
predecessors, stockholders, officers, directors or employees with respect to an
alleged or potential violation of a Contract requirement or any applicable Legal
Requirements pertaining to any Government Contract, since the date ten (10)
years prior to the date of this Agreement. No Person has filed or, to the
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knowledge of the Company, threatened to file a protest with any Governmental or
Regulatory Authority challenging a Government Contract award to the Company.
(g) Except as set forth on Schedule 3.10(g), other than
audits conducted by Governmental Authorities for which the Company has not been
provided any notice or which otherwise have not been made known to the Company
and other than routine pre-award audits, there have been no audits, there are no
ongoing audits and, to the knowledge of the Company, there are no audits
impending or expected under or relating to any Government Contract. None of the
audits (including the pre-award audits and the system review audits) identified
on Schedule 3.10(g) has resulted or would reasonably be expected to result in a
material change to any Government Contract or has otherwise identified any
actual or potential non-compliance issue in respect of the Company. All such
audits identified on Schedule 3.10(g) constitute routine audits conducted in the
ordinary course of business, and such audits have not, and, to the Company's
knowledge, will not, result in any liability by the Company to any Governmental
Authority.
(h) The Company has not conducted any internal investigation
in connection with which the Company has engaged any outside legal counsel,
auditor, accountant or investigator, or has made any disclosure to any
Governmental or Regulatory Authority or other customer or prime contractor or
higher-tier subcontractor related to any suspected, alleged or possible
violation of a contract requirement or violation of any Legal Requirements with
respect to any Government Contract.
(i) The Company maintains systems of internal controls that
are in material compliance with all requirements of all of the Government
Contracts and of applicable Legal Requirements.
(j) Neither the Company nor, to the knowledge of the
Company, any of the employees, stockholders, members, officers or directors of
the Company have violated any legal, administrative or contractual restriction
concerning the employment of (or discussions concerning possible employment
with) current or former officials or employees of a state, local or federal
government (regardless of the branch of government), including (but not limited
to) the so-called "revolving door" restrictions set forth at 18 U.S.C. ss. 207.
(k) All representations, certifications and statements
executed, acknowledged or submitted by or on behalf of the Company to a
Governmental or Regulatory Authority, prime contractor or higher-tier
subcontractor in connection with any Government Contract (or a change or
modification thereto) during the four (4)-year period prior to the date of this
Agreement, including any statements made in connection with the Procurement
Integrity Act, 41 U.S.C. ss. 423, the Lobbying Disclosure Act of 1995, 2 U.S.C.
ss. 1601-1612, the ▇▇▇▇ Amendment, 31 U.S.C. ss. 1352, and their associated
implementing regulations, Contract clauses, representations or certifications,
were true, complete and correct in all material respects as of their respective
effective dates and, to the knowledge of the Company, with respect only to any
such representations or certifications (or the portion thereof) that are
continuing in nature, are true, complete and correct as of the date hereof.
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(l) The Company does not have any pending or anticipated
claims, requests for equitable adjustment or requests for waiver or deviation
from Contract requirements with respect to any Government Contract, and the
Company has no knowledge of any claim or threatened claim against the Company by
any customer agency with respect to any Government Contract, including any claim
for a reduction in price under any Government Contract. There exists no
reasonable basis for a claim of liability against the Company by any
Governmental or Regulatory Authority under the Truth in Negotiations Act and/or
as a result of defective cost and pricing data submitted by the Company to any
Governmental or Regulatory Authority or Prime Contractor or Higher Tier
Subcontractor.
(m) Except as set forth on Schedule 3.10(m), with respect to
any Government Contracts, (i) there is, as of the date of this Agreement, no
request by any Governmental or Regulatory Authority for a Contract price
adjustment based on a claimed disallowance by the Defense Contract Audit Agency
(or other applicable Governmental or Regulatory Authority) or claim of defective
pricing and (ii) there has been no dispute between the Company and a
Governmental or Regulatory Authority which, during the four (4)-year period
prior to the date hereof, has resulted in a government contracting officer's
final decision.
(n) As of the date hereof, the Company does not have any
outstanding bid that, if accepted or awarded, is expected by the Company to
result in a loss in excess of $50,000 to the Company (or, following the Closing,
the Parent or its subsidiaries), or in excess of $100,000 in the aggregate with
respect to all such bids. To the knowledge of the Company, the Company is not a
party to any Government Contract which is expected by the Company to result in a
loss in excess of $50,000 to the Company (or, following the Closing, the Parent
or its subsidiaries), or in excess of $100,000 in the aggregate with respect to
all of the Government Contracts. For purposes of this Section 3.10(n), such loss
shall be determined by including all direct and indirect costs, including
allocated indirect costs, overheads, general and administrative costs, bid and
proposal costs and research and development costs.
(o) There are no existing conflicts of interest ("OCI"),
including without limitation organizational conflicts of interest, that would
reasonably be expected to adversely impact any Government Contract or any
competitive proposals submitted, or that will be submitted, by the Company prior
to Closing. The Company is in compliance with all of its OCI mitigation plans
and has not been advised by any Governmental Authority of any failure to be in
compliance with any such plans or the existence of any other prohibited conflict
of interest.
3.11 REAL PROPERTY.
(a) The Company does not own any real property. As used
herein, "Permitted Liens" means (i) prior to the Closing, the Liens designated
as such on Schedule 3.11(a), (ii) statutory Liens for Taxes or assessments not
yet due and payable or that the taxpayer is contesting in good faith through
appropriate proceedings for which adequate reserves have been maintained in
accordance with GAAP, (iii) mechanic's, materialmen's, and similar Liens, (iv)
purchase money Liens and Liens securing rental payments under capital lease
arrangements, and (v) such other Liens, imperfections in title and easements, if
any, which do not detract from the value of or interfere with the present or
proposed use by the Company of the property subject thereto or affected thereby.
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(b) Schedule 3.11(b) sets forth each interest in real
property leased by the Company, the lessor of such leased property, the annual
rent payable by the Company in respect of such leased property, and each lease
or any other arrangement under which such property is leased (the "Leased
Property"). The Company enjoys peaceful and quiet possession of its leased
premises, and is not in default or breach in any material respect under any Real
Estate Lease. The Company has not received written or, to its knowledge, oral
notice that any lessor under any of the leases set forth on Schedule 3.11(b)
(the "Real Estate Leases") has taken action in respect of any Real Estate Lease
or threatened to terminate any Real Estate Lease before the expiration date
specified in such lease. The Company is entitled to the benefit of
non-disturbance agreements that will permit it to continue to occupy the Leased
Property leased under such Real Estate Lease in the event of a change in
ownership or foreclosure upon the fee interest in such Leased Property.
(c) The Leased Property includes all real property necessary
for the conduct of the Business as currently conducted and is adequate to
conduct the operations of the Company as currently conducted. The Company does
not need to own or lease any other real property to conduct the Business as
currently conducted.
(d) To the knowledge of the Company, none of the buildings,
plant or structures on any Leased Property is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are, individually and
in the aggregate, immaterial. To the knowledge of the Company, all utility
systems serving the Leased Property are adequate in all material respects for
the Business as currently conducted. Each Leased Property has access for ingress
from and egress to a public way that is adequate for the Business as currently
conducted. There is no pending or, to the knowledge of the Company, threatened
condemnation, eminent domain or similar proceeding with respect to any Leased
Property.
3.12 PERSONAL PROPERTY AND ASSETS.
(a) The Company has good title to or a valid leasehold or
license interest in each item of personal property used by it in the Business,
free and clear of all Liens, other than Permitted Liens. All material tangible
assets of the Company are in good operating condition and repair, normal wear
and tear excepted, and are adequate to conduct the operations of the Company as
currently conducted. The assets and properties (including Intellectual Property)
of the Company include all assets and properties (including Intellectual
Property) necessary for or currently used in the conduct of the Business, and
are adequate in all material respects to conduct the operations of the Company
as currently conducted.
(b) Schedule 3.12(b) sets forth all leases of personal
property ("Personal Property Leases") involving annual payments in excess of
$50,000 relating to personal property used in the Business or to which the
Company is a party or by which the properties or assets of the Company are
bound. The Company has a leasehold interest under each of the Personal Property
Leases under which it is a lessee that is valid and enforceable in accordance
with its terms against the Company and, to the knowledge of the Company, any
other party thereto and neither the Company nor, to the knowledge of the
Company, any other party to the Personal Property Leases has exercised any
termination rights with respect thereto.
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3.13 INTELLECTUAL PROPERTY.
(a) As used herein "Intellectual Property" means all
intellectual property rights of every kind and related priority rights arising
from or in respect of the following, whether protected, created or arising under
the laws of the United States or any other jurisdiction or under any
international convention: (i) patents, patent applications, patent/invention
disclosures and inventions, including all continuations, divisionals,
continuations-in-part and provisionals and patents issuing thereon, and all
reissues, reexaminations, substitutions, renewals and extensions thereof, (ii)
trademarks, service marks, trade dress, trade names, logos and corporate names
(in each case, whether registered or unregistered) and other source or business
identifiers, and all applications, registrations, renewals and extensions
thereof, (iii) copyrights (registered or unregistered) and moral rights, and all
registrations, applications, renewals, extensions and reversions thereof, (iv)
computer programs (whether in source code or object code, and including any and
all software implementations of algorithms, models and methodologies), data,
databases, compilations, user interfaces, development tools, report formats,
templates, firmware and documentation (including user manuals and other training
documentation) related to any of the foregoing in this clause (iv)
(collectively, "Software"), (v) trade secrets and other confidential or
proprietary information or materials (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, concepts, ideas, processes, techniques, formulae,
compositions, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information) (collectively,
"Trade Secrets"), (vi) World Wide Web addresses and domain name registrations,
(vii) works of authorship including computer programs, source code and
executable code, whether embodied in Software, firmware or otherwise,
documentation, designs, files, records, data and mask works and any rights in
semiconductor masks, layouts, architectures or topography, and (viii) goodwill
associated with any of the foregoing.
(b) As used herein "Company Intellectual Property" means all
Intellectual Property used in or necessary for the conduct of the business of
the Company, or owned or held for use by the Company.
(c) As used herein "Intellectual Property License" means (i)
any grant by the Company to another Person of any license, sublicense, right,
permission, consent or non-assertion relating to or under any Company
Intellectual Property and (ii) any grant by another Person to the Company of any
license, sublicense, right, permission, consent or non-assertion relating to or
under any Intellectual Property owned by a third Person.
(d) Schedule 3.13(d) contains a complete and accurate list
of: (a) all issued patents, and all pending applications for patents, owned by
Company; (b) all registered trademarks, and all pending applications for
trademarks, owned by Company; (c) all registered copyrights, and all pending
applications for copyrights, owned by Company; and (d) all domain names
registered by Company; and further lists (x) the record owner of each such item
of Intellectual Property; (y) the jurisdictions in which each such item of
Intellectual Property has been issued or registered or in which any such
application for issuance or registration has been filed; and (z) the
registration or application date, as applicable, for each such item of
Intellectual Property. Schedule 3.13(d) contains a complete and accurate list of
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all Intellectual Property Licenses and other rights granted by the Company to
any Person with respect to any Company Intellectual Property and all
Intellectual Property Licenses and other rights granted by any Person to the
Company with respect to any Company Intellectual Property (for this purpose,
excluding so-called "off-the-shelf," "shrink wrap" Software licensed to the
Company in the ordinary course of business for a fee not exceeding $10,000 in
payment by the Company ("Off-the-Shelf Software") and excluding any implied
licenses granted or obtained through product sales or purchases). The Company is
not required to pay any royalties or other compensation to any third Person in
respect of its ownership or use of any Company Intellectual Property, other than
payments in the ordinary course of business for Off-the-Shelf Software, or as
otherwise listed in Schedule 3.13(d).
(e) The Company owns, solely and exclusively, or possesses
valid and sufficient legal rights to use, sell, license and otherwise
commercially exploit, as the case may be, all Company Intellectual Property and
Intellectual Property licensed to the Company under Intellectual Property
Licenses as the same is used, sold, licensed and otherwise commercially
exploited by the Company in the Business as presently conducted. The Company
(including the Company's business practices, methods and operations) has not
violated, infringed or misappropriated, and is not violating, infringing or
misappropriating, any Intellectual Property or privacy or publicity rights of
any other Person, and the Company has no knowledge of any violation,
infringement or misappropriation by any Person of any Company Intellectual
Property. The Company has not received any written or, to the knowledge of the
Company, oral notice from any Person claiming any violation, infringement or
misappropriation of any other Person's Intellectual Property rights. The Company
Intellectual Property owned by the Company, and all of the Company's rights in
and to the Company Intellectual Property, are valid and enforceable. Each of the
Intellectual Property Licenses is valid and enforceable in accordance with its
terms against the Company and, to the knowledge of the Company, the other party
to such Intellectual Property License.
(f) No item of Company Intellectual Property owned by the
Company is registered with, or required to be registered with, any Governmental
or Regulatory Authorities in the United States or in any foreign jurisdictions.
(g) The Company has taken reasonable measures (consistent
with the measures generally taken in the industry in which the Company operates)
to protect its rights in, and the confidentiality of, the Company Intellectual
Property that constitutes a Trade Secret and any other confidential information
of the Company (and any confidential information owned by a third Person to whom
the Company has a confidentiality obligation). No Trade Secret included in the
Company Intellectual Property has been authorized to be disclosed or, to the
knowledge of the Company, has been actually disclosed by the Company to any
third Person other than pursuant to a written non-disclosure agreement
restricting the disclosure and use of the Company Intellectual Property. Each
employee, consultant and independent contractor of the Company involved in
creating or developing any products, services or Intellectual Property related
to the Business has entered into a written non-disclosure and invention
assignment agreement with the Company in a form provided to Parent prior to the
date hereof or substantially similar thereto. To the knowledge of the Company,
no employee, consultant or independent contractor of the Company is obligated
under any agreement or commitment, or subject to any judgment, decree or order
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of any court or administrative agency, that could be reasonably expected to
interfere with such employee's, consultant's or independent contractor's duties
to the Company with respect to the Company Intellectual Property, or that could
reasonably be expected to conflict with the Business as currently conducted.
(h) All of the Company's rights, title and interest in and
to the Company Intellectual Property owned by the Company are free and clear of
all Liens, other than Permitted Liens.
(i) No open source or public library Software (or other
Software having similar licensing or distribution models), including any version
of any Software licensed pursuant to any GNU public license, was used in the
development or modification of any Software owned by the Company that is
incorporated into or utilized by any products of the Company where, as a result
of the use of such open source or public library Software (or other Software
having similar licensing or distribution models), the Company is obligated to
make available to third parties other than its customers any source code for the
proprietary Software owned by the Company that is incorporated into or utilized
by such products. Except as set forth on Schedule 3.13(d), the Company has not
licensed or provided to any third Person, or otherwise permitted any third
Person to access or use, any source code or related materials for any Software
developed by or for the Company. The Company is not currently a party to any
source code escrow agreement or any other agreement (or a party to any agreement
obligating the Company to enter into a source code escrow agreement or other
agreement) requiring the deposit of source code or related materials for any
such Software.
3.14 ACCOUNTS AND NOTES RECEIVABLE. All accounts and notes
receivable of the Company, including unbilled and accrued receivables, are
determined in accordance with GAAP and arose out of bona fide transactions in
the ordinary course of business. All accounts and notes receivable of the
Company reflected on the audited, consolidated balance sheets of the Company as
at the Latest Audited Financial Statement Date, including unbilled and accrued
receivables, (a) are valid and enforceable claims, (b) are not subject to set
off or counterclaim, and (c) are collectible in the ordinary course of business
(assuming collection activities are consistent with the Company's past
practices) in the aggregate recorded amounts thereof, net of the reserves shown
on the most recent Financial Statements set forth in Section 3.7(a). All
accounts and notes receivable of the Company arising after the Latest Audited
Financial Statement Date and reflected in the calculation of Closing Working
Capital, including unbilled and accrued receivables, (i) are valid and
enforceable claims, (ii) are not subject to set off or counterclaim, and (iii)
are collectible in the ordinary course of business (assuming collection
activities consistent with the Company's past practices) in the aggregate
recorded amounts thereof, net of any applicable reserve.
3.15 WARRANTY CLAIMS. There are, and since January 1, 2005, there
have been, no claims against the Company alleging any defects in the Company's
services or products, or alleging any failure of the products or services of the
Company to meet applicable specifications, warranties or contractual
commitments. The Company's liability for breach of warranty is limited to repair
or replacement of products or nonconforming parts. The Company's liability for
any breach of warranty for products manufactured or services provided prior to
Closing shall not exceed the warranty reserve set forth in the most recent
financial statements set forth in Section 3.7(a). The Company's products are
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free from material defects and perform in accordance in all material respects
with all applicable specifications, warranties and contractual commitments. The
Company has no liability arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product designed,
manufactured, assembled, repaired, maintained, delivered, sold or installed, or
services rendered, by or on behalf of the Company. The Company has not sold any
products or delivered any services that included a warranty for a period of
longer than one (1) year.
3.16 BUSINESS RELATIONSHIPS. Schedule 3.16(i) sets forth a list of
all customers that accounted for at least $2,000,000 of consolidated net sales
by the Company during the twelve (12) calendar months ended as of April 30,
2007. No such customer has provided to the Company any written or, to its
knowledge, oral notice that such customer will not continue purchasing, without
significant reductions, products and services from the Company. No supplier,
vendor or service provider has provided the Company with any written or, to its
knowledge, oral notice that such supplier, vendor or service provider will not
continue after the Closing to sell the products and provide the services to the
Company currently sold and provided by them at the same or similar terms and
conditions. The Company, the Company's relationships with such customers,
suppliers, vendors and service providers are good commercial working
relationships. During the previous eighteen (18) months, no customer
representing more than $2,000,000 of consolidated annualized revenues and no
supplier, vendor or service provider (a) has terminated or, to the knowledge of
the Company, threatened to terminate, its relationship with the Company
(excluding the expiration of any Contract governing such relationship pursuant
to its terms), (b) has decreased or limited materially or, to the knowledge of
the Company, threatened to decrease or limit materially, the services, supplies
or materials supplied to or purchased from the Company as a result of the
quality of the products or services of the Company, or (c) has materially
changed or, to the knowledge of the Company threatened to change materially, its
business relationship with the Company (including the pricing or terms of its
business) as a result of the quality of the products or services of the Company.
3.17 REGULATORY AND LEGAL COMPLIANCE. The Company is in compliance
in all material respects with all Legal Requirements. Since January 1, 2003, the
Company has not received any written or, to its knowledge, oral notice from any
Governmental or Regulatory Authority or any other Person of any alleged
violation or noncompliance with any Legal Requirement. As used herein, the term
"Legal Requirements" means, with respect to any Person, all foreign, federal,
state and local statutes, laws, ordinances, judgments, decrees, orders, rules,
regulations, policies and guidelines applicable to such Person, including the
Foreign Corrupt Practices Act of 1977, as amended, and the regulations
promulgated thereunder, the regulations promulgated by the General Services
Administration and the laws and the regulations relating to export controls. The
Company maintains an accredited Sensitive Compartmented Information Facility for
the handling of classified information concerning or derived from intelligence
sources, methods, or analytical processes that complies with all Legal
Requirements. All Company personnel who have had access to classified
information have possessed the security clearance required under all applicable
Legal Requirements for such access.
3.18 LICENSES AND PERMITS. Schedule 3.18 sets forth all licenses,
permits, authorizations, franchises and certifications of Governmental or
Regulatory Authorities held by the Company or that are material to the Business.
The Company is in compliance in all material respects with all such licenses,
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permits, authorizations, franchises and certifications, all of which are in full
force and effect and will be in full force and effect immediately after giving
effect to the Transactions, subject to obtaining the Required Consents, if any.
No event has occurred that, with notice or the lapse of time or both, would
constitute a default or violation, in any material respect, of any term,
condition or provision of any such license, permit, authorization, franchise or
certification, and to the knowledge of the Company, there are no facts or
circumstances that could reasonably be expected to form the basis for any such
default or violation. There are no other licenses, permits, authorizations,
franchises or certifications that are material to the Company or the Business
that the Company is required to obtain. The Company does not have knowledge of
any threatened suspension, revocation or invalidation of any such licenses,
permits, authorizations, franchises or certifications, or any reasonable basis
therefor.
3.19 TAX MATTERS.
(a) DEFINITIONS. For purposes of this Agreement, the
following definitions shall apply:
(i) "Tax" or "Taxes" means (i) all taxes, charges,
fees, levies, penalties, additions or other assessments imposed by
any foreign, federal, state or local taxing authority, including
income, excise, property, sales, use, transfer, franchise, payroll,
withholding, value added, social security or other taxes, and (ii)
any interest, penalties or additions attributable to any item
described in clause (i).
(ii) "Tax Returns" means all reports, estimates,
declarations of estimated Tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes
and any schedules attached to or amendments of (including refund
claims with respect to) any of the foregoing.
(b) Except as set forth on Schedule 3.19(b) hereto: (i) all
material Tax Returns required to be filed by or on behalf of the Company or
Holdings have been duly filed on a timely basis; (ii) such Tax Returns are true,
complete and correct in all material respects; (iii) all material Taxes owed by
the Company or Holdings for or with respect to any taxable period or partial
taxable period ending on or before the Closing Date, whether or not stated as
due on such Tax Returns (including Taxes withheld from employees' salaries and
all other withholding Taxes and obligations and deposits required to be made by
or with respect to the Company), have been paid or will be timely paid by the
Company or Holdings prior to the Closing Date unless such Taxes are reflected in
Closing Working Capital as finally determined pursuant to Section 1.8; (iv) true
and complete copies of each material Tax Return of the Company including each
material franchise or excise Tax Return based on income filed for the last three
(3) taxable years have been made available to the Parent; (v) neither the
Company nor Holdings (A) has ever been audited or received notice of initiation
thereof by any governmental taxing authority for which the statute of
limitations for assessment of Taxes remains open, (B) has ever extended any
applicable statute of limitations regarding Taxes for which the statute of
limitations for assessment of Taxes remains open, (C) is liable, contractually
or otherwise, for the material Taxes of any other Person (other than withholding
Taxes arising in the ordinary course of business), (D) except in connection with
the conversion to an accrual method of accounting as a result of the
Transactions, will be required to include any item of income in, or exclude any
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item of deduction from, its taxable income for any taxable period (or portion
thereof) ending after the date hereof as a result of any change in method of
accounting for a taxable period ending on or prior to the date hereof under
Section 481(c) of the Code (or any corresponding or similar provision of state,
local or foreign income Tax law), "closing agreement" as described in Section
7121 of the Code (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the date hereof, installment
sale or open transaction disposition made on or prior to the date hereof, or
prepaid amount received on or prior to the date hereof, (E) has ever
participated in the filing of any consolidated, combined or unitary Tax Return,
and (F) is currently the beneficiary of any extension of time within which to
file any Tax Return, and (vi) the Company and Holdings have complied in all
material respects with all applicable laws relating to the payment and
withholding of Taxes, and has duly and timely withheld and paid over to the
appropriate taxing authority all material amounts required to be so withheld and
paid under all applicable laws.
(c) From the date of its organization and until such time as
it is converted into a limited liability company, the Company continuously has
had in effect a valid election to be taxed as an S corporation for federal and
all applicable state law purposes. From the date of its organization, Holdings
continually has had in effect a valid election to be taxed as an S corporation
for federal and all applicable state law purposes. Neither the Company nor
Holdings has any potential liability under Section 1374 of the Code or is, or
has ever been, subject to the passive income tax under Section 1375 of the Code.
(d) Neither the Company nor Holdings has engaged in a
transaction that is the same or substantially similar to one of the types of
transactions that the Internal Revenue Service has determined to be a reportable
transaction, as set forth in Treasury Regulation Section 1.6011-4(b).
(e) Neither the Company nor Holdings has any interest in or
is not subject to any joint venture, partnership, or other arrangement or
contract which is treated as a partnership for federal income tax purposes. The
Company is not a successor to any other Person by way of merger, reorganization
or similar transaction.
(f) There are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company or Holdings.
(g) As of the date hereof, neither the Company nor Holdings
has knowledge of any conditions that exist that could reasonably be expected to
prevent or impede (i) the Initial Reorganization from qualifying as a
reorganization within the meaning of Section 368(a)(1)(F) of the Code; or (ii)
the Merger and the Subsequent Merger, taken together, from qualifying as a
reorganization within the meaning of Section 368(a)(2)(D) of the Code.
3.20 LITIGATION. Except as set forth on Schedule 3.20, no action,
arbitration, suit, claim, inquiry, proceeding or investigation (each, a "Legal
Proceeding") is pending or, to the knowledge of the Company, threatened against
the Company, or, to the knowledge of the Company, pending or threatened against
any stockholder, officer, director or employee of the Company in relation to the
affairs of the Company (including any Legal Proceeding relating to any
Transaction Documents or Transactions), nor to the knowledge of the Company is
there any reasonable basis for any such Legal Proceeding. The Company is not
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subject to any order, injunction, judgment, subpoena, decree or ruling of any
Governmental or Regulatory Authority.
3.21 EMPLOYEES AND COMPENSATION.
(a) The Company is in compliance in all material respects
with all applicable Legal Requirements respecting employment and employment
practices in the jurisdictions within which it operates including the Age
Discrimination in Employment Act of 1967, as amended, the Civil Rights Act of
1964, as amended, the Americans with Disabilities Act of 1990, as amended,
ERISA, the Code and state fair employment practices laws.
(b) The Company's employees are not represented by a union,
and there is no labor strike, dispute, arbitration, grievance, slowdown,
stoppage, organizational effort, dispute or proceeding by or with any employee
or former employee of the Company or any labor union pending or, to the
knowledge of the Company, threatened against the Company. There has been no
"mass layoff" or "plant closing" as defined in the Worker Adjustment and
Retraining Notification Act ("WARN") with respect to the Company or any of its
subsidiaries within six (6) months prior to Closing.
(c) There are no employment or consulting Contracts or
arrangements (other than those terminable at will without liability to the
Company) with any employees or consultants of the Company other than as
described on Schedule 3.9. Schedule 3.21 sets forth a complete list, as of the
date of this Agreement, of all employees of and consultants to the Company, with
annual compensation in excess of $50,000, showing date of hire, hourly rate or
salary or other basis of compensation and job function, all as of the date of
this Agreement, and other benefits accruing pursuant to the Company's standard
policies, including paid time off or vacation pay. The Company has not received
any written or, to its knowledge, oral notice that any officer or key employee
of the Company intends to terminate his or her employment with the Company.
3.22 ERISA; COMPENSATION AND BENEFIT PLANS.
(a) Schedule 3.22(a) sets forth all material employee
compensation and benefit plans, agreements, commitments, programs, practices,
policies or arrangements of any type (including all "employee benefit plans"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) providing cash or equity-based compensation
or incentives (such as stock options, phantom stock, and stock purchase or stock
appreciation rights), health, medical, dental, cafeteria benefit (Section 125 of
the Code), dependent care (Section 129 of the Code), disability, accident or
life insurance benefits or vacation, severance, change in control, retention,
deferred compensation, retirement, pension or savings benefits that are
sponsored, offered, maintained or contributed to by the Company for the benefit
of current or former employees or directors of the Company, or with respect to
which the Company has or may have any liability, whether direct or indirect,
actual or contingent (including liabilities arising from any subsidiaries,
Affiliates or any trade or business (whether or not incorporated) which is or
has ever been under common control, or which is or has ever been treated as a
single employer with any of them under Section 414(b), (c), (m) or (o) of the
Code or Section 4001(b)(1) of ERISA ("ERISA Affiliate")) (collectively, the
"Benefit Plans"), and includes a written description of all oral Benefit Plans.
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There are no material compensation or benefit plans, agreements, commitments,
practices or arrangements of any type providing compensation or benefits to
employees or directors of the Company, or with respect to which the Company or
any ERISA Affiliate may have any liability, contingent or otherwise, other than
the Benefit Plans.
(b) With respect to each Benefit Plan, the Company or its
ERISA Affiliate has delivered and made available to the Parent true and complete
copies of: (i) any and all plan documents, manuals, texts, agreements and
amendments thereto (including adoption agreements, trust agreements, insurance
Contracts and investment management agreements currently in effect); (ii) any
and all material written descriptions of Benefit Plans circulated generally
among participants (including all summary plan descriptions and summary of
material modifications thereto currently in effect); (iii) the three most recent
Form 5500 series annual returns and all schedules thereto, if applicable; (iv)
the most recent annual and periodic accounting of plan assets, if applicable;
(v) the most recent determination letter received from the Internal Revenue
Service (the "Service"), if applicable; and (vi) in the case of any unfunded or
self-insured plan or arrangement, the most recent actuarial report and a current
estimate of accrued and anticipated liabilities thereunder.
(c) Except as otherwise provided on Schedule 3.22(c) with
respect to each Benefit Plan: (i) if intended to qualify under Section 401(a) of
the Code, the Service has issued a favorable opinion letter upon which the
Company is entitled to rely under Service pronouncements, that such plan
document meets the qualification requirements of Section 401(a) of the Code, and
to the knowledge of the Company such opinion letter has not been revoked, (ii)
the Company has no knowledge of any events or conditions since the issuance of
such opinion letter that could reasonably be expected to cause the loss of the
Tax-qualified status of such plan (iii) such plan has been administered,
maintained and operated in material compliance with its terms and all applicable
Legal Requirements including, but not limited to, ERISA and the Code; (iv) no
breach of fiduciary duty has occurred, nor has the Company, any ERISA Affiliate
or any "fiduciary" (as such term is defined in Section 3(21) of ERISA) engaged
in any conduct, that would result in the assessment of any Taxes or penalties
under Sections 4976 through 4980 of the Code or under Section 502(i) or 502(l)
of ERISA; (v) no disputes, actions, suits, claims or arbitrations (other than
claims for benefits in the ordinary course) nor to the knowledge of the Company
are any audits or investigations by any Governmental or Regulatory Authority
pending or threatened; (vi) no "prohibited transaction" (within the meaning of
either Section 4975(c) of the Code or Section 406 of ERISA) has occurred with
respect to which the Company, any ERISA Affiliate or any Benefit Plan may be
liable or otherwise damaged; (vii) all contributions, premiums, and other
payment obligations have been accrued on the Financial Statements of the Company
if required by and in accordance with GAAP, and, to the extent due, have been
made on a timely basis; (viii) all contributions or benefit payments made or
required to be made under such plan meet the requirements for deductibility
under the Code to the extent intended to be deductible; (ix) the Company and its
ERISA Affiliates have prepared in good faith and timely filed all requisite
governmental reports including, but not limited to, Form 5500 series annual
returns, any related schedules, attachments and audit reports; (x) the Company
and its ERISA Affiliates have properly and timely distributed or posted all
notices and reports to current and former employees and their beneficiaries as
required under all applicable Legal Requirements including, but not limited to,
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ERISA and the Code; (xi) each such plan may be terminated by the Company in
accordance with its terms; and (xii) no such plan requires the Company or any
ERISA Affiliate to continue to employ any employee or director.
(d) Neither the Company nor any ERISA Affiliate has, or at
any time in the past had, an obligation to contribute to or incurred any
liability with respect to a "multiemployer plan" within the meaning of Section
3(37) of ERISA or a pension plan subject to Title IV of ERISA or Section 412 of
the Code.
(e) With respect to each Benefit Plan that is an "employee
welfare benefit plan" within the meaning of Section 3(1) of ERISA: no such plan
provides medical or death benefits with respect to current or former employees
or directors of the Company of any ERISA Affiliate beyond thirty (30) days
following their termination of employment, other than coverage mandated by
Sections 601-608 of ERISA and Section 4980B(f) of the Code or similar state
laws, (ii) each such plan has been administered in material compliance with
Sections 601-609 of ERISA and Section 4980B(f) of the Code; (iii) no such plan
is or is provided through a "multiple employer welfare arrangement" within the
meaning of Section 3(40) of ERISA; and (iv) no such plan has reserves, assets,
surpluses or prepaid premiums in violation of Sections 419 or 419A of the Code.
(f) Except as set forth on Schedule 3.22(f)-1, the
consummation of the Transactions contemplated by this Agreement, either alone or
in combination with another event, will not (i) entitle any current or former
employee, consultant, officer or director to severance pay, retention bonuses,
or change in control payments or bonuses, (ii) accelerate the time of payment,
funding or vesting under any Benefit Plan, or (iii) increase the amount of
compensation or benefits due to any current or former employee, consultant,
officer or director. Except as set forth on Schedule 3.22(f)-2, the Company has
no obligation to make payments that are contingent upon the consummation of the
Transactions contemplated by this Agreement that will constitute "excess
parachute payments" that will be nondeductible under Section 280G of the Code or
subject to the excise Tax under Section 4999 of the Code.
(g) Neither the Company nor any ERISA Affiliate has any
obligation to establish any new Benefit Plan or to amend or modify any Benefit
Plan, except to the extent required to conform any Benefit Plan to the
requirements of any applicable Legal Requirements including, but not limited to,
ERISA and the Code.
(h) Except as described on Schedule 3.22(h), neither the
Company nor any ERISA Affiliate has granted, or is a party to, any contract that
grants any compensation, equity award, or bonus, that fails to comply with the
provisions of Section 409A of the Code and the regulations issued thereunder.
(i) No Benefit Plan is required to be maintained or
contributed to by any applicable Legal Requirement of a jurisdiction outside of
the United States.
3.23 ENVIRONMENTAL MATTERS. The use by the Company of its premises
and assets, the Company's occupancy and operation thereof, and the conduct of
the Company's operations and business, are and at all times have been in
compliance in all material respects with all applicable Legal Requirements
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relating to pollution, environmental protection, hazardous substances and
related matters. The Company has received no written allegations of any
liabilities under any Environmental Law and the Company has no knowledge of any
such allegations pending or threatened. For purposes of this Section 3.23,
"hazardous substance" shall mean oil, petroleum or any fraction of petroleum or
any other substance that is included within the definition of a "hazardous
substance", "pollutant", "toxic substance", "toxic waste", "hazardous waste",
"contaminant" or other words of similar import in any environmental Legal
Requirement, and "Environmental Law" means any and all federal, state, foreign,
interstate, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decisions, injunctions, decrees, requirements of any
Governmental or Regulatory Authority, any and all common law requirements, rules
and bases of liability regulating, relating to, or imposing liability or
standards of conduct concerning pollution, hazardous substances or protection of
human health, safety or the environment, as currently in effect.
3.24 INSURANCE. Schedule 3.24 sets forth all insurance policies
under which the Company is insured, the name of the insurer of each policy, the
type of policy provided by such insurer, the amount, scope and period covered
thereby and a description of any material claims made thereunder. Such insurance
policies are valid and in full force and effect and for such amounts as are (a)
sufficient for all Legal Requirements and otherwise required by any agreements
to which the Company is a party or by which it is bound, and (b) reasonable for
the Business, assets and properties of the Company. All premiums due to date
under such policies have been paid, no default by the Company or, to the
knowledge of the Company, any other party exists thereunder and, with respect to
any material claims made under such policies, no insurer has (i) given any
written or, to the knowledge of the Company, oral notice to the Company or the
Selling Stockholders of any "reservation of rights", or (ii) refused to cover
all or any portion of such claims. The Company has not received any notice of
any proposed increase in the premiums payable for coverage, or proposed
reduction in the scope (or discontinuation) of coverage, under any of such
insurance policies and, to the knowledge of the Company, no event has occurred
which could reasonably be expected to result in a retroactive upward adjustment
in premiums under any such insurance policies or which could reasonably be
expected to result in a prospective upward adjustment in such premiums. To the
knowledge of the Company, no event has occurred which limits or impairs the
rights of the Company under any such insurance policies.
3.25 AFFILIATE TRANSACTIONS. Except as set forth on Schedule 3.25
and except as contemplated by the Sale Bonus Plan, (a) the Company is not a
party to any Contract or arrangement with, or indebted, either directly or
indirectly, to any of its (i) officers, directors, stockholders, or any of their
respective relatives or Affiliates, or (ii) employees, other than compensation
and benefits arrangements between the Company, as employer, and such Person, as
employee, in the usual, regular and ordinary course of business, and (b) (i)
none of such officers, directors or stockholders and (ii) to the knowledge of
the Company, none of its employees or any of the relatives or Affiliates of its
officers, directors or stockholders: (A) is indebted to the Company or has any
direct or indirect ownership interest in, or any contractual or business
relationship (whether written or oral) with, any Person with which the Company
is or was Affiliated or with which the Company has a business relationship, or
any Person which, directly or indirectly, competes with the Company, (B) has any
claim or cause of action against the Company, or (C) owns any interest in, or
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controls or is a director, officer, employee or partner of, or consultant to, or
lender to or borrower from or has the right to participate in the profits of,
any Person which is a competitor, supplier, customer, landlord, tenant, creditor
or debtor of the Company. As used herein, "Affiliate" has the meaning ascribed
to it in Rule 405 promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
3.26 ABSENCE OF MATERIAL UNDISCLOSED LIABILITIES. Except as set
forth on Schedule 3.26 and except for (a) accounts payable, accrued expenses and
other liabilities or obligations specifically reflected and reserved against on
the Financial Statements as at the Latest Audited Financial Statement Date and
other similar amounts incurred in the ordinary course of business since the
Latest Audited Financial Statement Date or (b) liabilities incurred pursuant to
the terms of or expressly contemplated by this Agreement, the Company does not
have any material liabilities or obligations, whether absolute, accrued,
contingent or otherwise, and whether due or to become due.
3.27 BROKERS. Except as set forth on Schedule 3.27, no finder,
broker, agent, financial advisor or other intermediary has acted on behalf of
the Selling Stockholders or the Company in connection with the negotiation or
consummation of this Agreement or the Transactions and no such Person is
entitled to any fee, payment, commission or other consideration in connection
therewith as a result of any arrangement made by any of them.
3.28 EXPORT CONTROLS. The Company has not exported, and does not
export, any products or services outside of the United States that required or
requires the registration by the Company with the Directorate of the Defense
Trade Control. The Company does not have a customer, supplier or distributor
relationship with, or is a party to any agreement with, any Person (a) organized
or domiciled in or that is a citizen of, the Balkans, Burma (Myanmar), Cuba,
Iran, Liberia, North Korea, Sudan, Syria or Zimbabwe (including any Governmental
or Regulatory Authority within any such country), or (b) that appears on the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Controls in the United States Department of the Treasury, or in the
Annexes to the United States Executive Order 13224 - Blocking Property and
Prohibiting Transactions with Person Who Commit, Threaten to Commit, or Support
Terrorism.
3.29 CERTAIN PAYMENTS. Neither the Company nor, to the knowledge of
the Company, any director, officer, consultant, employee, or other Person
associated with or acting on behalf of any of them, has directly or indirectly
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, domestic or
foreign, regardless of form, whether in money, property, or services (i) in
violation of any Legal Requirements, or (ii) to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns,
(b) violated any applicable export control, money laundering or anti-terrorism
Legal Requirement, or otherwise taken any action that would be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or (c) established or
maintained any fund or asset with respect to the Company that has not been
recorded in the books and records of the Company.
3.30 PURCHASE COMMITMENTS. Schedule 3.30 identifies the Persons
that represent, in the aggregate, at least eighty percent (80%) of the current
written commitments (whether pursuant to an agreement or purchase order) to
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purchase existing products or services or products or services being developed
by the Company or any of its Affiliates (the "Purchase Commitments"). The
Company has made available to the Parent correct and complete copies of all
documents evidencing such Purchase Commitments. The Company has no oral
commitments to purchase existing products or services or products or services
being developed by the Company or any of its Affiliates. All such Purchase
Commitments (a) are in full force and effect, have not been withdrawn, amended,
modified or terminated and are enforceable in accordance with their terms
against the Company and, to the knowledge of the Company, against any other
party thereto by the Company, and (b) upon consummation of the Transactions,
will be enforceable in accordance with their terms against the Company and, to
the knowledge of the Company, against any other party to such Purchase
Commitments. To the knowledge of the Company, no fact, condition or circumstance
exists that would give any party the right to withdraw, amend, modify or
terminate any Purchase Commitment and no Person has given any notice to the
Company or the Selling Stockholders, and neither the Company nor the Selling
Stockholders has any reasonable basis to believe that any Person intends to
withdraw, amend, modify or terminate any Purchase Commitment.
3.31 CORPORATE RECORDS. The Company has delivered or made available
(or will deliver and make available in the case of Holdings) to the Parent
copies of: (a) the Company's articles of incorporation and by-laws, including
all amendments thereto; (b) Holdings' certificate of incorporation and bylaws,
including all amendments thereto; (c) the records of issuance and transfer of
the Shares; (d) the records of issuance and transfer of the Holdings Shares; (e)
the minutes and other records of the meetings and other proceedings (including
any actions taken by written consent or otherwise without a meeting) of the
shareholders and directors of the Company, and all committees thereof; and (f)
the minutes and other records of the meetings and other proceedings (including
any actions taken by written consent or otherwise without a meeting of the
stockholders and directors of Holdings, and all committees thereof. There has
been no violation of any provision of the articles or certificates of
incorporation or by-laws of the Company or Holdings. Neither the Company nor
Holdings has taken any action that is inconsistent with any resolution adopted
by its shareholders and directors or any committee thereof. All stock transfer
Taxes levied, if any, or payable with respect to all transfers of Shares prior
to the date of this Agreement have been (or will be in the case of Holdings
Shares) paid and appropriate transfer Tax stamps affixed, if any.
3.32 BANKS; POWER OF ATTORNEY. Schedule 3.32 contains a complete
and correct list of the names and locations of all banks in which Company has
accounts or safe deposit boxes and the names of all Persons authorized to draw
thereon or to have access thereto. Except as set forth on Schedule 3.32, no
Person holds a power of attorney to act on behalf of the Company. Holdings will
not maintain any accounts or safe deposit boxes or grant any powers of attorney.
3.33 STOCKHOLDERS' REPRESENTATIVE. The execution, delivery and
performance by the Stockholders' Representative (on behalf of the Selling
Stockholders) of the Transaction Documents and the consummation by the
Stockholders' Representative (on behalf of the Selling Stockholders) of the
Transactions are within the power and authority granted to the Stockholders'
Representative by the Selling Stockholders. Each of the Transaction Documents to
which the Stockholders' Representative is or will be a party has been and will
be duly executed and delivered by the Stockholders' Representative on behalf of
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the Selling Stockholders constitutes the legal, valid and binding obligation of
the Stockholders' Representative, enforceable against her in accordance with its
terms. Each of the Selling Stockholders has appointed the Stockholders'
Representative as his, her or its representative, agent and attorney-in fact to
enter into the Transaction Documents and to perform all of such Selling
Stockholder's obligations and to exercise all of such Selling Stockholder's
rights thereunder pursuant to a validly executed appointment hereunder, and the
Stockholders' Representative has accepted each such appointment. A decision,
act, consent or instruction of the Stockholders' Representative relating to the
Transaction Documents shall constitute a decision for each Selling Stockholder
and shall be final, binding and conclusive upon each Selling Stockholder, and
the Parent may conclusively rely upon such decision, act, consent or instruction
of the Stockholder Representative as being the decision, act, consent or
instruction of each Selling Stockholder.
3.34 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except as
expressly set forth in Article 2, this Article 3, or any certificate delivered
by the Company pursuant to this Agreement, the Company makes no representation
or warranty, express or implied, at law or in equity, in respect of the Company
or any of its assets, liabilities or operations, including with respect to
merchantability or fitness for any particular purpose, and any such other
representations or warranties are hereby expressly disclaimed.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent represents and warrants to the Selling Stockholders in
this Article 4 as follows:
4.1 ORGANIZATION AND AUTHORITY; CONSENTS; NO-CONFLICT. The Parent
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Parent has full power and authority, and has
taken all required action on its part (including board approval) necessary to
permit it, to execute and deliver and to perform its obligations under and to
consummate the Transactions contemplated by, the Transaction Documents to which
the Parent is or will be a party. Upon its execution of the Acquisition Sub
Joinder Agreement and at the Closing, the Acquisition Sub will be a corporation
validly existing and in good standing under the laws of the State of Delaware
and will have full power and authority and will have taken all required action
on its part (including board approval) necessary to permit it to execute and
deliver and to perform its obligations under and to consummate the Transactions
contemplated by the Transaction Documents to which the Acquisition Sub is or
will be a party. The Merger Sub is a corporation validly existing and in good
standing under the laws of the State of Delaware and has full power and
authority and has taken all required action on its part (including board
approval) necessary to permit it to execute and deliver and to perform its
obligations under and to consummate the Transactions contemplated by the
Transaction Documents to which the Merger Sub is or will be a party. Except for
a periodic report on Form 8-K to be filed by the Parent with the SEC and as
specified on Schedule 4.1, no consent, order, authorization, approval,
declaration or filing, including any consent, approval or authorization of or
declaration or filing with any Governmental or Regulatory Authority or any party
to any Contract with the Parent, Acquisition Sub or Merger Sub is required on
the part of the Parent, Acquisition Sub or Merger Sub for or in connection with
the consummation of the Transactions, the execution, delivery or performance of
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this Agreement and the other Transaction Documents to which either of them is or
will be a party. The execution, delivery and performance of this Agreement and
the other Transaction Documents to which the Parent, Acquisition Sub or Merger
Sub is or will be a party will not result in any violation of, be in conflict
with, constitute a default under, or cause or give rise to any right of
acceleration of any obligation or loss or impairment of any rights or benefits
under, any Legal Requirement, Contract, instrument, charter, by-laws, operating
agreement, partnership agreement, organizational document, license, permit,
authorization, franchise or certification to which the Parent, Acquisition Sub
or Merger Sub, as applicable, is or will be a party or by which the Parent,
Acquisition Sub or Merger Sub, as applicable, is or will be bound, or result in
the creation of any Liens upon any properties or assets of the Parent.
4.2 VALIDITY AND ENFORCEABILITY. This Agreement is, and each of
the other Transaction Documents to which the Parent is a party shall be, when
executed and delivered by the Parent, the valid and binding obligations of the
Parent enforceable in accordance with its terms, (a) except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Legal Requirement of general application
affecting the rights and remedies of creditors and by principles of public
policy, and (b) subject to general principles of equity, and the availability of
remedies of specific performance and injunctive relief that may be subject to
the discretion of the court before which any Legal Proceeding for such remedies
may be brought. Upon execution of the Acquisition Sub Joinder Agreement and at
the Closing, this Agreement is, and each of the other Transaction Documents to
which the Acquisition Sub will be a party shall be, when executed and delivered
by the Acquisition Sub, the valid and binding obligations of the Acquisition
Sub, as applicable, enforceable in accordance with its terms, (a) except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Legal Requirement of general application
affecting the rights and remedies of creditors and by principles of public
policy, and (b) subject to general principles of equity, and the availability of
remedies of specific performance and injunctive relief that may be subject to
the discretion of the court before which any Legal Proceeding for such remedies
may be brought. This Agreement is, and each of the other Transaction Documents
to which the Merger Sub will be a party shall be, when executed and delivered by
the Merger Sub, the valid and binding obligations of the Merger Sub, as
applicable, enforceable in accordance with its terms, (a) except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Legal Requirement of general application
affecting the rights and remedies of creditors and by principles of public
policy, and (b) subject to general principles of equity, and the availability of
remedies of specific performance and injunctive relief that may be subject to
the discretion of the court before which any Legal Proceeding for such remedies
may be brought.
4.3 LITIGATION. No Legal Proceeding against the Parent,
Acquisition Sub or Merger Sub is pending or, to the knowledge of the Parent,
threatened against the Parent, Acquisition Sub or Merger Sub, which would
reasonably be expected to affect the legality, validity or enforceability of
this Agreement or the Transaction Documents or interfere with the Parent's,
Acquisition Sub's or Merger Sub's ability to consummate the Transactions
contemplated hereby.
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4.4 BROKERS. Except as set forth on Schedule 4.4, no finder,
broker, agent, financial advisor or other intermediary has acted on behalf of
the Parent in connection with the negotiation or consummation of this Agreement
or the Transactions and no such Person is entitled to any fee, payment,
commission or other consideration in connection therewith as a result of any
arrangement made by any of them.
4.5 FINANCIAL ABILITY. At the time of the Closing, the Parent will
have immediately available funds sufficient to consummate the Transactions
contemplated by this Agreement, including the payment of all fees and expenses
payable by the Parent in connection with the Transactions contemplated by this
Agreement.
4.6 EQUITY CONSIDERATION. The Equity Consideration, issued or to
be issued as of the Closing Date, will, when issued, be duly authorized, validly
issued, fully paid and non-assessable.
4.7 FINANCIAL STATEMENTS. All financial statements of the Parent
(including the notes to such financial statements) included in the Parent's
Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (i)
present fairly in all material respects the financial position, results of
operations, changes in stockholders' equity and cash flow (as applicable) of the
Parent as of the date of such financial statements and for the periods indicated
and (ii) have been prepared in conformity with GAAP applied in all material
respects on a consistent basis through the periods involved.
4.8 PARENT SEC REPORTS. Except as set forth on Schedule 4.8. the
Parent and its predecessor companies (excluding Identix, Inc.), have timely
filed with, and furnished or otherwise transmitted to, the SEC all Parent SEC
Reports required to be filed with the SEC. Each Parent SEC Report, at the time
it was filed, complied in all material respects with the requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Reports. As of the date of
this Agreement, Parent has no reason to believe that the Registration Statement
to be filed pursuant to Section 5.15 cannot be filed on Registration Statement
Form S-3. As used herein, "Parent SEC Reports" means all forms, schedules,
statements, reports and other documents filed by the Parent and its predecessor
companies (excluding Identix, Inc.), or any of their subsidiaries under the
Securities Act or the Exchange Act or otherwise filed by the Parent or any of
its subsidiaries with, or furnished by the Parent or any of its subsidiaries to,
the SEC, in each case since January 1, 2005.
4.9 TAX EFFECT. As of the date hereof, neither the Parent,
Acquisition Sub nor Merger Sub has knowledge of any conditions that exist that
could reasonably be expected to prevent or impede (i) the Initial Reorganization
from qualifying as a reorganization within the meaning of Section 368(a)(1)(F)
of the Code; or (ii) the Merger and the Subsequent Merger, taken together, from
qualifying as a reorganization within the meaning of Section 368(a)(2)(D) of the
Code.
4.10 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except as
set forth in this Article 4 or any certificate delivered by the Parent pursuant
to this Agreement, the Parent makes no representation or warranty, express or
implied, at law or in equity, in respect of the Parent or any of its assets,
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liabilities or operations, including with respect to merchantability or fitness
for any particular purpose, and any such other representations or warranties are
hereby expressly disclaimed.
ARTICLE 5
COVENANTS OF THE COMPANY, THE SELLING
STOCKHOLDERS AND HOLDINGS
5.1 CONDUCT OF THE BUSINESS. Except as set forth on Schedule 5.1
or pursuant Section 5.12(a), the Company and Holdings will, and the Selling
Stockholders will cause the Company and Holdings to, as the case may be, comply
with the following covenants prior to the Closing, unless otherwise approved in
writing by the Parent (which approval shall not be unreasonably withheld,
delayed or conditioned).
(a) Selling Stockholders will, and will cause the Company
and/or Holdings to, as applicable:
(i) maintain its legal existence;
(ii) use commercially reasonable efforts to preserve
the Business and its business organization intact (except as
contemplated by the Pre-Closing Transactions), retain its licenses,
permits, authorizations, franchises and certifications, and preserve
the existing Contracts in accordance with their respective terms and
goodwill of its customers, suppliers, vendors, service providers,
personnel and others having business relations with it;
(iii) conduct its Business only in the ordinary course
(including the collection of receivables and the incurrence and
payment of payables and capital expenditures);
(iv) use commercially reasonable efforts to operate in
such a manner as to assure that the representations and warranties
of the Company, Holdings and the Selling Stockholders set forth in
this Agreement will be true and correct in all material respects as
of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the
Closing Date;
(v) maintain the books, accounts and records of the
Company and Holdings in the ordinary course of business;
(vi) comply in all material respects with all
contractual and other obligations of the Company and Holdings;
(vii) comply in all material respects with all Legal
Requirements;
(viii) consummate the Pre-Closing Transactions;
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(ix) form Holdings and cause Holdings to execute and
deliver the Holdings Joinder Agreement as soon as reasonably
practicable following the date of this Agreement; and
(x) transfer that certain Aspen Lake Contract
(2005-P185400-000) dated February 1, 2005 by and between the Company
and the United States Government (the "Aspen Lake Contract") and the
related Company personnel set forth on Schedule 5.1(a)(x) to BAI,
Inc. on terms and conditions reasonably satisfactory to the Parent.
(b) Without limiting the generality of the foregoing the
Selling Stockholders will not, and will cause the Company and Holdings not to:
(i) change its method of management or operations in
any material respect;
(ii) dispose, acquire or license any assets or
properties in an aggregate amount in excess of $33,000 or make any
commitment to do so, except that the Company and the Selling
Stockholders may take such actions as are necessary to transfer the
Aspen Lake Contract to BAI, Inc. in accordance with Section
5.1(a)(x);
(iii) except for any Indebtedness incurred to make
payments contemplated by Section 1.7(b)(ii)(C), incur any
Indebtedness for borrowed money, make any loans or advances (other
than employee advances, credit cards and expense reimbursements),
assume, guarantee or endorse or otherwise become responsible for the
obligation of any other Person, or subject any of its properties or
assets to any Lien, other than Permitted Liens;
(iv) modify, amend, cancel or terminate any Material
Contract or any other existing Contract material to the Company,
Holdings or their respective Businesses;
(v) make any change in the compensation paid or
payable to any indirect personnel of the Company or Holdings whose
annual compensation is greater than $100,000 or, with respect to
indirect personnel of the Company or Holdings whose annual
compensation is less than $100,000, increase the compensation paid
or payable to such Person to an amount greater than $100,000;
(vi) except for the payments contemplated by Section
1.7(b)(ii)(C), (A) increase the salary or other compensation of any
director, officer or employee of the Company or Holdings, (B) grant
any bonus, benefit or other direct or indirect compensation to any
director, officer, employee or consultant, (C) increase the coverage
or benefits available under any (or create any new) severance pay,
termination pay, vacation pay, company awards, salary continuation
for disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit
plan or arrangement made to, for, or with any of the directors,
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officers, employees, agents or representatives of the Company or
Holdings or otherwise modify or amend or terminate any such plan or
arrangement, or (D) enter into any employment, deferred
compensation, severance, special pay, consulting, non-competition or
similar Contract or arrangement with any directors or officers of
the Company or Holdings (or amend any such Contract to which the
Company or Holdings is a party);
(vii) promote, change the job title of, or otherwise
alter in any material respect the responsibilities or duties of, any
management employee or officer of the Company or Holdings;
(viii) enter into any Contract with respect to which the
Company or Holdings has any liability or obligation involving more
than $100,000, contingent or otherwise, or which may otherwise have
any continuing effect after the Closing (other than in the ordinary
course of business, and other than such liabilities or obligations
that are billable directly to a client or customer of the Company or
Holdings), or which may place any express limitation on the method
of conducting or scope of the Business;
(ix) make or cause to be made any redemption,
repurchase, recapitalization, reclassification, issuance, split,
combination or other transaction involving the capital stock or
other equity securities or interests of the Company or Holdings, or
any option, warrant or right to acquire any such capital stock,
equity securities or interests (except as contemplated by the
Pre-Closing Transactions);
(x) declare, set aside, make or pay any dividend or
other distribution in respect of the capital stock of, or other
equity interests of, the Company or Holdings, except for any
distribution for the purpose of paying taxes with respect to
ownership of the Shares or the Holdings Shares and except for cash
distributions to the Selling Stockholders not to exceed $400,000 in
the aggregate;
(xi) transfer, issue, sell, pledge, encumber or dispose
of any shares of capital stock or other securities of, or other
equity interests in, the Company or Holdings or grant options,
warrants, calls or other rights to purchase or otherwise acquire
shares of the capital stock or other securities of, or other
ownership interests in, the Company or Holdings (except as
contemplated by the Pre-Closing Transactions);
(xii) amend the articles of incorporation, certificate
of formation, by-laws, operating agreement or equivalent
organizational or governing documents of the Company or Holdings;
(xiii) make any change in its accounting practices or
procedures, (a) except as required by GAAP or any Legal
Requirements, (b) except as contemplated by the Pre-Closing
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Transactions or (c) in the case of Tax accounting methods, except
where the Tax accounting method would not result in an increase in
the net taxable income of the Merger Sub for any taxable period (or
portion thereof) beginning after the Closing Date;
(xiv) except as required by law, (A) file, make or
change any Tax election or any Tax Return (or any amendment thereof)
(except as contemplated by the Pre-Closing Transactions), (B) settle
or compromise any Tax claim or liability or enter into a settlement
or compromise or (C) surrender any right to claim a refund of any
Taxes, if such action would result in an increase in the net taxable
income of the Subsequent Merger Surviving Corporation for any
taxable period (or portion thereof) beginning after the Closing
Date;
(xv) change its customer pricing, rebates or discounts, other
than in the ordinary course of business;
(xvi) acquire any Person or the business of any Person,
whether by merger or consolidation, purchase of assets or equity
securities or any other manner;
(xvii) cancel or waive any rights of substantial value, or
pay, discharge or settle any claim of an amount in excess of
$10,000;
(xviii) make any capital expenditures that, individually or in
the aggregate, exceed $15,000;
(xix) take any action with the intent of adversely affecting
the ability of the parties to consummate the Transactions;
(xx) recognize any labor union or enter into any collective
bargaining agreement;
(xxi) take any other action which could reasonably be expected
to have a Company Material Adverse Effect, or could reasonably be
expected to materially and adversely affect or detract from the
value of the Company, its assets or the Business;
(xxii) enter into any Contract or arrangement that restrains,
restricts, limits or impedes the ability of the Company to compete
with or conduct any business or line of business in any geographic
area or solicit the employment of any Persons;
(xxiii) commence or settle any Legal Proceedings;
(xxiv) enter into any Contract or arrangement with, make any
loans to, or borrow money from, either directly or indirectly, any
of its officers, directors, employees, stockholders, or any of their
respective relatives or Affiliates;
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(xxv) (A) submit any bid that, if accepted or awarded, could
reasonably be expected to result in any loss to the Company (or,
following Closing, the Parent or its subsidiaries), or (B) enter
into any Contract which could reasonably be expected to result in
any loss to the Company (or, following the Closing, the Parent or
its subsidiaries); or
(xxvi) commit to do any of the foregoing referred to in
clauses (i)-(xxv).
5.2 ACCESS. Until the Closing Date, if requested by the Parent,
the Company and Holdings will, and the Selling Stockholders will cause the
Company and Holdings to, permit the Parent, its financing sources and their
respective representatives, during normal business hours and upon reasonable
prior notice, access to (a) the assets, properties, records, books of account,
financial information (including working papers and data in the possession of
the Company and Holdings, internal audit reports and "management letters" from
its independent auditors), Contracts and other documents of the Company and
Holdings and (b) with the Company's or Holdings' prior consent (which shall not
be unreasonably withheld, conditioned or delayed), and so long as the Parent,
its financing sources, and/or their representatives are accompanied by the
Company's Chief Financial Officer or her designee, any such specific employees,
advisors, consultants, other personnel, service providers, vendors or suppliers
of, or others having material business relations with, the Company or Holdings
as the Parent may reasonably request. Until the Closing Date, the Company and
Holdings will, and the Selling Stockholders will cause the Company and Holdings
to, furnish promptly to the Parent such additional data and other information as
to its affairs, assets, business, properties, employees or prospects as the
Parent, its financing sources or their representatives may from time to time
reasonably request. The Company and the Selling Stockholders shall provide
reasonable cooperation in connection with the Parent obtaining any financing in
connection with the Transactions contemplated hereby. The obligations of the
Company and Holdings under this Section 5.2 shall be subject to the Company's
compliance with Legal Requirements, as determined in good faith by the Company
based upon the written advice of legal counsel to the Company.
5.3 EFFORTS; COOPERATION.
(a) The Company and the Selling Stockholders will use all
reasonable efforts to cause the conditions specified in Section 8.1 to be
satisfied as soon as practicable.
(b) The Company and the Selling Stockholders will cooperate
with any reasonable request by the Parent or its financing sources in connection
with the Parent's financing of the Transaction. For example, if requested by the
Parent, the Company and the Selling Stockholders will reasonably assist the
Parent in obtaining any mortgage, leasehold mortgage, landlord waiver, control
agreement, collateral assignment or other document, instrument or agreement
reasonably requested by the Parent's financing sources.
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5.4 FINANCIAL STATEMENTS.
(a) As soon as practicable but in no event later than the
Closing Date, the Company shall obtain and deliver to the Parent the unaudited,
condensed, consolidated interim financial statements of the Company as of and
for the three months ended March 31, 2007 (or, in the event the Closing occurs
after June 30, 2007, the six months ended June 30, 2007) and the corresponding
period in the prior year, reviewed by the Company's independent auditors in
accordance with Statement on Auditing Standards No. 100 "Interim Financial
Information". The Selling Stockholders and the Company shall, and the Selling
Stockholders shall cause the Company to, use their reasonable efforts to cause
▇▇▇▇▇▇▇ & Company, the Company's independent auditor (subject to performing the
keeping-current procedures required by generally accepted auditing standards),
to (A) consent to the inclusion of their report issued in connection with their
audit of the Company's financial statements for the fiscal year ended December
31, 2006 in a periodic report on Form 8-K or Form 8-K/A to be filed by the
Parent with the Securities and Exchange Commission (the "SEC") and their
incorporation in any registration statements that may be filed by the Parent
from time to time and (B) if requested in connection with any such registration
statements, issue a "comfort letter" which shall state that such financial
statements comply with the rules and regulations promulgated by the SEC. The
Parent acknowledges and agrees that the Parent shall be responsible for all
costs and expenses relating to the review, consents and comfort letters
contemplated by this Section 5.4(a). For purposes of clarity, Selling
Stockholders acknowledge and agree that Selling Stockholders shall be
responsible for all costs and expenses relating to the preparation of the
financial statements and the audit thereof required by Section 3.7.
(b) For the period commencing as of the date hereof and
ending as of the Closing Date, the Company shall deliver to the Parent the (i)
unaudited balance sheet of the Company for each monthly and quarterly period
ending after the date of this Agreement, and (ii) related unaudited statements
of cash flows and income for such periods. Such financial statements shall be
delivered within twenty (20) days after the end of such month or quarter or, if
earlier, contemporaneously with the delivery of such financial statements to the
directors, stockholders or lenders of the Company and shall be prepared in
accordance with the Company's past practices.
5.5 NONSOLICITATION. From the date of this Agreement until the
Closing, or, if earlier, the termination of this Agreement in accordance with
its terms, neither the Company nor any of the Selling Stockholders will, and the
Company and the Selling Stockholders shall not permit any of their Affiliates,
directors, officers, employees, representatives or agents to, directly or
indirectly, (a) solicit any offers or proposals or initiate or enter into
discussions for the recapitalization or purchase of the Company or the purchase
of all or any substantial portion of the equity securities or assets (including
by merger or in any other form of transaction) of the Company, (b) negotiate or
otherwise respond, other than to decline to enter into such negotiations or
discussions, with respect to any unsolicited offer, proposal or indication of
interest with respect to any such transaction or (c) furnish any information
concerning the Business to any Person in connection with any such transaction.
The Company and the Selling Stockholders will immediately disclose to the Parent
all such unsolicited offers, proposals or indications of interest, including
copies or summaries of any such offer, proposal or indication of interest. The
Selling Stockholders and the Company shall (and the Selling Stockholders and the
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Company shall cause their Affiliates, directors, officers, employees,
representatives or agents to) immediately cease and cause to be terminated any
existing discussions or negotiations with any Person (other than the Parent).
The Selling Stockholders and the Company agree not to release any third party
from any confidentiality agreement relating to any such transaction or the
standstill provisions of any agreement to which the Company is a party.
5.6 CONFIDENTIALITY. At all times following the Closing, no
Selling Stockholder shall, directly or indirectly, disclose, divulge or make use
of any trade secrets or other information of a business, financial, marketing,
technical or other nature pertaining to the Company or the Business, including
information of others that the Company has agreed to keep confidential, except
(a) to the extent that such information shall have become public knowledge other
than by breach of this Agreement by any of the Selling Stockholders, (b) as
required in connection with the performance of such Selling Stockholder's duties
as an employee of the Company, (c) to the extent that disclosure of such
information is required by any Legal Requirement or legal process (but only
after the Selling Stockholder has provided the Company with prompt notice and
the opportunity to take action against any legally required disclosure), or (d)
to the extent that such information is acquired on a non-confidential basis from
a Person who is not under an obligation of confidentiality to the Parent or the
Company.
5.7 NONCOMPETITION.
(a) During the Noncompetition Period and other than with
respect to the Noncompetition Exceptions (i) no Selling Stockholder will,
directly or indirectly, or as a stockholder, partner, member, manager, employee,
consultant or other owner or participant in any Person other than the Company,
engage in or assist any other Person to engage in, own, operate, control, work
for, consult with, render services for, do business with, maintain any interest
in (proprietary, financial or otherwise) or participate in the ownership,
operation, management or control of, any Covered Business anywhere in the United
States, or anywhere else in the world where the Company does business, (ii) no
Selling Stockholder will, directly or indirectly, solicit or endeavor to entice
away from the Company, or offer employment or a consulting position to, or
otherwise interfere with the business relationship of the Company with, any
Person who is, or was within the one (1) year period prior thereto, an employee
of or consultant to the Company and (iii) no Selling Stockholder will, directly
or indirectly, solicit or endeavor to entice away from the Company, endeavor to
reduce the business conducted with the Company by, or otherwise interfere with
the business relationship of the Company with, any Person who is, or was within
the one (1) year period prior thereto, a customer or client of, supplier, vendor
or service provider to, or other Person having business relations with, the
Company. The foregoing shall not prevent any Selling Stockholder from making an
investment and/or owning for investment purposes (A) up to three percent (3%) of
the outstanding securities of a publicly traded company engaged in any Covered
Business or (B) in the case of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ only, up to three percent (3%) of
the outstanding securities of a private company, provided that, with respect to
clause (B), such investment is held as a passive investment only and not with a
view towards controlling or directing such private company, and provided,
further that prior written notice of any such investment (including the issuer
and a brief description of the business thereof shall be given to the Parent by
such Selling Stockholder prior to making such investment). It is understood and
agreed that, prior to entering into any Contract in respect of the transfer of
the Aspen Lake Contract, Parent shall be furnished with a true, correct and
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complete copy of the terms and conditions of the transfer of the Aspen Lake
Contract, which shall be on terms reasonably satisfactory to Parent. It is
further understood and agreed that any and all consideration received by the
Company or any Selling Stockholder for the Aspen Lake Contract shall remain the
property of, or be transferred to and remain the property of, the Company
through the Closing and shall not be taken into account in calculating the
Closing Working Capital.
(b) For purposes of this Section 5.7, the following terms
shall have the following meanings:
"Company" means the Company, each of its subsidiaries, parents and
affiliated companies, whether now existing or created in the future, and all of
their respective successors or assigns.
"Covered Business" means (i) any business in which the Company is
engaged as of the Closing Date and (ii) for any Selling Stockholder that is an
employee of the Company after the Closing, shall also include any business in
which the Company is engaged during such Selling Stockholder's employment.
"Noncompetition Exceptions" means (i) the transfer of the Aspen Lake
Contract to BAI, Inc. and (ii) ownership of twenty-five (25%) of Key Solutions,
Inc. by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇; provided, that ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall dispose of such
ownership interest in accordance with Section 5.19 hereof.
"Noncompetition Period" means the period commencing as of the
Closing and ending as of the later of (i) the three (3) year anniversary of the
Closing Date, and (ii) for any Selling Stockholder that is an employee or
consultant of the Company after the Closing the one (1) year anniversary of the
termination of such Selling Stockholder's employment or engagement, whether by
the Company or the employee.
5.8 INJUNCTIVE RELIEF. The Company and the Selling Stockholders
acknowledge that any breach or threatened breach of the provisions of Sections
5.5, 5.6 or 5.7 will cause irreparable injury to the Parent, the Company and/or
their respective subsidiaries, if any, for which an adequate monetary remedy
does not exist. Accordingly, in the event of any such breach or threatened
breach, the Parent (in the case of Section 5.5) and the Parent, the Company
and/or such subsidiaries, if any (in the cases of Sections 5.6 and 5.7) shall be
entitled, in addition to the exercise of other remedies under this Agreement and
applicable law (but in all events subject to Section 10.9), to obtain injunctive
relief, without necessity of posting a bond, restraining the Company and/or the
Selling Stockholders, as the case may be, from committing such breach or
threatened breach. Subject to Section 10.9, the right provided under this
Section 5.8 shall be in addition to, and not in lieu of, any other rights and
remedies available (and permitted hereunder) to the Parent, the Company or such
subsidiaries.
5.9 REASONABLE RESTRICTIONS. Each Selling Stockholder (a) has
carefully read and understands all of the provisions of this Agreement and has
had the opportunity for this Agreement to be reviewed by counsel, (b)
acknowledges that the duration, geographical scope and subject matter of
Sections 5.6 and 5.7 are reasonable and necessary to protect the goodwill,
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customer relationships, legitimate business interests, trade secrets and
confidential information of the Business, (c) acknowledges that the Parent would
not be willing to enter into the Transaction Documents or consummate the
Transactions without the benefits contained in this Agreement, (d) will be able
to earn a satisfactory livelihood without violating this Agreement and (e)
understands that this Agreement is assignable by the Company and the Parent and
shall inure to the benefit of their respective successors and permitted assigns.
5.10 COMPANY INTELLECTUAL PROPERTY. If any Selling Stockholder owns
or shall at any time hereafter and prior to the Closing acquire any rights in
any Company Intellectual Property, such Selling Stockholder shall, and hereby
does, transfer all of its rights, title and interest in such Company
Intellectual Property to the Company for no additional consideration. Each
Selling Stockholder shall execute and deliver such additional documents and
instruments and take such other actions as the Parent shall reasonably request
to give effect to the provisions of this Section 5.10. Each of the Selling
Stockholders hereby irrevocably designates and appoints the Parent and its
agents as its attorneys-in-fact to act for and on such Selling Stockholders'
behalf to execute and file any document and to do all other lawfully permitted
acts to further the purposes of the foregoing with the same legal force and
effect as if executed by such Selling Stockholder.
5.11 GENERAL RELEASE. Effective as of the Closing, each Selling
Stockholder voluntarily, knowingly and irrevocably releases and forever
discharges the Company, Holdings, the Parent and their respective officers,
directors, employees and Affiliates from any and all actions, agreements,
amounts, claims, damages, expenses, liabilities and obligations of every kind,
nature or description, known or unknown, arising or existing prior to the
Closing against the Company, Holdings, or the Parent except for any rights of
such Selling Stockholder under this Agreement and any other agreements
contemplated by this Agreement to be executed at or prior to Closing, including
employment agreements.
5.12 SALE BONUS PLAN; KEY EMPLOYEE NONCOMPETITION AGREEMENTS.
(a) Immediately prior to the Closing, the Company shall
transfer and assign to the Sellers Continuing Entity all of its interest in, and
the Selling Stockholders shall cause the Sellers Continuing Entity to assume all
obligations of the Company under, the Sale Bonus Plan. The Selling Stockholders
shall cause the Sellers Continuing Entity thereafter to make the maximum awards
authorized and all required payments under the Sale Bonus Plan.
(b) On or prior to the Closing, the Company shall execute,
and shall use commercially reasonable efforts to cause each of its employees
named in Schedule 5.12(b) to execute, the Intellectual Property, Confidentiality
and Noncompetition Agreement attached hereto as Exhibit 5.12(b) (the
"Noncompetition Agreements").
5.13 NOTICE OF CERTAIN EVENTS. Each party hereto shall as promptly
as reasonably practicable notify the other parties hereto of (a) any event,
condition, fact, circumstance, occurrence, transaction or other item of which
such party becomes aware after the date hereof and prior to the Closing that
would constitute a violation or breach of this Agreement (or a breach of any
representation or warranty contained herein) or, if the same were to continue to
exist as of the Closing Date, would constitute the non-satisfaction of any of
the conditions set forth in Article 8, and (b) any event, condition, fact,
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circumstance, occurrence, transaction or other item of which such party becomes
aware which would have been required to have been disclosed pursuant to the
terms of this Agreement had such event, condition, fact, circumstance,
occurrence, transaction or other item existed as of the date hereof; provided,
however, that except for actions expressly permitted or not otherwise prohibited
under Section 5.1(b), and except for new hires of indirect personnel, no such
notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto), the conditions to
the obligations of the parties under this Agreement or the rights of any
Indemnified Party pursuant to Article 10.
5.14 EMPLOYEES AND BENEFIT PLANS.
(a) The Selling Stockholders will cause the Company to
terminate all existing employment agreements and agreements with Affiliates of
the Company immediately prior to the Closing.
(b) Until and including the Closing Date, the Company shall
maintain any Code Section 401(k) arrangement (the "Company 401(k) Plan") or any
other "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA, unless the Parent provides written notice to the Company at least five
(5) Business Days prior to the Closing Date that the Company 401(k) Plan (or
other employee pension benefit plan) shall be terminated. If the Parent provides
such written notice to the Company, the Company shall provide Parent with
evidence that such Company 401(k) Plan (or other retirement plan) has been
terminated pursuant to resolutions of the Company's Board of Directors. The form
and substance of such resolutions shall be subject to reasonable review and
approval of the Parent. The Company shall also take such other actions in
furtherance of terminating the Company 401(k) Plan(s) as the Parent may
reasonably require.
5.15 REGISTRATION RIGHTS.
(a) The Parent shall use commercially reasonable efforts to
(i) file with the SEC, as soon as practicable, but in any event no earlier than
August 13, 2007 and no later than 180 days after the Closing Date, a
registration statement (the "Registration Statement") under the Securities Act
on an appropriate form covering the shares of Parent Common Stock included in
the Equity Consideration (the "Registrable Securities"); (ii) cause such
Registration Statement to be declared effective by the SEC, as soon as
reasonably practicable after such filing and (iii) cause such Registration
Statement to remain effective until the earlier of (x) the date on which all
Parent Common Stock registered pursuant to such Registration Statement have been
sold pursuant to such Registration Statement and (y) the first anniversary of
the date that the SEC declares such Registration Statement effective. The
Registration Statement shall contain an intended method or methods of
distribution acceptable to the Parent. Each Selling Shareholder agrees and
understands that, upon and during the effectiveness of the Registration
Statement, he or she or it shall be entitled to transfer or sell each month no
more than five percent (5%) of the Parent Common Stock included in the Equity
Consideration held by such Selling Stockholder under such Registration
Statement.
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(b) Each Selling Stockholder agrees to indemnify and hold
harmless the Parent, its directors and officers from and against all Claims
arising out of based upon any untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact
required to be stated in a Registration Statement or any prospectus, amendment
or supplement included therein or necessary to make the statements in a
Registration Statement or such prospectus, preliminary prospectus, amendment or
supplement, in light of the circumstances under which they were made, not
misleading, in each case if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
information furnished to the Parent through a written instrument provided by
such Selling Stockholder stating that it is for used in the preparation of such
Registration Statement, prospectus, preliminary prospectus, amendment or
supplement, or a document incorporated by reference in any of the foregoing.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Parent or any of the prospective
sellers, or any of their respective affiliates, directors, officers or
controlling persons and shall survive the transfer of such securities by such
seller.
(c) Following the effectiveness of a registration statement
and filings with any state securities commissions, the Selling Stockholders
agree that they will not effect any sales of Registrable Securities pursuant to
a registration statement or any such filings at any time after they have
received notice from the Parent to suspend sales (i) as a result of the
occurrence or existence of pending negotiations relating to, or consummation of,
a transaction or the occurrence of an event that would require additional
disclosure of material information by the Parent in the registration statement
or (ii) as a result of any requirement under the Securities Act that such
registration statement or filing be corrected or updated, but only until such
time as required for the Parent, using reasonable diligence, to have corrected
or updated such registration statement or filing. The Selling Stockholders may
recommence effecting sales of the Registrable Shares pursuant to the
registration statement or such filings following further written notice to such
effect from the Parent.
(d) The Selling Stockholders agree that, upon receipt of any
notice from the Parent of the happening of any event of the kind described in
Section 5.15(c), such Selling Stockholders shall forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such persons receive copies of the
supplemented or amended prospectus (if applicable) and, if so directed by the
Parent, such persons shall deliver to the Parent all copies, other than
permanent file copies then in their possession, of the prospectus covering such
Registrable Securities which is current at the time of receipt of such notice.
If the Parent shall give any such notice, the Parent shall extend the period
during which such registration statement shall be maintained effective pursuant
to this Agreement by the number of days during the period from and including the
date of the giving of such notice to and including the date when sellers of such
Registrable Securities under such registration statement shall have received the
copies of the supplemented or amended prospectus.
5.16 APPROVALS. Holdings' board of directors will act on this
Agreement and the plan of merger it contains and adopt resolutions recommending
to its shareholders approval of the plan of merger contained in this Agreement
and any other matters required to be approved or adopted in order to effect the
Reverse Merger and other Transactions. The Selling Stockholders hereby agree to
take, in accordance with applicable law and Holdings' organizational documents,
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all reasonable action necessary to approve this Agreement and the plan of merger
contained in this Agreement.
5.17 HOLDINGS JOINDER AGREEMENT. Upon the formation of Holdings in
connection with the Pre-Closing Transactions, each of the Selling Stockholders
shall take all actions necessary to cause Holdings to become a signatory to this
Agreement, agreeing to be bound by all the terms of this Agreement (which event
shall not be deemed to be an amendment of this Agreement) pursuant to an
instrument of accession or other joinder agreement in substantially the form
attached hereto as Exhibit 5.17 (the "Holdings Joinder Agreement").
5.18 CHANGE OF NAME AGREEMENTS. The Company shall, and Holdings and
the Selling Stockholders shall cause the Company to, within 15 days after the
completion of the Pre-Closing Reorganization, file with or submit to the
applicable Governmental or Regulatory Authorities all change of name agreements
that are required with respect to the Government Contracts.
5.19 KEY SOLUTIONS DISPOSITION. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall sell, divest
or otherwise dispose of his entire interest in Key Solutions, Inc. to an
unaffiliated third party on or before the date that is 60 days after the date of
this Agreement.
ARTICLE 6
COVENANTS OF THE PARENT
6.1 REPRESENTATIONS AND WARRANTIES. Until the Closing Date, the
Parent will not take any action that would cause any of the representations and
warranties made by the Parent in this Agreement not to be true and correct in
all material respects on and as of the Closing Date with the same force and
effect as if such representations and warranties had been made on and as of the
Closing Date.
6.2 EFFORTS. The Parent will use all reasonable efforts to cause
the conditions specified in Section 8.2 to be satisfied as soon as practicable.
The Parent will use all reasonable efforts to obtain as soon as practicable
after the date of this Agreement, to the Parent's reasonable satisfaction and in
accordance with Section 5.2(b), assurances from the Company's primary customers
listed on Schedule 8.1(g) that such customers do not intend to terminate or
materially reduce, restrict or limit their relationship with the Company after
the Closing or as a result of the Transactions.
6.3 CONFIDENTIALITY AND NON-SOLICITATION. Pending the Closing, all
proprietary information obtained by Parent from or on behalf of the Company will
be kept confidential and will not be disclosed by Parent other than to its
Affiliates, partners, directors, officers, employees, advisors and financing
sources; provided that the foregoing restriction shall not apply to information
which (a) is lawfully and independently obtained by Parent from a third party
who is entitled to disclose such information, without restriction as to
disclosure by Parent, (b) was known by Parent prior to its disclosure by or on
behalf of the Company without violation of any confidentiality agreements, (c)
is in the public domain or enters into the public domain through no fault of
Parent, (d) is independently developed by Parent without reference to
information provided by the Company or (e) Parent is required by law or legal
process to disclose (but only after Parent has provided the Company with
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reasonable notice and opportunity to take action against any legally required
disclosure). If this Agreement is terminated, the foregoing restriction shall
expire on the date which is two (2) years after such termination, and, if
requested in writing by the Company, Parent will cause to be delivered to the
Company all materials obtained by Parent from or on behalf of the Company,
whether obtained before or after the date of this Agreement. Further, in the
event of termination of this Agreement (except for termination by the Parent as
a result of an intentional breach by the Company, Holdings or any Selling
Stockholder of any term or provision of this Agreement) and for two (2) years
thereafter, Parent shall not, directly or indirectly, on its own behalf or on
behalf of any other Person, hire, engage the services of or solicit for
employment any person who is at the time an employee or contractor of the
Company or induce or attempt to induce any such person to terminate his or her
employment or association with the Company. The forgoing restrictions on hiring
and solicitation shall not restrict Parent from publishing general "help wanted"
advertisements in any medium.
6.4 COMPLIANCE WITH RULE 144. The Parent shall file with the
Securities and Exchange Commission such information as is required under the
Exchange Act of 1934, as amended, for so long as the Selling Stockholders hold
shares of Parent Common Stock issued pursuant to this Agreement; provided,
further, the Parent shall use its reasonable efforts to take all action as may
be required as a condition to the availability of Rule 144 under the Securities
Act of 1933, as amended (or any comparable successor rules) ("Rule 144"). The
Parent shall further use its reasonable efforts to facilitate and expedite
transfers of Parent Common Stock issued pursuant to this Agreement under Rule
144, which efforts shall include timely notice to its transfer agent to expedite
such transfers of shares of Parent Common Stock and shall cooperate with the
Selling Stockholders to obtain any legal opinions required in connection with
such transfer sales.
6.5 APPROVALS
(a) Acquisition Sub's board of directors will act on this
Agreement and the plan of merger it contains and adopt resolutions recommending
to its stockholder approval of the plan of merger contained in this Agreement
and any other matters required to be approved or adopted in order to effect the
Reverse Merger and other Transactions. The Parent hereby agrees to take, in
accordance with applicable law and Acquisition Sub's organizational documents,
all reasonable action necessary to approve this Agreement and the plan of merger
contained in this Agreement.
(b) Merger Sub's board of directors will act on this
Agreement and the plan of merger it contains and adopt resolutions recommending
to its stockholder approval of the plan of merger contained in this Agreement
and any other matters required to be approved or adopted in order to effect the
Subsequent Merger and other Transactions. The Parent hereby agrees to take, in
accordance with applicable law and Merger Sub's organizational documents, all
reasonable action necessary to approve this Agreement and the plan of merger
contained in this Agreement.
6.6 ACQUISITION SUB JOINDER. Upon the formation of Acquisition
Sub, the Parent shall take all actions necessary to cause Acquisition Sub to
become a signatory to this Agreement, agreeing to be bound by all the terms of
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this Agreement (which event shall not be deemed to be an amendment of this
Agreement) pursuant to an instrument of accession or other joinder agreement in
substantially the form attached hereto as Exhibit 6.6 (the "Acquisition Sub
Joinder Agreement").
6.7 SUBSEQUENT MERGER. Immediately after the Effective Time,
Parent shall cause the Reverse Merger Surviving Corporation to merge with and
into Merger Sub as set forth in Section 1.11.
ARTICLE 7
TAX COVENANTS
7.1 CONSISTENT TAX REPORTING. The Selling Stockholders, the
Company and the Parent (a) intend that for federal and, as permitted by law, all
applicable state and local tax purposes, the (i) Pre-Closing Reorganization
shall be treated as a reorganization pursuant to Section 368(a)(1)(F) of the
Code and (ii) the Reverse Merger and the Subsequent Merger, taken together,
shall be treated as a reorganization under Section 368(a)(2)(D) of the Code, (b)
shall in all respects treat and report the Transactions in a manner consistent
with such treatment and (c) shall not take any actions or positions inconsistent
with the obligations of the parties set forth in this Section 7.1.
7.2 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The Selling
Stockholders shall prepare or cause to be prepared and timely file or cause to
be timely filed all Tax Returns of the Company and Holdings for taxable periods
ending on or before the close of business on the Closing Date ("Pre-Closing
Taxable Periods") which have not been filed prior to the Closing Date. The
Selling Stockholders shall permit the Parent to review and comment on each such
Tax Return described in the prior sentence at least ten (10) days prior to
filing (or, if such Tax Return is due within ten (10) days of the Closing Date,
such lesser amount of time as is practicable) and shall make such revisions to
such Tax Returns as are reasonably requested by the Parent (it being understood
that any such request by Parent will only be considered reasonable if, among
other things, the revision relates to (i) a reporting position of the Company
that is inconsistent with its past custom or practice, and (ii) the reporting
position would result in a material increase in the post-Closing Tax liability
of Merger Sub or any of its affiliates as it relates to the former activities of
the Company and Holdings. The Selling Stockholders shall be responsible for all
Taxes of the Company and Holdings for all Pre-Closing Taxable Periods, except
(i) any Transaction Taxes (which shall be borne in the manner described in
Section 7.9 hereof), (ii) any Taxes arising from Holdings' or the Company's
conversion from the cash method to the accrual method in connection with
Transactions, or (iii) to the extent reflected in Closing Working Capital as
finally determined pursuant to Section 1.8.
7.3 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. Parent shall cause to be prepared and timely filed all Tax Returns of the
Company and Holdings for taxable periods beginning before or on the Closing Date
and ending after the Closing Date. Parent shall permit the Selling Stockholders
to review and comment on each such Tax Return described in the prior sentence at
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least ten (10) days prior to filing and shall make such revisions to such Tax
Returns as are reasonably requested by the Selling Stockholders. All Tax Returns
to be prepared for the Company and Holdings pursuant to this Section 7.3 shall
be prepared in a manner consistent with the past practice of the Company, except
as otherwise required by Legal Requirements. The Selling Stockholders shall be
responsible for all Taxes of the Company and Holdings which relate to the
portions of any taxable periods ending at the close of business on the Closing
Date to the extent such Taxes have not already been paid by the Selling
Stockholders (including payments made by the Company, Holdings, or the Selling
Stockholders prior to the Closing), except (i) any Transactions Taxes (which
shall be borne in the manner described in Section 7.9 hereof), (ii) any Taxes
arising from Holdings' or the Company's conversion from the cash method to the
accrual method in connection with Transactions (which shall be borne by the
Parent), or (iii) to the extent reflected in Closing Working Capital as finally
determined pursuant to Section 1.8. The Selling Stockholders shall pay to (or as
directed by) Parent any such amounts by no later than five (5) Business Days
after such Taxes have been paid.
7.4 TAX ALLOCATION. For purposes of Section 7.3, in the case of
any Taxes that are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the Closing Date, the portion of such
Tax which relates to the portion of such taxable period ending at the close of
business on the Closing Date shall (a) in the case of any Taxes other than Taxes
based upon or related to income or receipts, be deemed to be the amount of such
Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and
the denominator of which is the number of days in the entire taxable period, and
(b) in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant Taxable period ended
at the close of business on the Closing Date (but calculated by excluding any
income or gain arising from the conversion from cash to accrual in connection
with the Transactions), any credits relating to a taxable period that begins
before and ends after the Closing Date shall be allocated on a basis consistent
with the allocations made pursuant to the preceding sentence. All determinations
necessary to give effect to the foregoing allocations shall be made in a
reasonable manner that endeavors to be consistent with the prior practice of the
Company to the extent such practice complies with applicable Legal Requirements.
For all purposes of this Agreement, the parties agree that any deductions
related to the payment or accrual of the Sale Bonus Amount shall be for the
benefit of the Selling Shareholders (either as a deduction of the Company
available for purposes of computing the income of the Selling Shareholders for
the Pre-Closing Period or as a deduction available to the Selling Shareholders
during the period beginning after the Closing Date. The parties also agree for
purposes of this Agreement (x) any Transactions Taxes shall be borne in the
manner described in Section 7.9 hereof, and (y) the Parent shall be responsible
for (i) any Taxes arising from Holdings' or the Company's conversion from the
cash method to the accrual method in connection with Transactions, and (ii)
Taxes reflected in Closing Working Capital as finally determined pursuant to
Section 1.8.
7.5 COOPERATION ON TAX MATTERS.
(a) The Parent, the Company and the Selling Stockholders
shall cooperate fully, to the extent reasonably requested, in connection with
the filing of Tax Returns pursuant to Sections 7.2 and 7.3 or otherwise, and any
audit, litigation, or other proceeding with respect to Taxes. Such cooperation
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shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such Tax Return
filing, audit, litigation, or other proceeding and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder.
(b) Merger Sub, Acquisition Sub and the Parent, on the one
hand, and the Company, on the other hand, agree (i) to retain all books and
records with respect to Taxes pertaining to Holdings, the Company or the
Transactions until the applicable period for assessment under applicable law
(giving effect to any and all extensions or waivers) has expired, (ii) to
provide to the Selling Stockholders, upon request, all books and records with
respect to Tax matters pertinent to Holdings, the Company or the Selling
Stockholders relating to any taxable period beginning before or on the Closing
Date or relating to the Transactions, in each case until the expiration of the
statute of limitations (including any extensions thereof) of the respective
taxable periods, and to abide by all record-retention agreements entered into
with any Tax authority, and (iii) to give the Selling Stockholders reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the Selling Stockholders so request, Parent, Acquisition
Sub, Merger Sub and the Company shall allow the Selling Stockholders to take
possession of such books and records. Parent, Acquisition Sub, Merger Sub and
the Company shall cooperate with the Selling Stockholders in the conduct of any
audit or other proceeding related to Taxes involving the Company or Holdings for
any Tax period (or portion thereof) ending on or before the close of business on
the Closing Date or involving the Transactions.
(c) Each party to this Agreement, at the reasonable request
of the other party, will cooperate to obtain any certificate or other document
from any Governmental or Regulatory Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed upon
the Company (including with respect to the Transactions contemplated hereby).
7.6 CONTROL OF AUDITS. In the case of any audit, claim for refund,
or administrative or judicial proceeding involving any asserted Tax liability or
refund with respect to the Company or Holdings (each, a "Contest") after the
Closing Date that relates to any Tax period (or portion thereof) beginning on or
before the Closing Date, the Selling Stockholders shall at their sole election
control the conduct of such Contest, but Parent shall have the right to
participate in such Contest at its own expense, and the Selling Stockholders
shall not settle, compromise and/or concede any portion of such Contest if, in
each case, the outcome of the Contest could have a material affect on the Tax
liability of the Company or any of its affiliates for any taxable year (or
portion thereof) after the Closing Date without the written consent of Parent,
which shall not be unreasonably withheld, conditioned or delayed; provided that,
if the Selling Stockholders fail to assume control of the conduct of any such
Contest within 30 days following the receipt by the Selling Stockholders of
notice of such Contest, the Company shall have the right to assume control of
such Contest but in no event shall be able to settle, compromise and/or concede
any portion of such Contest without the written consent of the Selling
Stockholders, which shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding the foregoing, in any Contest relating to any Tax period
beginning before or on the Closing Date and ending after the Closing Date if,
after taking into account the indemnity provisions of this Agreement, both the
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Selling Stockholders and Parent (or any of its affiliates) would be responsible
for Taxes that are the subject of such Contest, then Parent and the Selling
Stockholders shall have joint responsibility to represent the Company or
Holdings in connection with such Contest. In the event that there is a
disagreement between Parent and the Selling Stockholders with respect to the
actions to be taken in connection with such Contest (including, without
limitation, the procedures, handling, control or preferred forum for
litigation), the determination of the party that is liable for more than fifty
percent (50%) of the Tax at issue in such Contest shall be controlling.
Notwithstanding the foregoing, in no event shall either party settle, compromise
and/or concede any portion of such Contest if such Contest would result in
liability for such other party (by virtue of the indemnity provisions of this
Agreement or otherwise) without the written consent of such other party, which
shall not be unreasonably withheld, conditioned or delayed.
7.7 AMENDED RETURNS. The Parent, Acquisition Sub, the Merger Sub
and after the Closing, the Company, shall not file or cause to be filed any Tax
Return that relates to the Transactions or to any Tax period or portion thereof
that ends on or before the Closing Date without the consent of the Selling
Stockholders.
7.8 REFUNDS AND TAX BENEFITS. Any Tax refunds relating to the
former activities of the Company that are received by the Parent, Acquisition
Sub, Merger Sub, their Affiliates or the Company and any amounts credited
against Tax to which any of the foregoing become entitled that relate to any Tax
period or portion thereof ending on or before the Closing Date shall be for the
account of the Selling Stockholders, and the Parent shall pay over to the
Selling Stockholders any such refund or the amount of any such credit within
thirty (30) days after receipt or recognition thereof. For purposes of this
Agreement, the term "refund" shall mean the receipt of cash, an actual reduction
in Tax paid or the use of an overpayment as a credit or other Tax offset by
Parent, Acquisition Sub, Merger Sub, their Affiliates or the Company.
7.9 CERTAIN TAXES. All transfer, documentary, sales, use, real
property gains, stamp, registration, and other such similar Taxes and fees
incurred in connection with this Agreement ("Transaction Taxes") shall be shared
equally between the Parent on the one hand, and the Selling Stockholders on the
other hand, with 50% being paid by the Parent and fifty percent (50%) being paid
by the Selling Stockholders when due, and the Company will, at the expense of
the Parent and the Selling Stockholders (shared equally on a 50/50 basis), file
all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, real property gains, stamp, registration, and
other Taxes and fees, and, if required by applicable Legal Requirements, the
Parent and the Selling Stockholders will join in the execution of any such Tax
Returns and other documentation.
7.10 TAX TREATMENT. The parties intend that Pre-Closing
Reorganization will qualify as a reorganization within the meaning of Section
368(a)(1)(F) of the Code and that the Reverse Merger and the Subsequent Merger,
taken together, will qualify as a reorganization within the meaning of Section
368(a)(2)(D) of the Code, and each shall use its reasonable best efforts to
cause the Initial Reorganization and the Reverse Merger and the Subsequent
Merger to so qualify. None of Holdings, the Company, any Selling Stockholder,
the Parent, Acquisition Sub or Merger Sub shall knowingly take any action, cause
any action to be taken, fail to take any commercially reasonable action or cause
any commercially reasonable action to fail to be taken, which action or failure
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to act would reasonably be expected to prevent (i) the Pre-Closing
Reorganization from qualifying as a reorganization within the meaning of Section
368(a)(1)(F) of the Code; or (ii) the Reverse Merger and the Subsequent Merger,
taken together, from qualifying as a reorganization within the meaning of
Section 368(a)(2)(D) of the Code. In connection with the Merger, the Parent and
Merger Sub confirm and agree, as appropriate, as follows: (i) Acquisition Sub
has not held or beneficially owned and will not hold or beneficially own any
material assets other than in connection with the Merger; (ii) during the period
beginning on the Effective Time and ending on the effective time of the
Subsequent Merger, Parent will own all of the outstanding shares of stock of
Holdings; (iii) neither Parent nor any corporation affiliated with Parent will
take any action with respect to Holdings, any interest therein or any assets
thereof, other than actions to effect the Subsequent Merger in accordance with
the terms of the Agreement; and (iv) no capital stock of Acquisition Sub or
Merger Sub will be issued to the Selling Stockholders in connection with the
Merger. It is intended that the obligations of this Section 7.10 survive the
Closing until sixty (60) days after the expiration of the applicable statute of
limitations (including all extensions thereof).
ARTICLE 8
CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF THE PARENT. Unless waived in
writing by the Parent, the obligation of the Parent hereunder to consummate the
Transactions is subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. (i) The
representations and warranties of the Selling Stockholders and/or the Company
contained in Sections 2.1, 2.3, 3.1, 3.2, 3.4(a), 3.4(b), 3.5, 3.6, 3.7(c), and
3.10(d) shall be true and correct in all respects as of the Closing Date as if
made on and as of that date and (ii) all of the other representations and
warranties of the Selling Stockholders and the Company contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date as if made on and as of that date except that the representations and
warranties set forth in Article 2 and each other representation or warranty to
the extent qualified by materiality or Company Material Adverse Effect shall be
true and correct in all respects on and as of the Closing with the same effect
as though made on and as of such date, except for those representations and
warranties that speak as of a particular date, which shall be true and correct
in all respects as of that date, and for changes expressly contemplated by this
Agreement.
(b) COVENANTS PERFORMED. The Company and the Selling
Stockholders shall have performed and complied in all material respects with the
covenants, agreements and conditions required to be performed or complied with
by them hereunder on or prior to the Closing Date.
(c) COMPLIANCE CERTIFICATE. The Parent shall have received a
certificate of the Selling Stockholders and the Company certifying as to the
matters set forth in Sections 8.1(a) and (b).
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(d) REQUIRED CONSENTS RECEIVED. The Company and the Selling
Stockholders shall have obtained and delivered to the Parent copies of all
Required Consents listed on or required to be listed on Schedule 2.2 and
Schedule 3.4(c) (other than the change of name agreements required with respect
to the Government Contracts which shall have been filed or submitted pursuant to
Section 5.18), and no such Required Consents shall have been withdrawn,
suspended or conditioned.
(e) NO INJUNCTION OR LEGAL PROCEEDING. Consummation of the
Transactions shall not violate any order, decree or judgment of any court or
Governmental or Regulatory Authority having competent jurisdiction. No Legal
Proceedings shall have been instituted or threatened or claim or demand made
against the Selling Stockholders, the Company or the Parent, seeking to restrain
or prohibit, or to obtain substantial damages with respect to, consummation of
the Transactions.
(f) EMPLOYMENT ARRANGEMENTS. Each of the employment
agreements with ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ substantially in
the forms attached hereto as Exhibit 8.1(f) (the "Employment Agreements"), which
shall have been entered into on or prior to the Closing Date, shall be in full
force and effect and shall have not been amended or otherwise modified by the
parties thereto in any respect.
(g) CUSTOMER CONTACTS. The Parent shall have obtained to its
reasonable satisfaction assurances from the Company's primary customers listed
on Schedule 8.1(g) that such customers do not intend to terminate or materially
reduce, restrict or limit their relationship with the Company after the Closing
or as a result of the Transactions.
(h) CERTIFICATES; DOCUMENTS.
(i) The Parent shall have received copies of each of
the following for the Company certified to its reasonable
satisfaction by an officer of the Company: (i) the Company's
articles of incorporation, as amended, and articles of entity
conversion, each certified by the Virginia State Corporation
Commission as of a recent date; (ii) a certificate of the Virginia
State Corporation Commission as of a recent date as to the legal
existence and good standing of the Company; (iii) the Company's
limited liability company operating agreement, (iv) resolutions
adopted by the directors or managers (or other governing body of
similar function) of the Company authorizing the execution, delivery
and performance of this Agreement and the other Transaction
Documents and the consummation of the Transactions; and (v) evidence
as of a recent date of the qualification of the Company as a foreign
entity in the State of Maryland. The Parent shall also have received
such other certificates, documents and materials as it shall
reasonably request.
(ii) The Parent shall have received copies of each of
the following for Holdings certified to its reasonable satisfaction
by an officer of Holdings: (i) Holdings' certificate of
incorporation, as amended, certified by the Delaware Secretary of
State as of a recent date; (ii) a certificate of the Delaware
Secretary of State as of a recent date as to the legal existence and
good standing of Holdings; (iii) Holdings' bylaws; and (iv)
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resolutions adopted by the directors and stockholders of Holdings
authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation
of the Transactions. The Parent shall also have received such other
certificates, documents and materials as it shall reasonably
request.
(i) ESCROW AGREEMENT. The Stockholders' Representative and
the Escrow Agent shall have entered into, and delivered to the Parent, the
Escrow Agreement.
(j) PRE-CLOSING DELIVERIES. The Selling Stockholders and the
Company shall have delivered the items, certificates and documents required by
Section 1.7(d).
(k) [INTENTIONALLY OMITTED.]
(l) INDEBTEDNESS. The Parent shall have received evidence in
form and substance reasonably satisfactory to the Parent, including a payoff
letter from SunTrust Bank, that all Indebtedness has been fully paid off and
discharged, and all Liens securing such Indebtedness have been terminated and
released or the termination and release of such Indebtedness shall be been
authorized by the secured party with respect thereto. The Selling Stockholders
shall have delivered or caused to be delivered releases in form and substance
reasonably satisfactory to the Parent of all Liens on the Shares, the Holdings
Shares and the Company Membership Interests.
(m) NO MATERIAL ADVERSE EFFECT. There shall not have been or
occurred a Company Material Adverse Effect since the Latest Audited Financial
Statement Date.
(n) TERMINATION OF EMPLOYMENT AND AFFILIATE AGREEMENTS. The
Selling Stockholders and the Company shall have terminated the Contracts and
other arrangements set forth on Schedule 3.25, other than the Employment
Agreements and the Noncompetition Agreements.
(o) NONCOMPETITION AGREEMENTS. Each Company employee set
forth on Schedule 5.12(b) shall have executed a Noncompetition Agreement and
each such Noncompetition Agreements shall be in full force and effect.
(p) NO ADVERSE CHANGE IN TAX LAW. Subsequent to the date of
this Agreement, there shall not have been issued or enacted any amendment to the
Code, any final or temporary Tax regulation promulgated pursuant to the Code or
any final, non-appealable decision of a relevant court, in each case effective
on or before the Closing Date, that would directly and consequently result in
(i) the failure of the Pre-Closing Reorganization contemplated hereunder to be
treated as a "reorganization" within the meaning of Section 368(a)(1)(F) of the
Code, or (ii) the failure of the Reverse Merger and the Subsequent Merger
contemplated hereunder, taken together, to be treated as a "reorganization"
within the meaning of Section 368(a)(2)(D) of the Code; provided, that if any of
the foregoing events shall occur, the Parent and the Selling Stockholders agree
to cooperate and consult with each other in good faith to agree on a mutually
acceptable alternative Tax structure to effect the acquisition of the Company by
the Parent.
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(q) CERTIFICATE OF NON-FOREIGN STATUS. Each Selling
Stockholders shall have delivered to Parent a certificate of non-foreign status
in form and substance satisfactory to the Parent.
(r) SALE BONUS PLAN. The Selling Stockholders shall have
delivered to Parent the Sale Bonus Plan substantially in the form attached
hereto as Exhibit 8.1(r).
(s) GSA SCHEDULE CONTRACTS. The Company and United States
Government shall have executed a contract modification extending the period of
performance of each of the GSA Schedule Contracts identified on Schedule 8.1(s)
(the "Renewed GSA Schedule Contracts"), each in form and substance reasonably
satisfactory to the Parent.
(t) PRE-CLOSING TRANSACTIONS. The Pre-Closing Transactions
shall have been effected in form and substance reasonably satisfactory to the
Parent.
(u) OCI MATTERS. Parent shall have determined to its
reasonable satisfaction that the consummation of the Transactions will not
result in any OCI that would materially affect the business of Parent or any of
its Affiliates.
(v) EXPORT REGISTRATION. The Company shall have provided
evidence reasonably satisfactory to Parent that the Company has submitted an
application satisfactory to Parent in all respects for registration with the
Directorate of Defense Trade Control.
8.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SELLING
STOCKHOLDERS. Unless waived in writing by the Selling Stockholders, the
obligation of the Company and the Selling Stockholders hereunder to consummate
the Transactions is subject to the satisfaction at or prior to the Closing of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties contained in Article 4 shall be true and accurate in all material
respects on and as of the Closing Date with the same effect as though made on
and as of such date, except for those representations and warranties that speak
as of a particular date, which shall be true and correct in all respects as of
that date, and for changes expressly contemplated by this Agreement.
(b) COVENANTS PERFORMED. The Parent shall have performed and
complied in all material respects with the covenants, agreements and conditions
required to be performed or complied with by it under this Agreement on or prior
to the Closing Date.
(c) COMPLIANCE CERTIFICATE. The Selling Stockholders shall
have received a certificate of the Parent certifying as to the matters set forth
in Sections 8.2(a) and (b) above.
(d) NO INJUNCTION OR LEGAL PROCEEDING. Consummation of the
Transactions shall not violate any order, decree or judgment of any court or
Governmental or Regulatory Authority having competent jurisdiction. No Legal
Proceedings shall have been instituted or threatened or claim or demand made
against the Selling Stockholders, the Company or the Parent, seeking to restrain
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or prohibit, or to obtain substantial damages with respect to, consummation of
the Transactions.
(e) NO ADVERSE CHANGE IN TAX LAW. Subsequent to the date of
this Agreement, there shall not have been issued or enacted any amendment to the
Code , any final or temporary Tax regulation promulgated pursuant to the Code or
any final, non-appealable decision of a relevant court, in each case effective
on or before the Closing Date, that would directly and consequently result in
(i) the failure of the Pre-Closing Reorganization contemplated hereunder to be
treated as a "reorganization" within the meaning of Section 368(a)(1)(F) of the
Code, or (ii) the failure of the Reverse Merger and the Subsequent Merger
contemplated hereunder, taken together, to be treated as a "reorganization"
within the meaning of Section 368(a)(2)(D) of the Code; provided, that if any of
the foregoing events shall occur, the Parent and the Selling Stockholders agree
to cooperate and consult with each other in good faith to agree on a mutually
acceptable alternative Tax structure to effect the acquisition of the Company by
the Parent.
(f) CERTIFICATES AND CERTAIN DOCUMENTS.
(i) The Selling Stockholders shall have received
copies of each of the following for the Parent certified to their
reasonable satisfaction by an officer of the Parent: (A) the
Parent's certificate of incorporation, as amended, certified by the
Delaware Secretary of State as of a recent date; (B) a certificate
of the Delaware Secretary of State as of a recent date as to the
legal existence and good standing of the Parent; (C) the Parent's
bylaws, and (D) resolutions adopted by the directors of the Parent
authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation
of the Transactions. The Selling Stockholders shall also have
received such other certificates, documents and materials as they
shall reasonably request.
(ii) The Selling Stockholders shall have received
copies of each of the following for Acquisition Sub certified to
their reasonable satisfaction by an officer of Acquisition Sub: (A)
Acquisition Sub's certificate of incorporation, as amended,
certified by the Delaware Secretary of State as of a recent date;
(B) a certificate of the Delaware Secretary of State as of a recent
date as to the legal existence and good standing of Acquisition Sub;
(C) Acquisition Sub's bylaws; and (D) resolutions adopted by the
directors and stockholder of Acquisition Sub authorizing the
execution, delivery and performance of this Agreement and the other
Transaction Documents and the consummation of the Transactions. The
Selling Stockholders hall also have received such other
certificates, documents and materials as they shall reasonably
request.
(iii) The Selling Stockholders shall have received
copies of each of the following for Merger Sub certified to their
reasonable satisfaction by an officer of Merger Sub: (A) Merger
Sub's certificate of incorporation, as amended, certified by the
Delaware Secretary of State as of a recent date; (B) a certificate
of the Delaware Secretary of State as of a recent date as to the
legal existence and good standing of Merger Sub; (C) Merger Sub's
bylaws; and (D) resolutions adopted by the directors and stockholder
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of Merger Sub authorizing the execution, delivery and performance of
this Agreement and the other Transaction Documents and the
consummation of the Transactions. The Selling Stockholders hall also
have received such other certificates, documents and materials as
they shall reasonably request.
(g) EMPLOYMENT AGREEMENTS. Each of the Employment
Agreements, which shall have been entered into on or prior to the Closing Date,
shall be in full force and effect and shall have not been amended or otherwise
modified by the parties thereto in any respect.
(h) ESCROW AGREEMENT. The Parent and the Escrow Agent shall
have entered into, and delivered to the Stockholders' Representative, the Escrow
Agreement.
(i) PRE-CLOSING TRANSACTIONS. The Pre-Closing Transactions
shall have been effected in form and substance reasonably satisfactory to the
Selling Stockholders.
(j) TAX CERTIFICATE. Parent shall have delivered to the
Selling Stockholders a tax certificate substantially in the form set forth as
Exhibit 8.2(j).
ARTICLE 9
TERMINATION
9.1 TERMINATION. This Agreement and the Transactions contemplated
hereby may be terminated at any time prior to the Closing:
(a) by mutual written consent of the Parent, the Company and
the Selling Stockholders;
(b) by the Parent, if the Company or the Selling
Stockholders shall have breached or failed to perform in any material respect
any of their respective obligations, covenants or agreements under this
Agreement, or if any of the representations and warranties of the Selling
Stockholders and/or the Company set forth in this Agreement shall not be true
and correct to the extent set forth in Section 8.1(a), and such breach, failure
or misrepresentation is not cured to the Parent's reasonable satisfaction within
ten (10) days after the Parent gives the Company or the Selling Stockholders
written notice identifying such breach, failure or misrepresentation;
(c) by the Selling Stockholders, if the Parent shall have
breached or failed to perform in any material respect any of its obligations,
covenants or agreements under this Agreement, or if any of the representations
and warranties of the Parent set forth in this Agreement shall not be true and
correct to the extent set forth in Section 8.2(a), and such breach, failure or
misrepresentation is not cured to the Selling Stockholders' reasonable
satisfaction within ten (10) days after the Selling Stockholders give the Parent
written notice identifying such breach, failure or misrepresentation;
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(d) by the Parent, if any condition set forth in Section 8.1
becomes incapable of satisfaction;
(e) by the Selling Stockholders, if any condition set forth
in Section 8.2 becomes incapable of satisfaction; or
(f) by the Parent or the Selling Stockholders, if the
Closing shall not have occurred on or before August 30, 2007, which date shall
be automatically extended for up to thirty (30) days if all conditions to
Closing are satisfied as of such date, other than those conditions which are
normally performed at the Closing and the conditions set forth in Section 8.1(j)
and Section 8.2(e), or such other date, if any, as the Parent and the Selling
Stockholders may agree in writing; provided that this Agreement may not be
terminated under this Section 9.1 by or on behalf of any party on the basis of
the breach of any representation or warranty or violation of any covenant or
agreement contained herein by the party proposing such termination. For purposes
of the foregoing proviso, any breach of this Agreement by the Company or any
Selling Stockholder shall be considered a breach of the Agreement by the Company
and all of the Selling Stockholders.
9.2 EFFECT OF TERMINATION.
(a) If this Agreement is terminated (i) under Section 9.1(a)
or (ii) under Sections 9.1(d), (e) or (f) at a time when no party is in breach
of a representation or warranty or in violation of a covenant or agreement
contained herein, all further obligations of the Company and the Selling
Stockholders to the Parent, and of the Parent to the Company and the Selling
Stockholders, will terminate without further liability of any party hereto with
respect to such termination.
(b) If this Agreement is terminated under Section 9.1(b),
(c) or (f) at a time when one or more parties is in breach of a representation
or warranty or in violation of a covenant or agreement contained in this
Agreement, the liabilities and obligations of the parties not in breach or
violation of this Agreement shall terminate (provided that nothing in this
Section 9.2(b) constitutes a waiver of the breaching party's rights and remedies
against the non-breaching party for the obligations of the non-breaching party
prior to the date of termination), and the party or parties which are in breach
or violation of this Agreement shall remain liable for such breaches and
violations, and nothing shall be deemed to restrict the remedies available
against such party or parties; provided, however, that the provisions of this
Section 9.2 and Section 6.3 and Article 11, and the applicable definitions set
forth herein shall remain in full force and effect and survive any termination
of this Agreement; provided further, however, that if any Selling Stockholder
would otherwise have any liability as a result of the immediately preceding
sentence, the Company hereby assumes and agrees to satisfy in full such
liability on behalf of such Selling Stockholder. Notwithstanding the foregoing,
the assumption of the liability contemplated by the preceding sentence shall not
relieve such Selling Stockholder of any liability in the event that the Company
does not satisfy such liability in full and the Parent shall be permitted to
seek recovery from such Selling Stockholder in such event.
(c) If this Agreement is terminated under Section 9.1(b) as
a result of the Company's or any Selling Stockholder's breach of or failure to
perform its obligations pursuant to Section 5.5, the Company shall pay to the
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Parent as liquidated damages resulting therefrom an amount equal to six million
four hundred thousand dollars ($6,400,000) (the "Termination Fee"). The Company
shall make such payment to the Parent by wire transfer of immediately available
funds no later than two (2) Business Days following the date on which this
Agreement is terminated pursuant to Section 9.1(b) in accordance with the
preceding sentence to an account to be designated by the Parent. In the event
that the Company shall fail to pay the Termination Fee when due, the Termination
Fee shall accrue interest for the period commencing on the date the Termination
Fee became past due at a rate equal to the rate of interest publicly announced
by Bank of America from time to time during such period, as such bank's prime
rate plus two percent (2%). In addition, if the Company shall fail to pay the
Termination Fee when due, the Company shall also pay all of the Parent's costs
and expenses (including attorneys' fees) in connection with efforts to collect
the Termination Fee. The parties acknowledge that the Termination Fee is an
integral part of this Agreement and that without the Termination Fee the parties
would not enter into this Agreement. The parties further acknowledge that the
Termination Fee is reasonable in light of the actual damages that would be
incurred by the Parent in connection with a termination of this Agreement under
Section 9.1(b) as a result of the Company's or any Selling Shareholder's breach
of or failure to perform its obligations pursuant to Section 5.5 and that such
actual damages would be difficult to determine with exactness. The Termination
Fee shall not be deemed to be the exclusive remedy available to the Parent with
respect to the termination of this Agreement under Section 9.1(b) as a result of
the Company's or any Selling Stockholders breach of or failure to perform its
obligations pursuant to Section 5.5 hereof. Accordingly, the receipt of the
Termination Fee by the Parent shall not be deemed to be an election of remedies
and shall not be deemed to prejudice, or to constitute or operate as a waiver
of, any other right or remedy that the Parent may be entitled to exercise
hereunder.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
10.1 SURVIVAL. The representations, warranties, covenants and
agreements contained herein shall survive the Closing and any investigation or
finding made by or on behalf of the Parent, the Selling Stockholders or the
Company to the extent provided in this Section 10.1. No action for a breach of
the representations and warranties contained herein shall be brought more than
eighteen (18) months following the Closing Date, except for (a) claims arising
out of the representations and warranties contained in Sections 2.1, 2.3 (but
only to the extent such representations and warranties pertain to this
Agreement), 3.1, 3.2, 3.4(a), 3.4(b), 3.5 (but only to the extent such
representations and warranties pertain to this Agreement), 3.6, 3.10(d), and
Section 4.2, which shall survive indefinitely after the Closing, (b) claims
arising out of the representations and warranties contained in the last sentence
of Section 3.4(c), Sections 3.19, 3.22, 3.25, 3.27 or 4.5, which shall survive
until sixty (60) days after the expiration of the statute of limitations period
(including all extensions thereof) applicable to the underlying subject matter
being represented, and (c) claims of which the Selling Stockholders have been
notified with reasonable specificity by the Parent in accordance with Sections
10.5 or 10.7, or claims of which the Parent has been notified with reasonable
specificity by the Selling Stockholders in accordance with Section 10.5, within
such eighteen (18) month period. The representations and warranties contained in
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Sections 2.1, 2.3 (but only to the extent such representations and warranties
pertain to this Agreement), 3.1, 3.2, 3.4(a), 3.4(b), the last sentence of
Section 3.4(c), Sections 3.5 (but only to the extent such representations and
warranties pertain to this Agreement), 3.6, 3.10(d), 3.19, 3.22, 3.25, 3.27,
3.28, 4.2, and 4.5 are sometimes collectively referred to herein as the
"Specified Representations."
10.2 INDEMNIFICATION LIMITS. No Indemnified Party shall be entitled
to recover any Losses for breach of the representations and warranties of any
party contained herein, unless, and only to the extent that, such Indemnified
Party's cumulative aggregate claims therefor exceed three hundred seventy
thousand dollars ($370,000) (i.e., the Indemnifier shall not be required to
provide indemnity for the first three hundred seventy thousand dollars
($370,000) of Losses, even if total Losses exceed such amount, (the "Basket")).
Further, in no event shall the cumulative aggregate liability of the Selling
Shareholders collectively, on the one hand, and Parent, on the other hand, under
this Agreement and the Transactions exceed twenty percent (20%) of the Closing
Merger Consideration (the "Cap"); provided that claims for breach of any of the
Specified Representations or actions for fraud or willful misconduct shall not
be subject to the Basket or Cap and shall not be included in the determination
of whether the Basket or Cap have been reached. For all purposes of this Article
10, when determining Losses resulting from breach of a representation or
warranty of any party, any Company Material Adverse Effect or other materiality
qualifier contained in any such representation or warranty will be disregarded.
In calculating the Losses of any Indemnified Party hereunder, it is the intent
of the parties that no recovery shall be made twice for the same Loss by virtue
of the operation of any adjustment to the Closing Merger Consideration pursuant
to Section 1.8 and this Article 10. For the avoidance of doubt, if, for example,
there is any difference between the amounts or information set forth on the
Estimated Closing Merger Consideration Certificate and the amounts or
information set forth on the Closing Merger Consideration Certificate, and an
adjustment is made with respect thereto pursuant to Section 1.8, any Losses
incurred by the Parent with respect to the specific facts giving rise to such
adjustment shall not be recovered twice by operation of Section 1.8 and this
Article 10. Parent Indemnified Parties shall first seek indemnification from the
Escrow Fund (as defined in the Escrow Agreement), and shall not seek
indemnification from the Selling Stockholders until the Escrow Fund is
exhausted.
10.3 INDEMNIFICATION BY THE SELLING STOCKHOLDERS.
(a) Subject to the other terms of this Article 10, each of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (collectively, the
"Principal Stockholders") agrees jointly and severally, and each of ▇▇▇▇▇ ▇▇▇▇▇,
The Fairfax Supporting Organization, and The Arlington Supporting Organization
(collectively, the "Minority Stockholders") agrees severally and not jointly, to
indemnify and hold the Parent and its Affiliates, including without limitation
the Company (the "Parent Indemnified Parties") harmless from and against all
claims, liabilities, obligations, costs, damages, losses and expenses, whether
or not involving a Claim (including reasonable attorneys' fees and costs of
investigation) of any nature (collectively, "Losses"), arising out of or
relating to (i) any breach or violation of the representations or warranties of
any of the Selling Stockholders (other than those set forth in Article 2) or the
Company set forth in this Agreement (including the schedules), (ii) any breach
or violation of the covenants or agreements of the Company set forth in this
Agreement required to be performed prior to or at the Closing, (iii) any breach
or violation of covenants or agreements of any of the Selling Stockholders set
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forth in this Agreement, (iv) the failure of any portion of the Indebtedness or
the Transaction Expenses to be paid at or prior to Closing (other than such
Indebtedness, Indemnification Expense Cash Amount and Transaction Expenses for
which the Parent is to make payment pursuant to Section 1.7(b)(ii)), (v) any
Lien on any property or asset of the Company after the Closing as a result of
matters existing or relating to any period prior to the Closing, other than
Permitted Liens, (vi) litigation, suit, proceeding, arbitration or investigation
initiated by a third party with respect to the affairs of the Company prior to
the Closing, (vii) except to the extent such Taxes are accrued as a liability
for purposes of determining Closing Working Capital as finally determined
pursuant to Section 1.8 and Taxes for which Parent is responsible pursuant to
the extent provided in clause (y) of the last sentence of Section 7.4, any Taxes
(A) for which the Selling Stockholders are responsible pursuant to Section 7.2
and/or Section 7.3, (B) imposed on or incurred by any Selling Stockholder, or
(C) in accordance with Section 7.9, (viii) any failure by the Company or the
Sellers Continuing Entity to pay in full and satisfy all of its obligations to
employees of the Company (including all payments and obligations to be made or
performed at Closing or at anytime after Closing) under the Sale Bonus Plan, or
(ix) any violation of or non-compliance with United States export laws deriving
from activities of the Company at any time prior to the date of approval of
registration with the Directorate of Defense Trade Control resulting from the
filing of the application referred to in Section 8.1(v). The Selling
Stockholders shall not have a right of contribution, or any other means of
recovery, from the Company for the Selling Stockholders' indemnification
obligations hereunder. Notwithstanding anything else to the contrary in this
Agreement, the Principal Stockholders shall be jointly and severally liable for
any indemnity obligations of the Minority Stockholders under this Section
10.3(a).
(b) Each Selling Stockholder shall severally, but not
jointly, indemnify and hold the Parent Indemnified Parties harmless from and
against all Losses arising out of or relating to any breach or violation of the
representations or warranties of such Selling Stockholder (and no other Selling
Stockholder) in Article 2 of this Agreement (including the schedules thereto).
(c) Subject to the other limitations set forth herein, to
the extent that any Parent Indemnified Party is entitled to indemnification for
Losses pursuant to Section 10.3(a), each of the Principal Stockholders shall be
jointly and severally liable for the full amount of such Losses. In the event
that the indemnification and hold harmless obligations of any of the Principal
Stockholders with respect to Losses of the Parent Indemnified Parties pursuant
to Section 10.3(a) shall be in excess of such Stockholder's Pro Rata Share
thereof, such Principal Stockholder shall be entitled to contribution from each
other Selling Stockholder in accordance with and to the extent of each such
other Selling Stockholder's Pro Rata Share of such Losses. In order to exercise
their respective rights to the foregoing contribution with respect to any
specific Losses, each Principal Stockholder, as the case may be, shall make a
written demand therefor from each other Selling Stockholder. "Pro Rata Share"
for a specified Selling Stockholder shall mean the percentage set forth opposite
his or her name as set forth on Schedule 10.3(c).
(d) No Parent Indemnified Party may initiate a claim for
indemnification under this Agreement without the prior approval of the Parent.
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(e) In the event that a Parent Indemnified Party seeks
payment of an indemnification claim directly from the Selling Stockholders in
accordance with this Article 10, any dispute regarding such claim shall be
resolved in accordance with the Escrow Agreement.
10.4 INDEMNIFICATION BY THE PARENT. The Parent shall indemnify and
hold the Selling Stockholders harmless from and against all Losses arising out
of or relating to any breach or violation of the representations, warranties,
covenants or agreements of the Parent set forth in this Agreement. In the event
that the Selling Stockholders seek payment of an indemnification claim from the
Parent in accordance with this Article 10, any dispute regarding such claim
shall be resolved in accordance with this Agreement.
10.5 PROCEDURES FOR INDEMNIFICATION.
(a) A claim for indemnification for any matter not involving
a Claim may be asserted in good faith by written notice from a party or parties
entitled to indemnification hereunder (the "Indemnified Party") to the party or
parties required to provide such indemnification (the "Indemnifier"), provided
that, notwithstanding anything else to the contrary in this Agreement, a claim
for indemnification brought by a Parent Indemnified Party may be made by notice
provided to the Stockholders' Representative. The Indemnified Party shall assert
a claim for indemnification by providing a written notice to the Indemnifier
stating in reasonable detail the nature and basis of such claim, and such notice
shall be provided to the Indemnifier as soon as reasonably practicable after the
Indemnified Party becomes aware that it has incurred or suffered a Loss;
provided, however, that any failure to provide such notice in a timely manner as
aforesaid, shall not relieve any Indemnifier from any liability that it may have
to the Indemnified Party under this Article 10 except to the extent that the
ability of such Indemnifier to defend such claim is materially prejudiced by the
Indemnified Party's failure to give such notice in a timely manner, provided
that, notwithstanding anything else to the contrary in this Agreement, a claim
for indemnification brought by a Parent Indemnified Party may be made by notice
provided to the Stockholders' Representative.
(b) An Indemnified Party will give the Indemnifier prompt
written notice of any Legal Proceeding or demand instituted, or any claim
asserted, by any third party (in each case, a "Claim") in respect of which the
Indemnified Party is or may be entitled to indemnification hereunder, stating in
reasonable detail the nature and basis of such Claim, and such notice shall be
provided to the Indemnifier as soon as reasonably practicable after the
Indemnified Party becomes aware of the Claim; provided, however, any failure to
provide such notice in a timely manner as aforesaid, shall not relieve any
Indemnifier from any liability that it may have to the Indemnified Party under
this Article 10 except to the extent that the ability of such Indemnifier to
defend such claim is materially prejudiced by the Indemnified Party's failure to
give such notice in a timely manner.
(c) If the Indemnifier provides written notice to the
Indemnified Party stating that the Claim is a type for which the Indemnifier is
responsible, then within ten (10) days after the Indemnifier's receipt of
written notice from the Indemnified Party of such Claim, the Indemnifier shall
have the right, at the Indemnifier's expense, to defend against, negotiate,
settle or otherwise deal with such Claim and to have the Indemnified Party
represented by counsel, reasonably satisfactory to the Indemnified Party,
selected by the Indemnifier; provided that the Indemnified Party may participate
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in any proceeding with counsel of its choice and at its expense; provided,
further, that the Parent, at any time when it believes in good faith that any
Claim is having or could reasonably be expected to have a Company Material
Adverse Effect, may assume the defense and settlement of such Claim in good
faith subject to the terms of this Agreement, with counsel of its choice, and be
fully indemnified therefor; provided, further, that neither the Indemnifier nor
the Indemnified Party may enter into a settlement of any Claim without the
written consent of the other party unless such settlement provides the
Indemnified Party or the Indemnifier, as applicable, with a full release from
such Claim and requires no more than a monetary payment for which the party not
executing such settlement is fully indemnified hereunder.
(d) The parties will cooperate fully with each other in
connection with the defense of any Claim.
(e) Notwithstanding anything to the contrary contained
herein, in the event of a Contest, the provisions of Section 7.5 shall govern.
10.6 ESCROW AGREEMENT. If any of the Parent Indemnified Parties
seeks to make a claim for indemnification pursuant to this Article 10, then the
Parent shall be required to submit such claim, and any disputes with respect to
such claim shall be resolved, in accordance with the terms of this Agreement and
the Escrow Agreement prior to any such Parent Indemnified Party seeking payment
directly from any Selling Stockholder with respect to such claim to the extent
there are funds available under the Escrow Agreement; provided, however, that in
the case of an indemnification claim by any Parent Indemnified Party relating to
either (a) the failure of the Selling Stockholders to pay any portion of the
amount due to the Parent after the final determination of the Closing Merger
Consideration pursuant to Section 1.8(e), or (b) any failure by the Sellers
Continuing Entity to pay in full and satisfy all obligations to employees of the
Company (including all payments and obligations to be made or performed at
Closing or at anytime after Closing) under the Sale Bonus Plan, the Parent
Indemnified Party shall be entitled to first seek payment directly from any
Selling Stockholder with respect to such claim prior to submitting such claim in
accordance with the terms of the Escrow Agreement. Indemnification claims shall
be paid according to the terms of the Escrow Agreement.
10.7 ADJUSTMENT TO PURCHASE PRICE. All indemnification payments
paid pursuant to this Article 10 shall, to the maximum extent permitted by Legal
Requirements, be treated as an adjustment to the purchase price for Tax
purposes.
10.8 LIMITATIONS ON REMEDIES
(a) Except for actions or claims for fraud or willful misconduct
and as set forth in Section 9.2(c), indemnification under this Article 10 shall
constitute the sole remedy under this Agreement or the Transactions.
(b) Except for actions or claims for fraud or willful misconduct
and as set forth in Section 9.2(c), no party hereto shall be liable to the other
for indirect, special, incidental, consequential or punitive damages claimed by
such other party resulting from such first party's breach of its obligations,
agreements, representations or warranties hereunder; provided that nothing under
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this Section 10.8 shall preclude any recovery by an Indemnified Party against an
Indemnifier for third party Claims.
10.9 CALCULATION OF AMOUNT, CLAIMS AND LOSSES. The amount of any
claims or Losses subject to indemnification under Section 10.3 shall be
calculated net of any amounts actually received by Parent or its Affiliates
(including the Company after the Closing) under applicable insurance policies
(but taking into account any deductible or retention and initial premium
increase resulting therefrom) held by the Parent or its Affiliates (including
the Company after the Closing), and the Parent agrees to make or cause to be
made all reasonable claims for insurance under such policies that may be
applicable to the matter giving rise to the indemnification claim hereunder.
ARTICLE 11
MISCELLANEOUS
11.1 NOTICES. All notices, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person, by e-mail or fax (with written confirmation of
transmission), by United States mail, certified or registered with return
receipt requested, or by a nationally recognized overnight courier service, or
otherwise actually delivered:
(a) if to the Selling Stockholders or, prior to the Closing,
the Company or Holdings, to:
▇▇▇▇▇▇▇▇▇ Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇.▇▇▇▇▇@▇▇▇-▇▇▇▇.▇▇▇
with a copy (which shall not constitute notice) to:
Pillsbury ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇)-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
(b) if to the Stockholders' Representative (for herself or
on behalf of any Selling Stockholder), to:
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
E-mail: ▇▇▇▇▇▇▇@▇▇▇.▇▇▇
with a copy (which shall not constitute notice) to:
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇)-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
(c) if to the Parent, Acquisition Sub or Merger Sub or,
after the Closing, the Company or the Subsequent Merger Surviving Corporation,
to:
L-1 Identity Solutions, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
and
L-1 Identity Solutions, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Hampton LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: Lucantonio ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
or at such other address as may have been furnished by such person in writing to
the other parties. Any such notice, demand or communication shall be deemed
given on the date given, if delivered in person, e-mailed or faxed (with written
confirmation of transmission), on the date received, if given by registered or
certified mail, return receipt requested or given by overnight delivery service,
or three (3) days after the date mailed, if otherwise given by first class mail,
postage prepaid.
11.2 SEVERABILITY AND GOVERNING LAW; FORUM. This Agreement shall be
interpreted in such a manner as to be effective and valid under applicable Legal
Requirements, but if any provision hereof shall be prohibited or invalid under
any such Legal Requirement, such provision shall be ineffective to the extent of
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such prohibition or invalidity, without invalidating or nullifying the remainder
of such provision or any other provisions of this Agreement. If any one or more
of the provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, such
provisions shall be construed by limiting and reducing it so as to be
enforceable to the maximum extent permitted by applicable Legal Requirements.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware, without regard to its conflicts of laws
principles. Any proceeding arising out of or relating to this Agreement or any
of the Transaction Documents or any of the transactions contemplated hereby or
thereby (except as otherwise contemplated by Article 10 and the Escrow
Agreement) may be brought in the state or federal courts located in the State of
Delaware. Each party hereby irrevocably waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of the
venue of any such action, suit or proceeding brought in such a court and any
claim that any such action, suit or proceeding brought in such a court has been
brought in an inconvenient forum. This provision may be filed with any court as
written evidence of the knowing and voluntary irrevocable agreement between the
parties to waive any objections to venue or to convenience of forum.
11.3 AMENDMENTS, WAIVERS. This Agreement may be amended or modified
only with the written consent of the Parent, the Company and the Selling
Stockholders. No waiver of any term or provision hereof shall be effective
unless in writing signed by the party waiving such term or provision. No failure
to exercise or delay in exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
11.4 EXPENSES. Except as otherwise expressly provided in this
Agreement, all legal and other costs and expenses incurred in connection with
this Agreement and the Transactions shall be paid by the party incurring such
costs and expenses, provided, however, that if the Closing occurs, the Selling
Stockholders shall be responsible for the Transaction Expenses (including any
expenses incurred by the Selling Stockholders after the Closing).
11.5 SUCCESSORS AND ASSIGNS. This Agreement, and all provisions
hereof, shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto; provided that this
Agreement may not be assigned by any party without the prior written consent of
the other parties hereto except that after the Closing (a) the indemnification
and other rights hereunder of a party may be assigned to any bank or other
financial institution which is or becomes a lender to the Parent or the Company
or any of their respective successors and assigns and (b) this Agreement may be
assigned by the Parent to any of its Affiliates; provided that such assignment
does not relieve the Parent of its obligations hereunder, or to any Person
acquiring substantially all of the assets, business or securities of the Company
or the Parent, whether by merger, consolidation, sale of assets or securities or
otherwise.
11.6 ENTIRE AGREEMENT. This Agreement, the attached exhibits and
schedules and the other Transaction Documents contain the entire understanding
of the parties, and there are no further or other agreements or understandings,
written or oral, in effect between the parties relating to the subject matter
hereof unless expressly referred to herein.
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11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and with counterpart facsimile and/or portable document format
signature pages, each of which shall be an original, but all of which when taken
together shall constitute one and the same Agreement.
11.8 HEADINGS. The headings of Articles and Sections herein are
inserted for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
11.9 FURTHER ASSURANCES. Following the Closing, the Selling
Stockholders, on the one hand, and the Parent, on the other hand, will execute
and deliver to the other party such documents and take such other actions as
such other party may reasonably request in order to fully consummate the
Transactions (at the sole cost and expense of such other party).
11.10 THIRD PARTY BENEFICIARIES. Nothing in the Agreement shall be
construed to confer any right, benefit or remedy upon any Person that is not a
party hereto or a permitted assignee of a party hereto, except as set forth in
Article 10.
11.11 NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement and the other
agreements and documents contemplated herein. In the event an ambiguity or
question of intent or interpretation arises under any provision of this
Agreement or any other agreement or documents contemplated herein, this
Agreement and such other agreements or documents shall be construed as if
drafted jointly by the parties thereto, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of authoring any of the
provisions of this Agreement or any other agreements or documents contemplated
herein.
11.12 PUBLICITY. No party shall issue a press release or make any
other public announcement concerning the Transactions before or after the
Closing without the prior written consent of the Parent and the Stockholders'
Representative, which consent shall not be unreasonably withheld, conditioned or
delayed, except to the extent required by Legal Requirements or the applicable
rules of any stock exchange on which Parent or its Affiliates lists securities;
provided that, to the extent any such disclosure is required by any Legal
Requirement or the applicable rules of any stock exchange, the party intending
to make such release shall, subject to and consistent with such Legal
Requirement or applicable rules of any stock exchange, consult with the other
party with respect to the text thereof.
11.13 SCHEDULES AND EXHIBITS. All schedules and exhibits to this
Agreement are an integral part of this Agreement and are incorporated herein by
reference in this Agreement for all purposes of this Agreement. All schedules
delivered with this Agreement shall be arranged to correspond with the numbered
and lettered Sections and Subsections contained in this Agreement, (it being
understood that the disclosures in any section of the disclosure schedules shall
qualify only the corresponding Sections and Subsections contained in this
Agreement, unless it is reasonably apparent from a reading of such section of
the disclosure schedule that it also applies to other sections).
11.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
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INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
11.15 EXCLUSIVE AGENT FOR SELLING STOCKHOLDERS.
(a) The Selling Stockholders hereby authorize, direct and
appoint ▇▇▇▇▇ ▇▇▇▇▇ to act as sole and exclusive agent, attorney-in-fact and
representative of the Selling Stockholders (such position, the "Stockholders'
Representative"), with full power of substitution with respect to all matters
under this Agreement and the Escrow Agreement, including, without limitation,
determining, giving and receiving notices and processes hereunder, entering into
any documents required or permitted and contesting and settling any and all
claims for indemnification under Article 10 hereof, resolving any other disputes
hereunder, performing the duties expressly assigned to the Stockholders'
Representative hereunder and under the Escrow Agreement, making, executing,
acknowledging and delivering all such other agreements, guarantees, orders,
receipts, endorsements, notices, requests, instructions, certificates, stock
powers, letters and other writings, and, in general, doing any and all things
and taking any and all action that the Stockholders' Representative, in her sole
and absolute discretion, may consider necessary or proper or convenient in
connection with or to carry out the transactions contemplated by this Agreement
and all other agreements, documents or instruments referred to herein or
executed in connection herewith and to engage and employ agents and
representatives and to incur such other expenses as Stockholders' Representative
shall reasonably deem necessary or prudent in connection with the foregoing. The
Stockholders' Representative shall have the sole and exclusive right on behalf
of any Selling Stockholder to take any action or provide any waiver or receive
any notice, in each case with respect to any claims for indemnification under
Article 10 and to settle any claim or controversy arising with respect thereto.
Any such actions taken, exercises of rights, power or authority, and any
decision or determination made by the Stockholders' Representative, shall be
absolutely and irrevocably binding on each Selling Stockholder as if such
Selling Stockholder personally had taken such action, exercised such rights,
power or authority or made such decision or determination in such Selling
Stockholder's individual capacity, and no Selling Stockholder shall have the
right to object, dissent, protest or otherwise contest the same. Any action
required to be taken by the Selling Stockholders hereunder or any action which
Selling Stockholders, at their election, have the right to take hereunder, shall
be taken only by the Stockholders' Representative and no Selling Stockholder
acting on its own shall be entitled to take any such action. All deliveries and
payments to be made by the Parent to any Selling Stockholder hereunder shall be
made exclusively to the Stockholders' Representative on behalf of the Selling
Stockholders and any delivery or payment so made to the Stockholders'
Representative shall constitute full performance of the obligations hereunder of
the Parent to the Selling Stockholders.
(b) The appointment of the Stockholders' Representative as
each Selling Stockholder's attorney-in-fact revokes any power of attorney
heretofore granted that authorized any other person or persons to represent such
Selling Stockholder with regard to this Agreement. The appointment of the
Stockholders' Representative as attorney-in-fact pursuant hereto is coupled with
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an interest and is irrevocable. The obligations of each Selling Stockholder
pursuant to this Agreement (i) will not be terminated by operation of law,
death, mental or physical incapacity, liquidation, dissolution, bankruptcy,
insolvency or similar event with respect to such Selling Stockholder or any
proceeding in connection therewith, or in the case of a trust, by the death of
any trustee or trustees or the termination of such trust, or any other event,
and (ii) shall survive the delivery of an assignment by any Selling Stockholder
of the whole or any fraction of its interest in any payment due to it under this
Agreement.
(c) ▇▇▇▇▇ ▇▇▇▇▇ hereby accepts the foregoing appointment and
agrees to serve as Stockholders' Representative, subject to the provisions
hereof, for the period of time from and after the date hereof without
compensation except for the reimbursement solely from the Selling Stockholders
of out of pocket expenses incurred by Stockholders' Representative in her
capacity as such.
(d) Notwithstanding anything to the contrary in this
Agreement, with respect to the power and authority granted to Stockholders'
Representative, the Stockholders' Representative hereby agrees that she shall
have no authority with respect to (i) claims for indemnification for which a
Selling Stockholder is solely responsible under Article 2, and (ii) settlement
of any claim which is not in accordance with each Selling Stockholder's ratable
proportion of the Closing Merger Consideration to which all Selling Stockholders
are entitled or settlement of any claim which could cause any Selling
Stockholder to be liable for more than such Selling Stockholder's ratable
proportion of the Closing Merger Consideration to which all Stockholders are
entitled.
(e) Each Selling Stockholder hereby waives all potential
conflicts of interest arising out of the Stockholders' Representative's
activities or authority as Stockholders' Representative and her relationships
with the Company (whether before or after the Closing), whether as an employee,
consultant, agent, director, officer, stockholder or other representative of the
Company.
(f) The Parent shall pay to the Stockholders' Representative
$30,000 (the "Indemnification Expense Cash Amount") from the Estimated Closing
Merger Consideration otherwise payable to the Selling Stockholders. The
Stockholders' Representative shall pay such amount to an escrow account of the
Selling Stockholders (the "Stockholders' Escrow Account"). The Indemnification
Expense Cash Amount shall be held by the Stockholders' Representative in escrow
in the Stockholders' Escrow Account as a source of funds for the payment of
expenses, including legal and out-of-pocket expenses, incurred in connection
with the prosecution, defense, settlement or negotiation of any claim for
indemnification hereunder, or any disputes relating thereto, brought by or
against the Stockholders' Representative in accordance with Article 10. In the
event any funds remain in the Stockholders' Escrow Account at the end of the
period ending on the eighteen month anniversary of the Closing Date, the
Stockholders' Representative shall disburse such amounts from escrow to the
Selling Stockholders ratably in proportion to their respective Closing Merger
Consideration, unless there are unresolved claims for indemnification
outstanding on such date, in which case appropriate funds shall be held until
such claims are resolved or finally determined; and, further, to the extent any
funds remain in the Stockholders' Escrow Account they shall be paid to the
Selling Stockholders ratably in proportion to their respective Closing Merger
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Consideration. In the event that the Stockholders' Escrow Account is
insufficient to cover the payment of the Stockholders' Representative's
expenses, the Selling Stockholders shall, severally in proportion to their
respective shares of the Closing Merger Consideration, pay or reimburse the
Stockholders' Representative for such expenses incurred by Stockholders'
Representative in such capacity. Furthermore, in the event that the
Stockholders' Escrow Account is insufficient to cover the payment of the
Stockholders' Representative's expenses, upon request of the Stockholders'
Representative, the Selling Stockholders shall advance reasonable out-of-pocket
expenses to the Stockholders' Representative severally in proportion to their
respective shares of the Closing Merger Consideration. Neither the Selling
Stockholders nor the Stockholders' Representative will make a claim against the
Parent, the Company or any of their respective affiliates for any fees or
expenses incurred by the Stockholders' Representative. The Selling Stockholders
shall, severally in proportion to their respective ratable shares of the Closing
Merger Consideration, further indemnify the Stockholders' Representative against
any losses arising out of actions taken or omitted to be taken in her capacity
as the Stockholders' Representative under this Agreement (except in the case of
willful misconduct by the Stockholders' Representative), including the
reasonable costs and expenses of investigation and defense of claims not
otherwise covered by the Indemnification Expense Cash Amount.
(g) Notwithstanding anything to the contrary contained in
this Agreement, the Stockholders' Representative shall have no liabilities,
duties or responsibilities except those expressly set forth herein and therein,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities on behalf of any Selling Stockholder shall otherwise exist against
the Stockholders' Representative. ▇▇▇▇▇ ▇▇▇▇▇ shall not, by virtue of acting as
Stockholders' Representative or any of her actions taken in such capacity, be
deemed to have assumed any liability or become responsible for any obligation of
any Selling Stockholder. The Stockholders' Representative will not be liable to
any Selling Stockholder with respect to actions taken or omitted to be taken in
her capacity as a Stockholders' Representative under this Agreement (except in
the case of willful misconduct or fraud by the Stockholders' Representative).
(h) The Stockholders' Representative may resign at any time
by giving written notice of resignation to the Parent and the Selling
Stockholders, with such resignation to be effective upon the selection of her
successor. Upon any such resignation or removal, the Selling Stockholders shall
select a successor Stockholders' Representative, which successor shall be
selected by the approval of a majority in interest (based on the aggregate
number of shares of the Company's voting stock held on the Closing Date). Upon
the acceptance of any appointment as Stockholders' Representative thereunder by
a successor Stockholders' Representative, such successor Stockholders'
Representative shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the resigning Stockholders' Representative, and
the resigning Stockholders' Representative shall be discharged from its duties
and obligations as Stockholders' Representative under this Agreement. After any
resigning Stockholders' Representative's resignation as Stockholders'
Representative, the provisions of this Section 11.15 shall inure to her benefit
as to any actions taken or omitted to be taken by it while it was Stockholders'
Representative. Any successor Stockholders' Representative shall by means of
execution of a counterpart hereof be bound by the terms of this Agreement
applicable to the Stockholders' Representative.
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(i) Parent shall have the right to rely upon all actions
taken or omitted to be taken by the Stockholders' Representative pursuant to
this Agreement, without any liability to, or obligation to inquire of, any
Selling Stockholder, and all of which actions or omissions shall be legally
binding upon the Selling Stockholders. The Parent is expressly authorized to
rely on the genuineness of the signature of the Stockholders' Representative
and, upon receipt of any writing that reasonably appears to have been signed by
the Stockholders' Representative, may act upon the same without any further duty
of inquiry as to the genuineness of the writing.
11.16 RIGHTS AND REMEDIES. Subject to Section 10.8, the rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties hereto agree that (a) in the event of any breach or threatened breach by
any party of any covenant, obligation, or other provision of this Agreement
applicable to such party, the other parties shall be entitled (in addition to
any other remedy that may be available and permitted hereunder) to seek (i) a
decree or order of specific performance or mandamus to enforce the observance
and performance of such covenant, obligation or other provision, and (ii) an
injunction restraining such breach or threatened breach, and (b) neither such
other parties shall be required to provide any bond or other security in
connection with any such decree, order or injunction or in connection with any
related action or proceeding.
11.17 KNOWLEDGE. As used in this Agreement:
(a) "to the knowledge of the Company," "the Company has no
knowledge" and similar phrases mean that the information to be attributed to the
Company is information actually known to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or information that such
persons would reasonably be expected to know after reasonable inquiry; and
(b) "to the knowledge of the Parent," "the Parent has no
knowledge" and similar phrases mean that the information to be attributed to the
Parent is information actually known to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇'▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ or information that such persons would reasonably be
expected to know after reasonable inquiry.
11.18 CONSTRUCTION. The words "hereby," "herein," "hereof,"
"hereunder" and words of similar import refer to this Agreement as a whole
(including any exhibits and schedules hereto) and not merely to the specific
section, paragraph or clause in which such word appears. All references herein
to Sections, Exhibits and Schedules shall be deemed references to Sections of,
Exhibits to and Schedules delivered with this Agreement unless the context shall
otherwise require. The definitions given for terms in this Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. Except as otherwise expressly provided herein, all
references to "$" shall be deemed references to the lawful money of the United
States of America. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." The phrase "ordinary
course of business" shall be deemed to be followed by the phrase "consistent
with past practice."
11.19 WAIVER BY CERTAIN STOCKHOLDERS. Each of The Fairfax Supporting
Organization and The Arlington Supporting Organization understands and agrees
that it shall receive the Estimated Closing Merger Consideration to be set forth
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on Schedule 1.7(d)(iii) and shall not receive any shares of Parent Common Stock
as a result of the Transactions, and each such Selling Stockholder hereby waives
any claim, demand or other right to receive any shares of Parent Common Stock in
connection with the Transactions.
ARTICLE 12
DEFINITIONS
The following terms, as used in this Agreement, have the meanings
given to them where indicated below:
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TERM SECTION OR PLACE WHERE DEFINED
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Acquisition Sub Introduction
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Acquisition Sub Joinder Agreement Section 6.6
--------------------------------------------------------------------------------
Agreement Preamble
--------------------------------------------------------------------------------
Affiliate Section 3.25
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Aspen Lake Contract Section 5.1(a)(x)
--------------------------------------------------------------------------------
Base Merger Consideration Section 1.7(c)
--------------------------------------------------------------------------------
Base Working Capital Section 1.7(c)
--------------------------------------------------------------------------------
Basket Section 10.2
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Benefit Plans Section 3.22(a)
--------------------------------------------------------------------------------
Business Section 3.1(a)
--------------------------------------------------------------------------------
Business Day Section 1.7(c)
--------------------------------------------------------------------------------
Cap Section 10.2
--------------------------------------------------------------------------------
Certificate of Merger Section 1.3
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Claim Section 10.5(b)
--------------------------------------------------------------------------------
Classified Documents Section 3.9
--------------------------------------------------------------------------------
Classified Security Manual Section 3.9
--------------------------------------------------------------------------------
Classified SOW Section 3.9
--------------------------------------------------------------------------------
Closing Section 1.2
--------------------------------------------------------------------------------
Closing Date Section 1.2
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Closing Merger Consideration Section 1.7(c)
--------------------------------------------------------------------------------
Closing Merger Consideration Certificate Section 1.8(a)
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Closing Working Capital Section 1.7(c)
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Code Introduction
--------------------------------------------------------------------------------
Company Preamble, Section 5.7(b)
--------------------------------------------------------------------------------
Company Intellectual Property Section 3.13(b)
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Company Material Adverse Effect Section 3.8
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Company Membership Interests Introduction
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Company 401(k) Plan Section 5.14(c)
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Contest Section 7.6
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Contract Section 1.7(c)
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Covered Business Section 5.7(b)
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DGCL Section 1.3
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TERM SECTION OR PLACE WHERE DEFINED
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Disputed Items Notice Section 1.8(b)
--------------------------------------------------------------------------------
EAC Section 3.10(c)
--------------------------------------------------------------------------------
Effective Time Section 1.3
--------------------------------------------------------------------------------
Employment Agreements Section 8.1(f)
--------------------------------------------------------------------------------
Environmental Laws Section 3.23
--------------------------------------------------------------------------------
Equity Consideration Section 1.7(b)(i)
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ERISA Section 3.22(a)
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ERISA Affiliate Section 3.22(a)
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Escrow Amount Section 1.7(c)
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Escrow Agent Section 1.7(c)
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Escrow Agreement Section 1.7(c)
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Estimated Closing Merger Consideration Section 1.7(c)
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Estimated Closing Merger Consideration Section 1.7(d)
Certificate
--------------------------------------------------------------------------------
Exchange Act Section 4.8
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Financial Statements Section 3.7(b)
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GAAP Section 1.7(c)
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Government Contract Section 3.10(a)
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Governmental or Regulatory Authority Section 3.10(b)
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GSA Section 3.10(d)
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GSA Schedule Contract Section 3.10(d)
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Holdings Introduction
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Holdings Joinder Agreement Section 5.17
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Holdings Shares Introduction
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Indebtedness Section 1.7(c)
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Indemnification Expense Cash Amount Section 11.15(f)
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Indemnified Party Section 10.5(a)
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Indemnifier Section 10.5(a)
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Initial Sale Bonus Amount Section 1.7(b)(ii)(C)
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Intellectual Property Section 3.13(a)
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Intellectual Property License Section 3.13(c)
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IT Schedule Section 3.10(d)
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Latest Audited Financial Statement Date Section 3.7(a)
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Leased Property Section 3.11(b)
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Legal Proceeding Section 3.20
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Legal Requirements Section 3.17
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Liens Section 1.7(c)
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Losses Section 10.3(a)
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Material Adverse Effect Section 3.8
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Material Contracts Section 3.9
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Merger Sub Preamble
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Minority Stockholders Section 10.3(a)
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MOBIS Schedule Section 3.10(d)
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NASD Section 2.5(e)
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TERM SECTION OR PLACE WHERE DEFINED
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Noncompetition Agreements Section 5.12(b)
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Noncompetition Exceptions Section 5.7(b)
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Noncompetition Period Section 5.7(b)
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OCI Section 3.10(o)
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Off-the-Shelf Software Section 3.13(d)
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Parent Preamble
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Parent Common Stock Section 1.7(c)
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Parent Indemnified Parties Section 10.3(a)
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Parent SEC Reports Section 4.8
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Permitted Liens Section 3.11(a)
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Person Section 3.6(a)
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Personal Property Leases Section 3.12(b)
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PES Schedule Section 3.10(d)
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Pre-Closing Reorganization Introduction
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Pre-Closing Taxable Periods Section 7.2
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Pre-Closing Transactions Introduction
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Principal Stockholders Section 10.3(a)
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Pro Rata Share Section 10.3(c)
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Purchase Commitments Section 3.30
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Post Survival Claim Section 1.9
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Real Estate Leases Section 3.11(b)
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Registrable Securities Section 5.15(a)
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Registration Statement Section 5.15(a)
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Renewed GSA Schedule Contracts Section 8.1(s)
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Required Consents Section 3.4(c)
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Reverse Merger Introduction
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Reverse Merger Surviving Corporation Introduction
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Rule 144 Section 6.4
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Sale Bonus Plan Section 1.7(c)
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SEC Section 5.4(a)
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Securities Act Section 3.25
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Sellers Continuing Entity Introduction
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Selling Stockholder or Selling Stockholders Preamble
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Service Section 3.22(b)
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Shares Introduction
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Software Section 3.13(a)
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Specified Representations Section 10.1
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Stockholders' Escrow Account Section 11.15(f)
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Stockholders' Representative Section 11.15
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Subsequent Certificate of Merger Section 1.11(a)
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Subsequent Merger Section 1.11(a)
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Subsequent Merger Surviving Corporation Introduction
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Tax or Taxes Section 3.19(a)(i)
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Tax Returns Section 3.19(a)(ii)
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TERM SECTION OR PLACE WHERE DEFINED
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Termination Fee Section 9.2(c)
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Trade Secrets Section 3.13(a)
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Transaction Documents Section 2.1(b)
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Transactions Introduction
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Transaction Expenses Section 1.7(c)
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Transaction Taxes Section 7.9
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Treasury Regulations Section 1.7(c)
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WARN Section 3.21(b)
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[Remainder of Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as a sealed instrument as of the date first above written.
PARENT:
-------
L-1 IDENTITY SOLUTIONS, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President & Chief
Executive Officer
MERGER SUB:
-----------
L-1 IDENTITY SOLUTIONS OPERATING COMPANY
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President & Chief
Executive Officer
COMPANY:
--------
▇▇▇▇▇▇▇▇▇ CORPORATION
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman, Chief Executive Officer
STOCKHOLDERS' REPRESENTATIVE
----------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
[Signature Page to Agreement and Plan of Merger]
-i-
SELLING STOCKHOLDERS:
--------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
The Fairfax Supporting Organization
/s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President, Board of Trustees
The Arlington Supporting Organization
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Trustee
[Signature Page to Agreement and Plan of Merger]
-ii-