Exhibit 2.1
Execution Copy
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AGREEMENT AND PLAN OF MERGER
Among
Essex Corporation,
CSI ACQUISITION CORP.,
Computer Science Innovations, Inc.
and
COMPUTER SCIENCE INNOVATIONS
EMPLOYEE STOCK OWNERSHIP PLAN
Dated as of April 19, 2004 and Executed on April 28, 2004
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ARTICLE I MERGER............................................................1
SECTION 1.01 The Merger..............................................1
SECTION 1.02 Effective Time; Closing.................................1
SECTION 1.03 Effect of the Merger....................................2
SECTION 1.04 Certificate of Incorporation; By-Laws...................2
SECTION 1.05 Directors and Officers..................................2
SECTION 1.06 Tax Matters.............................................2
ARTICLE II REDEMPTION OF SECURITIES; CONVERSION OF SECURITIES; SURRENDER
OF CERTIFICATES...................................................2
SECTION 2.01 Exercise of Certain Options; Redemption of Shares of
Company Common Stock....................................2
SECTION 2.02 Aggregate Purchase Price................................3
SECTION 2.03 Conversion of Securities................................5
SECTION 2.04 Dissenting Shares.......................................5
SECTION 2.05 Surrender of Shares; Stock Transfer Books...............6
SECTION 2.06 Escrow Agreement........................................6
SECTION 2.07 Withholding.............................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................7
SECTION 3.01 Organization; Good Standing; Qualification..............7
SECTION 3.02 Charter Documents; Books and Records....................7
SECTION 3.03 Capitalization..........................................8
SECTION 3.04 Authority Relative to this Agreement....................8
SECTION 3.05 No Conflict; Required Filings and Consents..............8
SECTION 3.06 Subsidiaries............................................9
SECTION 3.07 Financial Statements....................................9
SECTION 3.08 Absence of Undisclosed Liabilities......................9
SECTION 3.09 Absence of Changes......................................9
SECTION 3.10 Transactions with Affiliates...........................10
SECTION 3.11 Accounts Receivable....................................10
SECTION 3.12 Inventory..............................................10
SECTION 3.13 Material Contracts.....................................10
SECTION 3.14 Insurance..............................................12
SECTION 3.15 Title; Sufficiency; Condition of Assets................12
SECTION 3.16 Real Property Leases...................................13
SECTION 3.17 Intellectual Property..................................13
SECTION 3.18 Intentionally Omitted..................................15
SECTION 3.19 Employees and Consultants..............................15
SECTION 3.20 The Company Benefit Plans..............................16
SECTION 3.21 Compliance with Laws...................................19
SECTION 3.22 Governmental Approvals.................................19
SECTION 3.23 Government Contracts and Subcontracts..................19
SECTION 3.24 Proceedings and Orders.................................21
SECTION 3.25 Taxes..................................................22
SECTION 3.26 Bank Accounts..........................................24
SECTION 3.27 Vote Required..........................................24
SECTION 3.28 Opinion of Financial Advisors..........................24
SECTION 3.29 Brokers' and Finders' Fees.............................25
SECTION 3.30 Disclosure.............................................25
SECTION 3.31 No Conflict............................................25
SECTION 3.32 ERISA Matters..........................................25
SECTION 3.33 ESOP Shares............................................25
SECTION 3.34 Due Authorization and Enforceability...................26
SECTION 3.35 Litigation.............................................26
SECTION 3.36 Broker's and Finders' Fees.............................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..........26
SECTION 4.01 Organization and Qualification; Subsidiaries...........26
SECTION 4.02 Authority Relative to this Agreement...................27
SECTION 4.03 No Conflict; Required Filings and Consents.............27
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER...........................27
SECTION 5.01 Conduct of Business by the Company Pending the Merger..27
ARTICLE VI ADDITIONAL AGREEMENTS............................................29
SECTION 6.01 Appropriate Action; Consents; Filings..................29
SECTION 6.02 Novation of Government Contracts.......................29
SECTION 6.03 Treatment of the ESOP Post-Closing.....................30
SECTION 6.04 Access to Information; Confidentiality.................30
SECTION 6.05 No Solicitation of Competing Transactions..............31
SECTION 6.06 Notification of Certain Matters........................31
SECTION 6.07 No Solicitation of Employees...........................32
SECTION 6.08 Public Announcements...................................32
SECTION 6.09 Proxy Statement........................................32
SECTION 6.10 Shareholders' Meeting..................................32
ARTICLE VII CONDITIONS TO THE MERGER.........................................33
SECTION 7.01 Conditions to the Obligations of Each Party............33
SECTION 7.02 Conditions to the Obligations of Parent and Merger
Sub....................................................33
SECTION 7.03 Conditions to the Obligations of the Company...........34
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER................................34
SECTION 8.01 Termination............................................34
SECTION 8.02 Effect of Termination..................................36
SECTION 8.03 Fees and Expenses......................................36
SECTION 8.04 Amendment..............................................36
SECTION 8.05 Waiver.................................................37
ARTICLE IX INDEMNIFICATION..................................................37
SECTION 9.01 Indemnification by Company.............................37
SECTION 9.02 Reserved...............................................37
SECTION 9.03 Procedures for Indemnification.........................37
SECTION 9.04 Limitations on Indemnification.........................38
SECTION 9.05 Remedies Cumulative....................................38
SECTION 9.06 Method of Asserting Claims.............................38
ARTICLE X GENERAL PROVISIONS...............................................38
SECTION 10.01 Survival of Representations, Warranties and
Agreements.............................................38
SECTION 10.02 Notices................................................38
SECTION 10.03 Certain Definitions....................................39
SECTION 10.04 Severability...........................................45
SECTION 10.05 Entire Agreement; Assignment...........................45
SECTION 10.06 Parties in Interest....................................46
SECTION 10.07 Specific Performance...................................46
SECTION 10.08 Governing Law..........................................46
SECTION 10.09 Headings...............................................46
SECTION 10.10 Interpretation.........................................46
SECTION 10.11 Counterparts...........................................47
SECTION 10.12 Waiver of Jury Trial...................................47
EXHIBITS AND SCHEDULES
Schedule A ESOP Stock Allocation
Exhibit 1.04(a) Certificate of Incorporation of the Surviving Corporation
Exhibit 1.04(b) By-laws of Surviving Corporation
Schedule 2.01 Redemption Spreadsheet
Exhibit 2.06 Escrow Agreement
Exhibit 7.02(d) Form of Opinion of Reinman, Matheson, ▇▇▇▇▇▇, ▇▇▇▇▇▇ &
Durham, PA
Exhibit 7.02(e) Form of Opinion of ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
INDEX OF DEFINED TERMS
DEFINED TERM LOCATION OF DEFINITION
Acquisition Proposal Section 10.03
Affiliate Section 10.03
Aggregate Purchase Price Section 2.02(a)
Agreement Recitals
AMS Section 3.23(d)(ii)
Articles of Merger Section 1.02
Basket Section 9.04
Books and Records Section 10.03
Business Recitals
Business Day Section 10.03
Cash Section 10.03
Certificates Section 2.05
Closing Section 1.02
Code Section 3.20(b)
Company Recitals
Company Benefit Plans Section 3.20(a)
Company Common Stock Recitals
Company Contract Section 10.03
Company Disclosure Schedule Article III
Company Financial Advisor Section 3.28
Company Intellectual Property Section 10.03
Company Options Section 10.03
Company Products Section 10.03
Company Registered Intellectual Property Rights Section 3.17(a)
Company Shareholders Section 2.03(a)
Confidentiality Agreement Section 10.03
Contract Section 10.03
Copyrights Section 10.03
Current Assets Section 2.02(b)
Current Liabilities Section 2.02(c)
Current Ratio Section 2.02(d)
Damages Section 10.03
DCAA Section 3.23(i)
Defined Benefit Plan Section 10.03
Dissenting Shares Section 2.04
Effective Time Section 1.02
Employee Benefit Plan Section 10.03
Encumbrances Section 10.03
Entity Section 10.03
ERISA Section 10.03
Escrow Account Section 2.06
Escrow Agent Section 2.06
Escrow Agreement Section 2.06
Escrow Amount Section 2.06
ESOP Recitals
ESOP Participants Recitals
Excess Current Assets Section 2.01(b)(i)
Excess Liabilities Section 2.02(e)
FICA Section 10.03
Financial Statements Section 3.07(a)
Florida Law Recitals
GAAP Section 10.03
Government Contract Section 10.03
Government Prime Contract Section 10.03
Government SubContract Section 10.03
Governmental Approval Section 10.03
Governmental Authority Section 10.03
Indemnitee Section 9.03
Indemnitor Section 9.03
Insurance Policies Section 3.14
Intellectual Property Rights Section 10.03
Inventory Section 10.03
Knowledge Section 10.03
Leased Real Property Section 10.03
Legal Requirements Section 10.03
Liability Section 10.03
March 31, 2004 Balance Sheet Section 2.02(f)
Mask Works Section 10.03
Material Adverse Effect Section 10.03
Material Contracts Section 3.13(a)
Member of the Controlled Group Section 10.03
Merger Recitals
Merger Sub Recitals
Multiemployer Plan Section 10.03
Offer Section 10.03
Order Section 10.03
Parent Recitals
Parent Material Adverse Effect Section 4.01
Patents Section 10.03
Per Share Merger Consideration Section 2.03(c)
Person Section 10.03
Post-Closing Period Section 10.03
Pre-Closing Period Section 10.03
Proceedings Section 10.03
Proxy Statement Section 6.09
Purchase Price Adjustment Section 2.02(a)
Real Property Section 10.03
Real Property Leases Section 10.03
Receivable Section 10.03
Redemption Section 2.01(b)
Registered Intellectual Property Rights Section 10.03
Representatives Section 6.04(a)
Resolutions Section 3.02(a)
Shareholders' Meeting Section 6.10
Shares Section 3.03(a)
Superior Proposal Section 6.05
Surviving Corporation Section 1.01
Tax Section 10.03
Tax Authority Section 10.03
Tax Returns Section 10.03
Teaming Agreement Section 10.03
Terminating Company Breach Section 8.01(g)
Terminating Parent Breach Section 8.01(f)
Termination Fee Section 8.03(a)
Trade Secrets Section 10.03
Trademarks Section 10.03
Transfer Taxes Section 10.03
Treasury Regulations Section 10.03
Trust Section 4.01
Trust Agreement Section 3.20(b)
Trustee Recitals
2004 Financials Section 3.25(b)
Warn Act Section 3.19(e)
AGREEMENT AND PLAN OF MERGER dated as of April 19, 2004 and
executed on April 28, 2004 (this "AGREEMENT") among Essex Corporation, a
Virginia corporation ("PARENT"), CSI ACQUISITION CORP., a Florida corporation
and a wholly owned subsidiary of Parent ("MERGER SUB"), COMPUTER SCIENCE
INNOVATIONS, INC., a Florida corporation (the "COMPANY"), the COMPUTER SCIENCE
INNOVATIONS EMPLOYEE STOCK OWNERSHIP PLAN (the "ESOP") and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
acting solely in his capacity as Trustee under the ESOP (in such capacity, the
"TRUSTEE").
WHEREAS, the Company is engaged in the business of providing
informational technology services and products directly or indirectly to or for
a Governmental Authority and any other business which prior to the date hereof
has been conducted by the Company (the "BUSINESS");
WHEREAS, each participant in the ESOP (collectively, the "ESOP
PARTICIPANTS") has allocated to him or her shares of common stock, par value
$.01 per share, of the Company ("COMPANY COMMON STOCK") as is set forth on
SCHEDULE A hereto;
WHEREAS, Merger Sub, upon the terms and subject to the
conditions of this Agreement and in accordance with the Business Corporation Law
of the State of Florida ("FLORIDA LAW"), will merge with and into the Company
(the "MERGER");
WHEREAS, the Board of Directors of the Company has (i)
determined that the Merger is fair to the holders of Shares (as defined in
Section 3.03(a)) and is in the best interests of such shareholders and (ii)
approved this Agreement and the transactions contemplated hereby and unanimously
has recommended that the shareholders of the Company adopt this Agreement; and
WHEREAS, the Board of Directors of Parent has determined that
the Merger is in the best interests of Parent and its stockholders and has
approved and, as sole stockholder of Merger Sub, has adopted this Agreement and
the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained and intending to be legally
bound hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions set
forth in Article VIII, and in accordance with Section 607.1101 of Florida Law,
at the Effective Time (as defined below), Merger Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease, and the Company shall be the surviving corporation of
the Merger (the "SURVIVING CORPORATION").
SECTION 1.02 EFFECTIVE TIME; CLOSING. As promptly as practicable, and in no
event later than five business days after the satisfaction or, if permissible,
waiver of the conditions set forth in Article VII (other than those conditions
that can only be satisfied on the
Closing), the parties hereto shall cause the Merger to be consummated by filing
articles of merger (the "ARTICLES OF MERGER") with the Secretary of State of the
State of Florida, in such form as is required by, and executed in accordance
with, Section 607.1105 of Florida Law. The term "EFFECTIVE TIME" means the date
and time of the filing of the Articles of Merger with the Secretary of State of
the State of Florida (or such later time as may be agreed by the parties hereto
and specified in the Articles of Merger). Immediately prior to the filing of the
Articles of Merger, a closing (the "CLOSING") will be held at the offices of
Reinman, Matheson, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Durham, PA, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or such other place as the parties may agree).
SECTION 1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Florida Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of each of the
Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.04 CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) At the Effective Time, the Certificate of Incorporation of the Surviving
Corporation shall be shall be amended and restated in its entirety to read as
set forth in Exhibit 1.04(a).
(b) At the Effective Time, the By-laws of the Surviving Corporation, as in
effect immediately prior to the Effective Time, shall be amended and restated in
their entirety to read as set forth in Exhibit 1.04(b).
SECTION 1.05 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.06 TAX MATTERS. The parties agree that the Merger shall be treated
as a purchase of Company Common Stock by Parent from the Company Shareholders
for federal and state income tax purposes and shall not take any position on any
Tax Return to the contrary.
ARTICLE II
REDEMPTION OF SECURITIES; CONVERSION OF SECURITIES; SURRENDER OF CERTIFICATES
SECTION 2.01 EXERCISE OF CERTAIN OPTIONS; REDEMPTION OF SHARES OF COMPANY
COMMON STOCK.
(a) Prior to the Closing, it is anticipated that the holders of Company
Options will exercise such options in order to participate in the
Redemption referred to below, as detailed in the spreadsheet attached
as Schedule 2.01. The Company may permit such option holders to use
promissory notes to pay the applicable exercise price under their
respective Company Options. Any such promissory notes will be returned
by the Company to the respective option holders as part of the payment
to such holder in the Redemption to the extent possible. Any portion of
such promissory notes remaining unpaid after the Redemption, shall be
repaid out of the Per Share Merger Consideration otherwise due to the
applicable shareholder pursuant to Section 2.03 hereof.
(b) Immediately prior to the Closing, the Company will redeem on a pro rata
basis (the "REDEMPTION"), that number of shares of Company Common Stock
required to redeem out the amount of estimated Excess Current Assets
plus the consideration received by the Company as a result of the
exercise of the Company Options in connection with the Redemption as
indicated on Schedule 2.01.
(i) "EXCESS CURRENT ASSETS" means as of the Closing, (A) The amount of
estimated Current Assets minus (B) the sum of (1) 2.25 times the amount
of estimated Current Liabilities and (2) the amount of any portion of
FICA payments which constitute extra expense to the Company in
connection with the transactions contemplated by this Agreement (which
relate primarily to Medicare payments) that the Company is required to
make in connection with the exercise of the Company Options in
accordance with Schedule 2.01. Notwithstanding the foregoing, the
amount of Excess Current Assets shall not exceed $1,600,000.
(ii) The Redemption shall be made in accordance with applicable law and the
Company's Certificate of Incorporation and the ESOP.
SECTION 2.02 AGGREGATE PURCHASE PRICE. (a) The "AGGREGATE PURCHASE PRICE"
shall be $8,125,000, subject to adjustment as follows (the "PURCHASE PRICE
ADJUSTMENT"):
(i) The Aggregate Purchase Price shall be decreased, dollar for dollar, by
the amount by which the estimated Cash is less than $300,000.
(ii) If the estimated Current Ratio is less than 2.25 to 1, the Aggregate
Purchase Price shall be shall be decreased dollar for dollar, by an
amount equal to the Excess Liabilities (as defined below).
(iii) The Aggregate Purchase Price shall be reduced by any Transfer Taxes.
(b) "CURRENT ASSETS" means as of March 31, 2004, the estimated total
current assets of the Company determined in conformity with GAAP
consistently applied.
(c) "CURRENT LIABILITIES" means as of March 31, 2004, the total current
liabilities of the Company determined in conformity with GAAP
consistently applied.
(d) "CURRENT RATIO" means as of March 31, 2004, the ratio of (A) estimated
Current Assets to (B) estimated Current Liabilities. The Current Ratio
shall be computed in accordance with GAAP consistently applied.
(e) "EXCESS LIABILITIES" means the amount of estimated Current Liabilities
in excess of (A) the estimated Current Assets divided by (B) 2.25.
(f) The Company has, with the assistance of the Company's independent
auditors, prepared and delivered to Parent an estimated balance sheet
at March 31, 2004 (the "MARCH 31, 2004 BALANCE SHEET"), including a
statement of the estimated Excess Current Assets and estimated Current
Ratio.
SECTION 2.03 CONVERSION OF SECURITIES. (a) At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, the Company,
ESOP Participants or other holders of outstanding shares of the Company's
capital stock immediately prior to the Effective Time (the "COMPANY
SHAREHOLDERS"):
(i) each outstanding share of Company Common Stock (other than Dissenting
Shares (as hereinafter defined) and treasury shares) shall be cancelled
and converted automatically into the right to receive the Per Share
Merger Consideration (as defined below);
(ii) each share of Company Common Stock held in the Company's treasury as of
the Effective Time shall be cancelled and retired and all rights in
respect thereof shall cease to exist, without any conversion thereof or
payment of any consideration therefor.
(b) From and after the Effective Time, each share of Company Common Stock
to be converted into the right to receive the Per Share Merger
Consideration pursuant to this Section 2.03 shall cease to be
outstanding, shall be cancelled and retired and shall cease to exist,
and the holders of certificates representing such shares shall cease to
have any rights with respect to such shares, except the right to
receive the Per Share Merger Consideration (such Per Share Merger
Consideration to be payable (except as provided in Section 2.06 hereof)
to the holder of each such share of Company Common Stock, upon
surrender, in the manner provided in Section 2.05, of the certificate
that formerly evidenced such share of Company Common Stock).
(c) As used in this Agreement "PER SHARE MERGER CONSIDERATION" shall mean
(A) the Aggregate Purchase Price, as adjusted pursuant to Section 2.02
divided by (B) the number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time.
SECTION 2.04 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary, shares of
Company Common Stock that are outstanding immediately prior to the Effective
Time and which are held by Company Shareholders who shall have not voted in
favor of the Merger and who shall have demanded properly in writing payment of
the fair market value of such shares of
Company Common Stock in accordance with Section 607.1302 of Florida Law
(collectively, the "DISSENTING SHARES") shall not be converted into or represent
the right to receive the Per Share Merger Consideration. Such shareholders shall
be entitled to receive payment of the fair market value of such shares of
Company Common Stock held by them in accordance with the provisions of such
Section 607, except that all Dissenting Shares held by shareholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such shares under such Section 607 shall thereupon be
deemed to have been converted into and to have become exchangeable for the right
to receive the Per Share Merger Consideration, without any interest thereon,
upon surrender, in the manner provided in Section 2.05, of the certificate or
certificates that formerly evidenced such shares of Company Common Stock.
(b) The Company shall give Parent (i) prompt notice of any demands for appraisal
received by the Company, withdrawals of such demands, and any other instruments
served pursuant to Florida Law and received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for payment of fair market value under the Florida Law. The Company shall not,
except with the prior written consent of Parent, make any payment with respect
to any such demands or offer to settle or settle any such demands.
SECTION 2.05 SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
(a) At the Closing, the Company shall cancel all certificates representing
outstanding Company Common Stock (the "CERTIFICATES") delivered to it (with any
stock transfer tax stamps required by reason of the payment of the Per Share
Merger Consideration to a person other than the registered holder of the
certificate surrendered), together with such other customary documents as may
reasonably be required by Parent, in exchange for the amount of cash which such
holder is entitled to receive in accordance with Section 2.03(a). Immediately
following the Effective Time, all Certificates surrendered to the Company shall
be cancelled. Any Company Shareholder whose Certificates are not delivered at
the Closing shall receive the Per Share Merger Consideration with respect to the
shares formally evidenced by such Certificates upon delivery after the Closing
of such Certificates and the other items required pursuant to the first sentence
of this Section 2.05. No interest shall accrue or be paid on the Per Share
Merger Consideration payable upon the surrender of any Certificate for the
benefit of the holder of such Certificate.
(b) At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after the
Effective Time, the holders of shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock except as otherwise provided
herein or by applicable law.
SECTION 2.06 ESCROW AGREEMENT. Prior to or simultaneously with the Closing,
the Company and Parent shall enter into an escrow agreement (the "ESCROW
AGREEMENT") with an escrow agent selected by Parent and reasonably acceptable to
the Company (the "ESCROW AGENT") substantially in the form of Exhibit 2.06
hereto, but with any changes reasonably requested by the Escrow Agent. Pursuant
to the terms of the Escrow Agreement at the Closing, Parent shall deposit cash
equal to, in the aggregate $125,000 of the consideration otherwise
payable to the Company Shareholders pursuant to Section 2.03 hereof ("ESCROW
AMOUNT") into an escrow account, which account is to be managed by the Escrow
Agent (the "ESCROW ACCOUNT"). Distributions of any funds from the Escrow Account
shall be governed by the terms and conditions of the Escrow Agreement. Unless
the Code and Treasury Regulations require otherwise, proceeds included in the
Escrow Amount shall be treated as property of the Company Shareholders for Tax
purposes unless and until such proceeds are returned to Parent.
SECTION 2.07 WITHHOLDING. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts,if any, as it or the Company is or was required to deduct and
withhold with respect to the making of such payment, the exercise of options
or the Redemption described in Section 2.01 hereof, under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by the Surviving Corporation or Parent, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation or
Parent, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a separate disclosure schedule
referring to the specific representations and warranties contained in this
Agreement, which has been delivered by the Company to Parent prior to the
execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), the Company
hereby represents and warrants to Parent and Merger Sub that:
SECTION 3.01 ORGANIZATION; GOOD STANDING; QUALIFICATION.SECTION 3.01 OF THE
COMPANY DISCLOSURE SCHEDULE sets forth the Company's jurisdiction of
organization and each state or other jurisdiction in which the Company is
qualified to do business. The Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization; (ii) is duly qualified to conduct business and is in good standing
under the laws of each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect on the Company; and (iii) has full power
and authority required to own, lease and operate its assets and to carry on its
Business as now being conducted and as presently proposed to be conducted.
SECTION 3.02 Charter Documents; Books and Records.
(a) The Company has delivered or made available to Parent accurate, correct and
complete copies of (i) the Certificate of Incorporation and By-Laws of the
Company, including all amendments thereto, as presently in effect; (ii) all
stock records of the Company, including the Company's stock ledger; (iii) all
minutes and other records of all meetings and other proceedings (including any
actions taken by written consent or otherwise without a meeting) of the
shareholders of the Company, the Company's Board of Directors and all committees
of the Company's Board of Directors (collectively, the "RESOLUTIONS"); and (iv)
all books of account and other financial records of the Company.
(b) The minute books of the Company accurately and completely reflect all
material corporate actions of its shareholders, the Company's Board of Directors
and any committees of the Company's Board of Directors. The books of account and
other financial records of the Company are accurate and complete.
(c) The Company is not in violation of any of the provisions of its Certificate
of Incorporation, By-Laws or Resolutions.
SECTION 3.03 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 8,500,000 shares of
capital stock. The Company has issued 3,538,984 shares, of which 3,000,359
shares are oustanding, of Company Common Stock (collectively referred to as the
"SHARES"). No other shares of capital stock are issued or outstanding. All
issued and outstanding shares of capital stock of, or beneficial interests in,
the Company have been duly authorized and validly issued, are fully paid and
nonassessable, have been issued in full compliance with all applicable
securities laws and other applicable Legal Requirements and are free and clear
of all Encumbrances. SECTION 3.03 OF THE COMPANY DISCLOSURE SCHEDULE sets forth
a true, correct and complete list of all holders of Shares and Company Options
and the number of Shares and Company Options owned by each.
(b) Except as disclosed on SECTION 3.03 OF THE COMPANY DISCLOSURE SCHEDULE,
there is no (i) outstanding preemptive right, subscription, option, call,
warrant or other right to acquire any securities of the Company; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any securities of the Company; (iii) Contract under
which the Company is or may become obligated to sell, issue or otherwise dispose
of or redeem, purchase or otherwise acquire any its securities; or (iv)
shareholder agreement, voting trust or other agreement, arrangement or
understanding that may affect the exercise of voting or any other rights with
respect to the capital stock of the Company.
SECTION 3.04 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Merger. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the Merger have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Merger (other
than, with respect to the Merger, the adoption of this Agreement by the
holders of a majority of the Shares and the filing and recordation of
appropriate merger documents as required by Florida Law). This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium as similar laws affecting creditors' rights generally
and by general principles of equity.
SECTION 3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution,
delivery and performance of this Agreement by the Company do not and will not
(with or without notice or lapse of time):
(a) conflict with, violate or result in any breach of (i) any of the provisions
of the Company's Certificate of Incorporation or By-Laws; (ii) any Resolutions;
(iii) any of the terms or requirements of any Governmental Approval held by the
Company or any of its employees or that otherwise relates to the Business; or
(iv) any material provision of any Company Contract;
(b) give any Governmental Authority or other Person the right to (i) challenge
the Merger; (ii) exercise any remedy or obtain any relief under any Legal
Requirement or any Order to which the Company is subject; (iii) declare a
default of, exercise any remedy under, accelerate the performance of, cancel,
terminate, modify or receive any payment under any Company Contract; or (iv)
revoke, suspend or modify any Governmental Approval; or
(c) except as disclosed on SECTION 3.05 OF THE COMPANY DISCLOSURE SCHEDULE,
require the Company to obtain any consent or make or deliver any filing or
notice to a Governmental Authority.
SECTION 3.06 SUBSIDIARIES. (a) The Company does not own any shares of capital
stock or other securities of, or control, directly or indirectly, any other
Entity.
SECTION 3.07 FINANCIAL STATEMENTS.
(a) The Company has previously delivered or made available to Parent the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): the
audited balance sheets, and the related statements of operations, changes in
shareholders' equity, and cash flows, of the Company as of and for the fiscal
years ended March 31, 2002 and 2003; and the Company will deliver prior to the
Closing, draft audited balance sheets, and the related statements of operations,
changes in shareholder's equity, and cash flows, of the Company as of and for
the fiscal year ended March 31, 2004.
(b) All of the Financial Statements (i) are consistent with the Books and
Records of the Company; (ii) fairly present the financial condition of the
Company as of the respective dates thereof and the results of operations,
changes in shareholders' equity and cash flows of the Company for the periods
covered thereby; and (iii) have been prepared in accordance with GAAP, applied
on a consistent basis throughout the periods covered. All reserves established
by the Company and set forth in the Financial Statements are adequate for the
purposes for which they were established.
SECTION 3.08 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
Liabilities other than (i) those set forth in the Financial Statements; (ii)
those incurred in the ordinary course of business and not required to be set
forth in the Financial Statements under GAAP, none of which, individually
or in the aggregate, would have a Material Adverse Effect on the Company;
(iii) those incurred in the ordinary course of business since March 31, 2004;
and (iv) those incurred in connection with the execution of this Agreement.
Notwithstanding the foregoing, if there is any Liability of which the Company
has no Knowledge and the existence of
such Liability would constitute a breach of another representation in this
Article III but for the inclusion of a Knowledge qualifier in such
representation, the existence of such Liability shall not be deemed to be a
breach of this Section 3.08.
SECTION 3.09 ABSENCE OF CHANGES. Since March 31, 2004, (i) the Company has
conducted the Business in the ordinary course of business and (ii) no event or
circumstance has occurred that could reasonably have a Material Adverse Effect
on the Company.
SECTION 3.10 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Financial Statements, no Affiliate (a) owns, directly or indirectly, any debt,
equity or other interest in any Entity with which the Company is affiliated,
has a business relationship or competes other than Affiliates that own less than
five percent (5%) of the issued and outstanding capital stock of a publicly-
traded competitor of the Company; (b) is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit)
to any Affiliate other than with respect to any of the Company's obligations
to pay accrued salaries, reimbursable expenses or other standard employee
benefits; (c) has any direct or indirect interest in any asset, property
or other right used in the conduct of or otherwise related to the Business;
(d) has any claim or right against the Company, and no event has occurred,
and no condition or circumstance exists, that might (with or without notice
or lapse of time) directly or indirectly give rise to or serve as a basis for
any claim or right in favor of any Affiliate against the Company; or (e) is a
party to any Company Contract or has had any direct or indirect interest in,
any Company Contract, transaction or business dealing of any nature involving
the Company.
SECTION 3.11 ACCOUNTS RECEIVABLE.
(A) SECTION 3.11 OF THE COMPANY DISCLOSURE SCHEDULE sets forth an accurate and
complete list of all Receivables of the Company existing as of March 31, 2004.
Each Receivable is (i) a valid and legally binding obligation of the account
debtor enforceable in accordance with its terms, free and clear of all
Encumbrances, and not subject to setoffs, adverse claims, counterclaims,
assessments, defaults, prepayments, defenses, and conditions precedent; (ii) a
true and correct statement of the account for merchandise actually sold and
delivered to, or for services actually performed for and accepted by, such
account debtor; and (iii) fully collectible within six (6) months, except for
the profit portion of Receivables which are not yet due and payable under the
terms of a Government Contract, and subject to trade discounts provided in the
ordinary course of business and any allowance for doubtful accounts contained in
the March 31, 2004 Financial Statements.
(B) SECTION 3.11 OF THE COMPANY DISCLOSURE SCHEDULE sets forth an aged list of
the Receivables of the Company as of March 31, 2004 showing separately those
Receivables that as of such date had been outstanding (i) 29 days or less, (ii)
30 to 59 days, (iii) 60 to 89 days and (iv) more than 90 days.
SECTION 3.12 INVENTORY. The Company has no Inventory.
SECTION 3.13 MATERIAL CONTRACTS.
(A) SECTION 3.13 OF THE COMPANY DISCLOSURE SCHEDULE sets forth an accurate,
correct and complete list of all the Company Contracts to which any of
the descriptions set forth below may apply (the "MATERIAL CONTRACTS"):
(i) Any Contract for capital expenditures or for the purchase of goods or
services in excess of $20,000;
(ii) Any Contract to sell or deliver service at a price which does not cover
the cost (including labor, materials and production overhead)
associated with such service;
(iii) Any Contract involving financing or borrowing of money, or evidencing
indebtedness, any liability for borrowed money, any obligation for the
deferred purchase price of property in excess of $20,000 (excluding
normal trade payables) or guaranteeing in any way any Contract in
connection with any Person;
(iv) Any joint venture, partnership, cooperative arrangement or any other
Contract involving a sharing of profits;
(v) Any advertising Contract not terminable without payment or penalty on
thirty (30) days (or less) notice;
(vi) Any Contract relating to any license or royalty arrangement;
(vii) Any power of attorney, proxy or similar instrument;
(viii) Any Contract for the manufacture, service or maintenance of any product
of the Business;
(ix) Any Contract for the purchase or sale of any assets other than in the
ordinary course of business;
(x) Any Contract to indemnify any Person or to share in or contribute to
the liability of any Person except for customary indemnity clauses
contained in Government Contracts entered into in the ordinary course
of the Company's Business;
(xi) Any Contract for the purchase or sale of foreign currency or otherwise
involving foreign exchange transactions;
(xii) Any Contract containing covenants not to compete in any line of
business or with any Person in any geographical area other than
non-compete provisions contained in any Government SubContract entered
into in the ordinary course of the Company's Business;
(xiii) Any Contract related to the acquisition of a business or an equity
interest in any other Entity; and
(xiv) Any other Contract which (i) provides for payment or performance by
either party thereto having an aggregate value of $50,000 or more; or
(ii) is not terminable without payment or penalty on thirty (30) days
(or less) notice.
(b) The Company has delivered or made available to Parent accurate, correct
and complete copies of all Material Contracts (or written summaries of
the material terms thereof, if not in writing), including all
amendments, supplements, modifications and waivers thereof. All
nonmaterial contracts of the Company do not, in the aggregate,
represent a material portion of the Liabilities of the Company.
(c) Each Company Contract is currently valid and in full force and effect,
and is enforceable by the Company in accordance with its terms, except
as the enforceability thereof may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium as
similar laws affecting creditors' rights generally and by general
principles of equity.
(d) (i) No party has notified the Company that it is in default, under any
Company Contract. To the Knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that would (with or
without notice or lapse of time) (a) result in a violation or breach of
any of the provisions of any Company Contract; (b) give any Person the
right to declare a default or exercise any remedy under any Company
Contract; (c) give any Person the right to accelerate the maturity or
performance of any Company Contract or to cancel, terminate or modify
any Company Contract; or (d) otherwise have a Material Adverse Effect
on the Company; and
(ii)The Company has not waived any of its remaining
rights under any Company Contract.
(e) To the Knowledge of the Company, each Person against which the Company has
or may acquire any rights under any Company Contract is (i) solvent and (ii)
able to satisfy such Person's material obligations and liabilities to the
Company.
(f) The performance of the Company Contracts will not result in any violation of
or failure by the Company to comply with any Legal Requirement.
(g) To the Knowledge of the Company, the Material Contracts constitute all of
the Contracts necessary to enable the Company to continue to conduct the
Business after the Closing in substantially the manner in which the Business is
currently being conducted.
SECTION 3.14 INSURANCE. SECTION 3.14 OF THE COMPANY DISCLOSURE SCHEDULE
sets forth an accurate and complete list of all insurance policies, self-
insurance arrangements and fidelity bonds, currently in effect, that insure the
Business (collectively, the "INSURANCE POLICIES"). The Company has delivered
or made available to Parent true, correct and complete copies of all Insurance
Policies. Each Insurance Policy is valid, binding, and in full force and effect.
The Company is not in breach of any Insurance Policy, and no event has occurred
which, with notice or the lapse of time, would constitute such a breach, or
permit termination, modification, or acceleration, of any Insurance Policy. The
Company has not received any notice of cancellation or non-renewal of any
Insurance Policy. The consummation of the Merger
will not cause a breach, termination, modification, or acceleration of any
Insurance Policy. There is no claim under any Insurance Policy that has been
improperly filed or as to which any insurer has questioned, disputed or denied
liability. The Company has not received any notice of, nor does the Company have
any Knowledge of any facts that might result in, a material increase in the
premium for any Insurance Policy.
SECTION 3.15 TITLE; SUFFICIENCY; CONDITION OF ASSETS.
(a) The Company has good and valid title to all its owned assets and properties,
in each case free and clear of all Encumbrances of any kind or nature, except
(a) restrictions imposed in any Governmental Approval and (b) Encumbrances
disclosed on SECTION 3.15 OF THE COMPANY DISCLOSURE SCHEDULE. As of the date
hereof, and at the Closing, there will be no amount outstanding under the
Company's line of credit.
(b) All tangible assets are (i) in good operating condition and repair, ordinary
wear and tear excepted; (ii) suitable and adequate for continued use in the
manner in which they are presently being used.
SECTION 3.16 REAL PROPERTY LEASES. The Company does not currently own nor
has it ever owned any Real Property. SECTION 3.16 OF THE COMPANY DISCLOSURE
SCHEDULE sets forth an accurate, correct and complete list of all Real Property
Leases (including the street address of each Leased Real Property and the name
of the lessor) and a list of Contracts affecting each Leased Real Property. The
Company has been in lawful possession of the premises covered by each Real
Property Lease since the commencement of the original term of such Lease. The
Company has delivered or made available to Parent accurate, correct and complete
copies of each Real Property Lease and copies of existing title insurance
policies, title reports, surveys, if any in its possession, for the real
property subject to the Real Property Leases. All Real Property Leases are
valid and effective in accordance with their respective terms and, to the
Knowledge of the Company, there exists no default thereunder or occurrence or
condition which could result in a default thereunder or termination thereof.
SECTION 3.17 INTELLECTUAL PROPERTY.
(A) SECTION 3.17 OF THE COMPANY DISCLOSURE SCHEDULE lists all Company
Intellectual Property, specifying in each case whether such Company Intellectual
Property is owned or controlled by or for, licensed to, or otherwise held by or
for the benefit of the Company, including all Registered Intellectual Property
Rights owned by, filed in the name of or applied for by the Company and used in
the Business (the "COMPANY REGISTERED INTELLECTUAL PROPERTY RIGHTS").
(b) Each item of Company Intellectual Property (i) to the Knowledge of the
Company is valid, subsisting and in full force and effect, (ii) to the Knowledge
of the Company has not been abandoned or passed into the public domain and (iii)
is free and clear of any Encumbrances. To the Knowledge of the Company, the
Company Intellectual Property constitutes all the Intellectual Property Rights
used in and/or necessary to the conduct of the Business as it is currently
conducted by the Company prior to the Closing and, to the Knowledge of the
Company, by Parent following the Closing, including the design, development,
manufacture, use, import and sale of the Company Products (including those
currently under development).
(c) The Company has no Knowledge of any facts, circumstances or information that
(i) would render any Company Intellectual Property invalid or unenforceable, or
(ii) would adversely affect or impede the ability of the Company to use any
Company Intellectual Property in the conduct of the Business as it is currently
conducted by the Company prior to Closing or, to the Knowledge of the Company,
by Parent following the Closing. The Company has not misrepresented, or failed
to disclose, and has no Knowledge of any misrepresentation or failure to
disclose, any fact or circumstances in any application for any Company
Registered Intellectual Property Right that would constitute fraud or a
misrepresentation with respect to such application or that would otherwise
affect the validity or enforceability of any Company Registered Intellectual
Property Right.
(d) The Company has taken all reasonably necessary action to maintain and
protect (i) the Company's Intellectual Property, and (ii) the secrecy,
confidentiality, value and the Company's rights in the Trade Secrets of the
Company and those provided by any Person to the Company, including by having and
enforcing a policy requiring all current and former employees, consultants and
contractors of the Company to execute appropriate confidentiality and assignment
agreements. All copies thereof shall be delivered or made available to Parent at
Closing. The Company has no Knowledge of any violation or unauthorized
disclosure of any Trade Secret related to the Business or the Liabilities, or
obligations of confidentiality with respect to such.
(e) To the Knowledge of the Company, the operation of the Business as it is
currently conducted, or as it is currently planned or contemplated to be
conducted by the Company prior to the Closing, including but not limited to the
design, development, use, import, branding, advertising, promotion, marketing,
manufacture and sale of the Company Products (including any currently under
development), does not and will not, and will not when operated by Parent
substantially in the same manner following the Closing, infringe or
misappropriate any Intellectual Property Rights of any Person, violate any right
of any Person (including any right to privacy or publicity), defame or libel any
Person or constitute unfair competition or trade practices under the laws of any
jurisdiction, and the Company has not received notice from any Person claiming
that such operation or any Company Product (including any currently under
development) infringes or misappropriates any Intellectual Property Rights of
any Person (including any right of privacy or publicity), or defames or libels
any Person or constitutes unfair competition or trade practices under the laws
of any jurisdiction (nor does the Company have Knowledge of any basis therefor).
(f) To the Knowledge of the Company, no Person is violating, infringing or
misappropriating any Company Intellectual Property Right.
(g) The Company has not received notice or any threat of any Proceedings before
any Governmental Authority (including before the United States Patent and
Trademark Office) anywhere in the world related to any of the Company
Intellectual Property, including any Company Registered Intellectual Property
Rights.
(h) No Company Intellectual Property or Company Product is subject to any
Proceeding or any outstanding decree, order, judgment, office action or
settlement agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or that may affect the validity,
use or enforceability of such Company Intellectual Property.
(i) Neither this Agreement nor the Merger, including the assignment to Parent,
by operation of law or otherwise, of any Company Contracts will result in (i)
Parent granting to any third party any right to, or with respect to, any
Intellectual Property Right owned by, or licensed to, Parent; (ii) Parent being
bound by, or subject to, any non-compete or other restriction on the operation
or scope of its businesses, including the Business; or (iii) Parent being
obligated to pay any royalties or other amounts to any third party.
SECTION 3.18 INTENTIONALLY OMITTED.
SECTION 3.19 EMPLOYEES AND CONSULTANTS.
(a) EMPLOYEES AND CONTRACTS. No employee of the Company has been granted the
right to continued employment by the Company or to any material compensation
following termination of employment with the Company other than ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Day, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Shverak, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, who will enter into mutually acceptable employment agreements
immediately prior to the Closing. The Company has no Knowledge that any officer,
employee or consultant of the Company, other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ intends to
terminate his or her employment or other engagement with the Company, nor does
the Company have a present intention to terminate the employment or engagement
of any Contractor.
(b) COMPENSATION. SECTION 3.19 OF THE COMPANY DISCLOSURE SCHEDULE sets forth an
accurate, correct and complete list of all (i) employees of the Company,
including each employee's name, title or position, present annual compensation
(including bonuses, commissions and deferred compensation), accrued and unused
paid vacation and other paid leave, years of service, interests in any incentive
compensation plan, and estimated entitlements to receive supplementary
retirement benefits or allowances (whether pursuant to a contractual obligation
or otherwise) and (ii) individuals who are currently performing services for the
Company related to the Business who are classified as "consultants" or
"independent contractors." SECTION 3.19 OF THE COMPANY DISCLOSURE SCHEDULE sets
forth all (i) bonuses, severance payments, termination pay and other special
compensation of any kind paid to, accrued with respect to, or that would be
payable to (as a result of the Merger), any present or former Contractor since
March 31, 2004; (ii) increases in any employee's wage or salary since March 31,
2004; or (iii) increases or changes in any other benefits or insurance provided
to any employees since March 31, 2004. No employee of the Company is eligible
for payments that would constitute "parachute payments" under Section 280G of
the Code.
(c) DISPUTES. There are no claims, disputes or controversies pending or, to the
Knowledge of the Company, threatened involving any employee or group of
employees. The Company has not suffered or sustained any work stoppage and no
such work stoppage is threatened.
(d) COMPLIANCE WITH LEGAL REQUIREMENTS. The Company has complied in all material
respects with all Legal Requirements related to the employment of its employees,
including provisions related to wages, hours, leaves of absence, equal
opportunity, occupational health and safety, workers' compensation, severance,
employee handbooks or manuals, collective bargaining and the payment of social
security and other Taxes. The Company has no Liability under any Legal
Requirements related to employment and attributable to an event occurring or a
state of facts existing prior to the date thereof.
(e) WARN ACT. The Company is in full compliance with the Worker Readjustment and
Notification Act (the "WARN ACT") (29 USC ss.2101), including all obligations to
promptly and correctly furnish all notices required to be given thereunder in
connection with any "plant closing" or "mass layoff" to "affected employees",
"representatives" and any state dislocated worker unit and local government
officials. No reduction in the notification period under the WARN Act is being
relied upon by the Company. SECTION 3.19(E) OF THE COMPANY DISCLOSURE SCHEDULE
sets forth an accurate, correct and complete list of all employees terminated
(except with cause, by voluntarily departure or by normal retirement), laid off
or subjected to a reduction of more than 50% in hours or work during the two
full calendar months and the partial month preceding this representation and
warranty.
(f) UNIONS. The Company has no collective bargaining agreements with any of its
employees. There is no labor union organizing or election activity pending or,
to the Knowledge of the Company, threatened with respect to the Company.
SECTION 3.20 THE COMPANY BENEFIT PLANS.
(A) SECTION 3.20 OF THE COMPANY DISCLOSURE SCHEDULE lists (i) all employment
agreements, including, but not limited to, any individual benefit arrangement,
policy or practice with respect to any current or former employee or director of
Company or a Member of the Controlled Group, and (ii) all other employee
benefit, bonus or other incentive compensation, stock option, stock purchase,
stock appreciation, severance pay, lay-off or reduction in force, change in
control, sick pay, vacation pay, salary continuation, retainer, leave of
absence, educational assistance, service award, employee discount, fringe
benefit plans, arrangements, policies or practices, whether legally binding or
not, which Company or any Member of the Controlled Group maintains, to which any
of them contributes, or for which any of them has any obligation or liability
(collectively, the "COMPANY BENEFIT PLANS").
(b) The ESOP has been duly authorized and established. The
Trust Agreement between the Company and the Trustee originally effective as of
April 1, 1997, as amended from time to time (the "TRUST AGREEMENT") has been
duly authorized by all necessary corporate action on the part of the Company.
The ESOP constitutes in all material respects an employee stock ownership plan
within the meaning of Section 4975(e)(7) of the Internal Revenue Code of 1986,
as amended (together with the rules and regulations promulgated thereunder the
"CODE"), Treasury Regulation Section 54.4975-11 and Section 407(d)(6) of ERISA.
The ESOP is not subject to any outstanding loan agreement and all of the shares
of Company Common Stock held by the ESOP have been allocated to the accounts of
participants of the ESOP. None of the shares of Company Common Stock held by the
ESOP are subject to the provisions of Code Section 1042, 4978 or 4979A. The
execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated by the
parties hereto (including, without limitation, the conversion of securities
contemplated by Section 2.02 of this Agreement) will not constitute a violation
of, or give rise to any liability under, Title I of ERISA or Section 4975 of the
Code.
(c) Neither the Company nor any Member of the Controlled Group
maintains or contributes to, or has ever maintained or contributed to, any
Defined Benefit Plan or Multiemployer Plan. Nothing contained in any of the
Company Benefit Plans will obligate Parent, Company or any Member of the
Controlled Group to provide any benefits to employees, former employees or
beneficiaries of employees or former employees, or to make any contributions to
any plans from and after the Closing.
(d) The Company does not maintain or contribute to any plan
that provides health benefits to an employee after the employee's termination of
employment or retirement except as required under Section 4980B of the Code and
Sections 601 through 608 of ERISA or applicable state or local law.
(e) The Company has maintained and funded each Company Benefit
Plan in accordance with its terms and all applicable statutes, orders or
governmental rules and regulations currently in effect and applicable to such
Company Benefit Plan, including but not limited to ERISA and the Code.
(f) All reports, forms and other documents required to be
filed with any governmental entity or furnished to employees, former employees
or beneficiaries with respect to any Company Benefit Plan (including without
limitation, summary plan descriptions, Forms 5500 and summary annual reports)
have been timely filed and furnished and are accurate.
(g) Each of the Company Benefit Plans that is intended to
qualify under Section 401(a) of the Code has been timely amended to incorporate
the applicable provisions of the Uruguay Round Agreements Act of 1994, the
Uniformed Services Employment and Reemployment Rights Act of 1994, the Small
Business Job Protection Act of 1996, the Taxpayers' Relief Act of 1997, the IRS
Restructuring and Reform Act of 1998, and the Community Renewal Tax Relief Act
of 2000, and is the subject of a favorable determination letter issued by the
Internal Revenue Service after January 1, 1997 approving such plan as amended.
Each trust maintained pursuant thereto has been determined by the Internal
Revenue Service to be exempt from taxation under Section 501 of the Code.
Nothing has occurred since the date of the Internal Revenue Service's favorable
determination letter that could adversely affect the qualification of the
Company Benefit Plan and its related trust. Company and each Member of the
Controlled Group have timely amended and operated each of the Company Benefit
Plans to comply with the Economic Growth and Tax Relief Reconciliation Act of
2001 and subsequent legislation enacted through the date hereof, and Section 501
of the Code.
(h) All contributions for all periods ending prior to the
Closing Date (including periods from the first day of the current plan year to
the Closing Date) have been timely made prior to the Closing Date by Company.
(i) All insurance premiums have been paid in full, subject
only to normal retrospective adjustments in the ordinary course, with regard to
the applicable Company Benefit Plans for plan years ending on or before the
Closing Date.
(j) With respect to each Company Benefit Plan:
(i) no prohibited transactions (as defined in Section 406 or 407 of ERISA
or Section 4975 of the Code) have occurred for which a statutory
exemption is not available;
(ii) no action or claims (other than routine claims for benefits made in the
ordinary course of Company Benefit Plan administration for which
Company Benefit Plan administrative review procedures have not been
exhausted) are pending, threatened or imminent against or with respect
to the Company Benefit Plan, any employer who is participating (or who
has participated) in any Company Benefit Plan or any fiduciary (as
defined in Section 3(21) of ERISA), of the Company Benefit Plan;
(iii) Company has no Knowledge of any facts that could give rise to any such
action or claim; and
(iv) it provides that it may be amended or terminated at any time and,
except for benefits protected under Section 411(d) of the Code, all
benefits payable to current, terminated employees or any beneficiary
may be amended or terminated by Company at any time without liability
(other than ordinary administrative expenses).
(k) Neither Company nor any Member of the Controlled
Group has any liability or is threatened with any liability (whether
joint or several) (i) for any excise tax imposed by Sections 4971,
4975, 4976, 4977 or 4979 of the Code, or (ii) to a fine under Section
502 of ERISA.
(l) All of the Company Benefit Plans, to the extent
applicable, are in compliance with the continuation of group health
coverage provisions contained in Section 4980B of the Code and Sections
601 through 608 of ERISA, the requirements of the Family Medical Leave
Act of 1993, as amended, the requirements of the Health Insurance
Portability and Accountability Act of 1996 (including the regulations
set forth in Parts 160, 162, and 164 of Title 45 of the Code of Federal
Regulations), the requirements of the Women's Health and Cancer Rights
Act of 1998, the requirements of the Newborns' and Mothers' Health
Protection Act of 1996, and any amendment to each such act, or any
similar state law requirements.
(m) Company has delivered or made available to Parent
true, correct and complete copies of: (i) all documents creating or
evidencing any Company Benefit Plan; (ii) all reports, forms and other
documents required to be filed with any governmental entity or
furnished to employees, former employees or beneficiaries (including,
without limitation, summary plan descriptions, Forms 5500 and summary
annual reports for all plans subject to ERISA, but excluding individual
account statements and tax forms) for the preceding three years; (iii)
all IRS determination, opinion, notification and advisory letters and
rulings relating to any Company Benefit
Plan; (iv) all applications and correspondence to or from the IRS,
Department of Labor or any other governmental agency with respect to
any Company Benefit Plan; and (v) all material written agreements and
contracts relating to each Company Benefit Plan or its related trust
including, but not limited to, administrative service agreements,
group annuity contracts and group insurance contracts. There are no
negotiations, demands or proposals which are pending or have been made
which concern matters now covered, or that would be covered, by the
type of agreements required to be listed in SECTION 3.20 OF THE
COMPANY DISCLOSURE SCHEDULE.
(n) All expenses and liabilities relating to all of
the Company Benefit Plans have been, and will on the Closing Date be
fully and properly accrued on Company's books and records and disclosed
in accordance with generally accepted accounting principles and in
Company Benefit Plan financial statements.
SECTION 3.21 COMPLIANCE WITH LAWS.
(a) The Company is, and at all times since January 1, 2002, has been, in
compliance in all material respects, with each Legal Requirement that is
applicable to the Company or any of the Company's properties, assets, operations
or businesses, and no event has occurred, and to the Knowledge of the Company no
condition or circumstance exists, that might (with or without notice or lapse of
time) constitute, or result directly or indirectly in, a default under, a breach
or violation of, or a failure comply with, any such Legal Requirement. The
Company has not received any notice from any third party regarding any actual,
alleged or potential violation of any Legal Requirement.
(b) To the Knowledge of the Company, no Governmental Authority has proposed or
is considering any Legal Requirement that may affect the Company, the Company's
properties, assets, operations or businesses, or the Company's rights thereto,
except to the extent that any such Legal Requirement, if adopted or otherwise
put into effect, individually or in the aggregate, will not have a Material
Adverse Effect on the Company.
SECTION 3.22 GOVERNMENTAL APPROVALS.
(a) To the Knowledge of the Company, the Company has all Governmental Approvals
that are necessary or appropriate in connection with the Company's ownership and
use of its properties or assets or the Company's operation of its businesses. To
the Knowledge of the Company, the Company has made all filings with, and given
all notifications to, all Government Authorities as required by all applicable
Legal Requirements. SECTION 3.22 OF THE COMPANY DISCLOSURE SCHEDULE contains an
accurate, correct and complete list and summary description of each such
Governmental Approval, filing or notification. Each such Governmental Approval,
filing and notification is valid and in full force and effect, and there is not
pending or, to the Knowledge of the Company, threatened any Proceeding which
could result in the suspension, termination, revocation, cancellation,
limitation or impairment of any such Governmental Approval, filing or
notification. No violations have been recorded in respect of any Governmental
Approvals, and the Company knows of no meritorious basis therefor. No fines or
penalties are due and payable in respect of any Governmental Approval or any
violation thereof.
(b) The Company has delivered or made available to Parent accurate and complete
copies of all of the Governmental Approvals, filings and notifications, if any,
identified in SECTION 3.22 OF THE COMPANY DISCLOSURE SCHEDULE, including all
renewals thereof and all amendments thereto. All Governmental Approvals, if any,
are freely assignable to Parent.
SECTION 3.23 GOVERNMENT CONTRACTS AND SUBCONTRACTS.
(a) No material cost incurred by the Company pertaining to any Government
Prime Contract or Government Subcontract has been questioned or
challenged by representatives of a Governmental Authority, and, to the
Company's Knowledge, no such material cost is the subject of any
investigation, or has been disallowed by the U.S. Government, and no
amount of money due to the Company pertaining to any Government Prime
Contract or Government Subcontract has been withheld or set off nor has
any claim been made to withhold or set off money and the Company is
entitled to all progress payments received with respect thereto other
than those Government Contracts which by their terms provide for
withholding certain amounts of money until such contract is complete;
and all amounts previously charged or at present carried as chargeable
by the Company to any Government Contract, Government Subcontract,
Offer or Teaming Agreement have been or will be reasonable, allowable
and allocable to each such Government Contract, Government Subcontract,
Offer or Teaming Agreement; and no notice has been given of a cost
accounting standard noncompliance.
(b) Neither the Company nor any of its directors, officers, or to the
Knowledge of the Company, its employees is, or in the past ten (10)
years has been has been, under administrative, civil or criminalal
investigation, and has not been under indictment or information by any
Governmental Authority or to the Knowledge of the Company subject to
any audit or investigation of the Company with respect to any material
alleged irregularity, misstatement or omission arising under or
relating to any Government Prime Contract or Government Subcontract,
and during the past ten (10) years, the Company has not conducted or
initiated any internal investigation or made a voluntary disclosure to
any Governmental Authority with respect to any material alleged
irregularity, misstatement or omission arising under or relating to a
Government Prime Contract or Government Subcontract.
(c) There exists no material irregularity, misstatement or omission arising
under or relating to any Government Prime Contract or Government
Subcontract that has led during the last ten (10) years or could lead
to any of the consequences set forth in Section 3.23(b) above, or any
other material damage, penalty assessment, recoupment of payment or
disallowance of cost.
(d) There exists:
(i) no outstanding material claims against the Company, either by any
Governmental Authority or by any prime contractor, subcontractor,
vendor or other person, arising under or relating to any Government
Prime Contract or Government Subcontract; and to the Knowledge of the
Company, there are no facts upon which such a claim may be based in the
future; and
(ii) no material disputes between the Company and any Governmental Authority
under the Contract Disputes Act, the Acquisition Management System
("AMS") or any other federal statute or regulation or between the
Company and any prime contractor, subcontractor or vendor arising under
or relating to any Government Prime Contract or Government Subcontract;
and, to the Knowledge of the Company, there are no facts over which
such a dispute may arise in the future.
(e) Except for claims for payment of fees and purchase prices in the
ordinary course of business, the Company does not have any interest in
any pending claim against any Governmental Authority or any prime
contractor, subcontractor or vendor arising under or relating to any
Government Prime Contract or Government Subcontract.
(F) SECTION 3.23 OF THE COMPANY DISCLOSURE SCHEDULE lists each Government
Prime Contract or Government Subcontract which is currently under audit
by any Governmental Authority or any other person that is a party to
such Government Prime Contract or Government Subcontract.
(g) The Company has not received any draft or final post award audit
report, any draft or final notice of cost disallowance, or any draft or
final notice of noncompliance with any cost accounting standard. All
information provided by the Company for any such audits was current,
complete and accurate and in compliance in all material respects with
applicable regulations and cost accounting standards.
(h) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any Governmental Authority, nor, to the
Company's Knowledge, has any suspension or debarment action been
commenced. There is no valid basis for the Company's suspension or
debarment from bidding on contracts or subcontracts for any
Governmental Authority.
(i) Other than routine contract audits by the Defense Contract Audit Agency
("DCAA"), the Company has not within the preceding three years been,
nor is it now being, audited or investigated by any government agency,
including without limitation the General Accounting Office, the DCAA,
the Defense Contract Administrative Service, the Department of Labor,
the Department of Health and Human Services, the Environmental
Protection Agency, the General Services Administration, or the
inspector general or auditor general or similar functionary of any
agency or instrumentality, nor, to the best of the Company's Knowledge,
is any such audit or investigation threatened.
(j) The Company has no disputes pending before a contracting office of, or
any current claim pending against, any agency or instrumentality of the
United States Government.
(k) The Company has not, with respect to any Government Contract and within
the preceding three years, received a cure notice or show cause notice
advising the Company that it was in default or would, if it failed to
take remedial action, be in default under such contract.
(l) There are no outstanding claims with respect to Government Contracts,
other than routine invoices in process and unbilled charges, by the
Company against a customer, or by a customer against the Company.
(m) The operation of its business by the Company, as it relates to the
Government Contracts, has been conducted in all material respects in
accordance with all applicable laws, regulations, and other
requirements of all Governmental Authorities, except to the extent it
has no effect on the Business, including, without limitation, the
Government Contracts.
SECTION 3.24 PROCEEDINGS AND ORDERS.
(a) There is no Proceeding pending or, to the Knowledge of the Company,
threatened against or affecting the Company, any of the Company's properties,
assets, operations or businesses, or the Company's rights relating thereto. To
the Company's Knowledge, no event has occurred, and no condition or circumstance
exists, that might directly or indirectly give rise to or serve as a basis for
the commencement of any such Proceeding. The Company has delivered or made
available to Parent true, accurate and complete copies of all pleadings,
correspondence and other documents relating to any such Proceeding. No insurance
company has asserted in writing that any such Proceeding is not covered by the
applicable policy related thereto.
(b) Neither the Company, its officers, directors, agents or employees, nor any
of the Company's properties, assets, operations or businesses, nor the Company's
rights relating to any of the foregoing, is subject to any Order or any proposed
Order, except to the extent that any such proposed Order, if issued or otherwise
put into effect, individually or in the aggregate, will not have a Material
Adverse Effect on the Company.
SECTION 3.25 TAXES.
(a) The Company has timely filed all Tax Returns that it was required to file,
and such Tax Returns are true, correct and complete in all respects. All Taxes
shown to be payable on such Tax Returns or on subsequent assessments with
respect thereto have been paid in full on a timely basis, and no other Taxes are
or will be payable by the Company with respect to any period ending on or prior
to the Closing, whether or not shown due or reportable on such Tax Returns. The
Company has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder, or other third party. There are no liens for
Taxes on the properties of the Company, other than liens for Taxes not yet due
and payable.
(b) The amount of the Company's liability for unpaid Taxes for all periods
ending on or before March 31, 2004 does not, in the aggregate, exceed the amount
of the current liability accruals for Taxes (excluding reserves for deferred
Taxes), reflected on the Financial Statements with respect to the period ending
on March 31, 2004 (the "2004 FINANCIALS"), and the amount of the Company's
liability for unpaid Taxes for all periods ending on or before the Closing shall
not, in the aggregate, exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes), as such accruals are reflected on
the 2004 Financials, as
adjusted for operations and transactions in the ordinary course of business
since March 31, 2004 in accordance with past custom and practice. There are no
contracts, agreements, arrangements, commitments or undertakings relating to any
prior audit of the Company, and there are no contracts, agreements,
arrangements, commitments or undertakings with a Tax Authority that have or are
reasonably likely to have a material and adverse impact on the Company's Taxes
that are not reflected on the 2004 Financials.
(C) SECTION 3.25 OF THE COMPANY DISCLOSURE SCHEDULE lists all federal, state,
and local income tax and all foreign Tax Returns filed by the Company for all
Tax Periods following December 31, 1997, indicates all Tax Returns that have
been audited following December 31, 1993, and indicates those Tax Returns that
currently are subject of audit. To the Knowledge of the Company, no other audit
of any Tax Return is currently pending or threatened. No claim has ever been
made by any Tax Authority in a jurisdiction where The Company does not file Tax
Returns that the Company is or may be subject to taxation by that jurisdiction.
The Company has delivered or made available to Parent correct and complete
copies of all Tax Returns filed, examination reports, and statements of
deficiencies assessed or agreed to by the Company following December 31, 1997.
The Company has not waived any statute of limitations in respect of any Tax or
agreed to an extension of time with respect to any Tax assessment or deficiency,
and none of the Company's Tax Returns are currently under extension of time to
file.
(d) Except as disclosed in SECTION 3.19(D) OF THE COMPANY DISCL;OSURE SCHEDULE,
the Company is not and has never been a party to any Tax sharing agreement or
Tax indemnity agreement and has not assumed the Tax liability of any other
person under contract. If the Company is or has been a party to a Tax Sharing
Agreement, it has no current obligation for Taxes or otherwise under such Tax
Sharing Agreement and has no expectation to become obligated under such Tax
Sharing Agreement on or after the Closing Date. Except from May 8, 1996 through
November 1, 1997 when the Company was a subsidiary of the Ashton Technology
Group, the Company is not and has never been a member of an affiliated group
filing a consolidated federal income tax Return, and the Company has no
liability for the Taxes of any individual or entity under Section 1.1502-6 of
the Treasury Regulations (or any similar provision of state, local or foreign
law) as a transferee or successor, by contract or otherwise. The Company is not
a party to any joint venture, partnership, or other arrangement or contract
which could be treated as a partnership or "disregarded entity" for United
States federal income tax purposes.
(e) The Company is not obligated under any agreement, contract or arrangement
that may result in the payment of any amount that would not be deductible by
reason of Section 280G or 404 of the Code.
(f) The Company has not agreed to make or is required to make any adjustment
under Section 481 of the Code by reason of a change in accounting method. The
Company has not made and will not make a consent dividend election under Section
565 of the Code. The Company has not made an election, or is required, to treat
any asset as owned by another person pursuant to the provisions of former
Section 168(f)(8) of the Code or as "tax-exempt use property" within the meaning
of Section 168 of the Code. None of the assets of the Company directly or
indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code. The Company is not nor has it been a "United States real
property
holding corporation," within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code and
Parent is not required to withhold tax pursuant to the Merger by reason of
Section 1445 of the Code. The Company has not been the "distributing
corporation" (within the meaning of Section 355(c)(2) of the Code) with respect
to a transaction described in Section 355 of the Code within the 3-year period
ending as of the date of this Agreement. The Company has not participated in an
international boycott as defined in Code Section 999. The Company does not have
a "permanent establishment" in any foreign country, as defined in any applicable
Tax treaty or convention between the United States of America and such foreign
country, or otherwise conduct a trade or business in a foreign country. The
Company is in compliance with the terms and conditions of any applicable Tax
exemptions, Tax agreements or Tax orders of any government to which it may be
subject or which it may have claimed, and the transactions contemplated by this
Agreement will not have any adverse effect on such compliance. The Company has
never claimed to be an S corporation for federal income tax purposes. No
indebtedness of the Company is "corporate acquisition indebtedness" within the
meaning of Section 279(b) of the Code. The Company has not disposed of any
property in a transaction accounted for under the installment method pursuant to
Section 453 of the Code. All options of employees of the Company that have been
treated as incentive stock options under Section 421 of the Code meet the
requirements of Section 422 of the Code. The Company has made timely and valid
tax identification of any and all hedge transactions, including the hedged
assets and/or liabilities. The Company has made timely and valid tax
identification of any securities held for sale in its capacity as a dealer in
securities as defined in Section 475 of the Code.
(g) The Company has not received a tax opinion with respect to any transaction
other than a transaction in the ordinary course of business. The Company is not
(nor has it ever been) the direct or indirect beneficiary of a guaranty of Tax
benefits or any other arrangement that has the same economic effect or tax
opinion relating to it. The Company is not a party to an understanding or
arrangement described in Section 6111(d) or Section 6662(d)(2)(C)(iii) of the
Code. The Company is not a party to a lease arrangement involving a defeasance
of rent, interest or principal. The Company has not engaged in a "reportable
transaction," within the meaning of Section 1.6011-4 of the Treasury Regulations
as in effect on January 1, 2004, regardless of whether such transaction was in
fact reported to the Internal Revenue Service or occurred prior to such date.
The Company has disclosed on its federal income tax returns all positions taken
therein that could give rise to a substantial understatement penalty within the
meaning of Code Section 6662.
(h) The Company does not have any deferred income or gains reportable for Tax
purposes in a Post-Closing Period ending after the Closing date but that is
attributable to a transaction occurring in, or resulting from a change in
accounting method for a Pre-Closing Period.
(i) Entering into or completing the transactions contemplated by this Agreement
shall not cause the Company to become subject to, or to become liable for the
payment of, any Tax, or cause any of the Company's assets to be reassessed or
revalued by any Tax Authority.
(J) SECTION 3.25 OF THE COMPANY DISCLOSURE SCHEDULE contains accurate and
complete description of the Company's basis in its assets, its current and
accumulated earnings and profits, its Tax carryovers and material Tax elections.
The Company has no net operating losses or other tax attributes presently
subject to limitation under Code Sections 382, 383, or 384, or the federal
consolidated return regulations.
(k) The Company has always been owned solely by "United States persons," within
the meaning of Section 7701(a)(30) of the Code.
SECTION 3.26 BANK ACCOUNTS. The name of each bank or other depository in
which the Company maintains any bank account, trust account or safety deposit
box is set forth in SECTION 3.26 OF THE COMPANY DISCLOSURE Schedule, along
with the names of all persons authorized to draw thereon or who have access
thereto.
SECTION 3.27 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class
or series of capital stock of the Company necessary to approve the Merger. The
Company has determined to pass through voting to the ESOP Participants.
SECTION 3.28 OPINION OF FINANCIAL ADVISORS. The Company has received the
written opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.(the "COMPANY FINANCIAL ADVISOR"), on or
prior to the date of this Agreement, to the effect that, as of the date of such
opinion, the consideration to be received by the holders of Company Common Stock
pursuant to this Agreement is fair to the shareholders of the Company and to the
ESOP from a financial point of view and that the consideration to be received by
the ESOP pursuant to this Agreement is at least equal to the fair market value
of the shares of Company Common Stock held by the ESOP that are cancelled and
converted pursuant to Section 2.03, and the Company will promptly, after the
date of this Agreement, deliver a copy of such opinion to Parent.
SECTION 3.29 BROKERS' AND FINDERS' FEES. No broker, finder or investment
banker (other than the Company Financial Advisor) is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger based upon
arrangements made by or on behalf of the Company. The Company has heretofore
furnished to Parent a complete and correct copy of all agreements between the
Company and the Company Financial Advisor pursuant to which such firm would be
entitled to any payment relating to the Merger.
SECTION 3.30 DISCLOSURE. No representation or warranty in this Agreement
contains any untrue statement of a material fact and the representations and
warranties contained in this Agreement do not omit to state any material fact
necessary to make any of the representations or warranties contained herein not
misleading to a prospective purchaser of the seeking full information as to the
Company and the Business.
SECTION 3.31 NO CONFLICT. The execution and delivery of this Agreement by
the Trustee does not, and the consummation by the ESOP and the Trustee of the
transactions contemplated herein on their respective parts will not violate,
cause a default under, breach the terms of or require the consent, authorization
or approval of any other person under any law, rule or regulation or any
governing instrument or any loan agreement, mortgage, indenture, or other
contract or agreement to which the ESOP or the Trustee are bound, or to which
the properties of the ESOP or the Trust established pursuant to the Trust
Agreement (the "TRUST") are subject or under any franchise, license or permit
applicable to the Trustee, the ESOP or the Trust, except for the consent of the
participants and beneficiaries of the ESOP in accordance with the ESOP and the
Trust Agreement.
SECTION 3.32 ERISA MATTERS. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated by the
parties hereto (including, without limitation, the conversion of securities
contemplated by Section 2.03 of this Agreement) will not constitute a violation
of, or give rise to any liability under, Title I of ERISA or Section 4975 of the
Code.
SECTION 3.33 ESOP SHARES. The shares of Company Common Stock held by the
ESOP are owned of record and beneficially by the ESOP free and clear of all
encumbrances. There are no provisions in any such addendums requiring a penalty
on prepayment. There are no Liabilities of the ESOP other than the obligation to
pay benefits to ESOP Participants under the ESOP in the ordinary course of
business. Except as contemplated by this Agreement, neither the ESOP nor the
Trustee is a party to any voting trust, shareholder agreement, proxy or other
agreement or understanding in effect with respect to the voting or transfer of
any shares of Company Common Stock.
SECTION 3.34 DUE AUTHORIZATION AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by the Trustee and constitutes the legal, valid and
binding obligation of the Trustee enforceable against the Trustee in accordance
with its terms, except as the enforceability thereof may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium as
similar laws affecting creditors' rights generally and by general principles of
equity.
SECTION 3.35 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of the Company,
threatened against the ESOP or the Trustee or any properties of the ESOP or the
Trust that, individually or in the aggregate, could reasonably be expected to
have a material adverse effect on the ability of the Trustee or the ESOP to
consummate the transactions contemplated by this Agreement. There is no
judgment, decree or order against the Trustee, the ESOP or any properties of the
ESOP or the Trust that could prevent, enjoin, alter or materially delay any of
the transactions contemplated by this Agreement, or that could reasonably be
expected to have a material adverse effect on the ability of the Trustee or the
ESOP to consummate the transactions contemplated by this Agreement.
SECTION 3.36 BROKER'S AND FINDERS' FEES. Neither the Trustee nor the ESOP
have incurred, or will incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment bankers' fees
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 4.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Parent Material Adverse Effect (as
defined below). Each of Parent and Merger Sub is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Parent
Material Adverse Effect. The term "PARENT MATERIAL ADVERSE EFFECT" means any
change or effect that, when taken individually or together with all other
adverse changes and effects, is or is reasonably likely to prevent or materially
delay consummation of the Merger or otherwise to prevent Parent from performing
its obligations under this Agreement.
SECTION 4.02 AUTHORITY RELATIVE TO THIS AGREEMENT.Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the Merger.
The execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the Merger have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the Merger (other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by Florida Law). This
Agreement has been duly and validly executed and delivered by Parent and Merger
Sub and, assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Merger
Sub enforceable against each of Parent and Merger Sub in accordance with its
terms, except as the enforceability thereof may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium as similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 4.03 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and Merger Sub do
not, and the performance of this Agreement by Parent and Merger Sub will not,
(i) conflict with or violate the Certificate of Incorporation or By-laws of
Parent or Merger Sub, (ii) conflict with or violate any Legal Requirement
applicable to Parent or Merger Sub or by which any property or asset of either
of them is bound or affected, except for such conflicts or violations which
would not, individually or in the aggregate, have a Parent Material Adverse
Effect.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, except as set forth in SECTION 5.01 OF THE COMPANY DISCLOSURE
SCHEDULE unless Parent shall otherwise agree in writing, the businesses of the
Company shall be conducted only in, and the Company shall not take any action
except in, the ordinary course of business and in a manner consistent with past
practice; and the Company shall use its reasonable best efforts to preserve
substantially intact its business organization, to keep available the services
of the current officers, employees and consultants of the Company and to
preserve the current relationships of the Company with customers, distributors,
suppliers and other persons with which the Company has significant business
relations. By way of amplification and not limitation, except as contemplated by
this Agreement, or as set forth in SECTION 5.01 OF THE COMPANY DISCLOSURE
SCHEDULE, the Company shall not, between the date of this Agreement and the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent:
(a) amend or otherwise change its Certificate of Incorporation or By-laws or
equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant or encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of
capital stock of the Company, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest),
of the Company (except for the issuance of a maximum of 2,242,500 shares
issuable pursuant to Company Options outstanding on the date hereof) or (ii) any
assets of the Company, except for sales in the ordinary course of business and
in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution, payable
in cash, stock, property or otherwise, with respect to any of its capital stock,
except as required by applicable law by the ESOP in connection with termination
of employment of an ESOP Participant;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock other than (i)
repurchases of stock as required by the ESOP in connection with the termination
of employment of an ESOP Participant and (ii) the Redemption pursuant to Section
2.01(b);
(e) (i) acquire (including, without limitation, by merger, consolidation or
acquisition of stock or assets) any Entity or any division thereof, or any
material amount of assets; (ii) incur any indebtedness for borrowed money or
issue any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person, or make any
loans or advances, except in the ordinary course of business and consistent with
past practice; (iii) enter into any Contract other than in the ordinary course
of
business, consistent with past practice; (iv) authorize any single capital
expenditure which is in excess of $5,000 or capital expenditures which are, in
the aggregate, in excess of $20,000 for the Company; or (v) enter into or amend
any Contract with respect to any matter set forth in this subsection (e);
(f) increase (except in the ordinary course of business and consistent with past
practice) the compensation payable or to become payable to its officers or
employees generally, or grant any bonus, severance or termination pay to, or
enter into any employment or severance agreement with any director, officer or
other employee of the Company, or establish, adopt, enter into or amend the
ESOP, any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or employee other than
amendments to the ESOP that are necessary to effect the terms and conditions of
this Agreement;
(g) take any action, other than reasonable and usual actions in the ordinary
course of business and consistent with past practice, with respect to accounting
policies or procedures (including, without limitation, procedures with respect
to the payment of accounts payable and collection of accounts receivable);
(h) make or change any material election in respect of Taxes, amend any Tax
Return, adopt or change any accounting method in respect of Taxes, enter into
any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or
closing agreement, settlement or compromise of any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes with any Tax Authority
or otherwise; or
(i) pay, discharge or satisfy any claim or Liability, other than the payment,
discharge or satisfaction, in the ordinary course of business and consistent
with past practice, of Liabilities reflected or reserved against in the
Financial Statements, or subsequently incurred in the ordinary course of
business and consistent with past practice.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company and Parent shall use their reasonable best efforts to (i) take,
or cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable under applicable Legal Requirements or
otherwise to consummate and make effective the Merger as promptly as
practicable, (ii) obtain from any Governmental Authorities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Parent or the Company in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger.
SECTION 6.02 NOVATION OF GOVERNMENT CONTRACTS.
(a) The parties agree that novation agreements should not be necessary, but
recognize that, in accordance with FAR 42.1200 et seq., novation of the
Government Contracts may be requested by a contracting officer and that
application for novation cannot be made until after the execution of this
Agreement and may take a substantial amount of processing time.
(b) Unless required by the terms of any Government Contract, this Section 6.02
does not require any notices to be given under any Government Contract prior to
the Closing. Promptly following the execution of this Agreement, if any
contracting officer requests novation of a Government Contract, the parties
shall cooperate in an attempt to persuade the contracting officer that a
novation is not necessary in light of the nature of this transaction. If
unsuccessful in persuading the contracting officer, however, each party shall
complete its respective portion of the documentation required for novation of
each Government Contract by FAR 42.1204(c) and the Company shall deliver its
portion to Parent. On behalf of the Company and Parent, Parent shall promptly
submit the required documentation to the appropriate contracting officer and
provide a copy thereof to the Company. Each party will thereafter, promptly and
in coordination with the other party, respond appropriately to any requests from
the contracting officer for additional information or documentation relating to
such novation. Each party shall keep the other fully informed, on a current and
timely basis, as to the progress of the novation process and provide copies of
all letters, correspondence, and other material documents to or from the
Governmental Authority with respect thereto.
(c) Notwithstanding any provisions or language contained herein, the Company
shall not compromise, settle, or release any existing requests for equitable
relief or claims pertaining to the Government Contracts, whether asserted or
unasserted, prior to the Closing, the Government's positive acknowledgement of
the change in ownership and control, or the Government's approval of the
novation, as applicable, whichever is later, without the express written consent
of Parent, which shall not be unreasonably withheld.
SECTION 6.03 TREATMENT OF THE ESOP POST-CLOSING.
(a) The cash received by the ESOP shall be allocated pursuant to Section 2.03 to
the accounts of the participants and beneficiaries in accordance with the terms
of the ESOP.
(b) (b) Prior to the Effective Time, the ESOP shall be amended by adopting an
Amendment in form reasonably satisfactory to the Company and Parent, which
provides that (i) the ESOP will be terminated at the Effective Time and all
Participants and beneficiaries fully vested, (ii) an IRS determination letter on
plan termination will be promptly applied for, (iii) 85% of the account balances
will be distributed to Participants and beneficiaries as soon as practicable
following the Effective Time (i.e., once allocations for the plan year ended
March 31, 2004 have been made), (iv) as soon as practicable following the
receipt of a favorable determination letter the remaining account balances
(except for the amount held in the Escrow Account) with be distributed to
Participants and beneficiaries, (v) upon receipt by the ESOP of any payment from
the Escrow Account, final distributions will be made from the ESOP, and (vi) the
Trustee shall vote shares of Company Common Stock for which no voting
instructions are received in his discretion in the best interest of all ESOP
participants.
(c) If requested by Parent, Company shall, immediately prior to the Closing,
terminate any one or more of the Company Benefit Plans other than the ESOP. In
the event Parent requests that any of the Company Benefit Plans be terminated,
Company shall adopt resolutions and shall take all other actions necessary to
effect the termination of any such plans, to be effective no later than the
Closing and shall provide to Parent executed resolutions by the Board of
Directors of Company authorizing the termination of any such plans.
SECTION 6.04 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) From the date hereof to the Effective Time, the Company shall: (i) provide
to Parent (and its respective officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively,
"REPRESENTATIVES")), access at reasonable times upon prior notice to the
Representatives, properties, offices and other facilities of the Company and to
the books and records thereof and (ii) furnish promptly such information
concerning the business, properties, contracts, assets, liabilities, personnel
and other aspects of the Company as Parent or its Representatives may reasonably
request.
(b) No investigation pursuant to this Section 6.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.05 NO SOLICITATION OF COMPETING TRANSACTIONS. The Company and the ESOP
shall not, directly or indirectly, through any Representative, (i) solicit,
initiate or encourage the submission of, any Acquisition Proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person, any information with respect to, or otherwise cooperate in any way with
respect to, or assist or participate in, or facilitate, any Acquisition
Proposal, except that the Company may take any action referred to in this clause
(ii) if (A) the Board of Directors of the Company determines in good faith,
after having received advice from independent legal counsel (who may be the
Company's regularly engaged independent legal counsel), that such action is
required by the fiduciary duties of the Board of Directors of the Company under
applicable law, (B) the Board of Directors of the Company determines in good
faith that the Acquisition Proposal constitutes a Superior Proposal, and (C)
after giving prior written notice to Parent and Merger Sub and entering into a
customary confidentiality agreement on terms no more favorable to the third
party than the Confidentiality Agreement between the Company and Parent. For
purposes of this Agreement, a "SUPERIOR PROPOSAL" means any bona fide written
proposal, not solicited, initiated or encouraged in violation of this Section
6.05, made by a third person to acquire, directly or indirectly, for
consideration consisting of cash, all of the equity securities of the Company
entitled to vote generally in the election of directors or all or substantially
all of the assets of the Company, if and only if, the Board of Directors of the
Company reasonably determines (after having received advice from its financial
advisor and independent legal counsel (who may be the Company's regularly
engaged independent legal counsel)) (x) that the proposed transaction would be
more favorable from a financial point of view to its shareholders than the
Merger taking into account at the time of determination any changes to the terms
of this Agreement that as of that time had been proposed by Parent, and (y) that
the person or entity making such Superior Proposal is capable of consummating
such Acquisition Proposal (based upon, among other things, the availability of
financing and the
degree of certainty of obtaining financing, the expectation of obtaining
required regulatory approvals and the identity and background of such person).
SECTION 6.06 NOTIFICATION OF CERTAIN MATTERS. From and after the date of this
Agreement until the Effective Time, each party hereto shall promptly notify the
other parties hereto of (a) the occurrence, or nonoccurrence, of any event the
occurrence, or non-occurrence of which would be likely to cause (i) any
representations or warranties made in this Agreement, or any information
furnished in Parent Disclosure Schedule or the Company Disclosure Schedule, not
to be accurate either at the time such representation or warranty is made, or
such information is furnished, or at the time of the occurrence or
non-occurrence of such event, or (ii) any condition to the obligations of any
party to effect the Merger not to be satisfied, or (b) the failure of the
Company or Parent, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this
Agreement which would be likely to result in any condition to the obligations of
any party to effect the Merger not to be satisfied; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 6.06 shall not be deemed to be
an amendment of this Agreement or any Section in Parent Disclosure Schedule or
the Company Disclosure Schedule and shall not cure any breach of any
representation or warranty requiring disclosure of such matter prior to the date
of this Agreement. No delivery of any notice pursuant to this Section 6.06 shall
limit or affect the remedies available hereunder to the party receiving such
notice, including the rights of Parent under Section 7.02(a) and those of the
Company under Section 7.03(a) in the event that a representation or warranty
made by the Company or Parent herein shall not be true and correct as of the
date hereof or as of the date when made (if a different date) and as of the
Effective Time.
SECTION 6.07 NO SOLICITATION OF EMPLOYEES. The Company and Parent hereby
covenant and agree that if the Closing does not occur, from the date of
Termination of this Agreement until the second anniversary of such date, neither
the Company nor Parent shall solicit any employee of the other party.
SECTION 6.08 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated
hereby. Parent and the Company shall not issue any such press release or make
any such public statement without the prior consent of the other (which consent
shall not be unreasonably withheld), except as may be required by applicable
Legal Requirements or any listing agreement with the Nasdaq National Market or
the National Association of Securities Dealers.
SECTION 6.09 PROXY STATEMENT. The Company has prepared and mailed to its
shareholders proxy materials in compliance with applicable Florida Law relating
to the meeting of the Company's stockholders to be held in connection with the
Merger (the "PROXY STATEMENT"). The Proxy Statement includes the unanimous
recommendation of the Board of Directors of the Company in favor of the Merger,
unless otherwise necessary due to the applicable fiduciary duties of the Board
of Directors of the Company, as determined in good faith after consultation with
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel). Parent and its counsel will be permitted to review
and comment upon the Proxy Statement prior to its distribution to the Company
Shareholders.
SECTION 6.10 SHAREHOLDERS' MEETING. The Company has called and will hold a
special meeting of its shareholders (the "SHAREHOLDERS' MEETING") as promptly as
practicable for the purpose of voting upon the adoption of this Agreement and
the Company shall use its best efforts to hold the Shareholders' Meeting as soon
as practicable after the date of this Agreement. The Company shall use its best
efforts to solicit from its shareholders proxies in favor of the adoption of the
Merger, and shall take all other action necessary or advisable to secure the
vote or consent of stockholders required by Florida Law to obtain such
approvals, unless otherwise necessary under the applicable fiduciary duties of
the Board of Directors of the Company, as determined in good faith after
consultation with independent legal counsel (who may be the Company's regularly
engaged independent legal counsel).
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the
Company, Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or, if permitted by applicable Legal Requirements, waiver of the
following conditions:
(a) this Agreement and the transaction contemplated hereby shall have been
approved and adopted by the affirmative vote of the shareholders of the Company
in accordance with Florida Law and the Company's Certificate of Incorporation,
the Company having determined that it will pass through voting to the ESOP
Participants;
(b) no order, statute, rule, regulation, executive order, stay, decree, judgment
or injunction shall have been enacted, entered, issued, promulgated or enforced
by any Governmental Authority or a court of competent jurisdiction which has the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger; and
(c) The Redemption will be made by the Company as described in Section 2.01 and
Schedule 2.01.
SECTION 7.02 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or, if permitted by applicable Legal Requirements, waiver of the
following further conditions:
(a) (i) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time; (ii) each of the representations and warranties of the Company
contained in this Agreement which is qualified as to materiality shall be true
and correct and each such representation and warranty that is not so qualified
shall be true and correct in all material respects, in each case as of the date
hereof and at and as of the Effective Time as if made at and as of such time,
except that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date; and (iii)
Parent shall have received a certificate signed by an executive officer of the
Company, respectively, to the foregoing effect;
(b) there shall not have been instituted or be pending any action or proceeding
having a reasonable likelihood of success by or before any Governmental
Authority or a court of
competent jurisdiction, nor shall there be in effect any judgment, decree or
order of any Governmental Authority or court of competent jurisdiction, in
either case, seeking to make materially more costly the Merger, or seeking to
obtain material damages in connection with the Merger, or seeking to prohibit or
limit materially Parent at any time after the Effective Time from exercising all
material rights and privileges pertaining to its ownership of the Surviving
Corporation to the full extent permitted by applicable Legal Requirements or the
ownership or operation by Parent or any of its subsidiaries of all or any
portion of the business or assets of the Surviving Corporation, Parent or any of
their subsidiaries, or seeking to compel the Surviving Corporation, Parent or
any of their subsidiaries to dispose of or hold separate all or any portion of
the business or assets of the Surviving Corporation, Parent or any of their
subsidiaries, as a result of the Merger;
(c) the documents providing for the Redemption and the exercise of the options
described in Section 2.01 shall be reasonably satisfactory to Parent and its
counsel and shall in any event include an acknowledgement of the deduction and
withholding described in Section 2.07;
(d) the Parent shall have received an opinion of Reinman, Matheson, ▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, PA, counsel to the Company, covering such matters as are listed
in Exhibit 7.02(d);
(e) the Parent shall have received an opinion of ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.,
counsel to the ESOP, covering such matters as are listed in Exhibit 7.02(e);
(f) Parent and each of ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Day,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
Shverak, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have entered into
mutually acceptable employment agreements; and
(g) The Company shall have furnished to Parent (i) certification in the form
required by Treasury Regulation Section 1.1445-2(c)(3) that the capital stock of
the Company is not a "United States real property interest"; and (ii) as agent
for the Company, a form of notice to the Internal Revenue Service in accordance
with the requirements of Treasury Regulations Section 1.897-2(h)(2) along with
written authorization for Parent to deliver such notice form to the Internal
Revenue Service on behalf of the Company upon the Closing.
SECTION 7.03 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company to consummate the Merger are subject to the satisfaction or, if
permitted by applicable Legal Requirements, waiver of the following further
conditions:
(a) (i) Parent and Merger Sub shall have performed in all material respects all
of their respective obligations hereunder required to be performed by them at or
prior to the Effective Time; (ii) each of the representations and warranties of
Parent contained in this Agreement which is qualified as to materiality shall be
true and correct and each such representation and warranty that is not so
qualified shall be true and correct in all material respects, in each case as of
the date hereof and at and as of the Effective Time as if made at and as of such
time, except that those representations and warranties which address matters
only as of
a particular date shall remain true and correct as of such date; and (iii) the
Company shall have received a certificate signed by an executive officer of
Parent to the foregoing effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of this Agreement and the transactions contemplated hereby
by the shareholders of the Company:
(a) by written consent duly authorized by the Boards of Directors of each of
Parent, Merger Sub and the Company;
(b) by any of Parent, Merger Sub or the Company if the Effective Time shall not
have occurred on or before May 30, 2004;
(c) by Parent, if the Board of Directors of the Company withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner adverse
to Parent or Merger Sub or shall have resolved to do any of the foregoing or the
Board of Directors of the Company shall have recommended to the shareholders of
the Company any Superior Proposal or resolved to do so;
(d) by the Company in order to enter into a definitive agreement for a Superior
Proposal, upon five business days' prior written notice to Parent setting forth,
in reasonable detail, the identity of the person making the Superior Proposal
and the final terms and conditions of such Superior Proposal, if, as a result of
an unsolicited proposal for such Superior Proposal, the Board of Directors of
the Company, after consultation with and based upon the advice of independent
legal counsel (who may be the Company's regularly engaged independent legal
counsel), determines in good faith that, after giving effect to any concessions
which may be offered by Parent, their fiduciary duties under applicable Law
require that such Superior Proposal be accepted; PROVIDED, HOWEVER, that any
termination of this Agreement by the Company pursuant to this Section 8.01(d)
shall not be effective until the Company has made payment of the full fee
required by Section 8.03(a) hereof;
(e) by either Parent or the Company, if the Shareholders' Meeting shall have
been held and the shareholders of the Company shall have failed to approve and
adopt this Agreement at such meeting;
(f) by the Company, upon a breach of any representation, warranty, or agreement
set forth in this Agreement such that the condition set forth in Section 7.03(a)
would not be satisfied (a "TERMINATING PARENT BREACH"); PROVIDED, HOWEVER, that
if such Terminating Parent Breach is curable by Parent through the exercise of
its best efforts and Parent continues to exercise such best efforts, the Company
may not terminate this Agreement under this Section 8.01(g) for a period of 30
days from the date on which the Company delivers to Parent written notice
setting forth in reasonable detail the circumstances giving rise to such
Terminating Parent Breach;
(g) by Parent, upon a breach of any representation, warranty, or agreement set
forth in this Agreement such that the condition set forth in Section 7.02(a)
would not be satisfied (a "TERMINATING COMPANY BREACH"); provided, HOWEVER,
that, if such Terminating Company Breach is curable by the Company through the
exercise of its best efforts and the Company continues to exercise such best
efforts, Parent may not terminate this Agreement under this Section 8.01(f) for
a period of 30 days from the date on which Parent delivers to the Company
written notice setting forth in reasonable detail the circumstances giving rise
to such Terminating Company Breach; or
SECTION 8.02 EFFECT OF TERMINATION. Except as provided in Section 8.03 and
Section 9.01, in the event of the termination of this Agreement pursuant to
Section 8.01, this Agreement shall forthwith become void, there shall be no
liability under this Agreement on the part of Parent, Merger Sub or the Company
or any of their respective officers or directors and all rights and obligations
of any party hereto shall cease; PROVIDED, however, that nothing herein shall
relieve any party from liability for the breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 8.03 FEES AND EXPENSES.
(a) The Company shall pay Parent a fee of $50,000 (the "TERMINATION FEE"),
if this Agreement is terminated:
(i) pursuant to Section 8.01(c);
(ii) pursuant to Section 8.01(d); or
(iii) pursuant to Section 8.01(b) or (e) and an Acquisition Proposal shall
have been proposed prior to such termination and a transaction pursuant
to such Acquisition Proposal shall have been consummated within 18
months of such termination.
(b) Any payment required to be made pursuant to Section 8.03(a) shall be
made as promptly as practicable but not later than five business days
after the final determination by Parent of such amount and shall be
made by wire transfer of immediately available funds to an account
designated by Parent.
(c) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Merger shall be paid
by the party incurring such expenses, whether or not the Merger is
consummated.
(d) Notwithstanding anything to the foregoing, to the extent that Purchaser
pays for any of the Company's incurred costs and expenses after
Closing, Purchaser shall have the right to set-off the amount of such
payments from the Escrow Amount.
(e) In the event that the Company shall fail to pay the Termination Fee
when due, in connection with the collection under and enforcement of
this Section 8.03, together with interest on such unpaid Termination
Fee, commencing on the date that the Termination Fee
became due, at a rate equal to the rate of interest publicly announced
by Citibank, N.A., from time to time, in the City of New York, as such
bank's Base Rate plus 2%.
SECTION 8.04 AMENDMENT. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; PROVIDED that, after the adoption of this Agreement
by the shareholders of the Company, no amendment may be made which would reduce
the amount or change the type of consideration to be received by the
shareholders of the Company pursuant to the Merger. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 8.05 WAIVER. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any obligation or other act of
any other party hereto, (b) waive any inaccuracy in the representations and
warranties of the other party contained herein or in any document delivered or
made available by the other party pursuant hereto and (c) waive compliance with
any agreement or condition contained herein. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party or parties
to be bound thereby.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01 INDEMNIFICATION BY COMPANY. Subject to the limitations set forth in
this Article IX, the Company shall indemnify, defend and hold harmless Parent
and its Representatives from and against any and all Damages, whether or not
involving a third-party claim, including attorneys' fees, arising out of,
relating to or resulting from (a) any breach of a representation or warranty of
the Company contained in this Agreement; (b) any breach of a covenant of the
Company contained in this Agreement; or (c) any Liability for Taxes which are
imposed on the Company in respect of its income, business, property or
operations or for which the Company may otherwise be liable (i) for any
Pre-Closing Period, (ii) resulting by reason of the several liability of the
Company pursuant to Treasury Regulations Section 1.1502-6 or any analogous state
or local law or regulation or by reason of the Company having been a member of
any consolidated, combined or unitary group on or prior to the Closing date,
(iii) resulting from the Company ceasing to be a member of an affiliated group
(within the meaning of Section 1504(a) of the Code), (iv) in respect of any
Post-Closing Period, attributable to events, transactions, sales, deposits,
services or rentals occurring, received or performed in a Pre-Closing Period,
(v) in respect of any Post-Closing Period, attributable to any change in
accounting method employed by the Company during any of its four (4) previous
taxable years, (v) in respect of any Post-Closing Period, attributable to any
items of income or gain of a partnership or disregarded entity for federal
income tax purposes reporting the Company as a partner or owner, to the extent
such items are properly attributable to periods of the partnership or
disregarded entity ending on or before the Closing date, or (vi) attributable to
any discharge of indebtedness that may result from any capital contributions by
a Company Shareholder (or an affiliate of a Company Shareholder of the Company)
to the Company of any intercompany indebtedness owed by the Company to a Company
Shareholder of the Company (or an affiliate of a Company Shareholder).
SECTION 9.02 RESERVED.
SECTION 9.03 PROCEDURES FOR INDEMNIFICATION. Promptly after receipt by a party
entitled to indemnification hereunder (the "INDEMNITEE") of written notice of
the assertion or the commencement of any Proceeding by a third-party with
respect to any matter referred to in Sections 9.1 or 9.2, the Indemnitee shall
give written notice thereof to the party obligated to indemnify Indemnitee (the
"INDEMNITOR"), and thereafter shall keep the Indemnitor reasonably informed with
respect thereto; PROVIDED, HOWEVER, that failure of the Indemnitee to give the
Indemnitor notice as provided herein shall not relieve the Indemnitor of its
obligations hereunder except to the extent that the Indemnitor is materially
prejudiced thereby. A claim for indemnification for any matter not involving a
third-party Proceeding may be asserted by notice to the party from whom
indemnification is sought and shall be paid promptly after such notice.
SECTION 9.04 LIMITATIONS ON INDEMNIFICATION. Notwithstanding anything herein to
the contrary, the Company shall not be obligated to indemnify Parent under
Section 9.01(a): (i) unless the aggregate of all Damages exceeds Twenty-Five
Thousand Dollars ($25,000) (the "BASKET"), in which case the Parent shall be
entitled to recover all Damages in excess of the Company's Basket or (ii) to the
extent that the aggregate of all Damages exceeds the Escrow Amount; PROVIDED,
HOWEVER, that the Company's Basket shall not apply to any Company
indemnification obligation (w) arising out of, relating to or resulting from
fraud or intentional misrepresentation by the Company; (x) arising out of,
relating to or resulting under Section 8.03 or from a breach of any of Company's
representations or warranties in Section 3.03, Section 3.04 or Section 3.33; or
(y) if the Merger is not consummated.
SECTION 9.05 REMEDIES CUMULATIVE. The remedies provided in this Agreement shall
be cumulative and shall not preclude any party from asserting any other right,
or seeking any other remedies, against the other party or any third person,
including in the case of Section 9.04(w), any officer, director or shareholder
of the Company.
SECTION 9.06 METHOD OF ASSERTING CLAIMS. All claims for indemnification by
Parent or the Company pursuant to this Article XI shall be made in accordance
with the provisions of the Escrow Agreement.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties in this Agreement and any certificate delivered
pursuant hereto by any person shall survive the Effective Time until the first
anniversary of the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that Section 3.03, Section
3.04, and Section 3.33 shall survive the Effective Time indefinitely.
SECTION 10.02 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested)
or by a nationally recognized overnight courier
service to the respective parties at the following addresses (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section 10.02):
if to Parent or Merger Sub:
Essex Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
if to the Company:
Computer Science Innovations, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Reinman, Matheson, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ P.A.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
SECTION 10.03 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "ACQUISITION PROPOSAL" shall mean any of the following involving the
Company: (i) the sale, license or disposition or acquisition of all or a
material portion of the Company's Business or assets; (ii) the issuance,
disposition or acquisition of (1) any capital stock or other equity security of
the Company, (2) any option, call, warrant or right (whether or not immediately
exercisable) to acquire any capital stock or other equity security of the
Company or (3) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock or other equity security
of the Company or (iii) any merger consolidation, business combination,
reorganization or similar transaction involving the Company.
(b) "AFFILIATE" shall mean, with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by or is under common control
with, the specified Person. For purposes of this definition, the term "CONTROL"
as applied to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management of that Person,
whether through ownership of voting securities or otherwise.
(c) "BOOKS AND RECORDS" shall mean all books, files, papers, agreements,
correspondence, databases, information systems, programs, software, documents,
records and documentation thereof related to any of the assets of the Company,
or used in the conduct of the Business, on whatever medium.
(d) "BUSINESS DAY" shall mean any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking and savings and loan institutions are authorized or
required by law to be closed in New York, NY.
(e) "CASH" shall mean as of March 31, 2004, the estimated total cash of the
Company determined in conformity with GAAP.
(f) "COMPANY CONTRACTS" shall mean all rights in, to and under any and all
Contracts to which the Company is a party or may be bound or receive benefits or
by which the Assets may be affected, including all Material Contracts listed on
SECTION 3.13 OF THE COMPANY DISCLOSURE SCHEDULE.
(g) "COMPANY INTELLECTUAL PROPERTY" shall mean all Intellectual Property Rights
related to the Business and held by the Company, whether owned or controlled,
licensed, owned or controlled by or for, licensed to, or otherwise held by or
for the benefit of the Company, including the Company Registered Intellectual
Property Rights.
(h) "COMPANY OPTIONS" shall mean all outstanding options, whether vested or
unvested, granted, awarded or issued from or under the Computer Science
Innovations Non-Qualified Stock Option Plan 98(1)-NQ or the Computer Science
Innovations Non-Qualified Stock Option Plan 98(2)-NQ .
(i) "COMPANY PRODUCTS" shall mean all products and services manufactured, made,
designed, maintained, supported, developed, sold, licensed, marketed, or
otherwise distributed or provided (or planned or envisioned to be manufactured,
made, designed, maintained, supported, developed, sold, licensed, marketed, or
otherwise distributed or provided) by or for the Company (including all versions
and releases thereof, whether already distributed or provided, under
development, planned or conceived, or otherwise), together with any related
materials, information or data, including, without limitation, the names,
numbers (e.g., part numbers) and packaging associated with such products and
services.
(j) "COMPANY REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall have the meaning
specified in Section 3.17(a).
(k) "CONFIDENTIALITY AGREEMENT" shall mean the confidentiality agreement entered
into between the Company and Parent.
(l) "CONTRACT" shall mean any agreement, contract, consensual obligation,
promise, understanding, arrangement, commitment or undertaking of any nature
(whether written or oral and whether express or implied), whether or not legally
binding.
(m) "COPYRIGHTS" shall mean all copyrights, including in and to works of
authorship and all other rights corresponding thereto throughout the world,
whether published or unpublished, including rights to prepare, reproduce,
perform, display and distribute copyrighted works and copies, compilations and
derivative works thereof.
(n) "DAMAGES" shall mean and include any loss, damage, injury, decline in value,
lost opportunity, Liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee, accounting fee, expert fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
(o) "DEFINED BENEFIT PLAN" shall mean either a plan described in Section 3(35)
of ERISA or a plan subject to the minimum funding standards set forth in Section
302 of ERISA and Section 412 of the Code.
(p) "EMPLOYEE BENEFIT PLAN" shall have the meaning specified in Section 3(3) of
ERISA.
(q) "ENCUMBRANCE" shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, equity, trust, equitable interest, claim,
preference, right of possession, lease, tenancy, license, encroachment,
covenant, infringement, interference, Order, proxy, option, right of first
refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
(r) "ENTITY" shall mean any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust or company (including any limited liability company or
joint stock company).
(s) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
(t) "FICA" shall mean the Federal Insurance Contributions Act.
(u) "GAAP" shall mean U.S. generally accepted accounting principles in effect on
the date on which they are to be applied pursuant to this Agreement, applied
consistently throughout the relevant periods.
(v) "GOVERNMENT CONTRACT" shall mean any Government Prime Contract, Government
Subcontract, Offer or Teaming Agreement and any current proposals related to the
foregoing and contracts issued in response to any such proposals.
(w) "GOVERNMENT PRIME CONTRACT" shall mean any prime contract, basic ordering
agreement, letter contract, purchase order, delivery order, change, arrangement
or other commitment of any kind, on which final payment has not been made and
close-out not completed, between the Company and a Governmental Authority.
(x) "GOVERNMENT SUBCONTRACT" shall mean any subcontract, basic ordering
agreement, letter subcontract, purchase order, delivery order, change,
arrangement or other commitment of any kind, on which final payment has not been
made, between the Company and any prime contractor to a Governmental Authority
or any subcontractor with respect to a Government Prime Contract.
(y) "GOVERNMENTAL APPROVAL" shall mean any: (a) permit, license, certificate,
concession, approval, consent, ratification, permission, clearance,
confirmation, exemption, waiver, franchise, certification, designation, rating,
registration, variance, qualification, accreditation or authorization issued,
granted, given or otherwise made available by or under the authority of any
Governmental Authority or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Authority.
(z) "GOVERNMENTAL AUTHORITY" shall mean any: (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) governmental or quasi governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal); (d) multinational organization or body; or (e) individual, Entity or
body exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature.
(aa) "INTELLECTUAL PROPERTY RIGHTS" shall mean any or all rights in and to
intellectual property and intangible industrial property rights, including,
without limitation, (i) Patents, Trade Secrets, Copyrights, Mask Works,
Trademarks and (ii) any rights similar, corresponding or equivalent to any of
the foregoing anywhere in the world.
(bb) "INVENTORY" shall mean all inventory of the Company's products and its
components, wherever located and whether held by the Company or third parties,
including all raw materials, work in process, samples, packaging, supplies,
service parts, purchased parts and goods and any and all rights to market and
sell all such inventory.
(cc) "KNOWLEDGE" The Company shall be deemed to have "Knowledge" of a particular
fact or other matter if any employee of the Company as of the date hereof has
actual Knowledge of such fact.
(dd) "LEASED REAL PROPERTY" shall mean all rights in, to and under the real
estate leases listed on SECTION 3.16 OF THE COMPANY DISCLOSURE SCHEDULE (the
"REAL PROPERTY LEASES"), together with all of the Company's right, title and
interest in and to all land, buildings, structures, easements, appurtenances,
improvements (including construction in progress) and fixtures located thereon.
(ee) "LEGAL REQUIREMENT" shall mean any federal, state, local, municipal,
foreign or other law, statute, legislation, constitution, principle of common
law, resolution, ordinance, code, Order, edict, decree, proclamation, treaty,
convention, rule, regulation, permit, ruling, directive, pronouncement,
requirement (licensing or otherwise), specification, determination, decision,
opinion or interpretation that is, has been or may in the future be issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Authority.
(ff) "LIABILITY" shall mean any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with generally accepted accounting principles and regardless of
whether such debt, obligation, duty or liability is immediately due and payable.
(gg) "MASK-WORKS" shall mean all mask works, mask work registrations and
applications therefor, and any equivalent or similar rights in semiconductor
masks, layouts, architectures or topology.
(hh) "MATERIAL ADVERSE EFFECT" shall mean any event, change or effect that, when
taken individually or together with all other adverse events, changes and
effects, is or is reasonably likely (a) to be materially adverse to the
condition (financial or otherwise), properties, assets, business, operations,
results of operations or prospects of the Company or the Business or (b) to
prevent or materially delay consummation of the Merger or otherwise to prevent
the Company from performing their obligations under this Agreement.
(ii) "MEMBER OF THE CONTROLLED GROUP" shall mean each trade or business, whether
or not incorporated, that would be treated as a single employer with the Company
under Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code.
(jj) "MULTIEMPLOYER PLAN" shall mean a plan described in Section 3(37) of ERISA.
(kk) "OFFER" shall mean an "Offer" to which the Company is a party as defined in
the Federal Acquisition Regulation ("FAR") 2.101.
(ll) "ORDER" shall mean any: (a) temporary, preliminary or permanent order,
judgment, injunction, edict, decree, ruling, pronouncement, determination,
decision, opinion, verdict, sentence, stipulation, subpoena, writ or award that
is or has been issued, made, entered, rendered or otherwise put into effect by
or under the authority of any court, administrative agency or other Governmental
Authority or any arbitrator or arbitration panel; or (b) Contract with any
Governmental Authority that is or has been entered into in connection with any
Proceeding.
(mm) "PATENTS" shall mean all United States and foreign patents and utility
models and applications therefor and all reissues, divisions, re-examinations,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries, including
invention disclosures related to the Business.
(nn) "PERSON" shall mean any individual, Entity or Governmental Authority.
(oo) "POST-CLOSING PERIOD" shall mean any Tax period (or portion thereof)
beginning after the close of business on the Closing date.
(pp) "PRE-CLOSING PERIOD" shall mean any Tax period ending on or before the
close of business on the Closing date or, in the case of any Tax period which
includes, but does not end on, the Closing date, the portion of such period up
to and including the Closing date.
(qq) "PROCEEDING" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation that is, has been or may in the future be
commenced, brought, conducted or heard at law or in equity or before any
Governmental Authority or any arbitrator or arbitration panel.
(rr) "REAL PROPERTY" shall mean All real property, together with all land,
buildings, structures, easements, appurtenances, improvements and fixtures
located thereon.
(ss) "REAL PROPERTY LEASES" shall have the meaning specified in Leased Real
Property.
(tt) "RECEIVABLES" shall mean all accounts and notes receivable, checks,
negotiable instruments and chattel papers.
(uu) "REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall mean all United States,
international and foreign: (i) Patents, including applications therefor; (ii)
registered Trademarks, applications to register Trademarks, including
intent-to-use applications, or other registrations or applications related to
Trademarks; (iii) Copyright registrations and applications to register
Copyrights; (iv) Mask Work registrations and applications to register Mask
Works; and (v) any other Intellectual Property Rights that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority at any time.
(vv) "TAX" (and, with correlative meaning, "Taxes" and "Taxable") shall mean all
taxes, however denominated, including any interest, penalties or other additions
to tax that may become payable in respect thereof, imposed by any federal,
territorial, state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without limiting
the generality of the foregoing, all income or profits taxes (including, but not
limited to, federal income taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers' compensation, Pension
Benefit Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected.
(ww) "TAX AUTHORITY" shall mean Governmental Authority responsible for the
imposition, assessment or collection of any Tax (domestic or foreign).
(xx) "TAX RETURN" shall mean any return, statement, declaration, notice,
certificate or other document that is or has been filed with or submitted to, or
required to be filed with or submitted to, any Governmental Authority in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement related to any Tax.
(yy) "TEAMING AGREEMENT" shall mean a "contractor team arrangement(s)" as
referenced in the FAR Subpart 9.601 to which the Company is a party.
(zz) "TRADE SECRETS" shall mean all trade secrets under applicable law and other
rights in know-how and confidential or proprietary information, processing,
manufacturing or marketing information, including new developments, inventions,
processes, ideas or other proprietary information that provide the Company with
advantages over competitors who do not know or use it and documentation thereof
(including related papers, blueprints, drawings, chemical compositions,
formulae, diaries, notebooks, specifications, designs, methods of manufacture
and data processing software, compilations of information) and all claims and
rights related thereto.
(aaa) "TRADEMARKS" shall mean any and all trademarks, service marks, logos,
trade names, corporate names, Internet domain names and addresses and
general-use e-mail addresses, and all goodwill associated therewith throughout
the world.
(bbb) "TRANSFER TAXES" shall mean all federal, state, local or foreign sales,
use, transfer, real property transfer, mortgage recording, stamp duty,
value-added or similar Taxes that may be imposed in connection with the
execution or completion of the transactions contemplated by this Agreement,
together with any interest, additions to Tax or penalties with respect thereto
and any interest in respect of such additions to Tax or penalties.
(ccc) "TREASURY REGULATIONS" shall mean the final and temporary regulations
promulgated under the Code.
SECTION 10.04 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Legal Requirements, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
SECTION 10.05 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Exhibits, Schedules, and the Company Disclosure Schedule which are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein) and the Confidentiality
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. This Agreement shall not be assigned by operation of law or
otherwise, except that Parent and Merger Sub may assign all or any of their
rights and obligations hereunder to any affiliate of Parent provided that no
such assignment shall relieve the assigning party of its obligations hereunder
if such assignee does not perform such obligations.
SECTION 10.06 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Article X (which is intended to be for the benefit of the
Indemnitees covered thereby and may be enforced by such persons).
SECTION 10.07 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 10.08 GOVERNING LAW. Except to the extent that Florida Law applies to
the Merger, this Agreement shall be governed by, and construed in accordance
with the laws of the State of New York applicable to contracts executed in and
to be performed in that State, without giving effect to any choice of law rule
that would cause the application of the laws of any jurisdiction other than the
internal laws of the State of New York to the rights and duties of the parties.
SECTION 10.09 HEADINGS. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 10.10 INTERPRETATION. Unless otherwise indicated herein, with respect to
any reference made in this Agreement to a Section (or Article), Exhibit or
Schedule, such reference shall be to a section (or article) of, or an exhibit or
schedule to, this Agreement. Any reference made in this Agreement to a statute
or statutory provision shall mean such statute or statutory provision as it has
been amended through the date as of which the particular portion of the
Agreement is to take effect, or to any successor statute or statutory provision
relating to the same subject as the statutory provision so referred to in this
Agreement, and to any then-applicable rules or regulations promulgated
thereunder. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed, as the context indicates, to be followed
by the words "but (is/are) not limited to." The words "herein," "hereof,"
"hereunder" and words of like import shall refer to this Agreement as a whole
(including its Schedules and Exhibits), unless the context clearly indicates to
the contrary (for example, that a particular section, schedule or exhibit is the
intended reference). Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context indicates is appropriate. Where specific language is used to clarify or
illustrate by example a general statement contained herein, such specific
language shall not be
deemed to modify, limit or restrict the construction of the general statement
which is being clarified or illustrated. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
SECTION 10.11 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 10.12 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY, THE TRUSTEE,
THE ESOP AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
PARENT, THE COMPANY, THE TRUSTEE, THE ESOP OR MERGER SUB IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the
Trustee have caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized,
ESSEX CORPORATION
Attest:
/S/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------- ----------------------------------
Title: Vice President and Secretary Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President & CEO
CSI ACQUISITION CORP.
Attest:
/S/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------- ----------------------------------
Title: Vice President and Secretary Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Treasurer
COMPUTER SCIENCE INNOVATIONS, INC.
Attest:
▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------- ----------------------------------
Title: Assistant Secretary Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
COMPUTER SCIENCE INNOVATIONS EMPLOYEE
STOCK OWNERSHIP PLAN
Attest:
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------- -------------------------------------
Title: Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee