AGREEMENT AND PLAN OF MERGER
by and among
SARNIA CORPORATION ("Sarnia")
and
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, INC. ("Parent")
and
B & R ACQUISITION, INC. ("Acquistion Co.")
October 5, 2001
Table of Contents
Article and Section Page
-------------------
1. DEFINITIONS 2
2. THE MERGER 7
2.01 The Merger 7
2.02 Effect of the Merger 7
2.03 Consummation of the Merger 7
2.04 Charter, Bylaws, Directors and Officers 8
2.05 Further Assurances 8
3. CONVERSION OF SHARES 8
3.01 Merger Consideration, Cash Consideration and
Note Consideration 8
3.02 Conversion of Shares; Issuance of Promissory Note 11
3.03 Surrender and Payment 11
3.04 Stock Options 13
3.05 Conversion of Acquisition Co. Common Stock 13
3.06 Dissenting Share 13
3.07 Dissenting Shares After Payment of Fair Value 14
3.08 Closing of Stock Transfer Books 14
3.09 Deliveries at the Closing 14
3.10 Obligation to Withhold 16
4. TERMINATION OR ABANDONMENT 16
4.01 Mutual Agreement 16
4.02 Breach of Agreements 16
4.03 Failure of Conditions 17
4.04 Regulatory Enforcement Matters 17
4.05 Fiduciary "Out" 17
4.06 Automatic Termination 17
4.07 Effect of Termination 17
Article and Section Page
-------------------
5. ADDITIONAL UNDERTAKINGS PRIOR TO CLOSING 18
5.01 Business in Ordinary Course 18
5.02 HSR Act 20
5.03 Breaches 20
5.04 Consummation of Agreement 20
5.05 No-Shop Clause 20
5.06 Interim Operating Reporting 21
5.07 Access to Information 21
5.08 Long-Term Debt 22
5.09 Conversion of Preferred Stock 22
5.10 Shareholders Approval 22
5.11 Information/Proxy Statement 22
5.12 Notifications and Consents 23
6. CONDITIONS TO THE MERGER 23
6.01 Conditions to Obligations of All Parties 23
6.02 Conditions Precedent to Parents' Obligations 23
6.03 Conditions to Obligations of Sarnia 25
7. REPRESENTATIONS AND WARRANTIES OF SARNIA 25
7.01 Sarnia Organization; Qualification and Capital
Stock; Corporate Records 25
7.02 Trade Names and Fictitious Names 27
7.03 Authorization; No Violations of Laws or
Agreements, Consents or Defaults 27
7.04 Subsidiaries 27
7.05 Financial Information 28
7.06 Absence of Material Changes 28
7.07 Licenses; Regulatory Approvals 28
7.08 Tax Matters 29
7.09 Litigation; Claims 29
7.10 Properties; Contracts; Leases and Other
Agreements;Bank Accounts 30
7.11 Employee Matters; Benefit Plans; ERISA 32
7.12 Title to and Condition of Properties 34
7.13 Intellectual Property 35
7.14 Insurance 35
7.15 Relationships 36
7.16 Compliance with Laws 36
7.17 Environmental Matters 37
7.18 No Undisclosed Liabilities or Obligations 37
7.19 Brokerage 38
7.20 Distributions 38
7.21 Related Party Transactions 38
7.22 Receivables 38
7.23 Statements and Disclosures True and Correct 38
8. REPRESENTATIONS AND WARRANTIES OF PARENT 38
8.01 Organization 38
8.02 Authorization; No Violations of Laws or Agreements 39
8.03 Brokerage 39
8.04 Governmental Consents 39
8.05 Litigation; Claims 39
8.06 Sufficient Funds 39
8.07 Non-Contravention 40
8.08 No Knowledge 40
9. REPRESENTATIONS AND WARRANTIES OF ACQUISITION CO. 40
9.01 Organization and Qualification 40
9.02 Capitalization 40
9.03 Authority Relative to Agreement 40
9.04 Non-Contravention 41
9.05 Governmental Consents 41
9.06 No Knowledge 41
9.07 Other Matters 41
10. ADDITIONAL UNDERTAKING SUBSEQUENT TO CLOSING 41
10.01 Tax Returns 42
10.02 Further Assurances 42
10.03 Other Documents and Actions 42
10.04 Books and Records 42
10.05 Director and Officer Indemnification 42
11. INDEMNIFICATION 42
11.01 Sarnia Indemnity 42
11.02 Conditions of Indemnification for Third Party
Claims 43
11.03 Limitations on Indemnity 44
11.04 Payment of Indemnification Claims 44
11.05 Arbitration 45
12. MISCELLANEOUS 45
12.01 Publicity 45
12.02 Return of Documents 45
12.03 Waiver of Jury Trial 45
12.04 No Third Party Beneficiaries 46
12.05 Binding Effect; Successors and Assigns 46
12.06 Assignment 46
12.07 Entire Agreement; Modification 46
12.08 Costs 46
12.09 Interpretation 46
12.10 Severability 47
12.11 Waiver of Obligations 47
12.12 Counterparts and Execution 47
12.13 Notices 48
12.14 Survival 50
12.15 Risk Of Loss 50
12.16 Governing Law 50
Index to Disclosure Schedules
-----------------------------
3.03(b) Payment to Shareholders 7.11(b) Employee Matters
5.08 Long-Term Debt 7.11(c) Employment Agreements
6.02(g) Filings and Notices to be 7.11(d) Benefit Plans
Made to Governmental
Entities 7.11(f) Benefit Liabilities
7.01(b) Qualifications to do 7.11(n) Reports; Summary Plan
Business Description
7.01(c) Directors; Officers;
Articles; ByLaws 7.12(a) Encumbrances upon Assets
7.01(d) Shareholders 7.12(b) Condition of Equipment
7.12(c) Condition of Real Estate
7.01(g) Options, etc. 7.13(a) Intellectual Property
7.02 Trade Names and Fictitious
Names 7.13(b) Obligations -
Intellectual Property
7.03(b) Required Consents 7.13(c) Confidentiality
7.03(c) Material Breaches or Agreements
Defaults 7.14 Insurance
7.04 Subsidiaries 7.15(b) Complaints
7.16(a) No Notice of Violation
7.05(a) Financial Statements 7.17(a) Environmental Claims
7.06 Material Adverse Changes 7.17(b) Environmental Violations
7.07 Licenses 7.18(c) Undisclosed Liabilities
7.08 Tax Returns 7.19 Brokerage Arrangements
7.09 Legal Proceedings 7.20 Distributions
7.10(b) Personal Property Leases 7.21 Related Party Transactions
7.10(c) Debt 7.22 Receivables
7.10(d) Agreements to Acquire
Assets/Stock 8.03 Brokerage Arrangements
7.10(e) Other Contracts 8.05 Legal Proceedings
7.10(f) Survival of Contracts 8.06 Parent Sufficient Funds
7.10(g) Defaults 9.05 Consents
7.10(h) Bank Accounts
7.10(i) Rent Rolls
7.10(j) Defaults; Changes in Contracts
7.11(a) Collective Bargaining Agreements
Index to Exhibits
-----------------
1(bj) Legal Description of Versar Center
2.04 Amended and Restated Articles of Incorporation of Sarnia
3.02 Form of Promissory Note
3.02(b) Form of Escrow Agreement
3.03(a) Form of Exchange Agent Agreement
3.09 Form of Parent's Counsel's Opnion
3.09(c) Form of Sarnia's Counsel's Opinion
3.09(c)(xi) Form of Tenant Estopple Certificate
(ar) Plan of Merger
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), is made as of
the 5th day of October, 2001, by and among SARNIA CORPORATION, a
Virginia corporation ("Sarnia"), B & R ACQUISITION, INC., a Virginia
corporation ("Acquisition Co."), and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, INC., a
Delaware corporation ("Parent"). Sarnia and Acquisition Co. are
hereinafter sometimes referred to as the "Constituent Corporations"
and Sarnia is hereunder sometimes referred to as the "Surviving
Corporation".
W I T N E S S E T H:
-------------------
WHEREAS, Sarnia is engaged in the business of owning and
managing the Versar Center (the "Business"); and
WHEREAS, Parent, Acquisition Co. and Sarnia desire that
Acquisition Co. merge with and into Sarnia (the "Merger"), upon
the terms and subject to the conditions set forth herein and in
accordance with the Virginia Stock Corporation Act, VA Code sections
13.1-601 through 13.1-781 (the "Virginia Stock Corporation Act")
with the result that the Surviving Corporation shall continue as the
surviving corporation and the separate existence of Acquisition Co.
(except as it may be continued by operation of law) shall cease; and
WHEREAS, Parent, Acquisition Co. and Sarnia desire that at the
Effective Time (as hereinafter defined) all outstanding shares of
the capital stock of Sarnia excluding Dissenting Shares (as
hereinafter defined) shall be converted into the right to receive
the Merger Consideration (as hereinafter defined), as hereinafter
provided; and
WHEREAS, Parent, Acquisition Co. and Sarnia desire that,
immediately after the Effective Time and solely as a result of the
Merger, Parent will own all the issued and outstanding shares of the
capital stock of Sarnia; and
WHEREAS, the respective Boards of Directors of Parent,
Acquisition Co. and Sarnia have approved the Merger.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
1. DEFINITIONS. The following terms shall have the
meanings set forth below when capitalized herein:
(a) "Automatic Termination Date" shall have the
meaning attributed to it in Section 4.06 of this Agreement.
(b) "Benefit Liability" shall mean any liability or
obligation of Sarnia: (i) that is an accrued but unpaid monetary
obligation to make a contribution under any Benefit Plan (other
than any amount payable or other consideration that is due to any
employee as an incentive or inducement to enter into an employment
agreement with Surviving Corporation pursuant hereto); (ii) for
accrued vacation pay or accrued sick pay; (iii) for accrued
employee wages payable in the ordinary course of business and
payroll taxes with respect thereto; (iv) that is due and owing to
independent contractors; or (v) for other employee fringe benefits,
including without limitation insurance programs (including COBRA
obligations), expense reimbursement obligations, continuing
education stipends and automobile allowances.
(c) "Benefit Plans" shall mean any profit sharing,
group insurance, medical and/or hospitalization, stock option,
pension, retirement, bonus, deferred compensation, stock bonus
or stock purchase plan, or collective bargaining agreements,
contracts or other arrangements under which pensions, deferred
compensation or other retirement benefits are being paid or may
become payable by Sarnia or any other employee welfare or benefit
agreements, plans or arrangements, as defined in Section 3(3) of
ERISA, any plan created in accordance with Section 125 of the
Code, or any nonqualified employee benefit plans or deferred
compensation, bonus, stock or incentive plans, or other employee
benefit or fringe benefit programs, established for the benefit
of Sarnia's former or current officers, directors or employees
including each trust or other agreement with any custodian or
any trustee for funds held under any such agreement, plan or
agreement.
(d) "Books and Records" shall mean: (i) the minute
books containing the minutes of all meetings and written consents
of the shareholders and directors (and all committees thereof),
shareholder register, stock certificate book and corporate seal
of Sarnia and (ii) all books and records of Sarnia for the period
prior to the Closing Date, including leases, contracts, agreements,
insurance policies, reports, plans, projections and tax, financial
and accounting books and records.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday or legal holiday in the Commonwealth of Virginia.
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(f) "Cash Consideration" shall have the meaning
attributed to it in Section 3.01(a)(i) of this Agreement.
(g) "Claims" shall have the meaning attributed to
it in Section 7.09 of this Agreement.
(h) "Closing" shall mean the satisfaction of the
conditions set forth in Article 6 and deliveries set forth in
Section 3.09 and "Closing Date" shall mean the day on which the
parties declare the Closing to have occurred
(i) "Closing Balance Sheet" shall have the meaning
attributed to it in Section 3.01(a)(iii).
(j) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(k) "Damages" shall have the meaning attributed to
it in Section 11.01 of this Agreement.
(l) "Default" shall have the meaning attributed to
it in Section 7.10(j) of this Agreement.
(m) "Disclosure Documents" shall mean all agreements
and documents referred to in any of the Disclosure Schedules,
together with all other agreements and documents disclosed by
Sarnia to Parent during Parent's due diligence investigation
conducted prior to the Closing Date, all as made available to
Parent at its request.
(n) "Disclosure Schedules" shall mean the Disclosure
Schedules attached to this Agreement, as supplemented as provided
herein.
(o) "Disputed Amount" shall have the meaning
attributed to it in Section 11.04(d) of this Agreement.
(p) "Dissenting Share" shall have the meaning
attributed to it in Section 3.06 of this Agreement.
(q) "Encumbrance" shall mean a mortgage, charge,
pledge, lien, option, restriction, right of first refusal, right
of preemption, third party right or interest or other encumbrance
or security interest of any kind or similar right or any other
matter affecting title.
(r) "Effective Time" shall mean the time of issuance
by the clerk of the State Corporation Commission of the
Commonwealth of Virginia of a certificate of merger with respect
to the Merger or such other time as may be specified in the
articles of merger referred to in Section 2.03 hereto.
(s) "Environmental Claim" shall mean any claim,
action, cause of action, investigation known by Sarnia or written
notice by any Person alleging potential liability (including
without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries, or penalties)
arising out of, based on, or resulting from: (i) the presence,
or release of Hazardous Substances at the Versar Center; or
(ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
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(t) "Environmental Laws" shall mean all applicable
local, state and federal environmental, health and safety laws
and regulations in all jurisdictions in which Sarnia have done
business or owned, leased or operated property, including,
without limitation, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental Responses,
Compensation and Liability Act, the Federal Clean Water Act,
the Federal Clean Air Act and the Federal Occupational Safety
and Health Act, all as amended and in effect at the relevant time
(u) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
(v) "ERISA Affiliate" shall mean Versar, Inc. or
any trade or business (whether or not incorporated) which,
together with such Persons, would be treated as a single employer
under Title IV of ERISA or Section 414 of the Internal Revenue
Code.
(w) "Escrow Agent" shall mean such financial
institution reasonably acceptable to Sarnia as shall be
designated by Parent prior to the Closing.
(x) "Exchange Agent" shall have the meaning
attributed to it in Section 3.03(a) of this Agreement.
(y) "Financial Statements" shall mean the audited
balance sheets of Sarnia as of June 30, 2000 and June 30, 2001,
and the related statements of operations, shareholders' equity
and cash flows for the year ended June 30, 2000 and June 30, 2001,
certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP ("AA"), the independent
certified public accountants retained by Sarnia.
(z) "GAAP" shall mean, at any particular time,
generally accepted accounting principles as then in effect.
(aa) "Hazardous Substances" shall mean any toxic or
hazardous waste, pollutants or substances, including, without
limitation, medical or infectious wastes, asbestos containing
materials or substances, any substance defined or listed as a
"hazardous substance," "toxic substance," "toxic pollutant,"
or similarly identified substances or mixture, in or pursuant
to any Environmental Law.
(ab) "Indemnity Amount" shall have the meaning
attributed to it in Section 3.03(c) of this Agreement.
(ac) "Indemnity Certificate" shall have the meaning
attributed to it in Section 11.04(a) of this Agreement.
(ad) "Information/Proxy Statement" shall have the
meaning attributed to it in Section 5.11 of this Agreement.
(ae) "Intellectual Property" shall mean: (i) any
copyright, trademark, trade name, service ▇▇▇▇, service name,
logo, corporate name, Internet domain name or industrial design,
4
any registrations thereof and pending applications therefor
(to the extent applicable); (ii) any other intellectual property
right and any computer program, software, database or data
right); (iii) any rights under licenses (including without
limitation license(s) to use specific telephone numbers)
relating to any of the foregoing, owned or used by Sarnia; and
(iv) any goodwill associated with any of the foregoing.
Intellectual Property shall include without limitation those
items set forth on Disclosure Schedule 7.13(a).
(af) "Knowledge" or "Knowledge of Sarnia" shall
mean the actual Knowledge (i.e. conscious awareness of facts
or other information), based upon reasonable investigation
undertaken as the result of the transactions contemplated
by this Agreement, of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇ as of
the date hereof, and such knowledge does not include
constructive knowledge or any information that might have been
gained upon further investigation.
(ag) "Law" shall have the meaning attributed to it
in Section 7.16(a) of this Agreement.
(ah) "Legal Proceeding" shall have the meaning
attributed to it in Section 7.09(a) of this Agreement.
(ai) "Long-Term Debt" shall have the meaning
attributed to it in Section 5.08(a) of this Agreement.
(aj) "Merger Consideration" shall have the
meaning attributed to it in Section 3.01(a) of this Agreement.
(ak) "Merger Unit" shall have the meaning
attributed to it in Section 3.01(b)(i) of this Agreement.
(al) "Note Consideration" shall have the meaning
attributed to it in Section 3.01(a)(ii) of this Agreement.
(am) "Options" shall have the meaning attributed
to it in Section 3.04 of this Agreement.
(an) "Parent Material Adverse Effect" shall mean
a material adverse effect on the financial condition, operating
results or business of Parent and its subsidiaries.
(ao) "Per Share Cash Consideration" shall have the
meaning attributed to it in Section 3.01(b)(ii) of this
Agreement.
(ap) "Per Share Note Consideration" shall have the
meaning attributed to it in Section 3.01(b)(iii) of this
Agreement.
(aq) "Person" shall mean an individual, corporation,
partnership, limited liability company, limited liability
partnership, joint venture, trust or unincorporated organization,
joint stock company or other similar organization, government or
any political subdivision thereof, or any other legal entity.
5
(ar) "Plan of Merger" shall mean the Plan of Merger
hereto as Exhibit (ar).
(as) "Promissory Note" shall mean the promissory
note secured by a letter of credit in the form of Exhibit 3.02.
(at) "Receivables" shall mean the rents receivable,
trade receivables, notes receivable and other receivables arising
out of or related to the operations of Sarnia as of: (i) June 30,
2001, determined in accordance with GAAP and set forth on
Disclosure Schedule 7.23.
(au) "Related Party" shall have the meaning
attributed to it in Section 7.21 of this Agreement.
(av) "Reserves" shall mean those reserves for bad
debts, self-insured risks, risk management, replacements, repairs
and unspecified uninsured liabilities, established and maintained
by Sarnia and reflected in the Financial Statements. However, the
definition of Reserves shall not include any reserves related to,
or reserved in anticipation of, any condemnation proceedings by
VDOT, or the costs and expenses of constructing a parking
structure in the Versar Center.
(aw) "Sarnia Common Stock" shall have the meaning
attributed to it in Section 3.02(a) of this Agreement.
(ax) "Sarnia Liabilities" shall mean the
liabilities shown on the Sarnia June 30, 2001 balance sheet
included in the Financial Statements or on the Closing Balance
Sheet, as applicable, except the liability for Deferred income
taxes but only to the extent that such deferred income tax
liability will not result in a future payment or loss of a tax
benefit by Sarnia, Acquisition Corp. or Parent after the
Effective Time solely as a result of the Merger. Sarnia
Liabilities shall not include any amount due under the promissory
note and related loan documents pertaining to the anticipated
$1,500,000 loan from a subsidiary of Parent to Sarnia nor any
liability with respect to the design and construction of a new
parking structure in the Versar Center.
(ay) "Sarnia Material Adverse Effect" shall mean
an act, omission or a circumstance of any kind whatsoever,
individually or in the aggregate, that has a material and adverse
effect on the assets, business, financial condition or results of
operations of Sarnia in an amount equal to or greater than
$500,000, net of any insurance proceeds payable to Sarnia as a
result of any event giving rise to a claim under applicable
insurance policies; provided, however that the following shall not
be taken into account in determining whether there has been or
would been Sarnia Material Adverse Effect (i) any adverse change
resulting from conditions affecting the United States economy that
is material to the business of Sarnia, (ii) any adverse change
that is primarily caused by conditions affecting Sarnia's industry
sector, (iii) any adverse change in the stock price or trading
volume of Sarnia's capital stock, (iv) any adverse change which is
primarily attributable to the announcement of this Agreement and
the transactions contemplated hereby, (v) employee attrition or
modification of any vendor relationships, (vi) any adverse change
arising out of any way related to any condemnation or other
proceedings by the VDOT, or (vii) matters covered by Parent and
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Acquisition Co.'s physical inspection of Versar Center such as
expenditures which may be required in connection with improvements
or replacements of elevators, roofs, HVAC and other mechanical
systems and the exterior of the buildings at Versar Center and
any environmental cleanup and remediation costs.
(az) "Sarnia Preferred Stock" shall have the meaning
attributed to it in Section 3.01(a)(i) of this Agreement.
(ba) "Sarnia Stock Option Plan" shall have the
meaning attributed to it in Section 3.04 of this Agreement.
(bb) "Shareholders" shall mean the shareholders of
Sarnia immediately prior to the Effective Time.
(bc) "Shareholders' Notice" shall have the meaning
attributed to it in Section 11.04(b) of this Agreement.
(bd) "Shareholders' Notice Period" shall have the
meaning attributed to it in Section 11.04(b) of this Agreement.
(be) "Shareholder Representative" shall mean the
person who shall have been so designated by the Shareholders.
(bf) "Shares" shall mean all of the outstanding
capital stock of Sarnia described in Section 7.01(d) and set
forth on Disclosure Schedule 7.01(d).
(bg) "Taxes" shall have the meaning attributed to
it in Section 7.10(a) of this Agreement.
(bh) "Undisputed Payment" shall have the meaning
attributed to it in Section 11.04(b) of this Agreement.
(bi) "VDOT" shall mean the Virginia Department of
Transportation.
(bj) "Versar Center" shall mean the ground and
buildings in Springfield, Virginia, located within the I395 and
I495 Washington Beltway interchange, the legal description of
which is set forth on Exhibit 1(bi).
2. THE MERGER.
-----------
2.01 The Merger. Subject to the terms and
conditions of this Agreement, at the Effective Time, in
accordance with this Agreement and the Virginia Stock Corporation
Act, Acquisition Co. shall be merged with and into Sarnia, the
separate existence of Acquisition Co. (except as it may be
continued by operation of law) shall cease, and Sarnia shall
continue as the Surviving Corporation under the corporate name
of "Sarnia Corporation" ("Merger").
2.02 Effect of the Merger. Upon the effectiveness
of the Merger, the Surviving Corporation shall succeed to, and
assume all the rights and obligations of, Sarnia and Acquisition
Co. in accordance with the Virginia Stock Corporation Act and the
Merger shall otherwise have the effects set forth in Section
13.1-721 of the Virginia Stock Corporation Act.
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2.03 Consummation of the Merger. As soon as
practicable after the satisfaction or waiver of the conditions
to the obligations of the parties to effect the Merger set forth
herein, provided that this Agreement has not been terminated
previously, the parties hereto will cause the Merger to be
consummated by filing with the State Corporation Commission of
the Commonwealth of Virginia properly executed articles of merger
in accordance with the Virginia Stock Corporation Act. The
Merger shall become effective at the Effective Time.
2.04 Charter, Bylaws, Directors and Officers. The
Articles of Incorporation of the Surviving Corporation from and
after the Effective Time shall be the Articles of Incorporation
of Sarnia as in effect immediately prior to the Effective Time,
until thereafter amended in accordance with the provisions
thereof and as provided by the Virginia Stock Corporation Act,
except that, at the Effective Time, the Articles shall be amended
and restated as set forth on Exhibit 2.04. The Bylaws of the
Surviving Corporation from and after the Effective Time shall be
the Bylaws of Acquisition Co. as in effect immediately prior to
the Effective Time, (which shall include an appropriate director
and officer indemnity provision in accordance with applicable
Virginia corporate law) continuing until thereafter amended in
accordance with the provisions thereof and the Articles of
Incorporation of the Surviving Corporation and as provided by the
Virginia Stock Corporation Act, provided, however any such
amendment adopted within five (5) years of the Effective Date
shall not result in the removal or material change to the
director and officer indemnity provision. The initial directors
and officers of the Surviving Corporation shall be the directors
and officers, respectively, of Acquisition Co. immediately prior
to the Effective Time, in each case until their removal or until
their respective successors are duly elected and qualified.
2.05 Further Assurances. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be
advised that any deeds, bills of sale, assignments or assurances
or any other acts or things are necessary, desirable or proper:
(i) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises,
properties or assets of either Sarnia or Acquisition Co.; or
(ii) otherwise to carry out the purposes of this Agreement,
the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver,
in the name and on behalf of either of Sarnia or Acquisition Co.
all such deeds, bills of sale, assignments and assurances and
do, in the name and on behalf of either Sarnia or Acquisition
Co. all such other acts and things necessary, desirable or proper
to vest, perfect or confirm its right, title or interest in, to
or under any of the rights, privileges, powers, franchises,
properties or assets of either Sarnia or Acquisition Co. and
otherwise to carry out the purposes of this Agreement.
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3. CONVERSION OF SHARES.
--------------------
3.01 Merger Consideration, Cash Consideration and Note
Consideration.
(a) "Merger Consideration" shall be the sum of the
following:
(i) Nineteen Million Dollars ($19,000,000), less the
sum of: (i) the Sarnia Liabilities (ii) and the amount, if any,
necessary to redeem all of the outstanding shares of Sarnia Series
A Convertible Preferred Stock, $25.00 par value (the "Sarnia
Preferred Stock"), which have not been converted into Sarnia Common
Stock pursuant to Section 5.09 ("Cash Consideration"); and
(ii) One Million Dollars ($1,000,000) (the face amount
of the Promissory Note) ("Note Consideration"). The principal
amount of the Promissory Note, subject to the adjustments and
set-offs described herein, shall be paid as follows: (a) forty
thousand dollars ($40,000) within five (5) business days after
the date of Closing and the balance (less any Disputed Amount
as described in paragraph 11.04(d)) shall be paid on the first
anniversary of the date of Closing.
(iii) The Note Consideration shall be adjusted in the
following manner. After Closing, Parent shall cause to be prepared
a balance sheet of Sarnia as of the date of Closing ("Closing
Balance Sheet") which shall be prepared on a basis consistent with
the accounting policies, practices and principles used in preparing
Sarnia's audited Balance Sheet dated June 30, 2001, and reflecting
all adjustments that take into account accruals and other
adjustmentsthat would be appropriate to a balance sheet being
prepared at a fiscal year end (for example, an appropriate
pro rata portion of bonus and other costs should be accrued
based on a good faith estimate of the full year 2002 final costs),
but shall not give effect to any purchase accounting adjustments
arising to Parent, Acquisition Co. or Sarnia as a result of the
Merger; provided further, that the parties agree that the accrual
for legal costs related to the VDOT condemnation proceedings is
not to be adjusted. The Closing Balance sheet shall be submitted
to the Shareholder Representative for review within ninety (90)
days after Closing. Approval of this Agreement by the
Shareholders shall be deemed as approval and appointment of
▇▇▇▇▇ ▇. ▇▇▇▇▇ by the Shareholders as the Shareholder
Representative for all purposes required by this
Agreement and the Escrow Agreement. The Shareholder
Representative and his designated accountants shall have
the right to examine the books and records of Sarnia during
normal business hours in order to determine the accuracy of
the Closing Balance Sheet. If the Shareholder Representative
fails to notify Parent in writing within thirty (30) days
that he disputes the Closing Balance Sheet it shall be
deemed to be accepted. In the event that the Shareholder
Representative disputes any item on the Closing Balance
Sheet he shall give written notice thereof to Parent within
such thirty (30)day period. Such notice shall specify the
basis for and the amount of the dispute. Thereafter the
parties shall endeavor to resolve the dispute by good faith
negotiation. If they are unable to do so within thirty
(30) days of notice by the Shareholder Representative,
the dispute shall be submitted first, to mediation with
a mediator mutually agreed to by the Parent and the
Shareholder Representative; and if no resolution is reached,
then second, to binding arbitration to be conducted in
Washington, D.C. in accordance with the rules for
commercial arbitration of the American Arbitration
Association and the decision of the arbitrator(s) shall
be final and binding.
9
The Note Consideration shall be: (a) reduced by the amount,
if any, by which the Sarnia Liabilities shown on the Closing Balance
Sheet exceed the Sarnia Liabilities on Sarnia's Balance Sheet dated
June 30, 2001 which is included in the Financial Statements; and
(b) increased by (i) the amount of "Cash" (which does not include
"Restricted Cash") shown on the Closing Balance Sheet, (ii) the
amount, if any, by which the Sarnia Liabilities shown on the
Closing Balance Sheet is less than Sarnia Liabilities on Sarnia's
Balance Sheet dated June 30, 2001, which is included in the
Financial Statements, and (iii) that portion of "Construction in
Progress" shown on the Closing Balance Sheet which is related to
the construction of a parking structure in the Versar Center.
(b) At the Effective Time, each share of the Sarnia Common
Stock shall be converted into the right to receive a portion of
the Cash Consideration and an interest in the Promissory Note
determined upon the following formula:
(i) Add (A) the number of outstanding shares of
Sarnia Common Stock; (B) the number of shares of Sarnia Common
Stock issued to Option holders pursuant to Section 3.04 and
(c) the number of shares of Sarnia Common Stock issued upon
conversion of the Sarnia Preferred Stock. The sum of the
foregoing shall be referred to herein as the "Merger Units."
(ii) Divide the Cash Consideration by the sum of
the items added together in Section 3.01(b)(i) (i.e., the
Merger Units) to determine the "Per Share Cash Consideration."
(iii) Divide the Note Consideration by the sum
of the items added together in Section 3.01(b)(i) (i.e., the
Merger Units) to determine the "Per Share Note Consideration."
By way of illustration, if the Effective Time were 11:59 pm
on June 30, 2001 and Sarnia Liabilities and Stockholders'
Equity were as shown on the Sarnia June 30, 2001 Balance
Sheet):
a. The Cash Consideration would have been (i)$19,000,000
plus Construction in Progress applicable to the parking
structure of $215,000 less (ii)$9,156,000 (being the amount
necessary to retire all of Sarnia Liabilities assuming no
portion of the liability for deferred income taxes was to
be included in Sarnia Liabilities) for a net of $10,059,000.
b. The Merger Units would have been:
(i) Shares of Sarnia Common Stock outstanding
4,572,545
(ii) Shares of Sarnia Common Stock issued to holders
of Sarnia Preferred Stock (assuming all shares
of Preferred Stock were converted)
1,875,927
10
(iii) Shares of Sarnia Common Stock to be issued
upon exercise of all outstanding options 312,500
Total Merger Units
_______
6,760,972
c. The Per Share Cash Consideration would be approximately $1.4878
(i.e. $10,059,000 divided by 6,760,972)
d. The Per Share Note Consideration would have been
approximately $0.1479
(i.e. $1,000,000 divided by 6,760,972)
e. The total per share Merger Consideration would have been:
(i)Per Share Cash Consideration $1.4878
plus(ii)Per Share Note Consideration $0.1479
_________
Total $1.6357
3.02 Conversion of Shares; Issuance of Promissory Note.
At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof:
(a) Each share of Sarnia Common Stock; issued and
outstanding immediately prior to the Effective Time (other than
shares to be canceled pursuant to paragraph (c) of this Section
3.02 and Dissenting Shares) shall be converted into the right to
receive the Per Share Cash Consideration and the Per Share Note Consideration.
(b) The Promissory Note in the form attached hereto
as Exhibit 3.02 in the face amount of One Million Dollars
($1,000,000) shall be issued and delivered to the Escrow Agent to
be held on behalf of the Shareholders entitled to receive Note
Consideration hereunder pursuant to the Escrow Agreement
substantially in the form attached hereto as Exhibit 3.02(b).
11
(c) Each share of capital stock that is held in the
treasury of Sarnia shall be canceled and retired and no capital
stock of Parent, cash or other consideration shall be paid or
delivered in exchange therefor.
3.03 Surrender and Payment.
(a) Prior to the Effective Time, Parent shall appoint
an agent (the "Exchange Agent") reasonably acceptable to Sarnia
for the purpose of exchanging certificates representing shares
of Sarnia Common Stock (collectively, the "Shares") for the Cash
Consideration pursuant to the Exchange Agent Agreement substantially
in the form attached hereto as Exhibit 3.03(a). Within three
(3) business days after the Effective Time, Parent shall transfer
to the Exchange Agent the Cash Consideration to be paid in respect
of the Shares. Promptly after the Effective Time, Parent shall
send, or shall cause the Exchange Agent to send, to each holder
of Shares a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk
of loss and title shall pass, only upon proper delivery of the
certificates representing Shares to the Exchange Agent).
(b) At the Effective Time and at any time thereafter,
upon the surrender to the Exchange Agent of a certificate or
certificates representing the holder's Shares, together with a
properly completed letter of transmittal covering such Shares,
Parent shall pay, or shall cause the Exchange Agent to pay, the
amount of cash equal to the Per Share Cash Consideration times
the number of Shares covered by the letter of transmittal and
each such holder shall thereupon have an interest in the
Promissory Note being issued into escrow as provided above
equal to the Per Share Note Consideration times the number of
Shares covered by the letter of transmittal. Except with respect
to the Promissory Note, no interest will be paid or accrued on
the cash payable to the holders of Shares. Until so surrendered,
each certificate representing Shares shall, after the Effective
Time, represent, for all purposes, only the right to receive the
Merger Consideration.
(c) In the event that Parent incurs or suffers any
Damages (as defined in Section 11.01 of this Agreement), then
Parent shall, subject to the provisions of Article 11 of this
Agreement, decrease the principal amount of the Promissory Note
by the amount of such Damages in excess of One Hundred Thousand
Dollars ($100,000) (the "Indemnity Amount").
(d) In the event that any holders of Shares fail
to surrender certificates to the Exchange Agent within twelve
(12) months after the Effective Time, the principal amount of
the Promissory Note shall be reduced by the number of Shares
not surrendered multiplied by the Per Share Note Consideration.
Notwithstanding the above, Parent shall remain liable to pay
the Per Share Note Consideration to any holder of Sarnia Common
Stock who thereafter surrenders a certificate or certificates
representing the holder's shares of Sarnia Common Stock,
together with a properly completed letter of transmittal
covering such Shares.
12
(e) Parent shall direct the Escrow Agent to pay
to the Shareholder Representative, out of the interest payable
on the Promissory Note and/or any principal amount payable
under the Promissory Note, the amount requested by the
Shareholder Representative, for any reasonable out-of-pocket
costs and expenses (including the reasonable fees and expenses
of legal counsel and accountants) incurred by the Shareholder
Representative in connection with his acting as Shareholder
Representative, including, without limitation, as a result
of his opposition of any Disputed Amount.
(f) If any portion of the Merger Consideration
is paid to or on behalf of a Person other than a registered
holder of the Shares represented by the certificate or
certificates surrendered in exchange therefor, it shall be
a condition to such payment that the certificate or
certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person
requesting such payment shall pay to the Exchange Agent any
transfer or other taxes required as a result of such payment
to a Person other than the registered holder of such Shares
or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(g) After the Effective Time, there shall be no
further registration or transfers of Shares. If, after the
Effective Time, certificates representing Shares are presented
to the Surviving Corporation, they shall be canceled and
exchanged for the consideration provided for, and in
accordance with the procedures set forth, in this Article 3.
(h) Any portion of the Cash Consideration made
available to the Exchange Agent pursuant to Section 3.03(a)
that remains unclaimed by the holders of Shares six (6)
months after the Effective Time shall be returned to Parent
upon demand, and any such holder who has not exchanged its
Shares for the Merger Consideration in accordance with this
Section 3.03 prior to such time shall thereafter look only
to Parent for payment of the Merger Consideration in respect
of such holder's Shares.
(i) In the event that any certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and, if required by Parent, the posting of a
bond in such reasonable amount as Parent may direct, the Exchange
Agent shall pay in exchange for such certificate the Merger
Consideration deliverable in respect thereof as provided herein.
3.04 Stock Options.
At the Effective Time, each option
(an "Option") to purchase shares of Sarnia Common Stock issued
under the 1994 Stock Option Plan of Sarnia, as amended ("Sarnia
Stock Option Plan") which has not previously been exercised
to purchase Sarnia Common Stock shall be vested as of the Effective
Time and the holder of the Option shall be issued the appropriate
number of shares of Sarnia Common Stock, assuming a "cashless"
exercise of such Options pursuant to the terms of the Sarnia Stock
Option Plan. Thereupon, the holder of an Option shall be entitled
to the Merger Consideration with respect to the number of shares
so issued.
13
3.05 Conversion of Acquisition Co. Common Stock. At the
Effective Time, each share of Common Stock, $.01 par value, of
Acquisition Co. issued and outstanding immediately prior to the
Effective Time shall remain outstanding and, by virtue of the
Merger, automatically and without any action on the part of the
holder thereof, be converted into and become one validly issued,
fully paid and nonassessable share of Common Stock of the
Surviving Corporation.
3.06 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of capital stock of Sarnia that
are outstanding immediately prior to the Effective Time and that
are held by shareholders who are entitled to vote and who have
not voted such shares in favor of the approval and adoption of
this Agreement and the Merger and who, in accordance with
section 13.1-733 of the Virginia Stock Corporation Act, shall
have delivered a written notice of intent to demand payment
prior to the Shareholder meeting approving the Merger and who
thereafter has submitted a written demand for payment in the
manner provided in Section 13.1-734 of the Virginia Stock
Corporation Act and who otherwise fully complied with the
Virginia Stock Corporation Act ("Dissenting Shares") shall
not be converted into or be exchangeable for the right to
receive the Merger Consideration provided in Section 3.02
of this Agreement, but the holders of such shares shall be
entitled to payment of the fair value of such shares in
accordance with the provisions of the Virginia Stock Corporation
Act; provided, however, that: (i) if any holder of Dissenting
Shares shall subsequently deliver a written withdrawal of his
or her demand for the fair value of such shares (with the
written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective
Time); or (ii) if any holder fails to perfect or loses his,
her or its dissenter's rights as provided in the Virginia
Stock Corporation Act; or (iii) if any holder of Dissenting
Shares fails to demand payment within the time periods
provided in the Virginia Stock Corporation Act, such holder
shall forfeit the right to the fair value of such shares and
such shares shall thereupon be deemed to have been converted
into and to have become exchangeable for, as of the Effective
Time, the right to receive the Merger Consideration without
any interest thereon.
3.07 Dissenting Shares After Payment of Fair Value.
Dissenting Shares, if any, after payment of fair value plus
interest in respect thereto, has been made to dissenting
shareholders of Sarnia pursuant to the Virginia Stock
Corporation Act, or any final court order, shall be
canceled.
3.08 Closing of Stock Transfer Books. On and after
the Effective Time, there shall be no transfers on the stock
transfer books of Sarnia or Parent of shares of capital stock
of Sarnia that were issued and outstanding immediately prior
to the Effective Time.
3.09 Deliveries at the Closing.
(a) At the Closing, Parent and Acquisition Co.
shall deliver to Sarnia:
(i) the opinion of Parent's and Acquisition
Co.'s counsel, covering the matters set forth in Exhibit 3.09(a)
(i) and otherwise in form reasonably satisfactory to Sarnia and
its counsel; and
14
(ii) certificates of incorporation of Parent
and Acquisition Co., certified by the Secretary of State of
Delaware and the State Corporation Commission of Virginia,
respectively, as of a date no more than twenty-five (25)
days prior to the Closing Date;
(iii) bylaws of Parent and Acquisition Co.,
each certified by the Secretary of each of Parent and
Acquisition Co. as of the Closing Date;
(iv) a copy of resolutions of the Board of
Directors of each of Parent and Acquisition Co., approving the
execution of this Agreement, approving the reservation of the
funds for the Merger Consideration, approving the issuance of
the Promissory Note and Letter of credit and the consummation
of the transactions contemplated hereby, each certified by the
Secretary of each of Parent and Acquisition Co. as of the
Closing Date;
(v) Good Standing Certificates for each of
Parent and Acquisition Co. as of a date no more than fifteen
(15) days prior to the Closing Date;
(vi) a certificate, signed by Parent as of
the Closing Date, certifying that: (A) the representations and
warranties of Parent set forth herein are true and correct in
all material respects as of the Closing Date; and (B) Parent
has performed all of the obligations under this Agreement that
were required to be performed by Parent prior to or at the
Closing Date (except as performance may have been waived by
Sarnia prior to or at the Closing); and
(vii) a certificate, signed by Acquisition Co.
as of the Closing Date, certifying that: (A) the representations
and warranties of Acquisition Co. set forth herein are true and
correct in all material respects as of the Closing Date; and (B)
Acquisition Co. has performed all of the obligations under this
Agreement that were required to be performed by Acquisition Co.
prior to or at the Closing Date (except as performance may have
been waived by Sarnia prior to or at the Closing).
(b) At Closing, Parent shall deliver to the Escrow
Agent:
(i) the Promissory Note in the principal amount
of $1,000,000; and
(ii) a letter of credit issued by a financial
institution securing the obligation of Parent under the Promissory
Note in form and substance reasonably acceptable to Sarnia;
(c) At the Closing, Sarnia shall deliver to Parent:
(i) the written resignations of all officers
and directors of Sarnia effective as of a date no later than the
Effective Time;
(ii) the articles of incorporation or
equivalent charter document of Sarnia certified by the State
Corporation Commission of Virginia of its incorporation as of a
date no more than twenty-five (25) days prior to the Closing
Date;
(iii) the bylaws of Sarnia, certified by
Sarnia's Secretary as of the Closing Date;
15
(iv) a copy of resolutions of the directors of
Sarnia, approving the execution of this Agreement and consummation
of the transactions contemplated hereby, certified by Sarnia's
Secretary as of the Closing Date;
(v) a Good Standing Certificate for Sarnia from
each jurisdiction listed on Disclosure Schedule 7.01(b) as of a
date no more than twenty-five (25) days prior to the Closing
Date;
(vi) the opinion of Sarnia's counsel, covering
the matters set forth in Exhibit 3.10(b)(vi) and otherwise in
form reasonably satisfactory to Parent and its counsel;
(vii) a certificate, signed by an executive
officer of Sarnia as of the Closing, certifying that: (A) the
representations and warranties of Sarnia set forth herein are
true and correct in all material respects as of the Closing;
and (B) Sarnia has performed all of the obligations under
this Agreement that were required to be performed by Sarnia
prior to or at the Closing (except as performance may have
been waived by Parent prior to or at the Closing);
(viii) "tax clearance certificates" (or the
functional equivalent thereof) from the applicable authorities
of each jurisdiction listed on Disclosure Schedule 7.01(b) and
7.04, indicating that any and all tax obligations of Sarnia that
are due and payable have been paid in full;
(ix) the Books and Records;
(x) all required consents, approvals or
authorizations of third parties;
(xi) an estoppel certificate from tenants who
occupy in the aggregate at least ninety percent (90%) of the
leased space in the Versar Center substantially in form attached
as Exhibit 3.09(c)(xi); and
(xii) all other documents required under Section
6.02 hereof;
(xiii) the agreement of the holders of all of the
Sarnia Preferred Stock to the effect that at the Closing, the shares
of Sarnia Preferred Stock will be deemed to be converted to Sarnia
Common Stock; the holders of Sarnia Preferred Stock will be issued
the appropriate number of shares of Sarnia Common Stock; and such
shares shall be entitled to their pro rata share of the Merger
Consideration and receive the Merger Consideration on as-
converted basis.
3.10 Obligation to Withhold. Sarnia hereby covenants and
agrees that, if and to the extent that any portion of the Merger
Consideration payable to any Shareholder of Sarnia is subject to
withholding for federal or state income tax purposes, Parent may
effect such withholding, but is under no obligation to do so and
shall have no liability for failure to do so except with respect
to any payment described in Section 3.05 hereof.
16
4. TERMINATION OR ABANDONMENT.
--------------------------
4.01 Mutual Agreement. This Agreement may be terminated
by the mutual written agreement of the parties at any time
prior to the Effective Time.
4.02 Breach of Agreements.
--------------------
(a) In the event that (i) there is a breach in any
of the representations, warranties, undertakings or agreements
of Sarnia, or (ii) the Disclosure Schedules delivered pursuant
to Section 5.01(e) disclose facts different from the Disclosure
Schedules delivered at or prior to the time of execution of
this Agreement the effect of which is a Sarnia Material Adverse
Effect, which is not cured within ten (10) days after notice to
cure is given to Sarnia, then Parent may terminate and cancel
this Agreement by providing written notice of such action to
Sarnia.
(b) In the event that there is a breach in any of
the representations, warranties, undertakings or agreements of
Parent, the effect of which is a Parent Material Adverse Effect,
which breach is not cured within ten (10) days after notice to
cure breach is given to Parent by Sarnia, then Sarnia may
terminate and cancel this Agreement by providing written notice
to Parent.
4.03 Failure of Conditions.
---------------------
(a) In the event that any of the conditions to the
obligations of Parent set forth in Section 6.02 are not satisfied
or waived on or prior to the Effective Time, and if any applicable
cure period provided above has lapsed, then Parent may terminate
and cancel this Agreement by delivery of written notice of such
action to Sarnia on such date.
(b) In the event that any of the conditions to the
obligations of Sarnia set forth in Section 6.03 are not satisfied
or waived on or prior to the Effective Time and if any applicable
cure period provided above has lapsed, then Sarnia may terminate
and cancel this Agreement by delivery of written notice of such
action to Parent on such date.
4.04 Regulatory Enforcement Matters.
------------------------------
(a) In the event that Sarnia shall, after the date
of this Agreement, become a party or subject to any new or amended
written agreement, memorandum of understanding, cease and desist
order, imposition of civil money penalties or other regulatory
enforcement action or proceeding with any federal or state agency,
the result of which would have a Sarnia Material Adverse Effect,
and Sarnia has not cured or eliminated any such agreement,
memorandum, order, penalty, action or proceeding on or before
the Automatic Termination Date, then Parent may terminate
this Agreement.
(b) In the event that Parent shall, after the date of
this Agreement, become a party or subject to any new or amended
written agreement, memorandum of understanding, cease and desist
order, imposition of civil money penalties or other regulatory
enforcement action or proceeding with any federal or state agency,
the result of which would have a Parent Material Adverse Effect,
and Parent has not cured or eliminated any such agreement,
memorandum, order, penalty, action or proceeding on or before
the Automatic Termination Date, then Sarnia may terminate this
Agreement.
17
4.05 Fiduciary "Out". In the event that the directors
of Sarnia determine that the Merger Consideration is not fair
to the Shareholders of Sarnia from a financial point of view,
they may terminate this Agreement at any time prior to the
Effective Time, provided that within ten (10) days after such
termination Sarnia shall pay Parent the sum of $100,000.
4.06 Automatic Termination. If the Effective Time
does not occur on or before January 31, 2002 (the "Automatic
Termination Date"), then this Agreement may be immediately
terminated by either party by giving written notice to the
other.
4.07 Effect of Termination. In the event of
termination of this Agreement as provided in this Article 4,
this Agreement shall forthwith become void and except as set
forth in Section 4.05, there shall be no liability or
obligation on the part of any party hereto, provided that
nothing herein shall relieve any party from liability for
any willful breach hereof.
5. ADDITIONAL UNDERTAKINGS PRIOR TO CLOSING.
----------------------------------------
5.01 Business in Ordinary Course. From the date
hereof through the Effective Time or earlier termination
of this Agreement, and except as expressly authorized herein:
(a) With the exception of the dividends to be paid
on the Sarnia Preferred Stock on September 1, 2001 and December 1,
2001, Sarnia shall not declare or pay any dividend or make any
other distribution to Shareholders, whether in cash, stock or
other property.
(b) Sarnia shall conduct its business only in the
usual and ordinary course as it has previously been conducted,
maintain the Versar Center and its other assets in as good
working order and condition as at present, ordinary wear and
tear excepted; perform all material obligations under material
agreements and leases relating to or affecting Sarnia; keep in
full force and effect present insurance polices; and use its
commercially reasonable best efforts to maintain and preserve
the business organizations of Sarnia intact, retain its present
employees, and maintain its relationships with tenants, employees,
suppliers and others having business relations with Sarnia. By
way of amplification and not limitation, Sarnia shall not
without the prior written consent of Parent:
(i) issue any shares of its common or other
capital stock or any options, warrants or other rights to
subscribe for or purchase such common or other capital stock or
any securities convertible into or exchangeable for any such
common or other capital stock; provided that Sarnia may issue:
(A) shares of Sarnia Common Stock upon (I) the exercise of
currently outstanding options referred to in Section 7.01(g)
hereof and (II) the conversion of shares of Sarnia Preferred
Stock;
18
(ii) directly redeem, purchase or otherwise
acquire any of its common or other capital stock; except as
contemplated by the mandatory redemption and conversion
provisions of the Sarnia Preferred Stock;
(iii) effect a reclassification,
recapitalization, split-up, exchange of shares, readjustment or
other similar change in or to any capital stock or otherwise
reorganize or recapitalize;
(iv) grant any increase (other than ordinary
and normal increases consistent with past practices) in the
compensation payable or to become payable to officers or salaried
employees, grant any stock options or, except as required by law,
adopt or make any change in any bonus, insurance, pension or other
Benefit Plan, agreement, payment or arrangement made to, for or
with any of such officers or employees;
(v) prepay any debt in excess of $20,000,
borrow or agree to borrow any amount of funds, except the
$1,500,000 loan from B-R Holdings, Inc., or directly or indirectly
guarantee or agree to guarantee obligations of others, or fail to
pay any monetary obligation in a timely manner prior to
delinquency;
(vi) enter into any lease, agreement, contract
or commitment requiring payments by Sarnia in excess of $50,000
or having a term in excess of three (3) months;
(vii) amend or modify any material contract in
any way materially adverse to Parent or Sarnia;
(viii)agree to increase the compensation or
benefits of any employee (except for normal annual salary
increases and bonuses granted in accordance with past practices);
(ix) place on any of its assets or properties
any mortgage, pledge, charge or other Encumbrance, except the
Deed of Trust for the benefit of B-R Holdings, Inc., to secure
a loan of $1,500,000;
(x) make any loan or advance in excess of
$10,000, or cancel or accelerate any material indebtedness owing
to it or any claims which it may possess or waive any material
rights of substantial value;
(xi) sell or otherwise dispose of any real
property or any material amount of any tangible or intangible
personal property except in the ordinary course; or;
(xii) knowingly commit any act or fail to do
any act which will cause a breach of any agreement, contract
or commitment and which will have a Sarnia Material Adverse
Effect;
(xiii) knowingly violate any law,
statute, rule, governmental regulation or order, which
violation might have a Sarnia Material Adverse Effect;
19
(xiv) purchase any real or personal property
or make any other capital expenditure where the amount paid or
committed thereof is in excess of $20,000 per expenditure;
(xv) Settle with the Virginia Department of
Transportation for the amount of compensation payable to
Sarnia for the taking of a portion of the Versar Center; or
(xvi) amend its articles of incorporation
or bylaws or, except as permitted by Sections 4.05 and 5.05,
enter into any agreement to merge or consolidate with, or sell
a significant portion of its assets to, any other Person other
than hereunder.
(c) Sarnia shall not, without the prior written
consent of Parent, knowingly engage in any transaction or take
any action that would render untrue in any material respect
any of the representations and warranties of Sarnia contained
in this Agreement, as if such representations and warranties
were given as of the date of such transaction or action.
(d) Sarnia shall promptly notify Parent, in writing,
of the occurrence of any matter or event known to and directly
involving Sarnia that could have a Sarnia Material Adverse Effect.
(e) No later than five (5) Business Days prior to
the Effective Time, Sarnia shall deliver to Parent new Disclosure
Schedules that are amended or supplemented to update the
information contained therein in order to reflect any changes
in the information contained therein resulting from events
occurring after the date hereof and on or prior to the Effective
Time. Such Disclosure Schedules may include new schedules
containing exceptions or other disclosure relating to any
representation or warranty, regardless of whether a schedule
of exceptions or other disclosure relating thereto is provided
on the date hereof.
5.02 HSR Act. The parties believe that the
transactions contemplated herein are not subject to the
pre-merger notification filings requirement of the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Act. If it is determined that such filing is necessary
the parties shall cooperate to prepare and file such notification
and Sarnia and Parent shall each pay one-half of the filing fee
and other related costs.
5.03 Breaches. Sarnia shall, in the event it has
Knowledge of the occurrence, or impending or threatened
occurrence, of any event or condition which would cause or
constitute a material breach (or would have caused or constituted
a breach had such event occurred or been known prior to the date
hereof) which caused or would cause a Sarnia Material Adverse
Effect of any of its representations or agreements contained
or referred to herein, give prompt written notice thereof to
Parent, and use its reasonable best efforts to prevent or
promptly remedy the same.
5.04 Consummation of Agreement. Each of the parties
hereto covenants and agrees that it will take all action
reasonably within its power and authority to duly and timely
carry out all of its obligations hereunder, to perform and
comply with all of the covenants, agreements, representations
and warranties hereunder applicable to it, and to cause all
conditions applicable to the obligations of the other party to
effect the Merger pursuant hereto to be satisfied as promptly
as possible. Each party will promptly notify the others in
the event such party receives notice of the
20
institution or threat to institute any action that could cause
the conditions set forth in Sections 6.01, 6.02 or 6.03 not to
be satisfied at the Effective Time. Sarnia shall furnish or make
available to Parent in a timely manner all Disclosure Schedule
and Disclosure Documents not provided to Parent prior to the
execution of the Agreement and all other information, data and
documents in the possession of Sarnia requested by Parent as
may be required to obtain any necessary regulatory or other
approvals of the transaction and shall otherwise cooperate
fully with Parent to carry out the purpose and intent of this
Agreement.
5.05 No-Shop Clause. Subject to the provisions of
Section 4.05 of this Agreement, Sarnia shall not, without the
prior written consent of Parent (which may be withheld by
Parent in its sole discretion): (i) enter into any
negotiations or other discussions with any party other than
Parent with respect to any proposed investment, acquisition,
business combination or purchase of all or any portion of the
stock or assets of Sarnia; (ii) directly or indirectly solicit,
encourage or initiate inquiries, offers or proposals from, or
participate in any discussions or negotiations with, any Person
(other than Parent); or (iii) except as required by law,
disclose any information not customarily disclosed to any
Person (other than Parent) concerning the business and
properties of Sarnia or afford to any Person (other than Parent)
access to the properties, books or records of Sarnia or otherwise
assist or encourage any Person in connection with the foregoing.
Sarnia shall promptly advise Parent of receipt of any proposal
or inquiry concerning any possible such transaction, and the
substance of such proposal or inquiry.
5.06 Interim Operating Reporting. During the period
from the date of this Agreement to the Effective Time, Sarnia
shall cause its officers and other management personnel to:
(a) furnish to Parent upon request of an officer,
executive employee or agent of Parent such financial, operating
and other information and data as is prepared by Sarnia in its
course of business and Sarnia shall also promptly furnish to
Parent other monthly operating and financial reports in such
form as Parent shall reasonably request;
(b) notify Parent in writing of any material adverse
change which caused or would cause a Sarnia Material Adverse
Effect in the financial position or earnings of Sarnia, any
unexpected emergency or other unanticipated change in the
business of Sarnia, any governmental complaint, investigation
or hearing, or adjudicatory proceeding (or communications
indicating that the same may be contemplated), or any material
litigation, arbitration or other such matter that has been
filed or threatened against Sarnia which caused or would cause
a Sarnia Material Adverse Effect;
(c) assist Parent in preparing for the transition
in management, including, without limitation, changes in Benefit
Plans, that will take place after the Effective Time; and
(d) keep Parent fully informed of events which caused
or would cause a Sarnia Material Adverse Effect and will use its
commercially reasonable best efforts to allow Parent to
participate in discussions with senior management of Sarnia
regarding such events.
21
5.07 Access to Information.
(a) Subject to the confidentiality provisions of the
Letter of Intent between Sarnia and Parent signed on June 22, 2001,
Sarnia shall permit Parent reasonable access, in a manner which
will avoid undue disruption or interference with Sarnia's normal
operations, to the properties of Sarnia, and Sarnia shall disclose
and make available to Parent all books, documents, papers and
records, including records in form of electronic media, computer
data bases, computer programs and all other materials and
information relating to the assets, stock ownership, properties,
operations, obligations and liabilities of Sarnia, including, but
not limited to, all books of account (including the general
ledger), tax records, minute books of directors and stockholders'
meetings, organizational documents, material leases, contracts and
agreements, filings with any regulatory authority, accountants'
workpapers (if available and subject to the respective independent
accountants' consent), litigation, investigations and other legal
files, plans affecting employees and any other business activities
or prospects in which Parent may have a reasonable and legitimate
interest in furtherance of the transactions contemplated by the
Agreement. Sarnia shall provide Parent with copies of any of the
foregoing information on request, which copies shall constitute
Disclosure Documents.
(b) Parent shall have the opportunity to interview
key officers and employees of Sarnia in a manner which is not
unreasonably disruptive to the operation of the Business.
(c) Sarnia shall make available to Parent all
Disclosure Documents referred to in the Disclosure Schedules.
5.08 Long-Term Debt.
--------------
(a) At least five (5) days before the Effective Time,
Sarnia shall deliver to Parent payoff statements from each holder
of the long-term debt of Sarnia set forth on Disclosure Schedule
5.08 hereto (such aggregate payoff amounts shall be herein called
the "Long-Term Debt").
(b) At the Effective Time, Parent shall cause Versar,
Inc. to be released from any and all obligations resulting from
and pursuant to each guaranty listed on Disclosure Schedule
5.08 hereto.
5.09 Conversion of Preferred Stock. At or before the
Closing Date, the holders of all outstanding shares of Sarnia
Preferred Stock shall have agreed that their shares of Sarnia
Preferred Stock shall be deemed converted into the appropriate
number of shares of Sarnia Common Stock as of the Effective
Time.
5.10 Shareholder Approval. Prior to the Effective
Time, Sarnia shall take all action necessary, subject to and
in accordance with the Virginia Stock Corporation Act and its
22
Articles of Incorporation and Bylaws, to obtain the requisite
approval and adoption of this Agreement by the Shareholders
of Sarnia and the appointment of the Shareholder
Representative at a duly called meeting or by written
consents pursuant to the Virginia Stock Corporation Act and
shall take such other actions as may be required by
applicable law. The Board of Directors of Sarnia has
determined that the Merger is advisable and in the best
interests of the Shareholders and, subject to its fiduciary
obligations as advised by counsel, shall recommend that the
Shareholders vote to approve and adopt this Agreement and
the Merger and any other matters to be submitted to the
Shareholders in connection therewith.
5.11 Information/Proxy Statement. Sarnia shall
promptly prepare as soon as practicable after the date
hereof a proxy or information statement or other disclosure
document to be distributed to the Shareholders and Option
holders of Sarnia (the "Information/Proxy Statement").
The Information/Proxy Statement shall comply in all material
respects with the provisions of any applicable federal and
state securities laws. Sarnia shall use its reasonable
efforts to obtain, prior to the mailing of the Information/
Proxy Statement, all necessary state securities law permits
or approvals required to carry out the Merger and the
transactions contemplated by this Agreement and Sarnia will
pay all expenses of obtaining any such permits or approvals.
5.12 Notifications and Consents. Parent and Sarnia
shall cooperate and promptly give all notices to, and obtain
all consents, approvals and authorizations of or from, any
individual, company, governmental authority or other person
to permit the consummation of the transactions contemplated
hereby.
6. CONDITIONS TO THE MERGER.
------------------------
6.01 Conditions to Obligations of All Parties. The
respective obligations of each party under this Agreement
shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) No temporary restraining order, preliminary
or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect; provided
that prior to invoking this condition, each party shall use
its reasonable best efforts to have any such order,
injunction, legal restraint or prohibition vacated.
(b) This Agreement and the Merger shall have been
approved and adopted by the affirmative vote of the
Shareholders who hold more than sixty-six and two thirds
percent (66 2/3%) of the outstanding shares of Sarnia Common
Stock (and the holders of Sarnia Preferred Stock shall have
given any consent required by Sarnia's Articles of
Incorporation).
23
(c) The Closing Date and the Effective Time shall
be after January 1, 2002 and on or before the Automatic
Termination Date.
6.02 Conditions Precedent to Parents' Obligations.
Parents' obligations to effect the Merger shall be subject
to the satisfaction (or waiver by Parent) prior to or at the
Effective Time of the following conditions in addition to
any other conditions elsewhere set forth in this Agreement:
(a) Except to the extent such representations and
warranties speak as of a specific date, the representations
and warranties made by Sarnia in this Agreement shall be true
and correct in all material respects at and as of the Effective
Time with the same effect as though such representations and
warranties had been made or given on and as of the Effective
Time and Parent shall have received a certificate from an
executive officer of Sarnia to such effect.
(b) Sarnia shall have performed and complied in
all material respects with all of its obligations and agreements
required to be performed prior to the Effective Time under this
Agreement and Parent shall have received a certificate of an
executive officer of Sarnia to such effect;
(c) Sarnia shall have delivered to Parent audited
consolidated balance sheets of Sarnia as of June 30, 2001, and
the related consolidated statements of operations, shareholders'
equity and cash flows for the year ended June 30, 2001,
certified by AA;
(d) Since the date of this Agreement, there shall
have been no change, occurrence or circumstance which has,
individually or in the aggregate, a Sarnia Material Adverse
Effect.
(e) No temporary restraining order, preliminary
or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger by
Parent or Acquisition Co. shall be in effect, nor shall any
proceeding by any regulatory authority or other person seeking
any of the foregoing be pending.
(f) There shall not have been any action taken, or
any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal.
(g) Except as set forth on Disclosure Schedule
6.02(g), Sarnia shall have given all notices to, and obtained
all consents, approvals or authorizations of or from, any
individual, company, governmental agency or authority or
other Person necessary to permit the consummation of the
transactions contemplated and the continued operation of
the Business by the Surviving Corporation; provided, however,
Sarnia is under no obligation to give any of the notices or
obtain any of the consents, approvals or authorizations set
forth in Disclosure Schedule 6.02(g), and such notices,
consents, approvals and authorizations shall not be a
condition to the Merger.
24
(h) Holders of Sarnia Preferred Stock shall
have either (i) agreed to convert all such shares into
shares of Sarnia Common Stock or (ii) have agreed to the
redemption of such shares.
(i) All holders of Options shall have exercised
their rights to purchase Sarnia Common Stock or shall have
agreed to accept the provisions of Section 3.04 hereinabove.
(j) Lessees in the Versar Center who occupy in
the aggregate ninety percent (90%) or more of the leased
space shall have signed an estoppel certificate (in form
reasonably acceptable to Parent) dated not more than thirty
(30) days prior to the Effective Time.
(k) Versar, Inc. has agreed in writing
(in form and substance reasonably acceptable to Parent) to
irrevocably and permanently waive its recapture right as set
forth in Section 7 of the Amended and Restated Office Lease
dated June 29, 1994, as amended.
(l) Sarnia shall not have suffered after the
date of this Agreement any change which has had, individually
or in the aggregate, a Sarnia Material Adverse Effect.
(m) The Dissenting Shares do not constitute
more than twenty percent (20%) of the shares of Sarnia Common
Stock entitled to vote at the shareholders' meeting called
to consider the merger.
(n) Sarnia shall have received all permits and
approvals necessary for construction, use and occupance of a
two hundred ninety one (291) space parking structure in the
Versar Center.
6.03 Conditions to Obligations of Sarnia. The
obligations of Sarnia to effect the transactions contemplated
by this Agreement are subject to the satisfaction of the
following conditions (which are for the exclusive benefit
of Sarnia, and any or all of which may be waived in whole
or in part by Sarnia):
(a) Except to the extent such representations
and warranties speak as of a specified date, the
representations and warranties of Parent set forth in this
Agreement shall be true and correct in all respects at and
as of the Effective Time with the same effect as though
such representations and warranties had been made or given
at and as of the Effective Time and Sarnia shall have
received a certificate of Parent to such effect;
(b) Parent shall have performed all obligations
required to be performed by it under this Agreement at or
prior to the Effective Time and Sarnia shall have received
a certificate of Parent to such effect;
(c) No temporary restraining order, preliminary
or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger by
Sarnia shall be in effect, nor shall any proceeding by
any regulatory authority or other person seeking any of
the foregoing be pending;
25
(d) There shall not have been any action taken,
or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
(e) Since the date of this Agreement there shall
have been no change, occurrence or circumstance which has had,
individually or in the aggregate, a Parent Material Adverse
Effect.
7. REPRESENTATIONS AND WARRANTIES OF SARNIA.
----------------------------------------
As a material inducement for Parent and Acquisition
Co. to enter into this Agreement and to consummate the
transactions contemplated hereby, Sarnia hereby makes the
following representations and warranties as of the date hereof
and as of the Effective Time, each of which is relied upon by
Parent regardless of any investigation made or information
obtained by Parent (unless and to the extent specifically and
expressly waived in writing by Parent on or before the Effective
Time):
7.01 Sarnia Organization; Qualification and Capital Stock;
-----------------------------------------------------
Corporate Records.
-----------------
(a) Sarnia is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Virginia, and has the corporate power to own all of its
property and assets, to incur all of its liabilities and to
carry on the Business as now being conducted.
(b) Except as set forth on Disclosure Schedule 7.01(b),
Sarnia is duly qualified and in good standing in each jurisdiction
in which the nature or conduct of the Business or the character or
location of its properties makes such qualification necessary,
except where the failure to be so qualified would not have a
Sarnia Material Adverse Effect. A list of all jurisdictions in
which Sarnia is qualified to do business appears on Disclosure
Schedule 7.01(b).
(c) The names of the directors and officers of Sarnia,
together with the offices they hold, are set forth on Disclosure
Schedule 7.01(c). Attached to Disclosure Schedule 7.01(c) are
true and correct copies of: (i) the articles of incorporation of
Sarnia, together with all amendments thereto; and (ii) the bylaws
of Sarnia, together with all amendments thereto.
(d) The authorized capital stock of Sarnia consists
of: (i) 20,000,000 shares of voting Common Stock, no par value,
of which 4,572,545 shares are duly and validly issued and
outstanding, fully paid and non-assessable; (ii) 1,000,000
shares of Preferred Stock, $25.00 par value, of which 30,000
shares of Series A cumulative preferred are duly and validly
issued and outstanding, fully paid and non-assessable.
Disclosure Schedule 7.01(d) sets forth a complete and correct
list of the holders of record of Sarnia Common Stock and Sarnia
Preferred Stock and the holders of all Options or other rights
to purchase Sarnia Common Stock or Sarnia Preferred Stock,
including by name of the holder, if obtainable, the number of
shares or the number of shares obtainable on exercise of Options
or rights held. Disclosure Schedule 7.01 (d) sets forth the
amount of the cumulative preferred dividend to which each holder
of Sarnia Preferred Stock is entitled. No shares of any class
of stock are held in the treasury of Sarnia.
26
(e) None of the outstanding shares of Sarnia's
capital stock has been issued in violation of any: (i)
applicable federal or state securities laws, regulations or
rules other than any such violation that would not have a
Sarnia Material Adverse Effect; or (ii) preemptive rights of
the current or past stockholders of Sarnia.
(f) Except as set forth in Disclosure Schedule
7.01(g), there are no issued or outstanding options, warrants,
rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of the capital stock of Sarnia,
or contracts, commitments, understandings or arrangements by
which Sarnia is or may be obligated to issue additional shares
of its capital stock or options, warrants or rights to purchase
or acquire any additional shares of its capital stock. Upon
consummation of the Merger, no options, warrants or other
rights to acquire shares of Sarnia's capital stock shall be
outstanding.
(g) Since March 31, 2001, except for the dividends
paid to the Sarnia Preferred Stockholders on June 1, 2001 and
September 1, 2001 and which will be paid on December 1, 2001,
Sarnia has not: (i) paid any dividend to any of its equity
owners; or (ii) made any other distribution on or with respect
to, or redeemed or otherwise acquired, any equity interest in
Sarnia.
(h) Sarnia has full power and authority to enter
into this Agreement and perform its duties and obligations
hereunder. All corporate actions of Sarnia required to
authorize the execution of this Agreement and the transactions
contemplated hereby have been duly performed in accordance
with applicable law and its articles of incorporation and
bylaws and are appropriately reflected in Sarnia's minute
books. This Agreement is a valid obligation of Sarnia,
legally binding upon it and enforceable in accordance with
its terms. There is no claim, action, suit or proceeding
(including, without limitation, current investigations by
governmental agencies) pending against Sarnia seeking to
enjoin the execution and delivery of this Agreement or
consummation of the transactions contemplated hereby.
(i) The Books and Records of Sarnia are in all
material respects complete and correct and have been
maintained in accordance with good business practice.
True and complete copies of all minutes and resolutions are
contained in the minute books and stock transfer books that
have been delivered to Parent for inspection and will be
delivered to Parent at or prior to the Effective Time.
The minute books and such other books and records as may
be requested by Parent, as exhibited to Parent and its
representatives, are complete and correct in all material
respects.
7.02 Trade Names and Fictitious Names. Disclosure
Schedule 7.02 contains a list which, to the best of Sarnia's
Knowledge, provides: (i) all trade names and fictitious
names, whether registered or not, used by Sarnia during the
past five (5) years and (ii) a list of locations of business
offices by state and county in which each such name was used
during the past five (5) years.
27
7.03 Authorization; No Violations of Laws or
---------------------------------------
Agreements, Consents or Defaults.
---------------------------------
(a) The delivery of this Agreement and the
consummation of the transactions contemplated hereby will
not result in any breach or violation of any of the terms
or provisions of, or constitute a default under: (i) the
articles of incorporation or bylaws of Sarnia or (ii) or
to Sarnia's Knowledge any statute, order, decree,
proceeding, rule or regulation of any court or governmental
agency or body, United States or foreign, having
jurisdiction over Sarnia other than any breach, violation
or default which, if made, would not have a Sarnia Material
Adverse Effect.
(b) Except as set forth in Disclosure Schedule
7.03(b), the delivery of this Agreement and the
consummation of the transactions contemplated hereby will
not result in a material breach or violation of the terms
of, or constitute a default under, any agreement, instrument
or commitment to which Sarnia is a party, by which it is
bound, or to which any of Sarnia's property is subject,
other than any breach, violation or default which, if made,
would not have a Sarnia Material Adverse Effect. Except
as set forth on Disclosure Schedule 7.03(b), to Sarnia's
Knowledge, no consent or approval is required from any
third party for the consummation of the Merger.
(c) Except as set forth in Disclosure Schedule
7.03(c), Sarnia is not in default under, or in violation of
any provision of, its articles of incorporation, bylaws, or
any promissory note, indenture or any evidence of
indebtedness or security thereof, lease, contract, purchase
or other commitment or any other agreement which is material
to Sarnia other than any default or breach which if made
would not have a Sarnia Material Adverse Effect.
7.04 Subsidiaries. Sarnia does not directly or
indirectly own any stock of, or any other interest in, any
other company, partnership, joint venture or business
entity.
7.05 Financial Information.
---------------------
(a) Attached hereto as Disclosure Schedule
7.05(a) are true and complete copies of the Financial
Statements. The Financial Statements (including any related
schedules and/or notes, if any) have been prepared in
accordance with GAAP consistently applied and consistent
with prior periods. Such balance sheets fairly present in
all material respects the financial position of Sarnia as
of their respective dates, and such statements of
operations, shareholders' equity and cash flows fairly
present in all material respects the results of operations
of Sarnia for the respective periods then ended.
(b) Except as and to the extent: (i) reflected
on the balance sheet of Sarnia as of June 30, 2001,
referred to above; (ii) incurred since June 30, 2001 in the
ordinary course of business consistent with past practice;
or (iii) set forth on Disclosure Schedule 7.05(a) hereto,
Sarnia does not have any material liabilities or obligations
of any kind or nature, whether known or
28
unknown or secured or unsecured (whether absolute, accrued,
contingent or otherwise, and whether due or to become due)
that would be required to be reflected on a balance sheet,
or the notes thereto, prepared in accordance with GAAP.
7.06 Absence of Material Changes. Except as set
forth on Disclosure Schedule 7.06, since June 30, 2001:
(i) the business affairs of Sarnia have been conducted
in the usual and ordinary course of business; (ii)
after the close of business on such date, no transaction
has taken place or material contract entered into other
than in the usual and ordinary course of business as
heretofore conducted; and (iii) there has been no
action, course of conduct or occurrence which, if taken
place after execution of this Agreement, would
constitute a breach of Section 5.01 hereof.
7.07 Licenses; Regulatory Approvals. Except as
set forth on Disclosure Schedule 7.07, to Sarnia's Knowledge
it holds all material licenses, certificates of occupancy
and other regulatory approvals required or necessary to be
applied for or obtained in connection with its Business
as presently conducted or as presently proposed to be
conducted except for such of the foregoing which, if not
held, would not have a Sarnia Material Adverse Effect.
All such licenses, certificates of occupancy, other
certificates and other approvals are listed on Disclosure
Schedule 7.07. Except as set forth on Disclosure Schedule
7.07, to Sarnia's Knowledge all such licenses, certificates
and other regulatory approvals relating to the business,
operations, facilities and properties of Sarnia are in full
force and effect. Except as set forth on Disclosure Schedule
7.07, any and all past litigation concerning such licenses,
certificates and regulatory approvals, and all claims and
causes of action raised therein, have been finally
adjudicated, and, in the case of such litigation finally
adjudicated since (June 30, 2001), such adjudication has
not had a Sarnia Material Adverse Effect. Except as set
forth on Disclosure Schedule 7.07, to Sarnia's Knowledge
no such license, certificate of need or regulatory approval
has been revoked, conditioned (except as may be customary)
or restricted, and no action (equitable, legal or
administrative), arbitration or other process is pending,
or to the Knowledge of Sarnia, threatened, which in any
way challenges the validity of, or seeks to revoke,
condition or restrict any such license, certificate of
need or regulatory approval.
7.08 Tax Matters.
-----------
(a) Except as set forth in Disclosure Schedule
7.08, Sarnia has filed, with the appropriate governmental
agencies, all returns, information statements and reports
required to be filed by or on behalf of Sarnia and each
Subsidiary prior to the date hereof with respect to all
taxes (referred to herein collectively as "Taxes").
(b) Except as set forth in Disclosure Schedule
7.08, Sarnia has not paid any penalty, surcharge, fine or
interest in connection with any alleged underpayment of Taxes.
(c) Except as set forth in Disclosure Schedule
7.08, Sarnia has paid (or Sarnia has established an adequate
reserve on
29
the Financial Statements for) all Taxes that have become due
from and payable by it to any federal, state, county, local,
foreign or other taxing authority. Sarnia has made or will
make full provision or reserve in the Financial Statements
for all Taxes for which Sarnia is or may be liable with
respect to income, profits or gains earned, accrued or
received by it on or before the Effective Time and full and
proper provision has been made in the Financial Statements
for deferred Taxes in accordance with GAAP. Except as set
forth on Disclosure Schedule 7.08, all estimated payments
of Taxes which have become due and payable prior to the
date of this Agreement have been paid.
(d) Except as set forth on Disclosure Schedule
7.08, Sarnia has properly withheld from the salaries,
wages or other compensation paid or payable to officers,
employees or other persons, and has paid to the appropriate
federal, state or local taxing authorities, all amounts
required to be withheld therefrom under applicable laws,
rules or regulations.
(e) Except as set forth on Disclosure Schedule
7.08, to the best of Sarnia's Knowledge, no event,
transaction, act or omission has occurred which could result
in Sarnia becoming liable for any Taxes which are primarily
or directly chargeable against or attributable to a Person
other than Sarnia or which is charged by reference to the
income or gains of another Person.
(f) Except as set forth on Disclosure Schedule
7.08, to the best of Sarnia's Knowledge, no return (or item
in a return) is currently under audit by any taxing
authority, and there are no agreements for the extension
of time for the assessment or payment of any Taxes.
Except as set forth on Disclosure Schedule 7.10, Sarnia is
not involved in an administrative or judicial proceeding
in relation to any tax matters, and to the best of
Sarnia's Knowledge no taxing authority has investigated
or indicated that it intends to investigate Sarnia's tax
matters.
7.09 Litigation; Claims.
------------------
(a) Except as set forth on Disclosure Schedule
7.09: (i) there is no claim or investigation by any Person
or governmental entity ("Claim") and there is no action,
suit or proceeding, whether at law or in equity, pending
or, to Sarnia's Knowledge, threatened (a "Legal Proceeding")
that would question the validity of this Agreement or the
related agreements or any action taken or to be taken by
Sarnia in connection with the consummation of the
transactions contemplated hereby or thereby or which seeks
to prohibit, enjoin or otherwise challenge any of the
transactions contemplated hereby or thereby; and (ii) there
is no outstanding or, to Sarnia's Knowledge, threatened,
injunction, judgment, order or consent or similar decree
or agreement (including, without limitation, any consent
or similar decree or agreement with any governmental
entity) against, affecting or naming Sarnia which might
have a Sarnia Material Adverse Effect or might materially
adversely affect the ability of Sarnia to consummate the
transactions contemplated hereby.
(b) Disclosure Schedule 7.09 sets forth an
accurate and complete list, and a brief description
(setting forth the names of the parties involved, the
court or other governmental or mediating entity involved,
the relief sought and the substantive allegations and the
status thereof), of each Legal Proceeding pending or, to
30
the Knowledge of Sarnia, threatened against or affecting
Sarnia, and to the Knowledge of Sarnia, no event has
occurred and no circumstance, matter or set of facts exists
which would constitute a valid basis for the assertion by
any third party of any claim or Legal Proceeding, other
than those listed on Disclosure Schedule 7.09, which in
either case might have a Sarnia Material Adverse Effect
or might materially adversely affect the ability of
Sarnia to consummate the transactions contemplated
hereby.
7.10 Properties; Contracts; Leases and Other
---------------------------------------
Agreements; Bank Accounts.
--------------------------
(a) Sarnia does not own any real property
other than the Versar Center.
(b) All real property owned by Sarnia and
any personal property used by Sarnia in the Business
are owned in fee simple by Sarnia or are held pursuant
to lease agreements which are valid and enforceable
in accordance with their terms. Such lease agreements
are listed on Disclosure Schedule 7.10(b). All such
properties comply in all material respects with all
applicable private agreements, zoning requirements
and other governmental laws and regulations relating
thereto, except to the extent that any such
noncompliance would not have a Sarnia Material Adverse
Effect; and (ii) except as set forth on Disclosure
Schedule 7.10(b), there are no condemnation
proceedings pending or, to Sarnia's Knowledge,
threatened with respect to such properties that
could reasonably be expected to have a Sarnia
Material Adverse Effect.
(c) Except as set forth on Disclosure
Schedule 7.10(c), and excluding trade accounts payable
incurred in the ordinary course of business and payable
to Persons other than affiliates of Sarnia, Sarnia does
not have any liabilities for borrowed funds, extensions
of credit or other advances that are subject to
repayment, whether pursuant to a written agreement,
oral understanding or course of conduct, and whether
reflected on the Financial Statements as indebtedness,
accounts payable or otherwise, and except as set forth
on Disclosure Schedule 7.10(c), such liability set forth
on Disclosure Schedule 7.10(c) may be prepaid at any
time without premium or penalty.
(d) Except as set forth in Disclosure Schedule
7.10(d), Sarnia is not party to any agreements, contracts
or commitments relating to the acquisition of the assets
or capital stock of any other business enterprise.
(e) Disclosure Schedule 7.10(e) lists all
agreements, loans, contracts, guaranties, letters of credit,
lines of credit or commitments of Sarnia not referred to
elsewhere in this Agreement to which Sarnia is a party which:
(i) involve potential payments by Sarnia,
or incurring by Sarnia, of costs or obligations of more than
$20,000 ;
(ii) involve payments based on profits
of Sarnia;
(iii) relate to the future purchase of
goods or services in excess of the requirements of the
Business at current levels or for normal operating purposes;
31
(iv) include powers of attorney or grants
of agency by Sarnia;
(v) cannot be cancelled by Sarnia without
penalty or premium on no more than thirty (30) days' notice;
(vi) were not made in the ordinary course
of business; or
(vii) otherwise materially affect the
Business or financial condition of Sarnia.
(f) Except as set forth in Disclosure Schedule
7.10(f), no lease or other contracts with third-parties
material to the Businesses will terminate or are subject
to modification by reason of consummation of the Merger.
(g) Except as set forth in Disclosure Schedule
7.10(g), to Sarnia's Knowledge , Sarnia is not in default,
technical or otherwise, of any real estate lease, equipment
lease, loan or credit agreement, or any other contract or
agreement to which Sarnia is a party, and no event or
condition has occurred or exists which, with the passage
of time, giving of notice or both, would cause any party
to be in default thereunder, except where such default
would not have a Sarnia Material Adverse Effect.
(h) Set forth on Disclosure Schedule 7.10(h)
is an accurate and complete list showing the name and
address of each bank, securities broker, mutual fund,
investment company, investment adviser or other financial
institution or similar Person with which Sarnia has an
account, including the account or box number and the names
of all persons and entities authorized to draw thereon or
have access thereto.
(i) Set forth on Disclosure Schedule 7.10(i)
is an accurate and complete rent roll for the Versar
Center. Each lease described thereon is a Disclosure
Document and a true and correct copy has been delivered
to Parent.
(j) To Sarnia's Knowledge, except as set forth
on Disclosure Schedule 7.10(j), all material leases and
contracts and agreements to which Sarnia is a party
("Contracts"): (i) are valid and enforceable in accordance
with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity); (ii) to
Sarnia's Knowledge no Default (as defined below) exists
under any Contract either by Sarnia or by any other party
thereto; (iii) Sarnia has no Knowledge of the assertion
by any third party of any claim of Default or breach under
any of the Contracts; and (iv) Sarnia has no Knowledge of
any present intention on the part of any significant tenant
of the Versar Center, customer or supplier or other business
partner of Sarnia to either: terminate or significantly
change its existing lease or business relationship with
Sarnia either now or in the foreseeable future; For purposes
of this Agreement, the term "Default" means, with respect to
any Contract: (1) any breach of or default under
32
such Contract; (2) any event, other than the normal passage
of time, which would (either with or without notice or lapse
of time or both) give rise to any right of termination,
cancellation or acceleration or any obligation to repay with
respect to such Contract; or (3) any event, other than the
normal passage of time, which would result in either a
significant increase in the obligations or liabilities of,
or a loss of any significant benefit of, the party in
question under such Contract.
7.11 Employee Matters; Benefit Plans; ERISA.
--------------------------------------
(a) Except as may be disclosed in Disclosure
Schedule 7.11(a), Sarnia has not entered into any collective
bargaining agreement with any labor organization with respect
to any employees of Sarnia; and, to the Knowledge of Sarnia,
there is no present effort or existing proposal to attempt
to unionize any employees of Sarnia.
(b) Except as may be disclosed in Disclosure
Schedule 7.11(b):
(i) Sarnia is and has been in material
compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment
and wages and hours, including, without limitation, any such
laws respecting employment discrimination and occupational
safety and health requirements, and Sarnia is not engaged
in any unfair labor practices, except where such
noncompliance or engagement would not have a Sarnia Material
Adverse Effect.
(ii) there is no material unfair labor
practice complaint against Sarnia pending or, to the
Knowledge of Sarnia, threatened before the National Labor
Relations Board;
(iii) there is no labor dispute, strike,
slowdown or stoppage actually pending or, to the Knowledge
of Sarnia, threatened against or directly relating to Sarnia;
and
(iv) Sarnia has not experienced any
material work stoppage or other material labor difficulty
during the past year.
(c) Except as described and attached to
Disclosure Schedule 7.11(c), Sarnia is not a party to any
agreement for the employment, retention or engagement, or
with respect to the severance, of any officer, employee,
agent or consultant. Disclosure Schedule 7.11(c) contains
a correct and complete list of all compensation plans and
arrangements; bonus and incentive plans and arrangements;
deferred compensation plans and arrangements; stock purchase
and stock option plans and arrangements; hospitalization and
other life, health or disability insurance or reimbursement
programs; holiday, sick leave, severance, retention, vacation,
tuition reimbursement, personal loan and product purchase
discount policies and arrangements, policy manuals and any
other plans or arrangements providing for benefits for
employees of Sarnia.
(d) Except as set forth in Disclosure Schedule
7.11(d), none of the ERISA Affiliates maintains, contributes
33
to or participates in any Benefit Plan, whether as sponsor,
adopting employer or otherwise.
(e) Sarnia has no material Benefit Liabilities
that are not reflected or disclosed in the Financial
Statements.
(f) Except as set forth in Disclosure Schedule
7.11(f), to the best of the knowledge of Sarnia, no ERISA
Affiliate participates in, has in the past three (3) years
participated in or has any present or future obligation or
liability under any multi-employer plan (as defined at
Section 3(37) of ERISA).
(g) All Benefit Plans have in all material
respects been operated, administered and maintained in
accordance with the terms thereof and in compliance with
the requirements of all applicable laws, including,
without limitation, ERISA and the Code except where the
failure to comply with such laws would not have a Sarnia
Material Adverse Effect
(h) All contributions to, and payments from,
the Benefit Plans, which may have been required to be made
in accordance with the Benefit Plans and, when applicable,
Section 302 of ERISA or Section 412 of the Code, have been
timely made. All such contributions to the Benefit Plans,
and all payments under the Benefit Plans, except those to
be made from a trust qualified under Section 401(a) of the
Code, for any period ending before the Effective Time that
are not yet, but will be, required to be made, are properly
accrued and reflected on the respective Financial Statements.
No Benefit Plan has applied for or received a waiver of the
minimum funding standards imposed by Section 412 of the Code.
(i) All reports, returns and similar documents
with respect to the Benefit Plans required to be filed with
any governmental agency or distributed to any Benefit Plan
participant have been duly and timely filed or distributed.
(j) All of the Benefit Plans which are "pension
benefit plans" (as defined in Section 3(2) of ERISA) have
received determination letters from the IRS to the effect
that such plans are qualified, and each trust maintained
in connection with such plan is exempt from federal income
taxes under Sections 401(a) and 501(a), respectively, of
the Code; and no determination letter with respect to any
Benefit Plan has been revoked nor, to the best of
Sarnia's knowledge, has revocation been threatened, nor
has any Benefit Plan been amended since the date of its
most recent determination letter or application therefore
in any respect which would adversely affect its
qualification or materially increase its cost, and no
Benefit Plan has been amended in a manner that would
require security to be provided in accordance with Section
401(a)(29) of the Code.
(k) Each of the Benefit Plans has been
administered at all times, and in all material respects,
in accordance with its terms except that in any case in
which any Benefit Plan is currently required to comply
with a provision of ERISA or the Code, but is not yet
required to be amended to reflect such provision, it has
been administered in accordance with such provision.
There are no pending investigations by any governmental
agency involving the Benefit Plans, no termination
proceedings involving the Benefit Plans, and no
threatened or pending claims (except for claims for
benefits payable in the normal operation of the
Benefit Plans),
34
suits or proceedings against any Benefit Plan or
asserting any rights or claims to benefits under any Benefit
Plan which could give rise to any liability, nor, to the
best of Sarnia's knowledge, are there any facts which could
give rise to any liability in the event of any such
investigation, claim, suit or proceeding.
(l) None of the Benefit Plans, any ERISA
Affiliate, any employee of Sarnia or, to the best of
Sarnia's Knowledge, any trusts created thereunder, or
any trustee, administrator or other fiduciary thereof,
has engaged in a "prohibited transaction" (as such term
is defined in Section 4975 of the Code or Section 406 of
ERISA) which could subject any of them to the tax or
penalty on prohibited transactions imposed by such Section
4975 of the Code or the sanctions imposed under Title I of
ERISA. Neither the Benefit Plans nor any such trust has
been terminated nor have there been any "reportable
events" (as defined in Section 4043 of ERISA and the
regulations thereunder) with respect to either thereof.
(m) No Benefit Plan subject to Title IV of
ERISA has incurred any liability to the Pension Benefit
Guaranty Corporation other than for the payment of
premiums, all of which have been paid when due. Each
Benefit Plan subject to Title IV of ERISA has assets
sufficient on a plan termination basis to be eligible
at the Effective Time for a standard termination pursuant
to ERISA Section 4041 without an ERISA Affiliate being
required to make any additional contributions. Each
Benefit Plan subject to Title IV of ERISA has assets
equal to or greater than such Benefit Plan's project
benefit obligations as disclosed in such Benefit Plan's
most recent actuarial report. All unfunded liabilities
of each Benefit Plan not subject to Title IV or ERISA
have been accrued or expensed in accordance with GAAP.
(n) The latest reports or forms, if any,
filed with the Department of Labor and Pension Benefit
Guaranty Corporation under ERISA, any current financial
or actuarial reports and any currently effective IRS
private rulings or determination letters obtained by
or for the benefit of Sarnia, and all current and prior
summary plan descriptions, in respect to any of the
Benefit Plans, are listed in Disclosure Schedule
7.11(n).
(o) Sarnia is in material compliance with
the coverage continuation requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.
(p) Since ninety (90) days prior to Effective
Date, Sarnia has not temporarily or permanently closed or
shut down any single site of employment or any facility or
any operating unit, department or service within a single
site of employment, or effected a mass layoff, as such
terms are used in the WARN Act.
7.12 Title to and Condition of Properties.
------------------------------------
(a) Except as described in Disclosure Schedule
7.12(a), Sarnia is the sole owner and has good, valid and
marketable title to the Versar Center and to all of the
other assets used in connection with the operation of the
Business, free and clear of all liens, encumbrances,
judgments, easements and restrictions.
(b) Except as disclosed in Disclosure Schedule
7.12(b), each item of equipment, each mechanical system
and each elevator
35
located in the Versar Center is in good and workable
condition, reasonable wear and tear excepted, of a quality
and quantity usable in the ordinary course of the Business.
(c) Except (i) as disclosed in Disclosure
Schedule 7.12 (c), or (ii) as may have been ascertained by
experts and consultants engaged by Parent, copies of whose
reports have been delivered to Sarnia, to Sarnia's Knowledge
the buildings in the Versar Center are in good condition and
no significant replacement or repair is necessary or
contemplated.
7.13 Intellectual Property.
---------------------
(a) Disclosure Schedule 7.13(a) sets forth a
list of all Intellectual Property which is owned by, licensed
by, or licensed to Sarnia or otherwise used or able to be
used in the Business (other than commonly-used computer
software which is generally available to the public and
the use rights to which were legally acquired by Sarnia
either for free or through established retail facilities)
and indicates, with respect to each item of Intellectual
Property listed thereon, the owner thereof and, if
applicable, the name of the licensor and licensee thereof
and the terms of such license or other contract relating
thereto. Sarnia owns or has the lawful right to use all
Intellectual Property as currently used or as necessary
for the conduct of the Business as now conducted. After
the Effective Time, the Surviving Corporation will have
the right to use all of the Intellectual Property as
currently used or as necessary for the conduct of the
Business as now conducted.
(b) Except as set forth in Disclosure Schedule
7.13(b), Sarnia has no liability or obligations to any
third parties incident to the Intellectual Property used
or able to be used by Sarnia in the conduct of the
Business as heretofore conducted, and Sarnia has timely
met all of its obligations to any third parties incident
to the Intellectual Property used or able to be used by
Sarnia in the conduct of the Business as heretofore
conducted, and such obligations have been correctly and
adequately disclosed in the Financial Statements.
(c) Except as set forth in Disclosure Schedule
7.13(c), Sarnia is not a party to any confidentiality or
other agreement which materially restricts its use or
disclosure of information.
7.14 Insurance. All material insurable properties
owned or held by Sarnia and all commercially reasonable
insurable risks related to the Business, are adequately
insured by insurers which are to the best of Sarnia's
Knowledge financially sound and reputable, in such
amounts and against fire and other risks insured against
by extended coverage and public liability insurance,
property damage, product liability, general liability,
workers compensation, fidelity bonds, professional
liability insurance and errors and omissions insurance,
and against other risks and in such amounts as would be
prudently insured against by comparable businesses and
as may be required by law or any agreement to which
Sarnia is a party. Disclosure Schedule 7.14 lists all
policies of insurance owned or held by Sarnia insuring
Sarnia's assets. All current premiums and any other
obligations under such insurance have been paid and
all such policies are valid and enforceable and in
full force and effect on the date hereof. Sarnia has
not received
36
any notice of cancellation or of premium increase
under any such policies within the last ninety
(90) days.
7.15 Relationships.
-------------
(a) To Sarnia's Knowledge, its relationships
with its lessees and vendors are satisfactory, and
Sarnia has no Knowledge of any facts or circumstances
which might materially alter, negate, impair or in
any way materially adversely affect the continuity
of any such relationships.
(b) Except as disclosed in Disclosure Schedule
7.15(b), Sarnia has no Knowledge of and has not received
notice of any complaints, claims, threats, plans or
intentions to discontinue relations or terminate a lease
from any lessee or from any provider of goods or services
to Sarnia. Except as set forth on Disclosure Schedule
7.15(b), Sarnia has not breached or is in breach of any
of its obligations under any lease agreement with a
existing or prior tenant in the Versar Center.
(c) Except for the consequences of the
condemnation proceeding instituted by VDOT, Sarnia has
no Knowledge of any present or future condition or state
of facts or circumstances which would prevent the Business
from being carried on by the Surviving Corporation after
the Closing Date in essentially the same manner as it is
presently being carried on.
7.16 Compliance With Laws.
--------------------
(a) The operations and activities of Sarnia
have previously and continue to comply in all material
respects with all applicable Federal, state and local
laws, statutes, codes, ordinances, rules, regulations,
permits, judgments, orders, writs, awards, decrees or
injunctions (collectively, the "Laws"), as in effect
on or before the date of this Agreement, except where
such limitation or restriction would not have a Sarnia
Material Adverse Effect. To the best of Sarnia's
Knowledge, the conduct of the Business as presently
conducted does not conflict with the rights of any
other person, firm or company and does not violate,
or with or without the giving of notice or the
passage of time, or both, would violate, conflict
with or result in a default, right to accelerate or
loss of rights under any terms or provisions of its
articles of incorporation or bylaws as presently in
effect, or any Encumbrance, lease, agreement,
understanding, or Laws to which Sarnia is a party
or by which it may be bound or affected. Except as
set forth on Disclosure Schedule 7.16, Sarnia has
not received a notice or communication from any
Person asserting a failure to comply with any Laws,
nor has Sarnia received any notice that any authority
or third party intends to seek enforcement against
Sarnia to compel compliance with any such Laws.
(b) Neither Sarnia nor to the best Sarnia's
Knowledge any officer, employee or agent of Sarnia
acting on its behalf, nor any other Person acting on
its behalf, has directly or indirectly within the past
three (3) years given or agreed to give any gift or
similar benefit to any tenant, supplier, governmental
employee or other Person who is or may be in a
position to help or hinder Sarnia or assist Sarnia
in connection with any actual or proposed transaction
which might subject Sarnia to any damage or penalty
in any civil, criminal or governmental litigation
or proceeding.
37
7.17 Environmental Matters.
---------------------
(a) Except as may be disclosed in Disclosure
Schedule 7.17(a), Sarnia has not has received any written
notice from any Person of an Environmental Claim, and Sarnia
does not have any Knowledge that any person has made an
Environmental Claim, alleging that Sarnia or the operation
or condition of any property ever owned, leased or operated
by Sarnia is or was in violation of any Environmental Laws,
or that Sarnia is responsible (or potentially responsible)
for remedying, or the cleanup of, any pollutants,
contaminants or hazardous or toxic wastes, substances or
materials at, on or beneath any such property.
(b) Except as may be disclosed in Disclosure
Schedule 7.17(b), the conduct or operation of Sarnia
or of any prior owner of the Versar Center or any
condition of any property presently or previously owned,
leased or operated by Sarnia does not materially violate
and has not materially violated Environmental Laws; and no
condition or event has occurred with respect to any of them
or any such property that, with notice or the passage of
time, or both, would constitute a material violation under
Environmental Laws or obligate (or potentially obligate)
Sarnia to remedy, stabilize, neutralize or otherwise alter
the environmental condition of any such property where the
aggregate cost of such actions would cause a Sarnia Material
Adverse Effect.
(c) Sarnia possesses all material permits and
other governmental authorizations required under applicable
Environmental Laws to operate the Business as currently
operated, and Sarnia is and at all times has been in
compliance in all material respects with the terms and
conditions thereof.
(d) Except as may be disclosed on Disclosure
Schedule 7.17(d), no Hazardous Substances have been
generated or stored on, at, or adjacent to, or disposed
of or released on, from or adjacent to the Versar Center
or any other property owned at any time by Sarnia, except
in material compliance with applicable Environmental Laws;
7.18 No Undisclosed Liabilities or Obligations.
-----------------------------------------
Sarnia has no material liability or obligation, known
or unknown, asserted or unasserted, absolute or contingent,
accrued or uncured, liquidated or unliquidated, and due or
to become due (and there is no past or present fact,
situation, circumstance, condition or other basis for any
present or future action, suit or proceeding, hearing,
charge, complaint, claim or demand against Sarnia giving
rise to any such liability), which caused or could cause a
Sarnia Material Adverse Effect except:
(a) for liabilities or obligations accrued for
or reserved against on the most recent balance sheet
included in the Financial Statements;
(b) for liabilities or obligations of the same
type incurred in the ordinary course of business of Sarnia
or in connection with the Merger or the construction of
the parking structure, since the date of the most recent
balance sheet included in the Financial Statements; and
38
(c) as may be disclosed in Disclosure Schedule
7.18(c).
7.19 Brokerage. Except as listed on Disclosure
Schedule 7.19, Sarnia has not made any agreement or taken
any other action which might cause a claim for brokerage
commissions, finders' fees or similar compensation in
connection with the transaction contemplated by this
Agreement.
7.20 Distributions. Except as disclosed in
Disclosure Schedule 7.20, since March 31, 2001, Sarnia
has not paid or declared any dividend or made any other
distributions to shareholders or taken any action which,
if taken after the date of this Agreement, would require
the prior written consent of Parent pursuant to this
Agreement.
7.21 Related Party Transactions. Except as set
forth in Disclosure Schedule 7.21 hereto, there are no
existing arrangements or proposed transactions between
Sarnia and: (i) any substantial employee, shareholder or
director of officer of Sarnia or any member of the
immediate (corporate or otherwise) family of any of the
foregoing persons (such shareholder, employees, officers,
directors and family members being hereinafter individually
referred to as a "Related Party"); (ii) any business
(corporate or otherwise) which a Related Party owns,
directly or indirectly, or in which a Related Party has
an ownership interest; or (iii) between any Related Party
and any business with which Sarnia regularly does business.
7.22 Receivables. Except as set forth in Disclosure
Schedule 7.22 all Receivables set forth on the June 30,
2001, balance sheet of Sarnia included in the Financial
Statements, and are valid and enforceable claims for rents
and other tenant charges.
7.23 Statements and Disclosures True and Correct.
All copies of Disclosure Documents are true and correct
copies of the originals, and to the extent that such
Disclosure Documents are agreements with other parties
all such agreements are valid and binding, enforceable
in accordance with their terms and no default, or event
which with the passage of time or notice, or both, would
constitute in default, has occurred thereunder, other than
any such default or event the result of which would not
have a Sarnia Material Adverse Effect.
8. REPRESENTATIONS AND WARRANTIES OF PARENT.
----------------------------------------
Parent hereby represents and warrants to Sarnia as follows:
8.01 Organization. Parent is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite
corporate power and authority to own or lease and operate
its properties and assets and to carry on its business as
it is now being conducted. Parent is duly qualified as a
foreign corporation to do business and is in good standing
in each jurisdiction in which the character of its
properties owned or leased or the nature of its activities
makes such qualification necessary, except where the
failure to be so qualified would not have a Parent Material
Adverse Effect.
39
8.02 Authorization; No Violation of Laws or
Agreements. Parent has full power and authority, and has
taken all requisite corporate action, to enter into and
perform under this Agreement and all other agreements
and documents contemplated by or related to this Agreement
to which Parent is a party and to execute and deliver the
Notes. Nothing in the articles of incorporation or bylaws
of Parent, as amended, or any other agreement, instrument,
decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this
Agreement) by or to which Parent is bound or subject
would prohibit or inhibit Parent from consummating this
Agreement and executing and delivering the Promissory Note
on the terms and conditions herein and therein contained.
Upon execution and delivery, this Agreement, the Promissory
Note and any other agreement or document to be executed by
Parent pursuant hereto shall constitute a legal, valid and
binding obligation of Parent in accordance with its terms.
8.03 Brokerage. Parent has not made any agreement
or taken any other action which might cause a claim for
brokerage commissions, finders' fees or similar compensation
in connection with the transaction contemplated by this
Agreement except as listed on Disclosure Schedule 8.03.
8.04 Governmental Consents. No consent, approval,
order or authorization of, or registration, declaration or
filing with, any Federal, state, local or foreign
governmental or regulatory authority is required to be made
or obtained by Parent in connection with the execution and
delivery of this Agreement by Parent or the consummation by
Parent of the transactions contemplated hereby, except for:
(i) compliance by Parent with the HSR Act; (ii) the filing
of articles of merger with the State Corporation Commission
of the Commonwealth of Virginia in accordance with the
Virginia Stock Corporation Act; and (iii) such consents,
approvals, orders or authorizations which if not obtained,
or registrations, declarations or filings which if not made,
would not have a Parent Material Adverse Effect or materially
adversely affect the ability of Parent to consummate the
transactions contemplated hereby or to conduct the Business
after the Effective Time.
8.05 Litigation; Claims. Except as set forth on
Disclosure Schedule 8.05, to the best of the knowledge of
Parent there is no Legal Proceeding pending or, to the
knowledge of Parent, threatened that questions the validity
of this Agreement or the related agreements or any action
taken or to be taken by Parent in connection with the
consummation of the transactions contemplated hereby or
thereby which seeks to prohibit, enjoin or otherwise
challenge any of the transactions contemplated hereby
or thereby.
8.06 Sufficient Funds. Parent has and will have
available at the Effective Time sufficient funds to enable
it to consummate the transactions contemplated hereby.
Additionally, the Parent's Board of Directors shall, by
resolution, reserve the funds necessary to consummate the
transactions contemplated by this Agreement (the "Funds")
and such Funds shall be used for no purposes whatsoever
until the Effective Time. Disclosure Schedule 8.06 sets
forth the balance sheet, and the financial statements
necessary for inclusion with the Information/Proxy
Statement.
40
8.07 Non-Contravention. The execution and delivery
of this Agreement and the Promissory Note by Parent and
the consummation by Parent of the transactions
contemplated hereby will not: (i) violate or conflict
with any provision of the articles of incorporation or
bylaws of Parent; or (ii) result in any violation of,
conflict with, or default (or an event which with notice
or lapse of time or both would constitute a default) or
loss of a benefit under, or permit the termination of
or the acceleration of any obligation under, any
mortgage, indenture, lease, agreement, license,
judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or its
properties, other than any such violation, conflict,
default, loss, termination or acceleration that would
not materially adversely affect the ability of Parent
to consummate the transactions contemplated hereby.
8.08 No Knowledge. Except with respect to tax
matters, Parent has no reason to believe that any
representation and warranty given by Sarnia in this
Agreement, including the Disclosure Schedules furnished
by Sarnia, is untrue or incorrect.
9. REPRESENTATIONS AND WARRANTIES OF ACQUISITION CO.
-------------------------------------------------
Acquisition Co. hereby represents and warrants to Sarnia as
follows:
9.01 Organization and Qualification. Acquisition Co.
is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia and
has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on
its business as it is now being conducted. Acquisition Co.
is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature
of its activities makes such qualification necessary,
except where the failure to be so qualified would not have
a material adverse effect on the financial condition,
operating results or business of Acquisition Co.
9.02 Capitalization. The authorized capital stock of
Acquisition Co. consists of 1,000 shares of Common Stock,
$.01 par value. As of the date hereof, 100 shares of Common
Stock are issued and outstanding, all of which were duly
authorized and validly issued and are fully paid and
nonassessable, and all such shares are owned of record and
beneficially by Parent, and no shares of Common Stock are
held in the treasury of Acquisition Co. Acquisition Co.
has no commitments to issue or sell any shares of its
capital stock or any securities or obligations
convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from
Acquisition Co., any shares of its capital stock, and
no securities or obligations evidencing any such rights
are outstanding.
9.03 Authority Relative to Agreement. Acquisition
Co. has all requisite corporate power and authority to
enter into this Agreement, to issue the Promissory Note and
to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Promissory
Note by Acquisition Co. and the consummation by Acquisition
Co. of the transactions contemplated hereby have been duly
authorized by the Board of Directors of
41
Acquisition Co. and by Parent as its sole shareholder, and
no other corporate approvals or proceedings on the part of
Acquisition Co. are necessary to authorize this Agreement,
the Promissory Note or the transactions contemplated hereby.
This Agreement and the Promissory Note have been duly
executed and delivered by Acquisition Co. and constitutes
the legal, valid and binding obligation of Acquisition Co.,
enforceable against Acquisition Co. in accordance with its
terms.
9.04 Non-Contravention. The execution and delivery
of this Agreement and the Promissory Note by Acquisition Co.
and the consummation by Acquisition Co. of the transactions
contemplated hereby will not: (i) violate or conflict with
any provision of the articles of incorporation or bylaws of
Acquisition Co.; or (ii) result in any violation of,
conflict with, or default (or an event which with notice or
lapse of time or both would constitute a default) or loss of
a benefit under, or permit the termination of or the
acceleration of any obligation under, any mortgage,
indenture, lease, agreement, license, judgment, order,
decree, statute, law, ordinance, rule or regulation
applicable to Acquisition Co. or its properties, other
than any such violation, conflict, default, loss,
termination or acceleration that would not materially
adversely affect the ability of Acquisition Co. to
consummate the transactions contemplated hereby.
9.05 Governmental Consents. No consent, approval,
order or authorization of, or registration, declaration
or filing with, any Federal, state, local or foreign
governmental or regulatory authority is required to be
made or obtained by Acquisition Co. in connection with the
execution and delivery of this Agreement and the
Promissory Note by Acquisition Co. or the consummation by
Acquisition Co. of the transactions contemplated hereby,
except for: (i) compliance by Acquisition Co. with the
HSR Act; (ii) the filing of articles of merger with the
State Corporation Commission of the Commonwealth of
Virginia in accordance with the Virginia Stock
Corporation Act; (iii) the consents described in
Disclosure Schedule 6.01(a); and (iv) such consents,
approvals, orders or authorizations which if not obtained,
or registrations, declarations or filings which if not made,
would not materially adversely affect the ability of
Acquisition Co. to consummate the transactions
contemplated hereby.
9.06 No Knowledge. Except with respect to tax
matters, Acquisition Co. has no reason to believe that any
representation and warranty given by Sarnia in this
Agreement, including the Disclosure Schedules furnished by
Sarnia, is untrue or incorrect.
9.07 Other Matters. Acquisition Co. has been formed
for the sole purpose of effecting the Merger and, except as
contemplated by this Agreement, Acquisition Co. has not
conducted any business activities and does not have any
material assets, liabilities or obligations.
10. ADDITIONAL UNDERTAKINGS SUBSEQUENT TO CLOSING.
---------------------------------------------
The parties agree that subsequent to the
Closing:
10.01 Tax Returns. Parent shall, or shall cause the
Surviving Corporation to, prepare and file or cause to be
prepared and filed
42
all Tax returns of Sarnia with respect to all Tax periods
ending on or before the Effective Time and all Tax periods
beginning before and ending after the Effective Time, in
each case where such returns are required to be filed on
or after the Effective Time. Parent shall pay or cause
to be paid to the appropriate taxing authorities all Taxes
due in connection with such returns, all of which shall be
included in Sarnia Liabilities on the Closing Balance Sheet.
10.02 Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause
to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions
contemplated by this Agreement, including, without
limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect
all necessary registrations and filings.
10.03 Other Documents and Actions. The parties shall
execute such documents and take such additional actions as
may be necessary and appropriate to carry out the purpose
and intent of this Agreement.
10.04 Books and Records. Parent will preserve and
keep all Books and Records for a period of at least seven
(7) years from the Effective Time, except such records as
Parent would dispose of in the ordinary course of business,
which will be returned to the Shareholder Representative
rather than be destroyed if the Shareholder Representative
requests such return. The Shareholder Representative shall
access thereto, on reasonable prior notice to Parent,
during regular business hours, to examine, inspect and
copy, the Books and Records, so long as such examination
and inspection takes place on the premises of Parent and
does not unreasonably interfere with Parent's thereof.
Parent will also provide to the Shareholder Representative,
on a loan basis, original Books and Records to the extent
required by Sarnia in connection with any tax investigation
or audit of, or a third party claim against Sarnia.
10.05 Director and Officer Indemnification. Parent
and Acquisition Co. will cause the director and officer
indemnity provisions of the bylaws of Parent and Surviving
Corporation to be applicable to and cover the current
officers and directors of Sarnia.
11. INDEMNIFICATION.
---------------
11.01 A. Sarnia Indemnity. Subject to the terms and
conditions of this Article 11, Sarnia agrees to indemnify,
defend and hold Parent harmless from and against all
demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including
without limitation interest, penalties and reasonable
attorneys' fees and expenses (hereinafter called "Damages"),
asserted against, resulting to, imposed upon or incurred by
Parent, Acquisition Co. and/or Sarnia by reason of, or
resulting from, a breach of any representation, warranty,
covenant or agreement of Sarnia contained in or made
pursuant to this Agreement. The obligation of Sarnia to
indemnify Parent shall be satisfied by the setoff of the
Indemnity Amount against the Promissory Note as described
in Section 3.03(c).
43
B. [RESERVED]
C. Satisfaction of Indemnity Claim.
In the event Parent incurs or suffers any Damages, then
Parent shall, subject to the provisions of Section 3.03(c)
and (d) and this Article 11, be entitled to reduce the
principal of the Promissory Note by the amount of such
Damages in excess of $100,000 (the "Indemnity Amount").
11.02 Conditions of Indemnification for Third
Party Claims. Subject to the provisions of Section 11.03,
the obligations and liabilities of Sarnia to Parent under
Section 11.01 hereof with respect to Damages resulting
from the assertion of liability by third parties shall
be subject to the terms and conditions set forth below.
(a) Within thirty (30) days after receipt
of any written notice of the commencement of any action
or the assertion of any claim by a third party, Parent
shall give the Shareholder Representative written notice
thereof together with a copy of such claim, process or
other legal pleading, and the Shareholder Representative
shall have the right to undertake the defense thereof by
representatives of its own choosing who are reasonably
acceptable to the party to be indemnified; provided,
however, the right to undertake the defense shall not
apply to any claim by the federal government, or any
state government or by any authority or agency thereof.
(b) In the event that the Shareholders
Representative, by the 30th day after receipt of notice
of any such action or claim (or, if earlier, by the fifth
day preceding the day on which an answer or other pleading
must be served in order to prevent judgment by default in
favor of the person bring such action or asserting such
claim), does not elect to defend against such action or
claim, Parent will (upon further notice to the Shareholder
Representative) have the right to undertake the defense,
compromise or settlement of such action or claim on behalf
of and for the account and risk of the Shareholder
Representative, subject to the right of the Shareholder
Representative to assume the defense of such action or
claim at any time prior to settlement, compromise or final
determination thereof.
(c) Anything in this Section 11.02 to the
contrary notwithstanding if there is a reasonable
probability that an action or claim may materially and
adversely affect the Parent other than as a result of
money damages or other money payments, the Parent shall
have the right to compromise or settle such action or
claim.
(d) In connection with any such indemnification,
Parent will cooperate with all reasonable requests of the
Shareholder Representative. Any notices required to be
given to or by, and all other actions or decisions required
to be taken or made by, Sarnia as the "indemnifying party"
as provided in this Section 11.02, shall be given to or by,
or shall be taken or made by, the individual appointed in
writing as the Shareholder Representative.
11.03 Limitations on Indemnity. Notwithstanding
anything to the contrary herein: (i) Sarnia shall not be
obligated to indemnify,
44
defend and hold harmless Parent pursuant to this Article
11 for Damages until the aggregate amount of all such
Damages exceeds $100,000 and only to the extent of such
excess; (ii) the total aggregate liability for indemnity
payments by Sarnia pursuant to this Agreement shall not
exceed, in the aggregate, the principal amount of the
Promissory Note and interest accrued thereon; and
(iii) no claim for indemnification by either party under
this Article 11 shall be timely, if not made within
one (1) year after the Effective Time.
11.04 Payment of Indemnification Claims.
----------------------------------
(a) The indemnification obligations of Sarnia
under this Agreement shall first be satisfied from the
proceeds of any applicable insurance policies, and if the
proceeds from such policies are insufficient to cover the
full amount of the Damages, or there is no applicable
insurance policy, then, subject to the limitations set
forth in Section 11.03, the indemnification obligation of
Sarnia shall be satisfied solely by setoff against
payments of principal and interest due under the Promissory
Note as set forth in Section 11.01; provided to the extent
the Shareholder Representative requires funds to pay the
costs and expenses described in paragraph 3.03(e), the
interest and forty thousand dollars ($40,000) of principal
payable under the Promissory Note shall not be subject to
set-off. In order to receive any Indemnity Amount, Parent
shall provide within one (1) year from the Effective Time
a certificate (an "Indemnity Certificate") to the
Shareholder Representative in accordance with Section
11.03 hereof: (i) certifying that Parent, as the party to
be identified or reimbursed, is entitled to receive a
specified amount as Damages; (ii) identifying the Damages
in reasonable detail; (iii) certifying Parent's
compliance with this Article 11; and (iv) signed by a
duly authorized officer of Parent.
(b) If the Shareholder Representative believes
in good faith that: (i) Parent has not incurred or suffered
Damages in the amount of the Indemnity Amount set forth in
any Indemnity Certificate; (ii) the amount of any proposed
Indemnity Amount is incorrect; or (iii) Parent's claim is
not in accordance with the provisions of this Article 11,
the Shareholder Representative shall give written notice
(a "Shareholder's Notice") to Parent within twenty (20)
business days' submission of such Indemnity Certificate
(the "Shareholders' Notice Period"), which notice shall
set forth the reasons for such objection and a statement
of the extent (if at all) to which the proposed Indemnity
Amount is undisputed (such specified undisputed amount
being hereinafter referred to as the "Undisputed Payment").
(c) If Parent does not receive a Shareholder's
Notice relating to a proposed Indemnity Amount within the
Shareholders' Notice Period, then Parent shall be entitled
to set off the Indemnity Amount against the Promissory Note.
To effect the setoff, the Shareholder Representative and a
duly authorized representative of the Parent shall execute,
in writing, a joint directive authorizing the Escrow Agent
to make such setoff.
(d) If Parent receives a Shareholders' Notice
relating to a proposed Indemnity Amount within the
Shareholders' Notice Period, then upon the expiration of
the Shareholders' Notice Period, the Escrow Agent shall
set off against the Promissory Note the Undisputed Amount,
if any. The amount (the "Disputed Amount") equal to the
Indemnity Amount less the Undisputed Amount required to be
paid hereby, shall not be released to the Shareholders as
a payment
45
of the principal amount of the Promissory Note or offset
against the principal amount of the Promissory Note except
upon receipt by the Escrow Agent of a joint written
directive signed by Parent and the Shareholder
Representative or in accordance with a final and non-
ppealable decision of a court of competent jurisdiction
or final award of an Arbitrator.
11.05 Arbitration. In the event Parent and the
Shareholder Representative are unable to resolve the Disputed
Amount within forty-five (45) days after the giving of a
Shareholder Notice, the dispute shall be submitted first,
to mediation with a mediator mutually agreed to by the
Parent and the Shareholder Representative; and, if no
resolution is reached, then second, to binding arbitration
in Washington, D.C. in accordance with the rules for
commercial arbitration of the American Arbitration
Association and the decision of the Arbitrator(s) shall be
final and binding and judgment may be entered thereon in
any court of competent jurisdiction.
12. MISCELLANEOUS.
-------------
12.01 Publicity. The Parties shall cooperate with
each other in the development and distribution of all news
releases and other public disclosures concerning this
Agreement. Sarnia shall not issue any news releases or
make any other public disclosure without the prior consent
of Parent, and Parent shall not issue any news releases or
other public disclosure without the prior consent of Sarnia
unless such is required by law upon the written advice of
counsel or is in response to published newspaper or other
mass media reports regarding the transaction contemplated
hereby, in which such latter event the parties shall
consult with each other regarding such responsive public
disclosure.
12.02 Return of Documents. Upon termination of this
Agreement without the Merger being consummated, each party
shall deliver to the other originals and all copies of all
information made available to such party and will not retain
any copies, extracts or other reproductions in whole or in
party of such information.
12.03 Waiver of Jury Trial. Each party to this
Agreement agrees that any suit, action, or proceeding,
whether claim or counterclaim, brought or instituted by
either party hereto or any successor or assign of any
party on or with respect to this Agreement shall be tried
only by a judge and not by a jury. EACH PARTY HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH
SUIT, ACTION, OR PROCEEDING. SARNIA ACKNOWLEDGES AND AGREES
THAT THIS SECTION 12.03 IS A SPECIFIC AND MATERIAL ASPECT OF
THIS AGREEMENT BETWEEN THE PARTIES AND THAT PARENT WOULD NOT
HAVE EXECUTED THIS AGREEMENT IF THIS WAIVER OF JURY TRIAL
SECTION WERE NOT A PART OF THIS AGREEMENT.
12.04 No Third Party Beneficiaries. Except as
expressly provided herein with respect to the rights of
Sarnia's Shareholders and Sarnia's Shareholder
Representative, nothing in this Agreement is intended, nor
shall it be deemed, to confer upon any Person other than the
parties hereto and their respective successors and assigns
any rights or remedies under or by reason of this Agreement.
46
12.05 Binding Effect; Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns, including any representative appointed to administer
or liquidate their respective estates in any way whatsoever.
12.06 Assignment. None of the parties hereto may assign
any of its rights or obligations hereunder without the prior
written consent of the other parties hereto; provided,
however, that Parent may: (a) prior to or at the Effective
Time, assign any or all of its rights or obligations
hereunder to any wholly-owned subsidiary of Parent; and
(b) after the Effective Time, assign any or all of its
rights hereunder without any consent or approval of Sarnia
provided further that no such assignment shall relieve Parent
of liability to Sarnia hereunder.
12.07 Entire Agreement; Modification. This Agreement,
together with the exhibits and schedules hereto is the entire
agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior and
contemporaneous communications, agreements and understandings
with respect to the subject matter hereof, express or
implied, oral or written, all of which are merged herein.
No employee, agent or other representative of a party hereto
shall have any authority to bind such party with respect to
any statement, representation, warranty or other expression
unless the same is specifically set forth herein. No usage
of trade, course of dealing or other regular practice or
method of dealing between the parties hereto shall be used
to modify, interpret, supplement or alter in any manner the
terms of this Agreement. This Agreement may not be modified
other than by an agreement in writing signed by all parties
hereto.
12.08 Costs. Except as expressly provided herein,
each party hereto shall bear its own costs, including
counsel, brokerage and accounting fees, incurred in
connection with the negotiation, preparation and execution
of this Agreement, the preparation of the Information/Proxy
Statement, the consummation of the Merger and other
transactions described herein and all matters incident
thereto. If the Merger is consummated, all such costs
incurred by Sarnia which are a not paid prior to the
Effective Time shall be includable in Sarnia Liabilities
on the Closing Balance Sheet.
12.09 Interpretation.
(a) The parties hereto acknowledge and agree
that this Agreement has been negotiated at arm's length
and between parties equally sophisticated and knowledgeable
in the matters dealt with in this Agreement, and that each
party has been advised by counsel of its choosing with
respect hereto. Accordingly, any rule of law or legal
decision that would require interpretation of any
ambiguities in this Agreement against the party that has
drafted it is not applicable and is hereby waived. The
terms of this Agreement shall be interpreted in a
reasonable manner in order to effect the intent of the
parties as set forth herein.
(b) All references to days in this Agreement
mean calendar days unless otherwise provided. Any day or
deadline or
47
time period hereunder which falls on a non-Business Day
shall be deemed to refer to the first Business Day
following.
(c) Whenever required by the context, as used
in this Agreement, the singular number shall include the
plural and vice versa, the neuter shall include the
masculine or the feminine gender, and the masculine gender
shall include the neuter or the feminine gender.
(d) The Article and Section headings contained
in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
12.10 Severability. Except as expressly provided to
the contrary herein, each Article, Section, term and
provision of this Agreement, and any portion thereof, shall
be considered severable and if, for any reason, any such
portion of this Agreement is held to be invalid, contrary
to, or in conflict with any applicable present or future
law or regulation in a final, unappealable ruling issued
by any court, agency or tribunal with competent
jurisdiction, that ruling shall not impair the operation
of, or have any other effect upon, such other portions of
this Agreement as may remain otherwise intelligible, which
shall continue to be given full force and effect and
binding upon the parties hereto, although any portion held
to be invalid shall be deemed not to be part of this
Agreement from the date the time for appeal expires.
12.11 Waiver of Obligations. Neither party shall be
deemed to have waived or impaired any right, power, or
option reserved by this Agreement (including, without
limitation, its right to demand exact compliance with every
term, condition and covenant herein) by virtue of: (a) any
custom or practice of the parties at variance with the terms
hereof; (b) any failure by such party demand strict
compliance with this Agreement; or (c) any waiver,
forbearance, delay, failure or omission to exercise any
right, power or option. No failure, refusal or neglect
exercise any right under this Agreement or to insist upon
full compliance by the other parties hereto with their
obligations, hereunder shall constitute a waiver of any
provision of this Agreement.
12.12 Counterparts and Execution. This Agreement
may be executed in multiple counterparts, each of which
shall be deemed an original Agreement for all purposes,
and all of which when taken together shall constitute one
Agreement among each of the parties hereto on the dates
respectively indicated in the signatures of the parties,
notwithstanding that all of the parties are not
signatories to the original or the same counterpart.
Executed signature pages to any counterpart instrument
may be detached and affixed to a single counterpart,
with such single counterpart with multiple executed
signature pages affixed thereto constituting the
original counterpart instrument. All of those
counterpart pages shall be read as though one, and they
shall have the same force and effect as if all the
signers had executed a single signature page.
12.13 Notices. Any notice called for hereunder
shall be deemed properly given if: (a) sent by certified
mail, return receipt requested; (b) personally delivered;
(c) dispatched by any form of private or governmental
express mail or delivery service providing receipted
delivery; or (d) sent by telefacsimile with a copy sent
48
by one of the foregoing methods to the following addresses
or to such other address as either party may designate by
notice in accordance with this Section:
If to Sarnia:
------------
Sarnia Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
--------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
General Counsel
Versar, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire
Paul, Hastings, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, LLP
Suite 2400
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
with a copy to:
--------------
Authorized Shareholder Representative
49
If to Parent:
------------
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Inc.
Waterside Mall
▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, COO
with a copy to:
--------------
S. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
Shaiman, Drucker, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Acquisiton Co.:
--------------------
C/▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Inc.
Waterside Mall
▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, COO
50
with a copy to:
--------------
S. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
Shaiman, Drucker, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Notice shall be deemed given on the earlier of: (a) actual
receipt by the receiving party; (b) the date shown on a
telefacsimile transmission confirmation (provided that
such notice is also sent by one of the methods provided
in clause (a), (c) or (d)); (c) the date reflected on a
signed delivery receipt; or (d) two (2) Business Days
following tender of delivery or dispatch by express mail
or delivery service.
12.14 Survival. All representations, warranties,
indemnifications, covenants and undertakings set forth
herein shall survive for a period of one (1) year after
the Effective Time at which time they shall terminate
12.15 Risk Of Loss. The parties hereto agree and
acknowledge that the risk of loss with respect to the
assets of Sarnia and the Business remains with Sarnia
prior to consummation of the Merger.
12.16 Governing Law. All issues relating to this
Agreement and its formation, performance and enforcement
shall be governed by and construed in accordance with the
substantive laws of the Commonwealth of Virginia in the
United States of America without reference to the rules
governing conflict of laws without regard to conflict of
laws principles.
51
IN WITNESS WHEREOF, the undersigned have executed
this Agreement as of the day and year first above written.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Inc.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO
B & R Acquisition, Inc.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO
Sarnia Corporation
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., President
52