Exhibit 2.1
MEMBERSHIP
PURCHASE AGREEMENT
Dated
as of August 19, 2010
by
and among
VSE
CORPORATION,
VAUGHN
G.A. VASCONCELLOS,
JOHN
T. HARRIS,
FRANK
C. FLORO,
AKIMEKA,
LLC, AND
SELLERS’
REPRESENTATIVE
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Page |
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CERTAIN
MATTERS OF CONSTRUCTION AND DEFINITIONS
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1
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ARTICLE
2.
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THE
PURCHASE AND SALE OF THE INTERESTS
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1
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2.1
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Purchase
of the Interests
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1
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2.2
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Purchase
Price
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2
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2.3
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Closing
Distributions
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5
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2.4
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The
Closing
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5
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ARTICLE
3.
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REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND SELLERS
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5
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3.1
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Legal
Status of the Company
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5
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3.2
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Membership
Interest of the Company
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5
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3.3
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No
Subsidiaries
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6
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3.4
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Authority
for Agreement; Noncontravention
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6
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3.5
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Financial
Statements
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7
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3.6
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Absence
of Material Adverse Changes
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7
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3.7
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Absence
of Undisclosed Liabilities
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8
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3.8
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Books
and Records
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8
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3.9
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Accounts
Receivable
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8
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3.10
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Compliance
with Applicable Laws, Organizational Documents
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8
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3.11
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Proceedings
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8
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3.12
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Tax
Matters
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9
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3.13
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Employee
Benefit Plans
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12
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3.14
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Employment-Related
Matters
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14
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3.15
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Environmental
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15
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3.16
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No
Broker’s or Finder’s Fees
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15
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3.17
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Assets
Other Than Real Property
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16
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3.18
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Real
Property
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16
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3.19
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Contracts,
Agreements and Commitments
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17
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3.20
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Intellectual
Property
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19
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3.21
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Insurance
Contracts
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21
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3.22
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Banking
Relationships
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22
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3.23
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No
Contingent Liabilities
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22
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3.24
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Absence
of Certain Relationships
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22
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3.25
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Sensitive
Payments
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22
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3.26
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Government
Contracts
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22
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3.27
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Cumulative
Exceptions
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27
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ARTICLE
4.
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REPRESENTATIONS
AND WARRANTIES OF BUYER
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27
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4.1
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Corporate
Status of Buyer
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27
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4.2
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Authority
for Agreement; Noncontravention
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27
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4.3
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Compliance
with Applicable Laws
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28
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4.4
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Investment
Intent
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28
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4.5
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Proceedings
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29
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ARTICLE
5.
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CONDUCT
PRIOR TO THE CLOSING DATE
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29
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5.1
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Conduct
of the Company’s Business
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29
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5.2
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Conduct
of Sellers and Company regarding Tax Status
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31
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ARTICLE
6.
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ADDITIONAL
AGREEMENTS
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31
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6.1
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Exclusivity
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31
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6.2
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Expenses
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31
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6.3
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Indemnification
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31
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6.4
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Access
and Information
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36
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6.5
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Public
Disclosure and Confidentiality
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36
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6.6
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Further
Assurances
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36
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6.7
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Tax
Matters
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37
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6.8
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Release
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39
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6.9
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Regulatory
Filings
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40
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6.10
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Exchange
Information
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40
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6.11
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Notification
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40
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6.12
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Certain
Post-Closing Covenants
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41
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6.13
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Seller’s
Right of Audit
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42
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6.14
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Termination
of Existing Employment Agreements
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42
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6.15
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Retention
Agreements
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42
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ARTICLE
7.
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CONDITIONS
PRECEDENT
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43
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7.1
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Conditions
Precedent to the Obligations of Each Party
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43
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7.2
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Conditions
Precedent to Buyer’s Obligation to Consummate the Closing
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44
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7.3
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Conditions
to Obligations of the Company and Sellers to Consummate the
Closing
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46
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ARTICLE
8.
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SURVIVAL OF
REPRESENTATIONS AND COVENANTS
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46
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8.1
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The
Company’s and Sellers’ Representations and Covenants
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46
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8.2
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Buyer’s
Representations and Covenants
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46
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ARTICLE
9.
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OTHER
PROVISIONS
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47
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9.1
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Termination
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47
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9.2
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Notices
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48
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9.3
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Entire
Agreement
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49
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9.4
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Assignability
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49
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9.5
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Validity
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50
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9.6
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Specific
Performance
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50
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9.7
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U.S.
Currency
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50
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9.8
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Governing
Law; Jurisdiction
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50
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9.9
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Sellers’
Representative
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50
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9.10
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Counterparts
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52
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9.11
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Waiver
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52
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EXHIBITS
A Form
of Escrow Agreement
B Form
of Employment Agreements
C Form
of Amended and Restated Operating Agreement
D AkiTech
Agreement
SCHEDULES
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Schedule
1
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Certain
Matters of Construction and
Definitions
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Schedule
2.2.2(b)
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Earnout
Payments
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Schedule
2.3
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Closing
Distributions
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Schedule
3.1
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Qualification
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Schedule
3.2.3
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Options
and Other Securities of the Company
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Schedule
3.4.2
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No
Conflicts
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Schedule
3.5
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Financial
Statements
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Schedule
3.6
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Absence
of Material Adverse Changes
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Schedule
3.7
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Absence
of Undisclosed Liabilities
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Schedule
3.8
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Books
and Records
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Schedule
3.9
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Accounts
Receivable
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Schedule
3.10
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Compliance
with Applicable Laws, Organizational
Documents
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Schedule
3.11
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Proceedings
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Schedule
3.12.4
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Assessments
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Schedule
3.12.6
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Miscellaneous
Items
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Schedule
3.13.1
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List
of Company Plans
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Schedule
3.13.5
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Welfare
Plans
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Schedule
3.14.1
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Labor
Relations
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Schedule
3.14.2
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Employee
List
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Schedule
3.17.1
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Title
to Assets
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Schedule
3.17.2(b)
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Material
Tangible Personal Property
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Schedule
3.17.2(d)
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Governmental
Entity-Owned or Furnished Property
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Schedule
3.18.2
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Company
Leases
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Schedule
3.19.1(a)
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Bonus
Plan
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Schedule
3.19.3
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Third
Party Consents
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Schedule
3.20.1
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Right
to Intellectual Property
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Schedule
3.20.2(a)
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Other
Intellectual Property
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Schedule
3.20.2(c)
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Proprietary
Rights Licenses
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Schedule
3.20.2(f)
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Exceptions
to Ownership of Company Proprietary
Rights
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Schedule
3.20.2(g)
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Claims
Against Company Proprietary Rights
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Schedule
3.20.2(h)
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Registered
IP
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Schedule
3.20.2(k)
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Restrictive
Agreements
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Schedule
3.20.3(a)
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Exceptions
to Employee Confidentiality
Agreements
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Schedule
3.20.3(b)
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Form
of Employee Confidentiality
Agreement
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Schedule
3.20.3(c)
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Form
of Officer Non-Competition
Agreement
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Schedule
3.20.3(d)
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Form
of Consulting Agreement
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Schedule
3.21
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Company
Insurance Contracts
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Schedule
3.22
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Banking
Relationships
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Schedule
3.24
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Absence
of Certain Relationships
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Schedule
3.26.1(a)
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Government
Contracts
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Schedule
3.26.1(b)
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Active
Government Contracts with Current
Issues
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Schedule
3.26.2
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Bids
and Awards
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Schedule
3.26.3
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Compliance
with Law and Regulation and Contract Terms; Inspection and
Certification
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Schedule
3.26.4(a)
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Disputes,
Claims and Litigation
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Schedule
3.26.5
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Sanctions
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Schedule
3.26.6
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Termination;
Show Cause Letter
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Schedule
3.26.7
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Within
Scope of Government Contracts
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Schedule
3.26.8
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Assignments
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Schedule
3.26.10
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Governmental
Entity Audits and DCAA Claims
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Schedule
5.1
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Conduct
of the Company’s Business
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Schedule
6.15
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Retention
Bonus Recipients
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Schedule
7.2.4
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Third-Party
Consents
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MEMBERSHIP PURCHASE
AGREEMENT
This
Membership Purchase Agreement, dated as of August 19, 2010 (“Agreement”), by and
among VSE Corporation, a Delaware corporation (“Buyer”), Akimeka, LLC, a Hawaii
limited liability company (the “Company”), Vaughn G. A. Vasconcellos
(“Vasconcellos”), John T. Harris (“Harris”) and Frank C. Floro (“Floro”) (each
of Vasconcellos, Harris and Floro a “Seller” and collectively, “Sellers”), and
Vaughn G. A. Vasconcellos as the exclusive agent of Sellers in accordance with
Section 9.9 (the “Sellers’ Representative”). Buyer, Sellers, the
Company and Sellers’ Representative are sometimes referred to herein
individually as a “Party” and collectively as the “Parties.”
RECITALS
R.1 The
Company is primarily engaged in the business of providing information technology
solution services for the United States Government.
R.2 Sellers
own all of the Company’s membership and other equity interests and such
interests consist of the membership interest in
the Company owned by Vasconcellos and the Distributional
Interests owned by Harris and Floro (such membership interest and Distributional
Interests are collectively referred to herein as the “Interests”).
R.3 Buyer
desires to purchase the Interests from Sellers and Sellers desire to sell the
Interests to Buyer.
R.4 The
Parties have determined that it is advisable, in connection with the
above-referenced purchase and sale of the Interests, to consummate certain other
transactions (collectively with such purchase and sale of the Interests, the
“Transactions”), all on the terms and conditions set forth herein.
R.5 The
Parties desire to make certain representations, warranties, covenants and other
agreements to and with one another in connection with the
Transactions.
NOW,
THEREFORE, in consideration of the mutual promises hereinafter set forth and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Parties, intending to be legally bound, agree as
follows:
ARTICLE
1. CERTAIN
MATTERS OF CONSTRUCTION AND DEFINITIONS
Certain
matters of construction of this Agreement and the definition of capitalized
terms used herein, but not otherwise defined in Articles 1 through 9, are set
forth in Schedule 1.
ARTICLE
2. THE
PURCHASE AND SALE OF THE INTERESTS
2.1 Purchase
of the Interests. Upon the terms and subject to the conditions
set forth herein, at the closing of the Transactions (the “Closing”), Buyer
shall purchase and acquire from each Seller, and each Seller shall sell and
transfer to Buyer, all of the Interests set forth on Schedule 2.1 across from
such Seller’s name, free and clear of any and all Encumbrances for and in
exchange for the consideration specified in Section 2.2.
2.2 Purchase
Price.
2.2.1 General. On
the terms and subject to the conditions set forth herein, as full consideration
for the Interests, Buyer shall pay:
(a) $33,000,000,
subject to adjustment pursuant to Section 2.2.3 (the “Initial Purchase Price”);
and
(b) the
amounts, if any, up to an aggregate maximum of $11,000,000, payable pursuant to
Section 2.2.2(b) (collectively, the “Earnout Payments”) (the Initial Purchase
Price, subject to adjustments pursuant to Sections 2.2.3 and 2.2.4, plus any
Earnout Payments paid or payable hereunder are collectively referred to herein
as the “Purchase Price”).
2.2.2 Payment
of Purchase Price. Buyer shall pay the Purchase Price as
follows:
(a) At the
Closing, Buyer shall pay the Initial Purchase Price as follows:
(i) $5,500,000
of the Initial Purchase Price to the Escrow Agent to hold and disburse pursuant
to Section 6.3 and the Escrow Agreement (“IPP Escrow
Amount”);
(ii) $725,000
of the Initial Purchase Price to the Escrow Agent to hold and disburse pursuant
to Section 6.15 and the Escrow Agreement (“Retention Escrow Amount” and,
together with the IPP Escrow Amount, the “Escrow Amount”); and
(iii) The
balance of the Initial Purchase Price to Sellers based on their Percentage
Ownership.
(b) After the
Closing, Buyer will pay Earnout Payments to Sellers based on their Percentage
Ownership, as may be required by and in accordance with Schedule
2.2.2(b).
2.2.3 Estimated
Closing Statement; Adjustment of Initial Purchase Price. At
least three Business Days prior to the Closing Date, the Company shall provide
to Buyer, in reasonable detail, statements of (a) an estimated Closing Balance
Sheet (the “Estimated Closing Balance Sheet”) and (b) an estimate of the Closing
Net Working Capital (the “Estimated Closing Net Working Capital”). If
the Estimated Closing Net Working Capital is less than $6,750,000, the Initial
Purchase Price shall be decreased by the amount by which the Estimated Closing
Net Working Capital is less than $6,750,000. If the Estimated Closing
Net Working Capital is more than $6,750,000, the Initial Purchase Price shall be
increased by the amount by which the Estimated Closing Net Working Capital is
more than $6,750,000, provided, however, that in no event will the Initial
Purchase Price be increased by more than $3,000,000. The adjustment
that results from the Estimated Closing Net Working Capital described in the two
immediately preceding sentences is referred to herein as the “Initial Purchase
Price Adjustment.”
2.2.4 Adjustments to Purchase
Price.
2.2.4.1 Closing
Balance Sheet and Closing Net Working Capital. Within 90 days
after the Closing Date, Buyer, working with the Company’s Chief Financial
Officer, shall prepare or cause to be prepared and shall deliver to Sellers’
Representative in reasonable detail (a) the Closing Balance Sheet and (b)
the Closing Net Working Capital (the statements referenced in foregoing clauses
(a) and (b), collectively the “Closing Statements”).
2.2.4.2 Review of
Closing Statements. Sellers’ Representative, upon receipt of
the Closing Statements, shall (a) review the Closing Statements and, (b) to the
extent Sellers’ Representative in his discretion may deem necessary, make
reasonable inquiry of Buyer and its accountants (if any are used) in respect of
the preparation of the Closing Statements. In connection with such
inquiry, Sellers’ Representative and his advisers shall have complete access as
promptly as reasonably practicable upon prior notice and during normal business
hours to the Company’s books, papers and records and accountants (if any are
used) relating to the preparation of the Closing Statements, including
worksheets and other computations. The Closing Statements shall be
final, binding and conclusive upon, and deemed accepted by, Sellers unless
Sellers’ Representative shall have, within 30 days after his receipt of the
Closing Statements, notified Buyer in reasonable detail of any objections
thereto, identifying the specific items involved and the dollar amount of each
disagreement and providing reasonable supporting documentation for each such
disagreement (the “Seller Objection”). After the end of the
above-referenced 30-day period, neither Buyer nor Seller may introduce
additional disagreements with respect to any item in the Closing Statements or
increase the amount of any disagreement, and any item not so identified shall be
deemed to be agreed to by Buyer and Seller and will be final, binding and
conclusive upon the Parties.
2.2.4.3 Disputes. If
a Seller Objection is provided, Buyer shall have 20 days to review and respond
to the Seller Objection, and Buyer and Sellers’ Representative shall attempt to
resolve the differences underlying the Seller Objection within 20 days following
completion of Buyer’s review of the Seller Objection. Disputes
between Buyer and Sellers’ Representative that are not resolved by them within
such 20-day period shall be referred no later than such 20th day
for decision to an independent accounting firm of national reputation mutually
acceptable to Buyer and Sellers’ Representative (the “Arbiter”) who shall act as
arbitrator and determine, whether and to what extent, if any, the Closing
Statements require adjustment, based solely on presentations by Sellers’
Representative and Buyer and only with respect to the remaining differences so
submitted. If Buyer and Sellers’ Representative cannot agree upon the
selection of the Arbiter within five Business Days, BDO Seidman shall serve as
the Arbiter hereunder. The Arbiter shall deliver to Buyer and
Sellers’ Representative its written determination as to whether and to what
extent, if any, the Closing Statements require adjustment no later than the
30th day
after the remaining differences underlying the Seller Objection are referred to
the Arbiter, or such longer period of time as the Arbiter determines is
necessary. The Arbiter’s determination pursuant to this Section
2.2.4.3 shall be final, conclusive and binding upon the Parties, absent manifest
error in the factual basis or application of the relevant or controlling
accounting principles. The fees and expenses of the Arbiter shall be
allocated to the Parties as determined (as set forth in the final determination)
by the Arbiter based upon the relative success (in terms of percentages) of each
Party’s claims. For example, if the final determination reflects a
60%-40% determination of the Parties’ claims, the Arbiter would allocate
expenses 40% to the Party whose claim was determined to be 60% successful and
60% to the Party whose claim was determined to be 40%
successful. Buyer and Sellers’ Representative shall make readily
available to the Arbiter all relevant information, books and records and any
work papers relating to the Closing Statements and all other items reasonably
requested by the Arbiter. In no event may the Arbiter’s resolution of
any difference be for an amount that is outside the range of Buyer’s and
Sellers’ Representative’s disagreement.
2.2.4.4 Final
Closing Statements. Each of the Closing Statements shall
become final, conclusive and binding upon the Parties upon the earliest of (a)
Sellers’ Representative’s failure to provide a Seller Objection within the
period permitted under Section 2.2.4.2, (b) the agreement between Buyer and
Sellers’ Representative with respect thereto, and (c) the decision by the
Arbiter with respect to any disputes under Section 2.2.4.3. The
Closing Statements (a) as submitted to Sellers’ Representative with his failure
to object thereto within the period permitted under Section 2.2.4.2, or (b) as
adjusted pursuant to the agreement of Sellers’ Representative and Buyer or (c)
the decision of the Arbiter, shall constitute the final, conclusive and binding
Closing Statements referred to herein as the “Final Closing
Statements.”
2.2.4.5 Adjustment
Amount. The Purchase Price shall be adjusted as
follows:
(a) If the
Closing Net Working Capital is less than the Estimated Closing Net Working
Capital, the Purchase Price shall be decreased by the amount by which the
Closing Net Working Capital is less than the Estimated Closing Net Working
Capital.
(b) If the
Closing Net Working Capital is greater than the Estimated Closing Net Working
Capital, the Purchase Price shall be increased by the amount by which the
Closing Net Working Capital is greater than the Estimated Closing Net Working
Capital, but in no event shall an increase in the Purchase Price as a result of
the foregoing calculation and the Initial Purchase Adjustment result in an
aggregate increase to the Purchase Price of more than $3,000,000.
2.2.4.6 Adjustments
to the Purchase Price. As soon as practicable (but not more
than five Business Days) after the date on which the Final Closing Statements
shall have been determined in accordance with this Section 2.2.4,
(a) Sellers’ Representative (on behalf of Sellers) shall pay to Buyer by
wire transfer the amount, if any, by which the adjustments to the Purchase Price
pursuant to Section 2.2.4.5 result in a net decrease of the Purchase Price,
which shall constitute an immediate decrease of the Purchase Price in such
amount, or (b), as the case may be, Buyer shall pay to Sellers, the amount, if
any, by which the adjustments to the Purchase Price pursuant to Section 2.2.4.5
result in a net increase of the Purchase Price, which shall constitute an
immediate increase of the Purchase Price in such amount.
2.3 Closing
Distributions. At least three Business Days prior to Closing,
the Company and Sellers’ Representative shall deliver to Buyer a written notice
containing in reasonable detail the aggregate dollar amount of cash and
cash-equivalent distributions to be made by the Company to Sellers immediately
prior to the Closing, together with the notes receivable from Akimeka
Technologies, LLC (“Akimeka Technologies”), Novellus Research Sites, Inc. and
9Line, LLC, respectively (such cash, cash equivalents and notes receivable,
collectively the “Closing Distributions”). Notwithstanding
anything to the contrary herein, any items that are the personal property of
Vasconcellos, including artwork and awards, although displayed in the Company’s
Hawaii offices or are referenced on Schedule 2.3, shall remain the personal
property of Vasconcellos, shall not be deemed property of the Company, and shall
not be considered Closing Distributions.
2.4 The
Closing. Subject to the satisfaction (or waiver) of all of the
conditions precedent to the obligations of the Parties to consummate the Closing
set forth in Article 7 (the “Closing Conditions”), the Closing shall take place
at the offices of Arent Fox LLP located at 1050 Connecticut Avenue, NW,
Washington, D.C. 20036, commencing at 10 a.m. local time (a) on August
19, 2010, or (b) if the Closing Conditions have not been satisfied in full
(or waived) by such date, on such other date that is the first Business Day
after the date on which all of the Closing Conditions (other than such
conditions to be satisfied on the Closing Date) are satisfied (or waived) or
(c) on such other date as the Parties may agree after the satisfaction (or
waiver) of all the Closing Conditions (“Closing Date”).
ARTICLE
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND SELLERS
The
Company and each Seller, jointly and severally, represent and warrant to Buyer
as follows:
3.1 Legal
Status of the Company. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Hawaii with the requisite limited liability company power to own,
operate and lease its properties and to carry on its business as currently being
conducted. The Company is duly qualified or licensed to do business
as a foreign limited liability company and is in good standing in all
jurisdictions in which the character of the properties owned or held under lease
by the Company or the nature of the business transacted by the Company makes
qualification, respectively, necessary, except where failure to be so qualified
would not have a Company Material Adverse Effect. All jurisdictions
in which the Company is qualified to do business are set forth on Schedule
3.1.
3.2 Membership Interest of the
Company.
3.2.1 Authorized
Membership Interest and Ownership. The membership,
Distributional Interests and other equity of the Company consist only of the
Interests. All of the Interests have been duly authorized and validly
issued, were not issued in violation or breach of any Person’s preemptive or
similar rights, and are fully paid and nonassessable. Sellers own all
of the Interests of record and beneficially as set forth on Schedule
2.1. Upon consummation of the Closing, Buyer will own all of the
Interests, free and clear of any and all Encumbrances.
3.2.2 Distributional
Interests. Schedule 2.1 sets forth all of the Distributional
Interests held by any Person and, upon consummation of the Closing, none of such
Distributional Interests nor any other Distributional Interests shall exist that
is not owned by Buyer and Buyer will own all of the Distributional Interests
free and clear of any Encumbrances.
3.2.3 Options
and Convertible Securities of the Company. Except as set forth
on Schedule 3.2.3, (a) there are no outstanding subscriptions, options,
warrants, conversion rights or other rights, securities, agreements or
commitments obligating the Company to issue, sell or otherwise transfer any of
its Interests, or any securities or obligations convertible into, or exercisable
or exchangeable for, any Interests or other equity securities of the Company,
(b) except for the Distributional Interests set forth on Schedule 2.1,
there are no profits interests or other interests in the cash flow or
distributions of the Company, and (c) there are no voting trusts or other
agreements or understandings to which the Company or any Seller is a party with
respect to the voting of the Interests, and the Company is not a party to or
bound by any outstanding restrictions, options or other obligations, agreements
or commitments to sell, repurchase, redeem or acquire any outstanding Interests
or other securities of the Company.
3.3 No
Subsidiaries. The Company does not have any Subsidiaries and
does not otherwise own or have a contractual right or obligation to acquire any
capital stock or other securities of any Person.
3.4 Authority for Agreement;
Noncontravention.
3.4.1 Authority. The
Company has the limited liability company power and authority to
enter into and deliver this Agreement, to perform its obligations hereunder and
to consummate the Transactions to the extent of its obligations
hereunder. Each Seller has full power and authority to enter into and
deliver this Agreement, to perform his obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by the
Company and its consummation of the Transactions, to the extent of its
obligations hereunder, have been duly and validly authorized by the Company’s
managers in their capacities as managers of the Company (the “Company Managers”)
and no other limited liability company proceedings on the part of the Company
are necessary to authorize the execution and delivery of this Agreement and the
consummation of the Transactions, to the extent of its obligations
hereunder. This Agreement and, when executed and delivered, the other
agreements contemplated hereby to be signed by the Company or Sellers have been,
or with respect to such other agreements, will be duly executed and delivered by
the Company and Sellers and constitute valid and binding obligations of the
Company and Sellers enforceable against the Company and Sellers in accordance
with their terms.
3.4.2 No
Conflict. Except as set forth on Schedule 3.4.2, neither the
execution and delivery of this Agreement or the other agreements contemplated
hereby to be signed by the Company or Sellers, nor the performance by the
Company or Sellers of their respective obligations hereunder or thereunder, nor
the consummation by the Company or Sellers of the Transactions, to the extent of
their respective obligations hereunder or thereunder, will (a) in respect of the
Company, conflict with or result in a violation of any provision of its
Organizational Documents, (b) with or without the giving of notice or the lapse
of time, or both, conflict with, or result in any violation or breach of, or
constitute a default under, or result in any right to accelerate or result in
the creation of any Encumbrance pursuant to, or right of termination under, any
provision of any note, mortgage, indenture, lease, instrument or other
agreement, Permit, concession, grant, franchise, license, judgment, order,
decree, statute, ordinance, rule or regulation to which the Company or any
Seller is a party or bound, or by which any the assets or properties of the
Company or any Seller is bound or which is otherwise applicable to the Company
or any Seller or any assets or properties of the Company or any
Seller. No authorization, consent or approval of, or filing with or
notice to, any Governmental Entity is necessary for the execution and delivery
of this Agreement or any of the other agreements contemplated hereby to be
signed by the Company or Sellers or for the consummation of the Transactions by
the Company or Sellers.
3.5 Financial
Statements. Schedule 3.5 sets forth the balance sheets of the
Company as of December 31, 2009 and 2008, statements of income and member’s
equity and cash flow of the Company for the fiscal years ended December 31, 2009
and 2008, as audited by Kane & Associates, certified public accountants, and
the unaudited balance sheet of the Company as of June 30, 2010 (the “Balance
Sheet Date”) and the unaudited statements of income and member’s equity and cash
flow for the six months then ended, and such balance sheets and statements of
income and cash flow are accurate and complete in all material
respects. Collectively, the financial statements referred to in the
immediately preceding sentence are sometimes referred to herein as the “Company
Financial Statements,” and the Company’s balance sheet as of the Balance Sheet
Date is referred to herein as the “Company Balance Sheet.” Each of
the balance sheets included in the Company Financial Statements (including any
related notes) fairly presents in all material respects the financial position
of the Company as of its date, and the other statements included in the Company
Financial Statements (including any related notes) fairly present in all
material respects the statements of income and cash flow, as the case may be, of
the Company for the periods therein set forth, in each case in accordance with
GAAP subject, in the case of the Company Balance Sheet, to normal year-end audit
adjustments (all except as otherwise stated therein) and to the fact that the
Company Balance Sheet lacks footnotes and other presentation items.
3.6 Absence
of Material Adverse Changes. Since the Balance Sheet Date, the
Company has not suffered any Company Material Adverse Effect, nor has there
occurred or arisen any event, condition or state of facts of any character that
would reasonably be expected to result in a Company Material Adverse
Effect. Except for the transactions referenced in Schedule 3.6, since
the Balance Sheet Date, there have been no dividends or other distributions
declared or paid in respect of, or any repurchase or redemption by the Company
of, any equity securities of the Company, or any commitment or other Liability
relating to any of the foregoing.
3.7 Absence
of Undisclosed Liabilities. The Company has no liabilities or
obligations, fixed, accrued, contingent or otherwise (individually, a
“Liability” and collectively, “Liabilities”), that are not fully reflected or
provided for on the Company Balance Sheet, except (a) Liabilities incurred
in the ordinary course of business since the Company Balance Sheet Date, none of
which individually or in the aggregate has had or could reasonably be expected
to have a Company Material Adverse Effect, and (b) Liabilities expressly
disclosed in Schedule 3.7.
3.8 Books and
Records. Except as disclosed on Schedule 3.8, the books of
account and other records of the Company, all of which have been made available
to Buyer, are complete and correct in all material respects and have been
maintained in accordance with normal and customary business
practices. At the Closing, all of those books and records will be in
the Company’s possession.
3.9 Accounts
Receivable. All accounts receivable of the Company that are
reflected on the Company Balance Sheet, the Closing Balance Sheet or on the
Company’s accounting records as of the Closing Date (collectively, the “Accounts
Receivable”) represented or represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of
business. Unless paid prior to the Closing Date, the Accounts
Receivable as shown on the Closing Balance Sheet are, or will be as of the
Closing Date, to the Company’s Knowledge and Sellers’ Knowledge, collectible in
an amount of not less than 99% thereof. There is no contest, claim or
right of set-off, other than returns in the ordinary course of business, under
any Company Contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable. Schedule 3.9 contains
a complete and accurate list of all Accounts Receivable as of June 30, 2010,
which list sets forth the aging of such Accounts Receivable.
3.10 Compliance
with Applicable Laws, Organizational Documents. Except as
otherwise set forth in Schedule 3.10, the Company has all requisite licenses,
certificates and permits from all Governmental Entities (collectively,
“Permits”) necessary to conduct its business as currently conducted, and to own,
lease and operate its properties in the manner currently held and
operated. To the Company’s Knowledge and Sellers’ Knowledge, all of
the Permits are in full force and effect and the Company is in compliance with
all of the terms and conditions related to such Permits. There are no
proceedings in progress, pending or, to the Company’s Knowledge and Sellers’
Knowledge, threatened, that may result in revocation, cancellation, suspension,
or any adverse modification of any of such Permits. To the Company’s
Knowledge or Sellers’ Knowledge, except as set forth in Schedule 3.10, the
Company’s business has been since December 31, 2004, and is currently being
conducted in material compliance with all Applicable Laws, Permits or other
authorizations of any Governmental Entity. The Company is not in
default or violation of any provision of its Organizational
Documents.
3.11 Proceedings. Except
for any claim, investigation, action, suit, audit, arbitration or other
proceeding set forth on Schedule 3.11, to the Company’s Knowledge and Sellers’
Knowledge, (a) there is no investigation by any Governmental Entity with
respect to the Company pending or threatened, nor has any Governmental Entity
indicated to the Company an intention to conduct the same; (b) there is no
claim, investigation, action, suit, audit, arbitration or other proceeding
pending or threatened against or involving the Company, or any of its assets or
properties, at law or in equity, or before any arbitrator or Governmental Entity
and (c) there are no judgments, decrees, injunctions or orders of any
Governmental Entity or arbitrator outstanding against the Company.
3.12 Tax
Matters.
3.12.1 Filing of
Returns. Each Seller and the Company has prepared and filed on
a timely basis with all appropriate Governmental Entities all returns (including
information returns) in respect of Taxes that each Seller or the Company, as the
case may be, is required to file on or prior to the Closing, and all such
returns are correct and complete. None of Sellers nor the Company has
received any claim in writing from any Governmental Entity in a jurisdiction
(domestic or foreign) where Sellers or the Company do not file returns in
respect of Taxes that Sellers or the Company is or may be subject to taxation in
such jurisdiction; and to the Company’s Knowledge and Sellers’ Knowledge, no
such Governmental Entity has asserted or is considering asserting such a
claim. To the Company’s Knowledge and Sellers’ Knowledge there are no
ongoing audits of such returns of Taxes. All deficiencies proposed in
writing by any Governmental Entity and agreed to by any Seller or the Company
(as opposed to any deficiencies proposed in writing by any Governmental Entity
and being contested in good faith by such Sellers or the Company) as a result of
such audits have been paid.
3.12.2 Payment
of Taxes. Each Seller and the Company has paid in full all
Taxes due and owing by it on or before the Closing (whether or not shown on any
Tax return) and, in the case of Taxes of the Company accruing for a period
ending on or before the Closing that are not due on or before the Closing, the
Company has made adequate provision (not including any provision for deferred
Taxes established to reflect timing differences between book and Tax income) in
the Company’s books and records and on the face of its financial statements
(rather than in any notes thereto) for such payment. There are no
Encumbrances on any of the assets of the Company that arose in connection with
any failure (or alleged failure) to pay any Tax. Since the Balance
Sheet Date, the Company has not incurred any Liability for Taxes arising from
extraordinary gain or loss as that term is used in GAAP, outside the ordinary
course of its business. There is no dispute or claim concerning any
Tax Liability of the Company claimed or raised by any Governmental Entity, any
Seller or any agent or other representative of the Company or any Seller in
writing or, to the Company’s Knowledge or Sellers’ Knowledge,
orally. The Company has received no indication from any Governmental
Entity that there exists any proposed tax assessment against the Company; and to
the Company’s Knowledge and Sellers’ Knowledge, there is no proposed tax
assessment against the Company.
3.12.3 Withholding. The
Company has withheld from each payment, whether in cash or in kind, made or
owing to any of its current or former employees, officers, managers, independent
contractors, creditors, Sellers, or other third party all amounts required by
Applicable Laws to be withheld and has, where required, remitted such amounts
within the applicable periods to the appropriate Governmental Entities or, if
such remittances are not yet due, has made adequate provision therefor in the
Company’s books and records and on the face of its financial statements (rather
than in any notes thereto). All Forms W-2 and 1099 required to be
filed by or on behalf of the Company have been properly completed and timely
filed. The Company has timely paid all amounts required by Applicable
Laws to be paid by the Company to any Governmental Entity in respect of taxation
of Sellers (or any other current or former Interest holder) on
Sellers’ (or any such other current or former Interest holder’s)
distributive shares of the Company’s income. No portion of the
Purchase Price is subject to any Tax withholding under any Tax law.
3.12.4 Assessments. None
of Sellers nor the Company expects any Governmental Entity to assess any
additional Taxes with respect to the Company for any period for which Tax
returns have been filed. Except as set forth on Schedule 3.12.4,
since December 31, 2004, no Governmental Entity has examined or audited the
Company in respect of Taxes. Except as set forth on Schedule 3.12.4,
since December 31, 2004, none of Sellers nor the Company has received any
communication from any Governmental Entity (a) indicating an interest to open an
audit or review in respect of Taxes, (b) requesting information relating to
Tax matters, or (c) noticing a deficiency or proposed adjustment for any amount
of Taxes proposed, asserted or addressed. Neither any of Sellers nor
the Company has executed or filed any agreement extending the period of
assessment or collection of any Taxes.
3.12.5 Access to
Returns. Buyer has been provided with a copy of or access to
all federal, state, local and foreign Tax returns filed by the Company since
January 1, 2004. Buyer has been provided with a copy of or access to
all assessments, extensions and waivers resulting from any audits of the Company
or any Seller by a Governmental Entity in respect of Taxes, and all such
assessments and related penalties and interest have been paid in full, except
for immaterial amounts being contested in good faith by the Company or any such
Sellers.
3.12.6 Miscellaneous
Items. The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or could result (determined regardless of
whether or not the Company is or has been otherwise subject to the Code Sections
280G or 162(m)), separately or in the aggregate, in the payment of (a) any
“excess parachute payment” within the meaning of Code Section 280G (or any
corresponding provision of state, local or foreign law) and (b) any amount that
will not be fully deductible as a result of Code Section 162 (m) (or any
corresponding provisions of state, local or foreign Tax law). The
Company is not and has never been a member of an Affiliated Group filing a
consolidated federal income tax return. The Company has no Liability
for the Taxes of any Person other than itself under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise. Each of Sellers
and the Company either (a) has disclosed on its respective income Tax returns,
or (b) has “substantial authority” within the meaning of Code Section 6662 for
all positions taken therein that could give rise to a substantial understatement
of income Tax within the meaning of Code Section 6662. Except as
otherwise disclosed on Schedule 3.12.6, neither any of Sellers nor the Company
is or has been a party to any “reportable transaction” as defined in Code
Section 6707(A)(c)(1) and Treasury Regulations Section 1.6011-4(h).
3.12.7 No Tax
Sharing Agreement. The Company is not and never has been a
party to or otherwise bound by any Tax-sharing agreement or similar
agreement. Any Tax-sharing agreement or similar agreement to which
the Company is, was or may have been a party shall be terminated as of the
Closing Date and shall have no further effect for any taxable year (whether the
current year, a future year or a past year) so that after the Closing the
Company shall not, except as set forth on the face of the Closing Balance Sheet,
have any Liability under any Tax-sharing agreement or similar
agreement.
3.12.8 Certain
Income Items and Deductions. The Company will not be required
to include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any:
(a) change in
method of accounting for a taxable period ending on or prior to the Closing
Date;
(b) “closing
agreement” as described in Code Section 7121 (or any corresponding or similar
provision of state, local or foreign income Tax law) executed on or prior to the
Closing Date;
(c) installment
sale or open transaction disposition made on or prior to the Closing Date;
or
(d) prepaid
amount received on or prior to the Closing Date.
3.12.9 [Intentionally
Omitted]
3.12.10 Affiliated
Group. The Company has never been a member of an Affiliated
Group.
3.12.11 Unclaimed
Property. The Company has no assets that may constitute
unclaimed property under Applicable Laws. Without limiting the
generality of the foregoing, the Company has established and followed procedures
to identify any unclaimed property and, to the extent required by Applicable
Laws, remit such unclaimed property to the respective Governmental
Entity. The Company’s records are adequate to permit Governmental
Entities or outside auditors to confirm the foregoing representations and
warranties of this Section 3.12.11.
3.12.12 Tax
Status. The Company has at all times since September 3, 1999
been, and up through the Closing Date will at all times continue to be either
(i) disregarded for U.S. federal income Tax purposes (and for all other U.S.
federal Tax purposes except as otherwise provided in Treasury Regulations
Sections 301.7701-2(c)(iv) – (v), 301.7701-2T(c)(iv)(B) and
301.7701-2T(c)(v)(B)) as an entity separate from Vasconcellos or (ii) an entity
treated as a partnership for U.S. federal income Tax purposes. The
Company has at all times since September 3, 1999 been, and up through the
Closing Date will at all times continue to be either (i) disregarded as an
entity separate from Vasconcellos for purposes of all income Taxes imposed by
any other Governmental Entity (whether state, local, municipal or foreign) in
any jurisdiction in which the Company has conducted any activities or (ii) an
entity treated as a partnership for such income Tax purposes.
3.13 Employee Benefit
Plans.
3.13.1 List of
Plans. Schedule 3.13.1 contains a correct and complete list of
all pension, profit sharing, retirement, deferred compensation, welfare, legal
services, medical, dental or other employee benefit or health insurance plans,
life insurance or other death benefit plans, disability, equity compensation,
bonus, severance pay and other similar plans, programs or agreements, relating
to any Persons employed by the Company or in which any Person employed by the
Company is eligible to participate and which is currently maintained or that was
maintained at any time since January 1, 2004, by the Company or any ERISA
Affiliate, or pursuant to which the Company has or may reasonably be expected to
have any Liability (collectively, the “Company Plans”). The Company
has made available to Buyer complete copies, as of the date hereof, of all of
the Company Plans that have been reduced to writing, together with all documents
establishing or constituting any related trust, annuity contract, insurance
contract or other funding instrument, and summaries of those that have not been
reduced to writing. The Company has made available to Buyer complete
copies of current plan summaries, employee booklets, personnel manuals and other
material documents or written materials concerning the Company Plans that are in
the possession of the Company as of the date hereof. The Company does
not have and has never had any “defined benefit plans” as defined in ERISA
Section 3(35).
3.13.2 ERISA. Neither
the Company nor any ERISA Affiliate of the Company has incurred any “withdrawal
liability” calculated under Code Section 4211 and there has been no event or
circumstance which would cause them to incur any such
Liability. Neither the Company nor any ERISA Affiliate of the Company
has ever maintained a Company Plan providing health or life insurance benefits
to former employees, other than as required pursuant to Code Section 4980B or to
any state law conversion rights. No Company Plan previously
maintained by the Company or its ERISA Affiliates which was subject to ERISA has
been terminated; no proceedings to terminate any such plan have been instituted
within the meaning of Subtitle C of Title IV of ERISA; and no reportable event
within the meaning of Section 4043 of said Subtitle C of Title IV of ERISA with
respect to which the requirement to file a notice with the Pension Benefit
Guaranty Corporation has not been waived has occurred with respect to any such
Company Plan, and no Liability to the Pension Benefit Guaranty Corporation has
been incurred by the Company or its ERISA Affiliates. With respect to
all the Company Plans, to the Company’s Knowledge and Sellers’ Knowledge, the
Company and every ERISA Affiliate of the Company is in compliance with all
requirements prescribed by all Applicable Laws, and has in all respects
performed all obligations required to be performed by it. Neither the
Company nor any ERISA Affiliate of the Company, nor any of their managers,
officers, employees or agents, nor any trustee or administrator of any trust
created under the Company Plans, has engaged in or been a party to any
“prohibited transaction” as defined in Code Section 4975 which could subject the
Company or its Affiliates, managers or employees or the Company Plans or the
trusts relating thereto or any party dealing with any of the Company Plans or
trusts to any tax or penalty on “prohibited transactions” imposed by Code
Section 4975. Neither the Company Plans nor the trusts created
thereunder have incurred any “accumulated funding deficiency,” as such term is
defined in Code Section 412 and regulations issued thereunder, whether or not
waived.
3.13.3 Plan
Determinations. Each Company Plan intended to qualify under
Code Section 401(a) (or the prototype or volume submitter document upon which
the Company Plan is based) has been determined by the Internal Revenue Service
(“IRS”) to so qualify, and the trusts created thereunder have been determined to
be exempt from Tax under Code Section 501(a); copies of all determination or
opinion letters which have been received by the Company have been delivered or
made available to Buyer, and Sellers have not taken any action, or received any
notification of any action taken by any other Person since the date of such
determination or opinion letters that might cause the loss of such qualification
or exemption. With respect to each Company Plan which is a qualified
profit sharing plan, all employer contributions accrued for plan years ending
prior to the Closing under the Company Plan terms and Applicable Laws have been
made.
3.13.4 Funding. Except
as set forth on Schedule 3.13.4:
(a) all
contributions, premiums or other payments due or required to be made to the
Company Plans as of the date hereof have been made as of the date hereof or are
properly reflected on the Company Balance Sheet;
(b) there are
no actions, liens, suits or claims (other than routine claims for benefits)
pending or, to the Company’s Knowledge and Sellers’ Knowledge, threatened with
respect to any Company Plan;
(c) no event
has occurred, and there exists no condition or set of circumstances, which
presents a material risk of a partial termination (within the meaning of Code
Section 411(d)(3)) of any Company Plan;
(d) each
Company Plan that is a “group health plan” (as defined in Section 607(1) of
ERISA) has been operated at all times in substantial compliance with the
provisions of COBRA and any applicable, similar state law; and
(e) with
respect to any Company Plan that is qualified under Code Section 401(k),
individually and in the aggregate, to the Company’s Knowledge and Sellers’
Knowledge, no event has occurred, and there exists no condition or set of
circumstances in connection with which the Company could be subject to any
Liability (except Liability for benefits claims and funding obligations payable
in the ordinary course) under ERISA, the Code or any other Applicable
Laws.
3.13.5 Welfare
Plans. With respect to any Company Plan that is an employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA) (a “Welfare
Plan”), (a) each Welfare plan for which contributions are claimed by the Company
as deductions under any provision of the Code is in compliance with all
applicable requirements pertaining to such deduction, (b) with respect to any
welfare benefit fund (within the meaning of Code Section 419 related to a
Welfare Plan, there is no disqualified benefit (within the meaning of Code
Section 4976(b) that would result in the imposition of a Tax under Code Section
4976(a), (c) any Company Plan that is a group health plan (within the meaning of
Code Section 4980B(g)(2) complies, and in each and every case has complied, to
the Company’s Knowledge and Sellers’ Knowledge, with all of the applicable
material requirements of COBRA, the Family Medical Leave Act of 1993, the Health
Insurance and Portability and Accountability Act of 1996, the Women’s Health and
Cancer Rights Act of 1996, the Newborns’ and Mothers’ Health Protection Act of
1996, and any similar provisions of state law or foreign law applicable to
employees of the Company or any ERISA Affiliate of the Company. None of the
Company Plans promises or provides retiree medical or other retiree welfare
benefits to any Person except as required by Applicable Laws, and neither the
Company nor any ERISA Affiliate of the Company has represented, promised or
contracted (whether in oral or written form) to provide such retiree benefits to
any employee, former employee, manager, consultant or other Person, except to
the extent required by statue. No Company Plan or employment
agreement provides health benefits that are not insured through an insurance
contract. Except as set forth on Schedule 3.13.5, each Company Plan
is amendable and terminable unilaterally by the Company at any time without
Liability to the Company as a result thereof and no Company Plan, plan
documentation or agreement, summary plan description or other written
communication distributed generally to employees by its terms prohibits the
Company from amending or terminating any such Company Plan.
3.13.6 Certain
Other Matters. Except as reserved for on the Company Balance
Sheet or the Final Closing Balance Sheet, the Company has no Liability or
potential Liability and the Company will not have any Liability or potential
Liability, with regard to any Company Plan, as a result of any failure to
perform non-discrimination testing on a Company Plan or any failure to amend a
Company Plan pursuant to the legislation commonly known as “GUST” or the
legislation commonly known as “EGTRRA.” All employee contributions,
including elective deferrals, to the Company’s 401(k) plan(s) have been
segregated from the Company’s general assets and deposited into the trust(s)
established pursuant to the 401(k) plan(s) in a timely manner in accordance with
the “plan asset” regulations of the Department of Labor.
3.14 Employment-Related
Matters.
3.14.1 Labor
Relations. Except to the extent set forth on Schedule 3.14.1:
(a) the Company is not a party to any collective bargaining agreement or
other contract or agreement with any labor organization or other representative
of any of the employees of the Company; (b) there is no labor strike,
dispute, slowdown, work stoppage or lockout that is pending or, to the Company’s
Knowledge and Sellers’ Knowledge, threatened against or otherwise affecting the
Company, and the Company has not experienced the same; (c) except as has
occurred in the ordinary course of the Company’s business without any resulting
Liability of the Company, the Company has not closed any plant or facility,
effectuated any layoffs of employees or implemented any early retirement or
separation program at any time, nor has the Company planned or announced any
such action or program for the future with respect to which the Company has any
Liability; and (d) all salaries, wages, vacation pay, bonuses, commissions and
other compensation due from the Company to the employees of the Company before
the date hereof have been paid or accrued as of the date hereof.
3.14.2 Employee
List. Set forth on Schedule 3.14.2 is a list containing the
name of each employee of the Company, whether full-time or part time, and each
such employee’s position, starting employment date and annual salary as of the
date indicated thereon (“Employee List”). The Employee List is
correct and complete as of the date of the Employee List. No third
party has asserted in writing any claim, or, to the Company’s Knowledge and
Sellers’ Knowledge, has any reasonable basis to assert any valid claim, against
the Company that either the continued employment by, or association with, the
Company of any of the current officers or employees of, or consultants to, the
Company contravenes any agreements or Applicable Laws regarding unfair
competition, trade secrets or proprietary information.
3.15 Environmental.
3.15.1 Environmental
Laws. (a) To the Company’s Knowledge and Sellers’
Knowledge, the Company is in material compliance with all applicable
Environmental Laws in effect on the date hereof; and (b) the Company has
not received any communication that alleges that the Company is not in
compliance with all applicable Environmental Laws in effect on the date
hereof.
3.15.2 No Basis
for Claims. To the Company’s Knowledge and Sellers’ Knowledge,
there are no past or current actions or activities by the Company, or any
circumstances, conditions, events or incidents, including the storage,
treatment, release, emission, discharge, disposal or arrangement for disposal of
any Material of Environmental Concern, whether or not by the Company, that could
reasonably form the basis of any Environmental Claim against the Company or
against any Person whose Liability for any Environmental Claim the Company may
have retained or assumed either contractually or by operation of law, including
the storage, treatment, release, emission, discharge, disposal or arrangement
for disposal of any Material of Environmental Concern or any other contamination
or other hazardous condition, whether caused by the Company or not related to
the premises at any time occupied by the Company.
3.15.3 Transportation
of Materials of Environmental Concern. Since December 31,
2004, the Company has not used, handled, generated, produced, manufactured,
treated, stored, disposed of, recycled or transported any Materials of
Environmental Concern, whether on behalf of the Company or any other Person, in
violation of any Environmental Laws, and there has been no Release or threatened
Release of any Materials of Environmental Concern beneath or from any real
property operated or formerly owned or operated by the Company.
3.16 No
Broker’s or Finder’s Fees. Except for D.A. Davidson & Co.
(“Davidson”), the fees and expenses of which shall be paid by Sellers at the
Closing, the Company has not paid or become obligated to pay any fee or
commission to any broker, finder, financial advisor, intermediary or other
Person in connection with the Transactions and giving effect to the consummation
of the Closing will not cause the Company to be so obligated. Upon
consummation of the Closing, the Company will have no Liabilities whatsoever in
respect of Davidson, including under the letter agreement and agreement, both
dated January 8, 2009, between Davidson and the Company (collectively, the
“Davidson Agreement”).
3.17 Assets Other Than Real
Property.
3.17.1 Title. The
Company has good, valid and marketable title to all of the tangible assets shown
on the Company Balance Sheet, in each case, free and clear of any Encumbrance,
except for (a) assets disposed of since Balance Sheet Date in the ordinary
course of business and in a manner consistent with past practices, (b)
Liabilities and Encumbrances reflected in the Company Balance Sheet or otherwise
in the Company Financial Statements, (c) Permitted Encumbrances, and (d)
Liabilities and Encumbrances set forth on Schedule 3.17.1.
3.17.2 Closing
Date Assets.
(a) As of the
Closing Date, the Company will have good, valid and marketable title to all of
its assets, including those assets shown on the Final Closing Balance Sheet, in
each case free and clear of any Encumbrances other than Permitted
Encumbrances.
(b) Schedule
3.17.2(b) lists all material tangible personal property that is owned by the
Company and the location thereof. All of such personal property is in
normal operating condition, subject to ordinary wear and tear.
(c) The
Company’s assets include all right, title and interest in and to all assets that
are used in or that are being held for use or are otherwise necessary in the
operation, as currently conducted by the Company, of its business.
(d) Schedule
3.17.2(d) contains a complete and correct list of all Governmental Entity-owned
property or Governmental Entity-furnished equipment, including tooling and test
equipment, provided under, necessary to perform the obligation under, or for
which the Company could be held accountable under, the Government Contracts and
such Governmental Entity-owned property is maintained by the Company in
accordance with government-approved property management system.
3.17.3 Condition. All
facilities, equipment and personal property owned by the Company and regularly
used in its business is in normal operating condition and repair, ordinary wear
and tear excepted, which wear and tear, taken in the aggregate, is not material
to the Company and does not affect the Company’s obligations to consummate the
Transactions and otherwise perform under this Agreement.
3.18 Real
Property.
3.18.1 Company
Real Property. The Company does not own and has never owned
any real property.
3.18.2 Company
Leases. Schedule 3.18.2 lists all of the Company
Leases. Complete copies of the Company Leases, and all material
amendments thereto (which are identified on Schedule 3.18.2) have been made
available by the Company to Buyer. The Company Leases grant leasehold
estates free and clear of all Encumbrances (except Permitted Encumbrances)
granted by or caused by the actions of the Company. The Company
Leases are in full force and effect and are binding and enforceable against each
of the parties thereto in accordance with their respective terms and
conditions. Neither the Company nor, to the Company’s Knowledge and
Sellers’ Knowledge, any other Person to a Company Lease, has committed a breach
or default under any Company Lease, nor has there occurred any event that with
the passage of time or the giving of notice or both would constitute such a
breach or default. Schedule 3.18.2 identifies each Company Lease the
provisions of which would be adversely affected by the Transactions and each
Company Lease that requires the consent of any third Person in connection with
the Transactions. No construction, alteration or other leasehold
improvement work with respect to the real property covered by any of the Company
Leases remains to be paid for or to be performed by the
Company. Except as set forth on Schedule 3.18.2, no Company Leases
have an unexpired term which, including any renewal or extensions of such term
provided for in the Company Lease, could exceed 365 days.
3.18.3 Condition. All
leasehold improvements and fixtures, or parts thereof, used by the Company in
the conduct of its business are in normal operating condition and repair,
ordinary wear and tear excepted, and are insured with coverages that are usual
and customary for similar properties and similar businesses or are required,
pursuant to the Company Leases, to be insured by third Persons.
3.19 Contracts, Agreements and
Commitments.
3.19.1 Company
Contracts. Except as set forth on Schedule 3.19.1, the Company
is not a party to:
(a) any
bonus, deferred compensation, pension, severance, profit-sharing, equity
compensation, employee stock purchase or retirement plan, Contract or
arrangement or other employee benefit plan or arrangement;
(b) any
employment Contract with any current employee, officer, manager or consultant
(or former employees, officers, managers and consultants to the extent there
remain at the date hereof obligations to be performed by the
Company);
(c) any
Company Contract for personal services or employment with a term of service or
employment specified in the Contract or any Contract for personal services or
employment in which the Company has agreed on the termination of such Contract
to make any payments greater than those that would otherwise be imposed by
Applicable Laws;
(d) any
Company Contract of guarantee or indemnification;
(e) any
Company Contract containing a covenant limiting or purporting to limit the
freedom of the Company to compete with any Person in any geographic area or to
engage in any line of business;
(f) any lease
other than the Company Leases under which the Company is lessee that involves,
in the aggregate, payments of $10,000 or more per annum, or of $50,000 or more
for the remaining term of the Company Lease or is material to the conduct of the
Company’s business;
(g) any joint
venture or profit-sharing Company Contract or similar Contract ;
(h) except
for trade indebtedness incurred in the ordinary course of business and equipment
leases entered into in the ordinary course of business, any loan or credit
Contract providing for the extension of credit to the Company or any instrument
evidencing or related in any way to indebtedness incurred in the acquisition of
companies or other entities or indebtedness for borrowed money by way of direct
loan, sale of debt securities, purchase money obligation, conditional sale,
guarantee, or otherwise that individually is in the amount of $10,000 or
more;
(i) any
license Contract, either as licensor or licensee, involving payments (including
past payments) of $10,000 in the aggregate or more, or any material distributor,
dealer, reseller, franchise, manufacturer’s representative, or sales agency or
any other similar material Contract;
(j) any
Company Contract granting exclusive rights to, or providing for the sale of, all
or any portion of the Company Proprietary Rights;
(k) any
Company Contract or arrangement providing for the payment of any commission or
similar payment based on sales or contract awards other than to employees of the
Company;
(l) Except as
set forth on Schedule 3.26.1(a), any Company Contract for the sale by the
Company of materials, products, services or supplies that involves future
payments to the Company of more than $10,000;
(m) other
than the Company Leases, any Company Contract for the purchase by the Company of
any materials, equipment, services, or supplies that either (i) involves a
binding commitment by the Company to make future payments in excess of $10,000
and cannot be terminated by it without penalty upon 30 days or less notice or
(ii) was not entered into in the ordinary course of business;
(n) any
Company Contract or arrangement with any third Person for such third party to
develop any intellectual property or other asset expected to be used or
currently used or useful in the Company’s business;
(o) any
Company Contract or commitment for the acquisition, construction or sale of
fixed assets owned or to be owned by the Company that involves future payments
by it of more than $10,000;
(p) any
Company Contract or commitment to which current or former managers, officers or
Affiliates of the Company (or directors, managers or officers of an Affiliate of
the Company) are also parties;
(q) any
Company Contract not described above (ignoring, solely for this purpose, any
dollar amount thresholds in those descriptions) involving the payment or receipt
by the Company of more than $25,000, other than the Company Leases;
(r) any
Company Contract not described above that was not made in the ordinary course of
business and that is material to the Company’s financial condition, business,
operations, assets, or results of operations; or
(s) any
Company Contract that provides for any continuing or future obligation of the
Company, involving Liability of the Company of more than $25,000, actual or
contingent, including any continuing representation or warranty and any
indemnification obligation, in connection with the disposition of any business
or assets of the Company.
3.19.2 Validity. All
Company Contracts, including the Company Contracts required to be set forth on
Schedule 3.19.1 are valid and in full force and effect. Since January
1, 2005, the Company has not, nor, to the Company’s Knowledge, has any other
party thereto, breached any provision of, or defaulted under the terms of any
such Contract except as set forth on Schedule 3.19.2 or have been cured or
waived, and the Company has not received any “notice to cure” or a similar
notice from any Governmental Entity requesting performance under any Contract
between the Company and such Governmental Entity.
3.19.3 Third-Party
Consents. Schedule 3.19.3 identifies each Contract and other
document that requires that notice be provided to a third Person or the consent
of a third Person, including Governmental Entities, in connection with the
Transactions.
3.20 Intellectual
Property.
3.20.1 Right to
Intellectual Property. Except as set forth on Schedule 3.20.1,
the Company owns, or has, fully paid, rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material (excluding Commercial
Software) that are used in the business of the Company as currently conducted
(the “Company Proprietary Rights”). The Commercial Software used in
the Company’s business has been acquired and used by the Company on the basis of
and in accordance with a valid license from the manufacturer or the dealer
authorized to distribute such Commercial Software and, to the Company’s
Knowledge, free and clear of any claims or rights of any third parties. The
Company is not in breach of any of the terms and conditions of any such license
and, to the Company’s Knowledge, has not been infringing upon any rights of any
third parties in connection with its acquisition or use of the Commercial
Software.
3.20.2 No
Conflict.
(a) Set forth
on Schedule 3.20.2(a) is a complete list of all patents, trademarks, registered
copyrights, trade names and service marks, and any applications therefor,
included in the Company Proprietary Rights, specifying, where applicable, the
jurisdictions in which each such Company Proprietary Right has been issued or
registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and the
names of all registered owners.
(b) None of
the Company’s currently marketed software products has been registered for
copyright protection with the United States Copyright Office or any foreign
offices nor has the Company been requested to make any such
registration.
(c) Set forth
on Schedule 3.20.2(c) is a complete list of all material licenses, sublicenses
and other Contracts as to which the Company is a party and pursuant to which the
Company or any other Person is authorized to use any Company Proprietary Right
(excluding “end-user licenses”) or other trade secret material to the business
of the Company, and includes the identity of all parties thereto, a description
of the nature and subject matter thereof, the applicable royalty and the term
thereof.
(d) The
Company is not in violation of any license, sublicense or other Contract
described on such list except such violations as do not materially impair the
Company’s rights under such license, sublicense or
other Contract.
(e) The
execution and delivery of this Agreement by the Company, and the consummation of
the Transactions, will neither cause the Company to be in violation or default
under any such license, sublicense or other Contract, nor entitle any other
party to any such license, sublicense or other Contract to terminate or modify
such license, sublicense or other Contract.
(f) Except as
set forth on Schedule 3.20.2(f), the Company is the sole and exclusive owner or
licensee of, with all right, title and interest in and to (free and clear of any
and all Encumbrances), the Company Proprietary Rights, and has sole and
exclusive rights (and is not contractually obligated to pay any compensation to
any third party in respect thereof) to the use thereof or the material covered
thereby in connection with the services or products in respect of which the
Company Proprietary Rights are being used.
(g) Except as
set forth on Schedule 3.20.2(g), no claims with respect to the Company
Proprietary Rights have been asserted or, to the Company’s Knowledge and
Sellers’ Knowledge, are threatened by any Person nor, to the Company’s Knowledge
and Sellers’ Knowledge, are there any valid grounds for any bona fide claims to
the effect that the manufacture, sale, licensing or use of any of the products
of the Company as currently manufactured, sold, licensed or used or proposed for
manufacture, use, sale or licensing by the Company infringes on any copyright,
patent, trademark, service mark or trade secret, against the use by the
Company of any trademarks, service marks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs and
applications used in the Company’s business as currently conducted or as
proposed to be conducted by the Company, or challenging the ownership by the
Company, or the validity or effectiveness of any of the Company Proprietary
Rights.
(h) Except as
set forth on Schedule 3.20.2(h), all material registered trademarks, service
marks and copyrights held by the Company are valid and subsisting in the
jurisdictions in which they have been filed.
(i) To the
Company’s Knowledge and Sellers’ Knowledge, there is no material unauthorized
use, infringement or misappropriation of any of the Company Proprietary Rights
by any third party, including any employee or former employee of the
Company.
(j) No
Company Proprietary Right or product of the Company is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by the Company.
(k) Except as
set forth on Schedule 3.20.2(k), the Company has not entered into any agreement
under which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
(l) The
Company’s products, packaging and documentation contain copyright notices
sufficient to maintain copyright protection on the copyrighted portions of the
Company Proprietary Rights.
3.20.3 Employee
Agreements. Except as set forth on Schedule 3.20.3(a), each
employee, officer and consultant of the Company has executed a confidentiality
agreement in substantially the form of Schedule 3.20.3(b), each officer has
executed a non-competition agreement in substantially the form of Schedule
3.20.3(c) and each consultant has entered into a consulting agreement in
substantially the form of Schedule 3.20.3(d). To the Company’s
Knowledge and Sellers’ Knowledge, (i) no employee, officer or consultant of the
Company is in breach of any employment or consulting contract, proprietary
information and inventions agreement, non-competition agreement, or any other
contract or agreement with the Company and (ii) the Company has no liability for
any breach by any employee, officer or consultant of the Company under any such
contracts or agreements with any previous employer.
3.21 Insurance
Contracts. Schedule 3.21 lists all contracts of insurance and
indemnity in force at the date hereof with respect to the
Company. Such contracts of insurance and indemnity and those shown in
other Schedules (collectively, the “Company Insurance Contracts”) insure against
such risks, and are in such amounts, as are disclosed on such
Schedules. All of the Company Insurance Contracts are in full force
and effect, and to the Company’s Knowledge and Sellers’ Knowledge, there are no
defaults thereunder by the Company which could permit the insurer to deny
payment of claims thereunder. The Company has not received notice
from any of its insurance carriers that any insurance premiums will be
materially increased in the future or that any insurance coverage provided under
the Company Insurance Contracts will not be available in the future on
substantially the same terms as now in effect. The Company has not
received or given a notice of cancellation with respect to any of the Company
Insurance Contracts.
3.22 Banking
Relationships. Schedule 3.22 shows the names and locations of
all banks, trust companies and other financial institutions in which the Company
has accounts, lines of credit or safety deposit boxes and, with respect to each
account, line of credit or safety deposit box, the names of all Persons
authorized to draw thereon or to have access thereto.
3.23 No
Contingent Liabilities. To the Company’s Knowledge and
Sellers’ Knowledge, the Company has no contingent or conditional Liabilities of
any kind arising from or in connection with any acquisition of a Person or a
line of business by the Company.
3.24 Absence
of Certain Relationships. Except as set forth on Schedule
3.24, to the Company’s Knowledge and Sellers’ Knowledge none of (a) the Company,
(b) any officer of the Company, (c) any Seller, or (d) any member of the
immediate family of the individuals listed in clauses (b) or (c) of this Section
3.24, has any financial or employment interest in any subcontractor, supplier,
or customer of the Company (other than equity holdings in publicly held
companies of less than two percent of the outstanding capital stock of any such
publicly held company).
3.25 Sensitive
Payments. Neither the Company nor any Affiliate of the
Company, nor, to the Company’s Knowledge and Sellers’ Knowledge, any other
Person associated with or acting for or on behalf of any of the foregoing, has
directly or indirectly taken any action which would cause the Company to be in
violation of the United States Foreign Corrupt Practices Act of 1977, as
amended. Neither the Company, nor any Affiliate of the Company, nor,
to the Company’s Knowledge and Sellers’ Knowledge, any other Person associated
with or acting for or on behalf of any of the foregoing, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kick-back, or other payment to any Person, private or public,
regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any Affiliate
of the Company, or (iv) in violation of any Applicable Laws, or (b) established
or maintained any fund or asset that has not been recorded in the Company’s
books and records.
3.26 Government
Contracts.
3.26.1 Generally. Each
Company Contract and other Company Engagement that is a Government Contract
(each an “Active Government Contract”) is listed on Schedule 3.26.1(a) and
identified as a Government Contract. Each Company Completed
Engagement that is or was a Government Contract is referred to herein as a
“Completed Government Contract.” Also listed on Schedule 3.26.1(a)
and identified as a “Government Bid” is each outstanding offer, quote, bid or
proposal for a Government Contract involving the Company’s business (“Government
Bid”). Listed on Schedule 3.26.1(b) is each Active Government
Contract under which, to the Company’s Knowledge and Sellers’ Knowledge, the
Company currently is experiencing, or is likely to experience, either cost,
schedule, technical or quality problems.
3.26.2 Bids and
Awards. To the Company’s Knowledge and Sellers’ Knowledge,
except as set forth on Schedule 3.26.2, (a) each Active Government Contract and
each Completed Government Contract (collectively, the “Government Contracts”)
was legally awarded, (b) no such Active Government Contract (or, where
applicable, the prime contract with the United States Government under which
such Government Contract was awarded) is the subject of bid or award protest
proceedings, (c) no such Active Government Contract (or, where applicable, the
prime contracts with the United States Government under which such Government
Contract was awarded) is reasonably likely to become the subject to bid or award
protest proceedings, and (d) there is no pending award in respect of a
Government Bid that was made under any small business set aside program that
would deem the Company ineligible for such award as a result of the
Closing. Except as set forth on Schedule 3.26.2, to the Company’s
Knowledge and Sellers’ Knowledge, no facts exist which would reasonably be
expected give rise to a claim for price adjustment under the Truth in
Negotiations Act or to any other request for a reduction in the price of any
Government Contracts.
3.26.3 Compliance with Law and
Regulation and Contractual Terms; Inspection and
Certification.
(a) Except as
set forth on Schedule 3.26.3, and to the Company’s Knowledge and Sellers’
Knowledge, the Company has complied with all applicable statutory and regulatory
requirements pertaining to the Government Contracts to which it is a party,
including the Armed Services Procurement Act, the Federal Property and
Administrative Services Act, the Federal Acquisition Regulation (the “FAR”), the
FAR cost principles, and the Cost Accounting Standards.
(b) To the
Company’s Knowledge and Sellers’ Knowledge, (i) the Company has complied
with all terms and conditions, including all clauses, provisions,
specifications, and quality assurance, testing and inspection requirements of
the Government Contracts, whether incorporated expressly, by reference or by
operation of Applicable Law; (ii) all facts set forth in or acknowledged by
any representations, certifications or disclosure statements made or submitted
by or on behalf of the Company in connection with any Government Contract and
its quotations, bids and proposals for Government Contracts were current,
accurate and complete as of the date of their submission; (iii) the Company
has complied with all applicable representations, certifications and disclosure
requirements under all Government Contracts and each of its quotations, bids and
proposals for Government Contracts; (iv) no facts exist which could
reasonably be expected to give rise to Liability to the Company under the False
Claims Act that would reasonably be expected to result in a Company Liability;
and (v) no facts exist which could reasonably be expected to give rise to
an obligation of the Company to reimburse any Governmental Entity in respect of
any Completed Government Contract that has not been officially closed out by
such Governmental Entity as a result of final indirect rate
adjustments.
(c) Except as
described in Schedule 3.26.3, to the Company’s Knowledge and Sellers’ Knowledge,
the Company has not undergone and is not undergoing any, review, inspection,
investigation, survey or examination of records relating to any Government
Contract and no audit, review, inspection, investigation, survey or examination
of records described in Schedule 3.26.3 has revealed any fact, occurrence, or
practice that would reasonably be expected to adversely affect the assets,
business or financial statement of the Company, or its continued eligibility to
receive and perform Government Contracts.
(d) To the
Company’s Knowledge and Sellers’ Knowledge, the Company has not made any
payment, directly or indirectly, to any Person in violation of Applicable Laws,
including laws relating to bribes, gratuities, kickbacks, lobbying expenditures,
political contributions and contingent fee payments.
(e) To the
Company’s Knowledge and Sellers’ Knowledge, the Company has complied with all
applicable requirements under each Government Contract relating to the
safeguarding of and access to classified information.
(f) To the
Company’s Knowledge and Sellers’ Knowledge, the Company’s cost accounting
purchasing, inventory and quality control systems are in compliance with all
applicable government procurement statutes and regulations and with the
requirements of the Government Contracts.
(g) To the
Company’s Knowledge and Sellers’ Knowledge, the Company has complied in all
material respects with applicable statutory and regulatory requirements
pertaining to each Government Contract to which it is a party premised on the
Company’s small business status, the Company’s status as a participant in the
Small Business Administration’s Section 8(a) Business Development program, small
disadvantaged business status, veteran owned status, protégé status, or other
preferential status, or whether, to the Company’s Knowledge and Sellers’
Knowledge, the prime contractor under which the Company is performing any
Government Contract as a subcontractor has taken credit based on the Company’s
small business status, the Company’s status as a participant in the Small
Business Administration’s 8(a) Business Development program, small disadvantaged
business status, veteran owned status, protégé status, or other preferential
status.
3.26.4 Disputes, Claims and
Litigation.
(a) Except as
described on Schedule 3.26.4(a), to the Company’s Knowledge and Sellers’
Knowledge: (i) there are neither outstanding claims or disputes against the
Company relating to any Government Contract nor any facts or allegations that
would reasonably be expected to give rise to such a claim or dispute in the
future; and (ii) there are neither any outstanding claims or disputes
relating to any Government Contract which, if resolved unfavorably to the
Company, would increase by five percent or more the Company’s cost to complete
performance of any task order under such Government Contract above the amounts
set forth in the estimates to complete previously prepared by the Company and
delivered to Buyer for the Government Contract, nor any reasonably foreseeable
expenditures which would increase by five percent or more the cost to complete
performance of any task order under Government Contract above the amounts set
forth in the estimates to complete described above.
(b) The
Company has not been nor is currently under any administrative, civil or
criminal investigation or indictment disclosed to the Company involving alleged
false statements, false claims or other misconduct relating to any Government
Contract or quotations, bids and proposals for Government Contracts, and, to the
Company’s Knowledge and Sellers’ Knowledge, there is no basis for any such
investigation or indictment.
(c) The
Company has not been nor is currently a party to any administrative or civil
litigation involving alleged false statements, false claims or other misconduct
relating to any Government Contract or quotations, bids and proposals for
Government Contracts and, to the Company’s Knowledge and Sellers’ Knowledge,
there is no basis for any such proceeding.
(d) Except as
described on Schedule 3.26.4(a): (i) neither the United States Government
nor any prime contractor or higher-tier subcontractor under a Government
Contract has withheld or set off, or attempted to withhold (other than the
hold-backs pursuant to contracts in the ordinary course of business) or set-off,
material amounts of money otherwise acknowledged to be due to the Company under
a Government Contract; (ii) neither the United States Government nor any
prime contractor or higher-tier subcontractor under an Active Government
Contract has questioned or disallowed any material costs claimed by the Company
under any Active Government Contract; and (iii) to the Company’s Knowledge
and Sellers’ Knowledge, there is no fact or occurrence that would reasonably be
expected to be a basis for disallowing any such costs.
3.26.5 Sanctions. Neither
the United States Government nor any prime contractor or higher-tier
subcontractor under a Government Contract nor any other Person has notified the
Company, of any actual or alleged violation or breach of any statute,
regulation, representation, certification, disclosure obligation, contract term,
condition, clause, provision or specification except where such violation or
breach is or would reasonably be expected to be immaterial. Except as
set forth on Schedule 3.26.5, the Company has not received any show cause, cure,
deficiency, default or similar notices relating to any Government
Contract. Neither the Company nor any manager, officer, employee,
consultant or Affiliate thereof has been or is currently suspended, debarred or,
to the Company’s Knowledge and Sellers’ Knowledge, proposed for suspension or
debarment from contracting with any Governmental Entities and, to the Company’s
Knowledge and Sellers’ Knowledge, no facts exist which could cause or give rise
to such suspension or debarment or proposed suspension or
debarment. No determination of non-responsibility has ever been
issued against the Company with respect to any quotation, bid or proposal for a
Government Contract.
3.26.6 Terminations;
Show-Cause Letters. Except as set forth on Schedule 3.26.6,
(a) no Company Government Contract relating to the Company’s business has
been terminated for default or convenience since December 31, 2004,
(b) the Company has not received a show-cause letter or any similar
communication, notice or Order from any Governmental Entity since December 31,
2004 and (c) the Company has not received any notice terminating or
indicating an intent to terminate any Active Government Contract for
convenience.
3.26.7 Within
the Scope. Except as set forth on Schedule 3.26.7, there has
been no allegation, charge or finding (internal or external to the Company), or,
to Company’s Knowledge and Sellers’ Knowledge, investigation or report (internal
or external to the Company) since December 31, 2004 to the effect that the
Company has been, or may have been, a party to any task order or delivery order,
under a multiple award schedule contract or any other Government Contract, where
the goods or services purchased, or identified to be purchased, by a Government
Entity under such task order or delivery order are or were not reasonably within
the statement of work contained in the multiple award schedule contract or other
government Contract under which the task order or delivery order was
issued.
3.26.8 Assignments. Except
as set forth on Schedule 3.26.8, the Company has not made any assignment of any
Active Government Contract or of any right, title or interest in or to any
Active Government Contract to any Person. The Company has not entered
into any financing arrangements with respect to the performance of any
Government Contract.
3.26.9 Property. To the Company’s
Knowledge and Sellers’ Knowledge, the Company is in compliance with all
Applicable Laws with respect to the possession and maintenance of all
government-furnished property (as defined in the FAR).
3.26.10 Governmental
Entity Audits and DCAA Claims. The Company has been audited by
the Defense Contracting Audit Agency (“DCAA”) through December 31,
2006. The Company has not had any material adjustments arising out of
any audit by a Governmental Entity, including DCAA’s audits and, to the
Company’s Knowledge and Sellers’ Knowledge, except as set forth on Schedule
3.26.10, there are no facts, events or circumstances that would reasonably
indicate that the Company is likely to be subject to a DCAA Claim.
3.26.11 National
Security Obligations. To the Company’s Knowledge and Sellers’
Knowledge, the Company is in compliance with all Applicable Laws regarding
national security, including those obligations specified in the National
Industrial Security Program Operating Manual, DOD 5220.22-M (February 2006), and
any supplements, amendments or revised editions thereof.
3.26.12 Credentials. To
the Company’s Knowledge and Sellers’ Knowledge, each Company employee performing
services related to a Company Government Contract possessed (during the time of
such performance) all of the required credentials (e.g., education and
experience) and security clearances specified in or required by such Company
Government Contract. To the Company’s Knowledge and Sellers’
Knowledge, there is no existing information, fact, condition or circumstance
that would cause the Company to lose its facility security
clearances.
3.26.13 Export
Compliance.
(a) To the
Company’s Knowledge and Sellers’ Knowledge, the Company has complied, and is in
compliance, in each case in all material respects, with the Arms Export Control
Act, the International Traffic in Arms Regulations, the Export Administration
Act (“EAA”), the Export Administration Regulations, the International Emergency
Economic Powers Act (“IEEPA”), the antiboycott and embargo regulations and
guidelines issued under the EAA and IEEPA (and other legal authority), the
economic sanctions regulations of the United States Department of the Treasury,
Office of Foreign Assets Control, United States/Canada Joint Certification
Program and United States Customs requirements, including the various laws and
regulations enforced by the United States Department of Homeland Security,
Customs & Border Protection.
(b) Neither
the Company, nor the member and managers of the Company are the subject of any
indictment for nor have any of them been convicted of violating the United
States Foreign Corrupt Practices Act of 1977, as amended (“FCPA”) or any of the
statutes or regulations referenced in Section 3.26.13(a), nor are any of them
ineligible to contract with, or to receive a license or other approval to export
or import articles or services subject to United States export control statutes
and regulations from, or to receive an export license or other approval from,
any United States Governmental Entity.
3.26.14 No
Contingent Fees. To the Company’s Knowledge and Sellers’
Knowledge, no facts, events or other circumstances exist that violate or
otherwise constitute a basis on which the United States Government or any other
Person might reasonably claim to violate, the covenant against contingent fees
under any Company Government Contract or Company Engagement, or 10 U.S.C. §2306,
41 U.S.C. §254(a) as implemented in FAR 3.402.
3.27 Cumulative
Exceptions. The exceptions and qualifications to the
representations and warranties set forth in this Article 3 which are based upon
such exceptions and qualifications being “material” or being “in all material
respects,” or not having or would or could not reasonably be expected to result
in a Company Material Adverse Effect, or any similar exception or qualification,
have not and will not, individually or in the aggregate, have a Company Material
Adverse Effect (collectively, the “Materiality Qualifications”).
ARTICLE
4. REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to Sellers as follows:
4.1 Corporate
Status of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with the requisite corporate power to own, operate and lease its properties and
to carry on its business as currently being conducted.
4.2 Authority for Agreement;
Noncontravention.
4.2.1 Authority
of Buyer. Buyer has the corporate power and authority to enter
into and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution, delivery and performance
of this Agreement and the consummation of the Transactions have been duly and
validly authorized by Buyer’s board of directors and no other corporate
proceedings on the part of Buyer are necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
Transactions. This Agreement and, when executed and delivered, the
other agreements contemplated hereby to be signed by Buyer have been or, when
executed and delivered, will be duly executed and delivered by Buyer as the case
may be, and constitute valid and binding obligations of Buyer as the case may
be, enforceable against Buyer in accordance with their terms.
4.2.2 No
Conflict. Neither execution and delivery of this Agreement by
Buyer nor the performance by Buyer of its obligations hereunder, nor the
consummation by Buyer of the Transactions will (a) conflict with or result in a
violation of any provision of Buyer’s certificate of incorporation or by-laws,
as amended, or (b) with or without the giving of notice or the lapse of time, or
both, conflict with, or result in any violation or breach of, or constitute a
default under, or result in any right to accelerate or result in the creation of
any Encumbrance pursuant to, or right of termination under, any provision of any
note, mortgage, indenture, lease, instrument or other agreement, Permit,
concession, grant, franchise, license, judgment, order, decree, statute,
ordinance, rule or regulation to which Buyer is a party or by which any of its
assets or properties is bound or which is applicable to Buyer or any of its
assets or properties. No authorization, consent or approval of, or
filing with or notice to, any Governmental Entity is necessary for the execution
and delivery of this Agreement by Buyer or the consummation by Buyer of the
Transactions.
4.3 Compliance
with Applicable Laws. Buyer is in compliance in all material
respects with all Applicable Laws and with all rules and regulations of all
national securities exchanges upon which Buyer’s stock is listed. All
filings and disclosures made by Buyer pursuant to the requirements of the
Securities Act of 1933, as amended (the “Securities Act”), the Securities
Exchange Act of 1934, as amended (“Exchange Act”), or the rules or regulations
of such national securities exchanges were true and correct in all material
respects as of the time that they were made, except to the extent any were
discovered to be incorrect and have been corrected by Buyer in the manner
required by the Applicable Law or exchange.
4.4 Investment
Intent.
(a) Buyer is
acquiring the Interests for its own account for investment and not for
distribution, assignment or resale to others;
(b) Buyer
acknowledges that the (i) issuance of the Interests has not been registered
under the Securities Act in reliance upon an exemption therefrom for nonpublic
offerings, and (ii) Interests may not be sold or otherwise transferred unless
such sale or other transfer is registered under the Securities Act or an
exemption from registration is available; and
(c) Buyer is
an “accredited investor” as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
4.5 Proceedings. There is no
investigation by any Governmental Entity with respect to Buyer or, to Buyer’s
knowledge, threatened, nor any action, suit or other proceeding against or
involving Buyer, at law or in equity, that would prevent Buyer from consummating
the Transactions.
ARTICLE
5. CONDUCT
PRIOR TO THE CLOSING DATE
5.1 Conduct
of the Company’s Business. Except as set forth on Schedule
5.1, between the date hereof and the Closing Date or the date, if any, on which
this Agreement is earlier terminated pursuant to its terms (“Pre-Closing
Period”), the Company shall, (a) carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, pay
its debts and Taxes when due subject to good faith disputes over such debts or
Taxes, pay or perform other material obligations when due, except when subject
to good faith disputes over such obligations, and use all commercially
reasonable efforts consistent with past practices and policies to preserve
intact the Company’s current business organization, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business relationships with it, to the
end that the Company’s goodwill and ongoing business shall remain substantially
the same at the Closing Date, and (b) promptly notify Buyer of any event or
occurrence which will have or could reasonably be expected to have a Company
Material Adverse Effect. In addition, during the Pre-Closing Period,
the Company, except as set forth on Schedule 5.1 or with Buyer’s prior consent,
shall not:
(a) amend its
Organizational Documents;
(b) declare
or pay any dividends or distributions on the Interests nor purchase,
redeem or otherwise acquire for consideration any of the Interests or any other
Company securities;
(c) issue or
sell any of its Interests or otherwise change its capitalization as it exists on
the date hereof, or issue, grant, or sell any options, equity appreciation or
purchase rights, warrants, conversion rights or other rights, securities or
commitments obligating it to issue or sell any of its Interests , or any
securities or obligations convertible into, or exercisable or exchangeable for,
any of its securities;
(d) grant any
profits interests or other interests in the cash flow or distributions of the
Company;
(e) borrow or
agree to borrow any funds or voluntarily incur, or assume or become subject to,
whether directly or by way of guaranty or otherwise, any Liability, except
obligations incurred in the ordinary course of business consistent with past
practices;
(f) pay,
discharge or satisfy any claim or Liability in excess of $25,000 (in any one
case) or $50,000 (in the aggregate), other than the payment, discharge or
satisfaction in the ordinary course of business of obligations reflected on or
reserved against in the Company Balance Sheet, or incurred since the Balance
Sheet Date in the ordinary course of business consistent with past practices or
in connection with this Transaction;
(g) except as
required by Applicable Laws, adopt or amend in any material respect, any
agreement or plan (including severance arrangements) for the benefit of its
employees;
(h) sell,
mortgage, pledge or otherwise encumber or dispose of any of its assets which are
material, individually or in the aggregate, to the business of the Company,
except in the ordinary course of business consistent with past
practices;
(i) acquire
by merging or consolidating with, or by purchasing any equity interest in or a
material portion of the assets of, any business or any other Person, or
otherwise acquire any assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary course of
business consistent with past practices;
(j) increase
the following amounts payable or to become payable: (i) the salary of any
member or manager of the Company, other than increases in the ordinary course of
business consistent with past practices and not exceeding, in any case, five
percent of the member’s or manager’s salary on the date hereof, (ii) any other
compensation of its member or managers, including any increase in benefits under
any bonus, insurance, pension or other benefit plan made for or with any of
those individuals, other than increases that are provided in the ordinary course
of business consistent with past practices to broad categories of employees and
do not discriminate in favor of the aforementioned persons, and (iii) the
compensation of any of its other employees, consultants or agents except in the
ordinary course of business consistent with past practices;
(k) dispose
of, permit to lapse, or otherwise fail to preserve the rights of the Company to
use the Company Proprietary Rights or enter into any settlement regarding the
breach or infringement of, any Company Proprietary Rights, or modify any
existing rights with respect thereto, other than in the ordinary course of
business consistent with past practices, and other than any such disposal,
lapse, failure, settlement or modification that does not have and could not
reasonably be expected to have a Company Material Adverse Effect;
(l) sell, or
grant any right to exclusive use of, all or any part of the Company Proprietary
Rights;
(m) enter
into any contract or commitment or take any other action that is not in the
ordinary course of its business or could reasonably be expected to have an
adverse impact on the Transactions or that would have or could reasonably be
expected to have a Company Material Adverse Effect;
(n) amend in
any material respect any agreement to which the Company is a party the amendment
of which will have or could reasonably be expected to have a Company Material
Adverse Effect;
(o) waive,
release, transfer or permit to lapse any claim or right (i) that has a value, or
involves payment or receipt by it, of more than $10,000 or (ii) the waiver,
release, transfer or lapse of which would have or could reasonably be expected
to have a Company Material Adverse Effect;
(p) take any
action that would materially decrease the Net Working Capital;
(q) make any
change in any method of accounting or accounting practice other than changes
required to be made so that the Company’s financial statements comply with GAAP;
or
(r) agree or
otherwise commit, whether in writing or otherwise, to take any action described
above in this Section 5.1.
5.2 Conduct
of Sellers and Company regarding Tax Status. Each of Sellers
and the Company shall not, and shall cause the Company not to, take or allow any
action that would cause any portion of Section 3.12.12 not to continue to be
true.
ARTICLE
6. ADDITIONAL
AGREEMENTS
6.1 Exclusivity. During
the Pre-Closing Period neither the Company nor any Seller will, directly or
indirectly, through its respective Affiliates, agents, officers, member and
managers, directly or indirectly, solicit, initiate, or participate in
discussions, negotiations or otherwise cooperate in any way with, or provide any
information to, any Person or group concerning, or enter into any letter of
intent, agreement in principle or agreement, definitive or otherwise, with
respect to, any tender offer, exchange offer, merger, business combination, sale
of substantial assets, sale of the Interests, or similar transaction involving
the Company.
6.2 Expenses. Except
as otherwise provided in Sections 6.3 and 6.7.5, each Party shall be responsible
for its own costs and expenses in connection with the Transactions, including
fees and disbursements of consultants, investment bankers and other financial
advisers, counsel and accountants.
6.3 Indemnification.
6.3.1 Indemnification
of Buyer Indemnified Parties. Subject to this Section 6.3 from
and after the Closing Date, Sellers shall, jointly and severally, indemnify,
defend and hold harmless Buyer and the Company and their respective managers,
directors, officers, employees, representatives, successor and assigns
(collectively “Buyer Indemnified Parties”) in respect of, and Buyer Indemnified
Parties shall be entitled to payment and reimbursement, jointly and severally,
from Sellers (collectively the “Seller Indemnifying Parties”) of the amount of,
all Losses suffered or incurred by any Buyer Indemnified Party, by reason of, in
whole or in part, or arising from, in whole or in part, (a) any breach by any
Seller or Sellers’ Representative of any covenant, agreement or obligation in
this Agreement (whether to be performed before, on or after the Closing Date) or
by the Company of any material covenant, agreement or obligation in this
Agreement to be performed by the Closing Date, (b) in respect of any DCAA
Claim, (c) any misrepresentation or inaccuracy in, or breach of, any
representation or warranty made by the Company, any Seller or Sellers’
Representative in this Agreement or any certificate delivered pursuant to
Article 7, or (d) in respect of the Davidson
Agreement. Notwithstanding anything herein to the contrary, in
determining (a) if there is a misrepresentation or inaccuracy in, or a
breach of, a representation or warranty in Article 3 or a certificate given
pursuant to Section 7.2.1 and (b) the amount of related Losses, each
representation or warranty referenced in clause (c) of the immediately preceding
sentence shall read as if made by such Seller Indemnifying Party and all
Materiality Qualifications and qualifications as to Company’s Knowledge and
Sellers’ Knowledge contained in any such representation or warranty shall be
ignored.
6.3.2 Indemnification
of Seller Indemnified Parties. Subject to this Section 6.3
from and after the Closing Date, Buyer shall indemnify, defend and hold harmless
Sellers (collectively “Seller Indemnified Parties”) in respect of, and Seller
Indemnified Parties shall be entitled to payment and reimbursement from Buyer
and its successors and assigns (collectively the “Buyer Indemnifying Parties”)
of the amount of all Losses suffered, incurred or paid by any Seller Indemnified
Party by reason of, in whole or in part, or arising from, in whole or in part,
(a) any breach by Buyer of any covenant, agreement or obligation of Buyer in
this Agreement to be performed after the Closing, and (b) any misrepresentation
or inaccuracy in, or breach of any, representation or warranty contained in
Article 4 or in any certificate of Buyer delivered pursuant to Article
7.
6.3.3 Claims
for Indemnification. When a Person entitled to indemnification
under this Section 6.3 (“Indemnified Person”) obtains reasonably sufficient
knowledge of any facts, claim or demand which has given rise to, or would
reasonably give rise to, a claim for indemnification hereunder (referred to
herein as an “Indemnification Claim”), such Indemnified Party shall promptly
thereafter give notice of such facts, claim or demand, including the amount or
method for calculation of such claim (“Notice of Claim”), to the Party from whom
indemnification is sought under this Section 6.3 (the “Indemnifying
Party”). So long as the Notice of Claim is given by the Indemnified
Party in the Claims Period specified in Section 6.3.6, no failure or delay by
the Indemnified Party in the giving of a Notice of Claim shall reduce or
otherwise affect the Indemnified Party’s right to indemnification except to the
extent, if any, that the Indemnifying Party has been materially prejudiced
thereby.
6.3.4 Defense by Indemnifying
Party.
(a) If a
claim or demand is asserted by a third Person against an Indemnified Person (a
“Third Party Claim”), the Indemnifying Party shall, except as otherwise provided
in Section 6.3.4(b), have the right, but not the obligation, exercisable by
notice to the Indemnified Party within 10 days of the date of the Notice of
Claim concerning the commencement or assertion of any Third Party Claim, to
assume the defense of such Third Party Claim.
(b) The
Seller Indemnifying Parties shall not have such right or opportunity to assume
and control the defense of any such Third Party Claim, but shall have the right
to participate in the defense of such Third Party Claim and shall pay the
reasonable fees and expenses of counsel retained by the Buyer Indemnified Party
in respect of the Third Party Claim if (i) such Third Party Claim relates to, or
arises in connection with, any criminal proceeding, indictment, investigation,
or civil action by any Governmental Entity other than inquiries or audits in the
ordinary course of business, (ii) such Third Party Claim alleges Losses in
excess of the then available funds held in Escrow (after deducting the full
amount of all pending Indemnification Claims), (iii) such Third Party Claim
seeks an injunction or other equitable relief against the Buyer Indemnified
Party, (iv) the Buyer Indemnified Party reasonably believes that an adverse
determination with respect to such Third Party Claim would be detrimental to the
Buyer Indemnified Party’s reputation or continuing business interests, or (v)
the Buyer Indemnifying Parties fail to conduct the defense of such Third Party
Claim actively and diligently.
(c) If the
Buyer Indemnified Party assumes and controls the defense of a Third Party Claim
pursuant to Section 6.3.4(b), the Buyer Indemnified Party shall permit the
Seller Indemnifying Parties to participate in the defense of such claim, to have
reasonable access to all documents and personnel involved in such claim and to
discuss its views and positions with the Buyer Indemnified Party. The
Buyer Indemnified Party agrees, in connection with any such Third Party Claim,
to work cooperatively and in good faith with the Seller Indemnifying
Parties.
(d) If the
Indemnifying Party is entitled under this Section 6.3.4 to assume the defense of
the respective Third Party Claim and gives such notice of intent to defend, the
Indemnifying Party shall assume the defense thereof as follows: (i)
the Indemnifying Party will defend the Indemnified Party against the matter with
counsel compensated by and chosen by Indemnifying Party, which choice of counsel
is subject to the reasonable satisfaction of Indemnified Party; (ii) the
Indemnified Party may retain separate co-counsel at the sole cost and expense of
Indemnified Party; (iii) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the matter without the
consent of the Indemnifying Party; and (iv) the Indemnifying Party will not
consent to the entry of any judgment with respect to the matter, or enter into
any settlement that does not include a provision whereby the plaintiff or
claimant in the matter releases the Indemnified Party from all Liability with
respect thereto, without the consent of the Indemnified Party, which consent
shall not be unreasonably withheld or delayed if such settlement only requires
the payment by one or more Indemnifying Parties of a monetary amount, does not
include a statement as to admission of fault, culpability or failure to act by
or on behalf of such Indemnified Party, and the Indemnified Party could not
reasonably believe that the settlement would be detrimental to the Indemnified
Party’s reputation or continuing business.
(e) If a
Third Party Claim is made and no Indemnifying Party notifies the Indemnified
Party within 10 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, the Indemnified
Party shall defend against, or enter into any settlement with respect to the
matter. The Indemnified Party shall not settle such Third Party Claim
without the prior consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.
6.3.5 Limitation on Liability for
Indemnification.
6.3.5.1 Buyer
Indemnity Deductible. Except for Core Representation Claims
and claims based on Sellers’ fraud, the Buyer Indemnified Parties shall not be
entitled to indemnification pursuant to this Section 6.3 in respect of a
misrepresentation or inaccuracy in, or breach of, a representation or warranty
referenced in clause (c) of the first sentence of Section 6.3.1 until the
aggregate amount of all Losses suffered, incurred or paid by one or more Buyer
Indemnified Parties exceeds $300,000 and thereafter to the extent of the Losses
that exceed $300,000.
6.3.5.2 Certain
Caps on Indemnification Liability. Except for Core
Representation Claims and claims based on fraud by any Seller, the aggregate
Liability of Sellers under this Section 6.3 in respect of a misrepresentation or
inaccuracy in, or breach of, any representation or warranty referenced in clause
(c) of the first sentence of Section 6.3.1 shall not exceed
$8,000,000. In no event shall the total indemnification Liability of
Sellers under this Agreement (including all such Liability under this Section
6.3, Liability for Core Representation Claims, Liability for claims based on
fraud by any Seller, and Liability claims based on Taxes under Section 6.7)
exceed in the aggregate the cash amount paid or payable to Sellers in respect of
the Purchase Price. Furthermore, except with respect to Ownership,
Tax and SBA Claims and claims based on fraud by any Seller, until the IPP Escrow
Amount, minus the amount of pending Indemnification Claims against such funds
under this Section 6.3, is not greater than zero, Buyer Indemnified Parties
shall be entitled under this Section 6.3 only to look to the IPP Escrow Amount
for Indemnification Claims in respect of a misrepresentation or inaccuracy in,
or breach of, any representation or warranty referenced in clause (c) of Section
6.3.1.
6.3.6 Claims Periods and IPP
Escrow Amount.
(a) Except
for (i) Core Representation Claims and (ii) Indemnification Claims based on
fraud by any Seller, any Indemnification Claim in respect of a misrepresentation
or inaccuracy in, or breach of, any representation or warranty referenced in
clause (c) of the first sentence of Section 6.3.1 or in Article 4 must be
asserted by notice on or before the end of the 183rd day
after the first Closing Date Anniversary. Any (i) Core Representation
Claims and (ii) Indemnification Claims based on fraud by any Seller must be made
before the expiration of the applicable statute of limitations for the
respective claims.
(b) Any Buyer
Indemnified Party entitled to payment for an Indemnification Claim or an
indemnification claim under Section 6.7.5 (“Section 6.7.5 Claim”) shall be
entitled to such payment from the IPP Escrow Amount in accordance with the
Escrow Agreement, provided, that:
(i) as of
5:00 p.m. Washington D.C. time on the 183rd day after the first Closing Date
Anniversary, the amount by which, if any, the remaining balance of the IPP
Escrow Amount, exceeds the sum of (x) $3,000,000 and (y) the aggregate amount of
any pending Indemnification Claims and pending Section 6.7.5 Claims of one or
more Buyer Indemnified Parties, shall be disbursed and released to Sellers’
Representative (on behalf of Sellers) pursuant to the Escrow
Agreement;
(ii) thereafter
any remaining balance of the IPP Escrow Amount, less the aggregate amount of any
pending Indemnification Claims and pending Section 6.7.5 Claims of one or more
Buyer Indemnified Parties, shall be disbursed and released to Sellers’
Representative (on behalf of Sellers) pursuant to the Escrow
Agreement on the earlier of (x) the 10th Business Day after April 30,
2014, or (y) if, following the 183rd day
after the first Closing Date Anniversary, there had been one or more claims,
audits, inquiries, reviews or examinations, or asserted deficiencies or
adjustments by the Internal Revenue Service in respect of Taxes payable by the
Company in connection with or otherwise related to any of the Interests with
respect to periods ending before, or including, the Closing Date, on such date
that all possible claims, audits, inquiries, reviews, examinations, deficiencies
and adjustments by the Internal Revenue Service in respect of the
above-referenced Taxes have been, to Buyer’s reasonable satisfaction, fully and
finally resolved; and
(iii) notwithstanding
anything herein to the contrary, during the period of time that the remaining
balance of the IPP Escrow Amount is held by Escrow Agent pursuant to Section
6.3.6(b)(ii), Buyer Indemnified Parties will only be entitled to payment from
the IPP Escrow Amount for Indemnification Claims pending as of the commencement
of such period, Indemnification Claims made after the commencement of the period
in respect of Section 3.12 and any Section 6.7.5 Claims.
6.3.7 Subrogation. Upon
making an indemnity payment pursuant to this Section 6.3, the Indemnifying Party
will, to the extent of such payment, be subrogated to all rights of the
Indemnified Party against any third party in respect of the damages to which the
payment is related. Without limiting the generality of any other
provision hereof, each such Indemnified Party and Indemnifying Party will
promptly execute upon request all instruments reasonably necessary to evidence
and perfect the above described subrogation rights.
6.3.8 Exclusive
Remedies. The remedies provided for in this Section 6.3 shall
be, except as otherwise provided in Section 6.7, the sole and exclusive remedies
of the Parties and their respective officers, managers, directors, employees,
agents, representatives, successors and assigns for any breach of or inaccuracy
in any representation or warranty contained in this Agreement or any certificate
delivered at Closing; provided, however, that nothing herein is intended to
waive any claims for fraud or waive any equitable remedies to which a Party may
be entitled.
6.3.9 Right of
Offset. Buyer may offset any amounts to which Buyer is
entitled under this Article 6 or Section 6.7 from any one or more Sellers
against any amounts otherwise payable hereunder by Buyer to any one or more
Sellers or Sellers’ Representative (on behalf of Sellers), including Earnout
Payments and any and all other payments pursuant to Section 2.2; provided, that
Buyer’s ability to exercise its right of offset (i) is subject to the terms and
conditions of Section 6.3 or, as the case may be, Section 6.7 and (ii) may only
be pursued to the extent the IPP Escrow Amount is otherwise insufficient to
satisfy pending Indemnification Claims and Section 6.7.5 Claims.
6.3.10 Treatment
of Indemnity Payments Between the Parties. Unless otherwise
required by Applicable Laws, all indemnification payments hereunder shall
constitute adjustments to the Purchase Price for all Tax purposes, and no Party
shall take any position inconsistent with such characterization.
6.4 Access
and Information. The Company shall afford to Buyer and its
officers, employees, accountants, counsel and other authorized representatives
and advisors full and complete access, during regular business hours, throughout
the Pre-Closing Period, to the Company’s offices, properties, books and records,
and shall use reasonable efforts to cause its representatives and independent
public accountants to furnish to Buyer such additional financial and operating
data and other information as to its business, customers, vendors and properties
as Buyer may from time to time reasonably request. Notwithstanding
the foregoing, all visits to any Company office will be coordinated and
conducted so as to not be disruptive to the Company’s operations and to preserve
the confidentiality of the Transactions. In addition, with the
Company’s prior consent, Buyer shall be permitted to meet with the Company’s
significant customers, provided, that Vasconcellos or Harris are present at any
such meeting.
6.5 Public
Disclosure and Confidentiality. Except as otherwise required
by Applicable Laws, none of Sellers shall announce or disclose to any other
Person the existence or the terms or conditions of this Agreement or the
Transactions without the prior consent of Buyer (which shall not be unreasonably
withheld, delayed or conditioned); provided further that the foregoing shall not
apply to any information that is publicly available other than as a result of
unauthorized disclosure by any of Sellers. Except as disclosure may
be required by Applicable Laws or the applicable rules, regulations or policies
of any national securities exchange, any press release or other public
disclosure of information regarding the Transactions (including the negotiations
with respect to the Transactions and the terms and existence of this Agreement)
shall be developed and approved by Buyer; provided that the initial press
release regarding the Transactions shall be subject to Buyer and Sellers’
Representative’s review.
6.6 Further
Assurances.
6.6.1 Generally. Subject
to terms and conditions herein provided and to the fiduciary duties of the board
of directors and officers, managers or representatives of any Party, each of the
Parties agrees to use its commercially reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under Applicable Laws to consummate and make effective this
Agreement and the Transactions. In case at any time after the Closing
Date the Parties determine that any further action, including the obtaining of
any required Governmental Entity approvals, and waivers and consents under any
agreements, material contracts or leases and the execution and delivery of any
licenses or sublicenses for any software, is necessary, proper or advisable to
carry out the purposes of this Agreement, the proper officers, managers and
directors or representatives of each Party to this Agreement are hereby directed
and authorized to use their commercially reasonable efforts to effectuate all
required action.
6.6.2 Consents. Each
Party agrees to use its commercially reasonable efforts to obtain the
Consents before the Closing, and further agrees to provide all documentation
necessary to effect each Consent, including all instruments, certifications,
requests, legal opinions, audited financial statements, and other documents
required or appropriated to obtain Consents. In particular and
without limiting the generality of the foregoing, the Company shall continue to
communicate with responsible officers of the United States Government from time
to time as may be appropriate and permissible, to request timely action on any
and all requests for the Consents.
6.7 Tax
Matters.
6.7.1 [Intentionally
Omitted]
6.7.2 Tax
Returns.
(a) Sellers
will, at Sellers’ expense, prepare (or cause to be prepared) and file (or cause
to be filed) all income Tax returns of the Company for all periods ending on or
before the Closing Date and will make all payments of Tax with respect to such
income Tax returns. Sellers shall include (or shall have included)
the income of the Company for all such periods on their individual income Tax
returns as required by Applicable Laws. Sellers’ Representative will,
at Sellers’ expense for all periods ending on, before or including the Closing
Date and at the Company’s expense , both as to Taxes due and expenses incurred
in connection with the preparation and filing of returns, for all periods
subsequent thereto, prepare (or cause to be prepared) and file all employment
Tax returns of the Company (including income and FICA Tax withholding,
employer’s FICA Tax, FUTA and W-2 reporting) (collectively, the “Withholding
Returns”) for all periods ending on or before December 31,
2010. Buyer shall timely provide Sellers’ Representative and his tax
advisors and preparers reasonable access to and copies of all books and records
necessary or appropriate to preparing Withholding Returns.
(b) Buyer
will be responsible for the preparation and filing of all Tax returns of the
Company for all periods as to which Tax returns are due after the Closing Date
other than those Tax returns referenced in Section 6.7.2(a). To the
extent that such a Tax return involves a Straddle Period, such return shall be
prepared in a manner consistent with the prior such Tax returns of the Company
unless otherwise required by Applicable Laws.
6.7.3 Audits. Sellers’
Representative shall allow the Company and its counsel to participate in any
audit of Sellers’ federal income Tax returns to the extent that such Tax returns
relate to the Company and of the Company’s income Tax returns for periods ending
on or before the Closing Date. None of Sellers shall settle any such
audit in a manner that would adversely affect the Company after the Closing Date
without Buyer’s prior consent, which consent shall not be unreasonably withheld,
delayed or conditioned. The Company and Buyer shall allow Sellers’
Representative and his counsel to participate, at Sellers’ cost, in any audit of
the Company’s Tax returns to the extent that such Tax returns relate to or
otherwise adversely affect Sellers. Any audit of any Tax return
referenced in Section 6.7.2(a) shall be at Sellers’ cost. The Company
or Buyer shall not settle any such audit in a manner that would adversely affect
Sellers for any period ending on or before the Closing Date without Sellers’
Representative’s prior consent, which consent shall not be unreasonably
withheld, conditioned or delayed.
6.7.4 No
Tax-Sharing Agreements. All income Tax-sharing agreement or
arrangements (and, with respect to Taxes other than income Taxes, all
Tax-sharing agreements or similar Contracts other than any Contract the primary
purpose of which is not the allocation or payment of Tax Liability and in which
such provisions regarding Tax Liability are typical of such type of Contracts)
with respect to or involving the Company shall be terminated as of the Closing
Date and, after the Closing Date, the Company shall not be bound thereby or have
any Liability thereunder.
6.7.5 Tax
Indemnification. Without otherwise limiting the
indemnification of Buyer Indemnified Parties pursuant to Section 6.3, Sellers
shall jointly and severally indemnify the Buyer Indemnified Parties and hold
them harmless from and against any Loss attributable to (a) any Taxes (or the
non-payment thereof) of the Company for all the taxable periods ending on or
before the Closing Date and the portion through the end of the Closing Date for
any taxable period that includes (but does not end on) the Closing Date
(“Pre-Closing Tax Period”), (b) all Taxes of any member of an affiliated,
consolidated, combined or unitary group of which the Company is or was a member
on or prior to the Closing Date, including pursuant to Treasury Regulation §
1.1502-6 or any analogous or similar state, local, or foreign law or regulation,
and (c) any and all Taxes of any Person (other than the Company) imposed on the
Company as a transferee or successor, by contract or pursuant to any law, rule
or regulations, which Taxes relate to an event or transaction occurring before
the Closing; provided, however, that in the case of clauses (a), (b) and (c)
above, Sellers shall be liable only to the extent that such Taxes exceed the
amount, if any, reserved for such Taxes (excluding any reserve for deferred
Taxes established to reflect timing difference between book and Tax income) on
the face of the Closing Balance Sheet (rather than in any notes thereto) and
taken into account in determining the Purchase Price adjustment provided in
Sections 2.2.4. Sellers’ Representative shall cause the Buyer
Indemnified Parties to be reimbursed, and Sellers shall, jointly and severally,
reimburse the Buyer Indemnified Parties, for any Taxes of the Company that are
the responsibility of Sellers within 15 Business Days after payment of such
Taxes by any one or more of the Buyer Indemnified Parties. The
procedures set forth in Sections 6.3.3 and 6.3.4 shall apply with respect to
claims made by any of the Buyer Indemnified Parties for indemnification pursuant
to this Section 6.7.5.
6.7.6 Straddle
Period. If any taxable period includes (but does not end on)
the Closing Date (a “Straddle Period”), the amount of (i) any Taxes based on or
measured by income or receipts of the Company, (ii) any employment Taxes of the
Company (including income and FICA Tax withholding, employer’s FICA Tax and
FUTA), and (iii) withholding Tax on income of the Company allocable,
distributable or otherwise Taxed to any Seller for the Pre-Closing Tax Period
shall be determined based on an interim closing of the books as of the close of
business on the Closing Date; provided, however, that any Taxes described in
clauses (ii) and (iii) of this sentence with respect to any payment to any of
Sellers pursuant to this Agreement shall be treated as attributable
to the Pre-Closing Tax Period no matter when such payment is made or when such
Tax is otherwise payable. The amount of other Taxes of the Company
for a Straddle Period that relates to the Pre-Closing Tax Period shall be deemed
to be the amount of such Tax for the entire taxable period multiplied by a
fraction, the numerator of which is the number of days in the taxable period
ending on the Closing Date and the denominator of which is the number of days in
such Straddle Period.
6.7.7 Cooperation on Tax
Matters.
(a) The
Parties shall cooperate fully, as and to the extent reasonably requested by the
other Party, in connection with the filing of Tax
returns and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the
other Party’s request) the provision of records and information reasonably
relevant to any such audit, litigation, or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Buyer and Sellers
agree (i) to retain all books and records with respect to Tax matters pertinent
to the Company relating to any taxable period beginning before the Closing Date
until expiration of the statute of limitations (and any extensions thereof) of
the respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other Party
reasonable notice prior to transferring, destroying or discarding any such books
and records and, if the other Party so requests, allow such other Party to take
possession of such books and records that would otherwise be transferred,
destroyed or discarded.
(b) Subject
to Applicable Laws, the Parties further agree, upon request, to use their
commercially reasonable efforts to obtain any certificate or other document from
any Governmental Entity or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including with respect to the
Transactions).
6.7.8 Certain
Taxes. All transfer, documentary, sales, use, stamp,
registration Taxes and similar fees payable in respect of the Transactions shall
be paid by Sellers. This arrangement does not apply to any other
Taxes.
6.8 Release. Subject
to and effective as of consummation of the Closing, each Seller hereby remises,
releases and forever discharges the Company and its successors and assigns of
and from any and all manner of action and actions, cause and causes of actions,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, executions, claims and demands
of any kind and nature whatsoever in law or in equity known or unknown against
the Company which any Seller ever had, may have up until immediately preceding
the Closing or may thereafter have, including any claims to any commissions or
any portion of the revenue or profits of the Company or any equity interest in
the Company, except to the extent of any obligation of the Company to Sellers
(a) under this Agreement or any other documents executed in connection with the
closing of the Transactions, (b) under the Employment Agreements, and
(c) except in respect of any breach by the Company, Sellers or Sellers’
Representative of any representations, warranties, covenants, obligations or
agreements contained herein, any and all indemnification and other rights,
benefits and claims of Sellers under the Company’s Organizational
Documents.
6.9 Regulatory
Filings. During the Pre-Closing Period, each of the Parties
shall coordinate and cooperate with one another and shall each use commercially
reasonable efforts to comply with, and shall refrain from taking any action that
would impede compliance with, all Applicable Laws, and, as promptly as
practicable after the date hereof, each of the Parties shall make all filings,
notices, petitions, statements, registrations, submissions or information,
application or submission of other documents required by any Government Entity
in connection with the Transactions, including any filing or registration
necessary to obtain any material consent, authorization or approval or otherwise
required or advisable to consummate the Transactions. Each Party
shall cause all documents that it is responsible for filing with any Government
Entity under this Section 6.9 to comply in all material respects with all
Applicable Laws.
6.10 Exchange
Information. During the Pre-Closing Period, each of the
Parties shall promptly supply the others with any information which may be
required to effectuate any filings or application pursuant to Sections 6.9 or
6.11. Except where prohibited by Applicable Laws, each of the Parties
shall consult with the other Parties prior to taking a position with respect to
any such filing, shall permit the other to review and discuss in advance, and
consider in good faith the views of the other in connection with any analyses,
appearances, presentations, memoranda, briefs, white papers, arguments, opinions
and proposals before making or submitting any of the foregoing to any
Governmental Entity by or on behalf of any Party in connection with any
investigations or proceedings in connection with this Agreement or the
Transactions (including under any antitrust or fair trade Applicable Laws),
coordinate with the other in preparing and exchanging such information and
promptly provide the other (and its counsel) with copies of all filings,
presentations or submissions (and a summary of any oral presentations) made by
such party with any Governmental Entity in connection with this Agreement or the
Transactions; provided that, with respect to any such filing, presentation or
submission, no Party need supply the other (or its counsel) with copies (or, in
case of oral presentations, a summary) to the extent that Applicable Laws
require such Party to restrict or prohibit access to any such properties or
information.
6.11 Notification. During
the Pre-Closing Period, each of the Parties will notify the other promptly upon
the receipt of: (a) any material comments from any officials of any
Governmental Entity in connection with any filings made pursuant hereto, and (b)
any request by any officials of any Governmental Entity for material amendments
or supplements to any filings made pursuant to, or information provided to
comply in all material respects with, any Applicable Laws. Whenever
any event occurs that is required to be set forth in an amendment or supplement
to any filing made pursuant to Sections 6.9, the respective Party will promptly
inform the other Party of such occurrence and reasonably cooperate in filing
with the applicable Governmental Entity such amendment or
supplement.
6.12 Certain Post-Closing
Covenants.
6.12.1 Non-Competition. Subject
to the terms and conditions hereof, except with Buyer’s prior consent, Floro
covenants and agrees that, during the Restricted Period, Floro shall not engage
in a Competitive Activity or be Associated with a Competitive
Activity.
6.12.2 Noninterference
with Business. During the Restricted Period, Floro agrees that
he shall not directly or indirectly:
(a) solicit,
induce or attempt to induce any employee, consultant or independent contractor
to terminate or breach an employment, contractual or other relationship with the
Company or Buyer;
(b) contact
any customer who was a customer of the Company as of the Closing Date for the
purpose of diverting or taking away business from the Company or Buyer;
or
(c) (i)
directly or indirectly contact any of the Company’s or Buyer’s then current
customers for the purpose of diverting or taking away business from the Company
or Buyer; or (ii) otherwise interfere with, impair, disrupt or damage the
Company’s or Buyer’s relationship with any of its then current customers for the
purpose of diverting or taking away business from the Company or
Buyer.
6.12.3 Confidentiality. Floro
agrees that during the Restricted Period, Floro will not disclose or use in any
manner that is adverse to the interests of Buyer or the Company, directly or
indirectly, any Confidential Information, except pursuant to a subpoena, order
or request issued by a court of competent jurisdiction or by another Government
Entity, or as otherwise required by Applicable Laws. Floro may,
however, use Confidential Information in the preparation of tax returns with
respect to periods prior to and including the Closing Date. If this
Agreement terminates without the Closing occurring, each Party agrees that
during the period commencing with the date of such termination and ending on the
third anniversary thereof it shall not, except to the extent otherwise required
by Applicable Law, directly or indirectly disclose or use any Confidential
Information obtained from the other Party pursuant to this
Agreement. If a receiving Party becomes legally compelled to disclose
any of the Confidential Information, such Party will provide the disclosing
Party with prompt notice so that the disclosing Party may seek a protective
order or other appropriate remedy or waive compliance with the provisions of
this Section 6.12.3. If such protective order or other remedy is not
obtained, or the disclosing Party waives compliance with the provisions of this
Section 6.12.3, the receiving Party will furnish only that portion of the
Confidential Information which, in the judgment of its counsel, is legally
required and will exercise reasonable efforts to obtain assurance that
confidential treatment will be accorded the Confidential
Information.
6.12.4 Use of
“Akimeka” Name. Except as an officer or employee of the
Company and in respect of Akimeka Technologies as may be permitted by Section
3.1 of the AkiTech Agreement, each Seller agrees not to use, directly or
indirectly, the name “Akimeka” and any derivation thereof in any manner after
the Closing Date; provided, however, that Vasconcellos shall have the right to
use the name “Akimeka” as part of his legal name.
6.12.5 Injunctive
Relief For Breach. Floro’s obligations under this Section 6.12
are of a unique character that gives Floro particular value, and a breach of any
of such obligations will result in irreparable and continuing damage to the
Company and Buyer for which there will be no adequate remedy at
law. Accordingly, without limiting Floro’s obligations under Section
6.3, in the event of such breach, Floro agrees that the Company and Buyer will
be entitled to injunctive relief and a decree for specific performance, and such
other and further relief as may be proper (including monetary damages if
appropriate).
6.13 Seller’s
Right of Audit. Each Seller and his advisors shall have access
upon prior notice and during normal business hours to the books, papers and
records of the Company and its accountants (if any are used) relating to the
calculation of any Earnout Payments due to Sellers pursuant to Section 2.2.2
(b). Also, upon reasonable notice to the Company, Sellers’
Representative, with the assistance of Sellers’ Representative’s advisors and
auditors, may conduct at Sellers’ own expense an examination of the Company’s
books and records in respect of the calculation of any amount due to Sellers
pursuant to Section 2.2.2(b). Such rights of access and examination
set forth above in this Section 6.13 shall terminate in respect of any payment
paid or payable pursuant to Section 2.2.2 (b) on the 180th day
after the earlier of the date such payment was due or paid pursuant to Section
2.2.2 (b). If Sellers’ Representative
shall conduct any audit and such audit shall disclose that Buyer shall have
underpaid the Earnout Payments by five percent or more, then Buyer or the
Company shall pay the cost of Sellers’ Representative’s audit as well as any
amounts underpaid, together with interest thereon at the rate of eight percent
per annum until paid in full.
6.14 Termination
of Existing Employment Agreements. Concurrently with the
execution and delivery of the employment agreements contemplated by Section
7.2.5, and the Retention Agreements contemplated by Section 6.15, any existing
employment agreements with the Company shall be terminated and null and void for
all purposes, so that the Company has no Liability thereunder.
6.15 Retention
Agreements.
6.15.1 Retention
Agreement.
(a) In
connection with the Closing, the Company will pay retention bonus installments
under the Retention Agreement as referenced on Schedule 6.15.1(a).
(b) As part
of the Closing, the Retention Escrow Amount will be placed into escrow in
relation to the Retention Agreements with the Company employees listed on
Schedule 6.15 (the “Retention Agreements.”). To the extent any
employee listed on Schedule 6.15 earns the last retention bonus installment
under his or her respective Retention Agreement, such amounts will be released
from the Retention Escrow Amount to Buyer. To the extent any employee
listed on Schedule 6.15 does not earn the last retention bonus installment under
his or her respective Retention Agreement, such amounts will be released from
the Retention Escrow Amount to Sellers’ Representative (on behalf of
Sellers). Upon release of any of the Retention Escrow Amount to Buyer
in accordance with the Escrow Agreement, Buyer will, in accordance with its
standard processes, unless it determines otherwise, pay the amount of such
Retention Escrow Amount owed to each employee under his or her applicable
Retention Agreement, net of applicable withholding taxes.
6.15.2 Assignment. The
Company may and, upon request of Sellers’ Representative, the Company shall,
assign to Sellers the Company’s rights and obligations under Sections 1 or 2 of
each Retention Agreement (the “Assigned Provisions”), in which case Sellers
shall assume such rights and obligations. If the Company assigns the
Assigned Provisions to Sellers, neither the Company nor Buyer shall have any
Liability under or otherwise in respect of the respective Retention Agreements
or the Retention Escrow Amount. Each Seller hereby remises, releases
and forever discharges the Company and Buyer and their respective successors and
assigns of and from any and all manner of action and actions, cause and causes
of actions, suits, debts, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, executions, claims and
demands of any kind and nature whatsoever at law or in equity known or unknown
against the Company or Buyer which any Seller ever had or may hereafter have
with respect to the Assigned Provisions. The Company’s assignment of
the Assigned Provisions shall have no effect on Buyer’s rights against Sellers
under this Agreement or otherwise with respect to the
Transactions. If the Company receives or obtains payment of any
amounts from employees or former employees of the Company pursuant to Section 2
of a Retention Agreement, the Company shall promptly remit any such payments to
Sellers’ Representative (on behalf of Sellers).
ARTICLE
7. CONDITIONS
PRECEDENT
7.1 Conditions
Precedent to the Obligations of Each Party. The obligations of
the Parties to consummate the Closing shall be subject to the satisfaction at or
prior to the Closing of the following conditions, any of which conditions may be
waived in writing prior to Closing by the Party for whose benefit such condition
is imposed:
7.1.1 No
Illegality. There shall not have been any action taken, and no
Applicable Laws shall have been enacted, by any Governmental Entity since the
date hereof that would prohibit or materially restrict the consummation of the
Transactions.
7.1.2 Government
Consents. All filings with and notifications to, and all
approvals and authorizations of, third parties, including Governmental Entities,
required for the consummation of the Transactions shall have been made or
obtained and all such approvals and authorizations obtained shall be effective
and shall not have been suspended, revoked or stayed by action of any
Governmental Entity.
7.1.3 No
Injunction. No injunction or restraining or other order issued
by a court of competent jurisdiction that prohibits or materially restricts the
consummation of the Transactions shall be in effect (each Party agreeing to use
all reasonable efforts to have any injunction or other order immediately
lifted), and no action or proceeding shall have been commenced or threatened in
writing seeking any injunction or restraining or other order that seeks to
prohibit, restrain, materially restrict, invalidate or set aside consummation of
the Transactions.
7.1.4 Escrow
Agreement. Each of the Parties, together with the Escrow
Agent, shall have entered into the Escrow Agreement.
7.1.5 Flow of
Funds Statement. The Parties shall have agreed to and executed
a Flow of Funds Statement describing the sources of funds and payments at
Closing.
7.2 Conditions
Precedent to Buyer’s Obligation to Consummate the
Closing. Buyer’s obligations to consummate the
Closing shall be subject to the satisfaction at or prior to the Closing of the
following additional conditions, any of which conditions may be waived in
writing by Buyer prior to Closing:
7.2.1 Representations
and Warranties. The representations and warranties of the
Company and Sellers contained in this Agreement shall be true and correct,
disregarding any Materiality Qualifications, in all material respects on and as
of the Closing Date, except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and as of
the Closing Date, and the Company and Sellers shall have delivered to Buyer a
certificate to that effect, dated the Closing Date and signed on behalf of the
Company by the Company’s Manager and signed by Sellers.
7.2.2 Agreements
and Covenants. The Company, Sellers’ Representative and each
Seller shall have performed in all material respects all of their respective
agreements, obligations and covenants set forth herein that are required to be
performed at or prior to the Closing Date; and the Company and Sellers’
Representative shall have delivered to Buyer a certificate to that effect, dated
as of the Closing Date and signed on behalf of the Company by the Company’s
Manager and signed by Sellers.
7.2.3 Closing
Documents. The Company and Sellers’ Representative shall have
delivered to Buyer the Company Closing certificate described hereafter in this
Section 7.2.3 and such Closing documents as the Buyer shall reasonably request.
The Company Closing certificate, dated as of the Closing Date, duly executed by
the Company’s Manager, shall certify as to (a) the signing authority and
incumbency of the signatories of this Agreement and other documents signed on
the Company’s behalf in connection herewith; (b) the resolutions adopted by the
Company Managers authorizing and approving the execution, delivery and
performance of this Agreement and the other documents executed in connection
herewith and the consummation of the Transactions and state that such
resolutions have not been modified, amended, revoked or rescinded and remain in
full force and effect; and (c) the Company’s Organizational
Documents.
7.2.4 Third-Party
Consents. All third Person consents or approvals listed in
Schedule 7.2.4 shall have been obtained by the Company and shall be effective
and shall not have been suspended, revoked, or stayed by action of any such
third Person.
7.2.5 Employment
Agreements. Buyer shall have entered into employment
agreements with Vasconcellos, Harris and Matthew Granger in the form of Exhibits
B-1, B-2 and B-3, respectively (the “Employment Agreements”).
7.2.6 Retention
Agreements. The Company shall have entered into Retention
Agreements with each of its employees listed on Schedule 6.15.
7.2.7 Material
Adverse Effect. Since the date of this Agreement, the Company
shall not have suffered an uncured Company Material Adverse Effect.
7.2.8 Updated
Employee List. The Company shall have delivered to Buyer a
list setting forth, as of the Closing Date, the name of each Company employee
and such employee’s position and annual salary.
7.2.9 Non-Foreign
Affidavit. A non-foreign affidavit as of the Closing Date,
sworn under penalty of perjury and in form and substance required under Treasury
Regulations issued pursuant to Code Section 1445 from each Seller stating that
each Seller is not a “foreign person” as defined in Code Section
1445.
7.2.10 Operating
Agreement. The Company’s Operating Agreement shall have been
amended and restated, effective as of the Closing, in the form of Exhibit
C.
7.2.11 Delivery
of Interests. Each Seller shall have delivered to Buyer any
and all certificates evidencing the issuance of the Interests, endorsed in blank
or accompanied by duly executed assignment documents, all sufficient to convey,
transfer and assign to Buyer sole and exclusive record and beneficial right,
title and interest in and to the Interests, free and clear of all
Encumbrances.
7.2.12 AkiTech
Agreement. The agreement by and among the
Company, Aki-Tech, and Buyer in the form of Exhibit D shall have
been executed, effective as of the Closing (the “AkiTech
Agreement”).
7.2.13 Sellers’
Expenses. No later than two Business Days prior to the
Closing, Sellers’ Representative shall cause Davidson to provide to Buyer and
the Company an invoice and release, in a form satisfactory to Buyer, from
Davidson setting forth the total amount due Davidson in respect of the
Transactions and stating that, upon the Closing and the payment by Sellers’
Representative (on behalf of Sellers) of the amount set forth on such invoice,
the Company shall have no Liabilities whatsoever in respect of
Davidson.
7.3 Conditions
to Obligations of the Company and Sellers to Consummate the
Closing. The obligations of the Company and Sellers to
consummate the Closing shall be subject to the satisfaction at or prior to the
Closing of the following additional conditions, any of which may be waived in
writing by Sellers’ Representative prior to Closing:
7.3.1 Representations
and Warranties. The representations and warranties of Buyer
contained in this Agreement shall be true and correct in all material respects
on and as of the Closing Date, except for those representations and warranties
which address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and as of
the Closing Date, and Buyer shall have delivered to the Company a certificate to
that effect, dated the date of the Closing and signed on behalf of Buyer by
Buyer’s Chief Financial Officer.
7.3.2 Agreements
and Covenants. Buyer shall have performed in all material
respects all of its agreements, obligations and covenants set forth herein that
are required to be performed at or prior to the Closing Date; and Buyer shall
have delivered to the Company a certificate to that effect, dated as of the
Closing Date and signed on behalf of Buyer by Buyer’s Chief Financial
Officer.
7.3.3 Payment
of Purchase Price. Buyer shall have tendered the Initial
Purchase Price pursuant to Section 2.2.2 (a).
ARTICLE
8. SURVIVAL OF REPRESENTATIONS AND
COVENANTS
8.1 The
Company’s and Sellers’ Representations and Covenants. All
representations and warranties made by the Company and Sellers in this
Agreement, or any certificate or other writing delivered by the Company,
Sellers, Sellers’ Representative or any of their Affiliates pursuant hereto or
in connection herewith, shall survive the Closing and any investigation at any
time made by or on behalf of Buyer and shall terminate on the 183rd day
after the first Closing Date Anniversary, except that (a) Buyer Indemnified
Party claims pending on such date shall continue until resolved and (b) the
representations and warranties in Sections 3.1, 3.2, 3.12, 3.13, 3.15, 3.19.3,
3.26.3(g) and 3.26.10 (the “Core Seller Representations”) shall survive until
the 10th
Business Day after the expiration of the applicable statute of limitation (after
giving effect for any extensions or waivers thereof) for the respective
Indemnification Claims, except that Buyer Indemnified Party claims pending on
such date in respect of any of such Sections shall continue until
resolved. The covenants and other agreements made by the Company,
Sellers or Sellers’ Representative in this Agreement or any certificate or other
writing delivered by the Company or any of its Affiliates pursuant hereto or in
connection herewith shall survive the Closing and any investigation at any time
made by or on behalf of Buyer until the expiration of the applicable statute of
limitations.
8.2 Buyer’s
Representations and Covenants. All representations and
warranties made by Buyer in this Agreement or any certificate or other writing
delivered by Buyer or any of its Affiliates pursuant hereto or in connection
herewith shall terminate on the 183rd day
after the first Closing Date Anniversary, except that Company or Sellers’ claims
pending on such date shall continue until resolved. The covenants and
other agreements made by Buyer in this Agreement or any certificate or other
writing delivered by Buyer pursuant hereto or in connection herewith shall
survive the Closing and any investigation at any time made by or on behalf of
the Company or Sellers until the expiration of the applicable statute of
limitations.
ARTICLE
9. OTHER
PROVISIONS
9.1 Termination.
9.1.1 Termination
Events. This Agreement may be terminated and the Transactions
abandoned at any time prior to the Closing as follows:
(a) by mutual
consent of Buyer and Sellers’ Representative;
(b) by Buyer
if there has been a breach of any representation, warranty, covenant, obligation
or agreement contained in this Agreement on the part of the Company, any Seller
or Sellers’ Representative and such breach has not been cured within 10 Business
Days after notice to the Company (provided that Buyer is not in material breach
of this Agreement, and provided further, that no cure period shall be required
for a breach which by its nature cannot be cured within such 10 Business Days)
such that the conditions set forth in Section 7.2.1 or Section 7.2.2, as the
case may be, will not be satisfied;
(c) by
Sellers’ Representative if there has been a breach of any representation,
warranty, covenant, obligation or agreement contained in this Agreement on the
part of Buyer, and such breach has not been cured within 10 Business Days after
notice to Buyer (provided, that neither the Company, any Seller nor Sellers’
Representative is in material breach of this Agreement, and provided further,
that no cure period shall be required for a breach which by its nature cannot be
cured within such 10 Business Days) such that the conditions set forth in
Section 7.3.1 or Section 7.3.2, as the case may be, will not be
satisfied;
(d) by any
Party hereto if: (i) there shall be a final, non-appealable order of
a federal or state court in effect preventing consummation of the Transactions;
(ii) there shall be any final action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Transactions by
any Governmental Entity which would make consummation of the Transaction illegal
or which would prohibit Buyer’s ownership of the Interests or operation of the
Company, or compel Buyer to dispose of or hold separate all or a material
portion of the business or assets of the Company or Buyer as a result of the
Transaction; or
(e) by any
Party if the Transaction shall not have been consummated by the 60th day
after the date hereof, provided that the right to terminate this Agreement under
this Section 9.1.1(e) shall not be available to any Party whose failure to
fulfill any material obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing Date to occur on or before such
date.
9.1.2 Effect of
Termination. If this Agreement is terminated pursuant to
Section 9.1.1, all of the obligations of the Parties under this Agreement shall
terminate, except for such obligations under Sections 6.5 and
6.12.3. Notwithstanding the immediately preceding sentence,
termination of this Agreement pursuant to either Section 9.1.1(b) or (c) shall
neither limit or impair any remedies that a Party may have with respect to a
misrepresentation or inaccuracy in, or breach of, any representations,
warranties, agreements, covenants or obligations hereunder by another Party
before the Closing, nor release any Liability that a Party may have with respect
to a misrepresentation or inaccuracy in, or breach of, any representations,
warranties, agreements, covenants or obligations of such Party hereunder before
the Closing.
9.2 Notices. All
notices, consents, agreements, waivers and other communications hereunder or
otherwise contemplated hereby shall be in writing and shall be deemed given if
delivered by hand sent via a reputable nationwide courier service or mailed by
registered or certified mail (return receipt requested) to the Parties at the
following addresses (or at such other address for a Party as shall be specified
by like notice) or sent via electronic mail and shall be deemed given on the
date on which so hand-delivered or on the next Business Day following
transmittal via electronic mail or on the third Business Day following the date
on which so mailed or sent:
To Buyer:
VSE
Corporation
2550
Huntington Avenue
Alexandria,
VA 22303
Attention: General
Counsel
E-mail: tmkiernan@vsecorp.com
with
copies to (which shall not constitute notice):
Arent Fox
LLP
1050
Connecticut Avenue, NW
Washington,
DC 20036-5339
Attention: Carter
Strong, Esq.
E-mail: strong.carter@arentfox.com
To Sellers or Sellers’
Representative:
c/o
Akimeka, LLC
1305
North Holopono Street
Suite
3
Kihei,
HI 96753
Attention: Vaughn
G. A. Vasconcellos
E-mail: vaughn@akimeka.com
with
copies to (which shall not constitute notice):
Hisaka
Yoshida & Cosgrove
Pacific
Guardian Center, Mauka Tower
737
Bishop Street, Suite 3000
Honolulu,
HI 96813
Attention: Bruce
T. Yoshida, Esq.
E-mail: byoshida@objectionsustained.com
and
Porter
Tom Quitiquit Chee & Watts, LLP
2125
Davies Pacific Center
841
Bishop Street
Honolulu,
HI 96813
Attention: Carl
Tom, Esq.
E-mail: ctom@btpqlaw.com
9.3 Entire
Agreement. Unless otherwise herein specifically provided, this
Agreement, including the Schedules and Exhibits, and the documents and
instruments and other agreements among the Parties as contemplated by or
referred to herein, constitute the entire agreement among the Parties with
respect to the subject matter hereof, and supersede all other prior agreements
and understandings, both written and oral, between the Parties with respect to
the subject matter hereof, including the letter of intent dated May 17, 2010
among Buyer, the Company and Vasconcellos. Each Party acknowledges
that, in entering this Agreement and consummating the Closing, such Party is not
relying on any representation, warranty, covenant, obligation or agreement not
expressly stated in this Agreement or in the certificates of or agreements among
the Parties contemplated by or referred to herein.
9.4 Assignability. This
Agreement is not intended to confer upon any Person other than the Parties any
rights or remedies hereunder, except as otherwise expressly provided
herein. Neither this Agreement nor any of the rights and obligations
of the Parties hereunder shall be assigned or delegated without the consent of
all Parties, except that Buyer may assign its rights to indemnification
hereunder to one or more of its lenders.
9.5 Validity. The
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
each of which shall remain in full force and effect, to the extent permitted by
Applicable Laws.
9.6 Specific
Performance. The Parties acknowledge that damages alone may
not adequately compensate a Party for violation by another Party of this
Agreement. Accordingly, in addition to all other remedies that may be
available hereunder or under Applicable Laws, any Party shall have the right to
any equitable relief that may be appropriate to remedy a breach or threatened
breach by any other Party hereunder, including the right to enforce specifically
the terms and conditions of this Agreement by obtaining injunctive relief in
respect of any violation or non-performance hereof.
9.7 U.S.
Currency. All amounts payable hereunder shall be paid in
United States dollars.
9.8 Governing
Law; Jurisdiction. This Agreement shall take effect and shall
be construed as a contract under the laws (excluding conflict of law rules and
principles) of the State of Delaware. Any litigation with respect to
any controversy, claim or dispute arising out of or relating to this Agreement
shall be brought in a state court of competent jurisdiction in the county of
Fairfax or in the U.S. District Court for the Eastern District of Virginia,
Alexandria Division. Each Party hereby expressly and irrevocably
consents to the personal jurisdiction and venue in such county and waive any
objections or motions based on venue, including objections or motions based on
forum non conveniens, 28 U.S.C. § 1404, or any similar basis. In the event of litigation between
the Parties relating to this Agreement each Party irrevocably waives any right
to a trial by jury. In the event of any litigation arising out
of or relating to this Agreement, the unsuccessful party shall reimburse the
successful party for its reasonable costs and expenses incurred in connection
with the litigation, including reasonable fees and expenses of
counsel. Notwithstanding anything to the contrary in the foregoing,
if a state court in the County of Fairfax, or the federal court for the Eastern
District of Virginia, Alexandria Division, declines to exercise jurisdiction
over any such litigation, the litigation may be brought in any state or federal
court of competent jurisdiction in the Commonwealth of Virginia, or if those
courts lack proper jurisdiction, in any other court of competent
jurisdiction.
9.9 Sellers’
Representative.
9.9.1 Appointment. To
the maximum extent legally permissible, by his approval of this Agreement, each
Seller hereby designates and appoints Vasconcellos as his representative, agent
and attorney-in-fact (in such capacity, “Sellers’ Representative”) for all
purposes of this Agreement, the Escrow Agreement and the
Transactions. This appointment and power of attorney shall be deemed
to be coupled with an interest and all authority conferred hereby shall be
irrevocable and shall not be subject to termination by operation of law, whether
by the death or incapacity of any Seller or the occurrence of any other event or
events. Sellers’ Representative is serving in the capacity as
representative, agent and attorney-in-fact of such Sellers hereunder solely for
purposes of administrative convenience.
9.9.2 Authority. Without
limiting the generality of Section 9.9.1, to the maximum extent legally
permissible, by his execution of this Agreement, each Seller, among other
things, hereby irrevocably agrees as follows:
(a) to the
taking by Sellers’ Representative of any and all actions and the making of any
decisions required or permitted to be taken by Sellers’ Representative under
this Agreement (including Sections 2.2.4, 6.3 and 6.7) and the Escrow
Agreement;
(b) to the
exercise by Sellers’ Representative of the power to: (i) execute and deliver the
Escrow Agreement; (ii) authorize delivery to Buyer of the Escrow Amount in
satisfaction of payment obligations under Section 2.2.4 and delivery to Buyer of
amounts due on account of indemnification claims made by Buyer Indemnified
Parties in accordance with Sections 6.3 or 6.7; (iii) agree to, investigate,
negotiate, enter into settlements and compromises of and demand arbitration and
comply with orders of courts and awards of arbitrators (including the Arbiter)
with respect to such obligations and claims; (iv) resolve any claim or dispute
under or made pursuant to Sections 2.2.4, 6.3 or 6.7; and (v) take all actions
necessary in the reasonable judgment of Sellers’ Representative for the
accomplishment of the foregoing, including execution on behalf of any Seller of
any agreement, instrument, or other document that, in the sole discretion of
Sellers’ Representative, is necessary, desirable, or otherwise appropriate to
effect any such settlement or compromise in connection with the
Transactions;
(c) that
Buyer Indemnified Parties shall be able to rely conclusively without further
inquiry on the instructions and decisions of Sellers’ Representative acting in
such capacity as to the settlement of any claims for indemnification by any one
or more Buyer Indemnified Parties pursuant to Sections 2.2.4, 6.3 or 6.7 and as
to any other action taken by Sellers’ Representative hereunder, and Sellers
shall have no cause of action against Buyer Indemnified Parties for any action
taken by any one or more Buyer Indemnified Parties in reliance upon the
instructions or decisions of Sellers’ Representative;
(d) that all
actions, decisions and instructions of Sellers’ Representative in accordance
with this Agreement or the Escrow Agreement shall be conclusive and binding upon
all Sellers; and
(e) that
Sellers’ Representative is authorized to receive and to accept on behalf of each
Seller any notice from any Person claiming to be a Buyer Indemnified Party given
in accordance with this Agreement (and any notice given to Sellers’
Representative shall be deemed to have been given to each Seller).
9.9.3 Substitution
of Sellers’ Representative. If the Sellers’ Representative is
or becomes unable or unwilling to act, or resigns or is removed, Harris shall
become Sellers’ Representative, and if such individual is or thereafter becomes
unable or unwilling to act, or resigns or is removed, Sellers may appoint a
substitute Sellers’ Representative as provided below. Sellers’
Representative may resign upon 10 days’ prior notice to Buyer, to Sellers and,
if before Closing, to the Company, provided that, except in the case where
Harris becomes the successor Sellers’ Representative as provided in the
preceding sentence, no such resignation shall become effective until the
appointment of a successor Sellers’ Representative. Sellers who hold
or held immediately before the Closing in the aggregate at least 67% of the
Interest may change the Sellers’ Representative, or appoint a successor, from
time to time upon not fewer than 10 days’ prior notice to Buyer and, if prior to
Closing, to the Company.
9.9.4 Notice to
Sellers; Actions in Good Faith. Sellers’ Representative shall
promptly, and in any event within 10 Business Days, provide notice to Sellers of
any action taken on behalf of them by Sellers’ Representative pursuant to the
authority delegated to Sellers’ Representative under this Section
9.9. Sellers’ Representative shall, at all times, act in his capacity
as Sellers’ Representative in a manner that Sellers’ Representative believes to
be in the best interest of Sellers. Neither Sellers’ Representative
nor any of his agents or employees, if any, shall be liable to any Seller for
any error of judgment, or any action taken, suffered or omitted to be taken
under this Agreement, except in the case of fraud or willful misconduct of
Sellers’ Representative. Sellers’ Representative may consult with
legal counsel, independent public accountants and other experts selected by
him. Sellers’ Representative shall not have any duty to Sellers to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement.
9.10 Counterparts. This
Agreement may be executed in one or more counterparts, all of which together
shall constitute one and the same Agreement.
9.11 Waiver. The
rights and remedies of the Parties are cumulative and not
alternative. Neither the failure nor any delay by any Party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by Applicable Laws,
(a) no claim or right arising out of this Agreement can be discharged by
one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Party, (b) no waiver that may
be given by a Party will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one Party will be deemed to
be a waiver of any obligation of such Party or of the right of the Party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this
Agreement.
[Signature
Page follows]
IN
WITNESS WHEREOF, the Parties have duly executed this Membership Purchase
Agreement under seal as of the date first above written.
“BUYER”
VSE
CORPORATION,
a
Delaware corporation
By
_________________________________
Maurice A. Gauthier
Chief Executive Officer,
President
and Chief Operating
Officer
“COMPANY”
AKIMEKA,
LLC,
a
Hawaii limited liability company
By
_________________________________
Vaughn G.
A. Vasconcellos
Manager
“SELLERS’
REPRESENTATIVE”
__________________________________
VAUGHN
G. A. VASCONCELLOS
“SELLERS”
__________________________________
VAUGHN
G. A. VASCONCELLOS
__________________________________
JOHN
T. HARRIS
__________________________________
FRANK C. FLORO
SCHEDULE
1
CERTAIN
MATTERS OF CONSTRUCTION AND DEFINITIONS
1.1. Construction of this
Agreement and Certain Terms and Phrases
(a) Unless
the context of this Agreement otherwise requires, (i) words of any gender
include each other gender; (ii) words using the singular or plural number also
include the plural or singular number, respectively; (iii) the terms “hereof,”
“herein,” “hereby” and derivative or similar words refer to this entire
Agreement and not to any particular provision of this Agreement; and (iv) the
terms “Article,” “Section,” “Schedule” and “Exhibit” without any reference to a
specified document refer to the specified Article, Section, Schedule and
Exhibit, respectively, of this Agreement.
(b) The
words “including,” “include” and “includes” are not exclusive and shall be
deemed to be followed by the words “without limitation”; if exclusion is
intended, the word “comprising” is used instead.
(c) The
word “or” shall be construed to mean “and/or” unless the context clearly
prohibits that construction.
(d) Whenever
this Agreement refers to a number of days, such number shall refer to calendar
days unless Business Days are specified.
(e) All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
(f) Any
reference to any federal, state, local or foreign statute or law, including any
one or more sections thereof, shall be deemed also to refer to, unless the
context requires otherwise, all rules and regulations promulgated thereunder,
including Treasury Regulations.
(g) Any
representation or warranty contained herein as to the enforceability of a
contract, including this Agreement, shall be subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
currently or hereafter in effect affecting the enforcement of creditors’ rights
generally and to general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(h) The
Parties have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions hereof.
(i) The
disclosures in the Schedules referenced in this Agreement shall relate solely to
the representations, warranties or other terms in this Agreement to which they
expressly relate and not to any other representations, warranties or terms in
this Agreement.
(j) In
the event of any inconsistency between the statements in the body of this
Agreement and those in the Schedules referenced in this Agreement other than an
exception expressly set forth as such Schedules with respect to a specifically
identified representation, warranty, or term, the statements in the body of this
Agreement will control.
(k) The
word “extent” in the phrase “to the extent” as used in this Agreement means the
degree to which a subject or other thing extends and such phrase does not simply
mean “if.”
(l) No
provision of this Agreement is to be construed to require, directly or
indirectly, any Person to take any action, or to omit to take any action, to the
extent such action or omission would violate Applicable Laws.
1.2. Cross
References. The following terms defined elsewhere in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
|
Term
|
Definition
|
|
Accounts
Receivable
|
Section
3.9
|
|
Active
Government Contract
|
Section
3.26.1
|
|
Agreement
|
Preamble
|
|
Akimeka
Technologies
|
Section
2.3
|
|
AkiTech
Agreement
|
Section
7.2.12
|
|
Assigned
Provisions
|
Section
6.15.2
|
|
Arbiter
|
Section
2.2.4.3
|
|
Balance
Sheet Date
|
Section
3.5
|
|
Buyer
|
Preamble
|
|
Buyer
Indemnified Parties
|
Section
6.3.1
|
|
Buyer
Indemnifying Parties
|
Section
6.3.2
|
|
Closing
|
Section
2.1
|
|
Closing
Conditions
|
Section
2.4
|
|
Closing
Date
|
Section
2.4
|
|
Closing
Distributions
|
Section
2.3
|
|
Closing
Statements
|
Section
2.2.4.1
|
|
Company
|
Preamble
|
|
Company
Balance Sheet
|
Section
3.5
|
|
Company
Managers
|
Section
3.4.1
|
|
Company
Financial Statements
|
Section
3.5
|
|
Company
Insurance Contracts
|
Section
3.21
|
|
Company
Proprietary Rights
|
Section
3.20.1
|
|
Company
Plans
|
Section
3.13.1
|
|
Completed
Government Contract
|
Section
3.26.1
|
|
Core
Seller Representations
|
Section
8.1
|
|
Davidson
|
Section
3.16
|
|
Davidson
Agreement
|
Section
3.16
|
|
DCAA
|
Section
3.26.10
|
|
EAA
|
Section
3.26.13(a)
|
|
Earnout
Payments
|
Section
2.2.1
|
|
Employee
List
|
Section
3.14.2
|
|
Employment
Agreements
|
Section
7.2.5
|
|
Escrow
Amount
|
Section
2.2.2(a)(ii)
|
|
Estimated
Closing Balance Sheet
|
Section
2.2.3
|
|
Estimated
Closing Net Working Capital
|
Section
2.2.3
|
|
Exchange
Act
|
Section
4.3
|
|
FAR
|
Section
3.26.3(a)
|
|
FCPA
|
Section
3.26.13(b)
|
|
Final
Closing Statements
|
Section
2.2.4.4
|
|
Government
Bid
|
Section
3.26.1
|
|
Government
Contracts
|
Section
3.26.2
|
|
IEEPA
|
Section
3.26.13(a)
|
|
IRS
|
Section
3.13.3
|
|
Indemnification
Claim
|
Section
6.3.3
|
|
Indemnified
Person
|
Section
6.3.3
|
|
Indemnifying
Party
|
Section
6.3.3
|
|
Initial
Purchase Price
|
Section
2.2.1(a)
|
|
Initial
Purchase Price Adjustment
|
Section
2.2.3
|
|
Interests
|
Recital
R.2
|
|
IPP
Escrow Amount
|
Section
2.2.2(a)(i)
|
|
Liabilities
|
Section
3.7
|
|
Materiality
Qualifications
|
Section
3.27
|
|
Notice
of Claim
|
Section
6.3.3
|
|
Permits
|
Section
3.10
|
|
Pre-Closing
Period
|
Section
5.1
|
|
Pre-Closing
Tax Period
|
Section
6.7.5
|
|
Purchase
Price
|
Section
2.2.1(b)
|
|
Retention
Agreements
|
Section
6.15(b)
|
|
Retention
Escrow Amount
|
Section
2.2.2(a)(ii)
|
|
Section
6.7.5 Claim
|
Section
6.3.6(b)
|
|
Securities
Act
|
Section
4.3
|
|
Seller
|
Preamble
|
|
Seller
Indemnified Parties
|
Section
6.3.2
|
|
Seller
Indemnifying Parties
|
Section
6.3.1
|
|
Seller
Objection
|
Section
2.2.4.2
|
|
Sellers’
Representative
|
Preamble
|
|
Straddle
Period
|
Section
6.7.6
|
|
Third
Party Claim
|
Section
6.3.4(a)
|
|
Transactions
|
Recital
R.4
|
|
Welfare
Plan
|
Section
3.13.5
|
1.3. Certain
Defined Terms. As used in this Agreement, the following terms
shall have the following meanings ascribed to them:
|
(a)
|
Affiliate: with
respect to any Person, any Person which, directly or indirectly, controls,
is controlled by, or is under common control with, such
Person.
|
|
(b)
|
Affiliated
Group: as defined in Code Section
1504(a).
|
|
(c)
|
Applicable
Laws: with respect to any Person, any law, statute,
treaty, rule, regulation, ordinance, permit, license, judgment, order,
writ, injunction, decree, directive, determination or other requirement of
any Governmental Entity or arbitrator, in each case, applicable to or
binding upon such Person or any of its property or to which such Person or
any of its property is subject.
|
|
(d)
|
Associated
with a Competitive Activity: any referenced Party or an
Affiliate of such Party that becomes directly or indirectly involved as an
owner, equity holder, member, employee, officer, manager, director,
independent contractor, agent, partner, advisor, consultant or in any
other capacity calling for the rendition of, any referenced Party or such
Affiliate’s personal or other services with any Person (other than the
Company or Buyer) that is engaged in a Competitive
Activity. Notwithstanding the foregoing, (i) the referenced
Party and his Affiliates may make and retain passive investments during
the Restricted Period in not more than two percent of the equity of any
entity engaged in a Competitive Activity, if such equity is listed on a
national securities exchange or otherwise has a class of securities
registered under Section 12 of the Exchange Act, as amended and (ii) the
referenced Party may seek and perform awards and contracts only available
to SBA Section 8(a) companies or otherwise permitted under the AkiTech
Agreement.
|
|
(e)
|
Business
Day: a day (other than a Saturday or Sunday) on which
commercial banking institutions in New York, New York are open for the
transaction of substantially all of their banking
business.
|
|
(f)
|
Buyer
Material Adverse Effect: any materially adverse change
in or effect on the financial condition, business, operations, assets,
properties, results of operations of Buyer and its Subsidiaries considered
on a consolidated basis.
|
|
(g)
|
Closing
Balance Sheet: the balance sheet of the Company as of
immediately prior to the Closing, prepared in accordance with GAAP,
applied on a basis consistent with the Company Balance
Sheet.
|
|
(h)
|
Closing
Date Anniversaries: the one or more referenced
anniversaries of the Closing Date.
|
|
(i)
|
Closing Net
Working Capital: as of 11:59 p.m. of the Closing Date,
the excess of the Company’s current assets as reflected on the Closing
Balance Sheet over the Company’s current Liabilities as reflected in the
Closing Balance Sheet (and after giving effect to the Closing
Distributions and the other transactions contemplated by Section 2.3) as
calculated in accordance with GAAP applied by the Company on a basis
consistent with the Company Financial Statements; provided, however, that
for purposes of calculating Closing Net Working
Capital,
|
|
(A)
|
Any
accounts receivable of the Company as of the Closing Date that were
included in the calculation of Estimated Closing Net Working Capital that
remain outstanding 90 days after the Closing Date will be excluded from
the calculation of Closing Net Working Capital; provided, however, that
any amount subsequently paid to the Company before the first anniversary
of the Closing Date in respect of such accounts receivable will be
promptly paid to Sellers’ Representative on behalf of
Sellers;
|
|
(B)
|
current
Liabilities of the Company as of the Closing Date will exclude any
Transaction fees and expenses of Sellers, the Company and Sellers’
Representative paid at or in connection with the Closing pursuant to the
Flow of Fund Statement; and
|
|
(C)
|
current
Liabilities will include payroll
or employment Taxes, including the employer’s Company’s share of Federal
Insurance Contributions Act (FICA) Tax, resulting from any payment by the
Company of the first installment of the Retention Bonuses prior to
Closing.
|
|
(j)
|
COBRA: the
provisions of Section 4980B of the Code and Part 6 of Title I of
ERISA.
|
|
(k)
|
Code: the
U.S. Internal Revenue Code of 1986, as
amended.
|
|
(l)
|
Commercial
Software: packaged commercial software programs
generally available to the public through retail dealers in computer
software or directly from the manufacturer which have been licensed to the
Company and which are used in the Company’s business but are in no way a
component of or incorporated in or specifically required to develop any of
the Company’s products and related trademarks and
technology.
|
|
(m)
|
Company
Completed Engagement: all contracts and other
arrangements which were entered into since December 31, 2004 pursuant to
which the Company formerly provided goods or
services.
|
|
(n)
|
Company
Contract: any Contract (i) under which the Company has
or may acquire rights, (ii) under which the Company has or may become
subject to any Liability, or (iii) by which the Company or any of the
assets owned or used by the Company is or may become
bound.
|
|
(o)
|
Company
Engagement: all contracts and other arrangements
pursuant to which the Company is providing goods or services, and all
proposals, bids and offers for future such contracts and arrangements,
including the contracts and other arrangements, proposals, bids and offers
listed on Schedule 3.26.1.
|
|
(p)
|
Company
Leases: each lease, sublease, license or other agreement
under which the Company uses, occupies or has the right to use and occupy
any real property or interest therein that (i) provides for future minimum
payments of $25,000 or more (ignoring any right of cancellation or
termination) or (ii) the cancellation or termination of which would have a
Company Material Adverse Effect.
|
|
(q)
|
Company
Material Adverse Effect: any materially adverse change
in or effect on the financial condition, business, operations, assets,
properties, results of operations or prospects of the Company, except to
the extent resulting from (i) changes in general economic conditions, (ii)
changes generally affecting the industry in which the Company operates,
(iii) acts of war, terrorism, military action, or the escalation thereof,
(iv) changes in Applicable Laws or accounting rules or principles,
including changes in GAAP or (v) the announcement of the Transactions
before the Closing Date.
|
|
(r)
|
Company’s
Knowledge: the actual, current knowledge, after
reasonable inquiry of any one or more of the Company
Managers.
|
|
(s)
|
Competitive
Activity: any business that competes with the Company’s
business as conducted as of the Closing Date, within any country or
territory in which the Company’s business is conducted or proposed to be
conducted as of the Closing Date; provided that the business activities of
Akimeka Technologies, LLC that are not restricted under Section 2.3 of the
AkiTech Agreement shall not constitute Competitive
Activities.
|
|
(t)
|
Confidential
Information: all information disclosed to any one or
more Sellers or known by such Party as a consequence of or through the
Party’s employment with the Company, or direct or indirect ownership of
Interests, or any other relationship with the Company, where such
information is not generally known in the trade or industry or was
regarded or treated as confidential by the Company, and where such
information refers or relates in any manner whatsoever to the business
activities, processes, services or products of the Company. Confidential
Information shall include business and development plans (whether
contemplated, initiated or completed), information with respect to the
development of technical and management services, business contacts,
methods of operation, results of analyses, business forecasts, financial
data, costs, revenues, and similar
information.
|
|
(u)
|
Contract: any
contract, agreement, obligation, promise, commitment, arrangement or
undertaking (whether written or oral and whether express or implied) that
is legally binding.
|
|
(v)
|
Control: (including
with correlative meaning, controlled by and under common control with): as
used with respect to any Person, the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or
otherwise.
|
|
(w)
|
Core
Representation Claims: any and all Indemnification
Claims, including Ownership, Tax and SBA Claims, of one or more Buyer
Indemnified Parties in respect of the Core Seller Representations or in
any certificate in respect thereof given by or on behalf of one or more
Sellers hereunder.
|
|
(x)
|
DCAA
Claim: any claim or assertion, whether before, on or
after the date hereof (including the matters referenced in Schedules
3.26.1(b), 3.26.3 and 3.26.4), of the DCAA against or otherwise in respect
of the Company, involving actual, potential or alleged Liability of the
Company, including a disallowance or asserted disallowance of any direct
or indirect costs or overhead, whether by a Form 1 or otherwise, for
services or products provided before the Closing Date or otherwise in
respect of an act or omission to act that occurred or allegedly occurred
before the Closing Date.
|
|
(y)
|
Distributional
Interest: shall have the meaning ascribed to it in
Section 25 of Article II of the Operating Agreement for Akimeka, LLC, as
amended and referenced in the definition of Organizational Documents
herein.
|
|
(z)
|
Encumbrance: any
mortgage, pledge, proxy, lien, charge, security interest, assignment as
security, conditional sale or other title retention agreement, third party
rights or other encumbrance.
|
|
(aa)
|
Environmental
Claim: any actual notice alleging potential liability
(including potential liability for investigatory costs, cleanup costs,
response or remediation costs, natural resources damages, property
damages, personal injuries, fines or penalties) arising out of, based on
or resulting from (i) the presence, or release of any Material of
Environmental Concern at any location, whether or not owned by that party
or (ii) circumstances forming the basis of any violation, or alleged
violation, of any Environmental
Law.
|
|
(bb)
|
Environmental
Laws: any and all Federal, state or local statutes,
regulations and ordinances relating to the protection of public health,
safety or the environment in existence and effective on the Closing Date,
including the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as
amended.
|
|
(cc)
|
Equity
Ownership
Claims: any and all claims of one or more Buyer
Indemnified Parties under Section 6.3.1 in respect of representations and
warranties in Section 3.2 or in any certificate given hereunder in respect
of Section 3.2.
|
|
(dd)
|
ERISA: the
Employee Retirement Income Security Act of 1974, as
amended.
|
|
(ee)
|
ERISA
Affiliate: with respect to a party, any member (other
than that party) of a controlled group of corporations, group of trades or
businesses under common control or affiliated service group that includes
that party (as defined for purposes of Code Section 414(b), (c) and
(m).
|
|
(ff)
|
Escrow
Agent: Title Guaranty Escrow Services, Inc., which will
serve as escrow agent pursuant to the Escrow
Agreement.
|
|
(gg)
|
Escrow
Agreement: the agreement that will be entered into at
the Closing among the Parties and the Escrow Agent in substantially the
form of Exhibit A regarding the administration of the Escrow as
contemplated by Sections 2.2.2(a), 6.3 and
6.15.
|
|
(hh)
|
GAAP: generally
accepted accounting principles used in the United States of
America.
|
|
(ii)
|
Government
Contract: any prime contract with the United States
Government and any contract with a prime contractor or higher-tier
subcontractor under a prime contract with the United States Government
("Subcontract"), including any teaming agreement or basic ordering
agreement. A task, purchase or delivery order under a
Government Contract shall not constitute a separate Government Contract,
for purposes of this definition, but shall be part of the Government
Contract to which it relates.
|
|
(jj)
|
Governmental
Entity: any nation or government, or supranational body,
any state or political subdivision thereof (including the United States or
any other country or other federal, or any state, local or municipal or
other), any court and any administrative agency or other regulatory body,
instrumentality, authority or other entity or official thereof exercising
executive, legislative, judicial, regulatory or administrative functions
thereof.
|
|
(kk)
|
Losses: without
duplication, any and all Liabilities, obligations, actions, suits,
proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement (provided that such
settlement is in accordance with the terms hereof), Taxes, Liens, losses
(including any actual diminution in value), expenses, and fees, including
court costs and reasonable attorneys’ fees and expenses; provided that if
a Buyer Indemnified Party receives any insurance proceeds in respect of
any of the foregoing, the amount of such insurance proceeds received less
any associated costs in obtaining such proceeds, shall be excluded in
determining the amount of Losses subject to an Indemnification
Claim.
|
|
(ll)
|
Materials
of Environmental Concern: petroleum and its by-products
and any and all other substances or constituents to the extent that they
are regulated by, or form the basis of liability under, any Environmental
Law.
|
|
(mm)
|
Organizational
Documents: means the Operating Agreement for Akimeka,
LLC dated September 3, 1999, the Amendment to Operating Agreement dated as
of November 7, 2003 by Vasconcellos, Floro and Harris, the Amendment to
Operating Agreement dated January 16, 2007, and the Articles of
Organization of the Company dated September 3,
1999.
|
|
(nn)
|
Ownership,
Tax and SBA Claims: any and all Indemnification Claims
of one or more Buyer Indemnified Parties in respect of Sellers’
representations and warranties in Sections 3.2, 3.12 or 3.26.3(g) or in
any certificate given hereunder in respect
thereof.
|
|
(oo)
|
Party: any
of Buyer, the Company, any Seller or Sellers’
Representative.
|
|
(pp)
|
Percentage
Ownership: in respect of Vasconcellos, Harris and Floro,
respectively, 44%, 28% and 28%.
|
|
(qq)
|
Permitted
Encumbrances: (i) liens for ad valorem taxes not yet due
and payable, (ii) immaterial liens that were incurred in the
ordinary course of business, such as carriers’, warehousemen’s, landlords’
and mechanics’ liens and other similar liens arising in the ordinary
course of business, (iii) immaterial liens on personal property leased
under operating leases for the repayment of borrowed money), statutory
obligations, progress payments, surety and appeal bonds and other
obligations of like nature, in each case incurred in the ordinary course
of business, and (iv) such imperfections or minor defects of title,
easements, rights-of-way and other similar restrictions (if any) as are
insubstantial in character, amount or extent, do not materially detract
from the value or interfere with the present or proposed use of the
properties or assets of the party subject thereto or affected thereby, and
do not otherwise adversely affect or impair the business or operations of
such party.
|
|
(rr)
|
Person: an
individual, a corporation, an association, a partnership, a limited
liability company, a joint stock company, an estate, a trust and any other
entity, including Governmental Entity, or
organization.
|
|
(ss)
|
Release: shall
have the meaning assigned to that term in the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended.
|
|
(tt)
|
Restricted
Period: the period from the Closing Date to and
including the third Closing Date
Anniversary.
|
|
(uu)
|
Sellers’
Knowledge: the actual and current knowledge, after
reasonable inquiry, of any one or more
Sellers.
|
|
(vv)
|
Subsidiary: any
corporation, partnership, limited liability company, association, joint
stock company or other business entity 50% or more of the outstanding
voting securities of which is owned or controlled, directly or indirectly,
by the referenced Person, or by one or more Subsidiaries of the referenced
Person, or by referenced Person and one or more Subsidiaries of the
referenced Person. For purposes of the definition, “voting
securities” means securities which ordinarily have voting power for the
election of directors or of other individuals having similar functions,
whether at all times or only so long as no senior class of securities has
such voting power by reason of any contingency, or other ownership
interests ordinarily constituting a majority voting
interest.
|
|
(ww)
|
Taxes: all
taxes, levies and other assessments, including all income, gross receipts,
license, franchise, sales, use, goods and services, value added, capital,
capital stock, capital gains, net worth, transfer, registration, profits,
withholding, payroll, employment, employer health, social security (or
similar), excise, severance, stamp, occupation, premium, windfall profits,
environmental, (including under Code Section 52A), customs, duties,
alternative or add-on, minimum, estimated, real property and personal
property taxes, and any other taxes, assessments or similar charges in the
nature of a tax, including unemployment insurance payments and workers
compensation premiums, together with any installments with respect
thereto, and any interest, fines and penalties, imposed by any
Governmental Entity (including federal, state, municipal and foreign
Governmental Entities), and whether disputed or
not.
|
|
(xx)
|
Treasury
Regulations: regulations promulgated by the United
States Department of Treasury under one or more provisions of the
Code.
|
|
(yy)
|
United
States Government: the government of the United States
of America or any agency, department, division, subdivision or office
thereof.
|
SCHEDULE
2.2.2(b)
Earnout
Payments
The
Earnout Payments will be payable by Buyer to Sellers based on their Percentage
Ownership on the following terms and conditions:
(a) Except
as otherwise provided in respect of Rollover Periods in Section (c) to this
Schedule 2.2.2(b), up to the Maximum Annual Earnout Amount (as defined below)
will be payable within 90 days after the end of each of the first three
Post-Closing Years (as defined below), if the Revenues (as defined below) for
the respective Post-Closing Year are at least equal to the Minimum Target for
such Post-Closing Year, as set forth below in Section (g) to this Schedule
2.2.2(b), and such Revenues otherwise satisfy the requirements set forth below
in Section (f) to this Schedule 2.2.2(b).
(b) The
annual Earnout Payment shall be calculated within 90 days after the end of each
of the first three Post-Closing Years as a percentage of the Maximum Annual
Earnout Amount for the respective Post-Closing Year, whereby the percentage
(which may never be greater than 100%) is determined by a formula
where:
(i) the
numerator is the dollar amount by which Revenues for the respective Post-Closing
Year exceed the Minimum Target for such Post-Closing Year, as set forth in
Section (g) to this Schedule 2.2.2(b), and
(ii) the
denominator is the dollar amount equal to the difference between the Minimum
Target for the Post-Closing Year and the Maximum Target, each as set forth below
in Section (g) to this Schedule 2.2.2(b).
(c) If
the Maximum Annual Earnout Amount for either the first or second Post-Closing
Year is not earned in full ( “Rollover Period”), the unearned portion of such
Maximum Annual Earnout Amount will rollover and be available to be earned in the
next Post-Closing Year (the “Subsequent Period”) as determined by the following
formula: N times (X/Y)
where:
(i) N
= the Maximum Annual Earnout Amount minus the actual Earnout Payment for the
Rollover Period;
(ii) X
= Revenues for the Subsequent Period minus the Maximum Target for the Subsequent
Period; and
(iii) Y
= the Maximum Target for the Rollover Period minus the Revenues for the Rollover
Period.
For
clarity, X/Y can never
be greater than 1.
(d) For
purposes of illustration only ($ in thousands):
|
|
|
Example
1:
|
|
Example
2
|
|
|
Period
1
|
|
Period
2
|
|
Period
2
|
|
|
Maximum
Target =
|
$43,000
|
Maximum
Target =
|
$49,000
|
Maximum
Target =
|
$49,000
|
|
Actual
Revenues =
|
$41,000
|
Actual
Revenues =
|
$51,000
|
Actual
Revenues =
|
$50,000
|
|
Earnout
Payment =
|
$1,333
|
X
=
|
$2,000
|
X
=
|
$1,000
|
|
N
=
|
$2,667
|
Earnout
Payment =
|
$3,500
|
Earnout
Payment =
|
$3,500
|
|
Y
=
|
$2,000
|
Earned
Rollover Amount
|
plus
$2,667
|
Earned
Rollover Amount
|
plus
$1,333
|
(e) For
all purposes of this Schedule 2.2.2(b):
(i) “Company
Change of Control” means the occurrence of any of the following
events: (1) a sale or other transfer of voting securities of the
Company, a merger or consolidation of the Company or a recapitalization of the
Company, whereby upon consummation of any such transaction, Buyer and its wholly
owned Subsidiaries together own less than 51% of the Company’s outstanding
voting securities; (2) a sale of all or substantially all of the Company’s
assets to any Person other than Buyer or a wholly owned Subsidiary of Buyer;
(3) any “person,” including a “group,” as such terms are defined in
Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or other
fiduciary holding voting securities of Buyer (“Voting Securities”) under any
Buyer-sponsored benefit plan, becomes the beneficial owner, as defined under the
Exchange Act, directly or indirectly, whether by purchase or acquisition or
agreement to act in concert or otherwise, of more than 50% of the outstanding
Voting Securities; or (4) except in the case of a merger or consolidation
in which (A) Buyer is the surviving corporation and (B) the holders of
Voting Securities immediately prior to such merger or consolidation beneficially
own, directly or indirectly, more than 50% of the outstanding Voting Securities
immediately after such merger or consolidation (there being excluded from the
number of Voting Securities held by such holders, but not from the outstanding
Voting Securities, any Voting Securities received by Affiliates of the other
constituent corporation(s) in the merger or consolidation in exchange for stock
of such other corporation), Buyer consummates a merger in which Buyer is a
constituent corporation, consolidation in which Buyer is a constituent
corporation, liquidation in which Buyer is a constituent corporation or sale of
all or substantially all of Buyer’s assets.
(ii) “Maximum
Annual Earnout Amount” means $4,000,000 in respect of the first Post-Closing
Year, $3,500,000 in respect of the second Post-Closing Year and $3,500,000 in
respect of the third Post-Closing Year.
(iii) “Revenues”
means the Company’s gross revenues, as determined by Buyer in accordance with
GAAP on the accrual basis, for the applicable Post-Closing Year.
(iv) “Earnout
Period” means the period from January 1, 2011 and ending on the earlier of
December 31, 2013 or such date on which any payment is made by Buyer pursuant to
Section (e)(i) of this Schedule 2.2.2(b).
(v) “Post-Closing Year” means the
period commencing on January 1 of a calendar year that occurs within the Earnout
Period and ending on and including the last day of such calendar
year. For the avoidance of doubt, the first Post-Closing Year is the
period between January 1, 2011 and December 31, 2011, the second Post-Closing
Year is the period between January 1, 2012 and December 31, 2012 and the third
Post-Closing Year is the period between January 1, 2013 and December 31,
2013.
(f) Notwithstanding
anything to the contrary in this Schedule 2.2.2(b), no Earnout Payment shall be
payable with respect to any Post-Closing Years if the Company’s income before
income taxes (i.e., Revenues minus all costs except income taxes) for such
Post-Closing Year does not equal or exceed 9% of the Revenues for such
Post-Closing Year; provided, that in no event will the Company’s “expenses” used
in the calculation of “income before income taxes” include (x) expenses imposed
on the Company by Buyer that are significantly in excess of expenses that were
historically incurred by the Company in the ordinary course of its business
prior to the Closing (determined as a percentage of Revenues), other than
expenses reasonably allocated to the Company for services actually performed in
accordance with Buyer’s cost accounting standards, consistently applied, or (y)
any expenses of the Company or Buyer (including amortization, depreciation and
interest) caused by consummation of the Transactions.
(g) Set
forth below ($ in thousands) are the Maximum Target and Minimum Target for each
of the first three Post-Closing Years and examples, for illustrative purposes
only, of the calculation of the Earnout Payments pursuant to this Schedule
2.2.2(b). This calculation does not take into account any rollover
provisions under Section (c) of this Schedule 2.2.2(b).
|
|
Period
1
|
Period
2
|
Period
3
|
|
|
2011
|
2012
|
2013
|
|
Maximum
Target
|
$43,000
|
$49,000
|
$58,000
|
|
Minimum
Target
|
$40,000
|
$44,000
|
$48,400
|
|
Denominator
|
3,000
|
5,000
|
9,600
|
|
(Max
Target – Min Target)
|
|
|
|
|
If
Revenues =
|
$40,000
|
$44,000
|
$48,400
|
|
Then:
|
|
|
|
|
Numerator
=
|
0
|
0
|
0
|
|
%
of Max Earnout =
|
0%
|
0%
|
0%
|
|
Earnout
=
|
0
|
0
|
0
|
|
|
|
|
|
|
If
Revenues =
|
$41,000
|
$45,667
|
$51,600
|
|
Then:
|
|
|
|
|
Numerator
=
|
1,000
|
1,667
|
3,200
|
|
%
of Max Earnout =
|
33.3%
|
33.3%
|
33.3%
|
|
Earnout
=
|
$1,333
|
$1,667
|
$1,667
|
|
|
|
|
|
|
If
Revenues =
|
$42,000
|
$47,333
|
$54,800
|
|
Then:
|
|
|
|
|
Numerator
=
|
2,000
|
3,330
|
6,400
|
|
%
of Max Earnout =
|
66.7%
|
66.7%
|
66.7%
|
|
Earnout
=
|
$2,668
|
$2,334
|
$2,334
|
|
|
|
|
|
|
If
Revenues =
|
$43,000
|
$49,000
|
$58,000
|
|
Then:
|
|
|
|
|
Numerator
=
|
3,000
|
5,000
|
9,600
|
|
%
of Max Earnout =
|
100%
|
100%
|
100%
|
|
Earnout
=
|
$4,000
|
$3,500
|
$3,500
|
(h) After
the Closing and during the Earnout Period:
(i) Buyer
shall maintain the Company as a separate Subsidiary doing business as “Akimeka”
and Buyer shall maintain a financial reporting system that will separately
account for the revenues and expenses of the Company and facilitate the
determination of Revenues and the Company’s income before income taxes during
the Earnout Period.
(ii) Buyer
shall cause the Company to operate the Company’s business in a manner reasonably
consistent with past practices of the Company, but taking into account the
acquisition of the Company by Buyer as a wholly owned Subsidiary of Buyer,
changes in the administrative operations of the Company as a result of such
acquisition, and other changes reasonably related to the Company’s being a
wholly owned Subsidiary of Buyer. Buyer shall not transfer to any
other Affiliate of Buyer any Government Contracts or other significant sales of
products or services that traditionally have been provided by the
Company.
(iii) Buyer
shall use commercially reasonable efforts to, and shall use commercially
reasonable efforts to cause the Company to, remain in material compliance with
all Applicable Laws, and Buyer shall not take any action in bad faith for the
sole purpose and intent of avoiding Buyer's obligation to pay any Earnout
Payment.
(iv) Notwithstanding
anything herein to the contrary, this Agreement shall not obligate Buyer or the
Company after the Closing to conduct its business in a manner to maximize the
possibility that the Earnout Payments will be earned hereunder and nothing
herein creates a fiduciary duty on the part of Buyer or the Company to Sellers
in respect of the Earnout Payments. Without limiting the effect of
the immediately preceding sentence or any of Buyer’s rights hereunder, Buyer
will exercise reasonable commercial efforts to operate the Company in good faith
on a profitable basis and will maintain the Company as a separate entity during
the Earnout Period.
(i) (i)
If a Company Change of Control occurs before or during the first Post-Closing
Year, Buyer shall pay to Sellers $11,000,000 in accordance with Schedule 2.1 and
upon making such payment all of Buyer’s obligations under this Agreement to make
Earnout Payments shall terminate and be null and void;
(ii) If
a Company Change of Control occurs during the second Post-Closing Year, Buyer
shall pay to Sellers $7,000,000 in accordance with Schedule 2.1 and upon making
such payment all of Buyer’s obligations under this Agreement shall terminate and
be null and void; and
(iii) if
a Company Change of Control occurs during the third Post-Closing Year, Buyer
shall pay to Sellers $3,500,000 in accordance with Schedule 2.1 and upon making
such payment all of Buyer’s obligations under this Agreement to make Earnout
Payments shall terminate and be null and void.
(j) Buyer’s
obligations to make Earnout Payments under this Schedule 2.2.2(b) shall not be
conditioned on or otherwise subject to any one or more Sellers being employees
of Buyer, the Company or any other Subsidiary of Buyer.
|
|
________________________________________
|