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of equipment -- 30,571
AGREEMENT FOR PURCHASE AND SALE OF STOCK
among
GEC ACQUISITION CORPORATION,
EXIGENT INTERNATIONAL, INC.,
GEC NORTH AMERICA CORPORATION,
ROGER A. GILMARTIN,
JACQUELINE R. GILMARTIN,
DEBORAH M. BOWEN
and
MARK W. BRYDGES
Dated as of November 19, 1999
TABLE OF CONTENTS
ARTICLE I
FORM OF TRANSACTION............................................................1
Section 1.1 Purchase and Sale.............................................1
Section 1.2 Closing.......................................................3
ARTICLE II
DELIVERY OF STOCK AND EMPLOYMENT AGREEMENTS....................................4
Section 2.1 Closing Procedure.............................................4
Section 2.2 Closing of Transfer Books.....................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MAJORITY SHAREHOLDERS....5
Section 3.1 Organization and Good Standing................................5
Section 3.2 Articles of Incorporation and Bylaws..........................5
Section 3.3 Capitalization................................................6
Section 3.4 Company Subsidiaries..........................................7
Section 3.5 Corporate Authority...........................................8
Section 3.6 Compliance with Applicable Law................................8
Section 3.7 Non-Contravention.............................................9
Section 3.8 Consents......................................................9
Section 3.9 Absence of Certain Changes or Events..........................9
Section 3.10 Actions and Proceedings......................................10
Section 3.11 Financial Statements.........................................10
Section 3.12 No Undisclosed Liabilities...................................10
Section 3.13 Contracts and Commitments....................................10
Section 3.14 Taxes........................................................12
Section 3.15 Title to Assets..............................................14
Section 3.16 Accounts.....................................................14
Section 3.17 Leases and Other Arrangements................................14
Section 3.18 Foreign Corrupt Practices Act................................15
Section 3.19 Antiboycott..................................................15
Section 3.20 Export Licensing and Customs.................................15
Section 3.21 Employee Payments and Benefits...............................15
Section 3.22 Compensation.................................................16
Section 3.23 Embargoes....................................................16
Section 3.24 Intellectual Property........................................16
Section 3.25 Employee Benefit Plans; ERISA................................17
Section 3.26 Environmental Matters........................................20
Section 3.27 Labor Matters................................................22
Section 3.28 Employees....................................................23
Section 3.29 Suppliers....................................................23
Section 3.30 Customers....................................................24
Section 3.31 Accounts Receivable and Contracts Receivable; Prepaids.......24
Section 3.32 Inventory....................................................24
Section 3.33 Professional Fees............................................25
Section 3.34 Affiliate Transactions.......................................25
Section 3.35 Takeover Laws................................................25
Section 3.36 Brokers......................................................25
Section 3.37 Disclosure...................................................25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUISITION.................................26
Section 4.1 Organization and Good Standing...............................26
Section 4.2 Corporate Authority..........................................26
Section 4.3 Government Approvals; Required Consents......................27
Section 4.4 Non-contravention............................................27
Section 4.5 Brokers......................................................27
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.................27
Section 5.1 Authority....................................................27
Section 5.2 Non-Contravention............................................28
Section 5.3 Government Approvals; Required Consents......................28
Section 5.4 Title to Shares of Company Stock.............................28
Section 5.5 Performance under Employment Agreements......................28
Section 6.6 Disclosure...................................................28
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING...........................................28
Section 6.1 Conduct of Business by the Company Pending Closing...........28
Section 6.2 Effect of Failure to Comply..................................30
ARTICLE VII
ADDITIONAL AGREEMENTS AND COVENANTS...........................................31
Section 7.1 Access and Information.......................................31
Section 7.2 No Solicitation..............................................31
Section 7.3 Reasonable Best Efforts......................................31
Section 7.4 Public Disclosure; Confidentiality...........................32
Section 7.5 Expenses.....................................................33
Section 7.6 Supplemental Disclosure......................................34
Section 7.7 Disclosure Statements........................................34
Section 7.8 Employee Bonus...............................................34
Section 7.9 Automobile Leases............................................35
Section 7.10 Officer Releases and Employee Offers of Employment...........35
Section 7.11 Release from Stock Grant Program.............................35
Section 7.12 Line of Credit...............................................36
Section 7.13 Disputed Contract Amount.....................................37
Section 7.14 Lien Search..................................................37
Section 7.15 Supplemental Financial Statement.............................37
Section 7.16 Stockholders'Equity..........................................37
Section 7.17 Shareholder Loan.............................................37
Section 7.18 Company Checks...............................................37
Section 7.19 Option Plans.................................................37
Section 7.20 Insurance....................................................37
Section 7.21 Audit of Company's Financial Statements......................37
Section 7.22 Effect of Failure to Comply..................................38
ARTICLE VIII
CONDITIONS TO CONSUMMATION....................................................38
Section 8.1 Conditions to Each Party's Obligation to Effect
Transactions..............................................38
Section 8.2 Conditions to Obligation of Acquisition......................38
Section 8.3 Conditions to Obligation of the Shareholders.................40
Section 8.4 Conditions Among Shareholders................................40
ARTICLE IX
POST-CLOSING OBLIGATIONS......................................................41
Section 9.1 Profit Sharing Plan..........................................41
Section 9.2 Short Year Tax Return........................................41
Section 9.3 Post-Closing Audit...........................................42
ARTICLE X
RESTRICTIVE COVENANTS.........................................................42
Section 10.1 General.....................................................42
Section 10.2 Protectable Interests.......................................42
Section 10.3 Covenant Not To Compete.....................................43
Section 10.4 Solicitation of Customers...................................44
Section 10.5 Solicitation of Employees...................................44
Section 10.6 Confidential Information....................................44
Section 10.7 Severability................................................45
Section 10.8 Cost of Litigation..........................................45
Section 10.9 Third Party Beneficiary.....................................45
Section 10.10 Enforcement.................................................45
Section 10.11 Assignment..................................................45
ARTICLE XI
TERMINATION...................................................................46
Section 11.1 Termination.................................................46
Section 11.2 Effect of Termination.......................................46
ARTICLE XII
SURVIVAL AND INDEMNIFICATION..................................................46
Section 12.1 Survival....................................................46
Section 12.2 Obligation of Shareholders to Indemnify....................47
Section 12.3 Remedies Non-Exclusive......................................48
Section 12.4 Procedure for Indemnification...............................49
Section 12.5 Promissory Note.............................................50
ARTICLE XIII
GENERAL PROVISIONS............................................................50
Section 13.1 Amendment and Modification..................................50
Section 13.2 Waiver......................................................50
Section 13.3 Notices.....................................................51
Section 13.4 Descriptive Headings; Interpretation........................52
Section 13.5 Entire Agreement; Assignment................................53
Section 13.6 Governing Law...............................................53
Section 13.7 Enforcement.................................................53
Section 13.8 Submission to Jurisdiction..................................53
Section 13.9 Severability................................................54
Section 13.10 Knowledge...................................................54
Section 13.11 Counterparts................................................54
AGREEMENT FOR PURCHASE AND SALE OF STOCK
AGREEMENT FOR PURCHASE AND SALE OF STOCK, dated as of November 19, 1999
(this "Agreement"), by and among GEC ACQUISITION CORPORATION, a corporation
organized under laws of the State of Nevada ("Acquisition"), EXIGENT
INTERNATIONAL, INC., a corporation organized under the laws of the State of
Delaware ("Parent"), GEC NORTH AMERICA CORPORATION, a Nevada corporation (the
"Company"), and ROGER A. GILMARTIN, JACQUELINE R. GILMARTIN, DEBORAH M. BOWEN
and MARK W. BRYDGES who are shareholders of the Company (collectively referred
to as the "Shareholders"). Roger A. Gilmartin and Jacqueline R. Gilmartin shall
collectively be referred to as the "Majority Shareholders". Deborah M. Bowen and
Mark W. Brydges may sometimes collectively be referred to as the "Minority
Shareholders".
WHEREAS, the board of directors of Acquisition has approved the acquisition
of the issued and outstanding capital stock of the Company owned by the
Shareholders;
WHEREAS, Parent which owns one hundred percent (100%) of the issued and
outstanding capital stock of Acquisition has approved the transaction
contemplated by this Agreement;
WHEREAS, the board of directors of the Company has recommended to the
Shareholders the consummation of the transactions contemplated by this
Agreement; and
WHEREAS, the Shareholders have agreed to enter into and consummate this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
FORM OF TRANSACTION
SECTION 1.1 PURCHASE AND SALE.
(a) Upon the terms and subject to the conditions contained in this
Agreement, at the Effective Time (as hereinafter defined), Acquisition shall
purchase from the Shareholders all of the issued and outstanding shares of the
voting common stock, Class "A" stock, authorized by the articles of
incorporation of the Company, par value one tenth of one cent ($0.001), ("Voting
Stock") and all of the issued and outstanding shares of the nonvoting common
stock, Class "B" stock, authorized by the articles of incorporation of the
Company, par value one tenth of one cent ($0.001), ("Nonvoting Stock")
(collectively referred to as "Company Stock"). In consideration for the
conveyance, transfer and delivery of the Company Stock by the Shareholders to
Acquisition at Closing (as hereinafter defined), Acquisition shall pay to the
Shareholders the amounts described below (the "Purchase Price"). At the
Effective Time, Roger A. Gilmartin, Deborah M. Bowen and Mark W. Brydges shall
also become employees of Acquisition pursuant to employment agreements
hereinafter described.
(b) At Closing, Acquisition shall deliver to the Shareholders cash or
instruments conveying immediately available funds to the Shareholders in the
amount of two million two hundred seventy thousand dollars ($2,270,000.00).
(c) (i) At Closing, Acquisition shall deliver to the Majority
Shareholders a negotiable, subordinated promissory note payable by Acquisition
to the Shareholders in the principal amount of one million dollars
($1,000,000.00) (the "Promissory Note") which bears interest at the rate of
eight percent (8%) per annum, has a term of four (4) years, and requires the
payment of sixteen (16) equal quarterly installment payments of principal and
interest beginning on the date which is three (3) months after the Closing Date.
Payments under the Promissory Note shall be subject to offset to secure the
obligations of the Majority Shareholders as described in Section 12.5.
(ii) The Promissory Note shall be subordinated to any senior
indebtedness of Acquisition and/or Parent which means:
(1) the principal, premium, if any, interest and all other
amounts owed in respect of all Acquisition's and/or Parent's
(A) indebtedness for money borrowed, and
(B) indebtedness evidenced by securities, debentures,
bonds or other similar instruments,
(2) all of Acquisition's and/or Parent's capital lease
obligations,
(3) all obligations issued or assumed by Acquisition and/or
Parent as the deferred purchase price of property, all of Acquisition's and/or
Parent's conditional sale obligations and all of Acquisition's and/or Parent's
obligations under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business and excluding any deferred
payment obligation issued by Acquisition and/or Parent for the acquisition of
capital stock, partnership interests or any other form of equity ownership
interest of an entity or the acquisition of the operating assets of an entity),
(4) all of Acquisition's and/or Parent's obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction,
(5) all obligations of the type referred to in clauses (1)
through (4) above of other persons for the payment of which Acquisition and/or
Parent is responsible or liable as obligor, guarantor or otherwise, and
(6) all obligations of the type referred to in clauses (1)
through (5) above of other persons secured by any lien on any of Acquisition's
and/or Parent's properties or assets (whether or not such obligation is assumed
by Acquisition and/or Parent, except for any indebtedness between or among
Acquisition and its Affiliates (as hereinafter defined).
(iii) The form of the Promissory Note shall be substantially in
the form attached hereto as Schedule 1.1(c)(iii) which is incorporated herein by
reference.
(d) At Closing, Parent shall issue its guaranty of the Promissory Note
to the Majority Shareholders (the "Guaranty") in the form attached hereto as
Schedule 1.1(d) which is incorporated herein by reference. The Guaranty shall be
subordinated in the same manner as the Promissory Note is subordinated to any
senior indebtedness of Acquisition and/or Parent as described in subsection
1.1(c)(ii) above.
(e) The Purchase Price shall be allocated among the Shareholders and
apportioned to Voting Stock and Nonvoting Stock in accordance with Table 1.2(e)
below.
Table 1.2(e)
Shareholder/Share Class Cash Promissory Note
- ------------------------------- -----------------------
------------------------
Roger A. Gilmartin $962,500.00 $500,000.00
Voting Stock
Jacqueline R. Gilmartin $962,500.00 $500,000.00
Voting Stock
Deborah M. Bowen $140,000.00 $0.00
Voting Stock
Mark W. Brydges $205,000.00 $0.00
Nonvoting Stock
SECTION 1.2 CLOSING.
(a) Subject to the terms and conditions of this Agreement, the closing
of the transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Wishart, Norris, Henninger & Pittman, P.A., 6832
Morrison Boulevard, Charlotte, North Carolina 28211 on the second business day
after which all of the conditions set forth in Article VIII are satisfied or
waived or on such other date and such other time and place as Acquisition and
the Company shall agree (the date on which the Closing actually occurs being
referred to herein as the "Closing Date"), but in no event later than November
30, 1999, except as provided in subsections 1.2(c) and 1.2(d). The Effective
Time shall be the close of business on the Closing Date.
(b) Notwithstanding the provisions of subsection 1.2(a) above, if any
of the conditions set forth in Section 8.1 have not been satisfied on or before
the second business day prior to the Closing Date, Acquisition, the Company and
the Shareholders jointly may waive said conditions and proceed to Closing or
extend the Closing Date by mutual agreement.
(c) Notwithstanding the provisions of subsection 1.2(a) above, if on
the second business day prior to the Closing Date, any of the conditions set
forth in Section 8.2, except subsection 8.2(e), has not been satisfied or waived
by the Company and the Shareholders, Acquisition shall have the right in its
sole and absolute discretion to extend the Closing Date on written notice to the
Company and the Shareholders to the earlier of the second business day after all
such conditions have been satisfied or waived, or December 17, 1999.
(d) Notwithstanding the provisions of subsection 1.2(a) above, if on
the second business day prior to the Closing Date, any of the conditions set
forth in Section 8.3 has not been satisfied or waived by the Company and the
Shareholders, the Company and the Majority Shareholders (acting jointly) shall
have the right in their sole and absolute discretion to extend the Closing Date
on written notice to Acquisition and to each other Shareholder to the earlier of
the second business day after all such conditions have been satisfied or waived,
or December 17, 1999.
ARTICLE II
DELIVERY OF STOCK AND EMPLOYMENT AGREEMENTS
SECTION 2.1 CLOSING PROCEDURE.
(a) At Closing, each Shareholder shall deliver to Acquisition
certificates representing the shares of the Company Stock owned by such
Shareholder endorsed in the name of Acquisition or accompanied by an irrevocable
stock power or other instrument sufficient to transfer ownership of the Company
Stock to Acquisition, free and clear of Liens (as hereinafter defined).
(b) At Closing, the Shareholders shall deliver to Acquisition all
other documents, instruments, opinions, assignments and other deliveries
required by other provisions of this Agreement.
(c) At Closing, the Shareholders shall deliver to Acquisition the
corporate minute book of the Company, stock transfer ledger of the Company and
the minutes of each meeting of the Company's Shareholders and its board of
directors, each resolution enacted by the Company's board of directors and
Shareholders or written consents in lieu of resolutions as permitted by the
Company's articles of incorporation, bylaws or the law of the state of its
incorporation, the corporate seal of the Company, and all books and records
pertaining to the Company.
(d) At or prior to Closing, each of Roger A. Gilmartin, Deborah M.
Bowen and Mark W. Brydges ("Employee Shareholders") shall have executed and
delivered to Acquisition the employment agreements attached hereto as Schedules
2.1(d)-1, 2.1(d)-2 and 2.1(d)-3, respectively.
(e) At Closing, Acquisition shall have executed the employment
agreements described in subsection 2.1(d) above provided each of such employment
agreements shall have been executed by the respective Employee Shareholder. Upon
execution of such employment agreements by Acquisition under the condition
described in this subsection 2.1(e), Parent shall guaranty the obligations of
Acquisition by executing such employment agreements as the guarantor described
thereon.
(f) At Closing, Acquisition shall deliver to the Shareholders the
Purchase Price.
(g) At Closing, Parent shall deliver to the Majority Shareholders the
Guaranty.
SECTION 2.2 CLOSING OF TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Stock shall thereafter be made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MAJORITY SHAREHOLDERS
Except as set forth in the Company disclosure schedule attached hereto and
incorporated herein by reference (the "Company Disclosure Schedule") (the
section numbers of which are numbered to correspond to the section numbers of
this Agreement to which they refer), the Company and each of the Majority
Shareholders, jointly and severally, represent and warrant to Acquisition and
Parent as follows:
SECTION 3.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has the corporate power and authority to carry on its
business as it is now being conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary.
SECTION 3.2 ARTICLES OF INCORPORATION AND BYLAWS. True, correct and
complete copies of the articles of incorporation and bylaws or equivalent
organizational documents, each as amended to date, of the Company and each of
its Subsidiaries have been made available to Acquisition. The articles of
incorporation, bylaws and other organizational documents of the Company are in
full force and effect. The Company is not in violation of any material provision
of its articles of incorporation, bylaws or other organizational documents. Any
merger, consolidation, share exchange or other reorganization (collectively
"Reorganization") involving the Company was effectuated in accordance with
Applicable Law (as hereinafter defined) and the surviving corporation in any
Reorganization succeeded to all of the ownership interests of the properties,
assets and businesses of each other entity in the Reorganization.
SECTION 3.3 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of the Company
consists of four million (4,000,000) shares of Voting Stock, par value one tenth
of one cent ($0.001) per share, and one million (1,000,000) shares of Nonvoting
Stock, par value one tenth of one cent ($0.001) per share. As of the date
hereof:
(i) three million five thousand (3,005,000) shares of Voting
Stock are issued and outstanding as follows:
Roger A. Gilmartin one million five hundred thousand
(1,500,000) shares
Jacqueline R. Gilmartin one million five hundred thousand
(1,500,000) shares
Deborah M. Bowen five thousand (5,000) shares
(ii) three thousand seven hundred fifty (3,750) shares of
Nonvoting Stock are issued and outstanding as follows:
Mark W. Brydges three thousand seven hundred fifty
(3,750) shares
(iii) all of the issued and outstanding shares of Company Stock
are validly issued, fully paid, nonassessable and free of restrictions on
transfer and preemptive rights;
(iv) no (0) shares of Voting Stock and no (0) shares of Nonvoting
Stock are held in the treasury of the Company; and
(v) unvested stock bonuses to acquire fifteen thousand (15,000)
shares of Voting Stock and thirty one thousand two hundred fifty (31,250) shares
of Nonvoting Stock are outstanding, and no unvested stock bonuses of Voting
Stock and no unvested stock bonuses of Nonvoting Stock remain reserved for
issuance under option plans of the Company.
(b) Except as described in this Section 3.3 and as contemplated by
this Agreement:
(i) as of the Effective Time, no shares of capital stock or other
equity securities of the Company shall be authorized, issued or outstanding, or
reserved for issuance, and there are no options, warrants or other rights
(including registration rights), agreements, arrangements or commitments of any
character to which the Company or any of its Subsidiaries is a party relating to
the issued or unissued capital stock or other equity interests of the Company or
any of its Subsidiaries, requiring the Company to grant, issue or sell any
shares of the capital stock or other equity interests of the Company or any of
its Subsidiaries by sale, lease, license or otherwise;
(ii) the Company and its Subsidiaries have no obligations,
contingent or otherwise, to repurchase, redeem or otherwise acquire any shares
of the capital stock or other equity interests of the Company or its
Subsidiaries;
(iii) neither the Company nor any of its Subsidiaries directly or
indirectly, own, or has not agreed to purchase or otherwise acquire, the capital
stock or other equity interests of, or any interest convertible into or
exchangeable or exercisable for such capital stock or such equity interests, of
any corporation, partnership, joint venture or other entity which would be
material in value to the Company; and
(iv) there are no voting trusts, proxies or other agreements or
understandings to which the Company or any of its Subsidiaries is a party or, to
the best knowledge of the Company, is bound with respect to the voting of any
shares of capital stock or other equity interests of the Company or any of its
Subsidiaries.
SECTION 3.4 COMPANY SUBSIDIARIES. Schedule 3.4 of the Company Disclosure
Schedule sets forth a list of each Company Subsidiary; its authorized, issued
and outstanding capital stock or other equity interests; the percentage of such
capital stock or other equity interests owned by the Company or any Company
Subsidiary, and the identity of such owner; the capital stock reserved for
future issuance pursuant to outstanding options or other agreements; and the
identity of all parties to any such option or other agreement. Each Subsidiary
of the Company is a corporation or partnership duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization. Each Subsidiary of the Company has all requisite corporate power
and authority to carry on its business as it is now being conducted. Each
Subsidiary of the Company is duly qualified as a foreign corporation or
organization authorized to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. All of the
outstanding shares of capital stock or other ownership interests in each of the
Company's Subsidiaries have been validly issued, and are fully paid,
nonassessable and are owned by the Company or another Subsidiary of the Company
free and clear of all pledges, claims, options, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, ALiens"), and
are not subject to preemptive rights created by statute, such Subsidiary's
articles of incorporation or bylaws or equivalent organizational documents or
any agreement to which such Subsidiary is a party. As used in this Agreement, a
ASubsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests) and of which is owned directly or indirectly by such person.
SECTION 3.5 CORPORATE AUTHORITY.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby,
have been duly authorized by its board of directors and the Shareholders and, no
other corporate action on the part of the Company is necessary to authorize the
execution and delivery by the Company of this Agreement and the consummation by
it of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company and is enforceable against the Company in accordance
with its terms except that:
(i) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights generally; and
(ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defense, and to the
discretion of the court before which any proceeding therefor may be brought.
(b) Prior to execution and delivery of this Agreement, the board of
directors of the Company at a meeting duly called and held or acting by
unanimous written consent in lieu of meeting pursuant to laws of the place of
incorporation of the Company has approved this Agreement and the other
transactions contemplated hereby.
(c) Prior to execution and delivery of this Agreement, the
Shareholders of the Company at a meeting duly called and held or acting by
written consent in lieu of meeting pursuant to laws of the place of
incorporation of the Company have approved this Agreement and the other
transactions contemplated hereby.
SECTION 3.6 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in Schedule
3.6 of the Company Disclosure Schedule, each of the Company and its Subsidiaries
(i) holds, and is in compliance with the terms of, all permits, licenses,
exemptions, orders and approvals of all Governmental Entities (as hereinafter
defined) necessary for the conduct of their respective businesses ("Company
Permits"), (ii) with respect to the Company Permits, no action or proceeding is
pending or, to the best knowledge of Company, threatened, (iii) the business of
the Company and its Subsidiaries is being conducted in compliance with all
applicable laws, ordinances, regulations, judgments, decrees or orders
("Applicable Law") of any federal, state, local, foreign or multinational
legislature, court, arbitral tribunal, administrative agency or commission or
other governmental or regulatory authority or administrative agency or
commission (a "Governmental Entity"), and (iv) no investigation or review by any
Governmental Entity with respect to the Company or its Subsidiaries is pending
or, to the best knowledge of the Company, threatened.
SECTION 3.7 NON-CONTRAVENTION. Except as set forth in Schedule 3.8 of the
Company Disclosure Schedule, the execution and delivery by the Company of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, (i) result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under any loan, guarantee of indebtedness
or credit agreement, note, bond, mortgage, indenture, lease, agreement,
contract, commitment, instrument, permit, concession, franchise, right or
license (any of the foregoing, a "Contract") applicable to the Company or any of
its Subsidiaries, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries, (ii) conflict
with or result in any violation of any provision of the articles of
incorporation or bylaws or other equivalent organizational document, in each
case as amended, of the Company or any of its Subsidiaries, or (iii) subject to
the governmental filings discussed in Section 3.8, conflict with or violate any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets.
SECTION 3.8 CONSENTS. Except as set forth in Schedule 3.8 of the Company
Disclosure Schedule, no notice to or filing with, and no authorization, consent
or approval of, any person or entity is necessary to the consummation of the
transactions contemplated hereby or to Acquisition's conduct of the historic
business of the Company after Closing, including, without limitation, consents
from parties to loans, contracts, leases or other agreements and consents from
governmental agencies, whether federal, state or local. Copies of each of the
consents included in Schedule 3.8 have been heretofore delivered by the Company
to Acquisition and such copies are true and complete and include all amendments,
supplements and modifications thereto.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1998,
the Company and each of its Subsidiaries has conducted its businesses and
operations in the ordinary and usual course consistent with past practice and
there has not occurred (i) any event, condition or occurrence having or that
would reasonably be expected to have, individually or in the aggregate, a
materially adverse effect, individually or in the aggregate, on the business,
financial condition or results of operations of the Company or its Subsidiaries;
(ii) any damage, destruction or loss (whether or not covered by insurance)
having or which would reasonably be expected to have, individually or in the
aggregate, a materially adverse effect, individually or in the aggregate, or the
business, financial condition or results of operations of the Company or its
Subsidiaries; (iii) any declaration, setting aside or payment of any dividend or
distribution of any kind by the Company on any class of its capital stock;
and/or (iv) any event during the period from December 31, 1998 through the date
of this Agreement that, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section 6.1
hereof.
SECTION 3.10 ACTIONS AND PROCEEDINGS. Except as set forth on Schedule 3.10
of the Company Disclosure Schedule, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against the Company or
any of its Subsidiaries, any of their properties, assets or business, or, to the
knowledge of the Company, any of the Company's or its Subsidiaries' current or
former directors or officers or any other person whom the Company or any of its
Subsidiaries has agreed to indemnify. There are no actions, suits or legal,
administrative, regulatory or arbitration proceedings pending or, to the best
knowledge of the Company and the Majority Shareholders, threatened against the
Company or any of its Subsidiaries, any of their properties, assets or business,
or any of the Company's or its Subsidiaries' current or former directors or
officers or any other person whom the Company or any of its Subsidiaries has
agreed to indemnify.
SECTION 3.11 FINANCIAL STATEMENTS. Attached as Schedule 3.11 of the Company
Disclosure Schedule is a true and complete copy of the Company's Balance Sheet
as of December 31, 1996, December 31, 1997, December 31, 1998 and October 30,
1999 and the related Statements of Operations, Cash Flows and Shareholders'
Equity and Financial Statement notes for the reporting period then ended (the
"Financial Statements"). Except as set forth in Schedule 3.11, the Financial
Statements and the Supplemental Financial Statement described in Section 7.16
(a) are in accordance with the Company's books and records and present fairly,
as of their respective dates, the Company's financial condition and the results
of its operations for the period covered, (b) have been prepared in accordance
with generally accepted accounting principles consistently applied, and (c)
contain adequate reserves for all liabilities, losses and costs in excess of
expected receipts and for all discounts, credits or refunds with respect to
services or products already rendered or sold.
SECTION 3.12 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise), whether
due or to become due and whether fixed or contingent, except (a) liabilities
fully reflected or reserved against in the October 30, 1999 Financial Statement,
(b) liabilities that have arisen in the ordinary course of business since
October 30, 1999, and (c) liabilities and obligations identified in Schedule
3.12 or otherwise identified in this Agreement or any of the schedules or
exhibits hereto.
SECTION 3.13 CONTRACTS AND COMMITMENTS. Set forth in Schedule 3.12 of the
Company Disclosure Schedule hereto is an accurate and complete description of
all the following contracts, agreements and other arrangements, and any
amendments, supplements or modifications thereto, to which the Company is a
party or by which it is bound, and which have not been fully performed:
(a) All contracts, agreements or commitments in respect of (i) the
sale of products or services, or for the purchase of raw materials, equipment,
supplies, other products or utilities and (ii) services of any subcontractor or
any other independent contractor, other than contracts, agreements or
commitments that involve payments or receipts by the Company of less than ten
thousand dollars ($10,000.00) in any single case and are terminable by the
Company or are to be performed fully within three (3) months from the date
hereof;
(b) All outstanding contracts with officers, employees, agents,
consultants, advisors, salespersons, sales representatives, distributors or
dealers, and all collective bargaining agreements;
(c) All stock option, profit-sharing, pension, retirement, thrift,
401(k), bonus, deferred compensation, severance pay, welfare, medical, dental,
disability, life or other employee benefit plans, agreements, arrangements or
commitments, whether or not legally binding;
(d) Any agreement whereby the Company is restricted from carrying on
its business in any respect or in any location;
(e) Any debt obligation for the deferred purchase price of goods or
services or for borrowed money, including as guarantor, surety, endorser,
co-maker or indemnitor, or agreements to acquire any such debt obligation of
others;
(f) Any mortgage, deed of trust, security agreement or other
instrument creating any lien against any properties or assets utilized in the
business of the Company;
(g) Any contract or arrangement not in the ordinary course of
business, including, without limitation, any preferential rights to purchase any
of the assets utilized in the business of the Company, any limitations on the
freedom of the Company to engage in business of any kind in any geographical
area, or any continuing arrangements for future purchase of materials, supplies
or equipment;
(h) Any agreements, contracts or commitments for the provision of
goods or services (including all proposals, bids and matters included in the
Company's backlog, whether or not cancelable) of a value in excess of twenty
thousand dollars ($20,000.00) in any single case;
(i) Any agreements, contracts or commitments with any agents,
consultants or independent or general contractors, or any power of attorney or
similar authorization outstanding;
(j) Any contract or arrangement with a Shareholder or members of his
family, or entities controlled by him (each of which contracts and arrangements
is hereby represented to have been negotiated at arm's length and on terms that
are fair to the Company); and
(k) All contracts, agreements or commitments other than those of the
types covered by paragraphs (a) through (j) inclusive that either (i) involve
payments or receipts by the Company of more than ten thousand dollars
($10,000.00) in any single case, are not terminable by the Company, and are not
to be fully performed within three (3) months from the date hereof or (ii)
otherwise materially affect the condition (financial or other) or prospects of
the Company.
To the best knowledge of the Company and the Majority Shareholders all
the contracts, agreements and other arrangements, as amended, described in
Schedule 3.13 are valid, binding and enforceable and in full force and effect,
and there are no (i) notices of violation or (ii) existing defaults (or events
that, with notice or lapse of time or both, would constitute defaults) on the
part of the Company or, to the best knowledge of the Company and the Majority
Shareholders, on the part of any other party thereto, which default would have a
material adverse affect on the Company's operations, properties, assets or
financial condition, and the Company and the Majority Shareholders have not
received notice of any such default, nor does the Company or the Majority
Shareholders know of any facts or circumstances that would reasonably indicate
the Company will be or may be in default under any such contract, agreement or
other arrangement. Copies of all the contracts, agreements and other
arrangements described in Schedule 3.13 have been heretofore delivered by the
Company to Acquisition and such copies are true and complete and include all
amendments, supplements and modifications thereto. Except as set forth in
Schedule 3.13, the Company is not a party to any contract for the provisions of
goods or services under which the cost to complete (estimated in good faith)
exceeds the amount remaining to be billed by more than ten thousand dollars
($10,000.00). All of the Company's prior contracts, projects and installations
have been performed in a professional and workmanlike manner in accordance with
prevailing standards of skill and care and in full compliance with all
prevailing laws, rules, ordinances, governmental regulations or orders of any
governmental authority and/or jurisdiction applicable to such contracts,
projects and installations, and there has been no negligence or other basis for
claim based on such performance.
SECTION 3.14 TAXES.
(a) The Company and each of its Subsidiaries has timely filed, or been
included in, all material federal, state, local and foreign income, franchise,
sales and other Tax Returns (as hereinafter defined) required to be filed by or
with respect to the Company or any of its Subsidiaries;
(b) as of the time of filing, all such Tax Returns were true, correct
and complete, in all material respects, and correctly reflected in all material
respects the facts regarding the income, business, assets, operations,
activities and status of the Company and its Subsidiaries and any other material
information required to be shown therein;
(c) the Company and its Subsidiaries have timely paid to the
appropriate taxing authority, or have made provision for, all material Taxes
shown as due on such Tax Returns with respect to the Company and any of its
Subsidiaries;
(d) the unpaid Taxes of the Company and its Subsidiaries (i) do not,
as of the date hereof, materially exceed the reserves for Taxes (other than
reserves for deferred Taxes) reflected on the books and records of the Company
and its Subsidiaries and (ii) will not materially exceed that reserve as
adjusted for operations and transactions through the Effective Time in
accordance with GAAP and the past custom and practice of the Company and its
Subsidiaries;
(e) neither the Company nor any of its Subsidiaries has requested any
extension of time within which to file or send any Tax Return, which Tax Return
has not since been filed or sent;
(f) except as set forth on Schedule 3.14 of the Company Disclosure
Schedule, no material deficiency for Taxes has been proposed, asserted or
assessed against the Company or any of its Subsidiaries (or any member of any
affiliated or combined group of which the Company or any of its Subsidiaries is
or has been a member for which either the Company or any of its Subsidiaries
could be liable) other than those Taxes being contested in good faith by
appropriate proceedings and set forth in the Company Disclosure Schedule (which
shall set forth the nature of the proceeding, the type of return, the
deficiencies proposed, asserted or assessed and the amount thereof, and the
taxable year in question);
(g) to the knowledge of the Company, no material issue has been raised
during the past five (5) years by any federal, state, local or foreign taxing
authority which, if raised with regard to any other period not so examined,
could reasonably be expected to result in a proposed material deficiency for any
other period not so examined;
(h) neither the Company nor any of its Subsidiaries has granted any
extension or waiver of the limitation period applicable to any Tax claims other
than those being contested in good faith by appropriate proceedings;
(i) neither the Company nor any of its Subsidiaries is subject to
liability for Taxes of any person (other than the Company or its Subsidiaries)
including, without limitation, liability arising from the application of U.S.
Treasury Regulation section 1.1502-6 or any analogous provision of state, local
or foreign law;
(j) neither the Company nor any of its Subsidiaries is or has been a
party to any tax sharing agreement with any corporation which is not currently a
member of the affiliated group of which the Company is currently a member;
(k) neither the Company nor any of its Subsidiaries is a party to any
agreement, Contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended ("Code");
(l) there are no Liens for Taxes on any assets of the Company or of
any of its Subsidiaries (other than statutory liens for current Taxes not yet
due);
(m) the Company and its Subsidiaries have withheld and paid (and until
the Effective Time will withhold and pay) all income, social security,
unemployment and all other material payroll Taxes required (including, without
limitation, pursuant to Sections 1441 and 1442 of the Code or similar provisions
under foreign law) to be withheld and paid in connection with amounts paid to
any employee, independent contractor, creditor, shareholder or other third
party; and
(n) neither the Company nor any of its Subsidiaries has participated
in, or cooperated with, an international boycott within the meaning of Section
999 of the Code. Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
As used in this Agreement, the term "Tax" (or "Taxes") means, with
respect to any person, (i) all taxes, charges, fees, levies, duties, imposts or
other assessments, including, without limitation, net income, gross income,
gross receipts, excise, property, sales, use, ad valorem, profits, franchise,
capital stock, registration, transfer, gains, license, payroll, withholding
requirement of another person's income or property, employment, excise,
severance, stamp, occupation, disability, premium, value-added, windfall
profits, social security (or similar), custom duty or other tax, governmental
fee, alternative or add-on minimum, estimated or other like assessment or charge
of any kind whatsoever, together with any interest, or penalties or additions
thereto imposed, or required to be withheld, by a taxing authority of the United
States, or any state, local or foreign government or subdivision or agency
thereof, and (ii) any liability of such person for the payment of any amount of
the type described in clause (i) as a result of such person's being a member of
an affiliated or combined group. As used in this Agreement, the term "Tax
Return" means any return, declaration, statement, report, schedule, certificate,
form, information return, or any other document (including any related or
supporting information) required to be supplied to, or filed with, a taxing
authority (foreign or domestic) in connection with Taxes.
SECTION 3.15 TITLE TO ASSETS. Except as set forth in Schedule 3.15 of the
Company Disclosure Schedule, the Company has good, valid and marketable title to
all of its assets and properties, including all the assets reflected on the
Financial Statement dated October 30, 1999, free and clear of all title defects
or objections, mortgages, judgments, pledges, liens, claims, charges, security
interests (UCC or otherwise), or other encumbrances of any nature whatsoever,
including, without limitation, leases, chattel mortgages, conditional sales
contracts, collateral security arrangements, and other title or interest
retention arrangements. Schedule 3.15 includes a list of all tangible personal
property owned by the Company.
SECTION 3.16 ACCOUNTS. Schedule 3.16 of the Company Disclosure Schedule
contains a schedule setting forth and describing (i) all bank accounts owned or
maintained by the Company and all authorized signatories with respect thereto;
and (ii) safety deposit boxes maintained by the Company and all persons having
access with respect thereto.
SECTION 3.17 LEASES AND OTHER ARRANGEMENTS. Set forth in Schedule 3.17 of
the Company Disclosure Schedule is a true and complete list of all leases and
other rental, use or service arrangements pursuant to which the Company rents,
leases or subleases real or personal property. All such leases and rental or
other arrangements are valid, binding and enforceable in accordance with their
terms, and are in full force and effect. There are no existing defaults by any
party thereunder and no event or condition has occurred or presently exists
that, with notice or lapse of time or both, would constitute a default
thereunder. All amounts now due and payable under each of such leases and
arrangements, whether as rent or otherwise, have been paid in full and the
Company and each other party to such leases have complied with all other
commitments and obligations required to be performed or observed thereunder.
Copies of all the leases and other arrangements set forth in Schedule 3.17 have
heretofore been made available to Acquisition.
SECTION 3.18 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor
controlled Affiliates of the Company, nor employees representing the Company or
such controlled Affiliates, has within the past three (3) years knowingly
offered or made payments, or offered or provided other inducements, to officials
of any government with the intent to influence the governmental actions of those
officials in a way that would violate U.S. federal or state laws against corrupt
payments or inaccurate record keeping relating to such payments.
SECTION 3.19 ANTIBOYCOTT. Neither the Company nor any controlled Affiliate
of the Company has, within the past three (3) years, taken any actions that
would violate U.S. laws and regulations against cooperation with unsanctioned
foreign boycotts, including 15 C.F.R. 769, and 26 U.S.C. 999. The Company and
its controlled Affiliates are in compliance with all U.S. laws and regulations
that require the reporting of requests to cooperate with unsanctioned foreign
boycotts.
SECTION 3.20 EXPORT LICENSING AND CUSTOMS. The Company and all controlled
Affiliates of the Company are in compliance with all U.S. laws and regulations
regarding the licensing of exports, and with all U.S. laws and regulations
regarding import duties, country-of-origin marking, and other customs
requirements.
SECTION 3.21 EMPLOYEE PAYMENTS AND BENEFITS.
(a) All payments due from the Company on account of employee health
and welfare insurance in respect of years and periods (and portions hereof)
ended on or prior to the Closing Date were paid prior to the Closing Date or
were accrued and are payable within thirty (30) days after the Closing Date. All
severance payments which are or were due under the terms of any agreement, oral
or written, in respect of years and periods (and portions hereof) ended on or
prior to the Closing Date shall have been paid prior to the Closing Date or were
accrued and are payable within thirty (30) days after the Closing Date. Schedule
3.21(a) of the Company Disclosure Schedule contains any payments described in
this subsection 3.21(a) which have been accrued but shall remain unpaid as of
the Effective Time.
(b) Schedule 3.21(b) of the Company Disclosure Schedule describes any
accrued vacation payments owed to each employee by number of hours accrued and
rate of pay of each such employee.
SECTION 3.22 COMPENSATION.
(a) The rate of compensation, including salaries and bonuses, which
was payable by the Company as of October 30, 1999 to any director, officer,
consultant or any employee whose total compensation was in excess of eighty
thousand dollars ($80,000.00) is set forth in the Company Disclosure Schedule.
(b) As of October 30, 1999, there has not been, and pending the
Closing there shall not be, any increase in the compensation payable or to
become payable by the Company to any of its directors, officers, agents,
consultants, or any of its employees; or any welfare, pension, retirement or
similar payment or arrangement made or agreed to by the Company for the benefit
of any director, officer, agent, consultant or employee.
(c) Schedule 3.22 of the Company Disclosure Schedule sets forth any
accrued bonuses which remain unpaid and any agreements or arrangements pursuant
to which any bonus, percentage compensation, service award or other like benefit
may be paid. Pending the Closing there shall not be granted bonuses, percentage
compensation, service award or other like benefits to any director, officer,
agent, consultant or employees of the Company or any agreements made or agreed
to on behalf of the Company which would obligate the Company to pay any bonus,
percentage compensation, service award or other like benefit for the benefit of
any director, officer, agent, consultant or employee. At the Effective Time, all
such bonuses, percentage compensation, service award or other like benefits
shall have been paid and discharged in full.
SECTION 3.23 EMBARGOES. The Company and all controlled Affiliates of the
Company are in compliance with U.S. laws and regulations regarding U.S.
embargoes of Cuba, Iran, Iraq, Libya and North Korea. The Company further
represents and warrants that neither the Company nor any controlled Affiliate of
the Company owns, in whole or in part, or manages, operates, uses or benefits
from property in Cuba that was nationalized by the Cuban Government after
January 1, 1959.
SECTION 3.24 INTELLECTUAL PROPERTY. A correct and complete schedule setting
forth all patents, federal, state, or common law trademarks or service marks,
trade name or brand name registrations and copyright registrations, and all
pending applications and applications to be filed, if any, therefor, owned by
the Company, is contained in the Company Disclosure Schedule. No licenses,
sublicenses, covenants or agreements have been granted or entered into by the
Company in respect of any of such patents, trademarks, service marks, trade
names, brand names, copyrights, applications or licenses. The Company owns the
entire right, title and interest in and to any and all trademarks, service
marks, patents, and copyrights listed in the Company Disclosure Schedule. Each
item listed in the Company Disclosure Schedule with respect to this Section 3.24
is free and clear of all Liens and encumbrances of every nature, is not
currently being challenged in any way, has not lapsed or expired, and is not
involved in any pending or threatened interference proceedings. No other
patents, trademarks, service marks, trade names, brand names, copyrights,
licenses or applications are necessary for the conduct of the business of the
Company, as presently operated. To the best knowledge of the Company and the
Majority Shareholders, the operations of the Company, the manufacture, use and
sale by them of their products, the use by it of its machinery, equipment and
processes, the use of its products by its customers for the purpose for which
sold, and the use of their patents, trademarks, service marks, trade names,
brand names, inventions, applications, licenses and advertising, technical or
other literature, do not involve infringement; nor has the Company or the
Majority Shareholders been advised of any claim of infringement by the Company
of any proprietary right, patent, trademark, service mark, trade name or
copyright of others. All trade secrets owned or used by the Company is owned by
such entity free of any adverse claims, rights or encumbrances; and the Company
has used reasonable efforts to protect its rights to continued secrecy thereof.
None of the employees, officers or directors of the Company owns directly
or indirectly, in whole or in part, any invention, patent, proprietary right,
trademark, service mark, trade name, brand name or copyright or application for
either of the foregoing:
(a) which the Company is presently using; or
(b) the use of which is necessary for the business of the Company as
presently conducted.
SECTION 3.25 EMPLOYEE BENEFIT PLANS; ERISA.
(a) The only welfare benefit plans (as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), employee pension
benefit plans (as defined in Section 3(2) of ERISA), bonus, stock purchase,
stock ownership, stock option, deferred compensation, incentive or other
compensation plan or arrangement, and other employee fringe benefit plans
presently maintained by, or contributed to by the Company for the benefit of any
current or former employee, director or independent contractor of the Company,
or any dependent, family member or beneficiary of such an employee, director or
independent contractor of the Company, are those listed on the Company
Disclosure Schedule (the "Benefit Plans"). For purposes of this Section 3.25,
"Company" means the Company and any ERISA Affiliate of the Company. For purposes
of this Agreement, "ERISA Affiliate" means any entity aggregated with the
Company at any time under Section 414 of the Code.
(b) The Benefit Plans including, in the case of an informal or
unwritten Benefit Plan, a written summary thereof, have been or will be made
available to Acquisition for review, including, but not limited to, correct and
complete copies of (i) all trust agreements or other funding arrangements for
such Benefit Plans and all amendments thereto, (ii) with respect to any such
Benefit Plans or amendments, all determination letters, rulings, opinion
letters, information letters, advisory opinions issued by the Internal Revenue
Service or the Department of Labor, and voluntary filings or summaries of other
corrective actions described in Revenue Procedure 98-22; and (iii) any written
communication by the Company or any agent or representative of the Company or
any Benefit Plan to any Company employee or any participant in or beneficiary of
such Benefit Plan regarding the Benefit Plan.
(c) The Company and each of the Benefit Plans are in compliance with
the applicable provisions of ERISA, those provisions of the Code applicable to
the Benefit Plans, each Benefit Plan's governing documents, and any oral or
written representations regarding the Benefit Plan which was made by the Company
or any representative of the Company to any employee, participant or beneficiary
of any Benefit Plan or to a representative or agent of any such employee,
participant or beneficiary, and all other laws,
