EXHIBIT 10.1
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement") is
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made as of the 30th day of March, 1999, among SM&A CORPORATION, a California
corporation ("SM&A"); SYSTEMS INTEGRATION SOFTWARE, a Delaware corporation (the
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"Company"); SIS ACQUISITION, INC., a California corporation ("Newco"); and GARY
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L. AND MARYANNE MARKLE, MICHAEL G. AND LYNETTE K. HILL, EDWARD L. AND DEBBIE K.
KNOLL and CHARLES F. AND CAROLYN F. BAIRD (each a "Principal Shareholder" and
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collectively the "Principal Shareholders"); and JOHN A. AND REBECCA H. GLORIOD,
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KAREN OLSEN and DAVID OLSEN (each an "Additional Founder," and collectively the
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"Additional Founders").
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WHEREAS, Newco has been duly organized and is currently existing under the
laws of the State of California, having been incorporated solely for the purpose
of completing the transactions contemplated hereby, and is a wholly-owned
subsidiary of SM&A; and
WHEREAS, the Principal Shareholders are the record owners of an aggregate
of 1,396,362 shares of common stock of the Company; and
WHEREAS, the Additional Founders are the record owners of an aggregate of
541,734 shares of common stock of the Company; and
WHEREAS, the respective Boards of Directors of SM&A, Newco and the Company
(all of which companies are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of each
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of the Constituent Corporations and their respective stockholders that SM&A
acquire all of the issued and outstanding shares of the Company and, as soon as
practicable thereafter, that the Company merge with and into Newco (the
"Merger") pursuant to the applicable provisions of the laws of the State of
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California and of the State of Delaware (the "Corporate Statutes"), and on the
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terms and subject to the conditions set forth in this Agreement, the Agreement
of Merger attached hereto as Exhibit 0.1 and the Articles of Merger attached
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hereto as Exhibit 0.2; and
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WHEREAS, the Board of Directors of each of the Constituent Corporations has
approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
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NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. ACQUISITION OF OUTSTANDING COMPANY SHARES; THE MERGER.
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1.1 Acquisition of Outstanding Company Shares; Merger. In accordance with
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the terms and subject to the conditions of this Agreement, the Agreement of
Merger and the Articles of Merger, and pursuant to the Corporate Statutes, SM&A
shall acquire all of the issued and outstanding shares of capital stock of the
Company (the "Outstanding Company Shares") at the Closing (as defined in Section
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3.1 below) in exchange for the consideration described in Article 2 below and,
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as soon as practicable thereafter, the Company shall be merged with and into
Newco (herein referred to as the "Surviving Corporation" whenever reference is
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made to it at or after the Effective Time (as defined in Section 1.2 below)),
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whereby the separate existence of the Company shall cease in accordance with
Section 1.4 below.
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1.2 Effective Time of Merger. As soon as practicable after the Closing
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Date (as defined in Section 3.1) but no later than April 30, 1999, Newco and the
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Company shall execute an Agreement of Merger and Articles of Merger in form and
substance reasonably satisfactory to SM&A, Newco and the Company, which shall be
filed with the Secretary of State of the State of California and the Secretary
of State of the State of Delaware, respectively. The Merger shall become
effective upon the filing and recordation of the Agreement of Merger with the
Secretary of State of California and the filing and recordation of the Articles
of Merger with the Secretary of State of the State of Delaware (the "Effective
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Time").
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1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving
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Corporation. At the Effective Time:
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(1) The Articles of Incorporation of Newco shall be amended and
restated to read as set forth in Exhibit 1.3 hereto, and such Articles of
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Incorporation, as amended and restated, shall be the Articles of
Incorporation of the Surviving Corporation.
(2) The Bylaws of Newco shall be the Bylaws of the Surviving
Corporation.
(3) Michael A. Piraino, the sole director of Newco, shall be the sole
director of the Surviving Corporation. Such director shall hold office
subject to the laws of the State of California and the provisions of the
Articles of Incorporation and Bylaws of the Surviving Corporation.
(4) The officers of the Surviving Corporation shall be as follows:
President, Chief Financial Officer and Secretary - Michael A. Piraino.
1.4 Effect of Merger. The Merger shall have the effects set forth in this
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Agreement, the Agreement of Merger, the Articles of Merger and the Corporate
Statutes. Except as specifically set forth to the contrary in the Corporate
Statutes, the Agreement of Merger, the Articles of Merger or in this Agreement,
the identity, existence, purposes, powers, objects, franchises, privileges,
rights and immunities of Newco shall continue unaffected and unimpaired by the
Merger and the corporate franchises, existence and rights of the Company shall
be merged into Newco, and Newco, as the Surviving Corporation, shall be fully
vested therewith; at the Effective Time, the separate existence of the Company
shall cease and, in accordance with and subject to the terms of this Agreement,
the Surviving Corporation shall possess all the rights, privileges, immunities
and franchises, of a public, as well as of a private nature; and all property
and all debts due on whatever account, including subscriptions to shares and all
and every other interest of or belonging to or due to Newco or the Company shall
be allocated to, and vested in, the Surviving Corporation without further act or
deed and without any transfer or assignment having occurred; and all property,
rights, privileges, powers, licenses and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Company and Newco; and the title to any real
estate, or interest therein, whether by deed or otherwise, under the laws of the
State of California and the State of Delaware, shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thenceforth
be responsible and liable for all the liabilities and obligations of the Company
and Newco and any claim existing, or action or proceeding pending, by or against
the Company or Newco may be prosecuted as if the Merger had not taken place, or
the Surviving Corporation may be substituted in its place. Neither the rights
of creditors nor any liens upon the property of the Company or Newco shall be
impaired by the Merger, and all debts, liabilities and duties of the Company and
Newco shall attach to the Surviving Corporation, and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred or
contracted by the Surviving Corporation.
2. CONSIDERATION.
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2.1 Consideration. The aggregate consideration to be paid in connection
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with the acquisition of the Outstanding Company Shares by SM&A (the
"Consideration") shall equal the (i) Base Purchase Price, plus (ii) the Earn-Out
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Purchase Price.
2.2 Capital Stock of the Company. At the Closing, by virtue of the
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acquisition of the Outstanding Company Shares by SM&A:
(1) each Outstanding Company Share, other than Dissenting Shares (as
hereinafter defined), shall automatically be converted into and become a
right to receive (i) cash in an amount equal to the Base Purchase Price
divided by the number of Outstanding Company Shares; and (ii) cash equal to
the Earn-Out Purchase Price divided by the number of Outstanding Company
Shares, subject to the Earn-Out conditions described in Schedule 13.6;
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provided, however, that with respect only to the Outstanding Company Shares
held by the Principal Shareholders and the Additional Founders, the Escrow
Funds which shall be paid into the escrow pursuant to Section 2.6 shall be
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deducted from the Base Purchase Price allocated to the Principal
Shareholders and the Additional Founders (which deduction shall be
allocated among the Principal Shareholders and the Additional Founders
according to the proportions specified in Schedule 3.1 to the Escrow
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Agreement);
(2) all shares of Company Stock held immediately prior to the Closing
Date by the Company as treasury stock or by a subsidiary of the Company
shall be canceled and no Consideration shall be paid with respect thereto;
and
(3) all Dissenting Shares shall be treated in accordance with Section
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2.5 below.
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2.3 Capital Stock of Newco. At the Effective Time, each share of capital
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stock of Newco issued and outstanding as of the Effective Time shall be
unaffected by the Merger. At the Effective Time, the Outstanding Company Shares
shall be deemed converted into the shares of capital stock of Newco.
2.4 Options. Each Company Option shall be exercised or cancelled prior to
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the Closing (as hereinafter defined).
2.5 Dissenting Shares.
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(1) Shares of Company Stock held by a shareholder who has properly
exercised dissenters' rights with respect thereto (collectively, the
"Dissenting Shares") in accordance with Section 262 of the Delaware General
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Corporations Law, or any successor provision (the "Dissenters Law"), shall
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not have a right to receive any Consideration with respect thereto. At the
Effective Time, any holder of Dissenting Shares shall cease to have any
rights with respect thereto, except the rights provided in the Dissenters
Law.
(2) The Company shall give SM&A (i) prompt notice of any written
demands under the Dissenters Law with respect to any shares of Company
Stock, any withdrawal of any such demands and any other instruments served
pursuant to the Dissenters Law and received by the Company, and (ii) the
right to participate in all negotiations and proceedings with respect to
any demands under the Dissenters Law with respect to any shares of Company
Stock. The Company shall cooperate with SM&A concerning, and shall not,
except with the prior written consent of SM&A, voluntarily make any payment
with respect to, or offer to settle or settle, any such demands; provided,
however, that SM&A shall in no
way hinder or prevent the Company from complying with the Company's
obligations under the Dissenters Law.
2.6 Escrow of Cash. At the Closing, SM&A shall deposit twenty percent
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(20%) of the Base Purchase Price allocated to the Principal Shareholders and
the Additional Founders (the "Escrow Funds") in escrow for a period of one (1)
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year (the "Escrow Period") as the source of payment for the indemnification
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obligations of the Principal Shareholders and Additional Founders pursuant to
Article 10 below. The Escrow Funds shall be held and disbursed pursuant to the
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terms of this Agreement and an escrow agreement in substantially the form
attached hereto as Exhibit 2.6 (the "Escrow Agreement"). The Escrow Funds shall
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be determined pro rata based on the Base Purchase Price allocable to each
Principal Shareholder and Additional Founder (as more particularly described on
Schedule 3.1 to the Escrow Agreement).
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3. CLOSING.
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3.1 Closing. The closing of the acquisition of the Outstanding Company
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Shares by SM&A (the "Closing") shall take place at the offices of the Company,
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411 South Tejon, Suite G, Colorado Springs, Colorado 80903, before the close of
business on the later of (a) the day after all of the conditions to the Closing
set forth in Articles 8 and 9 have been satisfied or waived in writing, or (b)
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April 30, 1999, or at such other place, time and date as the parties hereto
mutually may agree (the "Closing Date").
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3.2 Closing Deliveries. At the Closing, the parties shall have delivered
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to each other the following closing documents and agreements, and taken the
following actions:
(1) Documents and agreements delivered by or on behalf of each
Principal Shareholder, Additional Founder and/or the Company, as the case
may be, to SM&A:
(1) a duly executed copy of the Escrow Agreement;
(2) duly executed resignations from each of the Company's
directors serving in such capacity immediately prior to the Closing;
(3) such certificates of the Company, Additional Founders and/or
the Principal Shareholders as required by Article 9;
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(4) an opinion of counsel for the Company, substantially in the
form attached hereto as Exhibit 3.2(a)(iv);
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(5) duly executed copies of Employment Agreements, including
noncompetition provisions, between the Surviving Corporation and Gary
Markle, Charles Baird, Michael Hill and Edward Knoll, substantially in
the form attached hereto as Exhibit 3.2(a)(v) (each an "Employment
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Agreement");
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(6) [RESERVED];
(7) certificates of Good Standing and Existence of the Company
issued by the Secretary of State of the State of Delaware, Colorado
and for each other jurisdiction where the Company is qualified to do
business;
(8) a power of attorney duly executed by each shareholder of the
Company who has authorized Gary L. Markle to execute agreements and
other documents on his or her behalf;
(9) Company financials for each of January and February 1999;
(10) Documents showing the termination of the Company present bank
credit facility and release of related liens;
(11) the Equity Incentive Proposal of Gary Markle attached hereto as
Exhibit 3.2(a)(xi); and
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(12) such other documents that may be reasonably requested by SM&A.
(2) Documents and agreements delivered by or on behalf of SM&A and/or
Newco, as the case may be, to the Company, Additional Founders and/or the
Principal Shareholders, as the case may be:
(1) a duly executed copy of the Escrow Agreement;
(2) such certificates of SM&A and Newco as required by Article
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8;
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(3) an opinion of counsel for SM&A, substantially in the form
attached hereto as Exhibit 3.2(b)(iii);
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(4) duly executed copies of the Employment Agreements;
(5) certificates of Good Standing and Existence of SM&A issued
by the Secretary of State of the State of California; and
(6) such other documents that may be reasonably requested by the
Company.
(3) Base Purchase Price Closing. On the Closing Date, SM&A shall deliver
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to each shareholder of the Company that portion of the Base Purchase Price to
which each shareholder is entitled pursuant to Article 2, provided that
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each such shareholder delivers to SM&A at the Closing a certificate of
certificates representing shares of Common Stock held by each such shareholder
immediately prior to the Effective Time, along with stock powers duly executed
in blank and/or other instruments of transfer satisfactory to SM&A.
(4) Earn-Out Purchase Price Closing. On April 1, 2000, SM&A shall deliver
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to each shareholder of the Company the Earn-Out Purchase Price to which each
shareholder is entitled, as earned and payable according to Schedule 13.6.
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4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE ADDITIONAL FOUNDERS AND
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THE PRINCIPAL SHAREHOLDERS.
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The Company, the Additional Founders and the Principal Shareholders jointly
and severally represent and warrant that all of the following representations
and warranties are true as of the date of this Agreement and shall be true on
the Closing Date; subject to such exceptions as are specifically disclosed in
the disclosure schedule (referencing the appropriate section and paragraph
numbers), which shall modify all representations and warranties of the Company
and the Principal Shareholders contained in this Agreement ("Disclosure
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Schedule"). The Company and the Principal Shareholders have used their best
efforts to reference on the Disclosure Schedule the appropriate section and
paragraph number, however the failure to properly reference such section and
number shall not be a breach of a representation or warranty if SM&A could
reasonably ascertain the effect of the disclosure on the other representations
and warranties:
4.1 Due Organization. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware,
and is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of Government Authorities to own its
properties and assets and to carry on its business in the places and in the
manner as it is now conducted, except (a) as disclosed on Exhibit/Schedule 4.1-1
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or (b) where the failure to be so authorized, qualified or licensed would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
True and correct copies of the Articles of Incorporation (certified by the
Secretary of State of the State of Delaware) and Bylaws (certified by the
Secretary of the Company), as each is amended, of the Company are attached to
Exhibit/Schedule 4.1-2. The stock records and minute books of the Company, as
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heretofore made available to SM&A, are correct and complete (in the case of the
minute books, in all material respects).
4.2 Authorization; No Conflicts. Except as set forth on Exhibit 4.2, the
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Company has the full legal right, power and authority to enter into this
Agreement, the Agreement of Merger, the Articles of Merger and the Escrow
Agreement, and to perform the transactions contemplated herein and therein. The
execution, delivery and performance of this Agreement, the Agreement of Merger,
the Articles of Merger, and the Escrow Agreement, and the consummation of the
transactions contemplated hereby and thereby do not and will not (a) violate or
conflict with any provision of the Company's Articles of Incorporation or
Bylaws, (b) violate or conflict with any provision of, or be an event that is
(or with the passage of time will result in) a default or violation of, or
result in the modification, cancellation or acceleration of (whether after the
giving of notice or lapse of time or both) any obligation under, or result in
the imposition or creation of any Encumbrances upon any of the assets of the
Company pursuant to, any Contract (as defined in Section 4.15) to which the
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Company is a party or by which the Company is bound, (c) violate or conflict
with any Legal Requirement applicable to either the Company or any of its
properties or assets or any other material restriction of any kind or character
to which it is subject, or (d) require any authorization, consent, order, permit
or approval of, or notice to, or filing, registration or qualification with, any
Government Authority, except as set forth on Schedule 4.10. The Company has
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received, or will receive prior to the Closing, all necessary approvals from its
Board of Directors and shareholders to consummate the Merger. This Agreement
has been duly executed and delivered by the Company, and at the Closing the
Agreement of Merger, the Articles of Merger, and the Escrow Agreement, will be
duly executed and delivered by the Company, and, assuming the due execution and
delivery hereof and thereof by SM&A and Newco, respectively, this Agreement
constitutes, and the Agreement of Merger, the Articles of Merger, and the Escrow
Agreement, will constitute, the legal, valid and binding obligation of the
Company, enforceable against it in accordance with their terms, except as
enforceability hereof and thereof may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally and
by the exercise of judicial discretion in accordance with equitable principles.
4.3 Capital Stock. The authorized capital stock of the Company consists
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solely of 5,000,000 shares of voting common stock, $.01 par value per share, of
which 1,963,884 shares are issued and outstanding, and of which 1,132,749 shares
are subject to exercise prior to the Effective Time pursuant to option grants
currently outstanding, and held of record by the persons and in the amounts set
forth on Schedule 4.3, free and clear of all Encumbrances (for a total of
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3,096,633 shares as of the Closing). The issued and outstanding shares of
Company Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and such shares were offered, issued, sold and delivered by the
Company in compliance with all applicable state and federal securities laws
except as set forth on Schedule 4.3. Except as set forth on Exhibit/Schedule
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4.3, shares of the Company Stock were not issued in violation of the preemptive
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rights, if any, of any past or present shareholder.
4.4 Transactions in Capital Stock and Spin-offs. Except as set forth on
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Exhibit/Schedule 4.4, no right of first refusal, option, warrant, call,
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conversion right or commitment of any kind exists with respect to any
outstanding or authorized but unissued capital stock of the Company. In
addition, except as set forth on Exhibit/Schedule 4.4 there are no (a)
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outstanding securities or obligations that are convertible into or exchangeable
for any shares of the capital stock or other equity securities of the Company,
or (b) contracts, arrangements or commitments, written or otherwise, under which
the Company is or may become bound to sell or otherwise issue any shares of its
capital stock or any other equity securities. Without limiting the generality
of the foregoing and except as set forth on Schedule 4.4, the Company has done
nothing to the Company's Knowledge which would form the basis upon which any
person (other than any shareholder identified as a record owner of Company Stock
on the Company's stock books, or spouse of a principal of a trust that is such a
shareholder) may claim to be in any way the record or beneficial owner of, or to
be entitled to acquire (of record or beneficially), any shares of the capital
stock or other equity securities of the Company. In addition, the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof, and there has been no transaction or
action taken with respect to the equity ownership of the Company in
contemplation of the transaction described in this Agreement, except as set
forth on Exhibit/Schedule 4.4. Except as set forth on Exhibit/Schedule 4.4,
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since February 23, 1999 there has not been any (a) issuance, sale, repurchase,
redemption or other transfer of or transaction in the Company Stock capital
stock or (b) any sale or spin-off of significant assets of the Company, in each
case other than in the ordinary course of business.
4.5 No Bonus Shares. Except as set forth on Schedule 4.5, none of the
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shares of the Company Stock was issued for other than legally valid
consideration.
4.6 Subsidiaries. Except as set forth on Exhibit/Schedule 4.6, the
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Company does not presently own, of record or beneficially, or control, directly
or indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity.
Except as set forth on Exhibit/Schedule 4.6, the Company is not, directly or
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indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
4.7 [RESERVED]
4.8 Financial Statements. Copies of the following consolidated financial
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statements (the "Financial Statements") of the Company are attached hereto as
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Schedule 4.8:
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(1) The Company's consolidated balance sheet as of December 31, 1998
and for the two (2) prior years, and consolidated statements of earnings,
cash flows and stockholders' equity for the year then ended and for the two
(2) prior years; and
(2) The Company's consolidated balance sheet as of February 28, 1999
(hereinafter referred to as the "Balance Sheet Date") and consolidated
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statements of earnings, cash flows and stockholders' equity for the two-
month period then ended. The Company's financial statements, as adjusted,
reflecting earnings before interest and taxes of $370,000 for the fiscal
year ended December 31, 1998 are set forth on Schedule 4.8(b)-2.
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The Financial Statements have been prepared on a consistent basis throughout the
periods indicated. Such balance sheets present fairly and in all material
respects the financial condition of the Company as of the dates indicated
thereon, on a consolidated basis, and such statements of earnings, cash flows
and stockholders' equity present fairly and in all material respects the results
of its operations for the periods indicated thereon. SM&A acknowledges and
agrees that (i) the Financial Statements are "compiled" and do not necessarily
reflect such adjustments as may be contained in "audited" financial statements;
provided, however, that such acknowledgment by SM&A shall not affect in any
manner the representation and warranties contained herein concerning the
Financial Statements or any other matter, and (ii) any future analysis of the
Financial Statements which may form the basis for a claim for indemnification
under the Agreement shall be undertaken employing an accounting methodology
consistent with that as historically and consistently maintained by the Company.
4.9 Liabilities and Obligations. Except as set forth on Exhibit/Schedule
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4.4, Exhibit/Schedule 4.8 and Exhibit/Schedule 4.9, the Company has no
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liabilities or obligations of any nature (whether known or unknown, due or to
become due, absolute, accrued, contingent or otherwise, and whether or not
determined or determinable) and there is no existing condition, situation or set
of circumstances which could result in such a liability or obligation, except
for liabilities or obligations under any Contract disclosed on Schedule 4.15
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hereto. For each such liability for which the amount is not fixed or is
contested, the Company has provided on Schedule 4.9 a summary description of its
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best estimate of the liability.
4.10 Approvals. Except as set forth on Exhibit/Schedule 4.10, no
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authorization, consent or approval of, or registration or filing with, any
governmental authority or any other person is or was required to be, and has not
been, obtained or made by the Company in connection with the execution, delivery
or performance of this Agreement.
4.11 Accounts and Notes Receivable. Schedule 4.11 sets forth an accurate
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list of the accounts and notes receivable of the Company as of the Balance Sheet
Date, including receivables from and advances to the Company's employees and
shareholders. Such list includes an aging of all accounts and notes receivable
as of the Balance Sheet Date showing amounts due in thirty (30) day aging
categories. Except as set forth on Exhibit/Schedule 4.11, all accounts
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receivable, unbilled invoices and other debts due or recorded in the records and
books of account of the Company as being due to the Company (as the case may be)
as at the date of this Agreement will be good, payable and collectible in full
in the ordinary course of business within ninety (90) days after the Closing,
net of applicable reserves as recorded on the Company's books on the date
hereof; no contest with respect to the amount or validity of any amount is
pending; and none of such accounts receivable or other debts is or will at the
Closing be subject to any counterclaim or set-off. The values at which accounts
receivable are carried reflect the accounts receivable valuation policy of the
Company which is consistent with that as historically and consistently
maintained by the Company.
4.12 Intellectual Property. To the Company's knowledge and except as set
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forth on Exhibit 4.12, the Company owns or has valid, binding and enforceable
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rights to use all patents, trademarks, trade names, service marks, service
names, copyrights, applications for any of the foregoing, and licenses or other
rights in respect of any of the foregoing ("Intellectual Property"), used or
---------------------
held for use in connection with its business, without any conflict with the
rights of others. The Company has not received any notice from any other person
pertaining to or challenging the right of the Company to use any Intellectual
Property or Technology owned or used by or licensed
to the Company. Other than in the ordinary course of business, the Company has
not granted any outstanding licenses or other rights, and has no obligation to
grant any licenses or other rights, under, and the Shareholders of the Company
and the employees of the Company have no rights in or to, any of the
Intellectual Property or Technology owned or used by or licensed to the Company.
No claims have been made by the Company of any violation or infringement by
others of the rights of the Company with respect to any Intellectual Property or
Technology of the Company, and the Company knows of no basis for the making of
any such claim.
The Company has delivered to SM&A on Schedule 4.12 a complete and correct
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list and/or summary description of all material Intellectual Property and
Technology owned by, used by or licensed by the Company.
4.13 Permits. Except as set forth on Exhibit 4.13, the Company owns or
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possesses all franchises, licenses, permits, consents, approvals and
authorizations (collectively herein referred to as "Permits"), of any Government
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Authority which are necessary for the conduct of its business as currently
conducted. Each of the foregoing is in full force and effect, and the Company
is in compliance with all of its obligations with respect thereto, and no event
has occurred which permits, or upon the giving of notice or lapse of time or
otherwise would permit, revocation or termination of any of the foregoing which
would have a Material Adverse Effect upon the Company.
The Company has delivered to SM&A on Schedule 4.13 a complete and correct list
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and/or summary description of all Permits held by the Company.
4.14 Real and Personal Property. Except as set forth on Exhibit 4.14:
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(1) Schedule 4.14(a) contains an accurate list and/or description of
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all real property leased by the Company. The Company does not own, nor has
it ever owned, any real property.
(2) Schedule 4.14(b) contains an accurate list of all material items
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of tangible personal property of every kind or description owned or held by
the Company, and leases or licenses or other rights to possession thereof,
and includes an indication as to which assets were formerly or are
currently owned by business or personal affiliates of the Company. All
tangible personal property of the Company is in good operating condition
and repair, (a) excepting ordinary wear and tear and equipment that is out
of service, and (b) taking into consideration the current age, use and
functionality of such items.
(3) The Company has good and marketable title to, or holds by valid
lease or license (which lease or license is in full force and effect and,
to the best of the Company's Knowledge, binding upon the parties (and their
successors) thereto in accordance with their respective terms), the
property listed on Schedule 4.14(a) and Schedule 4.14(b), free and clear of
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all Encumbrances.
4.15 Material Contracts and Commitments. Schedule 4.15 sets forth a list,
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complete and correct in all material respects, of the following material oral,
and an accurate list of the following material written contracts, commitments
and other agreements to which the Company is a party or by which it or any of
its properties is bound (herein collectively referred to as the "Contracts"):
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(1) agreements involving payments, individually or in the aggregate,
in excess of $50,000;
(2) joint venture or partnership agreements or limited liability
company agreements;
(3) loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements (without regard to
dollar amount involved);
(4) leases, licenses, options to purchase real or personal property
involving future obligations on the part of the Company which aggregate in
excess of $50,000, other than as set forth on Schedule 4.14(a);
----------------
(5) agreements relating to the purchase or acquisition, by merger or
otherwise, of a signification portion of the business assets or securities
of the Company by any other person or of any other person by the Company
(other than as contemplated by this Agreement);
(6) contracts upon which the Company is substantially dependent or
which are otherwise material to the Company;
(7) agreements that limit or restrict the ability of the Company to
compete or otherwise to conduct its business in any manner or place, or
that contain covenants of any other person not to compete with the Company;
(8) any agreement with any holder of securities of the Company as
such (including, without limitation, any agreement containing an obligation
to register any of such securities under any federal or state securities
laws);
(9) agreements with any labor union or association representing any
employee of the Company;
(10) agreements with or for the benefit of any affiliates,
shareholders, employees, consultants, officers or directors of the Company
providing for compensation or benefits individually in excess of $60,000
annually, other than those set forth on Schedule 4.17(a) and Schedule
---------------- --------
4.17(b);
-------
(11) agreements that require the Company to buy or sell goods or
services with respect to which there will be material losses or will be
costs and expenses materially in excess of expected receipts;
(12) agreements not made in the ordinary course of business; and
(13) any other agreements, whether or not made in the ordinary course
of business, that are material to the Company.
The Company has delivered or made available for review by SM&A or its
representatives true and complete copies of the written Contracts. Except as
set forth on Exhibit 4.15, the Company has complied in all respects with all
-------------
commitments and obligations pertaining to any such Contract, and is not in
material default under any such Contract and no notice of material default has
been received, nor to the best of the Company's Knowledge is there any default
on the part of any other party to such Contract, or any intent of any such party
to attempt to terminate or amend any such Contract.
4.16 Insurance. Schedule 4.16 sets forth an accurate list of all
--------- -------------
insurance policies carried by the Company, and the Company has delivered to SM&A
on Schedule 4.16 an accurate list of all insurance loss runs or worker's
-------------
compensation claims received during the past three (3) policy years.
Such insurance policies are currently in full force and effect and shall remain
in full force and effect through the Closing Date.
4.17 Employees, Consultants, Etc. Except as set forth on Exhibit 4.17:
--------------------------- ------------
(1) Schedule 4.17(a) sets forth (i) an accurate and complete list of
----------------
(A) all officers and directors of the Company, (B) all employees of the
Company and (C) all consultants currently performing services for the
Company, and (ii) an accurate and complete list of all independent
contractors and other agents currently performing services for the Company,
setting forth in each case the rate of compensation (and the portions
thereof attributable to salary, bonus and other compensation,
respectively), the billing rate and gross margin percentage of the each
independent contractor and agent.
(2) Schedule 4.17(b) sets forth a schedule, accurate and complete,
----------------
showing all employment agreements and any other agreements to which the
Company is a party or by which it is bound, containing terms providing for
(i) compensation or other benefits or consequences upon the happening of a
change of control of the Company and (ii) deferred compensation; together
in each case with copies of such plans, agreements and any trusts related
thereto, and classifications of employees covered thereby.
(3) The Company has complied with the verification requirements and
the record keeping requirements of the Immigration Reform and Control Act
of 1986 ("IRCA") in all material respects; to the best of the Company's
----
Knowledge, the information and documents on which the Company relied in
complying with IRCA are true and correct; and there have not been any
discrimination complaints filed against the Company pursuant to IRCA.
(4) No employees of the Company are represented by any labor union or
covered by any collective bargaining agreement nor, to the best of the
Company's Knowledge, is any campaign to establish such representation in
progress.
(5) The Company has not received or been notified of any
discrimination complaint filed by any employee, applicant, union, or other
party with any Government Authority.
(6) The Company has filed all required reports and information that
were due prior to the Closing Date and otherwise has complied with all
material applicable regulatory requirements within the jurisdiction of the
United States Equal Employment Opportunity Commission, United States
Department of Labor and state and local human rights and/or civil rights
agencies.
(7) The Company has not received written notice of any intention by
any of its employees to terminate his or her employment or to seek a
modification in the terms of his or her employment, individually or
collectively with other employees.
(8) The Company is not aware that any employee, officer or director
is in violation of any obligation of confidentiality to the Company.
4.18 Benefit Plans; ERISA Compliance. Except as set forth on Exhibit
------------------------------- -------
4.18:
- ----
(1) Schedule 4.18 contains a list of all "employee pension benefit
-------------
plans" (as defined in Section 3(2) of Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (sometimes referred to in this Section
----- -------
4.18 as "Pension Plans"), "employee
---- -------------
welfare benefit plans" (as defined in Section 3(1) of ERISA) (sometimes
referred to in this Section 4.18 as "Welfare Plans") and all other Benefit
------------ -------------
Plans, as defined below, currently maintained in whole or in part,
contributed to, or required to be contributed to by the Company for the
benefit of any present or former officer, employee or director of the
Company. For purposes of this Agreement, the term "Benefit Plan" shall mean
------------
any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical, dependent care,
cafeteria, employee assistance, scholarship or other plan, program,
arrangement or understanding (whether or not legally binding) maintained in
whole or in part, contributed to, or required to be contributed to by the
Company for the benefit of any present or former officer, employee or
director of the Company which is not a Pension Plan or Welfare Plan. The
Company has delivered to SM&A true, complete and correct copies of (i) each
Pension Plan, Welfare Plan and Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof) and all amendments (none of
which amendments will materially increase to costs of the amended plan),
(ii) the three annual reports on Form 5500 most recently filed with the
Internal Revenue Service (the "IRS") with respect to each Pension Plan or
---
Welfare Plan (if any such report was required), (iii) the most recent IRS
determination letter request for each Pension Plan intended to be qualified
under Section 401(a) of the Code and all rulings or determinations
concerning such Pension Plan requested of the IRS subsequent to the date of
that letter, (iv) the most recent actuarial report for each Pension Plan
and Welfare Plan for which an actuarial report is required by ERISA, (v)
the most recent summary plan description for each Pension Plan and Welfare
Plan for which such summary plan description is required by ERISA and each
summary of material modifications prepared, as required by ERISA, after the
last summary plan description, (vi) each trust agreement and/or group
annuity contract relating to any Benefit Plan, and (vii) all other
information reasonably requested by SM&A.
(2) Each Pension Plan maintained and each pension plan formerly
maintained that is or was intended to be qualified under Section 401(a) of
the Code has been the subject of a determination letter from the IRS to the
effect that such plan is qualified under Section 401(a) of the Code or can
still be submitted in a timely manner to the IRS for such a letter, and no
such determination letter has been revoked nor has revocation of any such
letter been threatened, nor has any such plan been amended since the date
of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification or materially
increase its costs, and nothing has occurred or failed to occur which would
cause the loss of such qualification, and all amendments required to be
adopted before the Effective Time for any such Pension Plan to continue to
be so qualified have been or will be duly and timely adopted; provided
however, that to the extent that this representation applies to terminated
pension plans, this representation refers to the qualified status of any
such plan through the time of its termination. To the best Knowledge of the
Company, the Company has paid all premiums (including any applicable
interest, charges and penalties for late payment) due the Pension Benefit
Guaranty Corporation (the "PBGC") with respect to each such Pension Plan
----
for which premiums to the PBGC are required and no such Pension Plan in
whole or in part maintained by the Company has been terminated or partially
terminated under circumstances which would result in liability to the PBGC.
(3) Except as set forth on Schedule 4.18, each of the Pension Plan,
-------------
Welfare Plan and Benefit Plans sponsored by, and each of the benefit plans
formerly sponsored by the Company: (i) has been in substantial compliance
with all reporting and disclosure requirements of (x) Part 1 or Subtitle B
of Title I of ERISA, if applicable, or (y) other applicable law, (ii) has
had the appropriate required Form 5500 (or equivalent annual report) filed
timely with the appropriate governmental entity for each year of its
existence, (iii) has
at all times complied with the bonding requirements of (x) Section 412 of
ERISA, if applicable, or (y) other applicable law, (iv) has no issue
pending (other than the payment of benefits in the normal course) nor any
issue resolved adversely to the Company which may subject the Company to
the payment of penalty, interest, tax or other obligation that can be
expected to have a Material Adverse Effect on the Company, nor is there any
basis for any imposition of any such liability, and (v) has been maintained
in all respects in compliance with the applicable requirements of ERISA,
the Code and other applicable law not otherwise covered hereunder so as not
to have any Material Adverse Effect on the Company.
(4) All voluntary employee benefit associations maintained by the
Company and intended to be exempt from federal income tax under Section
501(c)(9) of the Code have been submitted to and approved as exempt from
federal income tax under Section 501(c)(9) of the Code by the IRS, and, to
the best Knowledge of the Company, nothing has occurred or failed to occur
which would cause the loss of such exemption.
(5) The execution of this Agreement or the consummation of the
transactions contemplated by this Agreement will not give rise to any, or
trigger any, change of control, severance or other similar provisions in
any Pension Plan, Welfare Plan or Benefit Plan. The consummation of any
transaction contemplated by this Agreement will not result in any (i)
payment (whether of severance pay or otherwise) becoming due from the
Company to any officer, employee, former employee or director thereof or to
the trustee under any "rabbi trust" or similar arrangement; (ii) benefit
under any Benefit Plan of the Company being established or becoming
accelerated, vested or payable; or (iii) payment or series of payments by
the Company, directly or indirectly, to any person that would constitute a
"parachute payment" within the meaning of Section 280G of the Code.
(6) The Company provides no material post-retirement medical, health,
disability or death protection coverage or contributes to or maintains any
employee welfare benefit plan which provides for medical, health,
disability or death benefit coverage following termination of employment by
any officer, director or employee except as is required by Section 4980B(f)
of the Code or other applicable statute, nor has it made any
representations, agreements, covenants or commitments to provide that
coverage.
(7) No Pension Plan or pension plan subject to Tile IV of ERISA (i)
that the Company maintains or maintained, or (ii) to which the Company is
or was obligated to contribute, other than any such plan that is or was a
"multiemployer plan" (as such term is defined in Section 4001(a)(3) of
ERISA) had, as of its most recent annual valuation date, an "unfunded
benefit liability" (as such term is defined in Section 4001(a)(18) of
ERISA), based on actuarial assumptions which have been furnished to SM&A.
None of such plans subject to Section 302 of ERISA has an "accumulated
funding deficiency" (as such term is defined in Section 302 of ERISA),
whether or not waived. The Company, any officer of the Company, or any of
the Pension Plan or Welfare Plans (including the Pension Plans and prior
pension plans) which are subject to ERISA, or any trusts created
thereunder, or any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406, 407 or
408 of ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject the Company or any officer of the Company
to the tax or penalty on prohibited transactions imposed by such Section
4975 of the Code or to any liability under ERISA which would have a
Material Adverse Effect on the Company. To the best Knowledge of the
Company, no "reportable event" (as that term is defined in Section 4043 of
ERISA) with respect to which the thirty (30)-day notice requirement has not
been waived has occurred and is continuing with respect to any such Pension
Plan, other than as may arise as a result of the consummation of the
Merger. The Company has not suffered a "complete withdrawal" or a "partial
withdrawal" (as such terms are defined in Section 4203 and Section 4205,
respectively, of ERISA) since the effective date of such Sections 4203 and
4205 for which the Company has any liability outstanding that can be
expected to have a Material Adverse Effect on the Company.
(8) With respect to any Welfare Plan, (i) each such Welfare Plan that
is a group health plan, as such term is defined in Section 5000(b)(1) of
the Code, complies in all material respects with any applicable
requirements of Part 6 of Title I of ERISA and Section 4980B(f) of the Code
and (ii) each such Welfare Plan (including any such plan covering retirees
or other former employees) may be amended or terminated with respect to
health benefits without having a Material Adverse Effect on the Company on
or at any time after the Consummation Date.
(9) All contributions required by law or by a collective bargaining
or other agreement to be made under the Pension Plan, Welfare Plan or
Benefit Plans with respect to all periods through the Effective Date of the
Merger, including a pro rata share of contributions due for the current
plan year, will have been made by such date or provided for by adequate
reserves by the Company. No changes in contribution rates or benefit levels
have been implemented or negotiated (but not yet implemented), with respect
to any Pension Plan, Welfare Plan or Benefit Plan since the date on which
the information provided in the attached schedule has been provided, and no
such changes are scheduled to occur.
(10) The Company has not and will not have any liability or obligation
for taxes, penalties, contributions, losses, claims, damages, judgments,
settlement costs, expenses, costs, or any other liability or liabilities of
any nature whatsoever arising out of or in any manner relating to any
Pension Plan, Welfare Plan or Benefit Plan (including but not limited to
employee benefit plans such as foreign plans which are not subject to
ERISA), that has been, or is, contributed to by any entity, whether or not
incorporated, which is deemed to be under common control (as defined in
Section 414 of the Code), with the Company that can be expected to have a
Material Adverse Effect on the Company, except to the extent they relate to
benefits payable in the ordinary course.
(11) The Company has not violated any of the health care continuation
coverage requirements of the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA") applicable to its employees prior to the Effective Time
-----
of the Merger.
4.19 Conformity with Law; Pending or Threatened Claims. To the Company's
-------------------------------------------------
knowledge and except as set forth on Exhibit/Schedule 4.19, the Company has
---------------------
complied with, and the Company is not in material default under, any law, rule,
ordinance, ruling, directive, or regulation or under any order, award, judgment
or decree of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company or any of its assets or its business, except where
the failure to so comply or the default thereunder would not have a Material
Adverse Effect on the Company. There are no claims, actions, suits or
proceedings, pending or, to the Knowledge of the Company threatened, against or
affecting the Company, at law or in equity, in any court, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over the Company or its
business and no notice of any such claim, action, suit or proceeding, whether
pending or threatened, has been received.
4.20 Taxes. Except as set forth on Exhibit 4.20:
----- ------------
(1) The Company has timely filed all federal and other Tax Returns
which are required to be filed; and except as set forth in Schedule 4.20-1,
---------------
there are no waivers or extensions of the statute of limitations, audits or
examinations in progress, judicial proceedings, or claims against the
Company for Taxes (including penalties and interest) for any period or
periods prior to and including the Balance Sheet Date and no notice of any
claim, whether pending or threatened, for Taxes has been received and not
paid. The Company is not a party to any Tax allocation or sharing agreement
(i.e., any agreement or arrangement for the payment of Tax liabilities or
payment for Tax benefits with respect to a consolidated, combined or
unitary Tax Return which includes the Company); there are no requests for
rulings in respect of any Tax pending by the Company with any tax
authority; and no penalty or deficiency in respect of any Taxes which has
been assessed against the Company remains unpaid. The amounts shown as
accruals for Taxes on the financial statements of the Company as of the
Balance Sheet Date delivered to SM&A as a part of Schedule 4.9 are
------------
sufficient for the payment of all Taxes of all kinds (including penalties
and interest) for any time or arising or incurred in connection with
periods on or before the Closing Date and the Company has reserved an
amount sufficient to pay all such Taxes. Copies of Tax Returns and
franchise tax returns of the Company for its last three (3) fiscal years,
or such shorter period of time as it has existed, are attached hereto as
Schedule 4.20-2. For purposes of this Section 4.20, "Tax" shall mean any
--------------- ------------ ---
United States or other federal, state, provincial, local or foreign income,
gross receipts, property, sales, goods and services use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum,
ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any governmental
authority, except that the term "Tax" is specifically defined to exclude
---
any Tax incurred by the Company directly or indirectly as a result of the
Merger failing to qualify as a "reorganization" within the meaning of
Section 368(a) of the Code. "Tax Return" shall mean any return, report or
----------
similar statement required to be filed with respect to any Tax (including
any attached schedules), including, without limitation, any information
return, claim for refund, amended return and declaration of estimated Tax.
(2) No shareholder of the Company is a foreign person subject to
withholding under Section 1445 of the Code and the regulations promulgated
thereunder, and certification to that effect will be delivered to SM&A at
the Closing.
(3) The Company has complied in all material respects with all
applicable laws, rules and regulations relating to information reporting
with respect to payments made to third parties and the withholding of and
payment of withheld Taxes and has timely withheld from employee wages and
other payments and paid over to the proper taxing authorities all amounts
required to be so withheld and paid over for all periods under all
applicable laws or it has finally resolved and fully satisfied any
liability for any failure to comply with any such matters.
(4) There is no pending claim by any taxing authority in any
jurisdiction in which the Company does not pay Taxes or file Tax Returns
that the Company is required to pay Taxes or file Tax Returns.
(5) The Company has made an election under Section 341(f) of the
Code.
(6) The Company has not agreed nor is required to make any adjustment
under Section 481(a) of the Code.
4.21 Government Contracts. The Company is not now and in the last two (2)
--------------------
years has not been a party to any governmental contracts subject to price
redetermination or renegotiation, except as set forth on Exhibit/Schedule 4.21.
---------------------
4.22 Absence of Changes. Except as set forth on Exhibit/Schedule 4.22,
------------------ ---------------------
since the Balance Sheet Date, there has not been:
(1) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(2) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company;
(3) any change in the authorized capital of the Company or its
securities outstanding or any grant by the Company of any options,
warrants, calls, conversion rights or commitments;
(4) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of the Company, except as
contemplated by this Agreement;
(5) any increase in the compensation, bonus, sales commissions,
fringe benefits or fee arrangement payable or to become payable by the
Company to any of its officers, directors, shareholders, employees,
consultants or agents, other than in the ordinary course of business and
consistent with past practice, or any change in the method by which sales
commissions are calculated and paid;
(6) any work interruptions, labor grievances or claims filed
materially adversely affecting the business or future prospects of the
Company;
(7) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the Company to any person, other
than in the ordinary course of business including, without limitation, the
Principal Shareholders and their respective affiliates;
(8) any cancellation, or agreement to cancel, any material
indebtedness or other obligation owing to the Company, including without
limitation any indebtedness or obligation of the Principal Shareholders or
any affiliate thereof;
(9) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights other than rights of
SM&A;
(10) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets, other than in the
ordinary course of business and consistent with past practice;
(11) any waiver of any material rights or claims of the Company, other
than in the ordinary course of business and consistent with past practice
and for fair value;
(12) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(13) any transaction by the Company outside the ordinary course of its
business; or
(14) any authorization, approval, agreement or commitment to do any of
the foregoing.
4.23 Deposit Accounts; Powers of Attorney. Schedule 4.23 contains an
------------------------------------ -------------
accurate list as of the date of this Agreement, of:
(1) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(2) the names in which the accounts or boxes are held;
(3) the type of account; and
(4) the name of each person authorized to draw thereon or have access
thereto.
Schedule 4.23 also sets forth the name of each person, corporation, firm or
- -------------
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power. Each such power, if any, has been or
will be canceled from and after the Closing Date.
4.24 Relations with Governments. To the best of the Company's knowledge,
--------------------------
neither the Company nor any director, officer, agent, employee or other person
acting on behalf of the Company, has used any Company funds for improper or
unlawful contributions, payments, gifts or entertainment, made any improper or
unlawful expenditures relating to political activity to domestic or foreign
government officials or others or accepted or received any unlawful
contributions, payments, gifts or expenditures.
4.25 Conflicts of Interest. Except as disclosed in Exhibit/Schedule 4.25,
--------------------- ---------------------
during the preceding two-year period, neither (a) any past or present officer or
director of the Company, nor (b) to the best of the Company's Knowledge, any
relative of any past or present officer or director of the Company, nor (c) to
the best of the Company's Knowledge, any corporation, partnership, trust or
other entity of which any such past or present officer or director of the
Company has a direct or indirect interest or is a director, officer,
shareholder, partner or trustee, is or has ever been a party, directly or
indirectly, to any transaction with the Company, including without limitation
any agreement or other arrangement providing for the furnishing of services by
or to the Company or the rental of any property from or to the Company, or
otherwise requiring or contemplating any payments by or to the Company. Except
as disclosed in Exhibit/Schedule 4.25, neither any present officer or director,
---------------------
nor, to the best of the Company's Knowledge, any relative of any such officer or
director, owns directly or indirectly any interest in any corporation, firm,
partnership, trust or other entity or business which is a competitor, potential
competitor, customer, client or supplier of the Company or any related business.
4.26 Environmental Matters. To the best of the Company's knowledge and
---------------------
except as set forth on Exhibit 4.26, the Company and all of its assets are in
------------
compliance with, and are not subject to any liability under, applicable federal,
state and local environmental and public or occupational health or safety laws,
regulations or codes or requirements relating to manufacture, storage,
transport, generation, use, treatment, disposal or handling of pollutants,
contaminants, hazardous or toxic wastes, substances, or materials, except where
the failure to so comply or the liability thereunder would not have a Material
Adverse Effect on the Company.
4.27 Future Plans and Commitments. Schedule 4.27 contains a summary
---------------------------- -------------
description of all plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any real or personal
property or existing business, to which the Company has committed any material
funds in the two (2) year period prior to the date of this Agreement, which if
pursued by the Company would require additional expenditures of significant
efforts or capital.
4.28 [RESERVED]
4.29 Disclosure. This Agreement and the Schedules hereto and all other
----------
documents included on, attached to or delivered with the Schedules hereto or
which were otherwise delivered to SM&A pursuant to the provisions of this
Agreement do not and will not include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading. If the Company or any Principal Shareholder becomes aware prior to
the Closing of any fact or circumstance which would change a representation or
warranty of the Company or the Principal Shareholders contained in this
Agreement, such person shall immediately give written notice of such fact or
circumstance to SM&A. However, such notification shall not relieve any person
of its or his respective obligations under this Agreement (including, without
limitation, under Article 4 or 5, as the case may be), and at the sole option of
--------------
SM&A, the truth and accuracy of any and all warranties and representations of
the Company and each Principal Shareholder at the date of this Agreement and at
the Closing, subject to the Disclosure Schedule, shall be a precondition to the
consummation of this transaction.
5. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS AND
---------------------------------------------------------------------------
ADDITIONAL FOUNDERS.
-------------------
In addition to the representations and warranties of the Company,
Additional Founders and Principal Shareholders set forth in Section 4, each
---------
Principal Shareholder and Additional Founder, represents and warrants to SM&A
and Newco that all of the following representations and warranties are true as
of the date of this Agreement and shall be true on the Closing Date; subject to
such exceptions as are specifically disclosed in the Disclosure Schedule:
5.1 Authorization; No Conflicts. Except as set forth on Exhibit 5.1, such
--------------------------- -----------
Principal Shareholder and Additional Founder has the full legal right, power and
authority to enter into this Agreement and the Escrow Agreement and to perform
the transactions contemplated herein and therein. The execution, delivery and
performance of this Agreement and the Escrow Agreement, and the consummation of
the transactions contemplated hereby and thereby, do not and will not (a)
violate or conflict with any Legal Requirement applicable to such Principal
Shareholder or Additional Founder, or (b) require any authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any Government Authority, except as set forth on
Exhibit/Schedule 4.10. This Agreement has been duly executed and delivered by
- ---------------------
each such Principal Shareholder and Additional Founder, and at the Closing will
be duly executed and delivered by such Principal Shareholder, and Additional
Founder, and, assuming the due execution and delivery hereof and thereof by
SM&A, Newco and/or the Surviving Corporation, as the case may be, this Agreement
constitutes, and the Escrow Agreement will constitute, the legal, valid and
binding obligation of such Principal Shareholder and Additional Founder,
enforceable against such Principal Shareholder and Additional Founder in
accordance with their terms, except as enforceability hereof and thereof may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally and by the exercise of judicial discretion
in accordance with equitable principles.
5.2 Title to Company Stock. Such Principal Shareholder and Additional
----------------------
Founder have good and marketable title to the number of shares of Company Stock
set forth opposite such Principal Shareholder's and Additional Founder's name on
Schedule 4.3, free and clear of Encumbrances.
- ------------
6. REPRESENTATIONS AND WARRANTIES OF SM&A.
--------------------------------------
SM&A and Newco, jointly and severally, represent and warrant to the Company
and the Principal Shareholders that all of the following representations and
warranties are true as of the date of this Agreement and shall be true on the
Closing Date:
6.1 Organization and Standing. SM&A and Newco are each corporations duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
California and SM&A and Newco are each duly authorized, qualified and licensed
under all applicable laws, regulations, and ordinances of and orders of
Government Authorities to own its properties and assets and to carry on its
business in the places and in the manner as it is now conducted except for where
the failure to be so authorized, qualified or licensed would not have a Material
Adverse Effect on its business. True and correct copies of the Articles of
Incorporation (certified by the Secretary of State of California) and Bylaws
(certified by the Secretary of SM&A), as each is amended, of each of SM&A and
Newco are attached to Schedule 6.1.
------------
6.2 Authorization and Binding Obligation. Each of SM&A and Newco has full
------------------------------------
corporate power and authority to enter into and perform this Agreement and the
Agreement of Merger, the Articles of Merger, and the Escrow Agreement, and the
transactions contemplated herein and therein. The execution, delivery and
performance of this Agreement and the Agreement of Merger, the Articles of
Merger, and the Escrow Agreement by SM&A and Newco have been duly and validly
authorized by all necessary action on their respective parts. This Agreement,
the Agreement of Merger, the Articles of Merger, and the Escrow Agreement have
been duly executed and delivered by each of SM&A and Newco and constitutes the
legal, valid and binding obligations of SM&A and Newco, enforceable against SM&A
and Newco in accordance with their terms, except as enforceability thereof may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally and by the exercise of judicial discretion
in accordance with equitable principles.
6.3 No Conflicts. The execution, delivery and performance of this
------------
Agreement, the Agreement of Merger, the Articles of Merger, the Escrow
Agreement, and the agreements to be executed and delivered at the Closing, and
the consummation of the transactions contemplated hereby and thereby do not and
will not (a) violate or conflict with any provision of each of SM&A's and
Newco's Articles of Incorporation or Bylaws, (b) violate or conflict with any
provision of, or be an event that is (or with the passage of time will result
in) a default or violation of, or result in the modification, cancellation or
acceleration of (whether after the giving of notice or lapse of time or both)
any obligation under, or result in the imposition or creation of any
Encumbrances upon any of the assets of each of SM&A and Newco pursuant to, any
material contract, mortgage, lien, lease, agreement or instrument to which SM&A
or Newco is a party or by which each of SM&A and Newco is bound, (c) violate or
conflict with any Legal Requirement applicable to each of SM&A and Newco
including but not limited to the legal requirements of the National Market
System of the National Association of Securities Dealers, or any of its
properties or assets or any other material restriction of any kind or character
to which it is subject, or (d) require any authorization, consent, order, permit
or approval of, or notice to, or filing, registration or qualification with, any
Government Authority.
6.4 Approvals. Except as set forth on Schedule 6.4, the execution,
--------- ------------
delivery and performance of this Agreement by SM&A and Newco do not require (a)
the consent, approval or authorization of any governmental or regulatory
authority having jurisdiction over SM&A or Newco or of any third party that have
not been obtained, or (b) the submission or filing of any notice, report or
other filing with any governmental or regulatory authority having jurisdiction
over SM&A or Newco.
6.5 Litigation and Administrative Proceedings. There is no litigation,
-----------------------------------------
proceeding or investigation pending or, to the best knowledge of SM&A,
threatened against SM&A or Newco in any federal, state or local court, or before
any administrative agency, that seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken pursuant to or in
connection with this Agreement.
6.6 Permits. SM&A owns or possesses all Permits of any public or other
-------
Government Authority which are necessary for the conduct of its business as
currently conducted. Each of the foregoing is in full force and effect, and
each of SM&A and Newco is in compliance with all of its obligations with respect
thereto, and no event has occurred which permits, or upon giving the notice or
lapse of time or otherwise would permit, revocation or termination of any of the
foregoing.
6.7 Conformity with Law; Pending or Threatened Claims. Each of SM&A and
-------------------------------------------------
Newco has complied with, and each of SM&A and Newco is not in material default
under, any law, rule, ordinance, ruling, directive, or regulation or under any
order, award, judgment or decree of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over each of SM&A and Newco or any of its
assets or its business except where the failure to so comply or default
thereunder would not have a Material Adverse Effect on SM&A or Newco; and there
are no claims, actions, suits or proceedings, pending or, to the Knowledge of
SM&A or Newco threatened, against or affecting SM&A or Newco, at law or in
equity, in any court, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over each of SM&A and Newco or its business and no notice of
any such claim, action, suit or proceeding, whether pending or threatened, has
been received. Each of SM&A and Newco has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local statues, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including,
without limitation, all such laws, rules, ordinances, decrees and orders
relating to intellectual property protection, antitrust matters, consumer
protection, currency exchange, environmental protection, equal employment
opportunity, health and occupational safety, pension and employee benefit
matters, securities and investor protection matters, labor and employment
matters, and trading-with-the-enemy matters. Neither SM&A nor Newco has
received any notification of any asserted present or past unremedied failure by
SM&A or Newco to comply with any of such laws, rules, ordinances, decrees or
orders.
6.8 SM&A Investigation. As of the Closing Date, SM&A has no Knowledge of
------------------
any fact or circumstance that would result in a claim of indemnification against
the Company or the Principal Shareholders under Section 10.
----------
7. COVENANTS.
---------
7.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, each of the Company and SM&A will afford to the officers and
authorized representatives of the other party access to all of its and its
subsidiaries' sites, properties, books and records and will furnish the other
party with such additional financial and operating data and other information as
to the business and properties of it and its subsidiaries as the other party may
from time to time reasonably request subject to regulatory requirements
concerning public reporting entities under the Securities Exchange Act of 1934,
as amended. Each of the Company and SM&A and its subsidiaries will cooperate
with the other party, its representatives, engineers, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by any governmental agency.
Each of the Company and SM&A will cause all information obtained in connection
with the negotiation and performance of this Agreement to be
treated as confidential. The confidentiality agreement(s) heretofore signed by
the Company and SM&A listed on Schedule 7.1 shall remain in full force and
------------
effect until the Closing.
(1) Conduct of Business Pending Closing. Between the date hereof and the
-----------------------------------
Closing Date, the Company shall:
(1) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management,
operation or accounting;
(2) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear
and tear excepted;
(3) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(4) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(5) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships with suppliers, customers and others having business
relations with it; provided, however, subject to the representations and
warranties contained herein and the terms and conditions of the Employment
Agreements to the contrary, that (i) the Company shall not have any
liability with respect to the determination of any of their employees to
terminate their employment at any time, either before or after the Closing
Date, and neither SM&A nor Newco shall be entitled to any adjustment in the
Consideration for any such terminations; and (ii) the Company, shall not
have any liability with respect to the determination of any of their
customers or suppliers to cease doing business with the Company, either
before or after the Closing Date, and neither SM&A nor Newco shall be
entitled to any adjustment in the Consideration for any such event;
(6) maintain compliance with all permits, laws, rules and regulations,
consent orders, and similar governmental approvals;
(7) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments, without the knowledge and consent of
SM&A; and
(8) use commercially reasonable efforts (such efforts not to require a
recission offer) to correct any prior failure to comply with applicable
federal and state securities laws in connection with the prior issuance of
its securities.
7.3 Prohibited Activities. Between the date hereof and the Closing Date,
---------------------
the Company will not, without the prior written consent of SM&A:
(1) make any change in its Articles of Incorporation or Bylaws;
(2) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind;
(3) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(4) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures in excess of $10,000, other
than in the ordinary course of business and consistent with past practice;
(5) increase any fringe benefit or the compensation payable or to
become payable to any officer, director, shareholder, employee or agent, or
make any bonus or management fee payment to any such person, other than in
the ordinary course of business and consistent with past practice;
(6) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired;
(7) sell, assign, lease or otherwise transfer or dispose of any
material property or equipment, other than in the ordinary course of
business and consistent with past practice;
(8) negotiate for the acquisition of any business or the start-up of
any new business;
(9) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(10) waive any of its material rights or claims, other than the
ordinary course of business and consistent with past practice and for fair
value;
(11) breach or permit a breach, amend or terminate any material
agreement or any of its permits, licenses or other rights; or
(12) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
7.4 Release by Principal Shareholders and Additional Founders. EACH
---------------------------------------------------------
PRINCIPAL SHAREHOLDER AND ADDITIONAL FOUNDER HEREBY AGREES AND CONFIRMS THAT
EFFECTIVE AS OF THE CLOSING THE PRINCIPAL SHAREHOLDER AND ADDITIONAL FOUNDER
HEREBY FULLY RELEASES, ACQUITS AND FOREVER DISCHARGES THE COMPANY, TOGETHER WITH
ITS SUCCESSORS, ASSIGNS, AFFILIATES, ANY PARENT AND RELATED PARTIES, FROM ANY
AND ALL LIABILITY, CLAIM, DAMAGE, SUIT, COST, EXPENSE OR OBLIGATION OF ANY
NATURE WHATSOEVER WHETHER KNOWN OR UNKNOWN, ARISING IN RESPECT OF OR IN
CONNECTION WITH ANY TIME OR PERIOD OF TIME ON OR PRIOR TO THE DATE HEREOF,
EXCEPT FOR COMPENSATION PAYABLE TO SUCH PRINCIPAL SHAREHOLDER OR ADDITIONAL
FOUNDER BY THE COMPANY BASED UPON THE COMPANY'S STANDARD PRACTICES WHICH HAS
NOT BEEN PAID, PLUS THE REASONABLE REIMBURSABLE EXPENSES BASED UPON THE PAST
PRACTICES OF THE PRINCIPAL SHAREHOLDER OR ADDITIONAL FOUNDER THAT HAVE NOT BEEN
PAID, AND EXCEPT FOR ANY CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY.
7.5 No Shop. Between the date of this Agreement and the earlier of (i)
-------
the Closing Date or (ii) April 30, 1999, each of the Company, each of the
Additional Founders and the Principal Shareholders shall not, directly or
indirectly, in any way solicit, initiate contact with, or enter into or conduct
any discussions or negotiations, or enter into any agreements, whether written
or oral, with any other firm, entity or individual, with respect to the sale of
the stock or assets or the merger or other business combination of the Company
with any other entity (an "Acquisition Transaction"). The Company, each of the
-----------------------
Additional Founders and each Principal Shareholder, shall, if it or he is the
recipient of such an offer, immediately notify SM&A of such event and the
details of such offer.
Any provision of this Agreement to the contrary notwithstanding, the parties
hereto acknowledge that the Company and each Principal Shareholder is bound by
its fiduciary obligations and that they each must act in accordance with those
obligations.
7.6 Options. Prior to, or contemporaneous with, the Closing, the Company
-------
Options shall be exercised or cancelled.
7.7 Flow of Funds. Funds shall be transferred and disbursed by the parties
-------------
in accordance with Schedule 7.7 attached hereto.
------------
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY, THE ADDITIONAL FOUNDERS
---------------------------------------------------------------------------
AND THE PRINCIPAL SHAREHOLDERS.
------------------------------
The obligations of the Company, each of the Additional Founders and each of
the Principal Shareholders to close the transactions set forth in this Agreement
are subject to the following conditions. Upon Closing, all conditions not
satisfied are deemed to be waived:
8.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of SM&A and Newco contained in Article 6 shall be
---------
accurate as of the Closing Date as though such representations and warranties
had been made as of that time; all of the terms, covenants and conditions of
this Agreement to be complied with and performed by SM&A and Newco on or before
the Closing Date shall have been duly complied with and performed; and the
Company shall have received a certificate from a duly authorized officer of SM&A
to such effect.
8.2 Counsel Approval. All actions, proceedings, instruments and documents
----------------
required to carry out this Agreement or incidental hereto and all other related
legal matters shall have been approved by counsel to the Company.
8.3 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by SM&A of the Company Stock or the payment by SM&A
of any Consideration; and no governmental agency or body shall have taken any
other action or made any request of the Company as a result of which the
management of the Company deems it inadvisable to proceed with the transactions
hereunder.
8.4 No Material Adverse Change. No material adverse change in the results
--------------------------
of operations, financial condition or business of each of SM&A and Newco shall
have occurred, and each of SM&A and Newco shall not have suffered any material
loss or damage to any of its properties or assets, whether or not covered by
insurance, since the date hereof, which change, loss or damage materially
affects or impairs the ability of each of SM&A and Newco to conduct its
business; and the Company shall have received a certificate from a duly
authorized officer of SM&A to such effect.
8.5 Opinion of Counsel. The Company shall have received an opinion from
------------------
Rutan & Tucker, LLP, counsel to SM&A, dated the Closing Date, in the form
attached hereto as Exhibit 3.2(b)(iii).
-------------------
8.6 Consents and Approvals. All necessary consents of and filings with
----------------------
any governmental authority or agency or any third party relating to the
consummation of the transactions contemplated herein shall have been obtained or
made, as applicable, and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Company's performance of its obligations
hereunder, and no governmental agency or body shall have taken any
other action or made any request of the Company as a result of which of the
Company deems it inadvisable to proceed with the transactions hereunder.
8.7 Employment Offers. Employment offers and duly authorized stock option
-----------------
grants conditioned upon and in consideration of acceptance of each such
employment offer, where appropriate, in accordance with the Equity Incentive
Proposal of Gary L. Markle, shall have been made to all full-time employees of
the Company having terms and conditions reasonably acceptable to the Company.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SM&A AND NEWCO.
-----------------------------------------------------
The obligation of SM&A and Newco to close the transactions set forth in
this Agreement are subject to the satisfaction, on or prior to the Closing Date,
of the following conditions. Upon Closing, all conditions not satisfied are
deemed to be waived.
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of the Company, the Additional Founders and the
Principal Shareholders contained in Article 4 and Article 5, respectively, shall
--------- ---------
be accurate as of the Closing Date as though such representations and warranties
had been made as of that time; all of the terms, covenants and conditions of
this Agreement to be complied with and performed by the Company, the Additional
Founders and the Principal Shareholders on or before the Closing Date shall have
been duly complied with and performed; and a certificate to the foregoing effect
dated as of the Closing Date and signed by each Principal Shareholder and each
Additional Founder with respect to such Principal Shareholder's representations,
warranties and obligations and a certificate to the foregoing effect dated as of
the Closing Date and signed by a duly authorized officer of the Company with
respect to the Company's representations, warranties and obligations, shall have
been delivered to SM&A.
9.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by SM&A of the Company Stock or the payment by SM&A
of any Consideration; and no governmental agency or body shall have taken any
other action or made any request of SM&A as a result of which the management of
SM&A deems it inadvisable to proceed with the transactions hereunder.
9.3 Examination of Financial Statements. Prior to the Closing Date, SM&A
-----------------------------------
shall have had sufficient time to review the unaudited consolidated balance
sheets of the Company as of the end of the month immediately preceding the
Closing Date, and the unaudited consolidated statements of income, cash flow and
shareholders' equity of the Company for the period then ended, disclosing no
material adverse change in the financial condition of the Company; and showing
working capital and net worth at no less than the Financial Statement
Requirements.
9.4 No Material Adverse Change. No material adverse change in the results
--------------------------
of operations, financial condition or business of the Company shall have
occurred, and the Company shall not have suffered any material loss or damage to
any of its properties or assets, whether or not covered by insurance, since the
Balance Sheet Date, which change, loss or damage materially affects or impairs
the ability of the Company to conduct its business; and SM&A shall have received
a certificate signed by a duly authorized officer of the Company dated the
Closing Date to such effect.
9.5 Review. SM&A, through its authorized representatives, must have
------
completed a satisfactory review of the practices and procedures of the Company
including, but not limited to, compliance with contracts and federal, state and
local laws and regulations governing the operations of the Company, disclosing
no actual or probable violations, compliance problems, required capital
expenditures, out of the ordinary course of business, or other substantive
concerns.
9.6 Counsel Approval. All actions, proceedings, instruments and documents
----------------
required to carry out this Agreement or incidental hereto and all other related
legal matters shall have been approved by counsel to SM&A.
9.7 Opinion of Counsel. SM&A shall have received an opinion from Sparks
------------------
Willson Borges Brandt & Johnson, P.C., counsel to the Company, dated the Closing
Date, substantially in the form attached hereto as Exhibit 3.2(a)(iv).
------------------
9.8 Consents and Approvals. All necessary consents of and filings with
----------------------
any governmental authority or agency or any third party relating to the
consummation of the transactions contemplated herein shall have been obtained or
made, as applicable, and no action or proceeding shall have been instituted or
threatened to restrain or prohibit SM&A's or Newco's performance of its
obligations hereunder, including the acquisition of the Company Stock and
payment of the Consideration, and no governmental agency or body shall have
taken any other action or made any request of SM&A or Newco as a result of which
SM&A or Newco deems it inadvisable to proceed with the transactions hereunder.
9.9 Additional Liabilities and Obligations. The Company shall have
--------------------------------------
delivered to SM&A a list, dated the Closing Date, setting forth all material
liabilities and obligations of the Company arising since the Balance Sheet Date.
9.10 Additional Contracts. The Company shall have delivered to SM&A a
--------------------
list, dated the Closing Date, showing all material contracts and agreements,
together with copies thereof, entered into by the Company since the date of this
Agreement.
9.11 Good Standing Certificates. The Company shall have delivered to SM&A
--------------------------
a certificate, dated as of a date no longer than five (5) business days prior to
the Closing Date, duly issued by the Secretary of State of the State of Delaware
and the State of Colorado, respectively, showing that the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns have been filed and taxes paid for the Company for all
periods prior to the Closing.
9.12 Termination of the Company Stock Option Plan. The Company's Board of
--------------------------------------------
Directors shall have voted to terminate the Company's Stock Option Plan as of or
prior to the Effective Time.
9.13 Termination of Options; Resignation of Directors. All outstanding
------------------------------------------------
rights, options, warrants and convertible securities of the Company shall have
been exercised or terminated to the reasonable satisfaction of SM&A. All
existing registration rights of holders of securities in the Company shall have
been terminated, and SM&A shall have received a certificate to such effect,
signed on behalf of the Company by a duly authorized officer of the Company.
Each of the Company's directors serving in such capacity immediately prior to
the Closing shall have delivered his duly executed resignation to the Company.
9.14 Dissenters' Rights. At the Closing, the Company's shareholders
------------------
holding in the aggregate less than five percent (5%) of the Company Stock, shall
have perfected their Dissenters' Rights.
10. INDEMNIFICATION.
---------------
10.1 Survival. The representations, warranties, covenants and agreements
--------
of the parties made in this Agreement shall survive (and not be affected in any
respect by) (i) indemnification for matters concerning the matters set forth in
Sections 4.3, 4.18, 4.20, and 4.26 shall survive until their
- ----------------------------------
applicable statutes of limitation, and (ii) the Closing and any examination or
investigation conducted by or on behalf of the parties hereto and any
information which any party may receive pursuant to the Schedules hereto or
otherwise. Notwithstanding the foregoing, the right of indemnification or other
claim with respect to each representation and warranty contained in this
Agreement shall terminate on the date (the "Survival Date") occurring on the
-------------
second anniversary of the Closing Date; provided, however, the right to
-------- -------
indemnification with respect to such representations and warranties, and the
liability of any party with respect thereto, shall not terminate with respect to
any claim, whether or not fixed as to liability or liquidated as to amount, with
respect to which such party has been given written notice prior to the Survival
Date.
10.2 Indemnification.
---------------
(1) Each of the Principal Shareholders and Additional Founders shall
indemnify, defend, protect and hold harmless SM&A and the Company, each of
their respective successors and assigns and each of their directors,
officers, employees, agents and affiliates (each an "SM&A Indemnified
----------------
Person"), at all times from and after the date of this Agreement (subject
------
to any limitation on the survival of representations and warranties set
forth in Section 10.1), against all losses, claims, damages, actions,
------------
suits, proceedings, demands, assessments, adjustments, costs and expenses
("Losses") (including specifically, but without limitation, reasonable
------
attorneys' fees and expenses of investigation ("Legal Expenses")) based
--------------
upon, resulting from or arising out of (i) any inaccuracy or breach of any
representation, or warranty of the Company contained in this Agreement, and
(ii) the breach by the Company of, or the failure by the Company to
observe, any of its covenants or other agreements contained in this
Agreement.
(2) Each of the Principal Shareholders and Additional Founders shall
indemnify, defend, protect and hold harmless each SM&A Indemnified Person,
-----------------------
at all times from and after the date of this Agreement (subject to any
limitation on the survival of representations and warranties set forth in
Section 10.1) against all Losses (including specifically, but without
------------
limitation, Legal Expenses) based upon, resulting from or arising out of
--------------
(i) any inaccuracy or breach of any representation, or warranty of such
Principal Shareholder or Additional Founders contained in this Agreement,
and (ii) the breach by such Principal Shareholder of, or the failure by the
Principal Shareholder or Additional Founders to observe, any of such
Principal Shareholder's or Additional Founder's covenants or other
agreements contained in this Agreement.
(3) Other than a Principal Shareholder or an Additional Founder, each
holder of Outstanding Shares shall have no liability under this Section
-------
10.2. The liability of each Principal Shareholder and each Additional
----
Founder under this Section 10.2, shall be limited to the aggregate
------------
Consideration received by such Principal Shareholder and Additional
Founder. In the event SM&A is entitled to indemnification in excess of the
Escrow Funds, SM&A must proceed for such indemnification against all
Principal Shareholders and Additional Founders as a group under Section
-------
10.2, and each Principal Shareholder's and Additional Founder's liability
----
shall be limited to his or her pro rata share of any indemnified Losses.
(4) As partial security for the indemnity provided herein, the
Escrow Funds shall be held and released by the Escrow Agent as provided in
the Escrow Agreement. Provided, however, the SM&A may not receive any
Escrow Funds unless and until a Notice of Claim(s) (as defined in the
Escrow Agreement), not disputed by Company and identifying SM&A claims,
which in the aggregate exceed $35,000 (the "Basket Amount"), have been
-------------
delivered to the Escrow Agent in which cash SM&A shall be entitled to
recover all SM&A claims above the Basket Amount threshold; provided,
however that any tax payments or retirement of
Company indebtedness shall not be subject to the Basket Amount and may be
deducted from the Escrow Funds if not otherwise satisfied at the Closing.
10.3 Indemnification by SM&A. SM&A covenants and agrees that it will
-----------------------
indemnify, defend, protect and hold harmless each holder of Outstanding Company
Shares, his successors and heirs (each a "Shareholder Indemnified Person") at
------------------------------
all times from and after the date of this Agreement (subject to any limitation
on the survival of representations and warranties set forth in Section 10.1)
------------
against all Losses (including specifically, but without limitation, Legal
Expenses) based upon, resulting from or arising out of (a) any inaccuracy or
breach of any representation or warranty of SM&A or Newco contained in this
Agreement, and (b) the breach by SM&A or Newco of, or the failure by SM&A or
Newco to observe, any of its covenants or other agreements contained in or made
pursuant to this Agreement.
10.4 Indemnification Procedures.
--------------------------
(1) Promptly after receipt by any person entitled to indemnification
under Section 10.2 or 10.3 (an "indemnified party") of notice of the
-------------------- -----------------
commencement of any action, suit or proceeding by a person not a party to
this Agreement in respect of which the indemnified party will seek
indemnification hereunder (a "Third Party Action"), the indemnified party
------------------
shall notify the person that is obligated to provide such indemnification
(the "indemnifying party") thereof in writing, but any failure to so notify
------------------
the indemnifying party shall not relieve it from any liability that it may
have to the indemnified party under Section 10.2 or 10.3, except to the
--------------------
extent that the indemnifying party is prejudiced by the failure to give
such notice. The indemnifying party shall be entitled to participate in
the defense of such Third Party Action and to assume control of such
defense (including settlement of such Third Party Action) with counsel
reasonably satisfactory to such indemnified party; provided, however, that:
-------- -------
(1) the indemnified party shall be entitled to participate in the
defense of such Third Party Action and to employ counsel at its own
expense (which shall not constitute Legal Expenses for purposes of
this Agreement) to assist in the handling of such Third Party Action;
(2) the indemnifying party shall obtain the prior written
approval of the indemnified party before entering into any settlement
of such Third Party Action or ceasing to defend against such Third
Party Action, if pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief would be imposed
against the indemnified party or the indemnified party would be
adversely affected thereby;
(3) no indemnifying party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each indemnified party of a release from all liability in respect of
such Third Party Action; and
(4) the indemnifying party shall not be entitled to control the
defense of any Third Party Action unless the indemnifying party
confirms in writing its assumption of such defense and continues to
pursue the defense reasonably and in good faith. After written notice
by the indemnifying party to the indemnified party of its election to
assume control of the defense of any such Third Party Action in
accordance with the foregoing, (i) the indemnifying party shall not be
liable to such indemnified party hereunder for any Legal Expenses
subsequently incurred by such indemnified party attributable to
defending against such Third Party Action, and
(ii) as long as the indemnifying party is reasonably contesting such
Third Party Action in good faith, the indemnified party shall not
admit any liability with respect to, or settle, compromise or
discharge the claim underlying, such Third Party Action without the
indemnifying party's prior written consent. If the indemnifying party
does not assume control of the defense of such Third Party Action in
accordance with this Section 10.4, the indemnified party shall have
------------
the right to defend and/or settle such Third Party Action in such
manner as it may deem appropriate at the cost and expense of the
indemnifying party, and the indemnifying party will promptly reimburse
the indemnified party therefor in accordance with this Section 10.4.
------------
The reimbursement of fees, costs and expenses required by this Section
-------
10.4 shall be made by periodic payments during the course of the
----
investigation or defense, as and when bills are received or expenses
incurred.
(2) If an indemnified party has actual knowledge of any facts or
circumstances other than the commencement of a Third Party Action which
cause in good faith it to believe that it is entitled to indemnification
under this Article 10 then such indemnified party shall promptly give the
----------
indemnifying party notice thereof in writing, but any failure to so notify
the indemnifying party shall not relieve it from any liability that it may
have to the indemnified party under Section 10.2 or 10.3, as the case may
--------------------
be, except to the extent that the indemnifying party is prejudiced by the
failure to give such notice.
(3) If any dispute arises concerning the representations and
warranties contained in Section 4.8 either SM&A or the Principal
-----------
Shareholders shall, as the case may be, send a notice to the other party
concerning such dispute and the parties shall attempt to resolve all of the
objecting party's objections within twenty (20) days of delivery of such
notice. If any objections remain unresolved after the end of such twenty
(20) day period, SM&A and the Principal Shareholders shall appoint a
nationally recognized accounting firm (the "Independent Arbitrator") to
----------------------
resolve all such disputed items. SM&A and the Principal Shareholders shall
each pay one-half of the Independent Arbitrator's fees and expenses. The
Independent Arbitrator shall give full consideration of all materials and
positions presented by SM&A and the Principal Shareholders and shall make a
final report concerning all such disputes within ten (10) days after being
appointed by SM&A and the Principal Shareholders. If the parties continue
to dispute the Independent Arbitrator's report, the report and the dispute
shall be sent to binding arbitration in accordance with Section 15.7.
------------
11. NONCOMPETITION.
--------------
11.1 Prohibited Activities of the Principal Shareholders. Each Principal
---------------------------------------------------
Shareholder hereby covenants and agrees as follows:
(1) For a period ending on the later of (A) three (3) years
after the date of this Agreement first set forth above, and (B) one
(1) year after the (x) termination or (y) expiration of the Employment
Term of the Employment Agreement of each Principal Shareholder (except
as set forth in the following paragraph), each Principal Shareholder
shall not for any reason whatsoever, directly or by other means with
intent, for himself or on behalf of or in conjunction with any other
Person, engage, as an officer, director, shareholder, owner, partner,
joint venturer, lender or in any capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct or indirect competition with the Company or SM&A on the Closing
Date;
Notwithstanding the foregoing provisions of this paragraph (a) each
Principal Shareholder may (i) be a passive investor owning no more than
five percent (5%) of the outstanding equity securities of any corporation
the equity securities of which are listed on a national securities exchange
or traded on the NASDAQ National Market and with which such Principal
Shareholder has no other connection whatsoever or (ii) invest in or act as
an employee, consultant or other position for SM&A, or any of its
Affiliates; or
(2) For a period ending on the later of (A) three (3) years
after the date of this Agreement first set forth above, and (B) one
(1) year after the (x) termination or (y) expiration of the Employment
Term of the Employment Agreement of each Principal Shareholder, each
Principal Shareholder shall not, directly or by other means with
intent, offer to employ any person who is, at that time, or who has
been within one (1) year prior to that time, an employee of SM&A, or
the Company. For the purposes of this Section 11.1 general
------------
advertising concerning available employment opportunities through
newspapers or trade journals shall not constitute solicitation.
11.2 Prohibited Activities of SM&A and Newco. In the event the Closing does
---------------------------------------
not occur for any reason, for a period of one (1) year after the date of this
Agreement, each of SM&A and Newco shall not for any reason whatsoever, solicit
the employment of any person who is, at that time, or who has been within one
(1) year prior to that date, an employee of the Company. For the purposes of
this Section 11.2 general advertising concerning available employment
------------
opportunities through newspapers or trade journals shall not constitute
solicitation.
11.3 Acknowledgments. The parties hereto agree and acknowledge that the
---------------
damages that would be suffered by a nonbreaching party as a result of any breach
of the provisions of this Article 11 may not be calculable and that an award of
----------
a monetary judgment for such a breach would be an inadequate remedy.
Consequently, a nonbreaching party shall have the right, in addition to any
other rights it may have, to obtain, in any court of competent jurisdiction,
injunctive relief to restrain any breach or threatened breach of any provision
of this Article 11 or otherwise to specifically enforce any of the provisions
----------
hereof, and a nonbreaching party shall not be obligated to post a bond or other
security in seeking such relief. This remedy is in addition to damages directly
or indirectly suffered by a nonbreaching party and reasonable attorneys' fees;
and
(1) The parties hereto agree that the restraint, duration and area for
which the covenants in this Article 11 are to be effective are reasonable in
----------
light of the business and activities of the parties hereto. In the event that
any court finally determines that the time period or the geographic scope of any
such covenant is unreasonable or excessive and any covenant is to that extent
made unenforceable, the parties agree that the restrictions in this Article 11
----------
shall remain in full force and effect for the greatest time period and within
the greatest geographic area that would not render it unenforceable. The
parties intend that each of the covenants in Article 11 shall be deemed to be a
----------
separate covenant.
11.4 Independent Covenant. All of the covenants in this Article 11 shall
-------------------- ----------
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of a nonbreaching
party against a breaching party, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by any party of
such covenants.
12 [RESERVED]
13 CERTAIN DEFINITIONS.
-------------------
13.1 "Affiliate" (whether or not capitalized) shall mean, with respect to
---------
any person, any other person that directly, or through one or more
intermediaries, controls or is controlled by or is under common control with
such first person. As used in this definition, "control" shall mean possession,
-------
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or other ownership
interest, by contract or otherwise).
13.2 "Base Purchase Price" means $3,330,000 payable at the Effective Time,
-------------------
less the Purchase Price Adjustment, if any.
13.3 "Company Options" mean all options and warrants, whether vested or
---------------
not, to purchase shares of Company Stock.
13.4 "Company Stock" means the common stock, $.01 par value per share, of
-------------
the Company.
13.5 "Dissenters' Rights" shall mean the rights of shareholders of the
------------------
Company to dissent from corporate action and receive payment of the fair value
of their shares of Company Stock under the Dissenters Law.
13.6 "Earn-Out Purchase Price" means an amount of cash up to $4,004,000
-----------------------
representing 100% of the anticipated Earn-Out Purchase Price (the "100% Level")
----------
calculated in accordance with Schedule 13.6 attached hereto payable, if earned,
-------------
on April 1, 2000. To earn the Earn-Out Purchase Price, any portion thereof, or
exceed the 100% Level, as the case may be, the Company shall attain or surpass
those milestones as set forth on Schedule 13.6 attached hereto and shall be paid
-------------
amounts commensurate with its level of performance as set forth on Schedule
--------
13.6. The parties acknowledge that the Company may exceed the 100% Level set
forth on Schedule 13.6 and that the 100% Level is not intended as a cap on the
-------------
Earn-Out Purchase Price, but rather a fulfillment of desired results. If
Company performance exceeds the 100% Level, any amount in excess of the 100%
Level shall also be calculated in accordance with the "Formula" set forth on
Schedule 13.6 attached hereto.
- -------------
13.7 "Encumbrances" shall mean mortgages, liens, pledges, encumbrances
------------
(legal or equitable), claims, charges, security interests, covenants,
conditions, voting and other restrictions, rights-of-way, easements, options,
encroachments, rights of others and any other matters affecting title, except,
in the case of the Company Stock, for restrictions on the sale or other
disposition thereof imposed by federal or state securities laws.
13.8 "Financial Statement Requirements" shall mean working capital of
--------------------------------
$378,200 and net worth of $400,000 (each computed on a basis consistent with
that historically and consistently maintained by the Company) each as of the
Effective Time and the Company's recasted earnings before interest and taxes for
the period ended December 31, 1998 shall be no less than $370,000.
13.9 "GAAP" shall mean generally accepted accounting principles.
----
13.10 "Government Authority" shall mean any government or state (or any
--------------------
subdivision thereof), whether domestic, foreign or multinational, or any agency,
authority, bureau,
commission, department or similar body or instrumentality thereof, or any
government court or tribunal.
13.11 "Knowledge" with respect to the Company shall mean all facts and
---------
conditions which are actually known by any of the executive officers or
directors of the Company or which should have been known by prudent managers
holding such positions with access to the books and records of the Company; and
"Knowledge" with respect to SM&A or Newco shall mean all facts and conditions
which are actually known by any of the executive officers or directors of SM&A
or Newco, as the case may be, or which should have been known by prudent
managers holding such positions with access to the books and records of SM&A or
Newco, as the case may be.
13.12 "Legal Requirement" shall mean any law, statute, ordinance, code,
-----------------
rule, regulation, standard, judgment, decree, writ, ruling, arbitration award,
injunction, order or other requirement of any Government Authority.
13.13 "Material Adverse Effect" shall mean any material adverse change in
-----------------------
or effect on, or any change that may reasonably be expected to have a material
adverse effect on, (i) the business, operations, assets, liabilities, condition
(financial or otherwise), results of operations, or prospects of the Company or
each of SM&A and Newco, as the context requires, (ii) the ability of any of the
parties hereto to consummate the transactions contemplated by this Agreement or
any related agreement to which any such party is a party.
13.14 "Outstanding Company Shares" shall mean the number of shares of
--------------------------
Company Stock outstanding immediately prior to the Closing, and any of such
shares. For the avoidance of doubt, Outstanding Company Shares do not include
shares held by the Company, whether as treasury stock or otherwise, or held by a
subsidiary of the Company.
13.15 "Person" (whether or not capitalized) shall mean and include an
------
individual, corporation, company, limited liability company, limited liability
partnership, partnership, joint venture, association, trust, and other
unincorporated organization or entity and a governmental entity or any
department or agency thereof.
13.16 "Purchase Price Adjustment Amount" shall mean (a) the amount by
--------------------------------
which the Company's working capital (computed on a basis consistent with that
historically and consistently maintained by the Company) is less than $378,200,
plus (b) the amount by which the Company's net worth (computed on a basis
consistent with that historically and consistently maintained by the Company) is
less than $400,000; plus (c) the amount of any accounts receivable of the
Company aged in excess of 90 days on the Closing Date ("Aged Receivables");
----------------
provided, however, (i) Aged Receivables shall only cause an adjustment to the
cash component of the Base Purchase Price, and (ii) that in the event that any
Aged Receivable shall later be collected by the Surviving Corporation within 180
days of the Effective Time, the proceeds thereof shall be distributed to the
former Company shareholders in the same manner as the Base Purchase Price; plus
(d) the amount of any expenses incurred by the Company as a result of this
Agreement and the transactions contemplated hereby (see Section 15.6). All such
------------
calculations pursuant to this Section 13.16 shall be made on or before April 9,
-------------
1999.
13.17 "Technology" shall mean all trade secrets, proprietary information,
----------
software and computer programs and source code data relating thereto (including
all current and historical data bases) research records, test information,
market surveys, marketing know-how, inventories, know-how, processes and
procedures owned, used by or licensed to the Company.
14 TERMINATION.
-----------
14.1 Circumstances of Termination. This Agreement may be terminated
----------------------------
(notwithstanding approval by the shareholders of any party hereto):
(1) By the mutual consent in writing of the Boards of Directors
of the Company and SM&A;
(2) By the Board of Directors of SM&A if any condition provided
in Article 9 hereof has not been satisfied or waived on or before the
---------
Closing Date;
(3) By the Board of Directors of either the Company or SM&A if
the Effective Time has not occurred by April 30, 1999;
(4) By SM&A if the Company or any Principal Shareholder has
breached in any material respect any of the representations or
warranties contained in Article 4 or Article 5, respectively;
--------- ---------
(5) By SM&A if (i) the Company's Board of Directors (A) fails to
include a recommendation that the Company's shareholders vote in favor
of the adoption of this Agreement, or (B) withdraws its recommendation
that shareholders vote in favor of the Merger; or (ii) the holders of
less than a majority of the Outstanding Company Shares vote in favor
of this Agreement on or before April 30, 1999.
14.2 Effect of Termination. In the event of a termination of this
---------------------
Agreement pursuant to Section 14.1 hereof, each party shall pay the costs and
------------
expenses incurred by it in connection with this Agreement, and no party (or any
of its officers, directors, and shareholders) shall be liable to any other party
for any costs, expenses, damages, or loss of anticipated profits hereunder.
15 GENERAL.
-------
15.1 Cooperation. The Company, the Principal Shareholders and SM&A shall
-----------
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each Principal Shareholder will cooperate and use his best
efforts to have the present officers, directors and employees of the Company
cooperate with SM&A on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
15.2 Successors and Assigns. This Agreement and the rights of the parties
----------------------
hereunder may not be assigned except by operation of law or the prior written
consent of the other parties, and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of the Company and SM&A, and the
heirs and legal representatives of the Principal Shareholders.
15.3 Entire Agreement. This Agreement (including the Exhibits attached
----------------
hereto and the Schedules delivered pursuant hereto) and the other writings
specifically identified herein or contemplated hereby contain the entire
agreement and understanding between the parties hereto with
respect to the transactions contemplated herein and supersede any prior
agreement and understanding relating to the subject matter of this Agreement.
This Agreement may be modified or amended only by a written instrument executed
by the Company, the Principal Shareholders, Newco and SM&A.
15.4 Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
15.5 Brokers and Agents. Each party represents and warrants that it
------------------
employed no broker or agent in connection with this transaction, and agrees to
indemnify the other against all loss, cost, damages or expense arising out of
claims for fees or commission of brokers employed or alleged to have been
employed by such indemnifying party.
15.6 Payment of Expenses. Each of the parties hereto shall pay all its own
-------------------
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby; provided, however, that all such expenses of
the Company shall be the responsibility of the Company's shareholders.
15.7 Arbitration, Attorney's Fees, Prevailing Party. All disputes arising
----------------------------------------------
under this contract will be resolved by submission to binding arbitration at the
Orange County offices of Judicial Arbitration & Mediation Services, Inc.
("JAMS"). If JAMS is unable to arbitrate the dispute, then the dispute will be
arbitrated at the Orange County offices of the American Arbitration Association
("AAA"). Except as specifically modified by this clause, the Commercial
Arbitration Rules of the AAA will apply to all arbitrations before JAMS and the
AAA. Except as specifically modified by this clause, California law, including
California evidence law, shall be applied to determine all arbitrated issues.
California discovery law will apply to provide all discovery available in
California Superior Court cases. No punitive damages shall be awarded in any
arbitration proceeding or otherwise, and such damages are hereby waived.
Judgment upon an arbitration award may be entered in any court having competent
jurisdiction and shall be binding, final and nonappealable. Should any
proceeding be commenced between the parties to this Agreement seeking to enforce
any of its provisions the prevailing party in such proceeding shall be entitled,
in addition to such other relief as may be granted, to a reasonable sum for
attorneys' fees and all legal expenses and fees incurred on appeal and all
interest thereon. For the purposes of this provision, "prevailing party" shall
----------------
include a party which dismisses an action for recovery hereunder in exchange for
payment of the sum allegedly due, performance of covenants allegedly breached,
or consideration substantially equal to the relief sought in the action or
proceeding.
15.8 Notices. All notices or communications required or permitted
-------
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
15.8.1 If to SM&A or Newco, addressed to them at:
SM&A Corporation
4695 MacArthur Court, Eighth Floor
Newport Beach, California 92660
Attn: President
Telephone: (714) 975-1550
Fax: (714) 975-1342
with a copy (which shall not constitute notice) to:
Rutan & Tucker
611 Anton Blvd., Suite 1400
Costa Mesa, CA 92626-1998
Attn: Thomas J. Crane, Esq.
Telephone: (714) 641-5100
Fax: (714) 546-9035
15.8.2 If to the Principal Shareholders or Additional Founders,
addressed to them:
c/o Gary Markle
411 S. Tejon Street, Suite G
Colorado Springs, CO 80903
15.8.3 If to the Company, addressed to it at:
Gary Markle
411 S. Tejon Street, Suite G
Colorado Springs, CO 80903
15.8.4 with a copy (which shall not constitute notice) to:
Sparks Willson Borges Branadt and Johnson, P.C.
1128 S. Tejon, Suite 304
Colorado Springs, CO 80903
Attention: Ben Sparks
15.9 Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of California. All disputes hereunder shall be
adjudicated in the federal and California State courts located in Orange County,
California.
15.10 Exercise of Rights and Remedies. Except as otherwise provided
-------------------------------
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
15.11 Reformation and Severability. In case any provision of this
----------------------------
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such a manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
15.12 General Terms. As used in this Agreement, the terms "herein,"
-------------
"herewith," and "hereof" are references to this Agreement, taken as a whole; the
term "includes" or "including" shall mean "including, without limitations," and
references to a "Section," "subsection," "clause," "Article," "Exhibit,"
"Appendix," or "Schedule" shall mean a Section, subsection, clause, Article,
Exhibit, Appendix or Schedule of this Agreement, as the case may be, unless in
any such case the context requires otherwise. All references to a given
agreement, instrument or other document shall be a reference to that agreement,
instrument or other document as modified, amended, supplemented and restated
through the date as of which such reference is made, and reference to a law
includes any amendment or modification thereof. The singular shall include the
plural, and the masculine shall include the feminine and neuter, and vice versa.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"SM&A" SM&A CORPORATION,
a California corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
"COMPANY": SYSTEM INTEGRATION SOFTWARE, INC.,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
"NEWCO": SIS ACQUISITION, INC.,
a California corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
(Signatures of Principal Shareholders and Additional Founders continued on
following page)
"PRINCIPAL SHAREHOLDERS":
_________________________________ __________________________________
Gary L. Markle Edward L. Knoll
_________________________________ __________________________________
Maryanne Markle Debbie K. Knoll
_________________________________ __________________________________
Charles F. Baird Michael G. Hill
_________________________________ __________________________________
Carolyn F. Baird Lynette K. Hill
"ADDITIONAL FOUNDERS":
_________________________________ __________________________________
John A. Gloriod Karen Renee Olesen
_________________________________ __________________________________
Rebecca H. Gloriod David E. Olesen
__________________________________
Gary L. Markle, as attorney in fact for
the Shareholders set forth on Schedule A, attached