COMMON STOCK PURCHASE AGREEMENT
BY AND BETWEEN
MLC HOLDINGS, INC.
AND
TC LEASING, LLC
October 23, 1998
TABLE OF CONTENTS
Page
----
1. Authorization and Closing.......................................1
1A. Authorization of the Common Stock.................1
1B. Purchase and Sale of the Shares...................1
1C. The Closing.......................................1
2. Deliveries at Closing...........................................1
2A. The Company's Deliveries at Closing...............1
2B. Purchaser's Deliveries at the Closing.............3
3. Definitions.....................................................3
3A. Definitions.......................................3
4. Covenants.......................................................8
4A. Financial Statements and Other Information........8
4B. Restrictions.....................................10
4C. Public Disclosures...............................10
4D. Use of Proceeds..................................11
4E. Payment of Bonuses to Norton.....................11
4F. Confidentiality..................................11
4G. Filings..........................................11
4H. Mergers or Consolidations........................12
4I. Material Decisions...............................12
4J. Super Majority Board Approval....................12
4K. Compensation Committee...........................13
4L. Determination Letter.............................13
4M. Transfer Agent Restriction.......................13
5. Representations and Warranties of the Company.............13
5A. Organization, Corporate Power and Licenses.......13
5B. Capitalization and Related Matters...............14
5C. Subsidiaries.....................................14
5D. Authorization; No Breach.........................15
5E. SEC Documents and Financial Statements...........15
5F. Reports with the SEC.............................16
5G. Absence of Undisclosed Liabilities...............16
5H. Absence of Certain Developments..................16
5I. Properties.......................................17
5J. Assets...........................................18
5K. Tax Matters......................................18
5L. Brokerage........................................20
5M. Employees........................................20
5N. ERISA............................................20
5O. Compliance with Laws.............................22
5P. Environmental, Health, and Safety Matters........22
5Q. Affiliated Transactions..........................23
5R. Contracts and Commitments........................23
5S. Intellectual Property............................25
5T. Litigation.......................................25
5U. Year 2000........................................25
5V. Disclosure.......................................26
6. Representations and Warranties of Purchaser....................26
6A. Organization and Power of Purchaser..............26
6B. Authorization; No Breach.........................26
6C. Brokerage........................................27
6D. Purchaser's Investment Representations...........27
7. Termination....................................................27
7A. Termination......................................27
8. Representations and Warranties.................................28
8A. Survival of Representations and Warranties.......28
8B. Indemnification..................................28
9. Miscellaneous..................................................28
9A. Expenses.........................................28
9B. Consent to Amendments............................28
9C. Successors and Assigns...........................28
9D. Severability.....................................28
9E. Counterparts.....................................29
9F. Descriptive Headings; Interpretation.............29
9G. Governing Law....................................29
9H. Notices..........................................29
9I. No Strict Construction...........................30
9J. Entire Agreement.................................30
EXHIBITS:
Exhibit 2.1 -- Stock Purchase Agreement
Exhibit 2.2 -- Stockholders Agreement
Exhibit 2.3 -- Stock Purchase Warrant
Exhibit 99.1 -- Text of Press Release, dated October 23, 1998
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
October 23, 1998, by and between MLC Holdings, Inc., a Delaware corporation (the
"Company"), and TC Leasing, LLC, a Delaware limited liability company (the
"Purchaser"). Capitalized terms used herein are defined in Section 3A hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of the Common Stock. The Company has authorized the
issuance and sale to Purchaser of 1,111,111 shares (the "Shares") of the
Company's newly issued Common Stock, par value $.01 per share (the "Common
Stock").
1B. Purchase and Sale of the Shares. At the Closing, subject to the terms
and conditions set forth herein, the Company shall sell to Purchaser and
Purchaser shall purchase from the Company, the Shares, free of all Liens (other
than transfer restrictions imposed by federal or state securities laws), for an
aggregate price of $10,000,000 (the "Purchase Price").
1C. The Closing. The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Kirkland & Ellis, 655 Fifteenth
Street, N.W., Washington, D.C. 20005 contemporaneously with the execution and
delivery of this Agreement and the execution of the Stockholders Agreement and
the Stock Purchase Warrant. Each of this Agreement, the Stockholders Agreement
and the Stock Purchase Warrant is conditioned upon, and shall only be effective
upon, the consummation of the other agreements.
Section 2. Deliveries at Closing.
2A. The Company's Deliveries at Closing. At or before the Closing, the
Company shall deliver to Purchaser all of the following:
(i) certified copies of the resolutions duly adopted by the board of
directors (including all of the non-employee directors) of Company
authorizing (a) the performance of this Agreement, the Stockholders
Agreement and the Stock Purchase Warrant by the Company, and (b) the
consummation of all transactions contemplated by this Agreement, the
Stockholders Agreement and the Stock Purchase Warrant by the Company;
(ii) a certified copy of the Certificate of Incorporation of the
Company (the "Charter") as in effect at the Closing, a certified copy of
the by-laws of the Company as in effect at the Closing (as amended as set
forth in Exhibit 2A(ii) attached hereto, the "By-Laws") and a certificate
of good standing of the Company from each jurisdiction in which the Company
is qualified to do business as a domestic or foreign corporation dated
within 5 days of the Closing;
(iii) a certified copy of the certificate of incorporation of each
domestic Subsidiary as in effect at the Closing, a certified copy of the
by-laws of each domestic subsidiary as in effect at the Closing and a
certificate of good standing of each domestic Subsidiary from each
jurisdiction in which such domestic Subsidiary is qualified to do business
as a domestic corporation dated within 5 days of the Closing;
(iv) a legal opinion from Alston & Bird, L.L.P. as to the matters set
forth in Exhibit 2A(iv) attached hereto;
(v) a legal opinion from Geltner & Associates, P.C. as to the matters
set forth in Exhibit 2A(v) attached hereto wit respect to J.A.P. Investment
Group, Inc.;
(vi) an executed copy of this Agreement and all other related
agreements, documents or certificates to which the Company is a party;
(vii) an executed copy of an amendment to the Company's 1998 Long-Term
Incentive Plan in the form set forth in Exhibit 2A(vii) attached hereto;
(viii) stock certificates for the Shares registered in Purchaser's
name;
(ix) certified copies of the resolutions duly adopted by the board of
directors of Company electing Dr. Paul G. Stern as a "Class I" director of
the Company and a member of the Compensation Committee of the board of
directors of the Company;
(x) certified copies of the resolutions duly adopted by the board of
directors of the Company electing Carl J. Rickertsen a member of the Stock
Incentive Committee of the board of directors of the Company;
(xi) certified copies of the resolutions duly adopted by the board of
directors or stockholders, as appropriate, of each domestic Subsidiary
electing Carl J. Rickertsen to the board of directors of each such domestic
Subsidiary;
(xii) a certificate from First Union National Bank Corporate Trust, as
transfer agent for the Company, stating the number of outstanding shares of
Common Stock; and
(xiii) a certificate from First Union National Bank Corporate Trust,
as transfer agent for the Company, stating that (A) it shall place as of
the date hereof a restriction on transfer on all Common Stock owned by any
of Bruce M. Bowen, Kevin M. Norton or Patrick J. Norton, Jr. (including,
without limitation, stock certificates numbered 12, 13, 90, 93, 95, 96, 187
and 190), and (B) it shall keep such restrictions in place until the legend
set forth in the Stockholders Agreement is placed on such stock
certificates.
2B. Purchaser's Deliveries at the Closing. At or before the Closing,
Purchaser shall:
(i) deliver to the Company certified copies of the resolutions duly
adopted by the Purchaser authorizing (a) the performance of this Agreement,
the Stockholders Agreement and the Stock Purchase Warrant by Purchaser, and
(b) the consummation of all transactions contemplated by this Agreement,
the Stockholders Agreement and the Stock Purchase Warrant by Purchaser;
(ii) pay via wire transfer of immediately available funds to a bank
account designated by the Company an amount equal to the Purchase Price;
(iii) deliver to the Company an executed copy of this Agreement and
all other related agreements, documents or certificates to which Purchaser
is a party; and
(iv) deliver to the Company a legal opinion from Kirkland & Ellis as
to the matters set forth in Exhibit 2B(iv) attached hereto.
Section 3. Definitions.
3A. Definitions. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of voting
securities, contract or otherwise, and in the case of Purchaser shall include
Thayer Equity Investors III, L.P. and any of its partners or Affiliates.
"Affiliated Group" means an "affiliated group" as defined in
Section 1504 of the Code, or any similar group defined under local, state or
foreign Tax law for which the Company or any Subsidiary is or has been a member.
"Agreement" has the meaning set forth in the preface hereof.
"Approved Sale" has the meaning set forth in the Stockholders Agreement.
"By-Laws" has the meaning set forth in Section 2A(ii) hereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Charter" has the meaning set forth in Section 2A(ii) hereof.
"Closing" has the meaning set forth in Section 1C hereof.
"COBRA" has the meaning set forth in Section 5N(i) hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular Code section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Common Stock" has the meaning set forth in Section 1A hereof.
"Company" has the meaning set forth in the preface hereof.
"Confidential Information" means any confidential or proprietary
information regarding the Company and any Subsidiary, their Intellectual
Property, their other assets or their operations.
"Credit Agreement" means the Credit Agreement between MLC Group, Inc. and
First Union National Bank, N.A. (successor by merger to CoreStates Bank, N.A.),
dated as of June 5, 1997, as amended by Amendment No. 1, dated September 5,
1997, as further amended by Amendment No. 2, dated December 19, 1997, and as
further amended by Amendment No. 3, dated June 30, 1998, and as further amended
from time to time.
"Disclosure Schedule" has the meaning set forth in Section 5B(i) hereof.
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health and safety,
worker health and safety and pollution or protection of the environment,
including without limitation all such standards of conduct and bases of
obligations relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
by-products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation,
each as amended and as now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal law then in force.
"GAAP" means United States generally accepted accounting principles.
"Indebtedness" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the Ordinary Course of Business), (iv)
any commitment by which a Person assures a creditor against loss (including,
without limitation, contingent reimbursement obligations with respect to letters
of credit), (v) any indebtedness guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets, (viii) all obligations and liabilities under foreign-exchange or
currency swap contracts or similar agreements designed to protect against
fluctuations in currency values, (ix) all obligations and liabilities under or
with respect to any interest rate swap, cap, collar, or similar agreement or
arrangement designed to protect against fluctuations in interest rates, (x) all
obligations under take or pay or, similar agreements or under commodities
agreements, and (xi) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA.
"Intellectual Property" shall mean all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
"IRS" means the United States Internal Revenue Service.
"Knowledge" shall mean, with respect to the Company, the actual knowledge
or awareness after reasonable inquiry of Norton, Bruce M. Bowen, Thomas B.
Howard, Jr., Steven J. Mencarini or Kleyton L. Parkhurst.
"Latest Balance Sheet" means the audited consolidated balance sheet as of
March 31, 1998 for the Company and the Subsidiaries, which is contained in the
Annual Report of the Company on Form 10-K as filed with the SEC for the
Company's fiscal year ended March 31, 1998.
"Lease" has the meaning set forth in Section 5I(a) hereof.
"Liability" means any obligation or liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind other than (i) mechanic's, materialmen's, and similar liens
not yet delinquent, (ii) liens for Taxes not yet due and payable, (iii) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (iv) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing.
"Material Adverse Effect" means any material adverse effect on the
business, financial condition, operations, results of operations, employee
relations, customer or supplier relations or assets of the Company and the
Subsidiaries, taken as a whole; provided that any event, fact or circumstance
which has had or has a reasonable likelihood in the future to have a material
adverse effect on the business, financial condition, operations, results of
operations, employee relations, customer or supplier relations or assets of the
Company and the Subsidiaries, taken as a whole, shall also be deemed to have a
Material Adverse Effect.
"Most Recent Financial Statements" means the unaudited consolidated
financial statements as of June 30, 1998 for the Company and the Subsidiaries,
which is contained in the Quarterly Report of the Company on Form 10-Q as filed
with the SEC for the Company's fiscal quarter ended June 30, 1998.
"Norton" means Phillip G. Norton.
"Operating Budget" has the meaning set forth in Section 4A(i)(c) and
Section 4A(i)(d) hereof.
"Ordinary Course of Business" means the ordinary course of the Company's
and the Subsidiaries' businesses consistent with past practice (including,
without limitation, with respect to collection of accounts receivable, purchases
of inventory and supplies, repairs and maintenance, payment of accounts payable
and accrued expenses, levels of capital expenditures and operation of cash
management practices generally).
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Purchase Price" has the meaning set forth in Section 1B hereof.
"Purchaser" has the meaning set forth in the preface hereto.
"Real Property" has the meaning set forth in Section 5I(a) hereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SEC" means the United States Securities and Exchange Commission and any
governmental body or agency succeeding to the functions thereof.
"SEC Reports" has the meaning set forth in Section 5E.
"Shares" has the meaning set forth in Section 1A hereof.
"Stock Purchase Warrant" means, collectively, the Stock Purchase Warrant,
dated as of the date hereof, by the Company in favor of Purchaser, and any
subsequent stock purchase warrant or stock purchase warrants in favor of
Purchaser or any of its Affiliates issued pursuant to or in connection with the
Stock Purchase Warrant, dated as of the date hereof, by the Company in favor of
Purchaser.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
date hereof, among the Company and certain of its stockholders.
"Subsidiary" means any Person with respect to which the Company (or a
Subsidiary thereof) owns a majority of the common stock or has the power to vote
or direct the voting of sufficient securities to elect a majority of the
directors or other governing body.
"Tax" or "Taxes" means (i) any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding, or
other tax of any kind whatsoever, including any interest, penalties or
additional amounts in respect of the foregoing and (ii) any Liability of the
Company for the payment of any amounts of the type described in clause (i) as a
result of any express or implied obligation to indemnify or otherwise assume of
succeed to the liability of another Person.
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Thayer Directors" has the meaning set forth in the Stockholders Agreement.
"Thayer Shares" has the meaning set forth in the Stockholders Agreement.
"Treasury Regulations" means the United States Treasury Regulations
promulgated under the Code, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
Section 4. Covenants.
4A. Financial Statements and Other Information. The Company shall deliver
to Purchaser:
(i) copies of all financial statements and other documents, notices
and information (including any management discussion and analysis of such
financial statements or information) which the Company is required to (or
actually does) deliver under the Credit Agreement, and giving effect to any
subsequent waivers, amendments, modifications and terminations which do not
materially reduce the scope or detail of, or increase the timing for, such
delivery requirements, at the time such materials are required to be
delivered thereunder, whether or not any Indebtedness is outstanding;
provided that in no event shall delivery of such financial statements be on
a basis which is less frequent than quarterly; and provided further that,
to the extent the following financial statements and other documents,
notices and information are not included among the foregoing items, and
whether or not such financial statements and other documents, notices and
information are required to be delivered under the Credit Agreement:
(a) promptly upon its availability, and in any event within
forty-five (45) days after the end of each of the first three (3)
quarters of each fiscal year, an unaudited consolidated balance sheet
of the Company and the Subsidiaries as of the end of such quarter, an
unaudited consolidated statement of cash flow of the Company and the
Subsidiaries as of the end of such quarter and for the interim period,
and an unaudited consolidated statement of income or loss of the
Company and the Subsidiaries for the interim period;
(b) promptly upon its availability, and in any event within
ninety (90) days after the end of each fiscal year, an audited
consolidated balance sheet of the Company and the Subsidiaries as of
the end of such fiscal year, an audited consolidated statement of
income or loss of the Company and the Subsidiaries for such fiscal
year, and an audited consolidated statement of cash flow of the
Company and the Subsidiaries as of the end of such fiscal year, all
accompanied by an opinion thereon of the Company's certified
independent accountants, such balance sheet, statement of income or
loss and statement of cash flow to include a comparison of such fiscal
year with the immediately preceding fiscal year;
(c) promptly upon its availability, and in any event prior to
December 31, 1998, an operating budget prepared on a monthly basis for
the Company and the Subsidiaries for the five fiscal quarters ending
March 31, 1998 and approved by the board of directors of the Company
(the "Operating Budget");
(d) promptly upon its availability, and in any event at least 2
months prior to the beginning of each fiscal year (beginning with the
fiscal year beginning on April 1, 1999), an annual operating budget
prepared on a monthly basis for the Company and the Subsidiaries for
such fiscal year and approved by the board of directors of the Company
(also, the "Operating Budget");
(e) promptly upon its availability, and in any event no more than
10 days after the end of each calender month (beginning with the month
ending April 30, 1999), an update of the then current Operating Budget
which includes updated projections and forecasts.
(ii) to the extent not provided under clause (i) above, promptly (but
in any event within thirty business days) after the discovery or receipt of
notice of any default under any agreement to which it or any Subsidiary is
a party or any other event or circumstance affecting the Company or any
Subsidiary (including without limitation the filing of any litigation
against the Company or any Subsidiary or the existence of any dispute with
any Person which involves a reasonable likelihood of such litigation being
commenced), which default, event or circumstance would have a Material
Adverse Effect, a certificate from the Company specifying the nature and
period of existence thereof and what actions the Company has taken and
proposes to take with respect thereto;
(iii) to the extent not provided under clause (i) above, concurrently
with the transmission or release thereof, copies of all press releases made
available generally by the Company to the public concerning material
developments in the Company's or any Subsidiary's business;
(iv) within ten days after transmission thereof, copies of all
registration statements, proxy statements and all regular, special or
periodic reports which the Company files, or, to the Company's Knowledge,
any of its officers or directors file with respect to the Company, with the
SEC or with any securities exchange on which any of its securities are then
listed; and
(v) to the extent not provided under clause (i) above, with reasonable
promptness, such other information and financial data concerning the
Company as Purchaser may reasonably request.
Each of the documents, notices and information referred to in this Section 4A
(other than financial statements and the Operating Budget) shall be true and
correct in all material respects and each of the financial statements referred
to in this Section 4A shall be prepared in accordance with GAAP and shall
present fairly the consolidated financial position, cash flows and results of
operations of the Company and the Subsidiaries as of the dates and for the
periods stated therein; provided, however, that the unaudited financial
statements are subject to changes resulting from normal year-end audit
adjustments (none of which would have a Material Adverse Effect) and may lack
footnotes and other presentation items.
4B. Restrictions. Without the prior written consent of Purchaser, the
Company shall not, and shall cause each Subsidiary not to:
(i) until the first anniversary of the Closing, directly or indirectly
declare or pay any dividends or make any distributions upon any of its
capital stock or other equity securities;
(ii) authorize, issue, sell or enter into any "anti-takeover" measure
or agreement, including, without limitation, providing for the issuance or
sale (contingent or otherwise) of securities or other rights which would
have the effect of materially increasing the cost or difficulty of a Person
of acquiring (via purchase, merger or otherwise) the securities or assets
of the Company or any Subsidiary (i.e., a "poison pill"); or
(iii) enter into any transaction with any of its officers, directors,
employees or Affiliates or any individual related by blood or marriage to
any such Person or any entity in which any such Person or individual owns a
beneficial interest, except to the extent that (a) such transaction is at
arms-length and on terms that are obtainable from unrelated third parties,
(b) the Company notifies the Purchaser in writing at least 5 business days
prior to entering into such transaction and (c) such transaction involves
consideration or has a value of less than $150,000.
4C. Public Disclosures. Except, in each case, to the extent required by law
or the rules of any relevant stock exchange, neither the parties hereto, nor the
subsidiaries or Affiliates of any of them, shall make any public announcement
after the Closing relating to the other party, this Agreement, the Stockholders
Agreement, the Stock Purchase Warrant or the consummation of any of the
transactions contemplated by this Agreement, the Stockholders Agreement or the
Stock Purchase Warrant (including any exercise of a Stock Purchase Warrant)
without the prior consent of the other party, which consent shall not be
unreasonably withheld. The text of any such public announcement which any party
proposes to make shall be submitted to the other party not less than three
business days before the day on which the announcement is to be made.
4D. Use of Proceeds. The Company shall use the proceeds of the sale of the
Shares to finance growth and acquisitions.
4E. Payment of Bonuses to Norton. The Company hereby agrees to withhold and
not pay to Norton any bonus otherwise due to him under any employment,
consulting or other similar agreement between the Company and any Subsidiary and
him if the Company is at the time or had been within the preceding two years in
default of its obligations under Section 4A(i)(c), 4A(i)(d) or 4A(i)(e) and such
default in the case of Section 4A(i)(c) or 4A(i)(d) remains or remained uncured
for 20 business days and in the case of Section 4A(i)(e) remains or remained
uncured for 5 business days.
4F. Confidentiality. Purchaser will treat and hold as confidential all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, the Stock Purchase
Agreement, the Stock Purchase Warrant, the Stockholders Agreement and the
Purchaser's ownership of Common Stock hereunder and thereunder. In the event
that Purchaser is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Purchaser will notify the Company promptly of the request or
requirement so that such Stockholder may seek an appropriate protective order or
waive compliance with the provisions of this Section 4F. If, in the absence of a
protective order or the receipt of a waiver hereunder, Purchaser is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, Purchaser may disclose the
Confidential Information to the tribunal; provided, however, that Purchaser
shall use reasonable efforts to obtain, at the request and expense of the
Company, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Company. The foregoing provisions shall not apply to any
Confidential Information that is generally available to the public immediately
prior to the time of disclosure. Notwithstanding anything herein to the
contrary, Purchaser may provide Confidential Information to any Person if
Purchaser deems necessary or desirable in connection with any transfer or
proposed transfer of Purchaser's Common Stock so long as such Persons have
entered into appropriate confidentiality arrangements with Purchaser (which
shall name the Company as an intended beneficiary).
4G. Filings. The Company and Purchaser shall make all filings required to
be made with the SEC, any stock exchange in which the Common Stock is listed and
all other governmental or quasi-governmental entities in connection with the
consummation of the transactions contemplated hereby and under the Stockholders
Agreement and the Stock Purchase Warrant. All such filings shall be in
compliance with all applicable laws, regulations, rules and ordinances of all
applicable stock exchanges and governmental and quasi-governmental entities in
all material respects and shall not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they shall be made not
misleading.
4H. Mergers or Consolidations. If the Thayer Directors do not vote in favor
of an acquisition, merger, consolidation or other transaction involving any
Person pursuant to Section 4J(ii), neither Purchaser nor its Affiliates shall
acquire (via stock purchase, asset purchase, merger, recapitalization, share
exchange, consolidation or other transaction) or make an investment in such
Person within two years after the date on which the Board of Directors of the
Company voted on such acquisition, merger, consolidation or other transaction.
4I. Material Decisions. The Company shall not make any material employment,
termination or compensation decision regarding the chief executive officer, the
president, the executive vice president, the chief financial officer or the
chief operating officer of the Company or any Subsidiary without the prior
consent of the board of directors of the Company or any Subsidiary, as
applicable.
4J. Super Majority Board Approval. Without the prior consent of at least
65% of the members of the Board of Directors of the Company, the Company shall
not, and shall cause each Subsidiary not to:
(i) make any capital expenditures for purchases of property or
equipment (other than capital expenditures for property or equipment to be
leased or sold in the Ordinary Course of Business) which shall cause the
Company's and the Subsidiaries' expenditures for any fiscal year to exceed
by more than 10% the amount set forth for capital expenditures for
purchases of property and equipment (other than capital expenditures for
property and equipment to be leased or sold in the Ordinary Course of
Business) in the applicable Operating Budget;
(ii) acquire (via stock purchase, asset purchase, merger,
recapitalization, share exchange, consolidation or other transaction) or
make an investment in any Person or permit any Subsidiary to acquire (via
stock purchase, asset purchase, merger, recapitalization, share exchange,
consolidation or other transaction) or make an investment in any Person;
provided that Company or any Subsidiary may acquire (via stock purchase,
asset purchase, merger, recapitalization, share exchange, consolidation or
other transaction) or make an investment in any Person without the consent
of at least 65% of the members of the Board of Directors of the Company so
long as such transaction involves consideration or has a value of less than
$5,000,000; or
(iii) except in the Ordinary Course of Business, sell, lease or
otherwise dispose of, or permit any Subsidiary to sell, lease or otherwise
dispose of, more than 20% of the consolidated assets of the Company and its
Subsidiaries (computed on the basis of book value, determined in accordance
with GAAP consistently applied, or fair market value, determined by the
Board of Directors of the Company in its reasonable good faith judgment) in
any transaction or series of related transactions.
4K. Compensation Committee. Without the prior consent of at least 51% of
the members of the Compensation Committee of the Board of Directors of the
Company, the Company shall not, and shall cause each Subsidiary not to:
(i) grant any stock option, stock appreciation right, restricted stock
or other stock based compensation to any officer, employee, director or
consultant of the Company or any Subsidiary other than pursuant to the 1998
Long-Term Incentive Plan or the Employee Share Purchase Plan, each as in
effect on the date of this Agreement; or
(ii) accelerate the vesting of or remove any restrictions upon any
stock option, stock appreciation right, restricted stock or other stock
based compensation except as specifically required under the terms of such
stock option, stock appreciation right, restricted stock or other stock
based compensation.
4L. Determination Letter. As soon as possible following the Closing (but in
no event later than two months thereafter), the Company shall cause to be
submitted to the IRS an application for a determination that the MLC Group, Inc.
401(k) Plan is qualified under Section 401(a) of the Code, and shall take any
and all actions as may be required by the IRS (including, but not limited to,
entering into a closing agreement) in order to cause the IRS to issue such a
determination.
4M. Transfer Agent Restriction. The Company shall cause First Union
National Bank Corporate Trust, as transfer agent for the Company, to (i) place
as of the date hereof a restriction on transfer on all Common Stock owned by any
of Bruce M. Bowen, Kevin M. Norton or Patrick J. Norton, Jr. (including, without
limitation, stock certificates numbered 12, 13, 90, 93, 95, 96, 187 and 190),
and (ii) keep such restrictions in place until the legend set forth in the
Stockholders Agreement is placed on such stock certificates
Section 5.. Representations and Warranties of the Company. As a material
inducement to Purchaser to enter into this Agreement and purchase the Shares
hereunder, the Company hereby represents and warrants as of the date hereof as
follows:
5A. Organization, Corporate Power and Licenses. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify, except
where the failure to so qualify would not have a Material Adverse Effect. The
Company possesses all requisite corporate power and authority and all material
licenses, permits and authorizations necessary to own and operate its
properties, to carry on its businesses as now conducted and as presently
proposed to be conducted and to carry out the transactions contemplated by this
Agreement, the Stockholders Agreement and the Stock Purchase Warrant.
5B. Capitalization and Related Matters.
(i)......As of immediately before the Closing, the authorized capital stock
of the Company shall consist of: (x) 2,000,000 shares of Preferred Stock, $.01
per share par value, of which zero shares are issued and outstanding, and (y)
25,000,000 shares of Common Stock, $.01 per share par value, of which 6,348,603
shares are issued and outstanding. As of immediately before the Closing, neither
the Company nor any Subsidiary shall have outstanding any capital stock,
options, convertible securities, securities or rights containing any profit
participation features, or any stock appreciation right or phantom stock plan,
except as set forth on Section 5B of the Disclosure Schedule attached hereto
(the "Disclosure Schedule"). Section 5B of the Disclosure Schedule accurately
sets forth the following information with respect to all outstanding options and
rights to acquire the Company's and the Subsidiaries' capital stock: the holder,
the number of shares covered, the exercise price and the expiration date. As of
immediately before the Closing, neither the Company nor any Subsidiary shall be
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any warrants, options or
other rights to acquire its capital stock, except as set forth on Section 5B of
the Disclosure Schedule. As of the Closing, all of the outstanding shares of the
Company's capital stock shall be validly issued, fully paid and nonassessable.
(ii).....There are no statutory or, to the Company's Knowledge, contractual
stockholders' preemptive rights or rights of refusal with respect to the
issuance of the Shares. Assuming Purchaser's representations and warranties set
forth in Section 6 are true and correct as of the date hereof, the Company has
not violated any applicable federal or state securities laws in connection with
the offer, sale or issuance of any of its capital stock, and the offer, sale and
issuance of the Shares do not require registration under the Securities Act or
any applicable state securities laws. To the Company's Knowledge, other than the
Stockholders Agreement and the Stock Purchase Warrant, there are no agreements
between the Company's shareholders with respect to the voting or transfer of the
Company's capital stock or with respect to any other aspect of the Company's
affairs.
5C. Subsidiaries. Section 5C of the Disclosure Schedule correctly sets
forth the name of each Subsidiary, the jurisdiction of its incorporation or
under which it was formed and the Persons owning the outstanding securities of
such Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction under which it was formed, possesses
all requisite power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted in the future, and
is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify except where the failure
to so qualify would not have a Material Adverse Effect. All of the outstanding
securities of a Subsidiary which are owned by the Company or another Subsidiary
are owned free and clear of any Lien and are not subject to any option or right
to purchase any such shares. Except as set forth in Section 5C of the Disclosure
Schedule, neither the Company nor any Subsidiary owns or holds the right to
acquire any shares of stock or any other security or interest in any other
Person.
5D. Authorization; No Breach. The execution, delivery and performance of
this Agreement, the Stockholders Agreement and the Stock Purchase Warrant by the
Company have been duly authorized by the Company. Each of this Agreement, the
Stockholders Agreement and the Stock Purchase Warrant, when it is executed by
the other parties thereto, will constitute a valid and binding obligation of the
Company enforceable in accordance with its respective terms except to the extent
that the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws of general application relating to or affecting the enforcement of
creditors' rights or by general principles of equity. Except as set forth in
Section 5D of the Disclosure Schedule, the execution and delivery by the Company
of this Agreement, the Stockholders Agreement and the Stock Purchase Warrant,
the offering, sale and issuance of the Shares hereunder and the fulfillment of
and compliance with the respective terms hereof and thereof by the Company do
not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any Lien upon the Company's or any Subsidiaries' securities or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to, (A) the Charter, the By-Laws or the constituting
documents of any Subsidiary, (B) any law, statute, rule or regulation to which
the Company or any Subsidiary is subject, or (C) any material agreement or
instrument, or any order, judgment or decree to which the Company or any
Subsidiary is subject, except in the case of (B) and (C) were such conflict,
default or violation would not have a Material Adverse Effect.
5E. SEC Documents and Financial Statements. The Company has heretofore
delivered to Purchaser each of the
following:
(i) Annual Report of the Company on Form 10-K as filed with the SEC
for the Company's fiscal year ended March 31, 1998; and
(ii) Quarterly Report of the Company on Form 10-Q as filed with the
SEC for the fiscal quarter of the Company ended June 30, 1998.
Each of the foregoing documents (the "SEC Reports") did not at the time it was
filed with the SEC, and except as set forth on Schedule 5E of the Disclosure
Schedule or a subsequent SEC Report, do not as of the date hereof, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, or are now made, respectively, not misleading. All of the
financial statements contained in the SEC Reports have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, fairly present in all material respects the financial position
of the Company and the Subsidiaries as of such dates and the results of
operations and cash flows of the Company and the Subsidiaries for such periods,
and are consistent with the books and records of the Company and the
Subsidiaries; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (none of which could, alone or in the
aggregate, reasonably be expected to have a Material Adverse Effect) and lack
footnotes and other presentation items.
5F. Reports with the SEC. The Company and the Subsidiaries have made all
filing with the SEC which they are required to make (including without
limitation all required filings under the Securities Act and the Exchange Act),
and have not received any request from the SEC to file any amendment or
supplement to any of the reports filed with the SEC. Section 5F of the
Disclosure Schedule sets forth all substantive correspondence between the SEC
and the Company concerning or relating to Securities Act or Exchange Act
compliance.
5G. Absence of Undisclosed Liabilities. The Company and the Subsidiaries
have no Liabilities except (i) obligations under executory contracts or
commitments described in Section 5R of the Disclosure Schedule or under
executory contracts and commitments which are not required to be disclosed
thereon (but not Liabilities for breaches thereof), (ii) Liabilities reflected
on the liabilities side of the Latest Balance Sheet and (iii) Liabilities which
have arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business or otherwise in accordance with the terms and conditions of this
Agreement (none of which is a Liability resulting from, arising out of, or
relating to any breach of contract, breach of warranty, tort, infringement or
violation of law or environmental matter, including those arising under
Environmental and Safety Requirements).
5H. Absence of Certain Developments. Except as set forth on Section 5H of
the Disclosure Schedule or expressly contemplated by this Agreement, since the
date of the Latest Balance Sheet, (i) neither the Company nor any Subsidiary has
suffered an event which would have a Material Adverse Effect, (ii) the
businesses of the Company and the Subsidiaries have been operated only in the
Ordinary Course of Business, (iii) there has not been any material loss of, or
material reduction in the amount of business done with, or any threat or such
material loss or reduction by, any key customer of the Company or any
Subsidiary, or any material loss or threatened loss of any source of supply for
goods or services to the Company or any Subsidiary that is material to its
business and (iv) neither the Company nor any Subsidiary has taken any of the
following actions:
(a) amended its certificate of incorporation or by-laws;
(b) (w) split, combined or reclassified any of its respective capital
stock, (x) declared, set aside or paid any dividend or other distribution
payable in cash, stock or property with respect to its capital stock, (y)
issued or sold any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, shares of its capital stock, or (z) redeemed, purchased or
otherwise acquired directly or indirectly any capital stock;
(c) (x) acquired, sold, licensed, leased or disposed of any property,
including real property and Intellectual Property (except in the Ordinary
Course of Business), or (y) entered into any commitment or transaction
which individually or in the aggregate would be material to the Company or
any of the Subsidiaries;
(d) (w) incurred or assumed any Indebtedness in excess of $500,000 in
the aggregate, (x) made any material loans, advances or capital
contributions to, or investments in, any other Person, (y) pledged or
otherwise encumbered shares of capital stock, or (z) mortgaged or pledged
any of its material assets, or create any Liens with respect thereto;
(e) (x) acquired (by merger, consolidation, acquisition of stock or
assets, or otherwise) any Person or division thereof or any equity interest
therein, (y) entered into any contract or agreement which would be material
to the Company and the Subsidiaries, or (z) authorized any new capital
expenditure or expenditures which, in the aggregate, are in excess of
$500,000;
(f) changed any of the accounting methods used unless required by
GAAP;
(g) adopted or amended in any material respect any collective
bargaining agreement;
(h) filed any amended Tax Return, surrendered any right to claim a
refund of Taxes or take any similar action, or omitted to take any action
relating to the filing of any Tax Return or the payment of any Tax, if such
election, adoption, change, amendment, agreement, settlement, surrender,
consent, or other action or omission would have the effect of increasing
the present or future tax liability or decreasing any present or future Tax
asset of the Company, Purchaser or any Affiliate of Purchaser; or
(i) authorized or entered into an agreement, whether in writing or
otherwise, to do any of the actions prohibited above.
5I. Properties.
(a)..Attached as Schedule 5I is a list of all leases, subleases and
other occupancy agreements, including all amendments, extensions and other
modifications (the "Leases") for real property (the "Real Property"). The
Company has a good and valid leasehold interest in and to all of the Real
Property, subject to no Liens. Each Lease is in full force and effect and is
enforceable in accordance with its terms. There exists no default or condition
which, with the giving of notice, the passage of time or both, would become a
default under any Lease. Except as described on Schedule 5I, no consent, waiver,
approval or authorization is required form any landlord under any Lease as a
result of the execution of this Agreement, the Stockholders Agreement, the Stock
Purchase Warrant or the consummation of the transactions contemplated hereby or
thereby.
(b)......The Real Property constitutes all of the real property owned,
lease, occupied or otherwise utilized in connection with the business of the
Company and its Subsidiaries. Other than the Company and the Subsidiaries, there
are no parties in possession or parties having any current or future right to
occupy any of the Real Property. All improvements located on the Real Property
have direct access to a public road adjoining such Real Property. No such
improvements or accessways encroach on land not included in the Real Property
and no such improvement is dependent for its access, operation or utility on any
land, building or other improvement not included in the Real Property.
(c)......There are no proceedings in eminent domain or other similar
proceedings pending or, to the Knowledge of the Company, threatened, affecting
any portion of the material Real Property owned or leased by the Company or any
Subsidiary. There exists no writ, injunction, decree, order or judgment
outstanding, nor any litigation, pending or threatened, relating to the
ownership, lease, use, occupancy or operation by any Person of any such Real
Property. The current use of the Real Property does not violate in any material
respect any instrument of record or agreement affecting such Real Property.
There is no violation of any covenant, condition, restriction, easement,
agreement or order of any governmental authority having jurisdiction over any of
the Real Property that affects such Real Property or the use or occupancy
thereof, except a violation which would not have a Material Adverse Effect. No
damage or destruction has occurred with respect to any of the Real Property
that, individually or in the aggregate, has had or will have a Material Adverse
Effect.
5J. Assets. Except as set forth on Section 5J of the Disclosure Schedule,
the Company and the Subsidiaries have good and marketable title to, or a valid
leasehold interest in, the material Real Property and assets used by them,
located on their premises or shown on the Latest Balance Sheet or acquired
thereafter, free and clear of all Liens, except for sales of inventory in the
Ordinary Course of Business since the date of the Latest Balance Sheet. Except
as described on the Section 5J of the Disclosure Schedule, the assets are in
good operating condition in all material respects, reasonable wear and tear
excepted, and are fit for use in the Ordinary Course of Business. The Company
and the Subsidiaries validly own or lease all buildings, machinery, equipment,
and other tangible assets necessary for the conduct of their businesses as
presently conducted.
5K. Tax Matters. Except as set forth on Section 5K of the Disclosure
Schedule:
(i) the Company, the Subsidiaries and each Affiliated Group have
timely filed all material Tax Returns which are required to be filed, and
all such Tax Returns are true, complete and accurate in all material
respects and have been prepared in all material respects in compliance with
applicable law;
(ii) except for Taxes less than $25,000 in the aggregate which are
being contested in good faith and by appropriate proceedings (with respect
to which adequate reserves have been established and are being maintained
in accordance with GAAP), all Taxes due and payable by the Company, the
Subsidiaries and each Affiliated Group, whether or not shown on a Tax
Return, have been paid by the Company, the Subsidiaries and each Affiliated
Group, respectively, and no Taxes are delinquent;
(iii) the amount accrued as a current liability for taxes on the
Latest Balance Sheet shall be sufficient to pay in full all Taxes for
taxable periods (or portions thereof) of the Company, Subsidiaries and each
Affiliated Group ending on or before the date of the Latest Balance Sheet,
whether or not such Taxes are due on or before such date and, since the
date of the Latest Balance Sheet, the Company has not incurred any
Liability for Taxes other than in the Ordinary Course of Business;
(iv) there is no action, suit, taxing authority proceeding or audit
now in progress, pending or, to the Knowledge of the Company, threatened
against or with respect to the Company, any Subsidiary or any Affiliated
Group and neither the Company, any Subsidiary, nor any Affiliated Group
reasonably expect any taxing authority to claim or assess any additional
Taxes in respect of the Company or any Subsidiary for any period, except in
each case which, if adversely determined, would not have a Material Adverse
Effect;
(v) the Company and the Subsidiaries have not been members of an
Affiliated Group, other than one in which the Company was the ultimate
parent, and the Company and the Subsidiaries have no liability for Taxes of
any Person other than under Treasury Regulations Section 1.1502-6 or any
similar provision of local, state or foreign Tax law;
(vi) the Company, the Subsidiaries and each Affiliated Group has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party;
(vii) the Company and the Subsidiaries have not consented to extend to
a date later than the date hereof the time in which any Tax may be assessed
or collected by any taxing authority; and no Affiliated Group has consented
to extend to a date later than the date hereof the time in which any Tax
may be assessed or collected by any taxing authority with respect to a
taxable period during which the Company or any Subsidiary was a member of
the Affiliated Group;
(viii) the Company and the Subsidiaries are not a party to or bound by
any Tax allocation or Tax sharing agreement and have no current or
potential contractual obligation to indemnify any other Person with respect
to Taxes; and
(ix) the Company, each Subsidiary and each Affiliated Group have not
made any payments, and are not and will not become obligated (under any
contract entered into on or before the Closing) to make any payments, that
will be non-deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign income Tax law).
5L. Brokerage. Except as set forth in Section 5L of the Disclosure
Schedule, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement binding upon the Company or any
Subsidiary. The Company shall pay, and hold Purchaser harmless against, any
Liability, Loss or expense (including, without limitation, reasonable attorneys'
fees and out-of-pocket expenses) arising in connection with any such claim.
5M. Employees. Except as set forth on Section 5M of the Disclosure
Schedule, to the Knowledge of the Company, no key executive employee and no
group of employees or independent contractors of the Company or any Subsidiary
has any plans to terminate his, her or its employment or relationship as an
independent contractor with the Company or any Subsidiary. Except as set forth
in Section 5M of the Disclosure Schedule, no organizational effort is presently
being made or, to the Knowledge of the Company, threatened by or on behalf of
any labor union with respect to any employees of the Company or any Subsidiary
and none of their employees are represented by any labor union. Except as set
forth in Section 5M of the Disclosure Schedule and, in each case, where the
failure to comply would not have a Material Adverse Effect, the Company and the
Subsidiaries are in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and are not engaged in any unfair labor practice and, to the Knowledge of
the Company, there is no reasonable basis for any unfair labor practice
complaint or claim to be asserted against the Company or any Subsidiary, and
there is no labor strike, dispute, slowdown or stoppage actually pending or, to
the Knowledge of the Company, threatened, against the Company or any Subsidiary.
The Company and the Subsidiaries have no labor contracts with any representative
of any of the Company's or any Subsidiary's employees.
5N. ERISA.
(i) Except as set forth on Section 5N of the Disclosure Schedule, with
respect to current or former employees of the Company or any Subsidiary, the
Company and the Subsidiaries do not maintain or contribute to or have any actual
or potential liability with respect to any (a) deferred compensation or bonus or
retirement plans or arrangements, (b) qualified or nonqualified defined
contribution or defined benefit plans or arrangements which are employee pension
benefit plans (as defined in Section 3(2) of ERISA), or (c) employee welfare
benefit plans, (as defined in Section 3(1) of ERISA), stock option or stock
purchase plans, or material fringe benefit plans or programs whether in writing
or oral and whether or not terminated. The Company has never contributed to any
multiemployer pension plan (as defined in Section 3(37) of ERISA), and neither
the Company nor any of its Subsidiaries has ever maintained or contributed to
any defined benefit plan (as defined in Section 3(35) of ERISA). The plans,
arrangements, programs and agreements referred to in the preceding two sentences
are referred to collectively as the "Plans." The Company does not maintain or
contribute to any Plan which provides health, accident or life insurance
benefits to former employees, their spouses or dependents, or to any other
Person, other than in accordance with Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code ("COBRA").
(ii) Except as set forth on Section 5N of the Disclosure Schedule attached
hereto, the Plans (and related trusts and insurance contracts) set forth on
Section 5N of the Disclosure Schedule comply in form and in operation with the
requirements of applicable laws and regulations, including ERISA and the Code
and the nondiscrimination rules thereof. All contributions, premiums or payments
which are due on or before the Closing Date under each Plan have been paid. Each
Plan which is intended to be qualified under Section 401(a) of the Code has
received from the Internal Revenue Service a determination letter stating that
such Plan is qualified under Section 401(a) of the Code, and nothing has
occurred since the date of such determination that could adversely affect the
qualification of such Plan.
(iii) All required reports and descriptions (including Form 5500 annual
reports, summary annual reports and summary plan descriptions) with respect to
the Plans set forth on Section 5N of the Disclosure Schedule have been properly
and timely filed with the appropriate government agency and distributed to
participants as required. The Company has complied with the requirements of
COBRA.
(iv) With respect to each Plan set forth on Section 5N of the Disclosure
Schedule attached hereto, (a) there have been no non-exempt prohibited
transactions as defined in Section 406 of ERISA or Section 4975 of the Code, (b)
no fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach
of fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of such Plans, and (c) no actions,
investigations, suits or claims with respect to the Plans or assets thereof
(other than routine claims for benefits) are pending or threatened, and the
Company has no Knowledge of any facts which would give rise to or could
reasonably be expected to give rise to any such actions, suits or claims.
(v) With respect to each of the Plans listed on Section 5N of the
Disclosure Schedule attached hereto, the Company has furnished to Purchaser true
and complete copies of (a) the current plan documents, summary plan descriptions
and summaries of material modifications and other material employee
communications, (b) the Form 5500 annual report (including all schedules and
other attachments) for the most recent three years, (c) all related trust
agreements, insurance contracts or other funding agreements which implement such
plans and (d) all contracts relating to each such plan, including, without
limitation, service provider agreements, insurance contracts, investment
management agreements and record keeping agreements.
(vi) The Company has not incurred and has no Knowledge of any basis upon
which it could reasonably incur any Liability to the Pension Benefit Guaranty
Corporation (other than routine premium payments) or otherwise under Title IV of
ERISA (including any withdrawal liability) or under the Code with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) that the
Company or any member of its "controlled group" (within the meaning of Code
Section 414) maintains or ever has maintained or to which any of them
contributes, ever has contributed, or ever has been required to contribute.
5O. Compliance with Laws. The Company and the Subsidiaries are, and at all
times have been, in compliance with all applicable laws, regulations and
ordinances of any governmental entity, and no claims have been filed against the
Company or any Subsidiary alleging a violation of any such laws or regulations,
and the Company and the Subsidiaries have not received notice of any such
violations, except, in each case, where the failure to comply would not have a
Material Adverse Effect.
5P. Environmental, Health, and Safety Matters. Except as set forth in
Section 5P of the Disclosure Schedule:
(i) the Company, the Subsidiaries and their respective Affiliates have
complied and are in compliance with all Environmental and Safety
Requirements (including without limitation all permits and licenses
required thereunder).
(ii) the Company, the Subsidiaries and their respective Affiliates
have not received any written or oral notice, report or other information
regarding any actual or alleged violation of Environmental and Safety
Requirements, or any Liabilities or potential Liabilities, including any
investigatory, remedial or corrective obligations, relating to any of them
or its facilities arising under Environmental and Safety Requirements;
(iii) none of the following exists at any property or facility owned
or operated by the Company or any Subsidiary or any of their respective
Affiliates: (a) underground storage tanks, (b) asbestos-containing material
in any form or condition, (c) materials or equipment containing
polychlorinated biphenyls, or (d) landfills, surface impoundments, or
disposal areas;
(iv) neither the Company, any Subsidiary nor any of their predecessors
or Affiliates has treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled, or released any substance, including
without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by
any such substance) in a manner that has given or would give rise to
Liabilities, including without limitation any Liability for response costs,
corrective action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to the CERCLA, the Solid Waste
Disposal Act, as amended or any other Environmental and Safety
Requirements;
(v) neither this Agreement nor the consummation of the transactions
contemplated hereby will result in any obligations for site investigation
or cleanup, or notification to or consent of government agencies or third
parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental and Safety Requirements;
(vi) the Company, the Subsidiaries and their Affiliates have not,
either expressly or by operation of law, assumed, undertaken or otherwise
become subject to any Liability, including without limitation any Liability
for corrective or remedial action, of any other Person relating to
Environmental and Safety Requirements; and
(vii) no facts, events or conditions relating to the past or present
facilities, properties or operations of the Company, any Subsidiary or any
of their predecessors of Affiliates will prevent, hinder or limit continued
compliance with Environmental and Safety Requirements, give rise to any
investigatory, remedial or corrective Liabilities pursuant to Environmental
and Safety Requirements, or give rise to any other Liabilities pursuant to
Environmental and Safety Requirements, including without limitation any
Liability relating to onsite or offsite releases or threatened releases of
hazardous materials, substances or wastes, personal injury, property damage
or natural resources damage;
except, in each case, where the failure to comply would not have a Material
Adverse Effect.
5Q. Affiliated Transactions. Except for those agreements or transactions
listed on Section 5Q of the Disclosure Schedule or contemplated by this
Agreement, neither the Company nor any Subsidiary has (i) paid, loaned or
advanced any amount to, (ii) sold, transferred or leased any properties or
assets to or (iii) entered into or continued any agreement, arrangement or
understanding (written or otherwise) with, any of its officers, directors,
employees or Affiliates or any individual related by blood, marriage or adoption
to any such Person or entity in which any such Person owns a beneficial
interest.
5R. Contracts and Commitments. Section 5R of the Disclosure Schedule lists
the following agreements to which the Company or any Subsidiary is a party or by
which any of their assets are bound:
(i) any indenture, mortgage, note, bond or other evidence of
Indebtedness, any loan, security, credit, factoring or similar agreement
under which the Company or any Subsidiary has borrowed or may borrow money
or issued any note, bond, indenture or other evidence of Indebtedness for
more than $10,000 individually or $25,000 in the aggregate or under which
the Company or any Subsidiary has imposed (or may impose) a Lien on any of
its respective assets, tangible or intangible (except for non-recourse
notes relating to specific leases entered into by the Company or any
Subsidiary in the Ordinary Course of Business, in which case, the Company
has made available to Purchaser a sample of such notes);
(ii) any confidentiality, non-solicitation or non-competition
agreement or any agreement which restricts, limits or prohibits the Company
or any Subsidiary from entering into any new, or expanding any existing,
line of business or any agreement which contains geographic or other
limitations, prohibitions or restrictions on the Company's or any
Subsidiary's ability to conduct business activities;
(iii) any agreement under which the Company or any Subsidiary could
have Liabilities after the Closing with any current or former directors,
officers, and employees in the nature of an employment agreement, a
consulting agreement or a severance agreement;
(iv) any agreement under which the Company or any Subsidiary could
have Liabilities in the future relating to the acquisition or disposition
of material assets or properties by way of merger, consolidation, purchase,
sale or otherwise, or granting to any Person a right at such Person's
option to purchase or acquire any material asset or property, of the
Company or any Subsidiary or any interest therein (not including
dispositions of inventory in the Ordinary Course of Business);
(v) any agreement for the construction, acquisition or modification of
any land, building, structure, improvement, fixture or other fixed asset,
or for the incurrence of any other capital expenditure involving amounts in
excess of $500,000 in the aggregate;
(vi) any agreement with the Company or any Subsidiary, on the one
hand, and any officer, director, employee or Affiliate of the Company or
any Subsidiary, on the other hand; and
(vii) any agreement not otherwise required to be disclosed pursuant to
this Section 5R the consequences of a default or termination thereunder
would have a Material Adverse Effect.
The Company has made available to Purchaser a correct and complete copy of each
written agreement listed in Section 5R of the Disclosure Schedule and a written
summary setting forth the terms and conditions of each oral agreement listed in
Section 5R of the Disclosure Schedule. Except as set forth in Section 5R of the
Disclosure Schedule, all such agreements are valid, binding and enforceable
obligations of the Company, as applicable, in accordance with their terms,
except to the extent that the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws of general application relating to or
affecting the enforcement of creditors' rights or by general principles of
equity. Neither the Company nor any Subsidiary is in default in the observance
or the performance of any material term or obligation to be performed by it
under any such agreement, and to the Knowledge of the Company, no other Person
is in default in the observance or the performance of any material term or
obligation to be performed by such Person under any such agreement, except where
such default would not have a Material Adverse Effect.
5S. Intellectual Property.
(i) Section 5S of the Disclosure Schedule contains a complete and
accurate list of all (a) patented or registered Intellectual Property owned
by the Company or any Subsidiary, (b) pending patent applications and
applications for registrations of other Intellectual Property filed by the
Company or any Subsidiary, (c) material unregistered trade names and
corporate names owned or used by the Company or any Subsidiary and (d)
material unregistered trademarks, service marks, copyrights, and computer
software owned or used by the Company or any Subsidiary. Section 5S of the
Disclosure Schedule also contains a complete and accurate list of all
licenses and other rights granted by the Company or any Subsidiary to any
third party with respect to any Intellectual Property and all material
licenses and other rights granted by any third party to the Company or any
Subsidiary with respect to any Intellectual Property, in each case
identifying the subject Intellectual Property. All of the material licenses
set forth in Section 5S of the Disclosure Schedule are valid and binding
obligations of the Company or any Subsidiary, and to the Knowledge of the
Company, the other parties thereto, and are enforceable against the Company
or any Subsidiary, and to the Knowledge of the Company, the other parties
thereto, in accordance with their respective terms, except to the extent
that the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws of general application relating to or affecting the
enforcement of creditors' rights or by general principles of equity.
(ii) Except as set forth in Section 5S the Disclosure Schedule, the
Company or a Subsidiary owns and possesses all right, title and interest in
and to, or has the right to use pursuant to a valid license, all
Intellectual Property necessary for the operation of the businesses of the
Company and the Subsidiaries as presently conducted.
5T. Litigation. Except as set forth in Section 5T of the Disclosure
Schedule, there are no actions, suits, complaints, charges, proceedings, orders,
investigations or claims (i) pending other than those filed but not yet served
on the Company or any Subsidiary or, (ii) to the Company's Knowledge, threatened
against the Company, any Subsidiary or any of their assets or properties which,
if adversely determined, would have a Material Adverse Effect.
5U. Year 2000. To the Knowledge of the Company,
(i none of the computer software, computer firmware, computer hardware
(whether general or special purpose) or other similar or related items of
automated, computerized or software systems that are used or relied on by
Company or by any of its Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will generate
incorrect data or will produce incorrect results when processing, providing
or receiving (a) date-related data from, into and between the twentieth and
twenty-first centuries or (b) date-related data in connection with any
valid date in the twentieth and twenty-first centuries;
(ii none of the products and services sold, licensed, leased,
rendered, or otherwise provided by the Company or by any of its
Subsidiaries in the conduct of their respective businesses will
malfunction, will cease to function, will generate incorrect data or will
produce incorrect results when processing, providing or receiving (a)
date-related data from, into and between the twentieth and twenty-first
centuries or (b) date-related data in connection with any valid date in the
twentieth and twenty-first centuries; and, accordingly, neither the Company
nor any of its Subsidiaries is or will be subject to any claim, demand,
action, suit, liability, damage, material loss, or material expense arising
from, or related to, circumstances where such products and services
malfunction, cease to function, generate incorrect data, or produce
incorrect results when processing, providing or receiving (x) date-related
data from, into and between the twentieth and twenty-first centuries or (y)
date-related data in connection with any valid date in the twentieth and
twenty-first centuries; and
(iii neither Company nor any of its Subsidiaries has made any other
representations or warranties regarding the ability of any product or
service sold, licensed, leased, rendered, or otherwise provided by Company
or by any of its Subsidiaries in the conduct of their respective businesses
to operate without malfunction, to operate without ceasing to function, to
generate correct data or to produce correct results when processing,
providing or receiving (a) date-related data from, into and between the
twentieth and twenty-first centuries and (b) date-related data in
connection with any valid date in the twentieth and twenty-first centuries.
5V. Disclosure. Neither this Agreement nor the Disclosure Schedule or any
statements, documents, certificates or other items prepared or supplied to
Purchaser by or on behalf of the Company or any Subsidiary as set forth in or
required under this Agreement contain any untrue statement of a material fact or
omit a material fact necessary to make each statement contained herein or
therein not misleading.
Section 6. Representations and Warranties of Purchaser. As a material
inducement to the Company to enter into this Agreement and sell the Shares,
Purchaser hereby represents and warrants as of the date hereof as follows:
6A. Organization and Power of Purchaser. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and is qualified to do business in every jurisdiction in
which its ownership of property or conduct of business requires it to qualify.
6B. Authorization; No Breach. The execution, delivery and performance of
this Agreement, the Stockholders Agreement and the Stock Purchase Warrant by
Purchaser have been duly authorized by Purchaser. Each of this Agreement, the
Stockholders Agreement and the Stock Purchase Warrant, when it is executed by
the other parties thereto, will constitute a valid and binding obligation of
Purchaser enforceable in accordance with its respective terms except to the
extent that the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws of general application relating to or affecting the enforcement
of creditors' rights or by general principles of equity. The execution and
delivery by Purchaser of this Agreement, the Stockholders Agreement and the
Stock Purchase Warrant, the purchase of the Shares hereunder and the fulfillment
of and compliance with the respective terms hereof and thereof by Purchaser do
not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any Lien upon Purchaser's securities or assets pursuant to, (iv)
give any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency pursuant to,
(A) the constituting documents of Purchaser, (B) any law, statute, rule or
regulation to which Purchaser is subject, or (C) any material agreement or
instrument, or any order, judgment or decree to which Purchaser is subject,
except in the case of (B) and (C) were such conflict, default or violation would
not have a material adverse effect on Purchaser.
6C. Brokerage. There are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by this
Agreement, based on any arrangement or agreement binding upon Purchaser for
which the Company or the Subsidiaries could become liable. Purchaser shall pay,
and hold the Company harmless against, any Liability, Loss or expense
(including, without limitation, reasonable attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
6D. Purchaser's Investment Representations. Purchaser hereby represents
that it is acquiring the Shares purchased hereunder or acquired pursuant hereto
for its own account with the present intention of holding such securities for
purposes of investment, and that it has no intention of selling such securities
in a public distribution in violation of the federal securities laws or any
applicable state securities laws; provided that nothing contained herein shall
prevent Purchaser and subsequent holders of Shares from transferring such
securities in compliance with the applicable federal and state securities laws,
subject to the provisions of the Stockholders Agreement.
Section 7. Termination.
7A. Termination. All rights of Purchaser and obligations of the Company to
the Purchaser under Section 4B shall terminate upon Thayer Shares constituting
less than 5% of the issued and outstanding Common Stock, and such sections shall
remain terminated even if Purchaser, its Affiliates and any holders of Thayer
Shares later own in the aggregate 5% or more of the issued and outstanding
Common Stock; provided that the limited partners of Thayer Equity Investors III,
L.P. shall not be treated as Affiliates of Thayer or the holders of Thayer
Shares for the purposes of this Section 7A. Except with respect to the
representations and warranties contained herein, all other rights of Purchaser
and obligations of the Company to Purchaser shall terminate upon the first to
occur of (i) there being no Thayer Shares, and (ii) the consummation of an
Approved Sale.
Section 8. Representations and Warranties.
8A. Survival of Representations and Warranties. All representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
continue in full force and effect until thirty days after the Company delivers
to Purchaser audited financial statements of the Company and the Subsidiaries as
set forth in Section 4A(i)(b) for the fiscal year ending March 31, 1999.
8B. Indemnification. Notwithstanding anything herein to the contrary, the
Company shall not be liable for any inaccuracy of any representation or warranty
contained herein unless all such inaccuracies, in the aggregate, shall have a
Material Adverse Effect, provided that for the purpose of determining any
inaccuracy of a representation or warranty, any qualification as to materiality
or Material Adverse Effect contained therein shall be ignored.
Section 9. Miscellaneous.
9A. Expenses. The Company shall pay all out-of-pocket fees and expenses
(including reasonable attorneys fees) of the Company and the Purchaser incurred
in connection with this Agreement, the Stockholders Agreement, the Stock
Purchase Warrant and the transactions contemplated hereby and thereby.
9B. Consent to Amendments. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or waived and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company has obtained the prior written consent
of Purchaser. No other course of dealing between the Company and Purchaser or
any delay in exercising any rights hereunder or under the Stockholders Agreement
or the Stock Purchase Warrant shall operate as a waiver of any rights of any
such holders.
9C. Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and Purchaser and their respective permitted successors and assigns,
provided, however that Purchaser shall not assign this Agreement or any of the
rights or interests hereunder (except any right or interest directly related to
the ownership of the Shares) to any Person other than an Affiliate of Purchaser
within two years of the date hereof.
9D. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
9E. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
9F. Descriptive Headings; Interpretation. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a substantive
part of this Agreement. The use of the word "including" in this Agreement shall
be by way of example rather than by limitation.
9G. Governing Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto (including the Disclosure Schedule) shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
9H. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (i) when delivered personally to
the recipient, (ii) on the day following the date on which the same shall have
been sent to the recipient by reputable overnight courier service (charges
prepaid), (iii) when delivered via facsimile (with appropriate confirmation of
receipt), or (iv) on the third day following the date on which the same shall
have been mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to Purchaser and to the Company at the addresses
indicated below:
If to Purchaser:
c/o Thayer Equity Investors III, L.P.
1455 Pennsylvania Avenue, Suite 350
Washington, DC 20004
FAX: 202-371-0391
Attention: Carl J. Rickertsen
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W., Suite 1200
Washington, DC 20005-5793
FAX: 202-879-5200
Attention: Jack M. Feder, Esq.
If to the Company:
MLC Holdings, Inc.
11150 Sunset Hills Road, Suite 110
Reston, VA 20190-5321
FAX: 703-834-5718
Attention: Phillip G. Norton
with a copy to:
Alston & Bird, LLP
601 Pennsylvania Avenue, N.W.
North Building, 11th Floor
Washington, DC 20004
FAX: 202-508-3333
Attention: Frank M. Conner, III, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
9I. No Strict Construction. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
9J. Entire Agreement. This Agreement (including the Disclosure Schedule and
the exhibits attached hereto), the Stockholders Agreement and the Stock Purchase
Warrant embody the complete agreement and understanding among the parties hereto
with respect to the subject matter hereof and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Purchase Agreement on the date first written above.
MLC HOLDINGS, INC.
By: /s/BRUCE M. BOWEN
--------------------------
Name: Bruce M. Bowen
Title: Executive Vice President
TC LEASING, LLC
By: THAYER EQUITY INVESTORS III, L.P.,
its managing member
By: TC EQUITY PARTNERS, L.L.C.,
its general partner
By: /s/JEFFREY W. GOETTMAN
-------------------------------
Name: Jeffrey W. Goettman
Title: Member