Exhibit 2.1
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT made as of this 1st day of February, 2005,
by and among MICRO SYSTEMS, INC., a Florida corporation (the "Company"), MSI
ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and the persons
whose signatures appear at the foot hereof (individually a "Stockholder" and
collectively the "Stockholders").
W I T N E S S E T H:
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WHEREAS, the Stockholders in the aggregate own 975,700 shares of common
stock, $0.01 par value per share (the "Common Stock"), representing all of the
outstanding capital stock of the Company; and
WHEREAS, the Purchaser and the Stockholders have agreed to the sale by the
Stockholders to the Purchaser of all of the outstanding Common Stock of the
Company upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants, warranties and mutual
agreements herein set forth, and in reliance upon the representations and
warranties contained herein, the parties do hereby agree as follows:
1. Definitions
1.1 Definition of Certain Terms.
As used herein, the following terms shall have the following
meanings:
Affiliate: means with respect to any Person, any Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
Agreement: means this Stock Purchase Agreement.
Applicable Law: means with respect to any Person, any statute, law,
ordinance, policy, guidance, rule, administrative interpretation, regulation,
order, writ, injunction, directive, judgment, decree or other requirement of any
Governmental Authority of the United States, or other foreign jurisdiction
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applicable to such Person or any of its Affiliates or ERISA Affiliates or any of
their respective properties, assets, officers, directors, employees, consultants
or agents (in connection with such officer's, director's, employee's,
consultant's or agent's activities on behalf of such Person or any of its
Affiliates or ERISA Affiliates).
Closing: as defined in Section 4.1.
Closing Date: as defined in Section 4.1.
Company: as defined in the Preamble to this Agreement.
Code: means the Internal Revenue Code of 1986, as amended, together with
the U.S. Treasury rulings and regulations promulgated thereunder. Contracts :
means all contracts, agreements, arrangements, options, leases, licenses, sales
and accepted purchase orders, commitments and other instruments of any kind,
whether written or oral, which relate to the Company and to which the Company is
a party or is otherwise bound by, or subject to on the Closing Date, including
the Material Contracts.
Damages: means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement including
reasonable costs, fees and expenses of attorneys, accountants, consultants and
other agents or independent contractors incurred in investigating, preparing for
and defending any thereof, and for avoidance of doubt references in this
Agreement to Damages include Environmental Liabilities.
Employee Benefit Plan: means any pension, retirement, profit-sharing,
deferred compensation, bonus or other incentive plan, or other employee benefit
program, arrangement, agreement or understanding, or medical, vision, dental or
other health plan, or life insurance or disability plan, or any other employee
benefit plan, including, without limitation, any Employee benefit plan" as
defined in Section 3(3) of ERISA to which the Company contributes or is a party
or is bound or under which it may have liability and which employees or former
employees of the Company (or their beneficiaries) are eligible to participate or
derive a benefit.
Environmental Law: means all laws, regulations, statutes, codes, permits,
orders, decrees, rules, judgments and decisions, including applicable precedent
and principles of common law, relating to the protection of human health or the
environment, including, but not limited to, those relating to (a) the release,
threatened release, containment, investigation, removal, remediation, response,
cleanup or abatement of any Hazardous Material; (b) the manufacture, generation,
formulation, processing, labeling, distribution, introduction into commerce,
use, treatment, handling, storage, recycling, disposal or transportation of any
Hazardous Material; (c) the protection, pollution or cleanup of the Environment;
(d) the condition of any building, facility, fixture or other structure; (e) the
protection of the health and safety of employees or the public.
Environmental Liabilities: means all Damages incurred (i) to comply with,
or by reason of the violation of, any Environmental Law; (ii) to investigate,
respond to, remediate or otherwise which result from the release or threatened
release of a Hazardous Material; or (iii) by reason of any injury to person,
property or the natural resources caused by or resulting from any environmental
conditions present at, created by, or arising out of the current or former
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operations of the Company or of any prior owner or operator of a facility or
site at which the Company operates, has operated or disposes or has disposed of
any Hazardous Material.
ERISA: means the Employee Retirement Income Security Act of 1974, as
amended.
Escrow Agent: means the firm of Matthews & Hawkins, P.A.
Escrow Agreement: means the agreement among the Escrow Agent, Stockholders'
Representative (on behalf of the Stockholders), the Company and the Purchaser in
the form attached hereto as Exhibit C. Upon execution of this Agreement, the
Escrow Agreement between the Company and the Purchaser in the form attached
hereto shall be executed and delivered to each party.
GAAP: means generally accepted accounting principles in the United States
as in effect from time to time and applied consistently throughout the periods
involved. Governmental Authority: means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
Hazardous Material: means (a) any substance, pollutant, containment
chemical, raw material product, byproduct, waste or other material which is now
or hereafter classified, identified, listed or regulated in any concentration
under or by any Environmental Law, now or hereafter in effect, or other
comparable laws; (b) any petroleum, hydrocarbon, asbestos containing material,
lead containing paint or plumbing, polychlorinated biphenyls, reactive materials
or radon; or (c) any other substance or material or waste which is or becomes
subsequently the subject of regulatory action by any Government Authority
pursuant to any applicable Environmental Law.
Indebtedness: of any Person means all obligations of such Person (a) for
borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) under capital leases and (d) in the nature of guarantees of the
obligations described in clauses (a) through (c) above of any other Person.
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Intellectual Property: means any patent, patent application and invention,
trademark, trade name, trademark or trade name registration or application,
copyright or copyright registration or application for copyright registration,
servicemark, brand mark or brand name or any pending application related
thereto, or any trade secret, proprietary know-how, programs or processes or any
similar rights relating to the Company, and each license or licensing agreement
for any of the foregoing.
Inventory: means all items of inventory owned or maintained by the Company
including all supplies, containers, packaging materials, raw materials, work-in
progress, finished goods and samples of the Company, and any claims, credits and
rights of recovery with respect to the Inventory.
Knowledge of Purchaser or Company: means the actual knowledge of any of the
Persons and the knowledge they would have had had they made commercially
reasonable inquiry and investigation.
Liability: means with respect to any Person, any liability or obligation of
such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated,
secured or unsecured, joint or several, due or to become due, vested or
unvested, executory, determined, determinable or otherwise.
Lien: means, with respect to any asset, any mortgage, title defect or
objection, lien, pledge, charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such asset.
Material Adverse Effect: means any circumstance, change or effect that,
individually or when taken together with all other such circumstances, changes
or effects is materially adverse to the Company.
Permitted Liens: means (i) Liens for Taxes or governmental assessments,
charges or claims the payment of which is not yet due, or for Taxes the validity
of which are being contested in good faith by appropriate proceedings; (ii)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen and other similar Persons and other Liens imposed by Applicable Law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith; (iii) Liens relating to deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security or to secure the performance of
leases, trade contracts or other similar agreements; and (iv) Liens securing
executory obligations under any Lease that constitutes an "operating lease"
under GAAP.
Person: means an individual, corporation, partnership, limited liability
company, association, trust, unincorporated organization or other legal entity.
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Tax or Taxes: means any form of taxation, levy, duty, charge, contribution,
withholding or impost of whatever nature (including any related fine, penalty,
cost, surcharge or interest) whenever and wherever imposed or assessed by, or
payable to, any Governmental Authority.
Tax Return: means all notices, elections, accounts, computations,
documentation, returns, reports, forms or other information required to be filed
or which ought to be filed with respect to any Tax.
2. Purchase and Sale of Stock
In reliance on the representations and warranties contained herein and
subject to all of the terms and conditions hereof, each of the Stockholders
hereby severally (and not jointly) agrees to sell, assign, transfer and deliver
to the Purchaser, and the Purchaser hereby agrees to purchase from the
Stockholders, on the Closing Date, all of the issued and outstanding Common
Stock held by each of the Stockholders (the "Stock").
3. Purchase Price.
Purchase Price. In full consideration of the sale of the Stock and subject
to the terms and conditions hereinafter set forth, the Purchaser hereby agrees
at the Closing to pay to the Person designated by the Stockholders as their
representative ("Stockholders' Representative"), NINETEEN MILLION SEVEN HUNDRED
SIXTY SEVEN THOUSAND ($19,767,000.00) DOLLARS by wire transfer in immediately
available funds to be allocated among the Stockholders in the proportion set
forth on Schedule 3.1 (the "Purchase Price").
4. The Closing.
4.1 Place and Date
The closing of the transactions contemplated by this Agreement shall take
place at the Company's offices in Fort Walton Beach, Florida or at such other
place as the parties may agree upon in writing, on or before February 2, 2005,
(or at such earlier time as the parties agree upon in writing). The closing is
referred to in this Agreement as the "Closing" and the date of the closing is
referred to herein as the "Closing Date".
4.2 Documents to be delivered by the Stockholders and the Company.
(a) Upon execution of this Agreement, the Standstill Agreement among the
Company, the Stockholders and the Purchaser in the form attached hereto as
Exhibit A and the Escrow Agreement attached hereto as Exhibit C shall be
executed and delivered to each party.
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(b) The non-competition agreements of Kevin Ferguson and Dale Gates, in the
form attached hereto as Exhibit B-1, and the non-competition agreement of Larry
W. Cooper, Thomas Ferguson, Jr. and Cortez A. Proctor in the form attached
hereto as Exhibit B-2 (collectively Exhibit B-1 and Exhibit B-2 may sometimes be
referred to herein as the "Non-competition Agreements") shall be executed and
delivered to Purchaser at Closing.
(c) At the date of this Agreement, a copy of resolutions of the Board of
Directors of the Company authorizing the execution, delivery and performance of
this Agreement, the Escrow Agreement, the Standstill Agreement, and a
certificate of its secretary or assistant secretary dated the date of this
Agreement, to the effect that such resolutions were duly adopted and are in full
force and effect shall be delivered to the Purchaser;
(d) At the Closing, each of the Stockholders or the Company, as the case
may be, shall deliver to the Purchaser the following:
(i) a certificate of the Company's secretary or its assistant secretary
dated the Closing Date to the effect that the resolutions referred to in
Section 4.2(c) are in full force and effect.
(ii) stock certificates for all the Stock.
(iii) the opinions, certificates and other documents or instruments
specified in Section 8.1 of this Agreement; and
(e) the Stockholders and the Company shall each execute such other
documents and instruments and take such action as may be necessary or reasonably
requested by the Purchaser to fully vest in Purchaser full title to the Stock
and place the Purchaser in possession and control of the Company and its assets.
4.3 Documents to be Delivered by the Purchaser.
(a) Upon execution of this Agreement, the Purchaser shall execute the
Escrow Agreement in the form attached hereto as Exhibit C and deliver it to the
Company and shall deliver to the Stockholders a copy of resolutions of the Board
of Directors of the Purchaser authorizing the execution, delivery and
performance of this Agreement, the Escrow Agreement by the Purchaser, and a
certificate of its secretary or assistant secretary, to the effect that such
resolutions were duly adopted and are in full force and effect.
(b) At the Closing, the Purchaser shall deliver to the Stockholders:
(i) a certificate of the Purchaser's secretary or its assistant secretary
dated the Closing Date to the effect that the resolutions referred to in
Section 4.3(a)(ii) are in full force and effect;
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(ii) the opinions, certificates and other documents or instruments
specified in Section 8.2 of this Agreement; and
(iii) the Purchaser shall deliver to the Stockholders' Representative the
cash portion of the Purchase Price.
4.4 Form of Documents.
Unless specifically otherwise provided herein, all documents to be
delivered pursuant to this Section 4 by one party to the other party to this
Agreement shall be in form and substance reasonably satisfactory to such other
party and its counsel.
5. Representations and Warranties of the Stockholders and the Company.
The Stockholders and the Company, jointly and severally, (except with
respect to Sections 5.2 and 5.3 as they pertain to the legal capacity and
actions of the Stockholders, in which case the Stockholders severally, and not
jointly) represent and warrant to the Purchaser as of the date hereof and as of
the Closing Date, as follows:
5.1 Organization and Authority.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with all
requisite power and authority (corporate and governmental) to own, operate and
lease its properties and to carry on its business as now being conducted, except
where the failure to have such power and authority would not have a Material
Adverse Effect on the Company. Except as set forth in Schedule 5.1, the Company
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which it is required to be so licensed or qualified, except
where the failure to be so licensed or qualified would not have a Material
Adverse Effect on the Company. Schedule 5.1 sets forth the jurisdictions in
which the Company is incorporated and licensed or qualified to do business.
5.2 Authorization of Agreements.
The Stockholders have the legal capacity to execute, deliver and perform
their respective obligations under this Agreement and the Non-Competition
Agreement. This Agreement has been duly executed and delivered by each of the
Stockholders and constitutes the legal, valid and binding obligation of each of
the Stockholders enforceable against each of them in accordance with its terms,
except as the enforcement thereof may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable remedies.
The Company has the power and authority to execute, deliver and perform its
obligations under this Agreement, the Escrow Agreement and the Standstill
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Agreement. This Agreement, the Escrow Agreement and the Standstill Agreement
have been duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be subject to
or limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally now or hereafter in
effect and subject to the application of equitable principles and the
availability of equitable remedies.
5.3 Capital Stock.
The authorized, issued and outstanding capital stock of the Company are set
forth on Schedule 5.3. All of the outstanding capital stock of the Company has
been duly authorized and is validly issued, fully paid and nonassessable. All
outstanding capital stock and any other outstanding securities of the Company
were issued in compliance with all federal and state securities laws. The
lawful, registered and beneficial owners (and their addresses) of all shares of
the capital stock of the Company and the number of shares held by each is as
indicated on Schedule 5.3 hereto. The Stockholders have, and on the Closing Date
will convey to the Purchaser, good title to the Stock free and clear of any
security interest, claim, Lien, pledge, option, or encumbrance whatsoever or any
restrictions except for restrictions under applicable securities laws. There are
no rights, subscriptions, warrants, options, conversion rights, commitments or
agreements of any kind authorized or outstanding to purchase or otherwise
acquire from the Stockholders, the Company, or any other person, any shares of
stock, or securities or obligations of any kind convertible into or exchangeable
for any shares of stock, of any class of the Company or any other equity
interest in the Company. There is no proxy, or any agreement, arrangement or
understanding of any kind authorized or outstanding which restricts, limits or
otherwise affects the right to vote any share of Stock, except the Shareholders
Agreement identified in Schedule 5.12(b).
5.4 No Conflicts.
The execution, delivery and performance of this Agreement, the
Non-Competition Agreements, the Standstill Agreement, the Escrow Agreement and
any other agreement or document contemplated herein or therein and the
consummation of all of the transactions contemplated hereby and thereby: (i) do
not and will not require the consent, waiver, approval, license, designation or
authorization of, or declaration with, any court to which the Company is subject
or any Governmental Authority; and (ii) do not and will not, with or without the
giving of notice or the passage of time or both, violate or conflict with or
result in a breach or termination of any provision of, or constitute a default
under, or accelerate or permit the acceleration of the performance required by
the terms of, or result in the creation of any Lien upon any of the assets of
the Company (except for Permitted Liens) pursuant to, or otherwise give rise to
any liability or obligation under, the certificate of incorporation or bylaws of
the Company, any agreement, mortgage, deed of trust, indenture, license, permit
or any other agreement or instrument or any order, judgment, decree, statute or
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regulation to which the Stockholders or the Company is a party or by which the
Stockholders or the Company or any of their assets may be bound, except for any
such violations, conflicts, breaches, defaults or other occurrences which would
not have a Material Adverse Effect on the Company, and (iii) do not and will not
require the consent of any natural person, firm, partnership, association,
corporation or trust, except for any such consent which would not have had a
Material Adverse Effect on the Company.
5.5 Financial Statements.
Schedule 5.5 sets forth the unaudited financial statements of the Company
for the years ended December 31, 2001, December 31, 2002 and December 31, 2003
and the nine months ended September 30, 2004 ("Financial Statements").
(b) Except as set forth on Schedule 5.5, for the relevant periods, the financial
statements: (1) are complete and correct in all material respects; (2) present
fairly the consolidated financial position of the Company at such dates and the
results of operations and changes in financial position for the respective
periods ended on such dates; and (3) are in accordance with the books and
records maintained by the Company in all material respects.
(c) Except as set forth on Schedule 5.5, as of September 30, 2004, the Company
had no liabilities, commitments or obligations of any nature, whether absolute,
accrued, contingent or otherwise, not shown and adequately provided for in the
Financial Statements as of such date or in the Schedules to this Agreement or in
the Notes to the Financial Statements.
5.6 Taxes.
The Company (and any predecessor of the Company) has been a validly
electing S corporation within the meaning of Code Sections 1361 and 1362 since
1986 for all Federal, state and local income tax purposes, and the Company and
the Stockholders shall not revoke or otherwise terminate the Company's election
to be taxed as an S corporation up to and including the Closing Date. Since
1986, the Company has not acquired stock of any other corporation, has not
formed any subsidiary; and the Company has not in the past 10 years acquired
assets from another corporation either in a tax free or taxable transaction. The
Company has never been a member of another consolidated group within the meaning
of Code Sections 1502 and 1504.
True and correct copies of the Company's federal and state income tax
returns for the years ended 2001, 2002 and 2003 have been delivered to the
Purchaser. All tax returns (including information returns) required by any
jurisdiction to have been filed by or with respect to the Company have been
timely filed, and all taxes shown due on such returns have been paid.
Except as set forth in Schedule 5.6, all liabilities of the Company to any
jurisdiction for taxes of every kind and nature, including interest thereon and
penalties with respect thereto, (collectively "Taxes") relating to any period
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ending on or prior to September 30, 2004, have been timely paid by the Company
or are accrued and provided for in the Financial Statements for the relevant
periods. Any liability for Taxes incurred by the Company since September 30,
2004 was incurred in the ordinary course of business.
Except as set forth in Schedule 5.6, the U.S. federal income tax returns
and state and foreign income tax returns of the Company have not been audited by
the Internal Revenue Service or other taxing authority within the past five
years. Neither the Internal Revenue Service nor any state, local or other taxing
authority has proposed any additional taxes, interest or penalties with respect
to the Company; there are no pending or, to the knowledge of the Company and the
Stockholders, threatened tax claims or assessments; and there are no pending or,
to the knowledge of the Company and the Stockholders, threatened tax
examinations by any taxing authorities.
The Company has not given any waivers of rights (which are currently in
effect) under applicable statutes of limitations with respect to the federal
income tax returns for any fiscal year.
5.7 Title to Assets.
Except as set forth in Schedule 5.7, the Company has valid title to all of
its personal property and valid leasehold interests in all real and personal
property leased by it, free and clear of all claims, Liens and other
encumbrances of any kind whatsoever, excluding (i) any Permitted Liens, which,
in the aggregate, do not exceed $25,000; (ii) defects, zoning restrictions,
restrictions on use, irregularities, encumbrances or clouds on title of real
property, which do not materially impair the property affected thereby for the
purpose for which it was acquired or leased; and (iii) any mortgages, pledges,
security interests, restrictions and other encumbrances caused by parties other
than the Company or the Stockholders relating to any leased real property,
which, in the aggregate, do not materially affect the use and enjoyment of such
leased real property by the Company. No instrument, easement, license or grant
of record, applicable zoning or building law, ordinance or administrative
regulation or other impediment of any kind prohibits or interferes with, limits
or impairs, or would, if not permitted by any prior nonconforming use, prohibit
or interfere with or limit or impair, the use, operation, maintenance of, or
access to, or the value of, the real or personal property owned or leased by the
Company as presently used, operated, maintained and accessed by the Company to
carry on its business as presently conducted. All of the assets and properties
owned or leased by the Company are (i) sufficient and adequate to carry on its
business as presently conducted; (ii) are in as good condition and repair as
necessary to carry on its business as presently conducted, normal wear and tear
excepted, and are in a state of maintenance, repair and operating condition
required for the proper operation and use thereof as necessary to carry on its
business as presently conducted; and (iii) comply with all applicable federal,
state or local laws, ordinances, rules and regulations and with the terms and
conditions of all leases and other agreements affecting or relating to any such
property, except where the noncompliance with any of the foregoing does not have
a Material Adverse Effect on the Company.
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5.8 Real Property.
The Company does not own any real property. Schedule 5.8 sets forth a true
and complete list of all leases of real property to which the Company is a
party. Except as set forth in Schedule 5.8, the Company enjoys quiet possession
under all of its leases of real property, each of which is enforceable in
accordance with its terms against the lessor thereunder and the Company is not
in default under the terms of any of said leases; and no condition exists and no
event has occurred which, with or without the passage of time or the giving of
notice or both, could constitute such a default.
5.9 Personal Property.
Schedule 5.9 hereto sets forth a true and complete list of all items of
personal property owned or leased by the Company and the location of each such
item. No shortage or damage exists in (i) any raw materials, supplies, work in
process or finished goods owned by customers or suppliers of the Company and
stored upon their premises of the business or (ii) any other items of personal
property owned by another for which the Company is accountable to another, and
any such items referred to in clauses (i) or (ii) are described in Schedule 5.9
hereto.
5.10 Inventory
The inventory based on the Company's method of accounting as of September
30, 2004, and all additions thereto acquired since September 30, 2004 and now on
hand, consist of items which are in good condition, of a quantity and quality
usable and saleable in the ordinary course of business and are adequate and
appropriate for the business of the Company as now conducted. There is no
obsolete nor slow moving inventory. Finished goods in such inventory conform to
specifications, including without limitation all applicable governmental
regulations, are free from defects and are marketable in their current
condition.
5.11 Accounts Receivable.
All accounts receivable, net of reserves, shown on the balance sheet as of
September 30, 2004, and all accounts receivable acquired by the Company since
September 30, 2004, net of reserves established consistent with the reserves
shown on the balance sheet as of September 30, 2004, have been collected or will
be collected and are subject to no known counterclaims or setoffs, except for
unliquidated customer deposit obligations associated with milestone billings as
noted on Schedule 5.11. All such accounts receivable have been generated in the
ordinary course of business and reflect a bona fide obligation for the payment
of goods or services provided by the Company.
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5.12 Material, Service Agreements; Other Contracts.
(a) Schedule 5.12(a) sets forth a complete list with regard to the Company
of (i) all bids, applications or proposals submitted by any of them to provide
materials or services with a value of $25,000 or more to any Person and for
which the award, approval or selection is pending, (ii) all contracts or
agreements for the provision of materials or services with a value of $25,000 or
more to which the Company is a party and which has not yet been performed in
full (the items referred to in the foregoing clauses (i) and (ii) being herein
collectively called the "Material/Service Agreements"). All of such
Material/Service Agreements are fully performable by the Company in compliance
with their terms. To the knowledge of the Company and the Stockholders, no
grounds exist for the termination or cancellation of any Material/Service
Agreement by the other party thereto.
(b) The Company is a party to numerous Contracts, many of which are de
minimis in nature involving internal Company operations. However, except as
disclosed in Schedule 5.12(b) hereto, the Company is not a party to or bound by
any Contract which is a:
(i) contract, commitment or arrangement involving, in any one case, $25,000
or more;
(ii) contract with a term of, or requiring performance, more than six
months from its date;
(iii) lease or lease purchase agreement, mortgage, conditional sale or
title retention agreement, indenture, security agreement, credit agreement,
pledge or option with respect to any property, real or personal (tangible
or intangible), in any capacity;
(iv) commitment, contract or undertaking for the purchase or use of
services, materials, supplies, inventory, machinery or equipment and
involving more than $50,000 in the aggregate;
(v) employment contracts or agreements;
(vi) sales representative or similar type agreements;
(vii) contract or agreement with any labor union or other collective
bargaining group;
(viii) note, loan, credit or financing agreement or other contract for
money borrowed, and all related security agreements and collateral
documents, including any agreement for any commitment for future loans,
credit or financing;
(ix) guarantee;
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(x) contract or understanding regarding any capital expenditures in excess
of $25,000;
(xi) agency (sales or otherwise), distribution, brokerage (including,
without limitation, any brokerage or finder's agreement or arrangement with
respect to any of the transactions contemplated by this Agreement) or
advertising agreement;
(xii) contract with investment bankers, accountants, attorneys, consultants
or other independent contractors;
(xiii) shareholder agreement or contract with any Stockholder (or family
member thereof), director or officer of the Company or any Affiliate of
such persons, except agreements or contracts referred to herein which
relate to the transactions contemplated by this Agreement;
(xiv) contract, commitment or arrangement which would restrain the Company
from engaging or competing in any business or to maintain the
confidentiality of any matter, except agreements made in the ordinary
course of business to maintain confidentiality of their vendors and
customers;
(xv) contract, commitment or arrangement not made in the ordinary course of
business;
(xvi) permit or franchise which is material to the business of the Company,
taken as a whole or license or royalty agreement requiring an annual
payment of $25,000 or more by the Company; and
(xvii) bonus, pension, savings, welfare, profit sharing, stock option,
retirement, commission, executive compensation, hospitalization, insurance
or similar plan providing for employee benefits or any other arrangement
providing for benefit or any former or current employees or for the
remuneration, direct or indirect, of the directors, officers or employees
of the Company.
(c) The Stockholders have made available to the Purchaser at the Company's
offices correct and complete copies of all of the Contracts and other documents
listed in Schedules 5.12(a) and 5.12(b) hereto and all amendments thereto and
any waivers granted thereunder (the "Scheduled Contracts"). Except as
specifically set forth on Schedules 5.12(a) and 5.12(b), the sale of the Stock
to the Purchaser and the consummation of the other transactions contemplated by
this Agreement are not a violation of or grounds for the modification or
cancellation of any of the Scheduled Contracts or for the imposition of any
penalty or security interests thereunder. No unresolved disputes are pending or,
to the Stockholders' knowledge, threatened under or in respect of any such
Scheduled Contracts. The Company has no outstanding power of attorney other than
routine power of attorney relating to representation before governmental
agencies or given in connection with qualification to do business in another
jurisdiction.
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Except as described in Schedule 5.12(a) and (b) hereto, all Scheduled
Contracts described in such Schedule 5.12(a) and (b) are valid and enforceable
in accordance with their respective terms, except as the enforcement thereof may
be subject to or limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally now or
hereafter in effect and subject to the application of equitable principles and
the availability of equitable remedies; and there is not, under any of such
documents or agreements or any obligation, or covenant or condition contained
therein, any existing default by the Company, or to the Stockholders knowledge
by any other party, or any event which with notice, lapse of time, or both,
would constitute a default and which would have an adverse effect of $25,000 or
more on the Company.
5.13 Intellectual Property.
Schedule 5.13 hereto sets forth a true and complete list of all
Intellectual Property and copyrights and copyright applications and renewals
thereof owned by the Company (the "Intellectual Property"). All the Intellectual
Property is owned by the Company free and clear of any and all licenses, Liens,
claims, security interests, charges or other encumbrances or restrictions of any
kind, and no licenses for the use of any of such rights or trade secrets have
been granted by the Company to any third parties, except as set forth in
Schedule 5.13 hereto. All of the Intellectual Property and the trade secrets are
valid, enforceable and in good standing, and are sufficient and appropriate for
the conduct of business of the Company as currently conducted and as proposed to
be conducted and, subsequent to the Closing, the same will be available for use
on the same terms and conditions as prior to the Closing. The sale of the Stock
to the Purchaser and the consummation of the other transactions contemplated
hereby will not adversely affect any rights in the Intellectual Property of the
Company. To the knowledge of the Company and the Stockholders, the operation of
the business of the Company does not infringe in any way on any patent,
trademark, trade name, copyright, trade secret, contract, license or other
similar right, of any person, and the Company does not license any such right
from others except as set forth on Schedule 5.13. No claim is pending or, to the
knowledge of the Company and the Stockholders, threatened, with respect to such
infringement or conflict. To the knowledge of the Company and the Stockholders,
no other intellectual property or trade secret other than those owned or
licensed by the Company is required for its business as presently conducted. The
Stockholders have no knowledge of any infringement by any third parties upon any
of the Intellectual Property.
5.14 Insurance.
Schedule 5.14 hereto contains a complete and correct list of all insurance
policies maintained by the Company together with a schedule of required
premiums, premium payment dates and any prepaid premiums under each such policy.
The Stockholders have made available to the Purchaser complete and correct
copies of all such policies together with all riders and amendments thereto.
Such policies are in full force and effect, and all premiums due thereon have
been paid. The Company has complied in all material respects with the provisions
of such policies. No notice has been received canceling or threatening to cancel
14
or refusing to renew any of such insurance. The rights of the insured under such
policies will not be terminated or adversely affected by the Closing or the
consummation of the other transactions contemplated hereby. To the knowledge of
the Company and the Stockholders, there is currently no basis for any insurance
claim by the Company.
5.15 Customer and Supplier Relationships.
Attached as Schedule 5.15 is a complete and correct list of all current
customers of the Company showing the sales to each for the year ended December
31, 2003 and the nine months ended September 30, 2004 and of all suppliers whose
sales to the Company amounted to more than $50,000 during any of such periods
showing the sales of each. Except as set forth in Schedule 5.15, with respect to
any such customer or supplier or group of related customers or suppliers listed
thereon, the Stockholders have no knowledge that any such customer, supplier or
group of related customers or suppliers has terminated, or is likely to
terminate any of its business with the Company, or materially change the terms
under which it is prepared to continue doing business. Except as disclosed in
Schedule 5.15 hereto, no Stockholders or director or officer of the Company or
any of their family members or Affiliates has any direct or indirect interest,
either by way of stock ownership or otherwise, in any firm, corporation,
association or business enterprise, which competes with, is a supplier or
customer of, or is a distributor or sales agent for, or is a party to any
Contract with the Company.
5.16 Environmental Compliance.
(a) The Company holds all permits required under all applicable
Environmental Law (each of which is in full force and effect) for any of its
current operations or for any property currently owned, leased or otherwise
operated by it, and is and has been in compliance with all such permits;
(b) There is not now has there been any disposal, release, or threatened
release of Hazardous Material by the Company on, under, in, from or about any
real property or any properties formerly owned or occupied by the Company, or
which otherwise were related to the operations of the Company that has subjected
or may subject the Company to Environmental Liabilities under any applicable
Environmental Law;
(c) The Company has not received any notice, demand, letter, claim or
request for information that alleges violation of or any Environmental Liability
under any Environmental Law and there are no pending, proceedings, actions,
investigations, orders, decrees, or injunctions relating to or otherwise
alleging any Environmental Liability under any Environmental Laws.
(d) In connection with any property currently or formerly owned, leased or
otherwise operated by the Company, the Company is in compliance with all
Environmental Law in all material respects;
15
(e) The Company has not engaged in or permitted any operations or
activities upon any properties currently or formerly owned or occupied by the
Company involving the use, storage, handling, release, treatment, manufacture,
processing, deposit, transportation or disposal of any Hazardous Material;
(f) Any other properties formerly owned or occupied by the Company are not
now and have not during the period of ownership or occupancy by the Company been
contaminated with any Hazardous Material used or generated by the Company, and
no Hazardous Material has migrated from or from properties formerly owned or
occupied by the Company, onto or beneath any other property;
(g) In relation to any property currently or formerly owned or occupied by
the Company during such period(s) of ownership or occupation or thereafter, to
the knowledge of the Company there have not been any civil or criminal actions,
notices of violations, administrative proceedings of any Government Authority
under any Environmental Law against the Company, nor any of its respective
directors, employees, officers or agents and for which there was imposed any
Environmental Liability under applicable Environmental Law;
(h) The Company has not disposed of or arranged for the disposal of
Hazardous Materials on any third party property that has or could subject it to
Environmental Liability under any Environmental Law;
(i) The Company has not exposed any current or former employee or Person to
any Hazardous Materials or condition which has subjected or could subject the
Company to any Environmental Liability under any Environmental Law or otherwise;
(j) The Company has not assumed by agreement or otherwise any liability of
any Person for investigation or remediation of Hazardous Material, compliance
with Environmental Law, or any claim for personal injury, property damage or
damage to natural resources related to or arising under any Environmental Law;
(k) The Company has not been required by any Government Authority to make,
nor to the knowledge of Stockholders are there any circumstances which would
require the Company to make any capital or other expenditures to comply with any
Environmental Law;
(l) The Company has no existing Environmental Liability resulting from, or
caused by any act, omission or condition existing prior to the Closing nor to
knowledge of Stockholders are there any circumstances which could result in any
such Environmental Liability.
5.17 Absence of Certain Changes. Except as set forth in Schedule 5.17 or as
otherwise disclosed in this Agreement, since September 30, 2004, the Company's
business has been conducted in the ordinary course; and
16
(a) There has not been: (i) any change in any liabilities of the Company
reflected in Financial Statements or that should be reflected as a liability on
the balance sheet or (ii) any incurrence, assumption or guarantee of any
Indebtedness for borrowed money by the Company.
(b) There has not been any commitment made, or any contract entered into,
by the Company, or any waiver, amendment, termination or cancellation of any
Contract by the Company, or any relinquishment of any rights hereunder by the
Company, or of any other right or debt owed to the Company, other than in each
such case actions taken in the ordinary course of business consistent with past
practice;
(c) There has not been any change by the Company in its accounting
principles, methods or practices or in the manner it keeps its books and records
or any change by the Company of current practices with regard to sales,
receivables, payables or accrued expenses;
(d) There have not been: (i) any capital expenditures or commitments in an
individual amount of $25,000 or an aggregate amount in excess of $50,000 for
additions to property, plant, equipment or intangible capital assets or capital
expenditures, or (ii) any sale, assignment, transfer, lease or other disposition
of or agreement to sell, assign, transfer, lease or otherwise dispose of any
asset or property having a value of $25,000 or group of assets or properties
having a value of $50,000, in the aggregate, other than in the ordinary course
of business;
(e) There has not been any payment, discharge or satisfaction of any
liabilities of the Company, other than payments, discharges or satisfactions in
the ordinary course of business, however the payments made in the ordinary
course of business include the satisfaction of that certain liability in the sum
of $690,000 on the Company's balance sheet which represents payment in full
satisfaction of the Company's obligations in a settlement with the U.S.
Government dated October 29, 2004;
(f) There has not been the creation or imposition of any Lien (other than a
"Permitted Lien") upon any of the assets and properties of the Company;
(g) There has not been any cancellation, compromise, waiver, or release of
any right or claim or Indebtedness (or series of related rights and claims);
(h) There has not been any issuance, sale or other disposition of any
capital stock of the Company, or grant of any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any
capital stock of the Company;
(i) There has not been any dividend or distribution (whether in cash or in
kind) or repurchase, redemption or retirement of any capital stock of the
Company;
(j) There has not been any threat or notification, orally or in writing, by
one or more distributors, customers or suppliers who are, individually or in the
aggregate, material to the Company of an intention to terminate or materially
alter their respective business relationships or contracts with the Company, nor
has any such termination or material alteration of such relationships or
Contracts occurred;
17
(k) There has not been any damage, destruction, or loss (whether or not
covered by insurance) to the property or assets of the Company;
(l) There has not been any loan to, or any other transaction with, any of
the directors, officers, and employees of the Company;
(m) There has not been any payment of any amount to any Person outside the
ordinary course of business with respect to any Liability (excluding any costs
and expenses incurred or which may be incurred in connection with this Agreement
and the transactions contemplated hereby) however the payments made in the
ordinary course of business include the satisfaction of that certain liability
in the sum of $690,000 on the Company's balance sheet which represents payment
of the Company's obligations in a settlement with the U.S. Government on October
29, 2004;
(n) There have not been any changes in the memorandum or articles of
association or other constitutional documents of the Company and no resolution
of Stockholders of the Company has been passed;
(o) The Company has not entered into any employment, deferred compensation
or other similar agreement (or any amendment to any such existing agreement)
with, or increased compensation, bonus or other benefits payable or potentially
payable to any director, officer or employee of the Company or increased
benefits payable or potentially payable under any severance, continuation or
termination pay policies or employment agreements for the benefit of employees
generally;
(p) There has not been any collective labor dispute or any activity or
proceeding by a labor union or representative thereof to organize any employees
of the Company nor have any lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to any such employees occurred;
(q) There has been no acquisition or disposal of any interest in real
property and no rights to transfer any interest in the real property has been
encumbered, other than the transfer of approximately 3.17 acres of land known as
the 65 Hill Street property to Larry W. Cooper, in consideration of the sum of
$49,000, which transfer is hereby acknowledged by Purchaser;
(r) No material change has been made in the practices of ordering supplies
and raw materials, shipping finished goods, invoicing customers and collecting
debts;
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(s) Except for debt collection in the ordinary course of business and
consistent with prior practice, no legal proceedings of any nature by or against
the Company has been commenced;
(t) No legally binding Contract, conditional or otherwise, to do any of the
foregoing has been made.
5.18 Assets of the Company
(a) Schedule 5.18 lists all of the equipment owned and used by the Company
in the conduct of the operation of its business.
(b) Except as set forth in Schedule 5.18, the equipment is structurally
sound and in good operating condition, ordinary wear and tear excepted, has been
and is being used in the Company's business in compliance in all material
respects with permits and licenses required for use or operation thereof, and
Applicable Law and Environmental Law, is capable of being used for the purposes
for which such equipment is now used by the Company and is sufficient to conduct
its business in the manner in which it is conducted currently and as it is
proposed to be conducted.
(c) Unless otherwise indicated, the equipment described in Schedule 5.18 is
valued on the books and records of the Company based on the original costs
thereof, less accumulated depreciation recorded and calculated on the basis of
the methodology and life specified on said schedule.
(d) The Company owns or has valid rights to use, free and clear of all
Liens except Permitted Liens, all of its assets. Such assets will be sufficient
for Purchaser to continue to operate the Company in the same manner as it is
conducted currently after the Closing Date and to design, manufacture, sell and
deliver the products of the Company in accordance with, and in full satisfaction
of, all of the requirements of the existing contracts and commitments of the
Company.
(e) Except as identified in Schedule 5.12(b), with regard to the equipment
listed on Schedule 5.18, the Company is not a party to or is liable under a
lease or hire, hire purchase, credit sale or additional sale agreement.
5.19 Product Warranties; Defects; Liability. Each product designed,
manufactured, sold and delivered by the Company has not been defective in any
material respects, has been in conformity in all material respects with
Applicable Law, Environmental Law, all Contracts and all express and implied
warranties. No product designed, manufactured, sold or delivered by the Company
is subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale. Schedule 5.19 includes copies of the
standard terms and conditions of sale or lease of the products and services of
19
the Company (containing applicable guaranty, warranty, and indemnity
provisions). The Company has not incurred any liability (and to the knowledge of
Stockholders no basis for any present or future action or proceeding giving rise
to any Liability exists) as a result of the ownership, possession, or use of any
product designed, manufactured, sold and delivered by the Company, and there has
been no inquiry or investigation made in respect thereof by any person including
any governmental authority.
5.20 Employees.
Except as disclosed in Schedule 5.20:
(a) There are no subsisting contracts for any Person to provide consulting
services to the Company.
(b) The Company has no profit-sharing, share option or share incentive
schemes or other employee plans in relation to any employee and there are no
collective bargaining agreements or arrangements with trade unions relating to
the employees.
(c) The Company has paid all relevant social security contributions and the
Company has in all material respects complied with, discharged and fulfilled all
requirements, liabilities and obligations (whether statutory or contractual) in
relation to its employees including all relevant legislation and codes of
practice under any Applicable Law in relation to employment or employees or
employee representation.
(d) No Liability has been incurred by the Company since December 31, 2003
for compensation for wrongful or unfair dismissal or for failure to comply with
any order for the reinstatement or re-engagement of any employees; and
(e) No gratuitous payment has been made or promised by the Company since
December 31, 2003, in connection with the actual or proposed termination or
suspension of employment or variation of any contract of employment of any
present or former director or employee as a result of the transactions
contemplated herein or otherwise.
(f) There is no Person previously employed by the Company who now has or
may in the future have a right to return to work (whether for reasons connected
with maternity leave or absence by reason of illness or incapacity or otherwise)
or a right to be reinstated or re-engaged.
(g) There is no outstanding, or to the knowledge of the Company and the
Stockholders, threatened, claim by any employee or former employee of the
Company on account of the Company's employment or termination of employment of
that Person prior to the Closing Date including, without limitation, workers'
compensation claims nor, to the knowledge of Stockholders, are there any
circumstances likely to give rise to any such claim.
(h) No key employee, or group of employees or any executive of the Company;
20
(i) has given notice of his or her intention to resign prior to the Closing
Date or within 12 months after the Closing Date nor to the knowledge of
Stockholders is any key employee, group of employees or executive intending to
do so;
(ii) would become entitled to any rights (including as to compensation) as
a result of the entry into, or the consummation of the transactions contemplated
by this Agreement.
(i) The Company is not a party to any agreement or engagement or practice
imposing a legal obligation on it to increase the rate of remuneration of, or to
make any bonus or incentive payments or any benefits in kind or any other
payments to or on behalf of, any of its former, present officers or employees,
either now or at any future date.
5.21 Affiliated Transactions.
Except as set forth in Schedule 5.21 (a) with regard to the Company, the
Company is not, nor has it been, a party to or bound by any Contract with any of
its Affiliates, other than on arms-length terms which are no less favorable to
the Company than those which could be obtained with a third party which is not
an Affiliate and (b) no Affiliate of the Company owns or otherwise has any
rights to or interests in any asset, tangible or intangible, which is used by
the Company.
5.22 No Illegal Payments.
The Company nor any of its directors, officers, employees or agents, has
(i) directly or indirectly given or agreed to give any illegal gift,
contribution, payment or similar benefit to any supplier, customer, governmental
official or employee or other person to assist in connection with any actual or
proposed transaction or made or agreed to make any illegal contribution, or
reimbursed any illegal political gift or contribution made by any other person,
to any candidate for federal, state, local or foreign public office (A) which
violates any Applicable Law, including but not limited to, the Foreign Corrupt
Practices Act of 1977, as amended, or might subject the Purchaser to any Damages
or penalties in any civil, criminal or governmental litigation or proceeding or
(B) the non- continuation of which has had or might have a Material Adverse
Effect or (ii) established or maintained any unrecorded fund or asset or made
any false entries on any books or records for any purpose.
5.23 Information Technology.
(a) Schedule 5.23 sets forth the summary details of the information
technology owned or used by the Company and all material agreements or
arrangements relating to the maintenance and support, security, disaster
recovery management and utilization (including facilities management and
computer bureau services agreements) of the information technology owned or used
by the Company have been disclosed.
21
(b) Maintenance contracts are in force for each asset which it is normal to
have maintained by independent or specialist contractors and for each asset
which the Company is obliged to maintain or repair under a leasing or similar
agreement. Those assets have been regularly maintained in accordance with safety
regulations required to be observed in relation to them and the provisions of
any applicable agreement.
(c) All information technology used by or required to carry on the business
of the Company and fulfill its existing contracts and commitments is either
owned by or validly leased or licensed to the Company.
(d) There are no material defects relating to the information technology
owned or used by the Company, and the information technology owned or used by
the Company has the capacity and performance necessary to fulfill the
requirements it currently performs.
(e) No source code or algorithms to any software owned (either solely or
jointly) by the Company has been disclosed to any Person, other than in the
ordinary course of business.
5.24 Employee Plans.
(a) Schedule 5.24 sets forth a true and complete list of each "employee
welfare benefit plan " (as defined in Section 3(1) of ERISA) maintained by the
Company or to which the Company contributes or is required to contribute,
including any multi-employer employee welfare benefit plan, on behalf of
officers and employees of the Company (such multi-employer and other employee
welfare benefit plans being hereinafter collectively referred to as the "Welfare
Benefit Plans"). With respect to each Welfare Benefit Plan, all contributions or
premiums due by the Closing Date have been paid or accrued.
(b) Schedule 5.24 sets forth a true and complete list of each "employee
pension benefit plan " (as defined in Section 3(2) of ERISA) maintained by the
Company or to which the Company contributes or is required to contribute,
including any multi-employer employee pension benefit plan, on behalf of
officers and employees of the Company (such multi-employer and other employee
pension benefit plans being hereinafter collectively referred to as the "Pension
Benefit Plans"). No Pension Benefit Plan is a "defined benefit plan" (as defined
in Section 3 (35) of ERISA). With respect to each Welfare Benefit Plan including
an "individual account Plan" (as defined in Section 3(34) of ERISA), all
contributions due by the Closing Date have been made or will be made or accrued
prior to the Closing Date.
(c) Each Pension Benefit Plan, each Welfare Benefit Plan and each related
trust agreement and annuity contract and insurance policy (and any other funding
instruments) complies and has complied, both as to form and operation, to the
extent applicable, with the provisions of (A) the Code in order to be tax
qualified under Section 401(a) or 403(a) of the Code; (B) ERISA; and (C) such
22
other Act as may be applicable. All necessary government approvals for the
Pension Benefit Plans have been obtained and copies of each of the Pension
Benefit Plans and each amendment thereto have been received from the Internal
Service and no event has occurred or condition exists which would adversely
affect such determination.
(d) Each Welfare Benefit Plan and each Pension Benefit Plan has been
administered to date in material compliance with the requirements of the Code,
ERISA and all other applicable laws and all reports required by any Government
Authority with respect to each Welfare Benefit Plan and each Pension Benefit
Plan have been timely filed, except to the extent failure to so file would not
result in an aggregate cost, fine or penalty in excess of $5,000. Future
compliance with the requirements of the Code, ERISA or any other applicable laws
as in effect on the Date of the Closing or any collective bargaining agreements
to which the Company may be a party will not result in any increase in the rate
of benefit accrual under any Pension Benefit Plan.
(e) The Company, nor any plan fiduciary of any Welfare Benefit Plan or
Pension Benefit Plan has engaged in any transaction in violation of Section 406
of ERISA or any "prohibited transaction" (as described in Section 4975(c) of the
Code), except to the extent that such violation would not result in an aggregate
cost, fine or penalty in excess of $5,000.
(f) Schedule 5.24 lists each deferred compensation plan, bonus plan, stock
option plan, employee stock purchase plan and any other employee benefit plan,
agreement, arrangement or commitment not required under a previous subsection to
be listed, which is maintained by the Company with respect to the compensation
of any of their employees.
(g) No liability has been incurred by the Company or other trade or
business under common control with the Company (as determined under Sections
414(b), 414(c), 414(m) or 414(o) of the code) ("Common Control Entity") on
account of any termination of an employee pension benefit plan subject to Title
IV of ERISA. No filing has been commenced to terminate any employee pension
benefit plan subject to Title IV of ERISA maintained, or wholly or partially
funded, by the Company (or any Common Control Entity). Neither the Company nor
any Common Control Entity has (i) ceased operations at a facility so as to
become subject to the provisions of Section 4062(e) of ERISA, (ii) withdrawn as
a substantial employer so as to become subject to the provisions of Section 4063
of ERISA, (iii) ceased making contributions on or before the date of the Closing
to any employee pension benefit plan subject to Section 4064(a) of ERISA to
which the Company (or any Common Control Entity) made contributions during the
five years prior to the date of the Closing, or (iv) made a complete or partial
withdrawal (as each is defined in Sections 4203 and 4205, respectively, of
ERISA) or a reduction in contribution base units which if sustained for three
23
years would constitute a partial withdrawal under Section 4205 of ERISA, from a
multiemployer plan (as defined in Section 3(37) of ERISA) so as to incur
withdrawal liability as defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under section 4207 or 4208 of
ERISA). Neither the Company, nor any Common Control Entity, including both
single employer and multi-employer pension plans has engaged in a transaction
designed to avoid or evade liability until Title IV of ERISA within the five
years preceding the Closing Date.
(h) There are no actions, suits or claims (other than routine claims for
benefits) pending or which could reasonably be expected to be asserted against
any Pension Benefit Plan or Welfare Benefit Plan; there are no civil or criminal
actions pending or, to the knowledge of the Stockholders threatened against any
fiduciary, Pension Benefit Plan or Welfare Benefit Plan with respect to the
plan; and no Pension Benefit Plan or Welfare Benefit Plan is the direct or
indirect subject of any audit, investigation or examination by any Governmental
Authority and no such completed audit, investigation or examination, if any, has
resulted in the imposition of any fine or penalty on any Person.
(i) All Welfare Benefit Plans, Pension Benefit Plans, related trust
agreements or annuity contracts (or any other funding instruments), and all
plans, agreements, arrangements and commitments referred to in subsection (i) of
this Section are legally valid and binding and in full force and effect.
(j) No Pension Benefit Plan containing a section 401(k) cash or deferred
arrangement in which employees of the Company participated has been terminated.
5.25 Books and Records. The books and all corporate (including minute books
and stock records books) and financial records of the Company are complete and
correct in all material respects and have been maintained in accordance with
applicable sound business practices, laws and other requirements and no notice
has been received or allegation made that a register or book is incorrect or
should be rectified.
5.26 Litigation; Compliance; Permits.
Except as disclosed in Schedule 5.26 hereto, there are no actions, suits,
proceedings, arbitrations or governmental investigations pending, or, to the
Stockholders' knowledge, threatened against, by or affecting the Company in
which, individually or in the aggregate, an unfavorable determination could
adversely affect by $25,000 or more the Company, or result in any liability of
$25,000 or more on the part of the Company, or prevent, hinder or delay the
execution and performance of this Agreement or any of the transactions
contemplated hereby, or could declare this Agreement unlawful or cause the
rescission of any of the transactions hereunder, or require the Purchaser to
divest itself of the stock; nor has any such suit been pending within the two
years prior to the date hereof. The Company has not been charged with or
received notice of any violation of any applicable federal, state, local or
foreign law, rule, regulation, ordinance, order or decree relating to it, or the
operation of its business, and the Stockholders are not aware of any threatened
claim of such violation (including any investigation) or any basis therefore.
24
The Company has complied and is in compliance with, all laws, rules,
regulations, ordinances, orders, judgments, decrees, writs, injunctions,
building codes, safety, fire and health approvals, certificates of occupancy or
other governmental restrictions applicable to it, its assets, employees and
employment practices, except where the failure to so comply would not have an
adverse effect of $25,000 or more on the Company, its business, assets,
financial condition, employees and employment practices.
The Company has all material governmental licenses, permits, approvals or
other authorizations required for the conduct of its business as now conducted,
all of which are in full force and effect; there is no action pending or, to the
knowledge of the Stockholders, threatened, to terminate any rights under any
such governmental licenses, permits or authorizations; and except as disclosed
on Schedule 5.26 at the Closing, none of such licenses, permits, approvals and
authorizations will be materially adversely affected by the sale of the Stock to
the Purchaser or the consummation of the other transactions contemplated by this
Agreement.
5.27 Bank Accounts; Power of Attorney.
Schedule 5.27 hereto correctly sets forth: (i) a list of all banks in which
the Company has an account or safety deposit box, account number, purpose of
such account or safety deposit box and the names of all persons authorized to
draw thereon or have access thereto; and (ii) the names of all persons holding
powers of attorney from the Company and a description of the power of attorney.
5.28 Disclosure.
The representations and warranties contained in this Section 5 (including
the schedules and exhibits required to be delivered by Stockholders or the
Company to Purchaser pursuant to this Agreement) and any certificate furnished
or to be furnished by Stockholders or the Company to Purchaser do not contain
and will not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements and information
contained in this Section 5 not misleading. To the knowledge of Stockholders,
there is no material fact or complex of facts or circumstances relating to the
Company which may result in a Material Adverse Effect which has not been
disclosed in this Agreement to Purchaser.
6. Representations and Warranties of Purchaser.
The Purchaser represents and warrants to the Stockholders and the Company
on the date hereof and on the Closing Date as follows:
25
6.1 Corporate Status.
The Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on its business as now conducted.
6.2 Authority for Agreements.
The Purchaser has the power and authority to execute and deliver this
Agreement and the Escrow Agreement and to carry out its obligations hereunder
and thereunder. The execution, delivery and performance by the Purchaser of this
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Purchaser. This Agreement and the Escrow
Agreement have been duly executed and delivered by the Purchaser and constitute
the legal, valid and binding obligations of the Purchaser enforceable against
the Purchaser in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization and similar laws
of general application relating to or affecting the rights and remedies of
creditors.
6.3 No Conflicts.
The execution, delivery and performance of this Agreement and the Escrow
Agreement, and the consummation of the other transactions contemplated hereby
and thereby, do not and will not (i) require the consent, waiver, approval,
license, designation or authorization of, or declaration with, any court or any
government authority or agency; or (ii) with or without the giving of notice or
the passage of time or both, violate, conflict with or result in a breach or
termination of, constitute a default under, accelerate or permit the
acceleration of the performance required by the terms of, result in the creation
of any mortgage, security interest, claim, lien, charge or other encumbrance
upon any of the assets of the Purchaser pursuant to, or otherwise give rise to
any liability or obligation under, the certificate of incorporation or bylaws of
the Purchaser or any agreement, mortgage, deed of trust, indenture, license,
permit or any other agreement or instrument, or any order, judgment, decree,
statute or regulation, to which the Purchaser is a party or by which the
Purchaser or any of its assets may be bound, excluding liens created by
Purchaser in connection with obtaining debt financing to complete the
transaction contemplated by this Agreement.
6.4 Disclosure.
The representations contained in this Section 6 and any certificate to be
delivered by the Purchaser to the Company or Stockholders pursuant to this
Agreement do not contain and will not contain any untrue statement of material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 6 not misleading.
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7. Covenants.
7.1 Conduct of the Business. During the period from the date hereof to the
Closing Date, the Company shall and the Stockholders shall cause the Company to
conduct its business in the ordinary course of business consistent with past
practice so as to maintain the same as a going concern in compliance with all
legal and regulatory requirements and will not, without the prior written
consent of Purchaser, permit the Company to:
(a) amend any of its constitutional documents in any respect;
(b) authorize for issuance, issue, sell, deliver, redeem or repurchase or
agree or commit to issue, sell, deliver, redeem or repurchase (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any share capital of any class or any other
securities or equity equivalents (including, without limitation, any stock
options or stock appreciation rights);
(c) split, combine or reclassify any of its share capital, declare, set
aside or pay any dividend or other distribution (whether in cash, share capital
or property or any combination thereof) in respect of its share capital, make
any other actual, constructive or deemed distribution in respect of its share
capital or otherwise make any payments to stockholders in their capacity as
such, or redeem or otherwise acquire any of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company (other than the sale of the Stock);
(e) (i) incur, assume or modify any long-term or short-term debt or issue
any debt securities except for borrowings under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practice; (iii) make any loans, advances or capital
contributions to or investments in any other person; or (iv) mortgage or pledge
any of its material assets, tangible or intangible, or create or suffer to exist
any Lien thereupon (other than Permitted Liens and Tax Liens for Taxes not yet
due);
(f) except as may be required by law, enter into, adopt, amend or terminate
any bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan, fund or
other arrangement for the benefit or welfare of any director, officer or
employee in any manner or increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock appreciation rights or performance units) or
exercise any discretion in relation to any such arrangement or communicate to
any participant in the same an intention to do the same or pay any benefits
other than in accordance with the terms thereof;
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(g) acquire, sell, lease or dispose of any assets in any single transaction
or series of related transactions having a fair market value in excess of
$50,000 in the aggregate (other than in connection with outsourcing agreements
entered into with customers of the Company);
(h) except as may be required as a result of a change in law, change any
accounting reference date of the Company or change any of the accounting
principles or practices used by it or its practices in managing debtors and
creditors;
(i) cause any right or entitlement, insurance or Contract to lapse or be
varied except in the ordinary course of business;
(j) except as otherwise provided herein, enter into any new Contract
obligating the Company to make payments thereunder in excess of $50,000 in any
twelve-month period; or
(k) make any substantial change in the continuation, nature or organization
of the Company or take or agree in writing or otherwise to take any of the
actions which would make any of the representations or warranties of the Company
or Stockholders contained in this Agreement untrue or incorrect in any material
respect.
7.2 Access to Information.
(a) Between the date hereof and the Closing Date, Stockholders will
provide, or cause the Company to provide, Purchaser and its authorized
representatives with reasonable access during normal business hours to the
facilities of the Company, its books and records, the personnel and
representatives of the Company and the customers and suppliers of the Company,
provided that (i) all contact with and access to the Company shall be conducted
in a manner consistent with the terms of the Confidentiality Agreement between
the parties dated October 29, 2004 ("Confidentiality Agreement"), (ii) Purchaser
agrees that such access will give due regard to minimizing interference with the
operations, activities and employees of the Company and (iii) such access and
disclosure would not violate the terms of any agreement by which Stockholders or
the Company is bound or any Applicable Law.
(b) Between the date hereof and the Closing Date, at the request of
Purchaser, Stockholders and the Company shall furnish to Purchaser and its
authorized representatives financial and operating data with respect to the
Company prepared in a manner consistent with the Financial Statements, including
tax returns.
7.3 Non-competition Agreements.
Non-competition agreements between MSI Acquistion Corp. as Employer, and
Kevin Ferguson and Dale Gates as Employees, in the form attached hereto as
Exhibit B-1 shall be executed and delivered to Purchaser at Closing.
Non-competition agreements between MSI Acquisition Corp. as Purchaser, and Larry
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W. Cooper, Thomas Ferguson, Jr., and Cortez A. Proctor, as Stockholders, in the
form attached hereto as Exhibit B-2 shall be executed and delivered to Purchaser
at Closing.
7.4 Financial Statements.
Prior to the Closing Date, the Stockholders and the Company shall provide
the Purchaser after they are available unaudited financial statements for the
years ended December 31, 2001, December 31, 2002 and December 31, 2003 and
unaudited financial statements for the nine months ended September 30, 2004 in
accordance with the Company's accounting policies. The Stockholders and the
Company will also provide audited financial statements prepared in accordance
with GAAP for the year ended December 31, 2003.
7.5 Expenses.
The Purchaser and the Stockholders shall bear their own respective expenses
incurred in connection with this Agreement and the transaction contemplated
hereby and in connection with all obligations required to be performed by each
of them under this Agreement. The Company shall not pay any such expenses of the
Stockholders.
7.6 Resignations of Directors and Officers.
The Stockholders shall provide to the Purchaser written resignations
effective as of the Closing Date of all of the directors and officers, bank
signatories and trustees of any pension, profit-sharing or similar plan of the
Company. In the event that the Purchaser requests any bank signatory
resignations, the Stockholders and the Company shall cause to be delivered to
Purchaser written instructions to each bank at which the Company has an account
or credit facility or at which the Company rents a safe deposit box informing
such bank of the said resignations and revoking the authority of said persons to
act with respect to said account or credit facility and to have access to said
safe deposit box. The Stockholders and the Company shall also cause to be
delivered to the Purchaser effective the Closing Date the written surrender by
all persons holding powers of attorney from the Company of their authority and
power to act under such powers of attorney.
7.7 Minute Books, Stock Books and Corporate Records.
The complete and correct minute books, certificate of incorporation,
by-laws, stock certificate and transfer books, stock ledgers, financial and
other corporate records and the corporate seal of the Company shall be delivered
to the Purchaser by the Company on or before the Closing Date.
7.8 Taxes.
(a) Section 338(h)(10) Election. The Company and each Stockholder shall
join with the Purchaser in making an election under Code Section 338(h)(10) (and
any corresponding election under state, local, and foreign tax law) with respect
to the purchase and sale of Company stock hereunder (collectively, a Section
"338(h)(10) Election"). Each Stockholder shall include any income, gain, loss,
29
deduction, or other tax item resulting from the Section 338(h)(10) Election on
their Tax Returns to the extent required by applicable law, and Each Stockholder
shall also pay any Tax imposed on the Company attributable to the making of the
Section 338(h)(10) Election, including any Tax imposed resulting from Sec. 1374.
The Stockholders shall indemnify Purchaser and the Company against any adverse
consequences arising out of any failure to pay any such Taxes, or any failure of
the Company or the Stockholders in properly electing its S corporation status in
1986 and maintaining its S corporation status through and including the date of
Closing. Each Stockholder shall, as a condition precedent to closing. sign the
forms that are necessary to effect the 338(h)(10) Election (including, but not
limited to form 8023).
(b) Purchase Price Allocation. Purchaser, the Company, and the Stockholders
agree that the Purchase Price and the liabilities of the Company (plus other
relevant items) will be allocated to the assets of the Company for all purposes
(including Tax and financial accounting) in a manner consistent with Code
Sections 338 and 1060 and the regulations thereunder. Purchaser, the Company,
and the Stockholders shall file all Tax Returns in a manner consistent with such
allocation and values. Any dispute shall be settled by an independent appraiser
or accounting firm to be mutually appointed by the Purchaser and the
Stockholders' Representative.
(c) Tax Periods Ending on or before Closing Date: The Stockholders'
Representative shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Company for all periods ending on or prior to the
Closing Date that are due and filed after the Closing Date. The Stockholders'
Representative shall permit Purchaser to review and comment on each such Tax
Return described in the preceding sentence prior to filing and the Stockholders'
Representative shall authorize such revisions to the Tax Returns as are
reasonably requested by the Purchaser. To the extent permitted and required by
applicable law, each Stockholder shall include any income, gain, loss, deduction
or other tax items for such periods on their Tax Returns in a manner consistent
with the Schedule K-1s prepared for such Tax Returns for such periods.
(d) Cooperation on Tax Matters.
(i) Purchaser, the Company, and the Stockholders shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information reasonably
relevant to any such audit, litigation, or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Purchaser, the Company, and the
Stockholders agree (A) to retain all books and records with respect to Tax
matters pertinent to the Company relating to any taxable period beginning before
the Closing Date until expiration of the statute of limitations (and, to the
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extent notified by Purchaser or the Stockholders, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Company or
Purchaser, as the case may be, shall allow the other party to take possession of
such books and records.
(ii) Purchaser and the Company further agree, upon request, to use their
best efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including with respect to the
transactions contemplated hereby).
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the
Company or its Stockholders when due, and the Company and its Stockholders
shall, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law,
Purchaser shall, and shall cause its affiliates to, join in the execution of any
such Tax Returns and other documentation.
(f) Tax Indemnification. Each Stockholder shall jointly and severally
indemnify the Company, Purchaser, and each Purchaser affiliate and hold them
harmless from and against [without duplication], any loss, claim, liability,
expense, or other damage attributable to (i) all Taxes (or the non-payment
thereof) of the Company for all taxable periods ending on or before the Closing
Date, and the portion through the end of the Closing Date for any taxable period
that includes (but does not end on) the Closing Date ("Pre-Closing Tax Period"),
(ii) all Taxes of any member of an affiliated, consolidated, combined or unitary
group of which the Company (or any predecessor of any of the foregoing) is or
was a member on or prior to the Closing Date, and (iii) any and all Taxes of any
person (other than Company) imposed on the Company as a transferee or successor,
by contract or pursuant to any law, rule, or regulation, which Taxes relate to
an event or transaction occurring before the Closing.
7.9 Amendment of Lease.
(a) At Closing, the Company and Purchaser will cause the lease dated
November 18, 1997 between the Company and MSI Investments, a Florida General
Partnership, for the facilities at 35 Hill Avenue, Fort Walton Beach, Florida to
be duly executed, ratified and approved in the form of Exhibit D attached
hereto.
(b) At Closing the lease dated January 1, 1998 between the Company and
Larry W. Cooper for the facilities at 65 Hill Avenue, Fort Walton Beach, Florida
will be terminated and the facilities and associated property will be acquired
by the Purchaser for $1,625,000.00, subject to the right of Larry W. Cooper to
occupy the iRespond/RSS office space at 65 Hill Avenue rent free for a period of
one year. The form of the Purchase Agreement and Lease Termination Agreement to
be utilized in such transaction(s) and which shall be duly executed by the
parties, are attached hereto as composite Exhibit E.
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7.10 Approvals and Consents
(a) The parties shall use their respective best efforts to obtain all
consents, waivers, approvals, authorizations or orders, including, without
limitation, (a) all regulatory rulings and approvals of any Governmental
Authority and (b) all actions, consents, approvals, novations or waivers from
any party to any Contract that is required or reasonably appropriate, in
connection with the consummation of the transactions contemplated by this
Agreement. Subject to the terms and conditions of this Agreement, in taking such
actions or making any such filings, the parties hereto shall furnish information
required in connection therewith and seek timely to obtain any such actions,
consents, approvals or waivers.
(b) Stockholders, the Company and Purchaser will, as promptly as
practicable, take all steps necessary or desirable to obtain all consents,
waivers, approvals, authorizations or orders, or make all registrations,
declarations or filings with and give all notices to all applicable Government
Authorities or any other Person required of Purchaser to consummate the
transactions contemplated hereby.
7.11 Additional Agreements; Reasonable Best Efforts.
Subject to the terms and conditions herein provided, each of the parties
hereto agrees to use its reasonable best efforts to take or cause to be taken
all action and to do or cause to be done all things reasonably necessary, proper
or advisable under Applicable Law to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (a)
contesting any legal proceeding challenging the transactions contemplated
hereby, and (b) executing any additional instruments necessary to consummate the
transactions contemplated hereby and thereby. If at any time after the Closing
Date any further action is necessary to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall take all
such necessary action.
7.12 Public Announcements. On and after the date hereof and through the
Closing Date, Stockholders, the Company and Purchaser shall consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby, and none of the parties shall issue any press release or make any public
statement prior to obtaining the other parties' written approval, which approval
shall not be unreasonably withheld, except that no such approval shall be
necessary to the extent disclosure may be required in the opinion of their
counsel by Applicable Law or applicable stock exchange rule or any listing
agreement of any party hereto.
7.13 Notice of Developments.
Each party will give prompt written notice to the other party of any
development causing a breach of any of its own representations and warranties in
Sections 5 and 6 above. No disclosure by any party pursuant to this Section
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7.13, however, shall be deemed to amend or supplement the schedules or to
prevent or cure any misrepresentations, breach of warranty, or breach of
covenant.
7.14 Exclusivity.
The extent to which Purchaser and the Stockholders have agreed to commit
the resources necessary to proceed with negotiation toward the execution of
definitive purchase agreements to consummate the transactions contemplated
herein, is reflected in the Standstill Agreement, the terms of which are
incorporated by reference herein and shall be fully operative as if set forth at
length hereat until the Closing Date unless this Agreement is sooner terminated
pursuant to Sections 9.1(a) or (c).
8. Conditions Precedent.
8.1 Conditions to Obligations of the Purchaser.
The obligation of the Purchaser to pay the Purchase Price to the
Stockholders and to satisfy its other obligations hereunder shall be subject to
the fulfillment (or waiver by the Purchaser) at or prior to the Closing, of the
following additional conditions:
(a) Representations, Performance. The representations and warranties
contained in Section 4 hereof shall be true at and as of the date hereof and
shall be repeated and shall be true at and as of the Closing Date with the same
effect as though made at and as of the Closing Date, except as affected by the
transactions contemplated hereby. The Stockholders and the Company shall have
each duly performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by each prior to or
on the Closing Date. The Stockholders' Representative and the Company shall have
delivered to the Purchaser a certificate dated the Closing Date to the effect
set forth in this Section 8.1(a).
(b) Financial Statements. The Company shall provide Purchaser with the
audited Financial Statements for the year ended December 31, 2003.
(c) Consents Under Scheduled Contracts. All required consents to the sale
of the Stock or any of the other transactions contemplated hereby under any
Scheduled Contracts shall have been obtained.
(d) Litigation. No suit, action or other proceeding or investigation shall
be threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain material damage or other material
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby or which is likely to affect materially the value of the
assets, business or condition (financial or otherwise) of the Company.
33
(e) Opinions of Counsel. The Purchaser shall have received a favorable
opinion, addressed to the Purchaser and dated the Closing Date, of Matthews &
Hawkins, P.A., counsel for the Company and the Stockholders, in the form
attached hereto as Exhibit D.
(f) Proceedings and Documentation. All corporate and other proceedings of
the Company and its Stockholders in connection with the transactions
contemplated by this Agreement, and all documents and instruments incident to
such corporate proceedings, shall be satisfactory in substance and form to the
Purchaser and the Purchaser's counsel, and the Purchaser and the Purchaser's
counsel shall have received all such receipts, documents and instruments, or
copies thereof, certified if requested, to which the Company is entitled and as
may be reasonably requested.
(g) Damage to Property. No portion of the plants, machinery or equipment of
or occupied by the Company material to the operation of the business of the
Company shall, after the date hereof and before the Closing Date, be materially
damaged, destroyed or taken by condemnation or eminent domain.
(h) Consents and Approvals. All material licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental or
regulatory bodies which are necessary for the consummation of the transactions
contemplated hereby shall have been obtained.
(i) Escrow Agreement. The Escrow Agent, Stockholders and the Purchaser
shall have executed and delivered to each other the Escrow Agreement.
(j) Standstill Agreement. There shall have been delivered to the Purchaser
the Standstill Agreement.
(k) Non-Competition Agreements. There shall have been delivered to the
Purchaser the Non- Competition Agreements of Cortez A. Proctor, Kevin Ferguson,
Dale Gates, Thomas Ferguson, Jr. and Larry W. Cooper.
(l) Good Standing Certificates. The Stockholders shall have delivered to
the Purchaser certificates as of a date not more than 5 days prior to the
Closing Date attesting to the good standing of the Company as a corporation in
its jurisdiction of incorporation by the Secretary of State of the applicable
jurisdiction.
(m) Real Estate Lease. The Purchaser; MSI Investments, a Florida general
partnership; and Larry W. Cooper shall have executed and delivered the real
estate lease and transfer of property in the form annexed hereto as Exhibit F.
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8.2 Conditions to Obligations of the Stockholders and the Company.
The obligation of the Stockholders and the Company to deliver the Stock and
to satisfy their respective obligations hereunder shall be subject to the
fulfillment (or waiver by the Stockholders), on or prior to the Closing Date, of
the following conditions:
(a) Representations, Performance, Etc. The representations and warranties
of the Purchaser contained in Section 6 hereof shall be true at and as of the
date hereof and shall be repeated and shall be true at and as of the Closing
Date with the same effect as though made at and as of such time. The Purchaser
shall have duly performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date. The Purchaser shall have delivered to the
Stockholders an officer's certificate dated the Closing Date to the effect set
forth above in this Section 8.2(a).
(b) Opinion of Counsel. The Stockholders shall have received a favorable
opinion, addressed to the Stockholders and dated the Closing Date, of Beckman,
Lieberman & Barandes, LLP, counsel for the Purchaser, in the form attached
hereto as Exhibit E.
(c) Proceedings and Documentation. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement, and all
documents and instruments incident thereto, shall be satisfactory in substance
and form to the Stockholders and Stockholders' counsel, and the Stockholders and
Stockholders' counsel shall have received all such receipts, documents and
instruments, or copies thereof, certified if requested, to which the
Stockholders is entitled and as may be reasonably requested.
(d) Escrow Agreement. The Escrow Agent, Stockholders and the Purchaser
shall have executed and delivered to each other the Escrow Agreement.
9. Termination; Amendment; Waiver.
9.1 Termination.
This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual consent of the parties.
(b) by the Purchaser by notice to the Company, (i) if any of the conditions
set forth in Section 8.1 hereof shall not have been fulfilled by Stockholders
and the Company, or (ii) if any default under or breach of any covenant,
agreement or condition of this Agreement, or any misrepresentation or breach of
any warranty contained herein, on the part of the Company or Stockholders shall
have occurred and, after proper notice, shall not have been cured, or (iii) if
the Audited Financial Statements represent a material change from the unaudited
financial statements for the same periods.
35
(c) by the Stockholders by notice to the Purchaser, (i) if any of the
conditions set forth in Section 8.2 hereof shall not have been fulfilled by
Purchaser, or (ii) if any material default under or breach of any agreement or
condition of this Agreement, or any misrepresentation or breach of any warranty
contained herein, on the part of the Purchaser shall have occurred and, after
proper notice, shall not have been cured.
(d) Except as set forth in paragraph (e) and in the Escrow Agreement, in
the event of the failure to close the transaction contemplated hereby or
termination of this Agreement pursuant to the provisions of Section 9 hereof,
this Agreement shall become void and have no effect, without any liability on
the part of any party hereto or its directors, officers or stockholders in
respect of this Agreement.
(e) If the Company and the Stockholders fail to consummate the transaction
contemplated by 5:00 p.m. CST on February 2, 2005, notwithstanding that the
Purchaser has fulfilled or is prepared to fulfill all of its obligations on the
Closing Date, all of the conditions set forth in Section 8.2 and is not in
default under or in breach of any agreement, condition, representation or
warranty contained in this Agreement, the Purchaser shall be entitled to seek
and obtain injunctive and other equitable relief to enforce the consummation and
Closing of this Agreement in accordance with the terms hereof.
9.2 Amendment.
This Agreement may not be amended except by an instrument in writing duly
executed and delivered on behalf of each of the parties hereto.
10. Survival.
10.1 Survival.
The representations, warranties, agreements and indemnities contained in
this Agreement shall survive the execution and delivery of this Agreement, any
examination by or on behalf of such parties, and the completion of the
transactions contemplated herein, provided that (i) all such representations,
warranties, agreements and indemnities of the Company and Stockholders shall
terminate two (2) years after the Closing Date, except for the representations
and warranties in Sections 5.13, 5.16, 5.19 and 5.22, which shall survive
indefinitely; and (ii) all such representations, warranties, agreements and
indemnities of the Purchaser shall terminate two (2) years after the Closing
Date.
11. Miscellaneous.
11.1 Stockholders' Representative.
36
(a) Appointment. The Stockholders, and each of them, hereby appoint Larry
W. Cooper (the "Stockholders' Representative") as their agent to (i) represent,
act for and on behalf of, and bind each of the Stockholders in the performance
of all of their obligations arising from or relating to this Agreement,
including the execution and delivery of any document, certificate or agreement
required under this Agreement to be delivered by the Stockholders at the
Closing; (ii) accept delivery from the Purchaser of the cash portion of the
Purchase Price to the Stockholders in the manner provided in or pursuant to this
Agreement; (iii) give and receive notices and receive service of process under
or pursuant to this Agreement; (iv) execute and deliver the Escrow Agreement on
behalf of the Stockholders, and to represent, act for, and bind each of the
Stockholders in the performance of all of their obligations and in securing all
their rights arising from or relating to the Escrow Agreement; (v) if the
Stockholders' Representative determines legal action is necessary to enforce
rights of the Stockholders under this Agreement to assess each Stockholder for a
pro rata share of the expenses and if such Stockholder does not remit such
amounts within thirty (30) days of written request to exclude such Stockholder
entirely from any recovery notwithstanding anything to the contrary in this
Agreement, and (vi) to deduct from the proceeds payable to any Stockholder at
Closing (A) an amount required for any federal or state withholding or other tax
owed by such Stockholder pursuant to the minimum withholding for this
transaction required by the applicable regulatory authority and/or the Internal
Revenue Service of the United States, (B) an amount required to compensate
Matthews & Hawkins, P.A. for rendering legal services in the negotiation of
these agreements and this transaction, and the rendering of the requisite legal
opinion, and (C) an amount required to compensate Lowry and Watson, P.A. for
rendering accounting services in the negotiation of these agreements and this
transaction. For purposes of this Section 11.1 "pro rata" means the same
proportion as that which the total cash proceeds for such Stockholder at Closing
as set forth on Schedule 2.1 hereto bears to the total cash proceeds for all
Stockholders at Closing as set forth on Schedule 2.1 hereto. The Stockholders'
Representative hereby accepts such appointment.
(b) Successors; Compensation; Reliance. In the event that the Stockholders'
Representative shall die, become incapacitated, resign or otherwise be unable to
fulfill his duties hereunder, a successor Stockholders' Representative shall be
selected by the Stockholders receiving a majority of the cash portion of the
Purchase Price as soon as reasonably practicable thereafter. If the Stockholders
desire to remove or replace the Stockholders' Representative for any reason, any
such Stockholders' Representative may be so removed or replaced by the
Stockholders receiving a majority of the cash portion of the Purchase Price. The
Stockholders' Representative shall receive no compensation from the Purchaser or
the Stockholders for his services hereunder. Any decision, act, consent or
instruction of the Stockholders' Representative shall constitute a decision of
the Stockholders and shall be conclusive and binding upon the Stockholders, and
the Purchaser may rely upon any such decision, act, consent or instruction of
the Stockholders' Representative as being the decision, act, consent or
instruction of the Stockholders.
11.2 Consent to Jurisdiction and Waivers For Injunctive Relief.
37
The Purchaser and the Stockholders each irrevocably consents that any legal
action or proceeding for equitable relief which may be brought against any of
them pursuant to the terms of this Agreement which arise out of or in any manner
related to, this Agreement may be brought in any court of the State of New York
located within New York County or in the United States District Court for the
Southern District of New York. The Purchaser and the Stockholders by the
execution and delivery of this Agreement, expressly and irrevocably consent and
submit to the personal jurisdiction of any of such courts in any such action or
proceeding. The Purchaser and the Stockholders further irrevocably consent to
the service of any complaint, summons notice or other process relating to any
such action or proceeding by delivery thereof to it by hand or by any other
manner provided for in Section 11.4. The Purchaser and the Stockholders hereby
expressly and irrevocably waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis. Nothing in this Section shall affect
or impair in any manner or to any extent the right of the Purchaser to commence
legal proceedings for equitable relief or otherwise proceed for equitable
relief.
11.3 Severability.
If any provision of this Agreement, and, in particular, if any provision of
the covenant not to compete, shall be held or deemed to be or shall, in fact, be
inoperative or unenforceable as applied in any particular case because it
conflicts with any other provision or provisions hereof or any constitution or
statute or rule of public policy, or for any other reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative, or unenforceable
to any extent whatever. The invalidity of any one or more phrases, sentences,
clauses, sections, or subsections of this Agreement shall not affect the
remaining portions of this Agreement.
11.4 Notices.
All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto shall
be validly given, made or served, if in writing and delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid,
recognized national or international air courier or by facsimile transmission
electronically confirmed:
if to Purchaser:
MSI Acquisition Corp.
101 North Point Boulevard
Lancaster, Pennsylvania 17601-4133
Fax: 717-397-9503
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Attn: Mr. John Kelley, President
with a copy to:
David H. Lieberman, Esq.
Beckman, Lieberman & Barandes, LLP
100 Jericho Quadrangle, Suite 329
Jericho, New York 11753
Fax: (516) 433-5858
if to the Company or Stockholders, to the Stockholder's
Representative:
Larry W. Cooper
Micro Systems, Inc.
35 Hill Avenue
Fort Walton Beach, Florida 32548
Fax: (850) 243-1378
with a copy to:
John W. Hawkins, Esq.
Matthews & Hawkins, P.A.
4475 Legendary Drive
Destin, Florida 32541
Fax: (850) 654-1634
(if to the Company prior to the Closing Date, to the Stockholders'
Representative, as aforesaid, and after the Closing Date, to the Purchaser, as
aforesaid)
or, in each case, at such other address as may be specified in writing to the
other parties.
11.5 Waiver.
Any party may waive compliance by another with any of the provisions of
this agreement. No waiver of any provisions shall be construed as a waiver of
any other provision or a future waiver of any other provision hereof. Any waiver
must be in writing.
11. Publicity.
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Until the Closing, none of the Purchaser, the Company or the Stockholders
shall issue any press release or public announcement of any kind concerning the
transactions contemplated by this Agreement without consulting with the other,
except as may be required by Applicable Law.
11.7 Brokers, Finders, etc.
The Company, Stockholders and Purchaser represent and warrant to each other
that they have not dealt with or employed any broker, finder, investment banker
or financial advisor in connection with the negotiation, execution or
performance of this Agreement.
11.8 Assignment.
The Purchaser may not assign any of its rights or obligations hereunder
without the prior written consent of the Stockholders' Representative, except
that such consent shall not be required for an assignment to a direct or
indirect wholly-owned subsidiary of the Purchaser, which subsidiary, at and
contemporaneously with the Closing, may be merged with the Company, provided
that in the event of any such assignment and/or merger with or without the
consent of the Stockholders' Representative, as the case may be, the Purchaser
and any such subsidiary or merged subsidiary shall remain subject to the
Purchaser's obligations hereunder. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
11.9 Miscellaneous.
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
This Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware, applicable to contracts made and to be performed in Delaware.
This Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the parties hereto. The rights and obligations contained in this
Agreement are solely for the benefit of the parties hereto and are not intended
to benefit or be enforceable by any other party, under the third party
beneficiary doctrine or otherwise.
12. iRespond/RSS Line. Notwithstanding anything contained herein to the
contrary, the parties are purposefully excluding, from the assets, contracts and
intellectual property conveyed by this transaction the iRespond/RSS Line of
products (the "iRespond/RSS Line"). The iRespond/RSS Line of products is a line
of realtime testing and assessment tools, and includes that certain license from
the Lemelson Foundation utilized in such products. All rights of the Company in
and to, or pertaining to the iRespond Line (the "iRespond Rights"), shall be
40
distributed by the Company to Larry W. Cooper at or before Closing. The iRespond
Rights are perceived and evaluated by Purchaser as having a de minimis value,
and the transfer of same shall not have a material effect on this stock purchase
transaction.
13. Counterparts. This instrument may be executed in any number of
counterparts, each of which when executed and delivered is an original, but all
of which together shall constitute one instrument with the same effect as if all
parties hereto had signed the same counterpart and signature page. In making
proof of this instrument, it shall not be necessary to produce or account for
more than one such counterpart which is executed by the party against whom
enforcement of such instrument is sought. In addition, any signature page and
related notary acknowledgments may be detached from any counterpart of this
instrument without impairing the legal effect of any signatures thereon, and
such signature page and related notary acknowledgments may be attached to
another counterpart of this instrument having attached to it one or more
additional signature pages and related notary acknowledgments.
Signatures appear on the following pages.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
PURCHASER
MSI ACQUISITION CORP.
By: /s/ Myron Levy
Title: Vice President
COMPANY
MICRO SYSTEMS, INC.
/s/ Cortez A. Proctor
By: Cortez A. Proctor
Title: President
STOCKHOLDERS
Cooper, Larry
Ferguson, Thomas Jr.
Ferguson, Kevin T.
Gates, Dale M.
Proctor, Cortez A.
Landice, Anita
Owens, Michael
Clark, Thomas
Manard, Tami
Urena, Erasmo
Stake, David
STOCKHOLDERS' REPRESENTATIVE
By: /s/ Larry W. Cooper
Larry W. Cooper
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