Exhibit 10.1
STOCK PURCHASE AGREEMENT
AMONG
HERLEY INDUSTRIES, INC.
AND
ICI ACQUISITION CORP.
AS SELLER
AND
ELBIT SYSTEMS OF AMERICA, LLC
AS PURCHASER
FOR
THE PURCHASE OF ALL OF THE OUTSTANDING CAPITAL STOCK
OF
INNOVATIVE CONCEPTS, INC.
DATED AS OF SEPTEMBER 18, 2008
TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE SALE AND REPURCHASE OF SHARES; CLOSING....................................................1
1.1 Agreement to Purchase, Repurchase and Sell...................................................... 1
1.2 Consideration. ................................................................................. 1
1.3 Manner of Delivery...............................................................................2
1.4 Time and Place of Closing........................................................................2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER...........................................................2
2.1 General Statement................................................................................2
2.2 Corporate........................................................................................3
2,3 Financial........................................................................................5
2.4 Taxes............................................................................................7
2.5 Conduct of Business .............................................................................9
2.6 Contracts.......................................................................................11
2.7 Employment and Benefit Matters..................................................................13
2.8 Litigation and Claims...........................................................................16
2.9 Environmental Matters...........................................................................17
2.10 Intellectual Property...........................................................................18
2.11 Real Property...................................................................................20
2.12 Government Contracts............................................................................20
2.13 Export and Import Control.......................................................................24
2.14 Anti-Corruption and Anti-Bribery................................................................24
2.15 Adequacy of Assets and Other Matters............................................................25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................26
3.1 General Statement. .............................................................................26
3.2 Corporate.......................................................................................26
3.3 Litigation......................................................................................27
3.4 Fees............................................................................................27
ARTICLE 4 CONDUCT PRIOR TO THE CLOSING.....................................................................27
4.1 General.........................................................................................27
4.2 Seller's Obligations............................................................................27
4.3 Joint Obligations...............................................................................31
4.4 Deliveries of Information; Consultations .......................................................31
ARTICLE 5 CONDITIONS TO CLOSING............................................................................32
5.1 Conditions to Seller's Obligations..............................................................32
5.2 Conditions to Purchaser's Obligations...........................................................33
ARTICLE 6 CLOSING..........................................................................................34
6.1 Form of Documents...............................................................................34
6.2 Purchaser's Deliveries..........................................................................34
6.3 Seller's Deliveries,............................................................................35
6.4 Section 338(0)(10) Election.....................................................................36
ARTICLE 7 POST. CLOSING AGREEMENTS........................................................................36
7.1 Post-Closing Agreements.........................................................................36
7.2 Inspection of Records...........................................................................36
7.3 Payments of Accounts Receivable.................................................................36
7.4 Non-Competition; Non-Solicitation...............................................................36
7.5 Third Party Claims..............................................................................37
7.6 Severance Agreements............................................................................38
7.7 Offset to Government Contract Indemnification...................................................38
ARTICLE 8 INDEMNIFICATION...................................................................................38
8.1 General.........................................................................................38
8.2 Seller's Indemnification Obligations............................................................38
8.3 Limitation on Seller's Indemnification Obligations..............................................39
8.4 Purchaser's Indemnification Obligations.........................................................41
8.5 Limitations on Purchaser's Indemnification Obligations,.........................................41
8.6 Cooperation.....................................................................................41
8.7 Subrogation.....................................................................................42
8.8 Procedures......................................................................................42
ARTICLE 9 TERMINATION.......................................................................................43
9.1 General.........................................................................................43
9.2 Right to Terminate,.............................................................................43
9.3 Certain Effects of Termination..................................................................44
9.4 Remedies........................................................................................44
9.5 Effect of Termination...........................................................................44
9.6 Specific Performance............................................................................45
9.7 Time is of Essence..............................................................................45
ARTICLE 10 TAX MATTERS......................................................................................45
10.1 Tax Returns for Periods Ending on or Before the Closing Date....................................45
10.2 Tax Returns for Periods Beginning Before and Ending After the Closing Date......................45
10.3 Allocation of Straddle Period Taxes ............................................................46
10.4 Audits and Contests Regarding Taxes.............................................................46
10.5 Cooperation on Tax Matters......................................................................47
10.6 Tax Sharing Agreements..........................................................................47
10.7 Section 338(h)(10) Election.....................................................................47
ARTICLE 11 DEFINITIONS.....................................................................................48
11.1 Index of Definitions............................................................................48
11.2 Other Definitions...............................................................................50
ARTICLE 12 MISCELLANEOUS...................................................................................57
12.1 Publicity.......................................................................................57
12.2 Notices.........................................................................................58
12.3 Expenses; Transfer Taxes........................................................................58
12.4 Entire Agreement................................................................................59
12.5 Non-Waiver. ....................................................................................59
12.6 Counterparts. ..................................................................................59
12.7 Severability,...................................................................................59
12.8 Applicable Law..................................................................................59
12.9 WAIVER OF JURY TRIAL............................................................................60
12.10 Binding Effect; Benefit.........................................................................60
12.11 Assignability...................................................................................60
12.12 Amendments......................................................................................60
12.13 Headings........................................................................................60
STOCK PURCHASE AGREEMENT
THIS STOCK. PURCHASE AGREEMENT (this "Agreement") is made as of September
18, 2008, by and among ELBIT SYSTEMS OF AMERICA, LLC, a Delaware limited
liability company ("Purchaser"), INNOVATIVE CONCEPTS, INC., a Virginia
corporation ("la"), HERLEY INDUSTRIES, INC., a Delaware corporation ("Herley")
and sole stockholder of ICI ACQUISITION CORP., a Delaware corporation ("ICI
Acquisition"), and ICI Acquisition, the sole stockholder of ICI (Herley and ICI
Acquisition are herein collectively referred to as "Seller" and shall be jointly
and severally liable for all of the representations, warranties and covenants
made by Seller hereunder). All capitalized terms shall have the meanings used
herein, including as referenced in .Article 11 hereof.
R E C I T A L S
A. Seller owns all of the outstanding shares of capital stock of ICI (the
"Shares");
B. ICI is a communications technology development firm specializing in the
research, design, development, production, sale and support of wireless data
communications and other products and services for federal, government and
commercial customers;
C. Pursuant to the terms and conditions set forth in this Agreement,
Purchaser desires to purchase all of the outstanding Shares, and Seller desires
to sell to Purchaser all of the outstanding Shares; and
D, Prior to the Closing (as defined below), Seller shall acquire ownership
of all of the outstanding capital stock of Stapor Research, Inc., a wholly owned
subsidiary of ICI (the "Excluded Business"), and Purchaser shall not acquire nor
assume liability for, any of the assets, obligations and operations of the
Excluded Business.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
PURCHASE SALE AND REPURCHASE OF SHARES; CLOSING
1.1 Agreement to Purchase, Repurchase and Sell.
On the basis of the representations, warranties, covenants, and agreements,
and subject to the satisfaction or waiver of the conditions set forth herein, at
the Closing, Purchaser shall purchase from Seller, and Seller shall sell,
assign, transfer and deliver to Purchaser, all of the Shares, free and clear of
all Claims. The total consideration to be given by Purchaser in connection with
the acquisition of the Shares shall be the sum of the payments described in
Section 1.2 below (collectively, the "Purchase Price").
1.2 Consideration.
1.2.1 Cash Payments at Closing. The cash payment at Closing shall equal
Fifteen Million Dollars ($15,000,000) and shall be payable as follows:
(a) as partial consideration for the Shares, the amount of Fourteen
Million, Two Hundred Fifty Thousand ($14,250,000) (the "Closing Cash Payment"),
shall be paid or satisfied at the Closing by wire transfer of immediately
available funds to such bank account(s) as Seller shall designate by written
notice delivered to Purchaser not later than five (5) business days prior to the
Closing; and
(b) the amount of Seven Hundred Fifty Thousand Dollars ($750,000) (the
"Escrow Amount") will be deposited into an interest bearing escrow (the
"Escrow") and held pursuant to an escrow agreement substantially in the form of
Exhibit A (the "Escrow Agreement"), The Escrow will be held, maintained and
disbursed by TD Bank, National Association, the escrow agent provided for in the
Escrow Agreement (the "Escrow Agent") and will serve solely as security for any
potential Claims of Purchaser Indemnitees for indemnification for the Claims (as
defined herein) set forth in Sections 8.2.3, 8.2.4, 8.2.5, 8.2.6, 8.2.7, 8.2.8
and 8.2.9 below.
(c) The amount of any intercompany balances due to or from Henley or any of
its Affiliates (other than ICI) to ICI, calculated in accordance with Section
4.5, as of the date which is five (5) business days prior to the Closing Date,
shall be settled prior to the Closing date.
1.3 Manner of Delivery.
At the Closing, Seller shall deliver to Purchaser certificates evidencing
the Shares, accompanied by valid stock powers duly executed in blank, in proper
form for transfer and in form and substance satisfactory to Purchaser.
1.4 Time and Place of Closing.
The transactions contemplated by this Agreement shall be consummated (the
"Closing") at 10:00 a.m., at the offices of Greenberg Traurig, LLP, 1750 Tysons
Blvd., Suite 1200, McLean, Virginia 22102, on October 2, 2008 or promptly after
the satisfaction or waiver of each of the conditions set forth in Sections 5.1
and 5.2, or on such other date, or at such time or place, as shall be mutually
agreed upon in writing by Seller and Purchaser. The date on which the Closing
occurs in accordance with the preceding sentence is referred to in this
Agreement as the "Closing Date."
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 General Statement.
Except as set forth in the disclosure schedule provided by Seller and
attached to this Agreement ("Seller's Disclosure Schedule"), Seller makes the
representations and warranties set forth in this Article 2. Such representations
and warranties to Purchaser shall not be limited or otherwise affected by any
investigation or lack of investigation by Purchaser. No specific representation
or warranty shall limit the generality or applicability of a more general
representation or warranty.
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2.2 Corporate.
22.1 ICI is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, with full corporate
power and authority to carry on its business as such business is now being
conducted, except where the failure to have such power and authority would not
have a Material Adverse Effect,
2.22 ICI is qualified to do business as a foreign entity, and is in good
standing, under the laws of Pennsylvania and in all other jurisdictions where
the nature of its business or the nature or location of its assets requires such
qualification, except where the failure to be so qualified in such other
jurisdictions would not have a Material Adverse Effect. All jurisdictions in
which ICI is qualified as a foreign entity are set forth in Schedule 2.22,
2.2.3 Except for the shares of Stapor Research, Inc., ICI does not own or
have the right to acquire, directly or indirectly, any securities or other
equity interests of any Person or hold or beneficially own any other direct or
indirect interest (whether it be capital stock or any comparable ownership
interest in any Person that is not a corporation), or any subscriptions,
options, warrants, rights, calls, convertible securities or other agreements or
commitments for any such equity interest in any Person.
2.2.4 True and complete copies of the Articles of Incorporation of ICI and
all amendments thereto, the bylaws as amended and currently in force, all stock
records, and all corporate minute books and records of ICI have been furnished
to Purchaser for review and inspection. Such stock records accurately reflect
all transactions relating to the Shares from and after the Seller Acquisition
Date and the current ownership of the Shares.
2.2.5 The authorized and issued and outstanding capital stock of ICI is set
out in Schedule 2.2.5. There are no shares of capital stock of ICI of any other
class authorized, issued or outstanding. All of the issued and outstanding
capital stock of ICI consisting of 1,500 shares of Class A Common Stock, has
been duly authorized and is validly issued, fully paid and non- assessable. ICI
Acquisition, owns all of the issued and outstanding shares of ICI capital stock,
free and clear of all Claims and Herley owns all of the issued and outstanding
shares of ICI Acquisition, free and clear of all Claims. There are no Claims
relating to the issued or unissued capital stock or other securities of ICI or
obligating ICI to issue any securities of any kind. No preemptive rights or
rights of first refusal exist with respect to the shares of capital stock of
ICI. There are no outstanding or authorized rights, options, warrants,
convertible securities, subscription rights, conversion rights, exchange rights
or other agreements or commitments of any kind that could require ICI or Seller
to issue or sell any shares of ICI's capital stock (or debt or equity securities
convertible into or exchangeable for shares of ICI's capital stock) and no such
rights or commitments of any kind arise by virtue of or in connection with the
transactions contemplated hereby. There are no outstanding stock appreciation,
phantom stock, profit participation or other similar rights with respect to ICI.
There are no proxies, voting rights, shareholders agreements or other agreements
or understandings with respect to the voting or transfer of the capital stock of
ICI. ICI is not obligated to redeem or otherwise acquire any of its outstanding
shares of capital stock.
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2.2.6 The execution and delivery by each of ICI and Seller of this
Agreement and the other Transaction Documents to be executed in connection
herewith, constitute the legal, valid and binding obligations of ICI and Seller,
respectively, enforceable against ICI and Seller in accordance with their
respective terms (except to the extent that enforcement may be affected by laws
relating to bankruptcy, insolvency and creditors' rights generally and by the
availability of injunctive relief, specific performance and other equitable
remedies), ICI and Seller have the absolute and unrestricted right, power,
authority and capacity to execute and deliver this Agreement and the Transaction
Documents and, subject to the receipt of the Approvals described in Schedule
2.12.10, the advance notification described in Schedule 2.2.6 and the consents
described in Schedule 2.2.9, to perform each of their respective obligations
under this Agreement and the Transaction Documents.
2.2.7 The Board of Directors of the Seller and the Board of Directors of
ICI have approved this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby and has authorized the execution,
delivery and performance of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby. The
shareholders of Seller are not required to approve the sale of the Shares to
Purchaser and no other corporate proceedings on the part of Seller or ICI are
necessary to approve and authorize the execution, delivery and performance of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby.
2.2,8 Except with regard to the approvals described in Schedule 2.12,10
relating to the facility security clearances, personnel security clearances and
permits listed on that schedule, no Approval of any Governmental Authority is
required for the execution and delivery of this Agreement and the other
Transaction Documents by Seller and ICI and the consummation of the transactions
contemplated hereby and thereby by Seller and ICI.
2.2.9 Except as set forth on Schedule 2.2.9, the execution, delivery and
performance by Seller and ICI of this Agreement and the other Transaction
Documents and the consummation by Seller and ICI of the transactions
contemplated hereby and thereby and the fulfillment by Seller and ICI of the
terms hereof and thereof: (i) shall not cause either of Seller or ICI to be in
violation or Breach of, and will not conflict with or constitute a default
under, and shall not accelerate or permit the acceleration of the performance
required by, any of the terms of the Articles of Incorporation or bylaws of ICI
or any Security Document or any other Contract or agreement, written or oral, to
which Seller or ICI is a party or by which it is bound; (ii) shall not be an
event which, after notice or lapse of time or both, will result in any material
violation, Breach, conflict, default, or acceleration; (iii) shall not result in
a violation under any material law, Judgment, permit or other material legal
requirement of any Governmental Authority applicable to Seller or ICI; (iv)
shall not result in the creation or imposition of any Lien in favor of any
Person upon the Shares or any of the properties or assets of Seller or ICI and
(v) will not adversely effect ICI's rights in any of its Intellectual Property.
Except as set forth on Schedule 2.2.9, no notice to, filing with, or consent of,
any Person is necessary for the execution, delivery or performance by Seller or
ICI of this Agreement and the other Transaction Documents nor the consummation
by Seller or ICI of the transactions contemplated hereby or thereby.
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2.3 Financial.
2.3.1 Since the Seller Acquisition Date, ICI's books, accounts and records
are, and have been, maintained in ICI's ordinary course of business, and all
material transactions to which ICI is or has been a party are accurately and
properly reflected therein in all material respects.
2.3.2 Schedule 2.3.2 contains complete and accurate copies of the unaudited
balance sheets and statements of profit and loss of ICI as of and for the years
ended July 29, 2007, July 30, 2006 and July 31, 2005 (the "Unaudited Financial
Statements") and the preliminary unaudited balance sheet and statement of profit
and loss of ICI as of and for the 2008 fiscal year ended August 3, 2008 (the
"2008 Financial Statements"). The Unaudited Financial Statements and the 2008
Financial Statements are hereinafter referred to as the "Financial Statements".
The Financial Statements are complete and correct in all material respects and
present fairly the financial position of ICI as of the date thereof and its
results of operations for the periods covered by such statements, in accordance
with U.S. GAAP, consistently applied; except for (a) the absence of footnote
disclosures required by U.S. GAAP, (b) normal recurring year-end adjustments
which are not material, individually or in the aggregate and (c) as set forth in
any footnotes to the 2008 Financial Statements.
2,3.3 None of the accounts receivable and notes receivable which are
reflected in the Financial Statements or which arose subsequent to the date of
the 2008 Financial Statements is or was subject to any deduction, counterclaim
or set-off in excess of the aggregate amounts, if any, reserved as uncollectible
for such purpose on the 2008 Financial Statements. All of such accounts
receivable and notes receivable arose out of bona fide, arms-length transactions
for the sale of goods or performance of services, and all such accounts
receivable and notes receivable (whether billed or =billed) are good and
collectible (or have been collected) at the aggregate recorded amounts thereof
within 180 days of the date of the invoice other than as set forth in Schedule
2.3.3, subject to the amount reserved for uncollectible accounts and notes
receivable on the 2008 Financial Statements.
2.3.4 On the date of this Agreement, the Funded Customer Backlog of ICI was
not less than the amount specified in Schedule 2.3.4. As used in this Agreement,
the term "Funded Customer Backlog" means purchase orders or Contracts from
customers with funding currently available and fixed prices, fixed quantities
and fixed delivery dates, and cost plus Contracts, subject to the terms
otherwise provided in the Contracts listed in Schedule 2.6.2. Except as provided
in Schedule 2.3.4, ICI has not received any written notification from any
customer that any of such Funded Customer Backlog may be canceled or revised by
an amount in excess of $50,000, individually or in the aggregate.
2.3.5 Except as specifically identified in Schedule 2.3.5, ICI has no
Liabilities except for:
(a) Liabilities provided for or reserved against in the Unaudited Financial
Statements;
5
(b) Liabilities which have been incurred by ICI subsequent to the date of
the Unaudited Financial Statements in the ordinary course of business and
consistent with past practice; and
(c) Liabilities under the executory portion of any Contract by which ICI is
bound and which was entered into in the ordinary course of business and
consistent with past practice.
Any of the Liabilities described in subparagraphs (a) through (c) of this
Section 2,3.5 that constitute Indebtedness are set forth in Schedule 2.3.5. None
of the Liabilities described in subparagraphs (a) through (c) of this Section
2.3.5 relates to or has arisen out of a Breach by or against ICI, any Proceeding
involving ICI or violation of Applicable Law and none of such Liabilities,
individually or in the aggregate, would have a Material Adverse Effect.
2.3.6 Schedule 2.3.6, in all material respects, sets forth a true, accurate
and complete list and description of all uncompleted Contracts of ICI as of the
date hereof and all outstanding bids, including Government Bids, of ICI which,
as of the date hereof, have not been accepted by the proposed customers. All
outstanding bids were made in the ordinary course of ICI's business.
2.3,7 ICI has good and marketable title to all of its assets, free and
clear of any Liens, except for Permitted Liens. As of the Closing Date, there
are no unreleased Security Documents encumbering any of ICI' s assets.
2.3.8 ICI has no guarantees, surety bonds, instruments or other agreements
to which ICI is a party as an obligor, surety or guarantor, other than checks
endorsed for collection or deposit in the ordinary course of business.
2.3.9 Schedule 2.3.9 contains a true, accurate and complete list and
description {including coverages, deductibles and expiration dates) of all
insurance policies which are owned by ICI or which name ICI as an insured (or
loss payee), and the claims history since January 1, 2007 under each such
policy. All such insurance policies are in full force and effect and neither ICI
nor Seller has received notice of cancellation of any such insurance policies,
In the three (3) year period ending on the date hereof, there has not occurred,
and neither Seller nor ICI has received any written notice from, or on behalf
of, any insurance carrier relating to or involving any change in conditions of
insurance of ICI, any refusal to issue an insurance policy or non- renewal of a
policy covering, or requiring material adverse changes or material premium
increases relating to ICI.
2.3.10 Section 2.3.10 contains a list showing:
(a) the name of each bank, safe deposit company or other financial
institution in which ICI has an account, lock box or safe deposit box; and
(b) the names of all Persons authorized to draw thereon or to have access
thereto and the names of all Persons, if any, holding powers of attorney from
ICI.
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2.3.11 Schedule 2.3.11 describes each:(.) (i) Contract or other business
relationship (excluding employee compensation and other ordinary incidents of
employment) between (x) ICI and (y) any Related Party; (ii) transaction
occurring since the Seller Acquisition Date between ICI and any Related Party
involving payment in excess of $50,000; and (iii) amount owing by or to any of
the Related Parties, respectively, to or from ICI as of the date of this
Agreement. No property or interest in any property which is used in the current
operation of ICI's business is presently owned by or leased or licensed by
Seller or by any other Related Party.
2.3.12 The closing balance sheet will be prepared jointly by Purchaser and
Seller based on the Allocation Schedule agreed to in connection with the
elections under Section 338(h)(10) and any analogous provisions of state or
local Law as provided in Section 10.7 of this Agreement based on a purchase
price of $15,000,000 and will be prepared promptly following agreement as to the
Allocation Schedule,
2.4 Taxes.
2.4.1 ICI or Seller has filed on a timely basis all Tax Returns required to
have been filed with respect to ICI's assets or operations or on behalf of any
"affiliated group" (within the meaning of Section 1504 of the Code) of which ICI
is or was a member. All such Tax Returns are correct and complete in all
material respects. All Taxes required to have been paid by or on behalf of ICI
(whether or not shown on any Tax Return) have been paid on a timely basis or, if
not yet due and owed, have been accrued and reserved as a current liability on
the balance sheets included in the Financial Statements. Since the Seller
Acquisition Date no Claim has been made or is currently pending by a
Governmental Authority in a jurisdiction where ICI or Seller does not file Tax
Returns that either ICI or Seller is or may be subject to taxation by that
jurisdiction based upon the assets or operations of ICI. Neither Seller nor ICI
has requested or obtained any extension of time within which to file any Tax
Return related to ICI's assets or operations, which Tax Return has not since
been filed. The accruals and reserves for Taxes reflected in ICI's balance sheet
included in the Financial Statements, if any, are adequate to cover all unpaid
Taxes of ICI and such reserves for Taxes as adjusted for operations and
transactions and the passage of time through the Closing Date in accordance with
past custom and practice of ICI are adequate to cover all unpaid Taxes of ICI
accruing through the Closing Date.
2.4.2 Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge prior to the Seller Acquisition Date, ICI and Seller have complied in
all material respects with all applicable laws, rules and regulations relating
to withholding Taxes for employees, contractors or consultants of ICI, and have,
within the time and manner prescribed by law, withheld from employee wages and
paid over to the proper Governmental Authority all amounts required to have been
so withheld and paid (including, without limitation, any such Taxes due as a
result of a plan or compensation agreement intended or purporting to be a
"deferred compensation arrangement" that does not comply with Section 409A of
the Code).
2.4.3 There is no audit or other proceeding presently pending or, to
Seller's Knowledge, threatened with regard to any Tax of ICI or of Seller
relating to ICI or ICI's operations or assets. ICI has not received a ruling
from a Governmental Authority relating to any Tax or entered into a written
agreement with a Governmental Authority relating to any Tax. Since the Seller
Acquisition Date and to Seller's Post-Acquisition Knowledge prior to the Seller
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Acquisition Date, no issue has been raised by any Governmental Authority with
respect to Taxes of ICI in any prior examination which, by application of the
same or similar principles, could reasonably be expected to result in a proposed
deficiency for any other taxable period.
2.4.4 No agreement, waiver ox other document or arrangement extending, or
having the effect of extending, the period for assessment or collection of Taxes
(including, but not limited to, any applicable statute of limitation), has been
executed or filed with any Governmental Authority by or on behalf of ICI that
has continuing effect; and no power of attorney with respect to any Tax matter
relating to ICI is currently in force.
2.4.5 ICI has not filed any consent or entered into any agreement under
Section 341(f) of the Code with respect to any of its assets.
2.4.6 ICI is not a party to any contract, agreement, plan or arrangement
that, individually or collectively, (i) requires it to make payments to any
person that could be characterized as "parachute payments" within the meaning of
Section 2800 of the Code (or any corresponding or similar provision of state,
local or foreign Tax law); (ii) could give rise to the payment of any amount
(whether in cash or property, including shares of capital stock) that would not
be deductible pursuant to the terms of Sections 162(a)(1), 162(m), 162(n) or
280G of the Code; or (iii) would be subject to the excise Tax under Section 4999
of the Code.
2.4.7 ICI has not made or agreed to make, and is not required to make, any
change in method of accounting of ICI which would require ICI to make an
adjustment to its income pursuant to Section 481(a) of the Code (or any similar
provision); and neither is there any application pending with any Governmental
Authority requesting permission for ICI to make any change in any accounting
method, nor has ICI received any notice that a Governmental Authority proposes
to require a change in method of accounting.
2.4.8 ICI is not and has not been a party to any Tax allocation, Tax
sharing or similar agreement or arrangement. ICI (i) has not been a member of an
"affiliated group" (within the meaning of Section 1504 of the Code) filing a
consolidated federal income Tax Return, other than the consolidated group of
which Seller is the common parent, and (ii) has no Liability for Taxes owing by
any other Person, including, without limitation (A) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law), (B)
as a transferee or successor, or (C) by contract or otherwise.
2.4.9 ICI has not taken any action not in accordance with past practice
that would have the effect of deferring a measure of Tax from a period (or
portion thereof) ending on or prior to the Closing Date to a period (or portion
thereof) beginning after the Closing Date. ICI has no deferred income or Tax
Liability arising out of any transaction, including without limitation, any (i)
intercompany transaction (as defined in Treasury Regulation Section 1.1502-13),
or (ii) the disposal of any property in a transaction accounted for under the
installment method pursuant to Section 453 of the Code.
2.4.10 Schedule 2.4.10 identifies all Tax Returns that ICI has filed after
the Seller Acquisition Date, and the taxable period covered by each such Tax
Return, and identifies those Tax Returns or periods that have been audited or
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are currently the subject of an audit by a Governmental Authority. ICI has
provided to Purchaser complete and accurate copies of all of the following
materials that relate to Tax periods ending after the Seller Acquisition Date:
(A) with respect to ICI only all income Tax Returns filed by or with respect to
ICI, (B) all elections relating to Taxes which have continuing effect for
taxable years ending after the Closing Date filed by or on behalf of ICI with
any Governmental Authority (other than elections which are included in or
apparent from Tax Returns referred to in A above), (C) all examination reports
relating to Taxes of ICI, and (D) all statements of Taxes assessed against ICI.
2.4,11 ICI is not currently a United States real property holding
corporation within the meaning of Code Section 897(c)(2) at any time since the
Seller Acquisition Date.
2.4.12 ICI has not constituted either a "distributing corporation" or a
"controlled corporation" within the meaning of Section 355(a)(1)(A) of the Code
in a distribution qualifying (or intended to qualify) under Section 355 of the
Code (or so much of Section 356 as relates to Section 355) since the Seller
Acquisition Date.
2.4.13 Seller or ICI have disclosed on their income Tax Returns since the
Seller Acquisition Date all material positions taken therein that could, if not
so disclosed, give rise to a substantial understatement penalty assessed against
ICI within the meaning of Section 6662 of the Code (or any comparable provision
of state law). ICI has not Mowed, and to Seller's Knowledge, no state of affairs
exist that could result in ICI incurring, any penalty under Section 6662(e) of
the Code (or any comparable provision of state law). ICI has not been a party to
or participated in any way in a transaction that could be described as a
"reportable transaction" within the meaning of Treasury Regulation Section
1.6011-4(b) (including without limitation, any "listed transaction") or any
confidential corporate Tax shelter within the meaning of Treasury Regulation
Section 1,6111-2, nor has any Tax item or any Tax strategy that has been derived
from or related to any such transaction been reflected in any Tax Return of ICI.
2.4.14 Seller is not a foreign person within the meaning of Section 1445 of
the Code.
2.4.15 (a) Since the Seller Acquisition Date, ICI has not (1) acquired
assets from another corporation in a transaction in which ICI's tax basis for
the acquired assets was determined, in whole or in part, by reference to the tax
basis of the acquired assets in the hands of the transferor or (2) acquired the
stock of any corporation that is a qualified subchapter S subsidiary; and (b) no
taxes have been or will be for periods through the Closing Date, imposed on ICI
pursuant to Sections 1374 or 1375 of the Code.
2.4.16 Schedule 2.4.16 sets forth ICI's tax basis in its assets for federal
income tax purposes which is accurate and complete in all material respects.
2.5 Conduct of Business.
2.5.1 Since August 3, 2008, except as set forth on Schedule 2.5.1, ICI has
conducted its business in the ordinary course of business in accordance with
past practices and has not, nor has Seller in the name of or on behalf of ICI:
(a) sold, assigned, leased, exchanged, transferred or otherwise disposed of
any of its material assets or property (including but not limited to transfers
9
to Seller or any of its non-ICI Affiliates), except for sales of its Inventory
in the ordinary course of business in accordance with past practices;
(b) suffered any casualty, damage, destruction or loss, or interruption in
use, of any asset or property (whether or not covered by insurance), on account
of fire, flood, riot, strike or other hazard or act of God;
(c) written off any material asset as unusable or obsolete or for any other
reason;
(d) made or suffered any material change in the conduct or nature of any
aspect of the businesses of ICI, whether or not made in the ordinary course of
business or whether or not such change had a Material Adverse Effect;
(e) made (or committed to make) capital expenditures in an amount which
exceeds $50,000 for any item or $250,000 in the aggregate;
(f) paid (or delayed payment of) payables, collected (or delayed collection
of) receivables or waived any material rights, in each case other than in the
ordinary course of business in accordance with past practices;
(g) made any change in accounting methods or principles, other than changes
required to comply with changes in U.S. GAAP;
(h) adopted, amended or announced the amendment or adoption of any Benefit
Plan;
(i) borrowed any money or issued any bonds, debentures, notes or other
corporate securities, including without limitation, those evidencing borrowed
money;
(j) entered into any transactions or agreements with any Related Party,
paid (or been paid by) any Related Party, or charged (or been charged by) any
Related Party, for (A) goods sold or services rendered by or to ICI, or (B)
corporate overhead expenses, management fees, legal or accounting fees, capital
charges, or similar charges or expenses, in each case other than in the ordinary
course of business consistent with past practice;
(k) increased the compensation payable to any employee, except in the
normal course of business;
(l) made any payments or distributions to its employees, officers or
directors except such amounts as constitute currently effective compensation for
services rendered, or reimbursement for reasonable ordinary and necessary
out-of-pocket business expenses;
(m) lost or transferred to Seller or a non-ICI Affiliate of Seller the
services of any Key Employee;
(n) sold or purchased any securities of any class of any third party
(exclusive of short term liquid investments);
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(o) paid, declared or set aside any dividend or other distribution on its
capital stock, exchanged or redeemed any of its capital stock;
(p) experienced a material change in the aggregate amount of accounts
receivable or the aging thereof;
(q) been debarred, suspended or disqualified from bidding for or
participating in the award of any Government Contract, or received notice that
any suspension, debarment or disqualification Proceeding has been commenced or,
to Seller's Knowledge, threatened against ICI by any Governmental Authority with
respect to ICI's participation in any Government Contract; or
(r) without limitation by the enumeration of any of the foregoing, entered
into any material transaction other than in the usual and ordinary course of
business in accordance with past practices.
2.5.2 ICI has not suffered or been threatened with (and to Seller's
Knowledge, there are no facts which are likely to cause or result in) any
material adverse change in the business, operations, assets, liabilities, or
financial condition of ICI, including, without limiting the generality of the
foregoing, the existence or threat of a labor dispute, or any material adverse
change in, or loss of, any relationship between ICI and any Key Employee.
2.5.3 To Seller's Knowledge, no Significant Customer, including the
Department of the Army, intends to terminate its business relationship with ICI,
including pursuant to the right of the Significant Customer who is a
Governmental Authority to terminate for convenience, or to limit or alter its
business relationship with ICI in any material respect (including by non-renewal
of any Contract or non-exercise of any Contract option period), whether as a
result of the transactions contemplated hereby or otherwise. To Seller's
Knowledge, no Significant Supplier intends to terminate its business
relationship with ICI or to limit or alter its business relationship with ICI in
any material respect whether as a result of the transactions contemplated hereby
or otherwise.
2.5,4 Schedule 2.5.4 sets forth in reasonable detail all material goods and
services which Seller or any Affiliate (other than ICI) currently provides to
ICI to support the operation of ICI's business or ICI's sales of any goods or
services.
2.6 Contracts.
2,6,1 Except as set forth on Schedule 2.6,1, ICI is not a party to, or
bound by, or the issuer, beneficiary or recipient of, any oral Contract(s) of
any kind or nature which provide for the receipt or expenditure of individually
$25,000, or in the aggregate $50,000, or more over the remaining duration of
such oral Contract(s).
2.6.2 Schedule 2,6.2 contains a complete and accurate list, and ICI has
made available to Purchaser true and complete copies of all of the following
Contracts to which ICI is a party:
(a) Contracts for the employment of any Person entered into since the
Seller Acquisition Date or which remain in effect;
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(b) consulting agreements entered into since the Seller Acquisition Date or
which remain in effect;
(c) plans or Contracts or arrangements providing for bonuses, options,
deferred compensation, severance, retirement payments, profit sharing, medical
and/or dental benefits or similar benefits covering employees of ICI;
(d) Contracts or orders for the purchase by ICI of Inventory, Equipment,
Services or other assets, except for purchase orders entered into in the
ordinary course of ICI's business, which involve more than $50,000 in the
aggregate;
(e) agreements for the sale of any Equipment, Inventory or other assets,
except for sales of Inventory in the ordinary course of business, and exchanges
or transfers of obsolete or worn equipment, involving less than $50,000 in the
aggregate;
(f) agreements, loans, purchase orders and advances between ICI, on the one
hand, and Seller or any of its Affiliates, or any other Related Parties, on the
other hand ;
(g) agreements of agency, representation, distribution, or franchise which
cannot be canceled by ICI without a termination payment or other penalty for
cancellation, upon notice of thirty (30) days or less;
(h) agreements for the advertisement, display, or promotion of any of ICI's
products or services which cannot by canceled by ICI without a termination
payment or other penalty for cancellation, upon notice of thirty (30) days or
less;
(i) service agreements relating to any of ICI's assets other than
agreements that in the aggregate are not material to the business, financial
affairs or assets of ICI;
(j) guaranties, performance, bid or completion bonds, and sureties or
indemnification agreements (without any dollar threshold);
(k) loan, credit or other financing agreements, notes, Security Documents,
factoring agreements or letters of credit;, except as disclosed in Section
2.6.2(f);
(l) Contracts, other than purchase orders or bills of lading, with any
shipping or transportation company, exceeding $50,000 in the aggregate;
(m) leases or subleases, either as lessee or sublessee, lessor or
sublessor, of real or personal property or intangibles which lease or sublease
requires payment by or to ICI of at least $20,000 per year;
(n) partnerships or joint venture agreements;
(o) Government Contracts (as defined in Section 11,2.37 of this Agreement),
the list of which at Schedule 2.6.2 contains the following categories of
information for each such contract: contract name, contract number, procuring
agency, ICI bidding/offeror status (e.g., Section 8(a), prime contractor,
subcontractor, subcontractor to joint venture, joint venturer etc.), award
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basis, agency credit, contract start date, contract expiration date, total
signed value, funded backlog, and unfunded backlog; or
(p) other Contracts not specifically enumerated above that provide for the
receipt or expenditure of an amount certain or reasonably estimated of more than
$50,000 over the remaining duration of such Contract.
2.6.3 All of the Contracts identified in Section 2.6.2 are in full force
and effect and are valid and enforceable in accordance with their terms, subject
to the rights of a Governmental Authority to terminate for convenience and
except for laws related to bankruptcy, insolvency and equitable rights, and none
of such Contracts has been sold, assigned, otherwise transferred or subjected to
any Lien, other than Pei pitted Liens. ICI is in compliance in all material
respects with all terms and requirements of each such Contract and, to Seller's
Knowledge, each other Person that is party to such a Contract is in material
compliance with the terms and requirements of such Contract. To Seller's
Knowledge, no event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with or result in a violation
or breach of, or give ICI or any other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, any such Contract. ICI has not given to or
received from any other Person any written notice or communication regarding any
actual, alleged, or potential violation or Breach of, or default under, any such
Contract. There are no renegotiations, or attempts to renegotiate any material
amount to be paid or payable to or by ICI under any such Contract and no Person
has made a written demand for such renegotiation. ICI has not released or waived
any of its rights under any such Contract. To Seller's Knowledge, no
subcontractor to which ICI has subcontracted any work under any Contract is in
material default under the terms of the subcontract.
2.6.4 Neither ICI nor Seller on its behalf, has paid or agreed to pay any
fee or commission to any employee, agent or representative, the payment of which
would be a violation of the prohibition against contingent fees as set forth in
the Federal Acquisition Regulation ("FAR") or any other regulation including
those relating to foreign military sales.
2,6.5 Neither Seller nor ICI or any of their respective Affiliates is bound
by any agreement restricting in any manner ICI's right to compete with any other
Person, ICI's right to sell to or purchase from any other Person, the right of
any other Person to compete with ICI, or the ability of such Person to employ
any of ICI's employees.
2.7 Employment and Benefit Matters.
2.7.1 Benefits Plans
(a) Schedule 2.7.1(a) contains a list of each Employee Welfare Benefit
Plan, Employee Pension Benefit Plan and each plan fund, program, agreement or
arrangement for the provision of executive compensation, deferred or incentive
compensation, profit sharing, stock bonus, bonus, stock option, stock purchase,
termination, salary continuation, employee assistance, supplemental retirement,
severance, vacation, sickness, disability, death, fringe benefit, insurance,
medical or other benefits (whether provided through insurance, on a funded or
unfunded basis, or otherwise), to any current or former employee, director,
13
consultant or independent contractor of ICI, or any of their dependents,
survivors or beneficiaries with respect to any of the foregoing, which is
maintained, administered or contributed to by ICI or any ERISA Affiliate of ICI,
whether or not legally binding (collectively, the "Benefit Plans") that is or
has been in effect since the Seller Acquisition Date.
(b) Each Benefit Plan (and each related trust, insurance contract or fund)
has been maintained, funded and administered in accordance with its governing
instruments and all applicable laws, including, but not limited to, ERISA and
the Code. Each plan which is or has been maintained, administered or contributed
to by ICI or an ERISA Affiliate has been administered in accordance with the
applicable provisions of COBRA and IIIPAA.
(c) All contributions, premiums or other payments due under the terms of
each Benefit Plan or required by applicable law have been made within the time
due and all unpaid amounts attributable to any such plan for any period prior to
the Closing Date will be accrued on ICI's books and records in accordance with
U.S. GAAP.
(d) The IRS has issued a favorable determination letter to ICI or to Seller
with respect to ICI, with respect to each Benefit Plan which is intended to
qualify under Code Section 401(a) (collectively, the "Qualified Plans"), such
determination letter may be relied upon with respect to the most recent
amendment, if any, to each Qualified Plan, and nothing has occurred which could
adversely affect the tax qualified status of any such Qualified Plan.
(e) There have been no Prohibited Transactions with respect to any ERISA
Plan which could result in liability to ICI. There has been no breach of
fiduciary duty (including violations under Part 4 of Title I of ERISA) or any
other failure to act or comply in connection with the administration or
investment of the assets of any ERISA Plan which could result in liability to
ICI. No action, suit, procedure, hearing, or investigation with respect to the
administration of the investment of the assets of any such plan (other than
routine claims for benefits) is pending or, to Seller's Knowledge, threatened.
To Seller's Knowledge, there is no basis for any such action, suit, proceeding,
hearing or investigation.
(f) Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, neither ICI nor any ERISA
Affiliate of ICI has ever sponsored, maintained, administered, contributed to,
or had any obligation to contribute to or had any other liability under or with
respect to any Employee Pension Benefit Plan which is subject to the
requirements of Section 412 of the Code, Section 302 of Title I of ERISA or
Title IV of ERISA.
(g) Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, neither ICI nor any ERISA
Affiliate of ICI has ever sponsored, maintained, administered, contributed to,
or had any obligation to contribute to or had any other liability under or with
respect to any Employee Welfare Benefit Plan which provides health, life or
other benefits for former directors, officers or employees of ICI (or any spouse
or former spouse or other dependent thereof), other than benefits required by
COBRA.
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(h) Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, no Employee Welfare Benefit
Plan providing medical, dental, vision or similar insurance benefits to ICI
employees is self insured.
(i) Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, neither ICI nor any ERISA
Affiliate has ever maintained a "voluntary employees beneficiary association"
within the meaning of Section 5011(9) of the Code or any other "welfare benefit
fund" as defined in Section 419(e) of the Code.
(j) Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, all reports and information
relating to each Benefit Plan required to be filed with a Governmental Authority
have been accurately and timely filed; all reports and information relating to
each such Benefit Plan required to be disclosed or provided to participants or
their beneficiaries have been timely disclosed or provided and there are no
restrictions on the right of ICI or any ERISA Affiliate to terminate or decrease
(prospectively) the level of benefits under any Benefit Plan after the Closing
Date without liability to any participant or beneficiary thereunder.
(k) Each ERISA Affiliate of ICI is identified in Schedule 2.7.1 b
(1) Each Benefit Plan sponsored by ICI since the Seller Acquisition Date is
terminable at the discretion of ICI and without cost to ICI. ICI may, without
cost, withdraw its employees, directors, officers and consultants from any
Benefit Plan which is not sponsored by ICI. No Benefit Plan has any provision
which could increase or accelerate benefits or any provision which could
increase liability to ICI or Purchaser as a result of the transactions
contemplated hereby, alone or together with any other event.
(m) Neither ICI nor any ERISA Affiliate contributes to, has been obligated
to contribute to, or has any Liability to any "multiemployer plan" as defined in
Section 3(37) of ERISA.
(n) Each Benefit Plan that provides nonqualified deferred compensation
within the meaning of Section 409A of the Code has complied since the Seller
Acquisition Date in operation with the requirements of Section 409A and any
regulations promulgated thereunder.
2.7.2 Employee Matters
(a) Schedule 2.7.2 contains a complete and correct list of all employees of
ICI and their respective titles and security clearances as of the date hereof
(the "ICI Employees"), the 2008 compensation payable to each such employee and
the date of employment of each such employee. Except as set forth on Schedule
2.7.2(a), (1) the employment or engagement of all directors, officers, ICI
Employees, agents, consultants and professional advisers of ICI may be
terminated at will with notice given at any time and without liability for
payment of severance or other additional compensation or damages, (ii) there are
no agreements between any ICI Employee and any other Person which would
restrict, in any manner, such employee's ability to perform services for ICI ,
(iii) and there are no severance plans or payments which are or could become
payable by ICI to any ICI Employees or consultants under the terms of any oral
or written agreement or commitment or any law, custom, trade or practice.
15
Schedule 2.7.2 describes any incentive commission program or related sales
program operated by ICI and the amounts of payments due thereunder to ICI's
employees as of the date hereof.
(b) ICI is not, and has not since the Seller Acquisition Date, been, bound
by or subject to (and none of its assets or properties are bound by or subject
to) any arrangement with any labor union or other collective bargaining
representative. Since the Seller Acquisition Date, there has not been, there is
not presently pending or existing, and, to Seller's Knowledge, there is not
threatened, (i) any material strike, slowdown, picketing, work stoppage or
employee grievance process; (ii) any material charge, grievance proceeding or
other claim against or affecting ICI relating to the alleged violation of any
law pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission or any comparable Governmental
Authority, (iii) any union organizational activity or other labor or employment
dispute against or affecting ICI, or (iv) any application for certification of a
collective bargaining agent.
(c) ICI is and has been since the Seller Acquisition Date in material
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, including
without limitation any such laws regarding employment documentation, equal
employment opportunities, fair employment practices, plant closings and mass
layoffs, sexual harassment, discrimination based on sex, race, disability,
health status, pregnancy, religion, national origin, age or other tortious
conduct, workers' compensation, family and medical leave, the Immigration Reform
and Control Act, and occupational safety and health requirements, and ICI has
not engaged in any unfair labor practice. IC is not liable for the payment of
any compensation, damages, taxes, fines, penalties or other amounts however
designated for failure to comply with any of the foregoing. All Persons
classified by ICI as independent contractors have satisfied the requirements of
law to be so classified, and ICI has fully and accurately reported their
compensation on IRS Forms 1099 when required to do so. No individual who has
performed services for or on behalf of ICI, and who has been treated by ICI as
an independent contractor, is classifiable as a "leased employee," within the
meaning of Section 414(nX2) of the Code with respect to ICI.
(d) Schedule 2.72(d) lists all ICI employees who are currently on leave
relating to work related injuries and/ or receiving disability or medical or
family leave benefits under any Benefit Plan.
(e) No Key Employee has advised Seller or ICI that he or she intends to
terminate employment with ICI within the next ninety (90) days or as a result of
the purchase of ICI by Purchaser hereunder, prior to, upon, or shortly after the
Closing.
2.8 Litigation and Claims.
2.8.1 There is no Proceeding in law or in equity (including Proceedings
before any commission or other administrative authority) pending or, to Seller's
Knowledge, threatened in writing against ICI or any of its officers or
directors; or any Proceedings against ICI or Seller related to the consummation
of the transactions contemplated hereby or relating to any of ICI's assets or
operations.
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2.8.2 Since the Seller Acquisition Date, ICI has not made any written
warranties, or to Seller's Knowledge, oral warranties with respect to the
quality or absence of defects of its products or services which it has sold or
performed which are in force as of the date hereof except for those warranties
which are described in Schedule 2.8.2(). There are no Claims pending or, to
Seller's Knowledge, threatened against ICI with respect to breach of warranty or
the quality of or absence of defects in such products or services. Schedule
2.8.2(ii) sets forth a summary, which is accurate and complete in all material
respects, of all material returns of defective products during the period
beginning January 1, 2006 and ending on the date hereof, all material credits
and allowances for defective products or services given to customers during said
period, and the defect which resulted in the return, allowance or credit. To
Seller's Knowledge, there are no products sold or services performed by ICI for
which warranties are presently in effect that will result in any material Claims
of $50,000 or greater for breach of such warranties after the Closing Date.
2.8.3 Neither ICI nor Seller is a party to, or bound by, any Judgment or
agreement with respect to a Proceeding relating to or affecting the properties,
assets, personnel or business activities of ICI.
2.8.4 ICI and Seller have been in compliance in all respects with all
Judgments, and in all material respects with all Applicable Laws and Approvals
of Governmental Authorities, that relate to ICI, its operations or assets,
including but not limited to the Guilty Plea Agreement by Seller entered in the
U.S. District Court for the Eastern District of Pennsylvania and the Seller's
Settlement Agreement with the United States. Since January 1, 2008, neither ICI,
nor Seller with regard to ICI, has received from any Governmental Authority any
written notification with respect to possible or alleged noncompliance with any
Judgment, Applicable Law or Approval.
2.9 Environmental Matters.
2.9,1 ICI is, and has been since the Seller Acquisition Date, in compliance
with applicable Environmental Laws and Environmental Permits and has no
Liability for any Environmental Claim or for non-compliance with any
Environmental Law or Environmental Permit.
2.9.2 ICI possesses all Environmental Permits which are required for the
operation of its business.
2.9.3 Neither ICI nor Seller has received any written communication since
the Seller Acquisition Date alleging that ICI is not or was not in compliance
with applicable Environmental Laws or Environmental Permits.
2.9.4 Since the Seller Acquisition Date, there has been no Environmental
Claim pending or, to Seller's Knowledge, threatened against ICI. Since the
Seller Acquisition Date, ICI has not received notice of any Environmental Claim
nor, to Seller's Knowledge, is there any Environmental Claim pending.
2.9.5 Since the Seller Acquisition Date, no wastes generated by ICI have
been directly or indirectly sent, transferred, transported to, treated, stored,
or disposed of at any site listed or formally proposed for listing on the
National Priorities List or the Comprehensive Environmental Response,
17
Compensation and Liability Information System, both promulgated under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or any comparable state list. Since the Seller Acquisition
Date, ICI has not received any written notice from any Person with respect to
any real property referred to in this subparagraph, of potential or actual
liability or a written request for information from any Person under or relating
to CERCLA or any comparable state or local law.
2.9.6 Since the Seller Acquisition Date there have not been any Hazardous
Substances used, generated, treated, stored, transported, disposed of, handled,
Released or otherwise existing in connection with ICI's business.
2.9.7 Since the Seller Acquisition Date, there have not been any
underground or aboveground storage tanks, asbestos containing materials, or
transformers containing or contaminated with PCBs used or existing in connection
with ICI's business.
2,9.8 Seller's Disclosure Schedule lists all environmental data, studies,
analyses or reports and Environmental Permits in the possession of Seller or
ICI, and true and complete copies thereof have been delivered to Purchaser.
2.10 Intellectual Property.
2,10.1 Schedule 2.10.1 , in all material respects, sets forth a complete
and accurate list of all U.S. and foreign copyright registrations, copyright
applications, patents, patent applications, identified inventions, invention
disclosures, trademark registrations, service mark registrations (including
Internet domain name registrations), trademark applications, service mark
applications, material unregistered trademarks and material unregistered service
marks included within the Intellectual Property that are owned by ICI or for
which ICI has the exclusive, perpetual right to use without further payment or
royalty. ICI is the owner of or has exclusive, perpetual rights to use all of
the Intellectual Property described in Schedule 2.10.1, ICI has not sold,
assigned or otherwise transferred or subjected to any Lien any of its
Intellectual Property,
2.10.2 ICI is the sole owner of record of the Intellectual Property
identified on Schedule 2.10.1, No application for registration nor any
registration of any patent, trademark, service mark or copyright has been
withdrawn or terminated by ICI since the Seller Acquisition Date and each of the
aforementioned applications and registrations has been duly maintained,
including the submission of all necessary filings and payment of all fees and
charges in accordance with the requirements of the applicable Government
Authorities.
2.10.3 Schedule 2.10.3, in all material respects, lists all Software which
is owned ("Proprietaly Software") or licensed, leased or otherwise used by ICI
and designates which Software is owned, licensed, leased or otherwise used, as
the case may be. ICI does not use any non-Proprietary Software unless it is
licensed for such use in the manner ICI currently uses such Software. ICI has
paid all applicable license fees for non-Proprietary Software through at least
December 31, 2008. ICI has and, as of the Closing Date, will retain all rights
to any Intellectual Property required by it for the continued conduct of its
business in the manner such business is currently conducted.
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2.10.4 Schedule 2.10.4(i), in all material respects.,, sets forth a
complete and accurate list of all agreements between ICI, on the one hand, and
any Person, on the other hand, granting ownership rights in or any right to
license, sublicense, use or practice any rights under any of the Intellectual
Property owned by ICI or by any other Person, including all IP addresses owned
or licensed by ICI or any other Person (collectively, "Intellectual Property
Licenses"). Since the Seller Acquisition Date, ICI has not licensed or
sublicensed any rights in any of the Intellectual Property or received or
granted any such rights, other than pursuant to the Intellectual Property
Licenses. Except as set forth on Schedule 2.10.4(ii), ICI has not provided to
any third party or deposited into escrow a copy of any source code for its
Proprietary Software. Since August 1, 2005, ICI has not agreed to provide a copy
of any source code for its Proprietary Software other than as required under its
Government Contracts.
2.10.5 The conduct of ICI's business, the use of its Intellectual Property,
and the exercise of its rights relating to its Intellectual Property used in
ICI's business do not infringe upon or otherwise violate the Intellectual
Property rights of any Person.
2.10.6 To Seller's Knowledge, no Person is infringing upon or otherwise
violating any of the Intellectual Property of ICI.
2.10.7 Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, neither Seller nor ICI has
received notice of any Claims and there are no pending Claims by any Persons
relating to the scope, ownership or use of any of the Intellectual Property.
2.10.8 All Intellectual Property of ICI and Proprietary Software of ICI was
either developed (A) by employees of ICI within the scope of their employment;
or (B) by independent contractors who have assigned their entire right, title
and interest in such Intellectual Property and Proprietary Software to ICI
pursuant to written agreements.
2.10.9 Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, neither Seller nor ICI has
agreed to deliver or provide to any third party any Software or any data or
information related thereto that is not subject to the applicable restricted or
limited rights under the FAR and Defense Federal Acquisition Regulations
Supplement ("DFARS"), respectively.
2.10.10 Subject to (a) the consent of the Israel-United States Binational
Industrial Research and Development Foundation under the Cooperation and
Property Funding Agreement described below be obtained for any assignment, and
(b) the non-exclusive royalty free license rights of the governments of Israel
and the United States to make or use any products derived from, and to use for
non-commercial purposes, the Intellectual Property developed pursuant to the
Cooperation and Property Funding Agreement, ICI retains all rights to the
Intellectual Property developed or created by ICI under the Cooperation and
Project Funding Agreement between Paragon Communications, Ltd., Seller and the
Israel-United States Binational Industrial Research and Development Foundation,
dated April 9, 2008. ICI is not in Breach of any of its obligations under the
Cooperation and Project Funding Agreement or the Contract with Full Spectrum,
Inc., dated October 10, 2007. ICI is not currently using and has no current plan
19
or intention to hereafter use in any manner the Intellectual Property developed
under the Contract with Full Spectrum.
2.10,11 As used herein (a) "Intellectual Property" means all right, title
and interest in any intellectual property, including, without limitation, all
patents, trade secrets, identified inventions, invention disclosures,
trademarks, designs, service marks, copyrights, Internet domain names, web sites
and IP addresses, trade or business names, trade dress and slogans (and all
registrations of any of the foregoing, and all applications for registration
thereof), Software, and any goodwill associated with such Intellectual Property,
(b) "Software" means any and all (i) computer programs, including any and all
software implementation of algorithms, models and methodologies whether in
source code or object code, (ii) databases and computations, including any and
all data and collections of data, (iii) documentation, including user manuals
and training materials, relating to any of the foregoing, and (iv) content and
information contained in any web site and (c) "IP addresses" means any and all
TCP/IP addresses.
2.11 Real Property.
2.11.1 Since the Seller Acquisition Date and currently, ICI does not own
any real property.
2.11.2 Schedule 2,11,2 lists all real property leased or subleased by ICI
(the "Leased Real Property"). The Leased Real Property: (i) constitutes all real
property and improvements leased or used by ICI; (ii) is not subject to any
leases, tenancies or rights of possession of any kind (except for ICI's lease as
to Leased Real Property); (iii) is, and has been since the date of possession
thereof by ICI, in the peaceful possession of ICI; (iv) is served by all water,
sewer, electrical, telephone, drainage and other utilities required for the
operations of ICI's business; (v) to Seller's Knowledge, requires no work or
improvements to bring it into compliance 'with any Applicable Law, is in good
condition and repair, and no material expenditures are required to be made for
the repair, replacement or maintenance of any improvements on the Leased Real
Property. Any options in favor of ICI to extend, expand or terminate any lease
as to Leased Real Property, if any, are in full force and effect.
2.11.3 ICI, and to Seller's Knowledge, the owner of the Leased Real
Property, as applicable, currently hold all certificates of occupancy, permits
and any other approvals of any Governmental Authority or any other Person which
are material for the lawful occupancy and operation of the Leased Real Property
or which are material to the operation of ICI's business on the premises of the
Leased Real Property. All such certificates of occupancy, permits and approvals
that ICI is required to have are current and in full force and effect.
2.12 Government Contracts.
2,12,1 Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge prior to the Seller Acquisition Date, neither Seller nor ICI has
received any decision of a contracting officer or prime contractor or
subcontractor at any tier asserting any Claim or request for equitable
adjustment against ICI with respect to any Government Contract held by ICI and
no such Claim is currently pending. There are no disputes between ICI and the
U.S. Government under the Contract Disputes Act of 1978, any dispute resolution
20
regulations, procedures or contract clauses or any other federal statute. There
are no disputes, including any bid. protests filed at the agency, Government
Accountability Office, or court level, or other legal or administrative causes
of action between or among ICI and any prime contractor, subcontractor at any
tier, other bidder or offeror, or vendor or any other third party arising under
or relating to any Government Contract. To Seller's Knowledge, there are no
facts, events or circumstances likely to give rise to a dispute under any
Government Contract. In addition, (i) all required 2007 and prior fiscal year
final indirect cost rate proposals concerning any Government Contract have been
submitted, and (ii) provisional indirect rates have been established and agreed
to by ICI and the U.S. Government up to and including ICI's fiscal year ended
August 3, 2008. Schedule 2.12.1 further sets out a list differentiating between
Government Contracts that have not been fully performed and those that have been
fully performed but as to which the U.S. Government's or a higher-tier
contractor's rights to review, audit, or investigate have not expired under
Applicable Law.
2.12.2 Since the Seller Acquisition Date neither Seller nor ICI has
received any notice of the intention of the U.S. Government or a prime
contractor or subcontractor to terminate any Government Contract for either
convenience or default or any other reason, whether or not permitted thereunder,
including, but not limited to, a breach or violation in any respect of any
statute or regulation pertaining to any Government Contract and no such notice
is currently pending. Neither Seller nor ICI has, since January 1, 2006,
received any show cause notices, cure notices, or negative determinations of
responsibility with respect to any Government Contract. There exists no
outstanding Claim against ICI, either by the U.S. Government or by any prime
contractor, subcontractor at any tier, other bidder or offeror, vendor or any
other third party, arising under or relating to any Government Contract.
2.12.3 Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, neither Seller nor ICI has
asserted any Claim or request for equitable adjustment concerning money,
interpretation of contract terms or other relief under any Government Contract
performed by ICI and no such Claim is currently pending. Since the Seller
Acquisition Date, and, to the Seller's Knowledge prior to the Seller Acquisition
Date, no money due to ICI or Seller pertaining to any Government Contract has
been withheld or set off nor has any Claim been made for such withholding or set
off. ICI is entitled to receive and retain all progress payments received under
all Government Contracts.
2.12.4 Since the Seller Acquisition Date, neither Seller nor ICI has
received notice of any failure to comply with the Truth in Negotiations Act (10
U.S.C. sec. 2306a, 41 U.S.C. sec. 254(d)) or to submit where required cost or
pricing data that were accurate, complete and current and no such notice is
currently pending. Neither Seller nor ICI has received notice of any failure to
comply with the pricing and discount disclosure requirements or the price
reduction clause in any Contract ICI may hold with the General Services
Administration pursuant to GSA's Multiple Award Schedule program.
2.12.5 Neither Seller nor ICI is subject to any Claim for or with respect
to price adjustment under any Government Contract performed by ICI, including
any liability for defective pricing. In relation to any Government Contract
where ICI is a subcontractor at any tier, to ICI's Knowledge, there is no
dispute between or among the prime contractor, upper-tier contractor and the
21
Government customer which may give rise to a Liability of ICI or which may lead
to the termination of the prime contract or the subcontract
2.12,6 Since the Seller Acquisition Date and to Seller's Post-Acquisition
Knowledge, prior to the Seller Acquisition Date, neither Seller nor ICI has
received notice that either ICI or any of its directors, officers, employees,
agents, or consultants is under administrative, civil, or criminal
investigation, indictment or writ of information, audit or internal
investigation with respect to any alleged or potential violation of law,
irregularity, misstatement, or omission regarding any Government Contract and no
such notice is currently pending. Since the Seller Acquisition Date and to
Seller's Post-Acquisition Knowledge, prior to the Seller Acquisition Date,
neither the U.S. Government nor any prime contractor, subcontractor or other
Person has notified ICI or Seller that ICI has breached or violated any statute,
regulation, certification, representation, clause, provision or requirement
pertaining to any Government Contract or Government Bid and no such notice is
currently pending.
2,12.7 ICI has not been debarred, suspended or disqualified from bidding
for or participation in the award of any Government Contract (excluding for this
purpose ineligibility to bid on certain contracts due to generally applicable
bidding requirements) and neither Seller nor ICI has received notice that any
suspension, debarment or disqualification action has been commenced against ICI
with respect to any Government Contract. To Seller's Knowledge there exists no
fact or circumstance that would warrant the institution of suspension, debarment
or disqualification proceedings or the finding of nonresponsibility or
ineligibility on the part of ICI with respect to any employee, director,
officer, agent or consultant of ICI, To Seller's Knowledge, there is no valid
basis for (i) the suspension, debarment or disqualification of ICI from bidding
on or performing Contracts or subcontracts with any Governmental Authority, or
(ii) any Claim pursuant to any audit by any Governmental Authority in connection
with any Contracts or subcontracts relating to the provision of products or
services to or for the benefit of a Governmental Authority. Upon the acquisition
of ICI by Purchaser pursuant to this Agreement, (a) the United States Department
of the Navy would not consider Purchaser or any subsidiary or Affiliate of
Purchaser, including ICI, to be a party to the Administrative Agreement between
the United States Department of the Navy and Herley, and (ii) the United States
Department of the Navy would not pursue a separate Administrative Agreement with
Purchaser or any subsidiary or Affiliate of the Purchaser, including ICI, based
solely on the acquisition of ICI,
2.12.8 ICI has complied in all material respects with all the terms and
conditions of each Government Contract, including its obligations under
Government Contracts relating to any Government-Furnished Property or similar
property or Equipment owned by the United States.
2.12.9 ICI has complied in all material respects with all applicable U.S.
Government laws and regulations in connection with all cost accounting,
materials management and procurement systems maintained by ICI and none of its
Government Contracts is or has been subject to the Cost Accounting Standards set
forth in FAR Part 30. No material cost incurred by ICI pertaining to any
Government Contract or Government Bid has, since the Seller Acquisition Date and
to Seller's Post-Acquisition Knowledge, prior to the Seller Acquisition Date,
been formally questioned or challenged, been the subject of any investigation or
been disallowed by the U.S. Government. ICI (or Seller on its behalf) has
22
maintained accounting systems, including cost accounting systems, and data and
document custody and maintenance controls that meet all requirements set forth
in ICI's Government Contracts and Applicable Laws.
2.12,10 ICI possesses all necessary facility security clearances, personnel
security clearances and permits for the execution of its obligations under any
Government Contract and Schedule 2.12.10 sets forth all facility security
clearances held by ICI and ICI employees. Since the Seller Acquisition Date and
to Seller's Post-Acquisition Knowledge prior to the Seller Acquisition Date, ICI
and each of its directors, officers, and employees, has complied with all
requirements set forth in its Government Contracts relating to the safeguarding
of, and access to, classified information as governed by the applicable
provisions of the National Industrial Security Program Operating Manual
("NISPOM") and applicable requirements of the Defense Security Service ("DSS").
Neither ICI nor Seller has been advised in writing of, and, to Seller's
Knowledge, there are no facts or actions indicating a violation or potential
violation of the applicable provisions of the NISPOM or DSS requirements
governing the safeguarding of, and access to, classified information.
2.12.11 Since the Seller Acquisition Date, ICI has complied in all material
respects with all applicable statutes and other regulations, including the False
Claims Act, the Anti- Kickback Act of 1986, the Federal Election Campaign Act of
1971, the Sherman Act, the Clayton Act, the Service Contract Act and the
regulations under each of them. Since the Seller Acquisition Date and to
Seller's Post-Acquisition Knowledge, prior to the Seller Acquisition Date, no
payment has been made by ICI, or by any person on behalf of ICI, in connection
with securing any award or obtaining favorable treatment with respect to any
Government Contract or Government Bid in violation of any applicable laws or
regulations.
2.12.12 Since the Seller Acquisition Date, ICI has not made any
representations or certifications that are incomplete or untrue in any material
respect or filed any accountings that are inaccurate in any respect as to any
Government Contract. ICI has complied in all material respects with all such
representations and certifications.
2.12.13 Schedule 2.12.13 identifies (i) by description or inventory number
all material Government-Furnished Property that is or should be in the
possession of ICI, and (ii) each Government Contract to which each such item of
Government-Furnished Property relates.
2,12.14 Since the Seller Acquisition Date, ICI has not been audited or
investigated and is not now being audited or threatened in writing with an
investigation by the Government Accountability Office, the U.S. Department of
Justice, the Inspector General of any Governmental Authority, the Department of
Defense or any of its agencies other than the Defense Contract Audit Agency on
routine audit matters. ICI has not, since January 1, 2006, been the subject or
recipient of any adverse audit finding or report by the Defense Contract Audit
Agency.
2.12.15 Since the Seller Acquisition Date, ICI has not conducted or
initiated any internal investigation, or made a voluntary disclosure to the U.S.
Government, with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or Government Bid, and to
Seller's Knowledge there exists no irregularity, misstatement or omission
arising under or relating to any Government Contract or Government Bid that has
23
led to any of the consequences set forth in this section or any other damage,
penalty assessment, recoupment of payment or disallowance of cost. Since January
1, 2006, ICI has not conducted any investigation in connection with which ICI
has engaged outside legal counsel or independent accountants, or made any
voluntary disclosure to the U.S. Government outside the ordinary course of
business as a result of any suspected irregularity or breach with respect to any
Government Contract.
2.12.16 ICI has no interest in any pending or potential Claim against the
U.S. Government or any prime contractor, subcontractor of any tier, vendor,
other bidder or offeror or any other third party arising under or relating to
any Government Contract or Government Bid.
2.12.17 ICI has not submitted any Government Bid or offer to develop or
assist in the development of specifications or requirements for any Government
Contract solicitation that could reasonably result in a conflict of interest for
ICI with respect to such Government Bid or otherwise could reasonably cause ICI
to be prohibited from obtaining any rights to bid for or receive any Government
Contract.
2.12.18 ICI holds a valid and current General Services Administration
Federal Supply Services Authorized Professional. Engineering Services Schedule
Contract No. GS-23F-0204M awarded May 31, 2002 with an initial expiration date
of May 30, 2007, subsequently modified on Amendment PS-0002 executed on May 22,
2007 for Option Period 1 for the period of Performance May 31, 2007 through May
30, 2012. The GSA Schedule also has two option periods of 5 years each, if both
are exercised that extend that Contract through May 30, 2022.
2.13 Export and Import Control.
2.13.1 Since the Seller Acquisition Date, ICI has conducted its export and
import transactions in accordance with all applicable Export and. Import Control
Laws. Without limiting the foregoing: (i) ICI is in compliance with the terms of
all applicable Export and Import Approvals; (ii) there are no pending or, to
Seller's Knowledge, threatened, claims, charges, investigations, violations,
settlements, civil or criminal enforcement actions, lawsuits, or other court
actions against ICI with respect to any Export and Import Control Laws; and
(iii), to Seller's Knowledge, there are no actions, conditions or circumstances
pertaining to ICI's export or import transactions that are likely give rise to
any future claims, charges, investigations, violations, settlements, civil or
criminal actions, lawsuits, or other court actions under the Export and Import
Control Laws,
2.13.2 ICI has established and currently maintains a compliance program or
internal controls or procedures appropriate to the requirements of Export and
Import Control Laws.
2.13.3 ICI has established and currently maintains a list of export control
classifications, Harmonized Tariff Schedule Codes, and Schedule B Codes for its
products, services, software and technologies and has provided Purchaser with
all Voluntary Disclosures currently pending or made since January 1, 2006.
2.14 Anti-Corruption and Anti-Bribery.
2.14.1 Since the Seller Acquisition Date, neither ICI nor Seller with
24
respect to ICI 24 (including any of its officers, directors, agents, employees
or other Person associated with or acting on its behalf) has directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, made
any unlawful payment to foreign or domestic government officials or employees or
made any bribe, rebate, payoff; influence payment, kickback or other similar
unlawful payment, or taken any action which would cause it to be in violation of
any Anti-Corruption or Anti-Bribery Laws (for purposes of this Agreement, the
term "Anti-Corruption and Anti-Bribery Laws" shall mean the Foreign Corrupt
Practices Act of 1977, as amended, any rules or regulations thereunder, or any
other applicable United States or foreign anti-corruption or anti-bribery laws
or regulations.)
2.14.2 There are no pending or, to ICI's or Seller's Knowledge, threatened,
claims, charges, investigations, violations, settlements, civil or criminal
enforcement actions, lawsuits, or other court actions against ICI with respect
to any Anti-Corruption and Anti-Bribery Laws; and
2.143 To Seller's Knowledge, there are no actions, conditions or
circumstances pertaining to ICI's activities that are likely to give rise to any
future claims, charges, investigations, violations, settlements, civil or
criminal actions, lawsuits, or other court actions under any Anti-Corruption and
Anti-Bribery Laws.
2,14,4 ICI has established and currently maintains a compliance program or
internal controls or procedures appropriate to the requirements of
Anti-Corruption and Anti-Bribery Laws.
2.15 Adequacy of Assets and Other Matters.
2.15,1 The Equipment and other personal property owned or leased by ICI and
used in its operations is in good operating condition and repair (ordinary wear
and tear excepted). Schedule 2.15.1 contains a complete list of all leased
Equipment and a description of any debt or lease payment obligations associated
therewith.
2.15.2 The assets owned by or licensed or leased to ICI constitute all
assets (including, without limitation, Intellectual Property) necessary for, or
in fact used in, the conduct of the business of ICI as it is currently conducted
and in accordance with recent historical practice, and are located at the
facilities leased by ICI. Schedule 2.15 identifies all assets used by ICI that
are owned by Seller or any of its non-ICI Affiliates that will be retained by
Seller or such Affiliate after the Closing.
2.15.3 ICI currently maintains an Inventory in an amount, type and quality
consistent with its historical practices and sufficient to meet its current
contractual obligations to its customers. ICI's Inventory has been fully paid
for, or will be fully paid for in the ordinary course of ICI's business and
consistent with its historical practice, is located at the facilities leased by
ICI, and is usable and saleable upon customary terms and conditions in the
ordinary course of business.
2.15.4 ICI possesses all accreditations or certifications from third party
accreditation or certification bodies required to conduct its business as it is
currently conducted and in accordance with recent historical practice, and, to
Seller's Knowledge, no accrediting or certifying body that has conducted an
evaluation, certification or accreditation of ICI or any of its assets or
25
operations has withdrawn, suspended or terminated such accreditation or
certification. Neither Seller nor ICI has any reason to believe that such
accreditations or certifications will not continue as currently in effect.
2.15.5 Neither Seller, nor any of its Affiliates, nor ICI has dealt with
any Person who is or may be entitled to a broker's commission, finder's fee,
investment banker's fee or similar payment from either ICI or Purchaser for
arranging the transactions contemplated hereby or introducing the parties to
each other.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 General Statement.
Except as set forth in the disclosure schedule provided by Purchaser and
attached to this Agreement ("Purchaser's Disclosure Schedule"), Purchaser makes
the representations and warranties set forth in this Article 3. Such
representations and warranties of Purchaser shall not be limited or otherwise
affected by any investigation or lack of investigation by Seller. No specific
representation or warranty shall limit the generality or applicability of a more
general representation or warranty.
3.2 Corporate.
3.2.1 Purchaser is duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full power and authority to carry
on its business as such business is now being conducted.
3.2.2 The Board of Directors of Purchaser has duly approved this Agreement
and the other Transaction Documents to which Purchaser is a party, and the
transactions contemplated hereby and thereby, and has authorized the execution,
delivery and performance of this Agreement and the other Transaction Documents
to which Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby. Purchaser has the full power, authority and
legal right to enter into this Agreement and the other Transaction Documents to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Purchaser of this Agreement and the
Transaction Documents to be executed by it, will constitute the legal, valid and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with their respective terms (except to the extent that enforcement may be
affected by laws relating to bankruptcy, reorganization, insolvency and
creditors' rights generally and by the availability of injunctive relief,
specific performance and other equitable remedies).
3,23 Except as set forth on Schedule 3.2.4, the execution, delivery and
performance by Purchaser of this Agreement and the other Transaction Documents
and the consummation by Purchaser of the transactions contemplated hereby and
thereby and the fulfillment by Purchaser of the terms hereof and thereof: (i)
are not in violation or Breach of, do not conflict with or constitute a default
under the terms of the Operating Agreement of Purchaser.
26
3.3 Litigation.
There are no Claims or Proceedings pending or, to the knowledge of
Purchaser, threatened against, relating to or affecting Purchaser before any
court or Governmental Authority or any arbitrator that seek to restrain or
enjoin the consummation of the Transactions contemplated by this Agreement.
Purchaser is not subject to any Judgment of any court, Governmental Authority,
or any arbitrator which prohibits or restricts the consummation of the
transactions contemplated by this Agreement.
3.4 Fees.
Neither Purchaser nor any of its Affiliates has dealt with any Person who
is or may be entitled to a broker's commission, finder's fee, investment
banker's fee or similar payment from Seller for arranging the transactions
contemplated hereby or introducing the parties to each other.
3.5 Status.
Purchaser shall use its good faith efforts to be qualified as of the
Closing Date to possess all necessary material facility security clearances,
personnel security clearances and permits for the performance following the
Closing Date of ICI's obligations under any current Government Contract of ICI,
and will use its best effort satisfy, as of the Closing Date, all requirements
applicable to a controlling person under the Government Contracts to which ICI
is a party, and under the Export and Import Controls applicable to ICI.
3.6 Conflicts.
The execution, delivery and performance by Purchaser of this Agreement and
the other Transaction Documents and the consummation by Purchaser of the
transactions contemplated hereby and thereby and the fulfillment by Purchaser of
the terms hereof and thereof: (a) will not conflict with or constitute a default
under, the terms of the Purchaser's organizational documents; and (b) will not
result in a material violation under any law, Judgment, permit or other legal
requirement of any Governmental Authority applicable to Purchaser.
ARTICLE 4
CONDUCT PRIOR TO THE CLOSING
4.1 General.
Seller and Purchaser shall have the respective rights and obligations set
forth in this Article 4 during the period between the date hereof and the
Closing Date.
4.2 Seller's Obligations.
4.2.1 Seller shall cause ICI to give access to Purchaser's officers,
employees, agents, attorneys, consultants, accountants and lenders to all of the
books, Contracts, documents, records and personnel of ICI and shall furnish to
Purchaser and such Persons as Purchaser shall designate to Seller such
information as Purchaser or such Persons may at any time and from time to time
reasonably request; provided that access shall be conditioned on each such third
27
party's agreement in writing to be bound by the provisions of the existing
confidentiality agreement between Purchaser and Seller and provided further that
such access shall be granted in a manner designed to minimize interference with
the normal business operations of ICI, including normal business hours and on
reasonable notice.
4.2.2 Seller shall cause ICI (and Purchaser shall cooperate with Seller and
ICI) to use its good faith efforts to obtain all consents, waivers and
assignments necessary for the consummation by Seller of the transactions
contemplated hereby under or with respect to any Contract, Approval or
Environmental Permit which is required to be scheduled pursuant to this
Agreement or otherwise necessary or desirable for the operation of ICI in
substantially the same manner as it was operated on the date hereof.
4.2.3 Seller shall cause ICI to use its good faith efforts to preserve its
business and the goodwill of its customers, suppliers and others having business
relations with it and to retain its business organizations intact, including
keeping available the services of its employees, representatives and agents, and
to maintain all of its properties in good operating condition and repair,
ordinary wear and tear excepted; and shall notify Purchaser of any actual or
prospective impairment of any thereof immediately upon becoming aware of the
same.
4.2.4 Seller shall cause ICI to conduct business in the usual and ordinary
course consistent with prudent industry practice and to carry on all business
operations (including, without limitation, the purchase and sale of Inventory,
the payment of trade payables and other obligations and the collection of
accounts receivable), all in accordance with past practices.
4.2.5 Seller shall provide Purchaser with reasonable access to each of the
employees listed on Schedule 4.2.5 so that Purchaser may request such employees
to discuss with Purchaser their possible continued employment with ICI following
the Closing..
4.2.6 Seller will not, and Seller will not permit any of its Affiliates to,
initiate, solicit, or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the making
of any proposal relating to, or that may reasonably be expected to lead to, any
Competing Transaction, or enter into discussions or negotiate with any Person in
furtherance of such inquiries or to obtain a Competing Transaction, or endorse
or agree to endorse any Competing Transaction, or authorize or permit any
investment banker, financial advisor, attorney, accountant, or other
representative retained by Seller or any of its Affiliates, to take any such
action.
4.2.7 Without the prior written consent of Purchaser, and without limiting
the generality of any other provision of this Agreement, Seller shall cause ICI
not to:
(a) amend its Articles of Incorporation or by-laws;
(b) make any change in its authorized capital stock, or issue any shares of
stock or issue or become a party to any subscriptions, warrants, rights,
options, convertible securities or other agreements or commitments of any
character relating to its issued or unissued capital stock or other equity
securities or grant any stock appreciation or similar rights;
28
(c) make any payment or distributions to its employees, officers or
directors except such amounts as constitute currently effective compensation for
services rendered or reimbursement for reasonable, ordinary and necessary
out-of-pocket business expenses;
(d) hire any new employee (other than direct charge employees) other than
in the ordinary course of business consistent with ICI's historical practices
who shall have, or terminate the employment or contract of any employee,
consultant or independent contractor who has, an annual salary in excess of
$50,000;
(e) incur or commit to incur any capital expenditures not set forth in
Seller's Disclosure Schedule in excess of $50,000 in the aggregate;
(f) do any act or omit to do any act, or permit any act or omission to
occur, which will cause a Breach by it of any of the Contracts it is a party to;
(g) grant any salary increase or other increase in compensation to, or
increase the draw of, or make loans to any of its officers, directors, employees
or agents, or enter into any new, or amend or alter any existing Benefit Plan,
trust agreement or other similar arrangement, or any employment or consulting
agreement, except in the normal course of business;
(h) prepay any of its material obligations or attempt to accelerate the
collection of any of its accounts receivable or defer payment of any of its
outstanding accounts payable outside the ordinary course of ICI's business,
consistent with its historical practices;
(i) incur, assume or guarantee any long-term or short-term Indebtedness;
(j) enter into any settlement agreement, consent, decree or similar
obligation relating to any actual or pending Claim against ICI, except for
Claims that require payment of less than $50,000 and only if done in the usual
and ordinary course of ICI's business, consistent with its historical practices;
(k) sell, transfer, license or encumber or otherwise dispose of any asset
or property of any kind or nature, except in the usual and ordinary course of
ICI's business, consistent with its historical practices;
(l) amend, terminate or give notice of termination with respect to any
existing Contract to which it is a party, or waive any of ICI's material rights;
(m) pay, declare, accrue or set aside any dividends or any other
distributions, in cash, property or otherwise, on its securities of any class or
purchase, exchange or redeem any of its securities of any class, or making any
inter-company advance, loan or payment between Seller and its Affiliates and ICI
other than in the usual and ordinary course of ICI's business, consistent with
its historical practices;
(n) except as required by appliCable law, make any changes in its reporting
for Taxes or accounting methods; make any change to its method or adopt any
method of reporting income, deductions, or other Tax items for Tax purposes that
is inconsistent with positions taken, elections made or methods used in
reporting such Tax items in prior periods; or make, amend or revoke any election
29
with respect to Taxes, amend any Tax Return, or settle or compromise any Tax
liability; or
(o) layoff and/or terminate or reduce the hours of employees, except in the
ordinary course of business consistent with its historical employment practices.
4.2,8 (a) During the period beginning on the date hereof and ending on the
Closing Date, prior to ICI directly or indirectly entering into, or assuming,
any material Contract (other than a Contract for which Purchaser or an Affiliate
of Purchaser is or is reasonably anticipated to be a competitive bidder) and for
no purpose other than compliance with the terms of this Section 4.2.8, Seller
shall provide to Purchaser a copy of such proposed Contract, including the
applicable solicitation document and ICI's bid or proposal thereto and shall
consult with Purchaser regarding any questions or concerns that Purchaser may
have regarding such Contract; provided that such consultation shall be conducted
in a manner that will not interfere with ICI's ordinary course of business.
(b) During the period beginning on the date hereof and ending on the
Closing Date, with respect to any bid or proposal for a Government Contract for
which ICI will be the prime contractor or subcontractor (other than a Contract
for which Purchaser or an Affiliate of Purchaser is or is reasonably anticipated
to be a competitive bidder) and for no purpose other than compliance with the
terms of this Section 4.2.8, Seller shall provide for Purchaser's review and
comment the bid or proposal, including the proposed fully burdened labor rates,
estimated level of effort, proposed or anticipated fee or profit, other
anticipated direct costs for contract performance and all proposed indirect rate
costs and Seller shall keep Purchaser apprised of all material developments
relating to that bid or proposal, including any material changes to any of the
information previously provided to Purchaser pursuant to Section 4.2.8(a) or
(b), provided that such submission will not interfere with ICI's ordinary course
of business.
(c) Seller agrees that in all non-Government Contract bids and proposals
where it is anticipated or proposed that ICI be a subcontractor to Seller or any
of its Affiliates, such bid or proposal shall include a separate fee or profit
payable to ICI. Such fee will be consistent with fees ICI charges on similar
contracts with Persons other than Seller and its Affiliates. Seller agrees that
in all Government Contract bids and proposals where it is anticipated or
proposed that ICI be a subcontractor to Seller or any of its Affiliates, such
bid or proposal shall not include a separate fee or profit payable to ICI;
provided that ICI shall receive 50 percent (unless another amount is mutually
agreed to in writing between Purchaser and Seller) of the contract fee
percentage or contract profit percentage payable to Seller or its Affiliate
under that Government Contract with respect to the goods or services provided
after the Closing Date by ICI under its subcontract.
4.2.9 Seller shall cause ICI to maintain the insurance policies required to
be listed in Schedule 2.3.8 to be in full force and effect. If any of the said
policies shall expire, ICI shall use commercially reasonable efforts to renew or
replace the same prior to the expiration of the expiring policies with policies
from a reputable insurance carrier containing insurance coverage in the same or
greater amount than the existing policies and in substantially the same form and
substance as the existing policies.
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4.2.10 Seller shall take all appropriate actions to transfer and divest ICI
of ownership of all shares of capital stock of Stapor Research, Inc. and to
ensure that ICI shall have no remaining obligation or liability relating to or
arising from the Excluded Business on and after the Closing Date. Such transfer
and divestiture shall be consummated such that ICI shall not incur any Tax or
other liability as a result thereof.
4.2,11 Seller shall remit to ICI payment in full of all outstanding amounts
under loans and advances that ICI shall have made to Seller or any of Seller's
other Subsidiaries, and Seller shall have terminated and cancelled all
obligations of ICI to repay any loans or advances made to ICI by Seller or any
of its non-ICI Affiliates.
4.2.12 Notwithstanding the restrictions in any other Contract between the
parties, upon a request by Purchaser, Seller shall allow Purchaser's
representatives to communicate with any Key Employee(s) for the purpose of
discussing and contracting with such Key Employee(s) with respect to his/her
employment with ICI or Purchaser following the Closing. Such communications
shall be conducted in a manner that does not unreasonably interfere with the
normal business operations of ICI or the provision of services by such Key
Employees to ICI.
4.3 Joint Obligations.
4.3.1 Each of the parties hereto shall use commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things reasonably necessary, proper or advisable to consummate the transactions
contemplated hereby as soon as practicable.
4.3.2 Each party shall promptly give the other party written notice of the
existence or occurrence of any condition which would make any representation or
warranty it made under this Agreement untrue as of the date of this Agreement or
any subsequent date as if made on and as of such subsequent date or which might
reasonably be expected to prevent the consummation of the transactions
contemplated hereby,
4.4 Deliveries of Information; Consultations.
From time to time prior to the Closing Date:
4.4.1 Seller shall furnish promptly to Purchaser: (1) all separate monthly
financial statements and budgets of ICI (if and to the extent prepared by ICI)
promptly after such financial statements and budgets are available and (ii) all
other material information concerning the operations, properties and personnel
of ICI as Purchaser may reasonably request.
4.4,2 Upon request by Purchaser, Seller shall consult from time to time
with representatives of Purchaser on operational matters of ICI; provided, that
such consultations do not unreasonably interfere with the operations of ICI.
4.5 Intercompany Payables and Receivables
Seller has provided to Purchaser a preliminary unaudited balance sheet of
ICI dated August 3, 2008, as referred to in Section 2.3.2 of this Agreement.
Seller shall provide to Purchaser a detailed reconciliation of all intercompany
balances (as defined below) due to or from Herley or any of its Affiliates
31
(other than ICI) to ICI from the date of the preliminary unaudited balance sheet
dated August 3, 2008 up to the date which is five (5) business days prior to the
Closing Date, Seller shall provide to Purchaser any back-up documentation or
work papers supporting the reconciliation of intercompany balances and further
agree that intercompany transactions between Herley or any of its non-ICI
Affiliates (except for inventory components shipped by Herley to ICI) and ICI
will not be made from the date of the said reconciliation until Closing.
Purchaser and Seller shall cooperate in good faith to resolve all disagreements
regarding the intercompany balances reconciliation prior to the Closing Date.
The amount of the intercompany balances, after reconciliation, as of the date
five (5) business days prior to the Closing Date shall represent the amount of
cash due to or from Herley and any of its non-ICI Affiliates (except for amounts
owing to Herley on account of inventory components shipped to ICI) and ICI and
will be settled prior to the Closing Date, as set forth in Section 1.2.1(c) as
follows (a) if the intercompany balances would result in an amount owed to ICI,
Seller will pay off such balance to ICI prior to Closing; and (b) if the
intercompany balances would result in an amount owed to Herley, ICI will pay off
such balance prior to Closing. The outstanding intercompany payable balance
owing by ICI to Herley on account of the shipment of inventory components will
be treated as a trade accounts payable and will be due and payable by ICI to
Herley net 30 days from the date of the respective invoices. As used above in
this Section 4.5, the term "intercompany balances" means the net amount of all
intercompany transactions (excluding the trade accounts payable identified in
the preceding sentence) between ICI on the one hand, and Herley and its
Affiliates other than ICI on the other hand, including but not limited to, an
allocation to ICI of corporate overhead, consistently applied.
The Seller agrees not to add additional external credit to ICI from what
currently exists and is reflected in the preliminary balance sheet dated August
3, 2008.
4.6 Funding Agreement with BIRD Foundation
Seller shall use its good faith efforts to obtain the written consent from
the Israel-United States Binational Industrial Research and Development
Foundation ("BIRD Foundation") and from Paragon Communications Ltd. ("Paragon")
to the assignment to Purchaser of the Cooperation and Project Funding Agreement
(the "Funding Agreement"). After Closing, Seller shall also allow Purchaser to
communicate with the BIRD Foundation and Paragon to seek their consents to the
assignment of the Funding Agreement to Purchaser. If the foregoing assignment of
the Funding Agreement is not completed prior to the Closing, at the request of
Purchaser, Seller, consistent with the limitations of the Funding Agreement,
shall continue to use its good faith efforts to obtain that consent following
the Closing,
ARTICLE 5
CONDITIONS TO CLOSING
5.1 Conditions to Seller's Obligations.
The obligation of Seller to close the transactions contemplated hereby is
subject to the fulfillment of all of the following conditions:
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5.1.1 The Purchaser shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing Date, including the deliveries set forth in Section 6.2, and the
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct at and as of the Closing Date, as such representations
and warranties are expressly qualified by materiality or Material Adverse
Effect, if applicable, as if made at and as of such date, and Seller shall have
received a certificate signed by an officer of the Purchaser attesting to the
foregoing.
5.1.2 No Proceeding shall have been commenced or threatened by any
Governmental Authority on any grounds to restrain, enjoin or hinder, or to seek
material damages on account of, the consummation of the transactions
contemplated hereby.
5.1.3 Purchaser shall have obtained the approval from the United States
Committee on Foreign Investment in the United States and any other Governmental
Authority necessary to consummate the acquisition of ICI contemplated herein.
5.2 Conditions to Purchaser's Obligations.
The obligation of Purchaser to close the transactions contemplated hereby
is subject to the fulfillment of all of the following conditions:
5.2.1 Each of ICI and Seller shall have performed in all material respects
all of its respective obligations hereunder required to be performed by it on or
prior to the Closing Date, including the deliveries set forth in Section 6.3,
the representations and warranties of ICI and Seller contained in this Agreement
shall be true and correct at and as of the Closing Date, as such representations
and warranties are expressly qualified by Materiality or Material Adverse
Effect, if applicable, as if made at and as of such date, and Purchaser shall
have received a certificate signed by an officer of ICI and Seller attesting to
the foregoing.
5.2.2 All of the consents referred to in Section 4.2.2 shall have been and
shall be in full force and effect.
5.2,3 Adequate assurances shall have been obtained that the DSS and any
other Governmental Authority responsible for the issuance and administration of
ICI's security clearances has indicated in substance that it will not terminate,
suspend, revoke, or in any way materially change either the Government Contract
or security clearances with respect to such Government Contract as a result of
this Agreement or the consummation of the transactions contemplated hereby.
5.2.4 Purchaser shall have obtained the approval to consummate the
acquisition of ICI from the United States Committee on Foreign Investment in the
United States and any other approvals from any other Governmental Authority
required for the consummation of the transactions contemplated herein. Purchaser
shall also have received written confirmation from U.S. Department of the Navy
upon the acquisition of ICI by Purchaser pursuant to this Agreement, (a) the
United States Department of the Navy would not consider Purchaser or any
subsidiary or Affiliate of Purchaser, including ICI, to be a party to the
Administrative Agreement between the United States Department of the Navy and
Herley, and (ii) the United States Department of the Navy would not pursue a
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separate Administrative Agreement with Purchaser or any subsidiary or Affiliate
of the Purchaser, including ICI, based solely on the acquisition of ICI.
5.2.5 No Proceeding shall have been commenced or threatened by any
Governmental Authority or private Person on any grounds against the business or
assets of ICI or to restrain, enjoin or hinder, or to seek material damages on
account of, the consummation of the transactions contemplated hereby.
5.2.6 Prior to the Closing Date, all amounts due and owing by ICI with
respect to any Indebtedness shall have been paid in full and terminated without
liability to ICI and all amounts due and owing to or from ICI by or to any of
the Related Parties or former shareholders (excluding employee compensation and
other ordinary incidents of employment) shall have been paid in full and
terminated without liability to ICI.
5.2.7 During the period from the date hereof to the Closing Date there
shall not have occurred, and there shall not exist on the Closing Date, any
condition or fact which has, or which reasonably may be expected to result in, a
Material Adverse Effect to ICI.
5.2.8 ICI's net working capital as of the Closing Date shall not be less
than zero dollars
ARTICLE 6
CLOSING
6.1 Form of Documents.
At the Closing, the parties shall deliver the documents, and shall perform
the acts, which are set forth in this Article 6. All documents which Seller
shall deliver shall be in form and substance reasonably satisfactory to
Purchaser and Purchaser's counsel. All documents which Purchaser shall deliver
shall be in form and substance reasonably satisfactory to Seller and Seller's
counsel.
6.2 Purchaser's Deliveries.
Purchaser shall execute and/or deliver to Seller all of the following:
6.2.1 the Closing Cash Payment and the Escrow Amount, each in the manner
provided in Section 1.2;
62.2 an incumbency and specimen signature certificate with respect to the
officers of Purchaser executing this Agreement and any other Transaction
Document delivered hereunder on behalf of Purchaser; and
6.2.3 a closing certificate duly executed by the President of Purchaser (or
any other officer of Purchaser specifically authorized to do so), on behalf of
Purchaser, as set forth in Section 5.1.1.
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6.2.4 the written opinion of Greenberg Traurig LLP, counsel to the
Purchaser, dated as of the Closing Date, substantially in the form of Exhibit B
attached hereto.
6.3 Seller's Deliveries.
Seller shall execute or deliver to Purchaser all of the following, each of
which shall be satisfactory in form and substance to Purchaser:
6.3.1 certificates of good standing of ICI issued not earlier than ten (10)
days prior to the Closing Date by the appropriate certifying authorities in the
states of Virginia and Pennsylvania;
63.2 certificates representing the Shares, duly endorsed in blank or with
duly executed stock powers attached;
6.3.3 an incumbency and specimen signature certificate with respect to the
officers of ICI executing this Agreement and any other Transaction Document
delivered hereunder on behalf of ICI;
6.3,4 a closing certificate duly executed by ICI and Seller, as set forth
in Section 5.2.1;
6.3.5 the written resignations, effective as of the Closing Date, of such
of the directors and officers of ICI as are designated by Purchaser to resign;
6.3.6 written evidence that all outstanding long term or short-term
Indebtedness of ICI, in each case including the current portions thereof, as
more fully described in Schedule 2.3.5, shall have been satisfied in full
immediately prior to the Closing;
6.3.8 physical possession where located at ICI's or Seller's facilities of
all records, tangible assets, licenses, written policies, procedures and
processes Contracts, Benefit Plans or other instruments owned by or pertaining
to ICI;
6.3.10 the written opinion of Beckman, Lieberman & Barandes, LLP, counsel
to Seller, dated as of the Closing Date, in substantially the form of Exhibit C
attached hereto;
6,3.11 a properly executed Foreign Investment and Real Property Tax Act of
1980 Notification Letter, which states that shares of ICI capital stock do not
constitute "United States real property interests" under Section 8971 of the
Code, for purposes of satisfying Purchaser's obligations under Treasury
Regulation Section 1.1445-21(3) and a form of notice to the IRS in accordance
with the requirements of Treasury Regulation Section 1.897-2(h)(2), along with
written authorization for Purchaser to deliver such notice form to the IRS on
behalf of ICI;
6,3.12 a mutual release between ICI, on the one hand, and Seller and its
Affiliates, on the other hand, whereby each party releases all Claims and
Indebtedness of every kind, including any loans or advances made by Seller or
any non-ICI Affiliate to ICI, which it may have against the other party for any
matters arising from or related to any period prior to the Closing, in form and
substance reasonably satisfactory to Purchaser, provided such release shall not
release any claims that Seller may have against Purchaser or that Purchaser may
35
have against Seller (a) under this Agreement or the other Transaction Documents,
(b) for intercompany balances that are applied as provided in Section 4.5 and
(c) for trade accounts payable between ICI to Herley Lancaster referred to in
Section 4.5;
6.3.13 a copy of IRS Form 8023, Elections Under Section 338 for
Corporations Making Qualified Stock Purchases, executed by Seller; and
6.3,14 any other documents reasonably required from Seller to consummate
the transactions contemplated hereby.
6.4 Section 338(10(10) Election.
Purchaser and Seller agree to take, or cause to be taken, any and all
action necessary and to do, or cause to be done, or to execute, or cause to be
executed, such documents as may be necessary or desirable to effect any Section
338(h)(10) Election, with respect to Purchaser's acquisition of the capital
stock of ICI, in accordance with the provisions of Section 10.7.
ARTICLE 7
POST-CLOSING AGREEMENTS
7.1 Post-Closing Agreements.
From and after the Closing, the parties shall have the respective rights
and obligations set forth in this Article 7.
7.2 Inspection of Records.
Seller, on the one hand, and Purchaser, on the other hand, and their
respective Affiliates, shall each retain and make their respective books and
records (including work papers in the possession of their respective
accountants) relating solely to ICI's operations prior to the Closing available
for inspection and copying for reasonable tax reporting compliance and other
reasonable business purposes during normal business hours, for a two (2) year
period after the Closing Date. The representatives of a party inspecting the
records of the other party shall be reasonably satisfactory to the other party.
7,3 Payments of Accounts Receivable.
In the event Seller shall receive any instruments of payment or any cash
constituting payment of any of the accounts receivable of ICI relating to any
period, Seller shall promptly deliver such cash and instruments to Purchaser,
endorsed where necessary, without recourse, in favor of Purchaser.
7.4 Non-Competition; Non-Solicitation.
7.4.1 Seller agrees for itself and its Affiliates that, for the period
commencing on the Closing Date and expiring on the third anniversary of the
Closing Date it will not, nor will any of its Affiliates, without the prior
written consent of Purchaser, directly or indirectly, or by action in concert
with others, own, manage, operate, join, control, finance or participate in, or
participate
36
in the ownership, management, operation, control or financing of, or be
connected as a principal, agent, representative, consultant, employee, investor,
owner, partner, manager, joint venturer or otherwise with, or permit its name to
be used by or in connection with, any business, enterprise or other entity
engaged anywhere in the world in a business that is engaged in providing
technology solutions for military applications for (a) routing and processing
tactical messaging data over IP-based or point-to-point networks using
voice-grade radios and /or (b) development of ad hoc networking software for
sale as a standalone software product.
7.4.2 Seller agrees for itself and its Affiliates that, for a period
commencing on the date of this Agreement and expiring on the third anniversary
of the Closing Date it will not, nor will any of its Affiliates, without the
written consent of Purchaser, directly or indirectly, for its own account or on
behalf of any other Person, hire any person who is then an employee of ICI or
Purchaser or any of their Affiliates, or induce or attempt to induce any
employee to leave his or her employment with ICI or Purchaser or any of their
Affiliates.
7,4.3 Seller agrees for itself and its Affiliates that, for the period
commencing on the Closing Date and expiring on the third anniversary of the
Closing Date it will not, nor shall any of its ,Affiliates, without the written
consent of Purchaser, directly or indirectly, for its own account or on behalf
of any other Person, solicit, divert, take away or attempt to take away any of
the customers or suppliers of ICI or Purchaser or any of its Affiliates, or the
business or patronage of any such customers or suppliers of ICI or Purchaser or
in any way interfere with, disrupt or attempt to disrupt any relationships
between ICI or Purchaser or any of its Affiliates, and any of their respective
customers or suppliers.
7,4.4 Seller acknowledges and agrees for itself and its Affiliates that (a)
the restrictions contained in this Section 7.4 are reasonably necessary to
protect the legitimate business interests of Purchaser and its Affiliates; and
(b) any violation of such provisions will result in irreparable injury to
Purchaser and its Affiliates for which money damages will not be an adequate
remedy. Accordingly, Seller agrees that, in addition to such money damages,
Seller may be restrained and enjoined from any continuing breach of such
covenants without any bond or other security being required by any court. If any
restriction contained in this Section 7,4 shall be deemed to be invalid, illegal
or unenforceable by reason of the extent, duration or geographical scope, or
otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope or other provision hereof, and
that the reduced form of such restriction will then be enforceable in the manner
contemplated thereby.
7.4.5 Notwithstanding any provision to the contrary, in the event that a
third party acquires all or substantially all of the assets of the Seller or
acquires the majority of the voting securities of the Seller or its successor
entity by merger or consolidation or otherwise with the Seller, that third party
shall not be bound by the provisions of this Section 7.4.
7.5 Third Party Claims.
The parties shall cooperate with each other with respect to the defense of
any Claims or litigation made or commenced by third parties subsequent to the
Closing Date which are not subject to the indemnification provisions contained
37
in Article 8; provided, that the party requesting cooperation shall reimburse
the other party for the other party's reasonable out-of- pocket costs and
expenses of furnishing such cooperation.
7.6 Severance Agreements.
Seller acknowledges and agrees that it shall be responsible for any and all
costs associated with any severance obligation or commitment made by Seller or
ICI to any ICI employees prior to the Closing that becomes payable as a result
of the voluntary resignation or termination of any ICI employee at any time
prior to the Closing.
7.7 Offset to Government Contract Indemnification.
Purchaser agrees that it shall cause ICI, consistent with ICI's customary
practices and applicable law, to use good faith efforts to (1) maximize ICI's
cost recovery on active cost plus firm fixed price Contracts (including, without
limitation , pursuit of the approximate $800,000 rates deviation claim ICI has
or is about to make on 2008 contracts prior to Closing) and (ii) with respect to
all Government Contracts , challenge, to the extent there is a lawful basis and
consistent with ICI's customary practices, disallowance of expenses and
otherwise obtain and retain the maximum amount of payments under Government
Contracts, all with the objective of providing an offset or credit to any
disallowable costs sustained by ICI or the Purchaser on cost plus fixed fee
Government Contracts so as to minimize the amount, if any, of any
Indemnification Claim sought by Purchaser under Article 8 of this Agreement.
Other than with respect to the offset provided above, Seller agrees that
Purchaser and ICI shall own and have full use of, and be entitled to the benefit
of, any funds represented by recoveries under active cost plus Contracts and any
other amounts recoverable by ICI subsequent to the Closing Date on account of
Government Contracts in existence on or prior to the Closing Date.
ARTICLE 8
INDEMNIFICATION
8.1 General.
From and after the Closing, the parties shall indemnify each other as
provided in this Article 8. For the purposes of this Article 8, all
representations and warranties in this Agreement made by any party to this
Agreement, shall be deemed to have been made at and as of the Closing,
8.2 Seller's Indemnification Obligations.
Seller shall indemnify and hold harmless Purchaser, its Affiliates and ICI,
and their respective officers, directors, shareholders, members, managers,
successors and permitted assigns (each a "Purchaser Indemnitee" and
collectively, the "Purchaser Indemnitees") from and against all Damages
sustained or incurred by any Purchaser Indemnitee as a result of or arising out
of or by virtue of
8,2.1 any inaccuracy in or Breach of any representation or warranty made by
Seller or ICI to Purchaser herein or in any Transaction Document delivered to
Purchaser in connection herewith;
38
8.2.2 any Breach by Seller of, or failure of Seller to comply with, any of
the covenants or obligations under this Agreement or any other Transaction
Document to be performed by Seller (including, without limitation, its
obligations under this Article 8);
8.2.3 any Debt, liability of obligation arising from or related to Stapor
Research, Inc. or the Excluded Business, including, but not limited to any
liability for Taxes that are or owed as a result of the transfer of the capital
stock of Stapor Research to Seller or an Affiliate of Seller;
8.2.4 any of the Proceedings set forth on Schedule 8.2.4;
8.2.5 any action or failure to act, in whole or in part, on or prior to the
Closing Date with respect to any Benefit Plan which ICI or any ERISA Affiliate
of ICI has at any time maintained or administered or to which ICI or any ERISA
Affiliate has at any time contributed;
8.2,6 (i) any Taxes of ICI with respect to any Tax period or portion
thereof ending on or before the Closing Date and the portion of the Straddle
Period attributable to Seller under the principles of Article 10, and (ii) any
Taxes resulting by reason of the several liability of ICI under Treas. Reg.
ss.1.1502-6 (or any similar provision of state, local or foreign law) or by
reason of its having been a member of any consolidated, combined or unitary
group on or prior to the Closing Date, or as a transferee or successor, by
contract, or otherwise or pursuant to any Law, which relates to an event or
transaction occurring on or before the Closing;
8.2.7 any U.S. Government, prime contractor or subcontractor disallowance
of incurred Direct Contract Costs and/or Indirect Costs of ICI including,
without limitation, any Damages arising out of disallowance based on the terms
and conditions of any Contract, disallowances arising out of U.S. Government or
prime contractor or subcontractor audits of final Indirect Cost rate proposals,
audits of compliance with Cost Accounting Standards, or audits of compliance
with the Truth in Negotiations Act, in respect of costs incurred in any period
prior to the Closing Date. For the purpose of calculating Damages under Claims
for indemnification under this Section 8.2.7, such Damages shall be reduced
dollar for dollar, but not below zero (0), by the amount, if any, paid to ICI
following the Closing as a result of any agreement by a Government Authority to
increase reimbursement for Direct Contract Costs and/or Indirect Costs of ICI
relating to any Government Contract for any period prior to the Closing Date (a
"Pre-Closing Reimbursement Increase"). Following the Closing, Purchaser shall
use good faith efforts to identify, in its good faith judgment, any opportunity
to recover a material Pre-Closing Reimbursement under applicable law and under
the terms of the applicable Government Contract and to request recovery of such
amount from the applicable Governmental Authority. Any such recovery beyond the
amount that offsets in full Purchaser's Damages as referenced in this Section
8.2.7 shall be retained by Purchaser.
8.2.8 all outstanding Indebtedness of ICI, in each case, including the
current portions thereof; and
8.2.9 any liability for Damages incurred by ICI or Purchaser that arise out
of, or result from a Breach of, Section 2.10.10.
8.3 Limitation on Seller's Indemnification Obligations.
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8.3.1 Except as set forth in Section 8.3.2, Seller shall not be liable to
the Purchaser Indemnitees with respect to any Claims for indemnification under
Section 8.3 unless the aggregate amount of Damages is in excess of one hundred
fifty thousand dollars ($150,000) (the "Indemnification Threshold"). Once the
Indemnification Threshold has been met, Seller shall then be liable for all
Claims in excess of the Indemnification Threshold excluding such Claims as were
aggregated to reach the Indemnification Threshold. Notwithstanding the
foregoing, Seller shall be liable for all Claims for indemnification arising
under Sections 8.2.3 through 8.2.6 and Sections 8.2.8 and 8.2.9, all Breaches of
the representations or warranties set forth in Sections 2.2.5, 2.3, 2.4 and 2.7,
and any Claims based on fraud, willful misconduct or intentional
misrepresentation, without regard to the Indemnification Threshold. For the
purpose of calculating Damages under Claims for indemnification under this
Section 8.3.1, such Damages shall be reduced dollar for dollar, but not below
zero (0), by the amount, if any, paid to ICI by Full Spectrum, Inc. subsequent
to the Closing pursuant to the Contract dated October 10, 2007 between ICI and
Full Spectrum.
8.3.2 Seller shall not be liable to the Purchaser Indemnitees with respect
to any Claims for indemnification under Section 8.2.7 unless the aggregate
amount of Damages for such Claims is in excess of five hundred thousand dollars
($500,000), subject to offset as provided in the last sentence of this Section
(the "Special Indemnification Threshold"). Once the Special Indemnification
Threshold has been met, Seller shall then be liable for all such Claims under
Section 8.2.7 in excess of the Special Indemnification Threshold, excluding such
Claims as were aggregated to reach the Special Indemnification Threshold.
Notwithstanding the foregoing, Seller shall be liable for all Claims for
indemnification arising under Section 8.2.7 without regard to the Special
Indemnification Threshold if there was Seller's Knowledge or Post-Acquisition
Seller's Knowledge of the act or omission to act giving rise to such Claim or if
such Claim arose from Seller's fraud, willful misconduct or intentional
misrepresentation. For the purpose of calculating Damages under Claims for
indemnification under this Section 8.32, such Damages shall be reduced dollar
for dollar, but not below zero (0), by the amount, if any, paid to ICI following
the Closing as a result of any agreement by a Government Authority to increase
reimbursement for Direct Contract Costs and/or Indirect Costs of ICI relating to
any Government Contract for any period prior to the Closing Date. Following the
Closing, Purchaser shall use good faith efforts to identify, in its good faith
judgment, any opportunity to recover a material Pre-Closing Reimbursement under
applicable law and the terms of the applicable Government Contract and to
request recovery of such amount from the applicable Governmental Authority. Any
such recovery beyond the amount that offsets in full Purchaser's Damages as
referenced in this Section 8.3.3 shall be retained by Purchaser.
8.3.3 The maximum amount for which Seller shall be liable to the Purchaser
Indemnitees under this Agreement for indemnification Claims under this Article 8
is one hundred percent (100%) of the Purchase Price (the "Indemncation Limit").
8.3.4 Except as set forth in this Section 8.3.4, Seller's representations
and warranties, and Seller's obligation to indemnify the Purchaser Indemnitees
under Section 8.3, shall survive the Closing and will remain in effect until the
date that is eighteen (18) months after the Closing Date with respect to any
failure on the part of Seller or ICI to perform any covenants or agreements set
forth herein, or any Breach by Seller of any of the representations and
warranties made in Article 2. Notwithstanding the foregoing, Seller's
40
indemnification obligations under Section 8.2.7 shall survive the Closing and
will remain in. effect until the date that is twenty-four (24) months after the
Closing. Notwithstanding the foregoing Seller's representations and warranties
made in Sections 2.2.5, 2.3, 2.4 and 227, Seller's indemnification obligations
under Sections 8.2.3 through 8.2.9 and any indemnification Claims based on
fraud, willful misconduct or intentional misrepresentation shall survive the
Closing and will remain in effect until the expiration of the applicable statute
of limitations. Notwithstanding the foregoing, Seller's representations,
warranties and obligation to indemnify the Purchaser Indemnitees under Section
8.3 with respect to any pending Claim for indemnification shall survive and
remain in effect until such pending Claim is finally resolved.
8.4 Purchaser's Indemnification Obligations.
Purchaser shall indemnify, and hold harmless Seller and its successors and
assigns ("Seller Indemnitees") from and against and from all Damages sustained
or incurred by any Seller Indemnitee as a result of or arising out of or by
virtue of:
8.4.1 any inaccuracy in or Breach of any representation and warranty made
by Purchaser to Seller herein or in any Transaction Document delivered to Seller
in connection herewith; or
8.4,2 any Breach by Purchaser of, or failure by Purchaser to comply with,
any of the covenants or obligations under this Agreement or in any Transaction
Document to be performed by Purchaser (including, without limitation, its
obligations under this Article 8).
8.5 Limitations on Purchaser's Indemnification Obligations.
8.5.1 Purchaser shall not be liable to Seller Indemnitees with respect to
any Claim for indemnification under Section 8.4 unless the aggregate amount of
Damages is in excess of the Indemnification Threshold. Once the Indemnification
Threshold has been met, Purchaser shall then be liable for all Claims in excess
of the Indemnification Threshold excluding such Claims as were aggregated to
reach the Indemnification Threshold. Notwithstanding the foregoing, Purchaser
shall be liable for all Claims based on fraud, willful misconduct or intentional
misrepresentation, without regard to the Indemnification Threshold.
8.5.2 The maximum amount for which Purchaser shall be liable to Seller
Indemnitees under this Agreement is the Indemnification Limit.
8.5.3 Purchaser's representations and warranties, and Purchaser's
obligation to indemnify Seller Indemnitees under Section 8.4, shall survive the
Closing and will remain in effect until the date that is eighteen (18) months
after the Closing Date. Notwithstanding the foregoing, Purchaser's
representations, warranties and obligation to indemnify Seller Indemnitees under
Section 8.4 with respect to any pending Claim for indemnification shall survive
and remain in effect until such pending Claim is finally resolved.
8.6 Cooperation.
Subject to the provisions of Sections 8.8 and 8.9, the Indemnifying Party
shall have the right, at its own expense, to participate in the defense of any
41
Third Party Claim, and if said right is exercised, the parties shall cooperate
in the investigation and defense of said Third Party Claim.
8.7 Subrogation.
The Indemnifying Party shall not be entitled to require that any action be
brought against any other Person before action is brought against it hereunder
by the Indemnified Party and shall not be subrogated to any right of action
until it has paid in full or successfully defended against the Third Party Claim
for which indemnification is sought.
8.8 Procedures.
All Claims or demands for indemnification under this Article 8 shall be
asserted and resolved as follows:
8.8.1 In the event an Indemnified Party has a Claim against any
Indemnifying Party hereunder which does not involve a Claim being asserted
against or sought to be collected by a third party, the Indemnified Party shall
with reasonable promptness send notice of such Claim to the Indemnifying Party.
In case the Indemnifying Party shall object in writing to any Claim for
indemnification made in accordance with this Section 8.8.1, the Indemnified
Party shall have fifteen (15) days to respond in a written statement to the
objection of the Indemnifying Party. If after such 15 -day period there remains
a dispute as to any indemnification Claims or if the indemnifying party does not
dispute such Claim as required under Section 8.8.2, the parties shall attempt in
good faith for thirty (30) days to reach written agreement on the resolution of
such indemnification Claim. If no such agreement can be reached after good faith
negotiation during that 30 day period, the parties shall submit the
indemnification Claim for final determination by binding arbitration, with such
arbitration proceeding conducted in accordance with the Commercial Rules of the
American Arbitration Association then in effect. The arbitration proceeding
shall be held in the New York City metropolitan area and the costs thereof shall
be paid by the prevailing party in such arbitration proceeding. The failure of
the Indemnifying Party to respond shall not be an acknowledgement of liability
by the Indemnifying Party.
8.8.2 In the event that any Claim for which any party would be liable to an
Indemnified Party hereunder is asserted against an Indemnified Party by a third
party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such Third Party Claim, specifying the nature of such
Claim and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such Claim) (the
"Claim Notice"). The Indemnifying Party shall have fifteen (15) days from the
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not the Indemnifying Party disputes liability to the
Indemnified Party hereunder with respect to such Third Party Claim and (ii) if
the Indemnifying Party does not dispute such liability, whether or not the
Indemnifying Party desires, at its sole cost and expense, to defend against such
Claim. In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party does not dispute its
obligation to indemnify hereunder and desires to defend the Indemnified Party
against such Third Party Claim, except as hereinafter provided, the Indemnifying
Party shall have the right to defend by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by the Indemnifying Party to
42
a final conclusion; provided that, unless the Indemnified Party otherwise agrees
in writing, the Indemnifying Party may not settle any matter (in whole or in
part) unless such settlement includes a complete and unconditional release of
the Indemnified Party. If the Indemnified Party desires to participate in, but
not control, any such defense or settlement, the Indemnified Party may do so at
the Indemnified Party's sole cost and expense. If the Indemnifying Party elects
not to defend the Indemnified Party against such Third Party Claim, whether by
failure of the Indemnifying Party to give the Indemnified Party timely notice as
provided above or otherwise, then, the Indemnified Party, without waiving any
rights against the Indemnifying Party, may settle or defend against any such
Claim in the Indemnified Party's sole discretion and the Indemnified Party shall
be entitled to recover from the Indemnifying Party the amount of any settlement
or judgment and, on an ongoing basis, all indemnifiable costs and expenses of
the Indemnified Party with respect thereto, including interest from the date
such costs and expenses were incurred.
8.8.3 An Indemnified Party may make an indemnification Claim hereunder, for
potential or contingent Claims or demands provided the Claim Notice sets forth
the specific basis for any such potential or contingent Claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such a Claim or demand may be made.
8.8.4 The Indemnified Party's failure to give reasonably prompt notice to
the Indemnifying Party of any actual, threatened or possible Claim or demand
which may give rise to a right of indemnification hereunder shall not relieve
the Indemnifying Party of any Liability which it may have to the Indemnified
Party unless the failure to give such notice materially and adversely prejudiced
the Indemnifying Party.
8.8.5 Seller hereby waives and releases irrevocably any right to make a
Claim against Purchaser or ICI for contribution, indemnification or subrogation
for any Damages asserted against Seller pursuant to this Article 8. In no event
shall Seller have a claim following the Closing against ICI for a breach by ICI
of any of its obligations under this Agreement, including breaches of ICI's
representations and warranties and covenants thereunder, or under the other
Transaction Documents.
ARTICLE 9
TERMINATION
9.1 General.
The parties shall have the rights and remedies with respect to the
termination and/or enforcement of this Agreement which are set forth in this
Article 9.
9.2 Right to Terminate.
Anything to the contrary herein notwithstanding, this Agreement and the
transactions contemplated hereby may be terminated at any time prior to the
Closing:
9.2.1 by the mutual written consent of Purchaser and Seller;
9.2.2 by Seller if there has been a misrepresentation or a default or
Breach by Purchaser with respect to its representations or warranties in this
43
Agreement or the due and timely performance of any of Purchaser's covenants and
agreements contained in this Agreement which, individually or in the aggregate,
would constitute grounds for the condition to Closing set forth in Section 5.2.1
to not be satisfied at the Closing Date, and such misrepresentation, default or
Breach shall not have been cured within ten (10) days after receipt by Purchaser
of notice specifying particularly such misrepresentation, default or Breach;
9.2.3 by Purchaser if there has been a misrepresentation or a default or
Breach by ICI or Seller with respect to any of their respective representations
or warranties in this Agreement or the due and timely performance by ICI or
Seller of any of their respective covenants and agreements contained in this
Agreement which, individually or in the aggregate, would constitute grounds for
the condition to Closing set forth in Section 5.1.1 to not be satisfied at the
Closing Date, and such misrepresentation, default or Breach shall not have been
cured within ten (10) days after receipt by ICI or Seller of written notice
specifying particularly such misrepresentation, default or Breach;
9.2.4 by prompt notice given in accordance with Section 12.2 by any of the
parties if the Closing shall not have occurred at or before 11:59 p,m. on
October 2, 2008; provided that if the United States Committee on Foreign
Investment in the United States elects to exercise its right to investigate
Purchaser's application for approval of the transactions contemplated hereby,
such date shall automatically be extended to November 5, 2008; or
9.2,5 by Seller, on the one hand, or by Purchaser, on the other hand, if
there shall be an order of a federal or state court in effect preventing the
consummation of the transactions contemplated by this Agreement; or there shall
be any action taken, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the transactions by any
Governmental Authority which would make the consummation of the transactions
illegal.
9.3 Certain Effects of Termination.
This Section 9.3, Section 9.5 and Article 8 shall survive any termination
of this Agreement.
9.4 Remedies.
Notwithstanding any termination right granted in Section 9.2, in the event
of the nonfulfillment of any condition to a party's closing obligations, such
party may elect to do one of the following:
9.4.1 proceed to close despite the non-fulfillment of any closing
condition; or
9.4.2 decline to close and terminate this Agreement as provided in Section
9.2,. 9.5 Effect of Termination.
Except as set forth in Section 9.6, in the event of the failure to close
the transactions contemplated hereby or termination of this Agreement pursuant
to Article 9, this Agreement shall become void and have no effect, without any
44
liability on the part of any party hereto or its directors, officers or
stockholders in respect of this Agreement, except that the Confidentiality
Agreement between the parties shall survive any termination of this Agreement.
9.6 Specific Performance.
If Seller fails to consummate the transaction contemplated at or before
11:59 p.m. on the date for Closing required under Section 9.2.4, notwithstanding
that the Purchaser has fulfilled or is prepared to fulfill all of its
obligations under this Agreement on the Closing Date and all of the conditions
set forth in Section 5.1 have been met or waived in writing by Seller, Seller
hereby grants to Purchaser, as its sole and exclusive remedy, the right to seek
and obtain injunctive and other equitable relief to enforce specifically this
Agreement and the terms and provisions hereof, in any action instituted after
the Closing and Seller agrees not to assert a position in such action that is
inconsistent with such grant. In consideration of the grant by Seller of the
right to seek and obtain injunctive and other equitable relief to enforce
specifically this Agreement and the terms and provisions hereof, Purchaser
hereby irrevocably waives all claims for damages, liabilities and loss sustained
by Purchaser as a consequence of the failure of Seller to fully perform its
obligations and/or breech the representations and warranties of Seller set forth
in this Agreement.
9.7 Time is of Essence.
Time is of the essence in this Agreement
ARTICLE 10
TAX MATTERS
10.1 Tax Returns for Periods Ending on or Before the Closing Date.
Seller shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for ICI which are filed after the Closing Date for all periods
ending on or prior to the Closing Date and such Tax Returns shall be prepared in
a manner that is consistent with past practices of Seller unless otherwise
required by Applicable Law. Seller shall permit the Purchaser a reasonable
opportunity to review and comment on each such Tax Return described in the
preceding sentence prior to filing and shall make such revisions to such Tax
Returns limited to computations as reasonably requested by Purchaser. Purchaser
shall not file, or cause to be filed, any amended federal, state or local Tax
Returns for any periods ending on or before the Closing Date without the prior
written consent of the Seller.
The parties agree that the election to ratably allocate items of income and
expense for Federal income tax purposes under Treasury Regulation Section
1.1502-76(b)(2) shall not be made in the event a short period Tax year arises
upon a termination of the Company's regular Tax year on the Closing Date and
that the Company's net income for any such resulting short period Tax return
shall be determined by a closing of the books of the Company on the Closing
Date.
10.2 Tax Returns for Periods Beginning Before and Ending After the Closing Date.
Purchaser shall properly and accurately prepare (or cause to be prepared)
and file (or cause to be filed) each Tax Return required to be filed by ICI
45
after the Closing Date that includes a taxable period beginning before the
Closing Date and ending after the Closing Date exclusive of a Tax Return for the
short period Tax Year referenced in Section 10.1 above. To the extent any Tax
shown as due on such Tax Return is payable by Seller (taking into account
indemnification obligations hereunder), (A) such Tax Return shall be provided to
Seller at least 30 days prior to the due date for filing such return (or, if
required to be filed within 30 days of the Closing, as soon as possible
following the Closing); and (B) Seller shall have the right to review and
comment on such Tax Return. The amount of any Taxes due with respect to any Tax
Returns relating to periods ending on or prior to the Closing Date and the
amount of any Taxes allocable to Seller under Section 10.2 with respect to a
Straddle Period Tax Return shall be paid by Seller to Purchaser within the later
of five (5) days of Purchaser's request therefor.
10.3 Allocation of Straddle Period Taxes.
For purposes of this Agreement, in the case of any Taxable period that
commences on or prior to and includes (but does not end on) the Closing Date (a
"Straddle Period"), the amount of any Taxes based on or measured by income,
profits or receipts of ICI or for other Taxes of ICI for the Pre-Closing Tax
Period shall be determined based on an interim closing of the books as of the
close of business on the Closing Date and the amount of any real and personal
property Taxes of ICI for a Straddle Period which relate to the Pre-Closing Tax
Period shall be deemed to be the amount of such Tax for the entire taxable
period multiplied by a fraction the numerator of which is the number of days in
the taxable period ending on the Closing Date and the denominator of which is
the number of days in such Straddle Period.
10.4 Audits and Contests Regarding Taxes.
Any party who receives any notice of a pending or threatened Tax audit,
assessment, or adjustment against or with respect to ICI which may give rise to
liability of another party hereto, shall promptly notify such other party within
ten (10) business days of the receipt of such notice. The parties each agree to
consult with and to keep the other parties hereto informed on a regular basis
regarding the status of any Tax audit or proceeding ("Tax Contest") to the
extent that such Tax Contest could affect a liability of such other parties
(including indemnity obligations hereunder). Purchaser shall control any such
Tax Contests, except that Seller shall have the right to represent its and ICI's
interests in any Tax Contest , and Seller shall have the right to control the
Tax Contest and to employ counsel of their choice, but reasonably satisfactory
to Purchaser, at Seller's expense, but only to the extent such audit or other
proceeding pertains to Tax periods ending on or before the Closing Date and then
only to the extent that any such Tax Contests are related exclusively to the
liability for any Taxes, the entire amount of which is owed by Seller hereunder.
In the event that Seller elects to contest an adjustment by paying the Tax at
issue and seeking a refund, Seller shall advance the amount of such Tax to
Purchaser with such advance being repayable only out of the contest recovery.
Purchaser shall have the right to participate in such proceeding at its own
expense, and shall be entitled to control the disposition of any issue involved
in such proceeding which does not effect a potential liability of Seller. Both
Purchaser and Seller shall be entitled to represent their own interests in light
of their responsibilities (including indemnity obligations) for the related
Taxes, at their own expense, in any audit or administrative or judicial
46
proceedings involving a Tax period that includes but does not end on the Closing
Date. Notwithstanding the foregoing, Seller shall not agree to any settlement
for any taxable period that would effect Tax Liabilities of Purchaser or ICI for
any Tax period beginning on or after the Closing Date without prior written
consent of Purchaser. Except as provided in this Section 10.3, the provisions of
Article 8 including the provisions therein addressing settlement authority,
shall govern the manner in which Tax audit or administrative or judicial
proceedings are resolved.
10.5 Cooperation on Tax Matters.
10.4.1 Purchaser, ICI and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Article 10 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
which are reasonably relevant to any such audit, litigation or other proceeding.
Seller, Purchaser and ICI agree (i) to retain all books and records with respect
to Tax matters pertinent to ICI (including Tax Returns) relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by another party, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (ii) to give the other
parties hereto reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so requests, shall
allow the other party to take possession of such books and records,
10.6 Tax Sharing Agreements.
All tax sharing agreements or similar agreements, arrangements or policies
with respect to or involving ICI shall be terminated as of the Closing Date and,
after the Closing Date, Purchaser and ICI shall not be bound thereby or have any
liability thereunder.
10.7 Section 338(11)(10) Election.
10.7.1 Seller and Purchaser shall join in making the elections under
Section 338(h)(10) of the Code or any analogous provision of state or local Law
(each such election, a "Section 338(4)(10) Election"), with respect to
Purchaser's purchase of the capital stock of ICI. Seller and Purchaser agree to
take, or cause to be taken, any and all action necessary and to do, or cause to
be done, or to execute, or cause to be executed, such documents as may be
necessary or desirable to effect any Section 338(11)(10) Election, with respect
to Purchaser's acquisition of the capital stock of ICI. At Closing, the parties
shall execute IRS Form 8023 (or any successor form(s) thereto), with all
attachments.
10.7.2 Purchaser and Seller agree that the Purchase Price will be allocated
to the assets of ICI in accordance with Sections 338 and 1060 of the Code and
the regulations thereunder. Within ninety (90) days after the Closing Date,
Purchaser shall complete and deliver to Seller a schedule (the "Allocation
Schedule") allocating the Purchase Price among the assets of ICI. Seller shall
be entitled to have reasonable comments incorporated into the Allocation
Schedule. If the parties cannot resolve a dispute over the Allocation Schedule,
the items remaining in dispute shall be submitted to the Referee. Purchaser and
47
Seller shall be bound by the determination by the Referee, absent manifest
error. Purchaser and Seller acknowledge and agree that, upon termination of the
Escrow Agreement, the Allocation Schedule shall be revised consistent with the
applicable provisions of the Code and. Treasury Regulations. Purchaser and
Seller shall file all Tax Returns (including amended returns and claims for
refund), IRS Form 8883 and any information reports in a manner consistent
therewith.
10.7.3 Seller shall include any income, gain, loss, deduction, or other tax
item resulting from the Section 338(11)(10) Elections on its tax returns to the
extent required by Applicable Law. Seller also shall pay any Tax imposed on ICI
attributable to the making of the Section 338(h)(10) Elections, including any
Tax imposed under Section 1374 of the Code.
ARTICLE 11
DEFINITIONS
11.1 Index of Definitions.
The following terms are defined in the following sections of this
Agreement:
Defined Term Section
2008 Financial Statements Section 2.3.2
Affiliate Section 11.2.1
Agreement Preamble
Allocation Schedule Section 10.7.2
Anti-Corruption and Anti-Bribery Laws Section 2.14.1
Applicable Law Section 11.2.2
Approvals Section 11.2.3
Benefit Plan Section 2.7,1(a)
Breach Section 11.2.4
Capitalized Lease Section 11.2.5
CERCLA Section 2.9,5
Claim Notice Section 8.8.2
Claims Section 112.6
Closing Section 1.4
Closing Cash Payment Section 1.2.1(a)
Closing Date Section 1.4
COBRA Section 11.2.7
Code Section 11.2.8
Competing Transaction Section 11.2.9
Contract Section 11.2.10
Cost Accounting Standards Section 11,2.11
Damages Section 11.2.12
Direct Contract Costs Section 11.2.13
DFARS Section 2.10.9
DSS Section 2.12,10
Employee Pension Benefit Plan Section 11.2.14
Employee Welfare Benefit Plan Section 11.2.15
Environmental Claim Section 11.2.16
Environmental Laws Section 11.2.17
Environmental Permits Section 11.2.18
48
Equipment Section 11.2.19
ERISA Section 11.2.20
ERISA Affiliate Section 11.2.21
ERISA Plan Section 11.2.22
Escrow Section 1.2.1(b)
Escrow Agent Section 1.2.1(b)
Escrow Agreement Section 1.2.1(b)
Escrow Amount Section 1.2.1(b)
Excluded Business Recitals
Export and Import Approvals Section 11.223
Export and Import Control Laws Section 11.2.24
FAR Section 2.6.4
Fiduciary Section 11.2.25
Financial Statements Section 2.3.2
Funded Customer Backlog Section 2.3,4
Government Bid Section 11.2.26
Government Contract Section 11.2.37
Governmental Authority Section 11,2.28
Government-Furnished Property Section 11.2.29
Hazardous Substances Section 11.2.30
Herley Preamble
HIPAA Section 11.2.31
ICI Preamble
ICI Acquisition Preamble
ICI Employees Section 2.7,2(a)
Indebtedness Section 11.2.32
Indemnification Limit Section 8.3.3
Indemnification Threshold Section 8.3.1
Indemnified Party Section 11.2.33
Indemnifying Party Section 11.2.34
Indirect Costs Section 11,2.35
Intellectual Property Section 2.10.11
Intellectual Property Licenses Section 2.10.4
Interest Expense Section 11.2.36
Inventory Section 11.2.37
LP addresses Section 2.10.11
Judgment Section 11.2.38
Key Employee Section 11.2.39
Leased Real Property Section 2.11.2
Liability Section 11.2.41
Lien Section 11.2.42
Material Adverse Effect Section 11.2.43
Net Income Section 11.2.44
NISPOM Section 2.12.10
Notice Period Section 8.82
PCBs Section 11.2.30
49
Permitted Liens Section 11.2.45
Person Section 11.2.46
Proceeding Section 11.2.47
Prohibited Transaction Section 11.2.48
Proprietary Software Section 2.10.3
Purchase Price Section 1.1
Purchaser Preamble
Purchaser Indemnitee Section 8.2
Purchaser's Disclosure Schedule Section 3.1
Qualified Plans Section 2.7.1(d)
Related Party Section 11.2.49
Release Section 11.2.50
Remedial Action Section 11.2.51
Removal Section 11.2.51
Response Section 11.2.51
Restriction Section 11.2.52
Section 338(h)(10) Election Section 10.7.1
Security Document Section 11.2.53
Seller Preamble
Seller Indemnitees Section 8.4
Seller Acquisition Date Section 11.2.54
Seller's Disclosure Schedule Section 2.1
Seller's Knowledge Section 11.2.41
Seller's Post-Acquisition Knowledge Section 11.2.55
Shares Recitals
Significant Customer Section 11.2.56
Significant Supplier Section 11.2.57
Software Section 2.10.11
Special Indemnification Threshold Section 8.3.2
Straddle Period Section 10.3
Tax Section 11.2.58
Tax Contest Section 10.4
Tax Returns Section 11.2.59
Taxes Section 11.2.58
Third Party Claim Section 11.2.60
Transaction Documents Section 11.2.61
U.S. GAAP Section 112.62
U.S. Government Section 11.2.63
Unaudited Financial Statements Section 2.3.2
11.2 Other Definitions.
The following terms shall have the following defined meanings when used in
this Agreement (terms defined in the singular having a correlative meaning when
used in the plural and vice versa):
50
11.2.1 "Affiliate" means any Person which controls a party to this
Agreement, which that party controls, or which is under common control
with that party. For purposes of the preceding sentence, the term
"control" means the power, direct or indirect, to direct or cause the
direction of the management and policies of a Person through voting
securities, contract or otherwise.
11.2.2 "Applicable Law" means all statutes, laws, rules, common law,
regulations and ordinances that apply to or govern a matter.
11.2.3 "Approvals" means all licenses, permits, consents, approvals and
authorizations of, and all filings, registrations and agreements with,
any Governmental Authority or court (federal, state, local or
foreign).
11.2.4 "Breach" means any breach of Contract, breach of representation or
warranty, tort or infringement and any related Claim.
11.2.5 "Capitalized Lease" shall mean a lease under which the obligations
of the lessee would, in accordance with U.S. GAAP consistently
applied, be included in determining total liabilities as shown on the
liability side of a balance sheet of the lessee.
11,2.6 "Claims" means all options, proxies, voting trusts, voting
agreements, Judgments, pledges, charges, requests or demands for
payment, escrows, rights of first refusal or first offer or other
pre-emptive rights, claims, transfer restrictions, Liens, equities,
and other encumbrances of every kind and nature whatsoever, whether
arising by agreement, operation of law or otherwise.
11.2.7 "COBRA" means Section 4980B of the Code, Part 6 of Title I of ER1SA,
similar provisions of state law and applicable regulations relating to
any of the foregoing.
11.2.8 "Code" means the Internal Revenue Code of 1986, as amended from time
to time. All citations to the Code, or to the Treasury Regulations
promulgated thereunder, shall include any amendments or any substitute
or successor provisions thereto.
11.2,9 "Competing Transaction" means any of the following (other than the
transactions contemplated by this Agreement) involving ICI: (a) any
merger, consolidation, share exchange, business combination, or
similar transaction; (b) any sale, lease, exchange, mortgage, pledge,
transfer, or other disposition of five percent or more of the assets
used in the business of ICI; or (c) any offer for five percent or more
of the outstanding shares of capital stock of ICI.
11.2.10"Contract" means each contract, agreement, commitment, undertaking,
purchase order, lease, sublease, indenture, debenture, instrument,
note, Security Document, or other similar obligation or document,
written or oral, including, without limitation, all contracts and
policies of insurance.
11.2,11 "Cost Accounting Standards" means regulations promulgated by the
Cost Accounting Standards Board set forth at 48 C.F.R. Parts 9903,
51
9904 and 9905, and any guidance, interpretations, or preambles to
those regulations published by the Cost Accounting Standards Board in
the Federal Register.
11.2.12"Damages" shall mean all Liabilities, demands, Claims, actions or
causes of action, regulatory, legislative or judicial Proceedings or
investigations, assessments, levies, losses, fines, penalties,
damages, Taxes, costs and expenses, including, without limitation,
attorneys', accountants', investigators', and experts' fees and
expenses, sustained or incurred in connection with the defense,
settlement or investigation of any Claim.
11.2.13 "Direct Contract Costs" means, with respect to any period, the
aggregate amounts of labor and other direct expenses, including,
without limitation, expenses for materials, subcontracts, consultants
and travel.
11.2.14"Emplovee Pension Benefit Plan" has the meaning set forth in Section
3(2) of ERISA.
11.2.15"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(1) of ERISA
11.2.16 "Environmental Claim" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, Claims, liens, investigations, statutory liens,
Proceedings or notices of noncompliance or violation (written or oral)
made or threatened by any Person alleging potential liability
(including potential liability for enforcement, investigatory costs,
cleanup costs, Responses, Removals or Remedial Actions, governmental
response costs, removal costs, remedial costs, natural resources
damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from: (1) the presence, or Release into the
environment, of any Hazardous Substance at or from any location,
whether or not owned by ICI; or (2) circumstances forming the basis of
any violation or alleged violation, of any Environmental Law or
Environmental Permit; or (3) any and all Claims by any Person seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Substances.
11.2.17 "Environmental Laws" shall mean all federal, state or local
statutes, laws, rules, ordinances, codes, rule of common law,
regulations, judgments and orders relating to protection of human
health or the environment (including industrial hygiene, pollution,
ambient air, surface water, ground water, drinking water, wildlife,
plants, land surface or subsurface strata), including laws and
regulations relating to Releases or threatened Releases of Hazardous
Substances, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Substances.
11.2.18 "Environmental Permits" shall mean all environmental, health and
safety permits, licenses, registrations, and governmental Approvals
and authorizations, including but not limited to any air emission
52
permits, wastewater discharge or treatment permits, storm water
permits, underground storage tank registrations and Hazardous
Substance handling, treatment, storage or disposal permits.
11.2.19 "Equipment" means all furniture, fixtures, vehicles, machinery,
equipment, aircraft, vessels, tools, dies, molds, jigs, computer
hardware and other tangible personal property (other than Inventory).
11.2,20"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
11.2.21 "ERISA Affiliate" means each Person which, within any time during
the past six years, is or was required to be treated as a single
employer with ICI under Section 414 of the Code or Sections 4001(0(1)
or 4001(b)(1) of ERISA.
11.2.22"ERISA Plan" means any Employee Pension Benefit Plan or any Employer
Welfare Benefit Plan.
11.2.23 "Export and Import Approvals" means all export licenses, license
exceptions, consents, notices, waivers, approvals, orders,
authorizations, registrations, declarations and filings, from or with
any Governmental Authority, that are required for compliance with
Export and Import Control Laws.
11.2.24 "Export and Import Control Laws" means any U.S. or applicable
non-U.S. law, regulation, or order governing (i) imports, exports,
reexports, or transfers of products, services, software, or
technologies from or to the United States or another country; (ii) any
release of technology or software in any foreign country or to any
foreign Person (anyone other than a citizen or lawful permanent
resident of the United States, or a protected individual as defined by
8 U.S.C. ss. 1324b(a)(3)) located in the United States or abroad;
(iii) economic sanctions or embargoes; or (iv) compliance with
unsanctioned foreign boycotts.
11.2.25 "Fiduciary" has the meaning set forth in ERISA Section 3(21).
11.2.26"Government Bid" means a bid, tender or proposal which, if accepted,
would result in a Government Contract.
11.2.27 "Government Contract" means any Contract, including an individual
task order or delivery order under a broader agreement, between ICI
and the U.S. Government, or any other Governmental Authority, as well
as any subcontract or other arrangement by which ICI has agreed to
provide goods or services to a prime contractor, to the Governmental
Authority, or to a higher-tier subcontractor where such goods or
services ultimately will benefit or be used by the Governmental
Authority, including any closed Contract or subcontract as to which
the right of the U.S. Government or a higher-tier contractor to
review, audit or investigate has not expired under Applicable Law.
11.2.28 "Governmental Authority" shall mean any nation or government, any
state or other instrumentality or political subdivision thereof, and
53
any entity exercising executive, legislative, judicial, military,
regulatory or administrative functions of or pertaining to government.
11.2.29"Government-Furnished Property" shall mean all machinery, Equipment,
tools, dies, spare parts and all other personal property and fixtures
loaned, bailed or otherwise furnished by the U.S. Government to ICI
pursuant to Government Contracts.
11.2.30"Hazardous Substances" shall mean: (1) any petroleum or petroleum
products (and any breakdown products), radioactive materials, asbestos
in any form, urea formaldehyde foam insulation, transformers or other
Equipment that contain dielectric fluid containing regulated levels of
polychlorinated biphenyls ("PCBs"), radon gas and chlorinated solvents
(and any breakdown products); and (2) any chemicals, materials or
substances which are now or ever have been defined as or included in
the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," or other words of similar import, under any
Environmental Law.
11.2.31 "HIPAA" means Subtitle K of the Code, Part 7 of Title I of ERISA,
Part C of Subchapter XI of Chapter 7 of Title 42 of the United States
Code, as amended, similar provisions of state law and applicable
regulations relating to any of the foregoing.
11.2.32 "Indebtedness" shall mean at a particular time, without dupli-
cation, (i) any indebtedness for borrowed money or issued in
substitution for or exchange of indebtedness for borrowed money, (ii)
any indebtedness evidenced by any note, bond, debenture or other debt
security, (iii) any indebtedness for the deferred purchase price of
property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course
of business that are not more than one hundred twenty (120) days past
due), (iv) any obligations under Capitalized Leases with respect to
which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person
assures a creditor against loss, (v) any indebtedness secured by a
Lien on a Person's assets, and (vi) any unsatisfied obligation for
"withdrawal liability" (as such term is defined under ERISA) to a
"multiemployer plan" as defined in Section 3(37) of ERISA.
11.2.33 "Indemnified Party" shall mean a party who is entitled to
indemnification pursuant to Article 8.
11.2.34"Indemni&ing Party" shall mean a party hereto who is required to
provide indemnification under Article 8.
11.2.35 "Indirect Costs" shall mean any fringe benefits, general and
administrative expenses and overhead expenses.
54
11.2.36 "Interest Expense" shall mean, for any period, total interest
expense (including that portion attributable to capital leases in
accordance with U.S. GAAP and capitalized interest) of ICI with
respect to all outstanding Indebtedness of ICI, including all
commissions, discounts and other fees and charges owed with respect to
letters of credit and net costs under hedging obligations.
11.2.37 "Inventory" means raw materials, work in process and finished goods
held for sale.
11.2.38"Judgmenr means any order, writ, award, injunction, judgment or
decree of any court, Governmental Authority or tribunal.
11.2.39"Kep Employee" means John Bpperly, Rich Barrett, Greg Smith, Charles
Woloszynski, Richard Griffin, Troy Smith, Robert Krobock, Scott
Rothrock, Dan Conner, Richard Harrison and Scott Murdock.
11.2.40"Knowledge of Seller" or "Seller's Knowledge" or words of similar
import mean the actual knowledge of Andy Feldstein, Scott Murdock,
Richard Harrison, Myron Levy and/or John Epperly.
11.2.41 "Liability" means any indebtedness, obligation or liability of any
nature whatsoever (direct or indirect, matured or unmatured, absolute,
accrued, contingent or otherwise), whether or not required by U.S.
GAAP to be provided for or reserved against on a balance sheet or
disclosed in the notes thereto.
11.2.42 "Lien" means any security interest, lien, charge, hypothecation or
encumbrance of any kind.
11.2.43 "Material Adverse Eff'ect" means, when used with respect to any
Person, any event, change or effect which is materially adverse to the
financial performance, financial condition, operations, business,
assets, liabilities, results of operations, prospects or reputation of
ICI.
11.2.44 "Net Income" shall mean, for any period, the net income (or loss)
of ICI for such period taken as a single accounting period determined
in conformity with U.S. GAAP; provided, however, that net income (or
loss) shall exclude any gains or losses attributable to asset sales
and any non-cash extraordinary gains or losses.
11.2.45 "Permitted Liens" means (a) statutory Liens for Taxes not yet due,
(b) Liens of carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business for sums not yet due, (c)
Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security; (d) liens securing the executory
obligations under any Lease that is an "operating lease" under GAAP
and (e) liens securing the payment of unpaid inventory owned by ICI in
the payment amount set forth in Schedule 2.3.5.
55
11.2.46 "Person" means any individual, corporation, general or limited
partnership, company, limited liability company or other entity,
trust, estate or other legal person, or any Governmental Authority.
11.2.47 "Proceeding" means any litigation, suit, action, claim, proceeding
or investigation before any court, Governmental Authority or tribunal.
11.2.48 "Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
11.2.49 "Related Party" means Seller and any Affiliate of Seller or ICI.
11.2.50"Release" shall have the meaning ascribed to it in Section 101(22)
of CERCLA, as amended by the Superfund Amendments and Reauthorization
Act ("SARA"), 42 U.S.C. ss. 9601(22).
11.2.51 "Response," "Removal" and "Remedial Action" shall have the meanings
ascribed to them in Sections 101(23)401(25) of CERCLA, as amended by
SARA, 42 U.S.C. ss.ss. 9601(23)-9601(25).
11.2.52 "Restriction" means, to the extent applied to any Person, all
terms, conditions and provisions of any articles of incorporation or
association, bylaws, other organizational documents, Applicable Law,
Judgments, and Contracts that bind or effect such Person or any of its
assets or property.
11.2.53 "Security Document" means each mortgage, security agreement, trust
deed, chattel mortgage, financing statement, hypothecation, pledge
agreement or other agreement, document or instrument which creates a
Lien.
11.2.54 "Seller Acquisition Date" means April 12, 2005.
11.2.55 "Seller's Post-Acquisition Knowledge" means, with respect to any
period prior to the Seller Acquisition Date, the actual knowledge of
Scott Murdock, Richard Harrison, Myron Levy, John Epperly and/or Andy
Feldstein that is acquired by such Person at any time on or after the
Seller Acquisition Date.
11.2.56 "Significant Customer" means any customer of ICI with which ICI has
Contracts in excess of $50,000 in value in the aggregate.
11.2.57 "Significant Supplier" means any supplier of ICI from whom ICI has
purchased $50,000 or more of goods or services during either of years
ended December 31, 2006 or 2007 for use in ICI's business.
11.2.58 "Tax" or "Taxes" shall mean (i) all federal, state, local, foreign
or other tax of any kind whatsoever, including without limitation, all
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, ad valorem, value added,
inventory, franchise, profits, withholding, social security (or
56
similar), unemployment, disability, real property, personal property,
unclaimed property, escheat, sales, use, transfer, registration,
alternative or add-on minimum, or estimated tax, and including any
interest, penalty, or addition thereto, whether disputed or not; (ii)
all liability for the payment of any amounts of the type described in
clause (i) as the result of being (or ceasing to be) a member of an
affiliated, consolidated, combined or unitary group (or being included
(or required to be included) in any Tax Return related thereto); and
(iii) all liability for the payment of any amounts as a result of an
express or implied obligation to indemnify or otherwise assume or
succeed to the liability of any other person with respect to the
payment of any amounts of the type described in clause (i) or clause
(ii);
11.2.59 "Tax Return" shall mean a report, return, statement, claim for
refund, election, declaration or other information with respect to any
Tax required to be filed, permitted to be filed or actually filed with
a taxing authority, including any schedule or attachment thereto, and
including any amendment thereof.
11.2.60"Third Party Claim" shall mean any Proceeding which is initiated or
threatened by a party other than the parties hereto, their successors
and permitted assigns, against any Indemnified Party or to which any
Indemnified Party is subject.
11.2.61 "Transaction Documents" means this Agreement and each other
agreement, document or instrument to be executed and delivered by
Purchaser, Seller or ICI in order to effectuate the transactions
contemplated by this Agreement.
11.2.62 "U.S. GAAP" means United States generally accepted accounting
principles.
11.2.63 "US. Government" means the government of the United States of
America, including all of its executive, legislative, judicial,
military, regulatory and administrative agencies, bureaus, departments
and other instrumentalities.
ARTICLE 12
MISCELLANEOUS
12.1 Publicity.
Except as otherwise required by Applicable Law, press releases and other
publicity concerning this transaction shall be made only with the prior
agreement of Seller and Purchaser, which agreement shall not be unreasonably
withheld. Seller and Purchaser shall use reasonable efforts to consult and agree
with each other with respect to the content of any such required press release
or other publicity.
12.2 Notices.
All notices required or permitted to be given hereunder shall be in writing
and may be delivered by hand, by facsimile, by nationally recognized private
courier, or by United States mail. Notices shall be deemed given when received.
All notices shall be addressed as follows:
57
If to Seller:
Herley Industries, Inc.
101 North Pointe Boulevard
Lancaster, Pennsylvania 17601
Attn: Mr. Myron Levy, Chief Executive Officer Fax: 717-297-9506
with copies to:
Beckman, Lieberman & Barandes, LLP 116 John Street, Suite 1313
New York, New York 10038
Attn: David H Lieberman, Esq.
Fax: 516-433-5858
If to Purchaser:
Elbit Systems of America Attn: David Mace Roberts 4700
Marine Creek Parkway Fort Worth, Texas 76179 Fax: (817)
231-4499
with copies to:
Greenberg Traurig LLP
Attn: Scott Meza
1750 Tysons Blvd., Suite 1200 McLean, Virginia 22102
Fax: (703)749-1301
and/or to such other respective addresses and/or addressees as may be
designated by notice given in accordance with the provisions of this Section
12.2.
12.3 Expenses; Transfer Taxes.
Except as otherwise provided in this Agreement, each party hereto shall be
responsible for all fees and expenses incurred by such party in connection with,
relating to or arising out of the negotiation, preparation, execution, delivery
and performance of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby, including, without
limitation, financial advisors', attorneys', accountants' and other professional
fees and expenses ("Transaction Costs"); provided that all Transactions Costs of
Seller and ICI incurred prior to the Closing shall be paid by ICI or Seller on
or prior to Closing and Seller shall deliver to Purchaser at Closing releases
from all such advisors in a form acceptable to Purchaser, Seller shall be
responsible for the cost of all sales, use, excise, documentary, stamp,
transfer, and any other such Taxes and fees (including penalties and interest)
incurred in connection with this Agreement.
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12A Entire Agreement.
This Agreement, the other Transaction Documents and the instruments to be
delivered by the parties pursuant to the provisions hereof and thereof
constitute the entire agreement between the parties and shall be binding upon
and inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns. Each exhibit and schedule
shall be considered incorporated into this Agreement.
12.5 Non-Waiver.
The failure in any one or more instances of a party to insist upon
performance of any of the terms, covenants or conditions of this Agreement, to
exercise any right or privilege in this Agreement conferred, or the waiver by
said party of any Breach of any of the terms, covenants or conditions of this
Agreement, shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights or privileges, but the same shall continue and
remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.
12.6 Counterparts.
This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original, and all such counterparts shall constitute
but one instrument,
12.7 Severability.
The invalidity of any provision of this Agreement or portion of a provision
shall not affect the validity of any other provision of this Agreement or the
remaining portion of the applicable provision.
12.8 Applicable Law.
This Agreement shall be governed and controlled as to validity,
enforcement, interpretation, construction, effect and in all other respects by
the laws of the State of New York, without giving effect to that body of laws
pertaining to conflict of laws. Each of the parties hereto irrevocably consents
to the exclusive jurisdiction and venue of the United States District Court for
the Southern District of New York, in connection with any matter based upon or
arising out of this Agreement or the transactions contemplated hereby (including
enforcement of the provisions of Section 8.8 or enforcement of any judgment
provided thereunder), agrees that process may be served upon them in any manner
authorized by the laws of the State of New York for such Persons and waives and
covenants not to assert or plead any objection which they might otherwise have
to such jurisdiction, venue and process. Each party hereto hereby agrees not to
commence any legal proceedings relating to or arising out of this Agreement or
the transactions contemplated hereby in any jurisdiction or courts other than as
provided herein. The parties to this Agreement elect not to be governed by the
United Nations Convention on Contracts for the International Sale of Goods.
59
12.9 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS
OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
HEREOF.
12.10 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto, and their successors and permitted assigns. Nothing in this
Agreement, express or implied, shall confer on any Person other than the parties
hereto, and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
12.11 Assignability.
This Agreement shall not be assignable by any party without the prior
written consent of the other parties, except that at or prior to the Closing,
Purchaser may assign its rights and delegate its duties under this Agreement to
a subsidiary or parent corporation and may assign its rights under this
Agreement to its lenders for collateral security purposes, and after the
Closing, Purchaser may assign its rights and delegate its duties under this
Agreement to any third party, including, without limitation, full or partial
assignments of Claims and rights under Section 8.3. No such assignment shall
relieve Purchaser of any of its liabilities under this Agreement.
12.12 Amendments.
This Agreement shall not be modified or amended except pursuant to an
instrument in writing executed and delivered on behalf of each of the parties
hereto.
12.13 Headings.
The headings contained in this Agreement are for convenience of reference
only and shall not affect the meaning or interpretation of this Agreement.
[Signature pages follow]
60
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
INNOVATIVE CONCEPTS, INC.
By: /s/ Myron Levy
---------------------------------------------
Name: Myron Levy
---------------------------------------------
Title:
---------------------------------------------
HERLEY INDUSTRIES, INC.:
By: /s/ Myron Levy
---------------------------------------------
Name: Myron Levy
---------------------------------------------
Title:
---------------------------------------------
ICI ACQUISITION CORP.
By: /s/ Myron Levy
---------------------------------------------
Name: Myron Levy
---------------------------------------------
Title:
---------------------------------------------
ELBIT SYSTEMS OF AMERICA, LLC:
By: /s/ Raman Horowitz
---------------------------------------------
Name: Raman Horowitz
---------------------------------------------
Title: President and Chief Executive Officer
---------------------------------------------
61