<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) :
December 4, 1997 (November 26, 1997)
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Advanced Communication Systems, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-22737 54-1421222
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(Commission File Number) (IRS Employer Identification No.)
10089 Lee Highway, Fairfax, Virginia 22030
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(Address of Principal Executive Offices) (Zip Code)
(703) 934-8130
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(Registrant's Telephone Number, Including Area Code)
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Item 2. Acquisition or Disposition of Assets.
On November 26, 1997, Advanced Communication Systems, Inc., a Delaware
corporation ("ACS"), acquired all the outstanding shares of Integrated Systems
Control, Inc., a Virginia corporation ("ISC") pursuant to a Stock Purchase
Agreement, dated as of October 31, 1997, by and between ACS and Howard F.
Sparks, Howard F. Sparks Trust, Irene L. Sparks, Irene L. Sparks Trust, Gale V.
Berry, Gale V. Berry Trust, Christine Berry and Christine Berry Trust
(collectively, the "Shareholders"). The consideration paid by ACS was 475,000
shares of ACS common stock. The amount and type of consideration was determined
on the basis of negotiations between ACS and the Shareholders.
ISC provides technical and engineering services to the Department of Defense,
primarily the U.S. Navy, in the areas of communications and information
technology. Headquartered in Virginia Beach, Virginia, ISC has operations in
Virginia Beach, San Diego, Charleston and the Washington, D.C. area and lends
support services from a number of sites worldwide, including Japan, Bahrain,
Honolulu, Italy, and Guam. Among others, its clients include Space and Naval
Warfare Systems Command and Centers, Defense Information Systems Agency Joint
Interoperability Engineering Office, Naval Air Systems Command, U.S. Coast
Guard, and NATO.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired. It is not
practicable to provide the required financial statements for
Integrated Systems Control, Inc. at this time. The
statements will be filed as an amendment to this report on
Form 8-K as soon as they are prepared and not later than 60
days after the deadline for filing this Form 8-K.
(b) Pro Forma Financial Information It is not practicable to
provide the required pro forma financial statements for ACS
at this time. The statements will be filed as an amendment
to this report on Form 8-K as soon as they are prepared and
not later than 60 days after the deadline for filing this
Form 8-K.
(c) Exhibits
10.1 Stock Purchase Agreement by and between
ACS and the Shareholders, dated as of October 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 4, 1997 ADVANCED COMMUNICATION SYSTEMS, INC.
/S/ Dev Ganesan
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Dev Ganesan
Executive Vice-President and Chief Financial Officer
<PAGE>
Exhibit 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is effective as of
the 31st day of October, 1997, by and among Advanced Communication Systems,
Inc., a Delaware corporation ("ACS"), and Howard F. Sparks, Howard F. Sparks
Trust, Irene L. Sparks, Irene L. Sparks Trust, Gale V. Berry, Gale V. Berry
Trust, Christine Berry and Christine Berry Trust (collectively, the
"Shareholders").
RECITALS
WHEREAS, the Shareholders own 1,000 shares of issued and outstanding
common stock, $1.00 par value per share (the "ISC Common Stock"), of Integrated
Systems Control, Inc., a Virginia corporation ("ISC"), which represent all of
the issued and outstanding capital stock of ISC; and
WHEREAS, ACS desires to purchase all of the ISC Common Stock owned by
the Shareholders, and the Shareholders desire to sell all of their ISC Common
Stock to ACS, on the terms and conditions set forth herein; and
WHEREAS, the Shareholders and the Board of Directors of ACS and ISC
have approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the parties intend that the "Sale" (as defined in Section 1.1)
be accounted for as a pooling of interests.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. PURCHASE AND SALE OF STOCK.
1.1 Purchase and Sale Obligation. The Shareholders shall sell the ISC
Common Stock to ACS and ACS shall purchase the ISC Common Stock from the
Shareholders (the "Sale") on the terms and conditions contained in this
Agreement.
1.2 Purchase Price. In full consideration for the ISC Common Stock to
be sold pursuant to Section 1.1 hereof, and upon the terms and subject to the
conditions contained herein, ACS shall issue and deliver to the Shareholders 475
shares of ACS Common Stock, $.01 par value per share (the "ACS Common Stock"),
for each share of the ISC Common Stock tendered to ACS, such that the total
number of shares of ACS Common Stock to be issued to the Shareholders pursuant
to the transactions contemplated by this Agreement shall be 475,000 shares. At
the Closing, the Shareholders shall, upon the surrender to ACS of the
certificates representing their ISC Common Stock duly endorsed in blank by the
Shareholders or accompanied by blank stock powers, receive a certificate or
certificates representing an amount of shares of ACS Common Stock as is
determined in accordance with this Section 1.2.
2. CLOSING; INTENT OF THE PARTIES.
2.1 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Venable, Baetjer
and Howard, LLP, 20180 Corporate Ridge, Suite 400, McLean, Virginia 22180 on
November 30, 1997 or at such other time and date as the parties may mutually
agree (the "Closing Date"); provided, however, that all conditions to Closing
shall have been satisfied or waived on or prior to the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each of the Shareholders, jointly and severally, represents and
warrants to ACS as follows. The term "knowledge," "best knowledge," or words of
similar import, as used in this Section 3 shall mean the actual knowledge of the
Shareholders without independent investigation.
3.1 Due Organization. ISC is a corporation duly organized, validly
existing and is in good standing under the laws of the Commonwealth of Virginia,
and has all requisite power and authority to own, operate and lease its
properties and to carry on its business as now being conducted and as proposed
to be conducted. ISC is qualified as a foreign corporation and is in good
standing in each jurisdiction where such qualification is required. Schedule 3.l
hereto contains a list of all jurisdictions in which ISC is qualified to do
business as a foreign corporation. The Shareholders have caused ISC to deliver
to ACS true, complete and correct copies of its charter and bylaws, each as
amended to date. Such charter and bylaws, as amended to date, are collectively
referred to as the "Charter Documents." The Shareholders have previously made
available to ACS true, correct and complete copies of ISC's corporate minute
books which include copies of all minutes of all actions of ISC's board of
directors and stockholders and a stock ledger setting forth the record ownership
of all outstanding shares of ISC's capital stock.
3.2 Authorization; Validity. Each of the Shareholders has the full
legal right and authority to enter into this Agreement and the transactions
contemplated hereby. This Agreement is a legal, valid and binding obligation of
each of the Shareholders, enforceable against each of the Shareholders in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors
generally and except that the availability of equitable remedies is subject to
the discretion of the court before which any proceeding therefor may be brought.
3.3 Capital Stock of ISC. The authorized capital stock of ISC consists
of 15,000 shares of Common Stock, $1.00 par value, of which 1,000 shares are
issued and outstanding. All of the issued and outstanding shares of ISC Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable and are owned of record and beneficially by the Shareholders free
and clear of all liens, encumbrances and claims of every kind. All of the issued
and outstanding shares of ISC Common Stock were offered, issued, sold and
delivered by ISC in compliance with all applicable state and federal laws
concerning the issuance of securities. None of such shares was issued in
violation of any preemptive rights created by statute, or by the Charter
Documents or by any agreement to which ISC may be bound. None of the shares of
ISC Common Stock were issued pursuant to awards, grants or bonuses. No shares of
ISC Common Stock are subject to repurchase upon termination of employment.
Other than as described in this Section 3.3, there are no outstanding
shares of ISC Common Stock, preferred stock or any other equity securities of
ISC, and except as set forth in Schedule 3.3, there are no options, warrants,
calls, conversion rights, commitments or agreements of any character to which
ISC or the Shareholders are a party or by which ISC or the Shareholders may be
bound that obligate or may obligate ISC to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of common stock, preferred stock
or other equity securities of ISC or that obligate or may obligate ISC to grant,
extend or enter into any such option, warrant, call, conversion right,
commitment or agreement. Except as set forth in Schedule 3.3, there are no
outstanding arrangements, agreements, commitments or understandings of any kind
affecting or relating to the voting, issuance, purchase, redemption, repurchase
or transfer of any capital stock of ISC or any other securities of ISC. Other
than as provided in or contemplated by this Agreement or set forth in Schedule
3.3, neither ISC nor the Shareholders have become party to or subject to any
contract or obligation wherein any person has a right or option to purchase or
acquire any rights in any additional capital stock or securities of ISC. Neither
the voting stock structure of ISC nor the relative ownership of ISC Common Stock
has been altered or changed in contemplation of this Agreement. As a result of
the transactions contemplated by this Agreement, ACS will be the record and
beneficial owner of all outstanding capital stock of ISC and rights to acquire
capital stock of ISC.
3.4 Subsidiaries. ISC has no subsidiaries and does not presently own,
of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity, nor is ISC, directly or
indirectly, a participant in any joint venture, partnership or other entity.
3.5 No Conflicts. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, will
not:
(a) conflict with, or violate any provision of the Charter
Documents as now in effect;
(b) conflict with, or result in any breach or default (or would
constitute a default but for any requirement of notice or lapse of time or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to a loss of a benefit under, or result in the creation or
imposition of any lien, charge or encumbrance on any of the properties of ISC or
the Shareholders pursuant to any agreement, contract, note, mortgage, indenture,
lease, sublease, instrument, permit, concession, franchise, license or
declaration of trust to which either is a party or by which ISC or the
Shareholders or any of their property or assets may be bound or affected; or
(c) conflict with or result in a violation of any law, statute,
order, judgment, rule, regulation, decree or ordinance applicable to ISC or the
Shareholders or by which any of their properties or assets is bound or affected.
3.6 No Defaults. ISC is not, nor has it or the Shareholders received
notice that it is or would be with the passage of time, (a) in violation of any
provision of its Charter Documents or (b) in default or violation of any term,
condition or provision of (i) any judgment, decree, order, injunction or
stipulation applicable to ISC or (ii) any agreement, note, mortgage, indenture,
contract, lease, sublease or instrument, permit, concession, franchise or
license to which ISC is a party or by which ISC or its properties or assets may
be bound.
3.7 Required Governmental Filings and Consents. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, will not require any consent, approval, authorization or
permit of, or filing with or notification to, any United States, federal, state
or local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal or judicial or arbitral
body ("Governmental Authority").
3.8 Financial Statements. Schedule 3.8 includes (a) true, complete and
correct copies of the audited Balance Sheet for ISC as of December 31, 1996 (the
end of ISC's most recent completed fiscal year), and audited Statements of
Income, Cash Flows and Retained Earnings for ISC for the year ended December 31,
1996 (collectively, the "Year-End Financials") and (b) true, complete and
correct copies of the audited Balance Sheet for ISC (the "Interim Balance
Sheet") as of September 30, 1997 (the "Interim Balance Sheet Date") and
Statements of Income and Retained Earnings for ISC for the period then ended
(together, the "Interim Financials" and collectively with the Year-End
Financials, the "ISC Financial Statements"). The ISC Financial Statements have
been prepared in accordance with GAAP consistently applied and fairly present
the financial position of ISC as of the dates thereof and the results of its
operations and cash flows for the periods then ended, subject, in the case of
the Interim Financials to normal year-end audit adjustments and the omission of
complete footnote information. Since the Interim Balance Sheet Date, there have
been no material changes in ISC's accounting policies.
3.9 Liabilities and Obligations.
(a) ISC has no material liabilities, except for liabilities:
(i) reflected on the Interim Balance Sheet and not
previously paid or discharged; and
(ii) those liabilities incurred since the Interim Balance
Sheet Date in the ordinary course of business consistent with past practice,
which liabilities are not, individually or in the aggregate, material.
For purposes of this Section 3.9, the term "liabilities" shall include without
limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent, mature, unmature or
otherwise and whether known or unknown, fixed or unfixed, inchoate or not,
liquidated or unliquidated, secured or unsecured.
(b) In the case of those liabilities which are not fixed or
contested, a reasonable estimate of the maximum amount which may be payable is
attached hereto as Schedule 3.9.
(c) The Shareholders shall cause ISC to deliver to ACS a
schedule of all outstanding liabilities as of the Closing Date.
3.10 Accounts and Notes Receivable. The receivables, including unbilled
accounts receivables, shown on the Interim Balance Sheet arose in the ordinary
course of business and have been collected or are collectible in the book
amounts thereof, less an amount not in excess of the allowance for doubtful
accounts provided for in such Interim Balance Sheet. Allowances for doubtful
accounts and warranty returns are adequate and have been prepared in accordance
with GAAP consistently applied and in accordance with the past practices of ISC.
The receivables of ISC arising after the Interim Balance Sheet Date arose in the
ordinary course of business and have been collected or are collectible in the
book amounts thereof, less allowances for doubtful accounts and warranty returns
determined in accordance with the past practices of ISC. None of the receivables
of ISC is subject to any claim of offset, recoupment, set off or counterclaim
and none of the Shareholders have any knowledge of any facts or circumstances
(whether asserted or unasserted) that could give rise to any such claim. No
amount of receivables are contingent upon the performance by ISC of any
obligation or contract. No person has any lien on any of such receivables and no
agreement for deduction or discount has been made with respect to any of such
receivables.
3.11 Governmental Permits and Licenses. ISC owns or holds all licenses,
franchises, permits and other governmental authorizations, including without
limitation permits (including, without limitation, all permits and approvals of
governmental authorities necessary for the continued occupancy, use and
operation of each of the "Leased Premises" as defined in Section 3.13(b)),
titles (including, without limitation, motor vehicle titles and current
registrations), fuel permits, licenses, franchises, certificates required to
conduct its business as currently being conducted or as proposed to be conducted
(the "Material Permits"). The Material Permits are valid and in full force and
effect, and ISC has not received any notice that any governmental authority
intends to modify, cancel, terminate or not renew any Material Permit. ISC has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the Material Permits and other
applicable orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing. The transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to ISC by any Material Permit.
3.12 Environmental Matters.
(a) No substance that is regulated by any Governmental
Authority or that has been designated by any Governmental Authority to be
radioactive, toxic, hazardous or otherwise a danger to health or the environment
(a "Hazardous Material") is present in, on, under or adjacent to any property
that ISC has at any time owned, operated, occupied or leased (including both the
land and improvements thereon) and no reasonable likelihood exists that any
Hazardous Material will come to be present in, on, or under any properties
leased or used at any time (including both land and improvements thereon) by
ISC.
(b) ISC does not and has not transported, stored, used,
manufactured, released or exposed its employees or any other person to any
Hazardous Material, or arranged for the disposal, discharge, storage or release
of any Hazardous Material, in violation of any applicable statute, rule,
regulation, order or law.
(c) No permits, consents, waivers, exemptions, licenses,
approvals and other authorizations are required to be obtained by it under the
laws of any Governmental Authority relating to land use, public and employee
health and safety, pollution or protection of the environment (collectively,
"Environmental Laws"). ISC has been and is in compliance in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. Neither ISC nor the Shareholders have received any notice
or have knowledge of any past or present condition or practice of the businesses
conducted by ISC which forms or could be reasonably expected to form the basis
of any material claim, action, suit, proceeding, hearing or investigation
(collectively "Environmental Claims") against ISC (or against any person or
entity whose liability for any Environmental Claims ISC has retained or assumed
either contractually or by operation of law), arising out of the manufacture,
processing, distribution, use, treatment, storage, spill, disposal, transport,
or handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material by ISC.
(d) ISC does not own, operate or maintain any underground
storage tanks on any property owned, operated, occupied or leased by ISC, and to
the Shareholders' best knowledge, no underground storage tanks are present at
any property owned, operated, occupied or leased at any time by ISC.
3.13 Real and Personal Property.
(a) Schedule 3.13(a) lists and describes briefly all real
property that ISC owns. With respect to each such parcel of owned real property:
(i) Except as set forth in Schedule 3.13(a),
ISC has good and marketable title to the parcel of real property, free and clear
of any security interest, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent and recorded easements,
covenants, and other restrictions which do not impair the current use,
occupancy, or value, or the marketability of title, of the property subject
thereto;
(ii) there are no pending or to the knowledge
of Shareholders threatened condemnation proceedings, lawsuits, or administrative
actions relating to the property or other matters affecting and adversely the
current use, occupancy, or value thereof;
(iii) the legal description for the parcel
contained in the deed thereof describes such parcel fully and adequately, the
buildings and improvements are located within the boundary lines of the
described parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-conforming use"
or "permitted non-conforming structure" classifications), and do not encroach on
any easement which may burden the land, and the land does not serve any
adjoining property for any purpose inconsistent with the use of the land, and
the property is not located within any flood plain or subject to any similar
type restriction for which any permits or licenses necessary to the use thereof
have not been obtained;
(iv) all facilities have received all
approvals of governmental authorities (including licenses and permits) required
in connection with the ownership or operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations;
(v) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the parcel of real
property;
(vi) there are no outstanding options or
rights of first refusal to purchase the parcel of real property, or any portion
thereof or interest therein;
(vii) there are no parties in possession of
the parcel of real property, other than tenants under any Leases disclosed in
Schedule 3.13(b) who are in possession of space to which they are
entitled;
(viii) all facilities located on the parcel
of real property are supplied with utilities and other services necessary for
the operation of such facilities, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are adequate in
accordance with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant easements
benefiting the parcel of real property; and
(ix) each parcel of real property abuts on
and has direct vehicular access to a public road, or has access to a public road
via a permanent, irrevocable, appurtenant easement benefiting the parcel of real
property, and access to the property is provided by paved public right-of-way
with adequate curb cuts available.
(b) Schedule 3.13(b) sets forth a list of all real property
leases, subleases, licenses or similar agreements ("Leases") to which ISC is a
party (copies of which have previously been furnished to ACS), in each case
setting forth (A) the landlord and tenant or sublessor and sublessee, as
applicable, thereof and the date and term of each of the Leases, (B) the legal
description or street address of each property covered thereby, and (C) a brief
description (including size and function) of the principal improvements and
buildings thereon (the "Leased Premises"). The Leases are in full force and
effect and have not been amended, ISC is not in default under the Leases and no
other no party thereto is in default or breach under any such Lease. No event
has occurred which, with the passage of time or the giving of notice or both,
would cause a material breach of or default under any of such Leases. There is
no breach or anticipated breach by any other party to such Leases.
With respect to each of the Leased Premises:
(i) ISC has valid leasehold interests in the
Leased Premises, which leasehold interests are free and clear of any liens,
covenants and easements or title defects of any nature whatsoever;
(ii) To the best knowledge of the
Shareholders, the portions of the buildings located on the Leased Premises that
are used in the business of ISC are each in good repair and condition
(including, without limitation, the electrical, mechanical, HVAC, plumbing,
elevator, other building systems and structural components serving such
premises, and the roofs are water-tight) normal wear and tear excepted, and are
in the aggregate sufficient to satisfy ISC's current business activities as
conducted thereat;
(iii) Each of the Leased Premises (A) has
direct access to public roads or access to public roads by means of a perpetual
access easement, such access being sufficient to satisfy the current and
reasonably anticipated normal transportation requirements of ISC's business as
presently conducted at such premises; and (B) is served by all utilities in such
quantity and quality as are sufficient to satisfy the current normal business
activities as conducted at such premises;
(iv) ISC and the Shareholders have not
received notice of (A) any condemnation proceeding with respect to any portion
of the Leased Premises or any access thereto, and, to the best knowledge of the
Shareholders, no such proceeding is contemplated by any governmental authority;
or (B) any special assessment which may affect any of the Leased Premises, and,
to the best knowledge of the Shareholders, no such special assessment is
contemplated by any governmental authority;
(v) To the best knowledge of the
Shareholders, each of the Leased Premises, including all buildings located
thereon, conform to all requirements of any underlying covenants, conditions,
restrictions and encumbrances, all insurance underwriter's requirements, all
applicable rules, regulations, statutes, ordinances, laws and building codes,
(collectively, "Laws");
(vi) To the best knowledge of the
Shareholders, there are no Laws under active consideration by any Governmental
Authority which could require ISC to make any expenditure in excess of $5,000 to
modify or improve the Leased Premises to bring them into compliance therewith;
and
(vii) Neither ISC nor the Shareholders have
received any notice from any insurance company of any defects or inadequacies in
the Leased Premises or any part thereof which could adversely affect the
insurability of the Leased Premises or the premiums for the insurance thereof.
(c) Schedule 3.13(c) sets forth an accurate list of all
personal property on the Interim Balance Sheet and all other personal property
owned or leased by ISC with a value in excess of $10,000 (a) as of the Interim
Balance Sheet Date and (b) acquired since the Interim Balance Sheet Date,
including in each case true, complete and correct copies of leases for material
equipment and all real properties on which are situated buildings, warehouses,
workshops, garages and other structures used in the operation of the business of
ISC. All leases to which ISC is a party are in full force and effect and
constitute valid and binding agreements of ISC and, to the best knowledge of the
Shareholders, the other parties thereto in accordance with their respective
terms. All fixed assets used by ISC that are material to the operation of its
business are either owned by ISC or leased under an agreement listed on Schedule
3.13(b). Except as set forth on Schedule 3.13(c), ISC has good and marketable
title to all of its assets free from all liens, charges, pledges, security
interests, claims and encumbrances of every kind.
3.14 Material Contracts. Schedule 3.14 lists and describes:
(a) Any union contract or any employment or consulting
contract or arrangement providing for future compensation, written or oral, with
any officer, consultant, director or employee which is not terminable by ISC on
30 days' notice or less without penalty or obligation to make payments related
to such termination;
(b) Any plan, contract or arrangement, whether written or
oral, providing for bonuses, pensions, deferred compensation, severance pay or
benefits, retirement payments, profit-sharing or the like;
(c) Any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of profits with
other persons;
(d) Any existing distribution agreement, volume purchase
agreement, or other similar agreement (but excluding individual customer
purchase orders) in which the annual amount involved in fiscal 1997 exceeded or
is expected to exceed in fiscal 1998 $25,000 in aggregate amount or pursuant to
which ISC has granted or received most favored customer pricing provisions or
exclusive marketing rights related to any product, group of products or
territory;
(e) Any individual customer purchase order for the sale of
goods or services in excess of $25,000;
(f) Except for trade indebtedness incurred in the ordinary
course of business, any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of companies or other entities or
indebtedness for borrowed money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, guarantee, leasehold obligations or
otherwise;
(g) Any contract containing covenants purporting to limit in
any way the freedom of ISC to compete in any line of business in any geographic
area;
(h) Any agreement of indemnification other than those entered
in connection with the sale of ISC products or services in the ordinary course
of business;
(i) Any agreement, contract or commitment relating to capital
expenditures and which involve future payments individually in excess of $5,000
or in the aggregate in excess of $10,000 by ISC;
(j) Any agreements, contracts or commitments relating to the
disposition or acquisition of any assets, including any intangible assets (other
than Inventory) which involve payments individually in excess of $5,000 or in
the aggregate in excess of $10,000 by ISC;
(k) Any purchase orders or contracts for the purchase of raw
materials which involve payments individually in excess of $5,000 or in the
aggregate in excess of $10,000;
(l) Any governmental contracts or subcontracts; and
(m) Any other agreement, contract or commitment which is
material to ISC.
The agreements described at Sections 3.14(a) through (m) above are hereinafter
referred to as the "Material Contracts."
Each Material Contract is valid and binding on ISC and is in full force
and effect and, to the best knowledge of the Shareholders, is not subject to any
default thereunder by any party obligated to ISC pursuant thereto. No Material
Contract contains any material liquidated damages, penalty or similar provision.
ISC does not intend to cancel, withdraw, modify or amend any such Material
Contract and, to the best knowledge of the Shareholders, no party to any such
contract, agreement or instrument intends to cancel, withdraw, modify or amend
any Material Contract.
Except as set forth on Schedule 3.14, ISC has obtained or will obtain
all necessary consents, waivers, approvals, "change of name agreements" and/or
novation agreements of all parties to any Material Contracts required in
connection with any of the transactions contemplated hereby, or as are advisable
or required by any Governmental Authority or other third party in order that any
such Material Contract remain in effect without modification after the
transactions contemplated under this Agreement and without giving rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit ("ISC Third-Party Consents"). All ISC Third-Party Consents are listed on
Schedule 3.14.
3.15 Intellectual Property. ISC does not own, and is not licensed or
otherwise entitled to exercise any rights under or with respect to any United
States and foreign patents, patent applications, trademarks, trade names,
service marks, copyrights, or any applications therefor, formulae, processes,
designs, schematics, compositions, ideas, technology, know-how and tangible or
intangible proprietary information or trade secrets or materials which are
employed in the operation of the business of ISC as currently conducted.
3.16 Insurance. Schedule 3.16 sets forth an accurate list, as of the
Interim Balance Sheet Date, of all insurance policies carried by ISC and all
insurance loss runs or workmen's compensation claims received for the past two
policy years. Attached to Schedule 3.16 are true, complete and correct copies of
the summaries from the insurance company of all current insurance policies, all
of which are in full force and effect. All premiums payable under all such
policies have been paid and ISC is otherwise in full compliance with the terms
of such policies (or other policies providing substantially similar insurance
coverage). To the Shareholder's knowledge, such policies of insurance are of the
type and in amounts customarily carried by persons conducting businesses similar
to that of ISC. None of the Shareholders have knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
3.17 Compensation; Employment Agreements. Schedule 3.17 sets forth an
accurate list, as of the date hereof, of all officers, directors and key
employees of ISC listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each such
person as of (a) the Interim Balance Sheet Date and (b) the date hereof. The
Shareholders have caused ISC to provide to ACS true, complete and correct copies
of all employment contracts, commitments and arrangements with persons listed on
Schedule 3.17.
3.18 Employee Benefit Plans.
(a) All employee compensation, incentive, fringe or benefit
plans, programs, policies, commitments or other arrangements (whether or not set
forth in a written document) covering any active, former or retired employee or
consultant of ISC, any subsidiary of ISC or any trade or business (whether or
not incorporated) which is a member of a controlled group or which is under
common control with ISC within the meaning of Section 414 of the Internal
Revenue Code of 1986, as amended (the "Code"), or with respect to which ISC has
or may in the future have liability, are listed on Schedule 3.18 (the "Plans").
Copies of all such written plans and summaries of any other plans which cover
active, former or retired employees or consultants of ISC or any subsidiary of
ISC have been provided to ACS. To the extent applicable, the Plans comply with
the requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and the Code, and any Plan intended to be qualified under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code (i) has either obtained a favorable determination letter as
to its qualified status from the Internal Revenue Service or still has a
remaining period of time under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination letter
and to make any amendments necessary to obtain a favorable determination, and
(ii) incorporates or has been amended to incorporate all provisions required to
comply with the Tax Reform Act of 1986 and subsequent legislation. The
Shareholders have furnished or made available to ACS copies of the most recent
Internal Revenue Service determination letters and Forms 5500 for the three most
current Plan years with respect to any such Plan. No Plan is covered by Title IV
of ERISA or Section 412 of the Code. Neither ISC nor any of its affiliates has
been a contributing employer to any multiemployer plan as defined under Section
4001 of ERISA. Neither ISC nor any officer or director of ISC has incurred any
liability or penalty under Section 4971 through 4980E of the Code or Title 1 of
ERISA. None of the Plans promises or provides retiree medical or other retiree
welfare benefits to any person except as required by applicable law, including
but not limited to, the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended. Each Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations, including but not limited
to ERISA and the Code, which are applicable to such Plans. No suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of Plan activities) has been brought, or to the best knowledge of the
Shareholders is threatened, against or with respect to any such Plan. All
contributions, reserves or premium payments required to be made or accrued as of
the date hereof to the Plans have been made or accrued. Schedule 3.18 includes a
listing of the accrued vacation liability of ISC as of the Interim Balance Sheet
Date.
(b) ISC is not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement with
any labor union. No employee of ISC is represented by any labor union or covered
by any collective bargaining agreement and, to the best knowledge of the
Shareholders, no campaign to establish such representation is in progress. There
is no pending or, to the best knowledge of the Shareholders, threatened labor
dispute involving ISC and any group of its employees nor has ISC experienced any
labor interruptions over the past three years, and ISC considers its
relationship with its employees to be good.
(c) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any director or employee of ISC under any Plan or
otherwise, (ii) materially increase any benefits otherwise payable under any
Plan, or (iii) result in the acceleration of the time of payment or vesting of
any such benefits.
3.19 Conformity with Law; Litigation.
(a) ISC is in compliance and has conducted its business so as
to comply with all laws, rules and regulations, judgments, decrees or orders of
any Governmental Authority applicable to its operations or with respect to which
compliance is a condition of engaging in the business thereof. There are no
judgments or orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against ISC or
against any of its properties or businesses or against the Shareholders. Without
limiting the generality of the foregoing, ISC has not violated any United States
and foreign import and export control laws and regulations, export licensing
laws and regulations and customs regulations (including its obligations under
the Foreign Corrupt Practices Act) applicable to ISC. ISC has not been cited by
the United States Department of Commerce, the United States Customs Service or
any other relevant Governmental Authority for any violation of United States
laws or regulations relating to importing or exporting of products, materials or
services. Schedule 3.19 contains a summary of any violation of, or conflict
with, any applicable statute, law, rule, regulation, ruling, order, judgment or
decree of which such Governmental Authority has notified ISC, including any of
the foregoing relating to Environmental Laws.
(b) There is no action, suit, proceeding, claim, arbitration
or investigation pending or, to the best knowledge of the Shareholders,
threatened, against ISC or the Shareholders, or which in any manner challenges
or seeks to prevent, enjoin, alter or delay any of the transactions contemplated
hereby. Schedule 3.19 sets forth with respect to each pending action, suit,
proceeding, claim, arbitration or investigation to which ISC is a party, the
forum, the parties thereto, a brief description of the subject matter thereof
and the amount of damages claimed. Except as stated in Schedule 3.19, none of
the Shareholders have knowledge of any reasonable basis for any other such
litigation. The Shareholders have delivered or made available to ACS correct and
complete copies of all correspondence prepared by ISC's counsel for ISC's
independent public accountants in connection with all completed audits or
reviews of ISC's financial statements and any such correspondence since the date
of the last such audit or review. Schedule 3.19 accurately describes all product
liability claims made against ISC since inception.
3.20 Taxes.
(a) All "Tax" (as defined below in Section 3.20(e)) returns,
statements, reports and forms (including estimated Tax returns and reports and
information returns and reports) required to be filed with any "Taxing
Authority" (as defined below) with respect to any Taxable period ending on or
before the Closing Date, by or on behalf of ISC (collectively, the "ISC
Returns"), have been or will be filed when due (including any extensions of such
due date), and all such ISC Returns are true and correct. The Interim Balance
Sheet fully accrues all actual and contingent liabilities for Taxes with respect
to all periods through the Interim Balance Sheet Date and ISC has not and will
not incur any Tax liability in excess of the amount reflected on the Interim
Balance Sheet with respect to such periods. All information set forth in the
notes to the ISC Financial Statements relating to Tax matters is true, complete
and accurate in all material respects.
(b) There is no claim, audit, action, suit, proceeding, or
investigation now pending or, to the best knowledge of the Shareholders,
threatened against or with respect to ISC in respect of any Tax or assessment.
There are no liens for Taxes upon the assets of ISC except for liens for current
Taxes not yet due. Except as may be required as a result of the transactions
contemplated by this Agreement, ISC has not been or will not be required to
include any material adjustment in Taxable income for any Tax period (or portion
thereof) ending on or after the Closing pursuant to Section 481 or 263A of the
Code or any comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Closing. Except
as set forth on Schedule 3.20(c) (which shall set forth the type of return, date
filed, and date of expiration of the statute of limitations), the statute of
limitations for the assessments of federal, state, local or foreign income taxes
has expired for all Tax returns of ISC or such returns have been examined by the
appropriate taxing authority for all periods through December 31, 1993.
(c) For purposes of this Agreement, the term "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental entity (a "Taxing Authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period and
(iii) any liability for the payment of any amounts of the type described in
clause (i) or (ii) as a result of any express or implied obligation to indemnify
any other person.
(d) S Corporation Status. ISC has been an S Corporation since
October 1988 within the meaning of Section 1361 of the Code.
3.21 Absence of Changes. Since the Interim Balance Sheet Date, there
has not been:
(a) any change that by itself or together with other changes,
has had a material adverse effect to the business, assets (including intangible
assets), liabilities, financial condition, results of operations or prospects of
ISC (a "Material Adverse Affect");
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of ISC;
(c) any change in the authorized capital of ISC or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of ISC;
(e) any increase in the compensation, bonus, sales commissions
or fee arrangements payable or to become payable by ISC to any of its officers,
directors, the Shareholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees in accordance
with past practice;
(f) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, materially adversely
affecting the business or future prospects of ISC;
(g) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to ISC, including without limitation any indebtedness
or obligation of the Shareholders or any affiliate thereof;
(h) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the assets,
property or rights of ISC or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(i) any waiver of any material rights or claims of ISC;
(j) any breach, amendment or termination of any material
contract, agreement, lease, sublease, license, permit or other right to which
ISC is a party;
(k) any transaction by ISC outside the ordinary course of
business;
(l) any change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by ISC or the
revaluation by ISC of any of its assets;
(m) any creation or assumption by ISC of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising under existing lease financing arrangements which are not material and
liens for taxes not yet due and payable);
(n) any entry into, amendment of, relinquishment, termination
or non-renewal by ISC of any contract, lease or sublease transaction, commitment
or other right or obligation requiring aggregate payments by ISC in excess of
$25,000;
(o) any violation of or conflict with any applicable laws,
statutes, orders, rules and regulations promulgated or judgment entered by any
Governmental Authority which, individually or in the aggregate, materially and
adversely affects (or, insofar as the Shareholders know, might reasonably be
expected to materially and adversely affect) ISC;
(p) the commencement or notice or, to the best knowledge of
the Shareholders, threat of commencement of any lawsuit or proceeding against or
investigation of ISC or any of its affairs;
(q) any agreement or arrangement made by ISC or the
Shareholders to take any action which, if taken prior to the date hereof, would
have made any representation or warranty set forth in this Agreement untrue or
incorrect as of the date when made; or
(r) negotiation or agreement by ISC or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(q) (other than negotiations with ACS and its representatives regarding the
transactions contemplated by this Agreement).
3.22 Bank Accounts; Powers of Attorney. Schedule 3.22 sets forth an
accurate list, as of the date of this Agreement, of the following: (a) the name
of each financial institution in which ISC has any account or safe deposit box;
(b) the names in which the accounts or boxes are held; (c) the type of account;
and (d) the name of each person authorized to draw thereon or have access
thereto. Schedule 3.22 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from ISC and
a description of the terms of such power.
3.23 Customers; Backlog; Returns and Complaints. Schedule 3.23 sets
forth the customers of ISC which represented 5% or more of ISC's revenues for
ISC's last fiscal year ("Significant Customers") and a description of backlog of
customer orders. The Shareholders have no reason to believe that ISC is at risk
of losing any of its Significant Customers.. ISC has not received any customer
complaints concerning its products which complaints it has not been able to
address to the satisfaction of the complainant within a commercially reasonable
length of time after ISC received notice of such complaint, nor has it had any
of its products returned by a purchaser thereof except for normal warranty
returns consistent with past history and those returns that would not result in
a reversal of any revenue by ISC.
3.24 Brokers; Finders. Neither ISC nor the Shareholders have made any
commitments to pay any broker's or finder's fee or any similar commission or fee
in connection with any of the transactions contemplated by this Agreement
("Broker's or Finder's Fee") to any agent, broker, investment banker or other
firm or person.
3.25 Interests of Officers. Neither the Shareholders nor any of ISC's
officers or directors have any interest, either directly or indirectly, in any
property, real or personal, tangible or intangible, used in or pertaining to
ISC's business, except for rights as a stockholder and except for rights under
any Plan. Neither the Shareholders nor any employee, officer or director of ISC,
or their spouses or children, is indebted to ISC, nor is ISC indebted to any of
them.
3.26 Disclosure. No representation or warranty made by the Shareholders
in this Agreement, nor any financial statement, other written financial
information or schedule, certificate, schedule or exhibit prepared and furnished
or to be prepared and furnished by ISC, the Shareholders or their
representatives or agents pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in the light of
the circumstances under which they were furnished. There is no event, fact or
condition that has caused, or that reasonably could be expected to cause, a
Material Adverse Effect, that has not been set forth in this Agreement. The
financial projections relating to ISC which are attached hereto as Exhibit 3.26
("Financial Projections") constitute ISC's good faith estimate of the
information purported to be shown therein. ISC prepared such projections in good
faith based upon reasonable assumptions, and ISC and the Shareholders believe
that there is a reasonable basis for such projections. The Shareholders are not
aware of any fact or information that would lead them to believe that the
Financial Projections are misleading in any material respect.
3.27 Investment Representations.
(a) Each Shareholder has received and reviewed a copy of the prospectus
dated June 27, 1997 contained in the ACS registration statement on Form S-1.
(b) Each Shareholder (a) has such knowledge, sophistication and
experience in business and financial matters that they are capable of evaluating
the merits and risks of an investment in the shares of ACS Common Stock and (b)
can bear the economic risk of any investment in the shares of ACS Common Stock
and can afford a complete loss of such investment.
(c) Each Shareholder qualifies as an "accredited investor" within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act"), because each Shareholder's individual net worth or joint net
worth with his or her spouse exceeds $1,000,000 or such Shareholder's individual
net income (i.e., not including the income of the Shareholder's spouse) was in
excess of $200,000 in each of the last two calendar years or joint net income
with his or her spouse was in excess of $300,000 in each of the last two
calendar years, and he or she reasonably expects his or her individual net
income to be in excess of $200,000 in the current calendar year or joint net
income with his or her spouse to be in excess of $300,000 in the current
calendar year.
(d) Each Shareholder has had an adequate opportunity to ask questions
and receive answers (and has asked such questions and received answers to its
satisfaction) from the officers of ACS concerning the business, operations and
financial condition of ACS.
(e) No Shareholder has any contract, undertaking, agreement or
arrangement, written or oral, with any other person to sell, transfer or grant
participations in any shares of ACS Common Stock to be acquired by such
Shareholder pursuant to this Agreement.
(f) Each Shareholder acknowledges that the ACS Common Stock to be
transferred to the Shareholders pursuant to this Agreement will not be
registered under the Securities Act or the securities laws of any state and will
therefore be restricted securities. Consequently, the ACS Common Stock received
by the Shareholders pursuant to this Agreement will not be transferable unless
registered under the Securities Act or exempt from registration thereunder and
reregistered under securities laws of applicable states or exempt from
registration thereunder. Each Shareholder represents and warrants that he or she
has been advised that the ACS Common Stock to be transferred to the Shareholders
pursuant to this Agreement will be "Restricted Securities" and such Shareholders
may be deemed "Affiliates" within the meanings ascribed to such terms under the
Securities Act and applicable state securities laws and further represents and
warrants that he or she has been advised of the resale limitations applicable to
the ACS Common Stock.
3.28 Liabilities to Government Agencies. There are no liabilities of
ISC to any agency of the United States Federal Government in connection with the
acquisition by any Governmental Authority of supplies and/or services from ISC
as may result from audits or investigations of the cognizant Governmental
Authority, including without limitation the DCAA, GSA, OFCCP, Inspector General
of the GAO or other similar investigative body.
3.29 Pooling. The Shareholders have no knowledge of any event or
condition or have not taken any action that would adversely affect the ability
of ACS to account for the Sale as a pooling of interests.
3.30 Cost Allowability. All costs (both direct and/or indirect) charged
to ISC or any of its affiliates pursuant to any existing subcontract agreements
are allowable in accordance with applicable cost accounting standards.
3.31 COBRA Compliance. ISC has complied with the continuation health
care coverage requirements of Section 4980B of the Code and Sections 601 through
608 of ERISA with respect to "qualifying events," as defined in the Code and
ERISA, which occur on or before the Closing with respect to any current or
former employees of ISC and their respective "qualified beneficiaries," as
defined in the Code and ERISA.
4. REPRESENTATIONS OF ACS.
ACS represents and warrants to the Shareholders as follows:
4.1 Due Organization. ACS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. ACS has
all requisite power and authority to own, operate and lease its properties and
to carry on its business as now being conducted or as proposed to be conducted.
ACS is qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required.
4.2 Authorization; Validity of Obligations. The representatives of ACS
executing this Agreement have all requisite corporate power and authority to
enter into and bind ACS to the terms of this Agreement. ACS has the corporate
power and authority to enter into this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement by ACS and the
performance by ACS of the transactions contemplated herein have been duly and
validly authorized by all necessary corporate action on the part of ACS. This
Agreement is a legal, valid and binding obligation of ACS enforceable in
accordance with its terms except as enforcement may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors
generally and except that the availability of equitable remedies is subject to
the discretion of the court before which any proceeding therefor may be brought
4.3 The ACS Shares. The shares of ACS Common Stock to be transferred
and exchanged pursuant to this Agreement, will be duly authorized and validly
issued, fully paid and nonassessable. The authorized capital stock of ACS
consists of 40,000,000 shares of Common Stock, $.01 par value per share and
1,000,000 shares of Preferred Stock, $.01 par value per share.
4.4 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, will
not;
(a) conflict with, or violate any provision of the charter or
bylaws of ACS as now in effect;
(b) conflict with, or result in any breach or default (or
would constitute a default but for any requirement of notice or lapse of time or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a benefit under, or result in the
creation or imposition of any lien, charge or encumbrance on any of the
properties of ACS pursuant to any agreement, contract, note, mortgage,
indenture, lease, sublease, instrument, permit, concession, franchise or license
to which ACS is a party or by which ACS or any of its property or assets may be
bound or affected; or
(c) conflict with or result in a violation of any law,
statute, order, judgment, rule, regulation, decree or ordinance applicable to
ACS or by which any of its properties or assets is bound or affected.
4.5 Brokers; Finders. ACS has not made any Broker's or Finder's Fee, as
defined in Section 3.24, to any agent, broker, investment banker or other firm
or person.
4.6 Filings with the SEC. ACS has made all filings with the Securities
and Exchange Commission ("SEC") that it has been required to make under the
Securities Act and Securities Exchange Act of 1934 ("Exchange Act")
(collectively the "Public Reports"). Each of the Public Reports has complied
with the Securities Act and the Exchange Act in all material respects. None of
the Public Reports, as of their respective dates, contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
5. INCIDENTAL REGISTRATION RIGHTS.
5.1 Registration. If ACS proposes to register any of its shares of
Common Stock under the Securities Act pursuant to an underwritten public
offering, the Company will give written notice to the Shareholders of its
intention so to do. Upon the written request of the Shareholders, given within
30 days after receipt of any such notice, to register any of the shares of ACS
Common Stock owned by them at such time (the "Registrable Shares") (which
request shall state the intended method of disposition thereof), ACS will cause
the Registrable Shares as to which registration shall have been so requested to
be included in the securities to be covered by the registration statement
proposed to be filed by ACS, all to the extent requisite to permit the sale or
other disposition by the holder (in accordance with its written request) of such
Registrable Shares.
If the managing underwriter shall be of the opinion that inclusion of
all Registrable Shares which Shareholders have requested be included would
adversely affect the marketing of the securities to be registered by ACS, ACS
will include in such registration (i) first, the securities ACS proposes to sell
and the Registrable Shares requested to be included, pro rata among ACS and the
holders of such Registrable Shares on the basis of the number of shares ACS and
the holder of such Registrable Shares propose to sell, and (ii) second, other
securities requested to be included in such registration. The Shareholders shall
agree, if requested by the managing underwriter or underwriters in conjunction
with a similar request being made to holders of previously issued, but
unregistered shares, not to sell any of their Registrable Shares in any
transaction other than pursuant to such underwritten offering for any reasonable
period deemed to be appropriate by such managing underwriter or underwriters
beginning on the date of the effectiveness of the registration statement filed
pursuant to this Section 5.1, provided that the Company's officers and directors
also agree to such limitations.
5.2. Changes in Common Stock. If, and as often as, there are any
changes in the ACS Common Stock by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization or by any other means, appropriate adjustment
shall be made in the provisions hereof, as may be required, so that the rights
and privileges granted hereby shall continue with respect to the ACS Common
Stock as so changed.
6. COVENANTS.
6.1 Confidentiality.
(a) Each of the Shareholders recognizes and acknowledges that
it has had in the past, currently has, and in the future may possibly have,
access to certain confidential information of ISC and ACS, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of ISC's and ACS's respective businesses.
Each of the Shareholders agrees that it will not disclose confidential
information with respect to ISC or ACS to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of ACS and to counsel and other advisers; provided,
however, that such advisors (other than counsel) agree to the confidentiality
provisions of this Section 6.1(a), unless (i) such information becomes known to
the public generally through no fault of the Shareholders, (ii) disclosure is
required by law or the order of any governmental authority under color of law,
or (iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party; and provided further, that prior to disclosing any information pursuant
to clause (i), (ii) or (iii) above, the Shareholders (as applicable) shall, if
possible, give prior written notice thereof to ACS and provide ACS with the
opportunity to contest such disclosure.
(b) ACS recognizes and acknowledges that it has had in the
past, currently has, and in the future may possibly have, access to certain
confidential information of ISC and the Shareholders, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of ISC's and the Shareholders' business. ACS
agrees that it will not disclose confidential information with respect to ISC to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of ISC and the
Shareholders and to counsel and other advisers and that they will not disclose
confidential information with respect to the Shareholders to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except to authorized representatives of ISC and the Shareholders and to counsel
and other advisers; provided, however, that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 6.1(b), unless (i) such
information becomes known to the public generally through no fault of ACS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party; and provided further, that prior to disclosing any information
pursuant to clause (i), (ii) or (iii) above, ACS shall, if possible, give prior
written notice thereof to ISC and the Shareholders and provide ISC and the
Shareholders with the opportunity to contest such disclosure.
6.2 Pooling Accounting; Transfer Restrictions. The Shareholders and ISC
shall each use its reasonable efforts to cause this Sale to be accounted for as
a pooling of interests. The Shareholders acknowledge and agree that the ACS
Common Stock received pursuant to this Agreement may not be sold, transferred or
assigned, and ACS shall not be required to give effect to any attempted sale,
transfer or assignment prior to the publication and dissemination of financial
statements by ACS which include the results of at least thirty (30) days of
combined operations of ISC and ACS and that the certificates representing the
shares of ACS Common Stock received by the Shareholders will bear a restrictive
transfer legend to that effect.
6.3 FIRPTA Compliance. On the Closing Date, the Shareholders shall
cause ISC to deliver to ACS a properly executed statement in a form reasonably
acceptable to ACS for purposes of satisfying ACS's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
6.4 Extended Insurance Coverage. The Shareholders agree to cause ISC to
purchase, if necessary, a policy of insurance sufficient to cover any
liabilities resulting from any action, suit, proceeding or claim against ISC
arising prior to the Closing Date, including liabilities resulting from any
action, suit, proceeding or claim described in Schedule 3.19. Such policy shall
be effective for such period and in such amounts as is reasonably necessary in
the judgment of ASC.
6.5 Operation of ISC Subsequent to the Closing. It is the intention of
the parties that subsequent to the Closing ISC shall operate as a separate
subsidiary for as long as the board of directors of ISC deems it to be
appropriate.
6.6 Conduct of Business Pending Closing. Between the date hereof and
the Closing, the Shareholders shall cause ISC to conduct the business of ISC
only in the ordinary course of business.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACS.
The obligation of ACS to purchase the ISC Common Stock is subject to
the satisfaction or waiver, at or before the Closing, of the following
conditions:
7.1 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
transactions contemplated by this Agreement, or limiting or restricting ACS's
conduct or operation of the business of ISC (or its own business) following the
purchase by ACS of the ISC Common Stock shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
Governmental Authority seeking any of the foregoing be pending. Except as set
forth in Schedule 3.19, there shall be no action, suit, claim or proceeding of
any nature pending or threatened, against ACS or ISC, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of ISC.
7.2 Employment Agreements. Each of Howard F. Sparks and Gale V. Berry
shall have entered into employment agreement(s) with ACS in the form and
substance satisfactory to the parties thereto (the "Employment Agreements").
7.3 Opinion of Counsel. ACS shall have received an opinion from counsel
to ISC and the Shareholders, dated the Closing Date, in form and substance
reasonably satisfactory to ACS and its counsel.
7.4 Consents and Approvals. Except as set forth on Schedule 3.14, all
necessary consents of or filings with any Governmental Authority or third party
(including without limitation any ISC Third-Party Consents) relating to the
consummation by the Shareholders of the transactions contemplated hereby shall
have been obtained and made. ISC shall also have received estoppel certificates
from the landlords and sublessees with respect to each of the Leased Premises
confirming the relevant business terms of the applicable Leases, that there are
no defaults thereunder, and, if and to the extent required under each of the
Leases, the written consent and approval of a landlord to any "assignment" of
the Lease arising from this Agreement.
Notwithstanding (i) that one or more consents of or filings with any
governmental Authority or third party (including without limitation any ISC
Third-Party Consents) shall not have been obtained or made prior to the Closing,
(ii) that one or more of such consent or filings shall not have been requested
or required by any Governmental Authority or third party prior to Closing or
(iii) that ACS shall have agreed under this Section 7 to effect the Sale, the
Shareholders shall nevertheless continue to be obligated, for no further
consideration, to obtain or make any such consent of or filing with any
Governmental Authority or third party as shall be necessary to effectuate the
purposes of this Agreement.
7.5 Accountants Letter With Respect to Pooling of Interest Accounting
Treatment. ASC shall have received a letter from ASC's accountants stating its
concurrence, as of the Closing Date, as to the appropriateness of the
transactions contemplated by this Agreement qualifying for pooling of interests
accounting treatment in accordance with GAAP and shall have delivered a copy of
that letter to ACS and ISC.
7.6 Cancellation of Certain Agreements; Amendment of Bylaws; Election
of Directors. ACS shall have received evidence of cancellation of any
stockholder agreement, buy sell agreement or similar agreement to which any of
the Shareholders are a party. ISC shall have amended its bylaws to increase the
number of members of the board of directors from four (4) to seven (7).
Effective as of the Closing Date, Christine Berry and Irene Sparks shall resign
from the board of directors of ISC and George Robinson, Dev Ganesan, Charles
Martinache and Thomas Costello shall be elected to the board of directors of
ISC.
7.7 Representations and Warranties; No Material Adverse Change. All of
the representations and warranties of the Shareholders contained in this
Agreement shall be true, correct and complete on and as of the date of this
Agreement and the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date and no
material adverse change in the business, operations, affairs, prospects,
properties, assets, existing and potential liabilities, obligations, profits or
condition (financial or otherwise) of ISC shall have occurred; and a certificate
to the foregoing effects dated the Closing Date and signed by each of the
Shareholders shall have been delivered to ACS.
7.8 Trusts. The parties hereto acknowledge that the declaration of
trusts with respect to the trusts signatory hereto (the "Trusts") have not been
reviewed by ACS and that the obligation of ACS to purchase the ISC Common Stock
is subject to the reasonable satisfaction of ACS that each of the Trusts has the
full legal right and authority to enter into this Agreement and the transactions
contemplated hereby; that this Agreement is a legal, valid and binding
obligation of each of the Trusts, enforceable against each of the Trusts in
accordance with its terms; and that each of the Trusts has the ability to
satisfy any and all obligations of the Shareholders under this Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS.
The obligation of each of the Shareholders to sell the ISC Common Stock
is subject to the satisfaction or waiver, at or before the Closing, of the
following conditions:
8.1 Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
Sale, or limiting or restricting ACS's conduct or operation of the business of
ISC (or its own business) following the Sale shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
Governmental Authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. Except as set forth in Schedule 3.19, there shall be
no action, suit, claim or proceeding of any nature pending or threatened,
against ACS or ISC, their respective properties or any of their officers or
directors, that could materially and adversely affect the business, assets,
liabilities, financial condition, results of operations or prospects of the ACS
and its subsidiaries taken as a whole.
8.2 Employment Agreement. Howard F. Sparks and Gale V. Berry shall have
entered into the Employment Agreements.
8.3 Consents and Approvals. All necessary consents of and filings with
any Governmental Authority or third party relating to the consummation by the
Shareholders or ACS of the transactions contemplated herein shall have been
obtained and made.
8.4 Representations and Warranties. All of the representations and
warranties of ACS contained in this Agreement shall be true, correct and
complete on and as of the date of this Agreement and the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date; and a certificate to the foregoing effects dated the Closing
Date and signed by ACS shall have been delivered to ISC.
9. INDEMNIFICATION.
9.1 Survival. All representations, warranties, covenants and agreements
contained in this Agreement and in any Schedule or other instrument delivered
pursuant to this Agreement shall survive indefinitely except (i) as expressly
provided otherwise herein, (ii) the indemnification obligations of each of the
Shareholders under Section 9.2 of this Agreement and ACS under Section 9.3 of
this Agreement shall survive until the first anniversary of the Closing Date and
(iii) that those representations, warranties, covenants and agreements of each
of the Shareholders relating to tax matters or ERISA matters, and the
indemnification obligations of each of the Shareholders under Section 9.2 with
respect thereto, shall survive until the third anniversary of the Closing Date
(the expiration of each of the Shareholders' obligations under clause (ii) or
(iii) of this Section 9.1, as applicable, is hereinafter referred to as the
"Indemnification Deadline Date"); provided, however, that the indemnification
obligations with respect to any claim with respect to which an Indemnified Party
has delivered a "Claim Notice" (defined in Section 9.5(b) below) prior to the
Indemnification Deadline Date (a "Pending Claim") and the related
representations, warranties and covenants will survive until the final
resolution of any such Pending Claim.
9.2 Indemnification by Shareholders. Each of the Shareholders, jointly
and severally, covenants and agrees to indemnify, defend, protect and hold
harmless ACS and its officers, directors, employees, stockholders, assigns,
successors and affiliates (the "ACS Indemnified Parties") from, against and in
respect of:
(a) all liabilities, losses, claims, damages, punitive
damages, causes of actions, lawsuits, administrative proceedings (including
informal proceedings), investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, deficiencies, penalties, fines,
interest (including interest from the date of such damages) and costs and
expenses (including without limitation reasonable attorneys' fees and
disbursements of every kind, nature and description) (collectively, "Damages")
suffered, sustained, incurred or paid by the ACS Indemnified Parties in
connection with, resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Shareholders set forth in this Agreement or any certificate, document or
instrument delivered by or on behalf of the Shareholders or ISC in connection
herewith;
(ii) any nonfulfillment of any covenant or agreement on
the part of the Shareholders pursuant to the specific terms of this Agreement;
(iii) the business, operations or assets of ISC prior to
the Closing Date, except as otherwise disclosed in ISC's Financial Statements or
the schedules to this Agreement;
(iv) the actions or omissions of ISC's directors,
officers, stockholders, employees or agents prior to the Closing Date; or
(v) any failure of ISC to comply with the continuation
health care coverage requirements of section 4980B of the Code and Sections 601
through 608 of ERISA with respect to a "qualifying event," as defined
thereunder, which occurred on or before the Closing Date; and
(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 9.2.
(c) Notwithstanding the foregoing, (i) no indemnification by
the Shareholders pursuant to this Section 9 shall be required to be made with
respect to the first $100,000 of Damages of the ACS Indemnified Parties and (ii)
the Shareholders aggregate liability with respect to their obligations to
indemnify the ACS Indemnified Parties pursuant to this Section 9 shall not
exceed $3,000,000.
9.3 Indemnification by ACS. ACS covenants and agrees to
indemnify, defend, protect and hold harmless ISC and its officers, directors,
employees, stockholders, assigns, successors and affiliates (the "ISC
Indemnified Parties") from, against and in respect of:
(a) all Damages suffered, sustained, incurred or paid by the
ISC Indemnified Parties in connection with, resulting from or arising out of,
directly or indirectly:
(i) any breach of any representation or warranty of ACS
set forth in this Agreement or any certificate, document or instrument delivered
by or on behalf of the ACS in connection herewith;
(ii) any nonfulfillment of any covenant or agreement on
the part of ACS pursuant to the specific terms of this Agreement; or
(iii) the actions or omissions of ACS's directors,
officers, stockholders, employees or agents prior to the Closing Date.
(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 9.3.
(c) Notwithstanding the foregoing, no indemnification by ACS
pursuant to this Section 9 shall be required to be made with respect to the
first $100,000 of Damages of the ISC Indemnified Parties and ACS's aggregate
liability with respect to their obligations to indemnify the ISC Indemnified
Parties pursuant to this Section 9 shall not exceed $3,000,000.
9.4 Tax Indemnification Each of the Shareholders hereby agrees to pay,
indemnify, defend and hold harmless the Indemnified Parties from and against any
and all Taxes of ISC with respect to any period (or any portion thereof) up to
and including the Closing Date. The indemnity provided for in this Section 9.3
shall be independent of any other indemnity provisions hereof and anything in
this Agreement to the contrary notwithstanding, shall survive until six months
after the expiration of the applicable statutes of limitation for the Taxes
referred to herein the third anniversary of the Closing Date, and any Taxes
subject to the indemnification for Taxes set forth in this Section 9.3 shall not
be subject to the provisions of Section 9.2 hereof.
9.5 Indemnification Procedures. All Claims for indemnification under
this Section 9 shall be asserted and resolved as follows:
(a) In the event an ACS Indemnified Party or ISC Indemnified
Party (the "Indemnified Party") has a Claim against any other party hereunder
(the "Indemnifying Party") 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 a Claim Notice (as defined in 9.5(b) below) with
respect to such Claim to the Indemnifying Party. If the Indemnifying Party does
not notify the Indemnified Party within 30 days from the date of receipt of such
Claim Notice that the Indemnifying Party disputes such Claim, the amount of such
Claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case the Indemnifying Party shall object in writing to any Claim
made in accordance with this Section 9.5(a), the Indemnified Party shall have
fifteen (15) days to respond in a written statement to the objection of the
Indemnifying Party. If after such fifteen (15) day period there remains a
dispute as to any Claims, the parties shall attempt in good faith for sixty (60)
days to agree upon the rights of the respective parties with respect to each of
such Claims. If the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties.
(b) In the event that any Claim for which the Indemnifying
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 Claim, including a copy of the
Claim made if the Claim was made in writing, 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 actions and decisions of the Indemnifying Party shall be
binding upon all of the Indemnifying Party. The Indemnifying Party shall have 30
days from the receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not the Indemnifying Party dispute the
Indemnifying Party liability to the Indemnified Party hereunder with respect to
such Claim and (ii) if Indemnifying Party do not dispute such liability, whether
or not the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend against such Claim, provided that the Indemnifying
Party are hereby authorized (but not obligated) prior to and during the Notice
Period to file any motion, answer or other pleading and to take any other action
which the Indemnifying Party shall deem necessary or appropriate to protect the
Indemnifying Party's interests. In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that the Indemnifying
Party does not dispute the Indemnifying Party's obligation to indemnify
hereunder and desire to defend the Indemnified Party against such Claim and
except as hereinafter provided, the Indemnifying Party shall have the right to
defend by appropriate proceedings, which proceedings shall be diligently settled
or prosecuted by the Indemnifying Party to a final conclusion; provided,
however, 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 elect not to defend the
Indemnified Party against such 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.
(c) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Indemnifying
Party, any such Claim seeks material prospective relief which could have a
materially adverse effect on the assets, liabilities, financial condition,
results of operations or business prospects of any Indemnified Party, the
Indemnified Party shall have the right to control or assume (as the case may be)
the defense of any such Claim and the amount of any judgment or settlement and
the reasonable costs and expenses of defense shall be included as part of the
indemnification obligations of the Indemnifying Party hereunder. If the
Indemnified Party should elect to exercise such right, the Indemnifying Party
shall have the right to participate in, but not control, the defense of such
claim or demand at the sole cost and expense of the Indemnifying Party.
(d) Nothing herein shall be deemed to prevent the Indemnified
Party from making a Claim, and an Indemnified Party may make a 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.
(e) 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 the Indemnifying Party may
have to the Indemnified Party unless the failure to give such notice materially
and adversely prejudiced the Indemnifying Party.
(f) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under Section 8, provided, however, that the
Indemnifying Party shall not be obligated to seek any payment pursuant to the
terms of any insurance policy.
10. NONCOMPETITION.
10.1 Prohibited Activities. Each of the Shareholders acknowledge that,
in connection with the transactions contemplated by this Agreement, the
Shareholders will be exposed to and gain information concerning ACS and its
operations, including confidential and proprietary information, and concerning
clients and prospective Customer of ACS, and that it would cause severe harm to
ACS if the Shareholders used such information to compete with or assist another
company or entity in competing with ACS. The Shareholders agree that for a
period of four (4) years after the Closing Date, Shareholders will not, either
for himself or herself, or as a stockholder, partner, investor, director,
officer, Shareholders, consultant, contractor or agent or in any other capacity:
(1) Engage in any business, activity or work that is in any way
competitive with the business of ACS within the Continental United States.
(2) Perform any communications or information technology
services work for, sell, solicit or attempt to sell any communications or
information technology services to, or interfere with ACS's relationship with
any person, company or other entity that was a Customer of ACS or was identified
by ACS as a prospective Customer during the period that such Shareholder were
employed by ACS. "Customer" means all persons, firms or entities that have
either (1) sought or obtained the ACS's services, (2) contacted ACS for the
purpose of providing its services or (3) been contacted by ACS for the purpose
of providing its services, and all persons, firms, or entities subject to
control of those persons, firms or entities.
(3) Solicit, hire or employ, or cause any other person, company
or entity to solicit, hire or employ any employee or contractor retained or
employed by ACS.
(4) Disparage ACS to anyone outside of ACS, including
competitors, customers and potential customers, or to employees or potential
employees of ACS.
As used throughout this Section 10, "business of ACS" and "ACS's
business" includes communication systems design and support, information
technology services and systems integration, and any other work or business of
ACS in which the Shareholders participate.
Notwithstanding the above, (i) if any Shareholder is subject to
noncompetition provisions contained in an employment agreement executed on or
after the date of this Agreement between such Shareholder and ACS, such
noncompetition provisions shall govern and the noncompetition provisions of this
Section 10 shall not apply for as long as the noncompetition provisions
contained in such employment agreement are applicable and (ii) the foregoing
covenant shall not be deemed to prohibit the Shareholders from acquiring as an
investment not more than ten percent (10%) of the capital stock of a competing
business whose stock is traded on a national securities exchange or
over-the-counter. For purposes of this Section 10, the term "ACS" includes all
subsidiaries of ACS (including without limitation ISC).
10.2 Damages. Because of the difficulty of measuring economic losses to
ACS as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to ACS for which it would
have no other adequate remedy, the Shareholders agree that the foregoing
covenant may be enforced by ACS in the event of breach by the Shareholders, by
injunctions and restraining orders.
10.3 Reasonable Restraint. The parties agree that the foregoing
covenants in this Section 10 impose a reasonable restraint on the Shareholders
in light of the activities and business of ACS on the date of the execution of
this Agreement and the current plans of ACS; but it is also the intent of ACS
and the Shareholders that such covenants be construed and enforced in accordance
with the changing activities and business of ACS throughout the term of this
covenant. The parties further agree that in the event the Shareholders shall
enter into a business or pursue other activities not in competition with ACS or
similar activities or business in locations the operation of which, under such
circumstances, does not violate Section 10.1(a), the Shareholders shall not be
chargeable with a violation of this Section 10 if ACS shall thereafter enter the
same, similar or a competitive (a) business, (b) course of activities or (c)
location, as applicable.
10.4 Severability; Reformation. The covenants in this Section 10 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
10.5 Independent Covenant. All of the covenants in this Section 10
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of the Shareholders
against ACS, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by ACS of such covenants. It is
specifically agreed that the period of four years stated at Section 10.1, during
which the agreements and covenants of each the Shareholders made in this Section
10 shall be effective, shall be computed by excluding from such computation any
time during which the Shareholders are found by a court of competent
jurisdiction to have been in violation of any provision of this Section 10. The
covenants contained in Section 10 shall not be affected by any breach of any
other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
10.6 Materiality. Each of the Shareholders hereby agree that the
covenants set forth in this Section 10 are a material and substantial part of
the transactions contemplated by this Agreement.
11. GENERAL.
11.1 Cooperation. The Shareholders and ACS, for no further
consideration, shall each deliver or cause to be delivered to the other on the
Closing Date, and either before of after the Closing Date at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Shareholders will cooperate and use their reasonable efforts to have the present
officers, directors and employees of ISC cooperate with ACS on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Tax Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
11.2 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) or otherwise
agreed in writing and shall be binding upon and shall inure to the benefit of
the parties hereto, the successors of ACS, and the heirs and legal
representatives of the Shareholders.
11.3 Entire Agreement. This Agreement (which includes the Schedules
hereto) sets forth the entire understanding of the parties hereto with respect
to the transactions contemplated hereby. It shall not be amended or modified
except by a written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between or among the parties
regarding the subject matter hereof, whether written or oral, are superseded by
this Agreement.
11.4 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties.
11.5 Brokers and Agents. ACS and the Shareholders each represents and
warrants to the other that it has not employed any broker or agent in connection
with the transactions contemplated by this Agreement and agrees to indemnify the
other against all loss, damages or expense relating to or arising out of claims
for fees or commission of any broker or agent employed or alleged to have been
employed by such indemnifying party.
11.6 Expenses. ACS has and will pay the fees, expenses and
disbursements of ACS and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement. The
Shareholders have and will pay the fees, expenses and disbursements of the
Shareholders, their agents, representatives, financial advisors, accountants and
counsel incurred in connection with the subject matter of this Agreement. ISC
has and will pay the fees, expenses and disbursements of ISC and its agents,
representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement.
11.7 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to ACS, to:
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, Virginia 22030
Attn: Dev Ganesan
Fax No.:(703) 385-8684
with a required copy to:
Venable, Baetjer and Howard, LLP
2010 Corporate Ridge, Suite 400
McLean, Virginia 22180
Attn: Joseph C. Schmelter, Esq.
Fax No.: (703) 821-8949
If to the Shareholders, to:
Howard F. Sparks
Gale V. Berry
c/o Integrated Systems Control, Inc.
350 Centre Pointe Drive
Virginia Beach, VA 23462
Fax No.: (757) 671-2509
Marked: ADDRESSEE ONLY
PERSONAL AND CONFIDENTIAL
with a copy to:
Kaufman & Canoles
One Commercial Place
P.O. Box 3037
Norfolk, VA 23514
Attn: John M. Paris, Jr., Esq. and T. Richard Litton, Jr. Esq.
Fax No.: (757) 624-3169
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
11.8 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the Commonwealth of
Virginia, without regard to conflicts of laws provisions.
11.9 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any jurisdiction, shall not be
affected thereby, and to this end the provisions of this Agreement shall be
severable. The preceding sentence is in addition to and not in place of the
severability provisions in Section 10.4.
11.10 Absence of Third-Party Beneficiary Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide or to create any
third-party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, member, employee, partner of any party hereto
or any other person or entity.
11.11 Mutual Drafting. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto.
11.12 Further Representations. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
11.13 Amendment; Waiver. This Agreement may be amended by the parties
hereto at any time prior to the Closing by execution of an instrument in writing
signed on behalf of each of the parties hereto. Any extension or waiver by any
party of any provision hereto shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
11.14 Public Disclosure. Prior to the Closing, the Shareholders shall
not make any disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement unless previously approved by ACS in writing.
ACS agrees to keep the Shareholders apprised in advance of any disclosure of the
subject matter of this Agreement by ACS.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ADVANCED COMMUNICATION SYSTEMS, INC.
By:_________________________________
Name:
Title:
------------------------------------
HOWARD F. SPARKS
HOWARD F. SPARKS TRUST
By:_________________________________
Howard F. Sparks, Trustee
------------------------------------
IRENE L. SPARKS
IRENE L. SPARKS TRUST
By:_________________________________
Irene L. Sparks, Trustee
------------------------------------
GALE V. BERRY
GALE V. BERRY TRUST
By:_________________________________
Gale V. Berry, Trustee
------------------------------------
CHRISTINE BERRY
CHRISTINE BERRY TRUST
By:_________________________________
Christine Berry, Trustee
