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 5, 1996
GENERAL KINETICS INCORPORATED
(Exact name of registrant as specified in its charter)
Virginia 0-1738 54-0594435
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
14130-C Sullyfield Circle, Chantilly, Virginia 22021-1615
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 802-9300
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Sale of Secure Communications Division
As of December 5, 1996, General Kinetics Incorporated
("GKI") completed the sale of its secure communications business to
Cryptek Secure Communications, LLC (the "Purchaser"), a Delaware
limited liability company, the majority of whose equity interests are
owned by affiliates of Angelo Gordon & Co., L.P.
In the transaction GKI received $1.75 million in
cash, a $750,000 secured promissory note payable over three years
(bearing interest at 1% over the prime rate) and $1.5 million face
amount of 6% convertible preferred equity of the Purchaser which must
be redeemed by the Purchaser within five years (unless previously
converted). Such preferred equity interest is convertible, at GKI's
option, into 4.2% of the regular membership interests in the Purchaser
on a diluted basis. The Purchaser also assumed certain liabilities
related to the secure communications business, subject to the terms and
conditions of the agreement of sale. The foregoing summary is not a
complete description of the terms of the reported transaction;
reference is made to the copy of the agreement between the Purchaser
and GKI attached as Exhibit 2.1 hereto and incorporated herein by
reference. Such summary is qualified in all respects by such reference.
The consideration received by GKI for its secure
communications business was determined in arms-length negotiations with
the Purchaser. GKI is not aware of any material relationship between it
or any of its directors and officers, or between any affiliate or the
directors or officers of any affiliate and the Purchaser, that existed
at the date of the disposition.
Item 5. Other Events.
Although GKI had earlier deferred a previously
contemplated one-for-three reverse stock until split after completion
of the sale of its secure communications business, GKI does not now
anticipate implementing such reverse stock split in the immediate
future, if at all.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
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<PAGE>
The following unaudited consolidated pro forma
balance sheet at August 31, 1996, and the unaudited consolidated pro
forma statements of income for the three months ended August 31, 1996
and the fiscal year ended May 31, 1996 give effect to the disposition
of the secure communications business of GKI to the Purchaser. The pro
forma statements of income assume the transaction occurred on June 1,
1995. The unaudited pro forma financial information is based on the
historical financial statements of GKI, giving effect to the
disposition and to the assumptions and adjustments in the accompanying
notes to the unaudited pro forma financial information.
The unaudited pro forma financial statements are
presented for informational purposes only and do not purport to be
indicative of the financial position which would actually have existed
or the results of operations which would actually have been obtained if
the transaction had occurred in the periods indicated below or which
may exist or be obtained in the future. The ultimate use of the
proceeds may differ from the assumptions used herein. The unaudited pro
forma financial information should be read in conjunction with the
notes thereto and the historical GKI consolidated financial statements
and notes thereto included in GKI's latest annual report on Form 10-K
and latest quarterly report on Form 10-Q.
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<PAGE>
General Kinetics Incorporated
Pro Forma Consolidated Balance Sheet
At August 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------
August 31, Secure
1996 Comm.
Form 10-Q Division Adjustments Adjusted
Assets
<S> <C>
Current Assets:
Cash and cash equivalents $ 153,600 $1,750,000(a) $ 1,903,600
Accounts receivable, net of allowance 2,236,400 (604,700) 1,631,700
Inventories 2,906,400 (2,374,800) 531,600
Prepaid expenses and other 28,900 (6,900) 22,000
-------------- ---------- ---------- -------------
Total Current Assets 5,325,300 (2,986,400) 1,750,000 4,088,900
-------------- ---------- ---------- -------------
Note Receivable 750,000(a) 750,000
Property, Plant and Equipment 6,899,500 (2,073,100) 4,826,400
Less: Accumulated Depreciation (5,475,600) 1,900,700 (3,574,900)
-------------- ---------- ---------- -------------
1,423,900 (172,400) -- 1,251,500
Other Assets, principally capitalized software 311,200 (296,600) 14,600
-------------- ---------- ---------- -------------
Total Assets $ 7,060,400 $ (3,455,400) $2,500,000 $ 6,105,000
============== ========== ========== =============
Liablilities and Stockholders' Deficit
Current Liabilities:
Advances from factor $ 317,000 $ 317,000
Current maturities of long-term debt 218,600 (1,400) 217,200
Accounts payable, trade 1,429,000 (526,200) 902,800
Accrued expenses and other payables 1,195,400 (399,500) 115,000(b) 910,900
-------------- ----------- --------- --------------
Total Current Liabilities 3,160,000 (927,100) 115,000 2,347,900
-------------- ----------- --------- --------------
Long-Term debt - less current maturities 9,778,300 9,778,300
Other long-term liabilities 282,200 282,200
-------------- ----------- --------- --------------
Total Long-Term Liabilities 10,060,500 -- 10,060,500
-------------- ----------- --------- --------------
Total Liabilities 13,220,500 (927,100) 115,000 12,408,400
-------------- ----------- --------- --------------
Stockholders' Deficit:
Common Stock, $0.25 par value 1,759,000 1,759,000
Additional Contributed Capital 7,186,900 7,186,900
Accumulated Deficit (14,655,800) (2,528,300) 2,385,000 (14,799,100)
-------------- ----------- --------- --------------
(5,709,900) (2,528,300) 2,385,000 (5,853,200)
Less: Unearned ESOP shares -- --
Treasury Stock, at cost (526,632 shares) (450,200) (450,200)
Total Stockholders' Deficit (6,160,100) (2,528,300) 2,385,000 (6,303,400)
-------------- ----------- --------- --------------
Total Liabilities and Stockholders' Deficit $ 7,060,400 $ (3,455,400) $2,500,000 $ 6,105,000
============== =========== ========= ==============
</TABLE>
Page 4
<PAGE>
General Kinetics Incorporated and Subsidiaries
Pro Forma Consolidated Statements of Operations
Quarter Ended August 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------
Quarter Ended Secure
August 31, Comm
1996 Division Adjusted
<S> <C>
Net Sales $ 3,490,000 $ 851,000 $ 2,639,000
Cost of Sales 2,484,900 571,200 1,913,700
--------------- -------------- --------------
Gross Profit 1,005,100 279,800 725,300
--------------- -------------- --------------
Selling, General & Administrative 654,300 192,100 462,200
Product Research, Development & Improvement 181,600 122,500 59,100
--------------- -------------- --------------
Total Operating Expenses 835,900 314,600 521,300
--------------- -------------- --------------
Operating Income 169,200 (34,800) 204,000
Interest Expense 105,400 105,400
--------------- -------------- --------------
Net Income $ 63,800 $ (34,800) $ 98,600
=============== ============== ==============
Net Earnings per share $ 0.00 $ (0.01) $ 0.00
=============== ============== ==============
Weighted Average Number of Common Shares
and Dilutive Equivalents Outstanding 25,508,925 6,508,925 25,508,925
=============== ============== ==============
</TABLE>
Page 5
<PAGE>
General Kinetics Incorporated and Subsidiaries
Pro Forma Consolidated Statements of Operations
Fiscal Year Ended May 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------
FY Ended Secure
May 31, Comm
1996 Division Adjusted
<S> <C>
Net Sales $ 15,368,400 $ 7,253,200 $ 8,115,200
Cost of Sales 11,668,200 5,578,500 6,089,700
------------- -------------- --------------
Gross Profit 3,700,200 1,674,700 2,025,500
------------- -------------- --------------
Selling, General & Administrative 3,170,000 1,395,900 1,774,100
Product Research, Development & Improvement 945,900 863,800 82,100
------------- -------------- --------------
Total Operating Expenses 4,115,900 2,259,700 1,856,200
------------- -------------- --------------
Operating Income (415,700) (585,000) 169,300
Interest Expense 337,000 2,000 335,000
------------- -------------- --------------
Net Income $ (752,700) $ (587,000) $ (165,700)
============== ============== ==============
Net Earnings per share $ (0.12) $ (0.09) $ (0.03)
============== ============== ==============
Weighted Average Number of Common Shares
and Dilutive Equivalents Outstanding 6,508,925 6,508,925 6,508,925
============== ============== ==============
</TABLE>
Page 6
<PAGE>
Notes to the Pro Forma Consolidated Financial Statements
The pro forma balance sheet pro forma adjustments column at August 31,
1996 reflects the following:
a. Represents the cash proceeds and note receivable from the
disposal of the secure communications business. Management
has not determined what portion of the proceeds, if any, will
be used to retire debt.
b. Represents the estimated closing costs related to the
disposition. GKI is currently in the process of calculating
the actual closing costs relating to the secure communications
business.
GKI has determined that the $1.5 million face amount of convertible
preferred equity of the Purchaser received by GKI in the transaction is
contingent consideration and the value is dependent upon future
earnings by the Purchaser. Accordingly, the pro forma consolidated
balance sheet does not record any value related to such interest.
The actual gain or loss to be recorded as of December 5, 1996 will
differ from the estimated pro forma loss assumed in the August 31, 1996
pro forma balance sheet.
Such gain or loss on the sale has been excluded from the accompanying
pro forma consolidated statements of income as it represents a direct,
nonrecurring effect of the transaction. The actual gain or loss is not
anticipated to be material to GKI's annual consolidated results of
operations.
(c) Exhibits.
2.1 Asset Purchase Agreement ("Asset Purchase Agreement")
between General Kinetics Incorporated and Cryptek
Secure Communications, LLC, a Delaware limited
liability company formed by affiliates of Angelo,
Gordon & Co., L.P., dated as of November 1, 1996.
2.2 List of contents of Exhibits and Schedules to the
Asset Purchase Agreement. Registrant hereby
undertakes to furnish to the Commission
supplementally a copy of any omitted Exhibit or
Schedule upon request.
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<PAGE>
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.
GENERAL KINETICS INCORPORATED
Date: December 20, 1996 /s/ Sandy B. Sewitch
--------------------
Sandy B. Sewitch
Chief Financial Officer
(Principal Accounting Officer
and Principal Financial
Officer)
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<PAGE>
Exhibit Index
Exhibit
Number Description
2.1 Asset Purchase Agreement ("Asset Purchase
Agreement") between General Kinetics Incorporated
and Cryptek Secure Communications, LLC, a
Delaware limited liability company formed by
affiliates of Angelo, Gordon & Co., L.P., dated
as of November 1, 1996.
2.2 List of contents of Exhibits and Schedules to the
Asset Purchase Agreement.
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
GENERAL KINETICS INCORPORATED
AND
CRYPTEK SECURE COMMUNICATIONS, LLC
DATED AS OF NOVEMBER 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE ............................... 1
1.1.1. Purchase and Sale................................ 1
1.1.2. Purchase Price................................... 2
1.1.3. Recent Balance Sheet............................. 2
1.2 Liabilities Assumed by Purchaser................. 2
1.3. Allocation....................................... 2
ARTICLE II CLOSING; EFFECTIVE TIME.......................... 3
2.1. Closing.......................................... 3
2.2. Deliveries....................................... 3
2.3. Affidavit........................................ 4
ARTICLE III REPRESENTATIONS AND
WARRANTIES BY THE SELLER......................... 4
3.1. Organization and Existence....................... 4
3.2. Authority and Approval........................... 5
3.3. No Violation..................................... 5
3.4. Assets Conveyed.................................. 5
3.5. Seller's Articles of Incorporation...............
and By-laws...................................... 5
3.6. Compliance With Laws; Licenses................... 6
3.7. Litigation; Investigations....................... 6
3.8. Taxes............................................ 6
3.9. Insurance Policies............................... 7
3.10. Environmental Laws............................... 7
3.11. No Material Adverse Change....................... 8
3.12. Absence of Specified Changes..................... 9
3.13. Real Property; Leases............................ 10
3.14. Equipment and Personal Property.................. 11
3.15. Intellectual Property............................ 12
3.16. Software......................................... 12
3.17. Contracts........................................ 13
3.18. Inventory........................................ 13
3.19. Title to Properties; Liens....................... 13
3.20. Assets Acquired.................................. 13
3.21. Major Customers and Suppliers.................... 14
3.22. Labor Relations.................................. 14
3.23. Investment Representations....................... 14
3.24. Accuracy of Information.......................... 15
3.25. Employee Benefit Plans........................... 15
3.26. Financial Statements............................. 15
3.27. Brokers and Finders.............................. 16
ARTICLE IV REPRESENTATIONS AND
WARRANTIES BY THE PURCHASER...................... 16
4.1. Organization and Existence....................... 16
4.2. Authority and Approval........................... 16
4.3. No Violation..................................... 16
<PAGE>
4.4. Equity Interests, etc............................ 17
4.5. Accuracy of Information.......................... 17
4.6. Brokers and Finders.............................. 17
ARTICLE V COVENANTS........................................ 18
5.1. Public Announcements............................. 18
5.2. Access to Information............................ 18
5.3. Conduct of Business in Normal Course............. 19
5.4. Exclusive Dealings............................... 19
5.5. Use of Names..................................... 19
5.6. [Reserved]....................................... 19
5.7. Consent.......................................... 20
5.8. Further Assurances............................... 20
5.9. Notification of Certain Matters.................. 20
5.10. Supplements to Schedules......................... 21
5.11. Taxes............................................ 21
5.12. Employees........................................ 21
ARTICLE VI CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASER................................. 21
6.1. No Material Adverse Changes...................... 22
6.2. Compliance....................................... 22
6.3. No Government Proceeding or Litigation........... 22
6.4. No Injunction.................................... 22
6.5. Closing Deliveries............................... 22
6.6. Consents......................................... 22
6.7. Completion....................................... 22
ARTICLE VII CONDITIONS TO THE OBLIGATIONS
OF THE SELLER.................................... 23
7.1. Compliance....................................... 23
7.2. No Government Proceeding or Litigation........... 23
7.3. No Injunction.................................... 23
7.4. Fairness Opinion................................. 23
7.5. Closing Deliveries............................... 23
7.6. Employees........................................ 24
7.7. Completion....................................... 24
ARTICLE VIII TRANSFER TAXES................................... 24
8.1. Liability for Transfer Taxes..................... 24
ARTICLE IX TERMINATION...................................... 24
9.1. Grounds for Termination.......................... 24
9.2. Effect of Termination............................ 25
ARTICLE X EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS;
INDEMNIFICATION.................................. 25
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<PAGE>
10.1. Indemnification:
(a) Indemnification by the Seller.............. 25
(b) Indemnification by the Purchaser........... 26
10.2. Conditions of Liability.......................... 26
10.3. Limitation of Indemnification.................... 28
10.4. Survival......................................... 28
ARTICLE XI MISCELLANEOUS.................................... 29
11.1. Wavier of Compliance with Bulk
Transfer Laws.................................... 29
11.2. Expenses......................................... 29
11.3. Notices.......................................... 29
11.4. Books and Records................................ 30
11.5. Exclusive Agreement.............................. 30
11.6. Injunctive Relief................................ 30
11.7. Governing Law, etc............................... 31
11.8. Amendments; Waivers; Headings.................... 31
11.9. Assignments and Third Parties.................... 31
11.10. Severability..................................... 31
11.11. Counterparts..................................... 31
11.12. Further Assurances............................... 32
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<PAGE>
List of Schedules
Schedule Description
1.1 Transferred Assets
1.1(a) Prepaid Expenses
1.1(b) Contracts, Agreements, Arrangements, etc.
1.1(c) Machinery, Equipment, Furniture
1.1(d) Interests in Licenses, Approvals, Permits and
Applications
1.1(e) Computer Software, Databases and Programs
1.1(f) Patents, Trade Secrets
and Other Intellectual Property
1.1(g) Real Property Lease
1.1(h) Finished goods, raw materials, work in
progress, inventories, supplies and similar
tangible assets
1.1(i) Accounts Receivable
1.1.3 Recent Balance Sheet
1.2 Assumed Liabilities
1.2(a) Accounts Payable
1.2(b) Accrued Expenses
1.2(c) Lease obligations
1.2(d) Obligations with respect to assigned
agreements
1.3 Allocation
3.1 Foreign Qualifications
3.6 Licenses
3.7 Litigation
3.9 Insurance
3.11 Material Adverse Effect
3.12 Absence of Specified Changes
3.14 Equipment and Property
3.15 Intellectual Property
3.16 Software
3.17 Material Contracts
3.18 Inventory
3.19 Liens
3.21 Major Customers and Suppliers
3.22 Labor Relations
3.26 Financial Statements
3.27 Brokers and Finders
4.4(a) Equity Interests
4.4(b) Preferred Interest; Capitalization
4.6 Brokers and Finders
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<PAGE>
5.12 Employees
6.6 Consents
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<PAGE>
List of Exhibits
Exhibit Description
A Promissory Note
B Security Agreement
C-1 Form of Preferred Interest Certificate
C-2 Rights and Preferences of Preferred Interests
D Registration Rights Agreement
E Sublease
F-1 Bill of Sale
F-2 Assignment and Assumption Agreement
F-3 Assignment of Intellectual Property
F-4 Assignment of Lease
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<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
November 1, 1996, by and between GENERAL KINETICS INCORPORATED, a Virginia
corporation (the "Seller"), and CRYPTEK SECURE COMMUNICATIONS, LLC, a Delaware
limited liability company (the "Purchaser") formed by affiliates of Angelo
Gordon & Co., L.P.
W I T N E S S E T H :
WHEREAS, the Seller desires to sell to the Purchaser certain
assets of the Seller relating to the Seller's manufacture and sale, in its
secure facsimile and secure LAN business units, of various products in the
secure high resolution facsimile and the secure network field for U.S. and
foreign military and government applications (the "Business"), and the Purchaser
desires to purchase such assets and assume certain related liabilities, all on
the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein, the parties hereto hereby agree as follows:
ARTICLE I.
Purchase and Sale
1.1.1. Purchase and Sale. Subject to the terms and
conditions of this Agreement, at the closing of the transactions contemplated
hereby (the "Closing"), the Seller shall sell, transfer, assign and convey to
the Purchaser, and Purchaser shall purchase and acquire, all of the Seller's
right, title and interest in and to all properties, assets, contracts,
rights and choses in action of every kind, character and description which are
listed on Schedule 1.1 hereto, whether tangible or intangible, whether real,
personal or mixed, whether accrued, contingent or otherwise, and wherever
located, that are related to or existing, used or held for use in connection
with the Business, as the same may exist on the Closing Date (as defined herein)
(the "Assets").
1.1.2. Purchase Price. At the Closing the Purchaser shall
deliver to the Seller in consideration for the purchase of the Assets the
purchase price as set forth below (the "Purchase Price"):
(a) One Million Seven Hundred and Fifty Thousand dollars
($1,750,000), payable at the Closing by wire transfer of immediately available
funds to such bank account as the Seller shall designate in writing;
<PAGE>
(b) the Purchaser's secured Promissory Note (the "Note")
payable to the order of the Seller in the principal amount of Seven Hundred and
Fifty Thousand dollars ($750,000) in substantially the form of Exhibit A hereto
and secured by certain assets of the Purchaser as set forth in a Security
Agreement (the "Security Agreement") in substantially the form of Exhibit B
hereto; and
(c) a convertible preferred membership interest in the
Purchaser (the "Preferred Interest") having an aggregate liquidation preference
of One Million Five Hundred Thousand dollars ($1,500,000) and otherwise
represented by certificates in substantially the form of Exhibit C-1 hereto and
having the rights and preferences set forth in Exhibit C-2 hereto, and entitled
to the benefits of a Registration Rights Agreement (the "Registration Rights
Agreement") with respect thereto in substantially the form of Exhibit D hereto.
1.1.3. Recent Balance Sheet. Set forth as Schedule 1.1.3
hereto is a pro forma Balance Sheet of the Business as of September 30,
1996.
1.2 Liabilities Assumed by the Purchaser. In
further consideration for the purchase of the Assets, the Purchaser shall
also assume (a) all liabilities of the Seller in connection with its lease (the
"Lease") of premises at 14130-C Sullyfield Circle, Chantilly, Virginia 22021
(subject to a sublease of a certain portion of such premises from the Purchaser
to the Seller (the "Sublease") in substantially the form of Exhibit E hereto),
and (b) those other liabilities of the Seller specifically set forth on
Schedule 1.2 hereto (the "Liabilities").
1.3 Allocation. The parties agree that the Purchase Price
will be allocated among the Assets in accordance with Schedule 1.3 hereto, and
that they shall each prepare and file Internal Revenue Service Form 8594, as
required by Section 1060 of the Internal Revenue Code (the "Code") and the
Treasury Regulations thereunder, in a manner consistent with the foregoing
allocation.
ARTICLE II.
Closing; Effective Time
2.1 Closing. The Closing shall be held at the offices
of Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New York, New
York 10022, on the second business day following the satisfaction or
waiver, if permissible, of the conditions contained in Articles VI and VII
hereof, or at such other place or time as the Purchaser
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<PAGE>
and the Seller may mutually agree. The date of the Closing is referred to herein
as the "Closing Date". The effective time of the conveyance of the Assets
shall be deemed to have been 12:01 a.m., New York City time, on the Closing Date
(the "Effective Time").
2.2 Deliveries. At the Closing, in addition to delivery by
the Purchaser of the Purchase Price as set forth in Section 1.1.2. above,
the Purchaser and the Seller shall each execute and deliver to each other (i) a
Bill of Sale in the form of Exhibit F-1 hereto, (ii) an Assignment and
Assumption Agreement in the form of Exhibit F-2 hereto, (iii) an Assignment in
the form of Exhibit F-3 hereto, transferring to the Purchaser all intellectual
property to be transferred to the Purchaser hereunder; (iv) an Assignment in
the form of Exhibit F-4 hereto, assigning the Lease to the Purchaser; (v) such
other bills of sale, instruments of assignment and other documents as may
be reasonably requested by the Purchaser in order to effect or evidence the
transfer of Assets; (vi) certificates of the chief executive officers of the
Seller and the Purchaser certifying to the fulfillment of the conditions set
forth in Sections 6.1 and 6.2, in the case of the Seller's certificate, and
Section 7.1, in the case of the Purchaser's certificate; (vii) copies of the
resolutions of the Seller's Board of Directors and the Purchaser's
Manager(s), in each case, certified by such party's chief executive officer,
authorizing the execution, delivery and performance of this Agreement; (viii)
opinions of their respective counsel in substantially the form of Exhibits
G-1 and G-2 hereto, (ix) the Sublease; and (x) such other instruments, if
any, as either of them may reasonably request in order to more fully
confirm or perfect the transfer of Assets and assumption of Liabilities
contemplated by this Agreement.
2.3 Affidavit. The Seller shall deliver to the Purchaser
at or prior to the Closing an affidavit under penalties of perjury stating:
(a) its name, address and taxpayer identification number and (b) that it
is not a "foreign person" within the meaning of Section 1445 of the Code.
ARTICLE III.
Representations and Warranties By the Seller
Except as otherwise disclosed in this Agreement or the
Schedules hereto, the Seller represents and warrants that:
3.1 Organization and Existence. The Seller is a corporation
duly organized, validly existing and in good
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<PAGE>
standing under the laws of the State of Virginia, and has all requisite
corporate power and authority to own and lease the Assets it currently owns
and leases and to carry on the Business as currently conducted. The Seller
is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where it owns or leases such Assets or the
nature of the Business conducted by it makes such qualification or
licensing necessary, except where failure to be so duly qualified or
licensed and in good standing would not in the aggregate have a Material
Adverse Effect on the Seller. A true, correct and complete list of such
jurisdictions with respect to the Seller is set forth on Schedule 3.1. For
purposes of this Agreement, a "Material Adverse Effect" with respect to the
Seller means any event, circumstance or condition that, individually or when
aggregated with all other similar events, circumstances or conditions can
reasonably be expected to have, or has had, a material adverse effect on: (i)
the business, property, operations, condition (financial or otherwise), results
of operations or prospects of the Seller with respect to the Business, taken as
a whole; (ii) the Assets, taken as a whole; (iii) the ability of the Seller to
consummate the transactions contemplated hereunder; or (iv) the ability of the
Purchaser to perform and conduct the Business of the Seller after the
consummation of the transactions contemplated by this Agreement substantially in
the manner conducted prior to the consummation of such transactions.
3.2 Authority and Approval. The Seller has all
requisite corporate power and authority to execute and deliver this
Agreement and the Related Agreements (as defined in Section 4.2) to be signed
by it, to consummate the transactions contemplated hereby and thereby and to
perform the terms and conditions hereof and thereof to be performed by it. The
execution and delivery by the Seller of this Agreement and the Related
Agreements, the performance by the Seller of all the terms and conditions
hereof and thereof to be performed by it and the consummation of the
transactions contemplated hereby and thereby have been duly authorized and
approved by all requisite corporate action on the part of the Seller. This
Agreement and the Related Agreements constitute the legal, valid and binding
obligation of the Seller, enforceable against it in accordance with its terms.
3.3 No Violation. This Agreement and the Related Agreements
and the execution, delivery and performance hereof and thereof by the Seller do
not, and will not, violate or conflict with any provision of or constitute a
default (whether with notice or the lapse of time or both) or give rise to any
right of termination, amendment, cancellation or acceleration or require
any filing, consent,
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<PAGE>
authorization or approval under the certificate of incorporation or bylaws of
the Seller or any law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment, writ, injunction or decree
or any license or permit of any court, arbitral tribunal, administrative agency
or commission or other governmental or other regulatory authority or agency (a
"Governmental Entity") applicable to or binding upon the Seller, or any
provision of any material mortgage, indenture, loan, lease, license, credit
agreement or contract to which the Seller is a party or by which the Seller or
any of the Assets is bound.
3.4 Assets Conveyed. The Assets constitute all the assets,
properties and rights used primarily in the Business as of the date hereof.
3.5 Seller's Articles of Incorporation and By-laws. The
Seller has heretofore delivered to the Purchaser true and complete copies of its
Articles of Incorporation and By-laws as in effect on the date hereof.
3.6 Compliance With Laws; Licenses.
(a) The conduct of the Business of the Seller has not
violated, and as presently conducted does not violate, any federal, state, local
or foreign laws, rules, regulations or ordinances, or judgments, injunctions,
writs, decrees or orders of any Governmental Entity (collectively, the
"Orders"), or any industry standards, the violation of which would have a
Material Adverse Effect, nor has the Seller received any notice of any such
violation. The Seller is not subject to any Order currently in effect which has
had a Material Adverse Effect.
(b) Except as set forth on Schedule 3.6, the Seller possesses
all licenses, permits, consents, authorizations, registrations and approvals of,
with or from Governmental Entities which have jurisdiction over the Seller's
operation of the Business or the Assets except where the failure to hold any
such license would not have a Material Adverse Effect ("Licenses"), and is in
full compliance with the terms thereof, except where violation thereof would not
have a Material Adverse Effect. Schedule 3.6 sets forth a complete and accurate
list of all such Licenses.
3.7 Litigation; Investigations. Schedule 3.7 sets forth
a complete and accurate list of all suits, claims, or proceedings, which
are pending or, to the best knowledge of the Seller, threatened against or
affecting the Business or any properties or Assets used in the conduct of the
Seller's Business and which, if resolved adversely to
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the Seller, can reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 3.7, to the best of the Seller's knowledge there
is, in connection with the Business, no investigation or inquiry by any
Governmental Entity pending or threatened, or which such Governmental Entity
has indicated to the Seller an intention to conduct, which, if resolved
adversely to the Seller, would have a Material Adverse Effect.
3.8 Taxes. The Seller has duly filed all returns of
Taxes required to be filed by it (except where the failure to so file would not
have a Material Adverse Effect) and has duly paid all Taxes (as defined below)
shown on such returns or claimed in writing to be due from it by federal, state,
local or foreign taxing authorities, except for such Taxes, if any, as
are being contested in good faith by the Seller; the reserves for Taxes
reflected in the Financial Statements (as defined in Section 3.26 below) are
adequate; and there are no Tax liens upon any property or assets of the
Seller except liens for current taxes not yet due and except for liens
relating to such Taxes, if any, as are being contested in good faith by the
Seller. The terms "Tax" and "Taxes" shall mean any and all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, premium, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment,
excise, estimated, severance, stamp, occupation, property or other taxes,
fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties (including penalties for failure to file in
accordance with applicable information reporting requirements), and
additions to tax by any authority, whether federal, state, or local or domestic
or foreign which in each case relate to or are assessed or assessable
directly or indirectly against the Business or the Assets.
3.9 Insurance Policies. Schedule 3.9 contains a complete
and accurate list of all insurance policies providing coverage in favor of
the Seller which relate to the Assets or the conduct of the Business, specifying
the insurer and type of insurance under each. Such insurance policies are of
the type required to be maintained with respect to the Business under any
applicable law. All premiums are currently paid and no notice of
cancellation or termination has been received with respect to any such policy.
Unless otherwise specifically noted in Schedule 3.9, coverage under all such
policies will expire at Closing. The Seller has not been refused any insurance
with respect to the Assets or the operation of the Business, nor has its
coverage with respect to the Assets or the conduct of the Business been limited
by any insurance carrier to
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which it has applied for any such insurance or with which it has carried
insurance during the last five (5) years.
3.10 Environmental Laws. The Seller in connection with
the Business and all properties owned or operated by the Seller relating to
the Business and the Assets comply with all Environmental Laws (as defined
below) except for such noncompliance as would not have a Material Adverse
Effect or to give rise to any material liability to the landlord on the part
of the Seller under the Lease, and the Seller has not received any
communication relating to the Business and the Assets (whether from a
governmental authority, private party, employee or otherwise) that
alleges that the Seller is not in such compliance and the Seller does not
know of any condition existing on such properties or any nearby property
which could reasonably be expected to cause such material noncompliance in
the future. The Seller has all permits and licenses required under the
Environmental Laws in connection with the operation of the Business including
any permits and licenses required for the disposal or emission of Hazardous
Materials. The Seller has not been named or, to the best knowledge of Seller,
threatened to be named a "potentially responsible party" within the meaning of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or any similar Federal, state or local law. "Environmental
Laws" means any applicable Federal, state, local or foreign laws, statutes,
rules, regulations, orders, consent decrees, permits or licenses, relating
to prevention, remediation, reduction or control of pollution, or
protection of the environment, natural resources and/or human health and safety,
including, without limitation, such applicable laws, statutes, rules,
regulations, orders, consent decrees, permits or licenses relating to (a) solid
waste and/or Hazardous Materials treatment, storage or disposal, (b) air, water,
and noise pollution, (c) soil, ground, water or groundwater contamination, (d)
the manufacture, generation, processing, handling, distribution, use, treatment,
storage, transportation or release, emission or discharge into the environment
of Hazardous Materials, or (e) regulation of underground and above ground
storage tanks. "Hazardous Materials" means any flammable or explosive materials,
petroleum (including crude oil and its fractions), radioactive materials,
hazardous wastes, toxic substances or related hazardous materials, chemicals,
pollutants and contaminants, including, without limitation, polychlorinated
biphenyls, friable asbestos, and any substances defined as, or included in the
definition of toxic or hazardous substances, wastes, or materials under any
federal or applicable state or local laws, ordinances, rules or regulations
including Environmental Laws.
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3.11 No Material Adverse Change. Since September 30,
1996, except as reflected in Schedule 3.11, there has been no Material Adverse
Effect, and the Seller does not have actual knowledge of any change that is
threatened or pending, nor, to the best of Seller's knowledge, has there been
any damage, destruction or loss with respect to the Assets or the Business,
whether or not covered by insurance, which would have a Material Adverse Effect.
3.12 Absence of Specified Changes. Except as disclosed on
Schedule 3.12, since September 30, 1996, there has not been with respect to the
Assets or the Business of the Seller any:
(a) transaction not in the ordinary course of business,
including without limitation any sale of all or substantially all of the Assets
of the Seller or any merger of the Seller and any other entity;
(b) unfulfilled commitment as of the date of this Agreement
requiring (i) expenditures by the Seller which are made in the ordinary course
of business and exceed $10,000 (excluding commitments expressly described
elsewhere in this Agreement or the Schedules hereto, payroll or other
compensation payments and fringe benefits and related Taxes, Tax obligations,
and intercompany charges) or (ii) expenditures by the Seller which are not in
the ordinary course of business and exceed $10,000;
(c) failure to maintain in full force and effect
substantially the same level and types of insurance coverage as in effect on
September 30, 1996;
(d) material change in accounting principles, methods or
practices, investment practices, claims, payment and processing practices or
policies regarding intercompany transactions, in each case, with respect to the
Business;
(e) material revaluation of any Assets or material write down
of the value of any inventory for the Business;
(f) sale, assignment or transfer of any material tangible
or intangible Asset, including any rights to intellectual property included in
the Assets, except in the ordinary course of business;
(g) disposition of or lapse of any material patent,
trademark, trade name, service mark or copyright or any application for the
foregoing, or assignment of any software or technology, or disposition of any
license, permit or authorization to use any of the foregoing;
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(h) mortgage, pledge or other encumbrance, including liens
and security interests, of any tangible or intangible Asset;
(i) cancellation of any debt or waiver or release of any
material Contract (as hereinafter defined), right or claim, except for
cancellations, waivers and releases in the ordinary course of business which do
not exceed $10,000 in the aggregate;
(j) any capital expenditure or capital commitment requiring
an expenditure of monies in the future, any incurrence of a contingent liability
or any guaranty or commitment to guaranty the indebtedness of others entered
into, by the Seller, other than customary transactions in the ordinary
course of business not in excess of $10,000 in the aggregate;
(k) amendment, termination or revocation of, or a failure in
any material respect to perform obligations or the occurrence of any default
under, any material Contract to which the Seller is, or as of September 30, 1996
was, a party or of any material license, permit or franchise required for the
continued operation of the Business as conducted by the Seller on September 30,
1996;
(l) increase or commitment to the increase of the salary or
other compensation payable or to become payable to any of its employees, agents
or independent contractors engaged in the Business, or the payment of any bonus
to the foregoing persons except in the ordinary course of business and
consistent with past practice and applicable policies and procedures of the
Seller;
(m) payment or cancellation of any liability other than
payment of current liabilities in the ordinary course of business; or
(n) agreement or understanding to take any of the actions
described above in this Section 3.12.
3.13 Real Property; Leases. The Seller owns no real
property which is used in the Business. The Lease is the only lease, sublease
or other arrangement pursuant to which the Seller leases or subleases real
property used in the Business, and the Seller has heretofore delivered to
Purchaser a complete and accurate copy of the Lease. The Seller is the sole
lessee under the Lease and such Lease is in full force and effect and
has not been further supplemented, amended or modified. Such Lease is a
valid and binding obligation of Seller and to the best knowledge of the
Seller, such Lease is enforceable substantially in accordance with its terms
and there exists no material event
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of default or event, occurrence, condition or act, including without
limitation, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder, which constitutes or
would constitute (with notice or lapse of time or both) a material default in
any respect under the Lease (except that the assignment of the Lease to the
Purchaser requires the consent of the lessor under the Lease). The Seller has
not received any notice of any event of default or any event, occurrence,
condition or act which constitutes or would constitute (with notice or lapse
of time or both) a default in any respect under the Lease. To the best knowledge
of the Seller, the leased premises are structurally sound with no material
defects and, taken as a whole, are in good operating condition and repair and
adequate for the uses to which they are being put, without need for maintenance
or repairs except for ordinary routine maintenance and repairs or those not
material in nature or cost. To the best knowledge of the Seller, the real
property covered by the Lease, the buildings, fixtures and improvements on
such, and the present use thereof, comply in all material respects with all
zoning laws, ordinances and regulations of governmental authorities having
jurisdiction thereof, including material provisions relating to permissible
nonconforming uses, if any, and any such premises are not presently
affected, nor to the best knowledge of the Seller threatened, by any
condemnation or eminent domain proceeding or any proceeding by a mortgagee.
3.14 Equipment and Personal Property. Schedule 3.14 sets
forth a complete and accurate description of all equipment and personal
property included on Schedule 1.1 which are owned by the Seller as well as
all capital leases and operating leases pursuant to which the Seller
leases property included on Schedule 1.1. Except as described in Schedule 3.14
all equipment and tangible personal property included on Schedule 1.1 are
either owned, free and clear of all liens and encumbrances other than
Permitted Liens (as defined below), or are (i) used under capital leases
reflected in the Financial Statements or (ii) used under operating leases.
All such leases are valid and binding obligations of the Seller, are in full
force and effect and, to the best knowledge of the Seller, enforceable
substantially in accordance with their terms. The Seller has not received
any notice of event of default, or event, occurrence, condition or act which
constitutes or would constitute (with notice or lapse of time or both) a default
in any respect under any such lease. All of the equipment and tangible personal
property owned or leased by the Seller which are included on Schedule 1.1 are in
good operating condition and repair, subject to normal wear and tear and
customary maintenance and repair. "Permitted Liens" means (i) liens for current
taxes, assessments or other
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governmental charges, if any, not due and payable, (ii) such imperfections
in title, liens and encumbrances, if any, as do not materially detract from
the value or materially interfere with the present use of the Assets, taken as
a whole, or materially impair the conduct of the Business as currently
conducted by the Seller, (iii) mechanic's, materialman's or other statutory
liens arising by operation of law in the ordinary course of the Business with
respect to a liability that is not yet delinquent, and (iv) other liens,
charges or encumbrances incurred in connection with the lease or purchase of
equipment or personal property for use in the Business.
3.15 Intellectual Property. Schedule 3.15 contains a
complete and accurate schedule of all trade names, trademarks, service marks,
patents and copyrights (including any registrations or pending applications for
registration of any of the foregoing) and all licenses or other rights relating
to any of the foregoing that are used in the Business and any material
trade secrets, processes, technical data and know how to the extent formally
reduced to writing and generally used in the Business. Except as set forth on
Schedule 3.15, with respect to the Seller (i) the Seller has the sole and
exclusive good, valid and transferable title with respect to the items
listed on Schedule 3.15 and all trade secrets, inventions, processes,
formulae, technology, technical data, information and know-how used by the
Seller in the conduct of the Business (collectively, the "Intangible
Property"), (ii) no royalties or other consideration is required in
connection with the Seller's use and enjoyment of the Intangible Property
and (iii) no claim has been asserted by any person against the Seller with
respect to the ownership or use of any Intangible Property by the Seller,
and to the best knowledge of the Seller, there exists no valid basis for any
such claim.
3.16 Software. Schedule 3.16 contains a complete and
accurate list of all computer software, databases and programs utilized by the
Seller in the conduct of the Business and which is not set forth on Schedule
3.15. Except as set forth on Schedule 3.16 all such computer software,
databases and programs are owned by the Seller, without any restrictions
thereon.
3.17 Contracts. Schedule 3.17 sets forth a complete and
accurate list of all material contracts, agreements, arrangements and other
instruments related to the conduct of the Business by the Seller on the date
hereof to which the Seller is a party or by which it or any of the Assets are
bound (hereinafter referred to collectively as the "Contracts"). Each of the
Contracts is a valid and binding obligation of Seller, is in full force and
effect
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and to the best knowledge of the Seller is enforceable substantially in
accordance with its terms. The Seller has not received notice of cancellation
of or intent to cancel any of the Contracts. There exists no event of default or
occurrence, condition or act on the part of the Seller or, to the best
knowledge of the Seller, on the part of the other party to such Contracts which
constitutes or would constitute (with notice or lapse of time or both) a
breach under, or cause or permit acceleration of, any obligation of the
Seller which can reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 3.17 no consent of any other party to the
Contracts is required in connection with the execution, delivery and
performance of this Agreement by the Seller.
3.18 Inventory. Schedule 3.18 sets forth a complete and
accurate list of inventory of the Seller related to the Business as of September
30, 1996 (or a more recent date if reasonably practicable). All inventory of
the Seller, whether reflected in the Financial Statements or otherwise,
consists of a quality and quantity usable in the ordinary course of business,
except for items of obsolete materials and materials of below-standard quality,
all of which have been written off or down to fair market value.
3.19 Title to Properties; Liens. The Seller has good, valid
and marketable title to all of its Assets, free and clear of any lien,
charge or other encumbrance, except for Permitted Liens and such other
liens or other encumbrances specifically set forth on Schedule 3.19 or on
any of the other Schedules hereto.
3.20 Assets Acquired. The Assets to be conveyed by the
Seller to the Purchaser constitute all of the property, tangible and intangible
of Seller, necessary to operate the Business as presently conducted and
to the best knowledge of the Seller, the tangible Assets, taken as a whole,
are in good working order and condition, subject to normal wear and tear,
and customary maintenance and repair.
3.21 Major Customers and Suppliers. Schedule 3.21 lists (i)
the names of the five largest customers (by revenues generated) of the Seller
and the amount of revenues generated by each of them during the fifteen months
ended September 30, 1996 and (ii) the names of the five largest suppliers (by
cost of purchases by the Seller) of the Seller during the fifteen months ended
September 30, 1996 and the approximate total purchases by the Seller from
each such supplier during such year. To the best knowledge of the Seller,
except as set forth in Schedule 3.21, there have been no material adverse
changes in the relationships between the Seller and the customers and
suppliers of the Seller listed on Schedule 3.21 since September 30, 1996.
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3.22 Labor Relations. Except as set forth on Schedule 3.22,
(i) the Seller has paid and performed all material obligations with respect to
its employees, independent sales representatives, consultants, agents, officers
and directors involved in the operation of the Business, including
without limitation all wages, salaries, commissions, bonuses, severance pay,
vacation pay, benefits and other direct compensation for all services
performed by them to the date hereof and all amounts required to be reimbursed
to such employees; (ii) there is no pending, or to the Seller's knowledge
threatened, charge, complaint, allegation, application or other process
against the Seller before the National Labor Relations Board or any comparable
state, local or foreign agency, governmental or administrative, relating
to the operation of the Business; (iii) there is no labor strike, dispute,
slowdown or work stoppage or other job action pending, or to Seller's knowledge
threatened, against Seller relating to the operation of the Business; (iv)
no employees of the Seller involved in the operation of the Business are
covered by any collective bargaining agreements; and (v) the Seller is in
compliance in all material respects with all federal, state and local laws
and regulations respecting employment practices and terms and conditions of
employment (provided that no representation is made as to wages and hours)
applicable to the operation of the Business.
3.23 Investment Representations. Seller is acquiring
the Preferred Interest for its own account, and not with a present view to, or
for sale in connection with, any distribution thereof. Seller understands that
the Preferred Interest has not been registered under the Securities Act of
1933, as amended (the "Securities Act") because the Purchaser believes it was
issued in a transaction exempt from the registration requirements of the
Securities Act pursuant to the exemption provided in Sections 3(b) and 4(2)
thereof, that the Preferred Interest has not been registered under
applicable state securities laws because the Purchaser believes it was issued
in a transaction exempt from such registration requirements, and that the
Preferred Interest may not be sold or otherwise disposed of unless
registered under the Securities Act and applicable state securities laws or
exempted from registration. Seller further understands that the exemption
from registration afforded by Rule 144 promulgated under the Securities
Act is not presently available with respect to the Preferred Interest.
3.24 Accuracy of Information. The schedules, exhibits
and certificates furnished hereunder by the Seller and identified hereto in
writing, taken as a whole, do not contain any untrue statement of a material
fact.
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3.25 Employee Benefit Plans. The Seller, in connection with
the Business, is not a party to any agreement requiring it to continue to employ
any of its present employees or any group of its present employees, or
continue to cover any present or former employees or any group of
present or former employees under any benefit plan. After the Closing, the
Purchaser shall not assume or be liable for any liability under any employee
benefit plan, fringe benefit plan or personnel policy maintained or sponsored
by the Seller, or to which the Seller makes contributions, or any
contributions, benefits or liabilities therefor, or to any liability for the
Seller's withdrawal from or termination of any such employee benefit plan
or fringe benefit plan. The Seller, at the Purchaser's request and at the
expense of such employees, shall make available to such employees, benefits
required by COBRA for a minimum of three months.
3.26 Financial Statements. The Seller's pro forma
financial statements for the Business as of September 30, 1996, furnished to the
Purchaser (the "Financial Statements"), are true and correct in all material
respects, have been prepared substantially in accordance with generally
accepted accounting principles consistently followed throughout the period
covered thereby, except as otherwise indicated therein, and fairly present the
financial condition of the Business in all material respects as of such date
and for the period covered thereby, except to the extent of any items
addressed by the parties elsewhere pursuant to this Agreement and
specifically identified in Schedule 3.26 hereto.
3.27 Brokers and Finders. Except as identified in Schedule
3.27 hereto, the Seller has not employed or retained any broker, finder,
consultant or other intermediary in connection with the transactions
contemplated by this Agreement who would be entitled to a broker's,
finder's or similar fee or commission from the Purchaser, or from the
Seller in connection therewith or upon the consummation thereof.
ARTICLE IV.
Representations and Warranties by the Purchaser
Except as otherwise disclosed in this Agreement or the
Schedules hereto, the Purchaser hereby represents and warrants that:
4.1 Organization and Existence. The Purchaser is a
limited liability company validly existing and in good
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standing under the laws of the State of Delaware which was newly formed on
October 31, 1996 and has conducted no business and entered into no
agreements or commitments except for the Agreement and the transactions
specifically contemplated hereby.
4.2 Authority and Approval. The Purchaser has all
requisite power and authority to execute and deliver this Agreement and the
Note, the Security Agreement, the Operating Agreement and the
Registration Rights Agreement (the "Related Instruments"), to consummate
the transactions contemplated hereby and thereby and to perform all the
terms and conditions hereof and thereof to be performed by it. Each of this
Agreement and the Related Instruments constitutes, or will constitute, the
legal, valid and binding obligation of the Purchaser enforceable against it in
accordance with its terms.
4.3 No Violation. This Agreement and the Related Instruments
and the execution, delivery and performance hereof and thereof by the
Purchaser do not, and will not, violate or conflict with any provision of or
constitute a default (whether with notice or the lapse of time or both), or
give rise to any right of termination, amendment, cancellation or
acceleration or require any filing, consent, authorization or approval
under any law or administrative regulation or any judicial, administrative
or arbitration order, award, judgment, writ, injunction or decree of any
Governmental Entity applicable to or binding upon the Purchaser, or any
provision of any material mortgage, indenture, loan, lease, license,
credit agreement or contract to which the Purchaser is a party or by which
the Purchaser or any of its assets or properties is bound.
4.4 Equity Interests, etc. The authorized capital of
the Purchaser consists of membership interests, of which interests with a face
value of $2,500,000 have been designated as Preferred Interests, and Common
Interests, with the respective characteristics described in Schedule 4.4(b)
hereto and Exhibit C-2 hereto. As of the date hereof, and until issuance to
the Seller at Closing, there are no issued and outstanding Preferred Interests
and at Closing the issued and outstanding Common Interests will represent
capital accounts which aggregate $1,750,000 (subject to adjustment if
agreed by the parties). Except as set forth in Schedule 4.4(a) hereto, the
Purchaser has, and at Closing will have (except for the Preferred Interests),
no other securities of any kind outstanding, nor any options, warrants or
other rights or instruments convertible into or exchangeable for any
securities of the Purchaser. The Preferred Interests, and the Common
Interests into which they are convertible, have been duly authorized and when
delivered at the Closing or upon conversion of the Preferred
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Interests, as the case may be, will be validly issued and outstanding and
fully paid and nonassessable.
(a) Schedule 4.4(b) hereto sets forth certain
information regarding capitalization of the Purchaser as of and after giving
effect to the Closing, together with a letter from Angelo Gordon & Co., L.P.
confirming its subscription funding for the common membership interest in the
Purchaser.
4.5 Accuracy of Information. The schedules, exhibits
and certificates furnished hereunder by the Purchaser and identified
hereto in writing, taken as a whole, do not contain any untrue statement of
a material fact.
4.6 Brokers and Finders. Except as identified in Schedule
4.6 hereto, the Purchaser has not employed or retained any broker,
finder, consultant or other intermediary in connection with the
transactions contemplated by this Agreement who would be entitled to a broker's,
finder's or similar fee or commission from the Seller, or from the Purchaser
in connection therewith or upon the consummation thereof.
ARTICLE V.
Covenants
The Seller and the Purchaser covenant and agree with each
other as follows:
5.1 Public Announcements. Subject to applicable law or
stock exchange requirements, at all times until the Closing Date, each party
shall promptly advise the other party, and obtain the written consent of such
other party before issuing or permitting any of its directors, officers,
employees or agents to issue, any press release, any announcement, or any other
communication with respect to this Agreement or the transactions contemplated
hereby.
5.2 Access to Information. From the date hereof until
the Closing, the Purchaser and the Purchaser's counsel, accountants,
representatives and agents shall have access, upon reasonable notice during
normal business hours, to appropriate personnel, properties, books and
records of the Seller relating exclusively to the Assets, the Liabilities and
the Business and, upon reasonable notice, shall be furnished all relevant
documents, records and other information relating exclusively to the Assets,
the Liabilities and the Business that they may reasonably request (including
obtaining copies thereof); provided,
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however, that such access shall not unduly interfere with the business and
operations of the Seller. Except as and only to the extent required by law
(after affording the Seller a reasonable opportunity to obtain a protective
order or similar relief), the Purchaser agrees that unless and until the Closing
occurs (and thereafter only to the extent such information does not constitute
an acquired Asset) it will not, without the consent of the Seller, (i) divulge,
directly or indirectly, to any person, other than its directors, officers,
employees, agents or representatives, any confidential or proprietary
information so obtained, or (ii) use or permit the use of such information for
any purpose other than the application of this Agreement to the transactions
contemplated hereby.
5.3 Conduct of Business in Normal Course. The Seller
covenants and agrees, except as otherwise expressly contemplated by this
Agreement or as specifically consented to in writing by the Purchaser, from
and after the date of this Agreement and until the Closing Date, with respect to
the Business only, to preserve its present business organization intact,
keep available the services of its present employees, preserve its present
relationships with entities or persons having business dealings with it and
operate the Business in the ordinary and regular course consistent with
its prior practices, and maintain its books and records on a basis
consistent with prior practice and maintain all material certificates,
licenses and permits necessary for the conduct of the Business
substantially as currently conducted. The Seller covenants and agrees that,
except as otherwise expressly contemplated by this Agreement or as
specifically consented to in writing by the Purchaser, from and after the date
of this Agreement and until the Closing Date, the Seller shall not undertake
or permit to occur any of the actions referenced in Section 3.12 hereto.
5.4 Exclusive Dealings. Prior to Closing or termination of
this Agreement, neither the Seller nor any of its subsidiaries, nor any other
entity controlling, controlled by or under common control with the Seller, nor
any of their respective officers, employees, representatives or agents, will,
directly or indirectly, solicit or initiate any discussions or
negotiations with, participate in any negotiations with or provide any
information to or otherwise cooperate in any other way with, or facilitate
or encourage any effort or attempt by, any corporation, partnership, person
or other entity or group, other than the Purchaser and its directors, officer,
employees, representatives and agents, concerning any merger, sale of
substantial assets, sale of shares of capital stock or similar transaction
involving the Business (a "Similar Transaction"). The Seller shall inform
the Purchaser if the Seller is approached by, or obtains a proposal or
indication of
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interest from, any other party regarding a Similar Transaction, and shall
disclose to the Purchaser the identity of such other party.
5.5 Use of Names. The Seller agrees that subsequent to
the Closing Date it will not use the name "Cryptek" for any purpose
whatsoever, except in the ordinary course of the Business or as otherwise
consented to by the Purchaser in writing.
5.6 [Reserved]
5.7 Consent. Each of the parties hereto will use its
best efforts and shall fully cooperate with each other party to make promptly
all registrations, filings and applications, give all notices and obtain
all governmental and third party consents, permits, approvals,
orders, authorizations, qualifications, and waivers necessary for the
consummation of the transactions contemplated hereby (collectively, the
"Consents"), and thereafter shall cooperate in good faith to effect the
transfer or renewal of any other license, approval or authorization (including
novation of the existing GSA contract and schedule, operation under the present
DIS facility clearance, and application for DIS facility clearance in the name
of the Purchaser).
5.8 Further Assurances. Subject to the terms and
conditions of this Agreement, each of the parties hereto will, prior to the
Closing Date, use its best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable
under applicable law and regulations to consummate and make effective the
transactions contemplated pursuant to this Agreement. From time to time after
the Closing Date, without further consideration, the Seller will, at its own
expense, execute and deliver such documents to the Purchaser as the Purchaser
may reasonably request in order more effectively to vest in the Purchaser good
title to the Assets or otherwise effect the transactions contemplated herein
including those reasonably required for the operation of the Business
pursuant to the existing GSA contract and schedules pending novation thereof.
5.9 Notification of Certain Matters. Each of the parties
hereto agrees to give prompt notice to the other of (i) the occurrence, or
failure to occur, of any event which occurrence or failure to occur can
reasonably be expected to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing Date, and (ii) any
material failure on its part to comply with or satisfy any covenant,
condition or agreement to be
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complied with or satisfied by it hereunder; provided, however, that the
delivery of or the failure to deliver any notice pursuant to this Section
5.9 shall not constitute a breach of this Agreement if the other party
otherwise obtains knowledge of such occurrence or failure prior to the Closing
Date and shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.10 Supplements to Schedules. Prior to the Closing, the
Seller will supplement or amend the Schedules hereto with respect to any
matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Schedules. Notwithstanding anything in Section 5.9 to the contrary, no
supplement or amendment of the Schedules made pursuant to this Section 5.10
shall be deemed to cure any breach of any representation or warranty made in
this Agreement as of the date hereof unless the Purchaser specifically agrees
thereto in writing.
5.11 Taxes. Following the Closing the Seller shall file all
Tax returns and pay all Taxes relating to the operation of its Business and
the ownership of the Assets for all periods ending on or prior to the Closing
Date when any Tax returns or Tax payments shall become due.
5.12. Employees. The Purchaser currently contemplates that
it shall offer employment, commencing on the Closing Date, to each of the
employees of the Seller listed on Schedule 5.12, in reliance on the information
regarding potential severance obligations with respect to such employees
included on such Schedule. The Purchaser also currently contemplates that the
wages, salaries and other compensation offered by Purchaser to each of such
employees shall not be less than the wages, salaries and other compensation paid
or provided to him or her by the Seller immediately prior to the Effective
Time, and such offers of employment by the Purchaser shall be on other terms and
conditions (including benefits) at least as favorable to each of such employees
as the terms and conditions (including benefits) of his or her respective
employment by the Seller which are in effect immediately prior to the Effective
Time. This representation is made to and for the exclusive benefit of the Seller
and no third party is intended to be a beneficiary hereof.
ARTICLE VI.
Conditions to the Obligations of the Purchaser
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The obligations of the Purchaser to proceed with the Closing
are subject to the satisfaction on or prior to the Closing Date of all of
the following conditions, any one or more of which may be waived, in whole
or in part, by the Purchaser:
6.1 No Material Adverse Changes. There shall have been no
material adverse change in the business or prospects (financial or otherwise) of
the Business, taken as a whole, between the date hereof and the Closing Date.
6.2 Compliance. The Seller shall have complied with each of
its covenants and agreements contained herein and delivered each instrument
to be delivered by it pursuant to Section 2.2 above and each of its
representations and warranties contained in Article III hereof shall be true
on and as of the Closing Date.
6.3 No Government Proceeding or Litigation. No suit,
action, investigation, inquiry or other proceeding by any governmental body
or other person or legal or administrative proceeding shall have been
instituted or threatened which questions the validity or legality of
the transactions contemplated hereby or by any of the Related Instruments.
6.4 No Injunction. On the Closing Date there shall
be no injunction, writ, preliminary restraining order or any order of any
nature issued or threatened by a court of competent jurisdiction directing
that the transactions provided for herein or by any of the Related Instruments
or any of them not be consummated as so provided or imposing any
conditions on the consummation of the transactions contemplated hereby which
the Purchaser deems unacceptable in its sole discretion.
6.5 Closing Deliveries. Seller shall have delivered to
Purchaser the agreements and other instruments required to be delivered by
Seller under Section 2.2 hereof and completed or supplemented Schedules and
Exhibits hereto as contemplated by the letter of even date herewith between
the Seller and the Purchaser.
6.6 Consents. The conditions regarding certain consents
or novations and related matters set forth in Schedule 6.6 shall have
been satisfied.
6.7 Completion. The Schedules and Exhibits hereto shall
have been completed and supplemented as agreed in writing by the parties.
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ARTICLE VII.
Conditions to the Obligations of the Seller
The obligations of the Seller to proceed with the Closing are
subject to the satisfaction on or prior to the Closing Date of all of the
following conditions, any one or more of which may be waived, in whole or in
part, by the Seller:
7.1 Compliance. The Purchaser shall have complied with
each of its covenants and agreements contained herein and delivered each
instrument to be delivered by it pursuant to Section 2.1 or 2.2 above,
and each of its representations and warranties contained in Article IV hereof
shall be true on and as of the Closing Date.
7.2 No Government Proceeding or Litigation. No suit,
action, investigation, inquiry or other proceeding by any governmental body
or other person or legal or administrative proceeding shall have been
instituted or threatened which questions the validity or legality of
the transactions contemplated hereby or by any of the Related Instruments.
7.3 No Injunction. On the Closing Date there shall
be no injunction, writ, preliminary restraining order or any order of any
nature issued or threatened by a court of competent jurisdiction directing
that the transactions provided for herein or by any of the Related Instruments
or any of them not be consummated as so provided or imposing any
conditions on the consummation of the transactions contemplated hereby
which the Seller deems unacceptable in its sole discretion.
7.4 Fairness Opinion. The Seller shall have received, if
it so determines, an opinion of a qualified professional valuation or
investment banking firm familiar with such matters regarding the fairness to
the Seller of the transactions contemplated hereby.
7.5 Closing Deliveries. The Purchaser shall have
delivered to the Seller the agreements and other instruments required to be
delivered by Purchaser under Section 2.2 hereof and completed or supplemented
Schedules and Exhibits hereto as contemplated by the letter of even date
herewith between the Seller and the Purchaser.
7.6 Employees. The Purchaser shall have offered
employment as contemplated by Section 5.12 hereof to substantially all of the
employees listed on Schedule 5.12.
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7.7 Completion. The Schedules and Exhibits hereto shall
have been completed and supplemented as agreed in writing by the parties.
ARTICLE VIII.
Transfer Taxes
8.1 Liability for Transfer Taxes. The Purchaser shall be
liable for 50% of all transfer taxes, sales and use taxes, and similar taxes
relating to the sale of the Assets, and any interest and penalties with
respect to such taxes, up to a maximum of $25,000. The Seller agrees to
promptly notify the Purchaser of receipt of any bills or other
communications relating to such taxes.
ARTICLE IX.
Termination
9.1 Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing Date:
(a) by the mutual written agreement of the Seller and the
Purchaser;
(b) by either party hereto by written notice thereof to
the other if the transactions contemplated hereby shall not have been
consummated by November 22, 1996;
(c) by either party if the consummation of such
transactions would violate any nonappealable final order, decree or judgment of
any court or governmental body having competent jurisdiction enjoining,
restraining or otherwise preventing, or awarding substantial damages in
connection with, the consummation of this Agreement or the transactions
contemplated hereby;
(d) by the Purchaser if the conditions to closing described
in Article VI have not been satisfied or waived in writing by November 20, 1996
or there has been a material misrepresentation or material breach on the part
of the Seller of any of the representations, warranties or covenants of the
Seller set forth in this Agreement;
(e) by the Seller if the conditions to closing described
in Article VII have not been satisfied or waived in writing by November 20, 1996
or there has been a material
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<PAGE>
misrepresentation or material breach on the part of the Purchaser of any of
the representations, warranties or covenants of the Purchaser set forth in
this Agreement; or
(f) by either party in the event the Schedules and
Exhibits hereto shall not have been completed and supplemented as agreed in
writing by the parties.
9.2 Effect of Termination. If this Agreement is
terminated as permitted under Section 9.1 hereof, such termination shall be
without liability to any party to this Agreement or any stockholder, director,
officer, employee, agent or representative of such party except that if such
termination results from the willful failure of either party to perform its
obligations hereunder, such party shall be liable for any and all damages
sustained or incurred by the other party as a result thereof. The provisions
of this Section 9.2, the last sentence of Section 5.2 and Article X shall
survive any such termination.
ARTICLE X.
Extent and Survival of Representations,
Warranties, Covenants and Agreements; Indemnification
10.1 Indemnification:
(a) Indemnification by the Seller. The Seller agrees to
indemnify, defend and hold the Purchaser harmless from and against any and all
losses, accrued or contingent liabilities (but in the case of contingent
liabilities, only if and to the extent they become accrued), claims, suits,
proceedings, demands, judgments, damages, expenses and costs, including without
limitation, reasonable counsel fees and costs and expenses incurred in the
investigation, defense or settlement of any indemnified matter (collectively,
"Claims"), which the Purchaser suffers by reason of (a) the material inaccuracy
of any of the representations or warranties, or material breach of any
covenants, of the Seller contained in this Agreement, or in any document,
certificate or agreement delivered pursuant hereto; (b) product liability,
employee or other claims arising from sales made by, or other operations or
activities of, the Seller, prior to the Effective Time; (c) any other matter
arising from the conduct of the Business by the Seller, unless and to the extent
explicitly disclosed with respect to the general nature of the Claim and dollar
amount thereof (to the extent now available or reasonably subject to estimate)
in the Schedules hereto. The Seller shall promptly forward to the Purchaser
notice of any claims of which it becomes aware in connection with the Business
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and Assets whether or not the subject of this Section 10.1(a).
(b) Indemnification by the Purchaser. The Purchaser agrees to
indemnify, defend and hold the Seller harmless from and against any and all
Claims, which the Seller suffers by reason of (a) the material inaccuracy of any
of the representations or warranties, or material breach of any covenants, of
the Purchaser contained in this Agreement, or in any document, certificate or
agreement delivered pursuant hereto; (b) product liability, employee or other
claims arising from sales made by, or other operations or activities of, the
Purchaser subsequent to the Effective Time; (c) any other matter arising from
the conduct of the Business by the Purchaser. The Purchaser shall promptly
forward to the Seller notice of any claims of which it becomes aware in
connection with the Business and Assets whether or not the subject of this
Section 10.1(b).
10.2 Conditions of Liability. For purposes of this Section
10.2, the "Indemnifying Party" shall mean the Purchaser, if it is the
subject of a claim to indemnification by another party (an "Indemnified
Party") pursuant to Section 10.1(b) above, or the Seller, if it is the
subject of a claim to indemnification pursuant to Section 10.1(a) above.
The obligations and liabilities of an Indemnifying Party under Section 10.1
with respect to Claims made by third parties shall be subject to the following
additional terms and conditions (for which purpose, unless the Indemnifying
Party is not assuming the defense of the Claim, each party shall make
reasonably available to the other relevant books, records and personnel
relating to such Claim):
(i) the Indemnified Party shall give the Indemnifying Party
written notice of any Claim within thirty (30) days after notice of the
commencement of any action relating thereto or other written assertion
thereof, tendering the defense thereof by the Indemnifying Party through
representatives chosen by it, in its sole discretion (provided, however, that
any defect or delay in delivery of such written notice shall not limit the
Indemnified Party's right to indemnification, except to the extent that such
defect or delay results in the forfeiture by the Indemnifying Party, or
material impairment, of substantial rights or defenses, and in the case of a
material impairment, only to the extent of such material impairment);
(ii) If the Indemnifying Party, within thirty (30) days
or sooner if the nature of the Claim(s) requires after notice pursuant to
clause (i) hereof, fails to accept the defense of any Claim so
tendered,
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the Indemnified Party shall (upon further written notice to the Indemnifying
Party) have the right to undertake the defense of such Claim on behalf of and
for the account and risk of the Indemnifying Party; provided, however,
that the Indemnified Party shall not compromise or settle any such claim
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld;
(iii) anything in this Section 10.2 to the contrary
notwithstanding, if there is a reasonable probability that a Claim may
materially and adversely affect an Indemnified Party other than as a result of
money damages or other money payments, the Indemnified Party shall have the
right, at its own cost and expense, to participate or join in the defense or to
defend, and, with the written consent of the Indemnifying Party (which shall not
unreasonably be withheld), compromise or settle (or decline to compromise or
settle) such Claim or consent (or decline to consent) to the entry of judgment
with respect thereto; and
(iv) Indemnified Party are both made parties to a Claim and
counsel selected by the Indemnifying Party to defend against such Claim
advises that conflicting interests or differing defenses available to such
parties in such Claim make it inappropriate for such counsel to represent both
parties therein, then the Indemnified Party may defend against such Claim with
counsel of its own choosing and the cost of such defense shall be subject to
indemnification by the Indemnifying Party in accordance with the terms and
conditions of this Article X.
10.3 Limitation of Indemnification. The liability of
an Indemnifying Party to indemnify an Indemnified Party pursuant to Section
10.1 above shall be limited to Claims as to which the Indemnified Party has
given the Indemnifying Party written notice on or prior to the date upon
which the representation, warranty or covenant upon which the Claim is
based expires pursuant to Section 10.4. Notwithstanding anything herein to
the contrary, the maximum aggregate amount of indemnification by the Seller
pursuant to this Article X shall be the amount of the Preferred Interest and
the Note, valued at the amount stated in Article I and payable by the Seller
only through reduction and cancellation of such amount first of the Note in
inverse order of maturity and then to the Preferred Interest, and by the
Purchaser shall be $3,000,000. In no event shall either party be liable for any
punitive, consequential, indirect or special damages (including, without
limitation, lost profits or lost opportunities).
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Neither party shall have any obligation to indemnify the other party against
Claims unless and until and to the extent that the aggregate amount of all
such Claims exceeds $50,000, whereupon the Indemnifying Party shall be
liable for the full amount of such Claims in excess of such amount.
10.4 Survival. Each of the representations and
warranties set forth in this Agreement and in any certificate, schedule or
instrument delivered in connection herewith shall survive the Closing until
August 30, 1998. Except as and to the extent set forth in Articles III and IV
hereof, respectively, each of the Seller and the Purchaser makes no
representations or warranties whatsoever, and disclaims all liability
and responsibility for any representation, warranty (express or implied,
including without limitation in the case of the Seller any warranty of
merchantability or fitness for a particular purpose), statement or
information made or communicated (orally or in writing), to the other party or
any other person. Except to the extent of fraud by the other party (in which
case, however, such party shall in no event be liable for damages in the
nature of lost profits or opportunities), indemnification pursuant to
this Article X shall be the sole remedy of either party for breach of
representations, warranties or covenants herein or otherwise arising hereunder.
ARTICLE XI.
Miscellaneous
11.1 Wavier of Compliance with Bulk Transfer Laws. The
Purchaser hereby waives compliance by the Seller with the provisions of any
bulk transfer laws that may be applicable to the transactions contemplated by
this Agreement. The Seller agrees to indemnify, defend and hold the Purchaser
harmless pursuant to Article X from and against any and all losses incurred by
the Purchaser based upon, arising out of or otherwise in respect of such
noncompliance.
11.2 Expenses. Except as specifically provided herein, all
legal and other costs and expenses in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party which
incurred such costs and expenses.
11.3 Notices. All notices and other communications
hereunder shall be in writing (setting forth in reasonable detail the
purpose of such notice or communication and identifying the provision
pursuant to
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which such notice or communication is given), and shall be deemed given when
delivered personally or when received if sent by registered or certified
mail, return receipt requested, or by confirmed facsimile transmission to the
parties at the following addresses (or at such other address as a party may
specify by like notice):
(A) If to the Purchaser, to:
Cryptek Secure Communications, LLC
14130-C Sullyfield Circle
Chantilly, VA 22021
Fax: as provided from time to time by
written notice
Attention: David Gross
with a copy to:
Shereff, Friedman, Hoffman & Goodman LLP
919 Third Avenue
New York, NY 10022
Fax: (212) 758-9526
Attention: Charles I. Weissman
(B) If to the Seller, to:
General Kinetics Incorporated
14130-C Sullyfield Circle
Chantilly, VA 22021
Fax: (703) 818-3706
Attention: Larry Heimendinger
with a copy to:
Donovan Leisure Newton & Irvine
30 Rockefeller Plaza
New York, NY 10112
Fax: (212) 632-3315
Attention: Peter G. Smith
11.4 Books and Records. After the Closing, the Seller
will promptly deliver or cause to be delivered all books and records relating
to the Business and/or the Assets to the Purchaser, subject to the terms hereof.
11.5 Exclusive Agreement. This Agreement, together with
the Related Instruments, supersedes all prior agreements between the
parties (written or oral) with
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respect to the subject matter hereof or thereof (including without
limitation the letter of intent dated July 19, 1996) and is intended as a
complete and exclusive statement of the terms of the agreement between the
parties with respect to such subject matter.
11.6 Injunctive Relief. Each of the Seller and the
Purchaser hereby acknowledges that damages at law would be an inadequate
remedy for the breach of any of the covenants, promises and agreements
contained in Sections 5.1, 5.2, and 5.4 hereof and, accordingly, the injured
party shall be entitled to injunctive relief with respect to any such
breach, including specific performance of such covenants, promises or
agreements or an order enjoining the breaching party from any threatened, or
from the continuation of any actual, breach of covenants, promises or
agreements without being required to post bond or other security or without
having to show proof of damages, and without having to prove the inadequacy of
the available remedies at law. The rights set forth in this Section 11.6 shall
be in addition to any other rights which, under this Agreement, the injured
party may have at law or in equity.
11.7 Governing Law, etc. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT
REGARD TO ITS CHOICE OF LAW PRINCIPLES. The parties hereto (i) agree that any
legal suit, action or proceeding arising from or related to this
Agreement must be instituted in a State or Federal Court located in the State
of New York, County of New York, (ii) waive any objection or defense which they
may now or hereafter have to the laying of venue of any such suit, action or
proceeding in such location or to the jurisdiction of such courts, and (iii)
irrevocably submit to the exclusive jurisdiction of any such court in any
such suit, action or proceeding.
11.8 Amendments; Waivers; Headings. This Agreement may
not be changed or terminated orally but only by an amendment in writing signed
by both parties hereto. No waiver of any term or condition of this Agreement
shall be effective unless in writing and signed by the party granting the
waiver. The headings and captions contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.9 Assignments and Third Parties. No party hereto shall
assign this Agreement or any part hereof without the prior written consent of
the other party. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns. Nothing in this Agreement shall entitle any
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person other than a party hereto to any claim, cause of action, remedy or right
of any kind.
11.10 Severability. The covenants and agreements contained
herein are separate and severable and the invalidity or unenforceability of any
one or more of such covenants or agreements, if not material to the basis
for this Agreement, shall not affect the validity or enforceability of any other
covenant or agreement contained herein.
11.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
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11.12 Further Assurances. The Seller and the Purchaser
agree to deliver or cause to be delivered to each other on the Closing Date
and at such other times thereafter as shall be reasonably agreed such additional
instruments as may be reasonably required to give effect to this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
GENERAL KINETICS INCORPORATED
By: /s/ Larry M. Heimendinger
---------------------------
Title: Chairman
CRYPTEK SECURE COMMUNICATIONS, LLC
By: /w/ Louis J. Forster
---------------------------
Title: Member
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Exhibit 2.2
List of Schedules
Schedule Description
1.1 Transferred Assets
1.1(a) Prepaid Expenses
1.1(b) Contracts, Agreements, Arrangements, etc.
1.1(c) Machinery, Equipment, Furniture
1.1(d) Interests in Licenses, Approvals, Permits and
Applications
1.1(e) Computer Software, Databases and Programs
1.1(f) Patents, Trade Secrets
and Other Intellectual Property
1.1(g) Real Property Lease
1.1(h) Finished goods, raw materials, work in
progress, inventories, supplies and similar
tangible assets
1.1(i) Accounts Receivable
1.1.3 Recent Balance Sheet
1.2 Assumed Liabilities
1.2(a) Accounts Payable
1.2(b) Accrued Expenses
1.2(c) Lease obligations
1.2(d) Obligations with respect to assigned
agreements
1.3 Allocation
3.1 Foreign Qualifications
3.6 Licenses
3.7 Litigation
3.9 Insurance
3.11 Material Adverse Effect
3.12 Absence of Specified Changes
3.14 Equipment and Property
3.15 Intellectual Property
3.16 Software
3.17 Material Contracts
3.18 Inventory
3.19 Liens
3.21 Major Customers and Suppliers
3.22 Labor Relations
3.26 Financial Statements
3.27 Brokers and Finders
4.4(a) Equity Interests
4.4(b) Preferred Interest; Capitalization
4.6 Brokers and Finders
5.12 Employees
6.6 Consents
List of Exhibits
Exhibit Description
A Promissory Note
B Security Agreement
C-1 Form of Preferred Interest Certificate
C-2 Rights and Preferences of Preferred Interests
D Registration Rights Agreement
E Sublease
F-1 Bill of Sale
F-2 Assignment and Assumption Agreement
F-3 Assignment of Intellectual Property
F-4 Assignment of Lease
