SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): October 11, 1995
INFODATA SYSTEMS INC.
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(Exact name of Registrant as specified in its charter)
Virginia 0-10416 16-0954695
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
12150 Monument Drive
Suite 400
Fairfax, Virginia 22033
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (703) 934-5202
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On October 11, 1995, Infodata Systems Inc. (the "Company") consummated
its purchase of substantially all of the assets and the assumption of certain
liabilities of Merex, Inc. ("Merex"). The purchase was effected pursuant to an
Asset and Purchase Agreement and Plan of Reorganization, dated as of October
6, 1995 (the "Agreement"), among the Company, Merex and Richard M. Tworek,
Mary Margaret Styer and Andrew M. Fregly (collectively, the "Shareholders"). A
copy of the Agreement is filed as an exhibit hereto and is incorporated herein
by reference. Merex was engaged in the business of marketing and delivery of
electronic document management solutions to businesses and the government. The
Company intends to continue to utilize the assets acquired in this transaction
for those same purposes.
Pursuant to the Agreement, the Company purchased the assets and assumed
certain liabilities of Merex in consideration for the issuance of up to
125,000 shares of common stock, par value $.03 per share (the "Common Stock"),
of the Company, with 100,000 shares of Common Stock being issued to the
Shareholders at the closing of the acquisition on October 11, 1995 and with
the remaining 25,000 shares of Common Stock being held in escrow until the
satisfaction by Merex and the Shareholders of certain post-closing conditions
by or before December 31, 1995. The purchase price in this transaction was
determined in arms-length negotiations between the Company and Merex.
Item 7. Financial Statements, Proforma Financial Information and
Exhibits.
In accordance with Items 7(a)(4) and 7(b)(2) of Form 8-K, the financial
statements called for by Item 7(a) of Form 8-K and Rule 3-05(b) of Regulation
S-X, and the proforma financial information called for by Item 7(b) of Form
8-K and Article XI of Regulation S-X, will be filed by amendment as soon as
practicable but not later than December 26, 1995.
The following exhibit is filed herewith:
Exhibit No. Document
2 Asset Purchase Agreement and Plan of
Reorganization, dated as of October 6,
1995, among Infodata Systems Inc., Merex,
Inc., Richard M. Tworek, Mary Margaret
Styer and Andrew M. Fregly.
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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 thereunto duly authorized.
INFODATA SYSTEMS INC.
(Registrant)
Dated: October 27, 1995 By:HARRY KAPLOWITZ
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Harry Kaplowitz
President
ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
by and among
INFODATA SYSTEMS INC.,
As the Buyer,
and
MEREX, INC.
As the Seller,
and
RICHARD M. TWOREK,
MARY MARGARET STYER
and
ANDREW M. FREGLY,
As the Shareholders.
Dated as of October 6, 1995
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TABLE OF CONTENTS
INTRODUCTORY PARAGRAPH
PREAMBLE
ARTICLE I
DEFINITIONS
1.1. Definitions........................................................ 1
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1. Sale and Purchase of Assets........................................ 5
2.1.1. Excluded Assets.................................................... 6
2.2. Purchase Price, Purchase Price Adjustments, Delivery of
Certificates and Post-Closing Matters.............................. 6
2.3. Assumed Liabilities of Seller...................................... 9
2.4. Delivery of Purchased Assets and Novation or Assignment of
Contracts.......................................................... 11
2.5. Closing............................................................ 12
2.6. Procedures for Certain Excluded Assets and Excluded Liabilities.... 12
2.6.1. Certain Excluded Assets............................................ 12
2.6.2. Certain Excluded Liabilities....................................... 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Seller........................... 12
3.1.1. Corporate Existence................................................ 12
3.1.2. Authorization...................................................... 13
3.1.3. No Violation Caused by this Agreement.............................. 13
3.1.4. Bank Accounts...................................................... 13
3.1.5. Actions or Proceedings............................................. 13
3.1.6. Compliance with Laws............................................... 14
3.1.7. Tax Matters........................................................ 14
3.1.8. Brokers; Finders................................................... 14
3.1.9. Financial Statements............................................... 14
3.1.10. Operations of Seller............................................... 15
3.1.11. Title to and Condition of Purchased Assets......................... 16
3.1.12. Real Property Leases; No Other Real Property....................... 16
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3.1.13. Equipment.......................................................... 16
3.1.14. Intellectual Property.............................................. 16
3.1.15. Contracts.......................................................... 17
3.1.16. Benefit Plans...................................................... 17
3.1.17. No Defaults or Violations.......................................... 18
3.1.18. Environmental Compliance........................................... 18
3.1.19. Inventory.......................................................... 19
3.1.20. Insurance.......................................................... 19
3.1.21. Accounts Receivable................................................ 19
3.1.22. Capital Improvements and Expenditures.............................. 19
3.1.23. Assets Sufficient for Conduct of Business ......................... 20
3.1.24. Accuracy of Statements ............................................ 20
3.1.25. No Other Agreement................................................. 20
3.1.26. Continuity of Business Enterprise.................................. 20
3.1.27. Improper and Other Payments........................................ 20
3.1.28. Officers, Directors, Key Employees and Others...................... 20
3.1.29. No Labor Unions; Employee Relations................................ 21
3.2. Representations and Warranties of Buyer............................ 21
3.2.1. Corporate Existence................................................ 21
3.2.2. Authorization...................................................... 21
3.2.3. No Violation....................................................... 21
3.2.4. Compliance with Laws............................................... 22
3.2.5. Actions and Proceedings............................................ 22
3.2.6. Ability to Perform................................................. 22
3.2.7. Capitalization..................................................... 22
3.2.8. Brokers; Finders................................................... 23
3.2.9. Continuity of Business Enterprise.................................. 23
3.2.10. No Defaults or Violations.......................................... 23
3.2.11. Environmental Compliance........................................... 23
3.2.12. Assets Sufficient for Conduct of Business ......................... 24
3.2.13. Accuracy of Statements ............................................ 24
3.2.14. Improper and Other Payments........................................ 24
3.3. Representations and Warranties of Shareholders..................... 25
3.3.1. General............................................................ 25
3.3.2. No Conflict of Interest............................................ 25
3.3.3. Purchase for Investment............................................ 25
3.3.4. Shareholders' Taxes................................................ 26
ARTICLE IV
CERTAIN COVENANTS OF SELLER AND SHAREHOLDERS PRIOR TO CLOSING
4.1. Access to Facilities, Files and Records............................ 27
4.2. Risk of Loss....................................................... 27
4.3. Employees and Compensation......................................... 27
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4.4. Conduct of Business................................................ 27
4.5. Contact Clients.................................................... 29
4.6. No Solicitation or Offers.......................................... 29
4.7. Change of Corporate Name........................................... 29
4.8. Notice Regarding Change in Circumstances........................... 29
4.9. Approval By Shareholders; Liquidation of Seller.................... 29
ARTICLE V
ADDITIONAL COVENANTS OF BUYER
5.1. Employment of Seller Personnel..................................... 30
5.2. Termination of NationsBank Loan Facility........................... 30
5.3. Consulting Agreement with Styer.................................... 30
5.4. Employment Agreements with Tworek and Fregly....................... 31
ARTICLE VI
ADDITIONAL COVENANTS OF THE PARTIES
6.1. Expenses........................................................... 31
6.2. Non-Competition.................................................... 31
6.3. Further Assurances................................................. 33
6.4. Use of Name........................................................ 33
6.5. Registration of Buyer Common Stock................................. 33
6.6. Termination of Certain Agreements.................................. 33
6.7. Agreement of Shareholders Not to Transfer Shares................... 33
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES TO CLOSE
7.1. Leases............................................................. 34
7.2. Non-Competition Provisions......................................... 34
7.3. Conditions Precedent to Obligations of Seller and Shareholders to
Close.............................................................. 34
7.3.1. Warranties True as of the Present Date, the Closing Date and the
Post-Closing Date.................................................. 34
7.3.2. Compliance with Agreement and Covenants............................ 34
7.3.3. Delivery of Buyer Common Stock..................................... 34
7.3.4. Certification...................................................... 35
7.3.5. Opinion of Buyer's Counsel......................................... 35
7.3.6. No Action.......................................................... 35
7.3.7. Termination of NationsBank Loan Facility........................... 35
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7.3.8. No Material Adverse Change in Buyer's Business..................... 35
7.4. Conditions Precedent to Obligations of Buyer to Close.............. 35
7.4.1. Warranties True as of the Present Date, the Closing Date and the
Post-Closing Date.................................................. 35
7.4.2. Compliance with Agreement and Covenants............................ 36
7.4.3. Consents and Approvals............................................. 36
7.4.4. Certification...................................................... 36
7.4.5. Opinion of Seller's Counsel........................................ 36
7.4.6. No Action.......................................................... 36
7.4.7. No Material Adverse Change in Seller's Business.................... 36
ARTICLE VIII
POST-CLOSING MATTERS
8.1. Purchase Price Adjustments......................................... 36
8.2. Escrow Agent....................................................... 37
8.3. Further Instruments and Actions.................................... 37
8.4. Novation/Assignment of Contracts................................... 37
8.5. Consents and Approvals............................................. 37
8.6. Termination of NationsBank Loan Facility........................... 37
ARTICLE IX
TERMINATION
9.1. Termination........................................................ 37
9.2. Effect of Termination.............................................. 38
ARTICLE X
INDEMNIFICATION
10.1. Survival........................................................... 38
10.2. Limits on Indemnification.......................................... 38
10.3. Indemnification by Shareholders.................................... 38
10.4. Indemnification by Buyer........................................... 39
10.5. Claims............................................................. 39
10.6. Notice of Third-Party Claims; Assumption of Defense................ 40
10.7. Settlement or Compromise........................................... 40
10.8. Failure of Indemnifying Person to Act.............................. 41
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ARTICLE XI
MISCELLANEOUS
11.1. Expenses........................................................... 41
11.2. Amendment.......................................................... 41
11.3. Notices............................................................ 42
11.4. Counterparts....................................................... 43
11.5. Interpretation..................................................... 43
11.6. Applicable Law..................................................... 44
11.7. Assignment......................................................... 44
11.8. No Third-Party Beneficiaries....................................... 44
11.9. Publicity.......................................................... 44
11.10. Severability....................................................... 44
11.11. Remedies Cumulative................................................ 44
11.12. Entire Understanding............................................... 44
11.13. Jurisdiction of Disputes; Waiver of Jury Trial..................... 45
EXHIBITS
1.1. Financial Statements
2.1. List of Purchased Assets and Form of Bill of Sale
2.1.1. List of Excluded Assets
2.2(a) Amount of Buyer Common Stock to be issued to the Shareholders
2.2(b)(ii) Description of ADOBE "Virtual File Cabinet" Product
2.2(c) Escrow Agreement
2.2(e) Joint Letter to all Utility Services
2.3. Assumption Agreement for Assumed Liabilities
2.4(a) Novation/Assignment Agreements
3.1.1. List of States in which Seller Qualified
3.1.3. List of Violations Caused by this Agreement
3.1.4. List of Banks, Brokers and Financial Institutions
3.1.5. Actions or Proceedings
3.1.6. Permits
3.1.7. Tax Matters
3.1.10. Operations of Seller
3.1.11. Title to and Condition of Purchased Assets
3.1.12. Real Property Leases
3.1.13. List of Subsequently Acquired Equipment
3.1.14. List of Seller's Intellectual Property and any Exceptions
3.1.15. Contracts
3.1.16. Benefit Plans
3.1.17. Defaults or Violations
3.1.20. Insurance
3.1.21. Accounts Receivable
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3.1.22. Capital Improvements or Purchases
3.1.27. Improper or Other Payments
3.1.28. Officers, Directors, Key Employees and Others
3.1.29(a) Changes in Terms of Employment
3.2.1. List of States in which Buyer Qualified
3.2.3. Consents
3.3.2. Conflicts of Interest
5.1.1 Changes or Exceptions to the Employment of Seller Personnel
5.1.2 Stock Options
5.3. Consulting Agreement of Styer
5.4.1. Employment Agreement of Tworek
5.4.2. Employment Agreement of Fregly
6.6. List of Contracts to Continue with the Shareholders or Affiliates
7.1. Landlord Consent and Assignment of Existing Office Lease
7.3.4. Certification of Buyer's President
7.3.5. Opinion of Buyer's Counsel
7.4.4. Certification of Seller's President and Controller
7.4.5. Opinion of Seller's Counsel
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ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
THIS ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is dated as of October 6, 1995 by and among INFODATA SYSTEMS
INC., a Virginia corporation with its principal office located at 12150
Monument Drive, Fairfax, Virginia 22033 ("Buyer"); MEREX, INC., a Maryland
corporation with its principal office located at 3206 Tower Oaks Boulevard,
Suite 300, Rockville, Maryland 20852 ("Seller"); RICHARD M. TWOREK who resides
at 3856 St. Clair Court, Monrovia, Maryland 21770 ("Tworek"); MARY MARGARET
STYER who resides at 621 Springvale Road, Great Falls, Virginia 22066
("Styer"); and ANDREW M. FREGLY who resides at 3151 K Covewood Court, Falls
Church, Virginia 22042 ("Fregly")(Tworek, Styer and Fregly are also
hereinafter collectively referred to as the "Shareholders").
P R E A M B L E
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, substantially all of the assets of Seller solely in exchange for
shares of voting common stock of Buyer and the assumption by Buyer of certain
of Seller's liabilities and obligations on the terms and conditions
hereinafter set forth. The parties intend for this transaction to be treated
as a tax-free "C" reorganization under Section 368(a)(1)(C) of the Internal
Revenue Code of 1986.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements and warranties made herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following words and terms as used in this Agreement
shall have the following meanings:
"Affiliate" means, with reference to a specified Person, (1) any
other Person that, directly or indirectly through one or more
intermediaries, owns or controls, is under common ownership or control
with, or is owned or controlled by, the specified Person, (2) any other
Person that is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of
equity securities of the specified Person or a Person described in clause
(1) of this paragraph, (3) another Person of which the specified Person
is a director, officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities,
or (4) any relative or spouse of the specified Person or any of the
foregoing Persons. For purposes of this definition, (i) "control"
(including, with correlative meaning, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
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Person, whether through the ownership of voting securities or by contract
or otherwise.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Assumption Agreement" has the meaning set forth in Section 2.3.
"Benefit Plans" has the meaning set forth in Section 3.1.16.
"Bill of Sale" has the meaning set forth in Section 2.1.
"Business Day" means a day other than a Saturday, Sunday or day on
which commercial banks in New York City are generally closed for
business.
"Buyer Common Stock" means the authorized, issued and outstanding
common stock, par value $0.03 per share, of Buyer, as further described
in Section 3.3.5.
"Closing" means the consummation of the transactions contemplated
herein.
"Closing Date" and "Post-Closing Date" mean the dates on which
Closing and Post-Closing occur, as specified in Sections 2.5 and 2.2(d),
respectively.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning set forth in Section
6.2(e).
"Contracts" has the meaning set forth in Section 2.1.
"Documentation of New Business," with respect to a named third
party, means one or more purchase orders, contracts or other written
commitments reasonably acceptable to Buyer and signed by the relevant
third party or one of its Affiliates, on the one hand, and by Seller,
Buyer or one of their respective Affiliates, on the other hand.
"Ending Date" has the meaning set forth in Section 6.2(a).
"Environmental Law" means any law which relates to or otherwise
imposes liability or standards of conduct concerning mining or
reclamation of mined land, discharges, emissions, releases or threatened
releases of noises, odors or pollutants, contaminants or hazardous or
toxic wastes, substances or materials, whether as matter or energy, into
ambient air, water or land, or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants or hazardous
or toxic wastes, substances or materials, including the Comprehensive
Environmental
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Response, Compensation and Liability Act of 1980 and the Superfund
Amendments and Reauthorization Act of 1986 (together, as amended,
"CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Federal Water Pollution Control Act Amendments of 1972, the
Clean Water Act of 1977, as amended, any so-called "Superfund" law, and
any other similar federal, state or local law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets" has the meaning set forth in Section 2.1.1.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"Existing Borrowing" means all borrowing from lending institutions,
vendors or agencies of federal, state or local governments or their
political subdivisions, as set forth on the Financial Statements or in
the books and records of the Seller.
"Financial Statements" means all of the following:
(a) the audited financial statements of the Seller as of March
31, 1995 (including all schedules and notes thereto), consisting of the
balance sheet at such date; and
(b) the audited financial statements of the Seller as of
December 31, 1994 (including all schedules and notes thereto), consisting
of the balance sheet at such date and the related statements of
operations and cash flows for the twelve month period then ended.
In addition to (a) and (b) above, the term "Financial Statements" shall
include any and all interim Financial Statements issued with respect to
Seller for any period after March 31, 1995. The Financial Statements
shall be attached as Exhibit 1.1 to this Agreement.
"GAAP" means generally accepted accounting principles as defined and
applied in the United States of America.
"Governmental Authority" means the government of the United States
or any foreign country or any state or political subdivision thereof and
any entity, body or authority exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
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"Hazardous Substance" means:
(a) any "hazardous substance" as defined by CERCLA;
(b) any "hazardous substance" as defined by RCRA;
(c) any petroleum product or fractions thereof; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of other
applicable federal, state or local Law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or material, all as now or
at any time hereafter in effect.
"Indemnified Person" and "Indemnifying Person" have the meanings set
forth in Section 10.5.
"Intellectual Property" means any and all trademarks, trade names,
service marks, patents, copyrights (including any registrations,
applications, licenses or rights relating to any of the foregoing),
technology, trade secrets, inventions, know-how, designs, computer
programs, processes, and all other intangible assets, properties and
rights. The "Seller's Intellectual Property" means any and all
Intellectual Property used by the Seller in the conduct of its business.
"Knowledge" means, with respect to an individual making a
representation to his or her "knowledge," those facts and circumstances
personally known by such individual; and with respect to an entity making
a representation to its "knowledge," those facts and circumstances
personally known by any officer of such entity.
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"Loss" or "Losses" means any and all liabilities, losses, costs,
claims, damages (including consequential damages), penalties and expenses
(including attorney's fees and expenses and costs of investigation and
litigation). In the event any of the foregoing are indemnifiable
hereunder, the terms "Loss" and "Losses" shall include any and all
attorneys' fees and expenses and costs of investigation and litigation
incurred by the Indemnified Person in enforcing such indemnity. No Loss
shall be reduced by reason of tax benefits allegedly enjoyed as a result
of such Loss by any Indemnified Party.
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"Noncompetition" has the meaning described in Section 6.2.
"Permits" has the meaning set forth in Section 3.1.6.
"Person" means an individual, firm, partnership, corporation,
association, limited liability company, limited liability partnership,
unincorporated organization, trust, corporation, or any other entity,
including, without limitation, a government or any department, agency or
instrumentality thereof.
"Prime Rate" means the annual rate of interest charged from time to
time by the Chase Manhattan Bank, N.A., in New York City for U.S. Dollar
loans made to the most credit worthy customers of such bank.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchase Price" has the meaning set forth in Section 2.2.
"Purchase Price Adjustments" means the decreases in the Purchase
Price set forth in Section 2.2(b).
"Subsidiary" means any Person of which 50.1 percent or more of the
voting power of such Person is controlled by another Person.
"Tax" or "Taxes" has the meaning set forth in Section 3.1.7.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Sale and Purchase of Assets. Subject to the terms and conditions of
this Agreement, at the Closing the Seller shall sell, transfer, convey, assign
and deliver to Buyer, and Buyer shall purchase from Seller, substantially all
of Seller's assets, business, properties, goodwill and rights as a going
concern, tangible and intangible, wheresoever located and whether or not
carried or reflected on the books and records of Seller and listed on attached
Exhibit 2.1 (hereinafter sometimes collectively called the "Purchased
Assets"). The Purchased Assets shall include, without limitation: (i) all of
Seller's right, title and interest in and to Seller's corporate name and all
variations thereof; (ii) cash-on-hand and cash in bank accounts of Seller,
inclusive of cash equivalents, as of the Closing Date, together with the bank
account records of Seller; (iii) all of Seller's right, title and interest in
and to all contracts, licenses or agreements to which Seller is a party or
shall become a party to prior to the Closing Date (other than this Agreement
and the agreements executed pursuant hereto or contemplated hereby),
including, without limitation, all supply and customer contracts, work and
purchase orders, employment and consultancy contracts, government
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contracts, equipment, capital and real property leases and loan agreements
listed on attached Exhibit 2.1 (collectively, the "Contracts"); (iv) all
accounts receivable, checks, negotiable instruments and chattel paper, payable
to or (with respect to bearer instruments) in the possession of Seller; (v)
all inventory and supplies; (vi) all furniture, fixtures, equipment and
machinery; (vii) all leasehold interests and improvements thereon and any
other interest in land owned by the Seller; (viii) all of Seller's right,
title and interest in and to Seller's Intellectual Property; (ix) all books
and records, files, designs, drawings, data processing software and operating
data relating to the Purchased Assets or the Assumed Liabilities, other than
those which constitute Excluded Assets or Excluded Liabilities; (x) any
rebates for insurance or other prepaid items (e.g., deposits to satisfy
worker's compensation claims); (xi) with respect to each insurance policy on
which Seller is an insured and which is an "occurrence" policy as opposed to a
"claims made" policy, all rights of Seller, including the right to receive any
amounts recovered or recoverable from the insurer after the Closing Date, with
respect to any Loss resulting from an occurrence which took place on or prior
to the Closing Date, and with respect to each insurance policy on which Seller
is an insured party and which is a "claims made" policy as opposed to an
"occurrence" policy, all rights of Seller, including the right to receive any
amounts recovered or recoverable from the insurer after the Closing Date, with
respect to any Loss resulting from a claim made on or prior to the Closing
Date, together with all insurance policies of which Seller is the sole owner
and which are listed on Exhibit 3.1.20 hereto to be assigned to Buyer; (xii)
all claims, causes of actions, and suits which Seller has or may have against
third parties in connection with the Purchased Assets or the Assumed
Liabilities; and (xiii) the business and operations of Seller as a going
concern; and excluding only the assets listed in Section 2.1.1 as Excluded
Assets. Seller shall convey to Buyer all of Seller's right, title and interest
in and to the Purchased Assets, subject to all liabilities, obligations, liens
and encumbrances related thereto, excepting only the Excluded Liabilities
described in Section 2.3. The conveyance shall be made pursuant to a bill of
sale, substantially in the form of Exhibit 2.1 attached hereto (the "Bill of
Sale") and any other instruments of conveyance to be delivered pursuant to
this Agreement.
2.1.1. Excluded Assets. Notwithstanding the foregoing and without
limitation, the Purchased Assets shall not include any of the following
("Excluded Assets"):
(a) The assets listed in Exhibit 2.1.1;
(b) Seller's corporate seals, certificates of incorporation,
minute books, stock books, stock certificates, tax returns, books of
account or other records having to do with Seller's corporate
organization;
(c) Any rights of Seller under this Agreement or under any
other agreement between Seller on the one hand and Buyer on the other
hand entered into on or after the date of this Agreement; and
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(d) Any tangible assets of the Seller that are not listed on
the Exhibits to this Agreement or are not otherwise expressly included in
the Purchased Assets.
2.2. Purchase Price, Purchase Price Adjustments, Delivery of Certificates
and Post-Closing Matters.
(a) The purchase price to be paid by Buyer for the Purchased Assets,
in addition to any Assumed Liabilities, shall be 125,000 shares of Buyer
Common Stock (the "Purchase Price"), but may be reduced to no less than
an aggregate of 100,000 shares of Buyer Common Stock as described in
Section 2.2(b).
At Closing, Buyer shall deliver certificates for 100,000 shares of Buyer
Common Stock to Seller, registered in the names of the Shareholders and
in the amounts provided on attached Exhibit 2.2(a). In addition, at
Closing Buyer shall deliver certificates for 25,000 shares (the
"Additional Shares") of Buyer Common Stock to Freedman, Levy, Kroll &
Simonds ("Escrow Agent") to be deposited and held in escrow, subject to
the Purchase Price Adjustments and the terms and conditions described in
subsections (b) and (c) below.
(b) Purchase Price Decreases. The Purchase Price shall be decreased
in the following amounts and in the following events; provided, however
that the aggregate expected value of $1,425,000 represented by the
following three items may be satisfied by an aggregate actual value of at
least $1,425,000 from any one or more of such three items:
(i) The Purchase Price shall be decreased by 5,000 shares of
Buyer Common Stock unless, on or before December 31, 1995, there exists
Documentation of New Business with ADOBE Systems Inc. ("ADOBE") with
respect to a minimum of $125,000 of funding by ADOBE and others to
develop "The Virtual File Cabinet" product as described in Exhibit
2.2(b)(ii), and which Documentation of New Business, if it is with Seller
and not Buyer or one of Buyer's Affiliates, shall be immediately
transferred to Buyer prior to December 31, 1995 without any material
change.
(ii) The Purchase Price shall be decreased by 15,000 shares of
Buyer Common Stock unless, on or before December 31, 1995, there exists
Documentation of New Business with the Westinghouse Hanford Company
("Westinghouse"), with respect to a minimum value (measured in terms of
gross dollars to be paid by Westinghouse to Seller, Buyer or an Affiliate
of Buyer) of $1,100,000.00, and which Documentation of New Business, if
it is with Seller and not Buyer or one of Buyer's Affiliates, shall be
immediately transferred to Buyer prior to December 31, 1995 without any
material change.
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(iii) The Purchase Price shall be decreased by 5,000 shares of
Buyer Common Stock unless, on or before December 31, 1995, there exists
Documentation of New Business with Nabisco, Inc. ("Nabisco"), with
respect to a minimum value (measured in terms of gross dollars to be paid
by Nabisco to Seller, Buyer or an Affiliate of Buyer) of an aggregate of
$200,000.00, and which Documentation of New Business, if it is with
Seller and not Buyer or one of Buyer's Affiliates, shall be immediately
transferred to Buyer prior to December 31, 1995 without any material
change.
(c) Escrow of Additional Shares. As security for the payment of the
Purchase Price (as adjusted pursuant to Section 2.2(b) above), Buyer, at
the Closing, shall deposit in escrow with the Escrow Agent certificates
for the Additional Shares issued in the names of the Shareholders in the
amounts specified on attached Exhibit 2.2(a), together with stock powers
endorsed in blank, and Escrow Agent shall agree to hold the certificates
for the Additional Shares pursuant to the terms and conditions of this
Section 2.2(c) and the Escrow Agreement attached hereto as Exhibit
2.2(c). On or prior to the Post-Closing Date, the Seller and Buyer shall
from time to time jointly instruct the Escrow Agent to deliver, and the
Escrow Agent shall deliver, certificates for all or a portion of the
Additional Shares in accordance with their joint instructions. In the
event the aggregate joint instructions issued hereunder by Buyer and
Seller direct the Escrow Agent to deliver certificates for less than the
entire amount of the Additional Shares, the Escrow Agent shall deliver
certificates to the Shareholders for such amount and in such manner as
shall be directed in the joint instructions, which instructions shall
reflect the Purchase Price described in Section 2.2(a) above, as adjusted
pursuant to Section 2.2(b) above. In such event, the Escrow Agent shall
return to Buyer any certificates for Additional Shares that have not been
delivered to the Shareholders pursuant to the joint instructions, or, in
the event of a dispute among the parties regarding such joint
instructions as to the undelivered Additional Shares, the Escrow Agent
shall deliver any and all undelivered Additional Shares to a court of
competent jurisdiction and thereafter the Escrow Agent shall be fully and
completely relieved from any further duties or responsibilities with
respect to the Additional Shares. The Escrow Agent shall not dispose of
the Additional Shares other than as provided in this Section 2.2(c) or
the Escrow Agreement.
(d) Post-Closing. Any delivery of certificates for the Additional
Shares required to be made by the Escrow Agent pursuant to Section 2.2(c)
hereof shall be made at the offices of Freedman, Levy, Kroll & Simonds at
10:00 a.m. (EST), on January 5, 1996, or on such other date and time as
Buyer and Seller shall agree in writing (the date and time of such
post-closing hereunder being referred to herein as the "Post-Closing
Date").
(e) Apportionments. (i) Any transfer taxes and any sales or use
taxes arising from the transactions contemplated herein shall be borne
and paid by Buyer.
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Real property taxes, utility charges, rents, income from leases,
licenses, permits, agreements, and privileges, if any, shall be
apportioned between the parties as of the Closing Date, regardless of the
date assessed, paid or payable, except to the extent that any such items
are included as Assumed Liabilities.
(ii) At Closing, Buyer shall sign, and deliver to Seller for
mailing, a joint letter in the form attached hereto as Exhibit 2.2(e),
requesting all persons as identified in said letter providing electric,
gas, water, telephone or other utility services to all premises leased or
occupied by Seller, to transfer such services and billing therefor to
Buyer, effective at Closing, and to issue a final bill to Seller for such
utility service rendered up to and including the Closing Date. Buyer
shall refund to Seller any payments previously made by Seller for utility
services furnished or to be furnished after Closing.
(iii) All recording costs and filing fees required to be paid
with respect to documents under this Agreement, and the cost of a survey,
if one is required, shall be the sole responsibility of Buyer.
2.3. Assumed Liabilities of Seller. Buyer hereby undertakes, assumes and
agrees, subject to the limitations contained herein, to perform, pay or
discharge all of Seller's debts, liabilities and obligations up to a maximum
of $515,000 plus any professional fees relating to the transactions underlying
this Agreement, other than the Excluded Liabilities (the "Assumed
Liabilities"), pursuant to an assumption agreement which Buyer shall execute
and deliver to Seller at the Closing (the "Assumption Agreement"), which
Assumption Agreement shall be substantially in the form of Exhibit 2.3
attached hereto. Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement, the debts, liabilities and obligations assumed by
Buyer hereunder shall not include any of the following, without regard to
whether they arose before or after the Closing (the "Excluded Liabilities"):
(a) All debts, obligations and liabilities of Seller to its
Affiliates, including without limitation, accounts payable and accrued
expenses, other than those arising out of goods sold or services
performed in the ordinary course of business which are included on the
Financial Statements or Exhibit 2.3;
(b) Any liability or obligation of the Shareholders arising or
incurred in connection with the negotiation, preparation and execution of
this Agreement and the transactions contemplated hereby, including fees
and expenses of legal counsel, accountants and other experts;
(c) Debts, liabilities or obligations of Seller of any nature to any
past or present shareholder of Seller, except as set forth in the
Financial Statements or the Assumption Agreement in Exhibit 2.3;
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(d) Any liability or obligation in respect of the Excluded Assets;
(e) Any obligations or liabilities related to employee claims under
worker's compensation laws arising from service or employment prior to
Closing;
(f) Any discrimination or other claims by employees against Seller
not fully reflected, reserved against or accrued for on the Financial
Statements;
(g) Any liabilities arising from any breach of contract, breach of
warranty, tort, infringement or violation of laws with respect to any
time period prior to Closing;
(h) Any suits, actions or claims for salaries, wages, vacation pay
or benefits due or accrued owing to any present or former employee of
Seller, except only with regard to such items that are included in the
Financial Statements or the Assumed Liabilities;
(i) Any obligations to indemnify any officer, director, employee or
agent of the Seller;
(j) Any liability or obligation which is not otherwise a specific
Assumed Liability;
(k) Any other suits, actions or claims against Seller, whether or
not filed against or known to Seller, and any losses, costs or damages
based upon or arising out of such suits, actions or claims which relate
to any time period prior to Closing; or
(l) Any obligations or liabilities of Seller or its Affiliates,
including but not limited to the Shareholders, of any nature with respect
to the provision of services or products to, or the receipt of
remuneration from, any Person in Russia or any other foreign country
which was formerly a part of the Union of Soviet Socialist Republics.
Seller agrees to satisfy all debts, liabilities and obligations with
respect to all Excluded Liabilities set forth in this Section 2.3, whether
known at Closing or thereafter determined, as and when due and Seller and
Shareholders shall indemnify and hold Buyer harmless therefor, as set forth in
Article X herein.
2.4 Delivery of Purchased Assets and Novation or Assignment of Contracts.
Prior to Closing, or as soon thereafter as practicably possible, Seller shall
use its best efforts to obtain the novation or assignment to the Buyer of the
Contracts and deliver to the Buyer such additional instrument or instruments
of transfer as shall, in the opinion of Buyer's counsel, be necessary or
appropriate to vest in the Buyer good and marketable title to the
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Purchased Assets. Prior to the novations or assignments of the Contracts,
Buyer and Seller agree that Buyer shall assume the Seller's rights and
obligations under the Contracts. In furtherance of the foregoing, the parties
hereby agree as follows:
(a) Seller shall further signify its consent to the novation or
assignment of the Contracts to the Buyer by the Seller's execution of
Novation/Assignment Agreements among Seller, Buyer and any other parties
to the Contracts (the "Novation/Assignment Agreements") in substantially
the form attached hereto as Exhibit 2.4(a) with respect to commercial
contracts, and in a form complying with the Federal Acquisition
Regulations (48 CFR 1204) as to federal government contracts;
(b) Buyer shall execute and deliver the Novation/Assignment
Agreements and all supporting documentation to Seller and Seller shall
deliver the Novation/Assignment Agreements as executed by Seller and
Buyer and all supporting documentation to the appropriate parties for
their review and approval;
(c) The beneficial interest of Seller in and to the Contracts and
all related rights and assets shall pass on the Closing Date to the
Buyer;
(d) From on and after Closing, Seller shall hold and declare that it
holds the Contracts and all related rights and assets in trust for the
benefit of the Buyer, its successors and assigns;
(e) Seller shall promptly forward to Buyer any payments and
consideration, unconditionally endorsed to Buyer, which Seller receives
from the Contracts after the Closing Date;
(f) Seller shall use all reasonable efforts to obtain and secure any
and all consents and approvals that are necessary to effect the valid
sale, transfer and assignment of the Contracts and all related rights and
assets to the Buyer without change in any of the material terms and
conditions thereof; and
(g) Seller shall cooperate with the Buyer in any other reasonable
arrangement designed to provide the Buyer with the benefits of each of
the Contracts and all related rights and assets.
2.5. Closing. The closing of the sale and purchase of the Purchased
Assets (the "Closing") will take place at the offices of Freedman, Levy, Kroll
& Simonds, Washington, D.C., at 10:00 A.M. (EST) on October 11, 1995, or at
such other place, time and date as the parties may agree upon in writing (the
"Closing Date").
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2.6. Procedures for Certain Excluded Assets and Excluded Liabilities.
2.6.1. Certain Excluded Assets. If any of the Purchased Assets are
ultimately determined by Buyer to be Excluded Assets, Buyer shall
transfer and convey (without further consideration) to Seller, and Seller
shall accept, such Purchased Assets that are determined by Buyer to be
Excluded Assets and Buyer and Seller shall execute such documents or
instruments of conveyance and take such further acts which are reasonably
necessary or desirable to effect the transfer of such Excluded Assets to
Seller. Buyer shall appropriately label such assets which are determined
to be Excluded Assets, to segregate such Excluded Assets from Buyer's
other assets and to move (at the Seller's expense) such Excluded Assets
to a place designated by the Seller.
2.6.2. Certain Excluded Liabilities. If any of the Assumed
Liabilities are ultimately reasonably determined by Buyer to be Excluded
Liabilities, Seller shall assume, and agree to pay, perform, fulfill and
discharge (without further consideration), such previously Assumed
Liabilities that are determined by Buyer to be Excluded Liabilities and
Buyer and Seller shall execute such documents or instruments of
assumption and take such further acts which are reasonably necessary or
desirable to effect the transfer of such Excluded Liabilities to Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Seller. Seller hereby represents
and warrants to Buyer as follows:
3.1.1. Corporate Existence. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Maryland and has full corporate power and authority to own or
lease its assets and properties and to carry on its business as now
conducted. Seller has delivered to Buyer true and complete copies of its
Certificate of Incorporation and By-laws of Seller as amended to date.
Seller is duly qualified to do business and (where the concept of "good
standing" is applicable) in good standing as a foreign corporation in the
States in which such qualification is materially required by Seller's
business, which States are set forth on Exhibit 3.1.1. Seller does not
presently own, directly or indirectly, any shares of capital stock of or
other equity interest in any corporation, partnership or other entity.
3.1.2. Authorization. Seller has full corporate power and authority
to enter into and perform its obligations under this Agreement and to
consummate the transactions contemplated herein. The execution, delivery
and performance of this
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Agreement by Seller and the consummation of the transactions contemplated
herein have been duly authorized by all requisite corporate action. This
Agreement is the legal, valid and binding obligation of Seller
enforceable in accordance with its terms, except as enforceability may be
limited by equitable principles or by bankruptcy, fraudulent conveyance,
insolvency or similar laws affecting creditors' rights generally.
3.1.3. No Violation Caused by this Agreement. Except as otherwise
set forth in Exhibit 3.1.3, the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
hereby will not violate (i) any provision of the Certificate of
Incorporation or By-laws of the Seller; (ii) any contract or other
agreement to which the Seller is a party or by or to which the Seller or
any of its assets or properties may be bound or subject; (iii) any order,
judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, the Seller or
upon the securities, assets, properties or business of the Seller; (iv)
any statute, law or regulation of any jurisdiction as such statute, law
or regulation relates to the Seller or to the securities, assets,
properties or business of the Seller; or (v) any Permits.
3.1.4. Bank Accounts. Exhibit 3.1.4 sets forth the names and
locations of each bank or other broker or financial institution at which
the Seller has an account (giving the account numbers) or safe deposit
box and the names of all Persons authorized to draw thereon or have
access thereto, and the names of all Persons, if any, now holding powers
of attorney or comparable delegation of authority from the Seller and a
summary statement thereof. All such accounts are maintained by Seller for
normal business purposes.
3.1.5. Actions or Proceedings. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, governmental or
regulatory body or arbitration tribunal against or involving the Seller;
and, there are no actions, suits or claims or legal, administrative or
arbitral proceedings or, to the knowledge of the Seller, investigations
(whether or not the defense thereof or liabilities in respect thereof are
covered by insurance) pending or, to the knowledge of Seller, threatened
against or involving the Seller or any of its properties or assets, that,
individually or in the aggregate, could have a material adverse effect
upon the transactions contemplated hereby or upon the assets, properties,
business, operations, or condition (financial or otherwise) of the
Seller, except for matters set forth in Exhibit 3.1.5 hereto.
3.1.6. Compliance with Laws. To the knowledge of the Seller, the
Seller is not in violation of (i) any applicable order, judgment,
injunction, award or decree, or (ii) any federal, state, local or foreign
law, ordinance or regulation or any other requirement of any Governmental
Authority applicable to the business of the Seller, except to the extent
that non-compliance does not and will not have a material adverse effect
upon the assets, properties, business or operations of the Seller. The
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Seller has all licenses, permits, orders or approvals of any federal,
state, local or foreign governmental or regulatory body (collectively,
"Permits") as described in Exhibit 3.1.6, that are material to the
conduct of the business of the Seller and such Permits are in full force
and effect. No other federal, state, local, and foreign licenses,
certificates, permits, franchises and rights are currently necessary for
the lawful operation of Seller's business, except for those the absence
of which would not have a material adverse effect on Seller's business.
3.1.7. Tax Matters. Except to the extent set forth on Exhibit 3.1.7,
the Seller has timely filed and paid all federal, state, county, local,
foreign and other taxes, including, without limitation, income taxes,
estimated taxes, excise taxes, sales taxes, use taxes, franchise taxes,
employment and payroll related taxes, property taxes and import duties
(hereinafter, "Taxes" or, individually, a "Tax"), required to be paid by
it through the Closing Date, and all deficiencies or other additions to
Tax, interest and penalties owed by it, in connection with any such
Taxes. Seller shall pay any Tax related to or arising out of this
transaction required by law to be paid by Seller.
3.1.8. Brokers; Finders. Seller has not retained any broker or
finder in connection with the transactions contemplated herein so as to
give rise to any valid claim against Seller or Buyer for any brokerage or
finder's commission, fee or similar compensation.
3.1.9. Financial Statements. Seller has delivered to Buyer copies of
the Financial Statements. The Financial Statements present fairly the
financial position of Seller with respect to, and the assets and
liabilities of, the Seller and the results of the operation of Seller's
business and changes in financial position of the Seller as of December
31, 1994, and for the 12 months then ended, and the assets and
liabilities of the Seller as of March 31, 1995 and for each month
thereafter until the Closing Date, in conformity with GAAP, consistently
applied during the period. The Financial Statements, including the notes
thereto, make full and adequate disclosure of, and provision for, all
material obligations and liabilities of Seller to the extent required by
GAAP. Except as set forth in the most recent balance sheet included in
the Financial Statements, there are no liabilities, debts, claims or
obligations, whether accrued, absolute, contingent or otherwise, whether
due or to become due, which could materially and adversely affect any of
the Purchased Assets or the rights of Seller therein or thereto, to the
extent required by GAAP to be included in such balance sheet.
3.1.10. Operations of Seller. Except as set forth in Exhibit 3.1.10
hereto, the Seller has not since March 31, 1995:
(i) amended its Certificate of Incorporation or By-laws or
merged with or into or consolidated with any other person, subdivided or
in any way
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reclassified any shares of its capital stock or changed or agreed to
change in any manner the rights of its outstanding capital stock or the
character of its business;
(ii) issued or sold or purchased, or issued options or rights
to subscribe to, or entered into any contracts or commitments to issue or
sell or purchase, any shares of its capital stock;
(iii) waived any right of material value to its business;
(iv) made any change in its accounting methods or practices or
made any change in depreciation or amortization policies or rates adopted
by it;
(v) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, employees,
consultants, agents or other representatives;
(vi) entered into any lease (as lessor or lessee); sold,
abandoned or made any other disposition of any of its tangible assets;
granted or suffered any lien or other encumbrance on any of the Purchased
Assets or properties; entered into or amended any contract or other
agreement to which it is a party, or by or to which it or the Purchased
Assets or its other properties are bound or subject, or pursuant to which
it agrees to indemnify any party or to refrain from competing with any
party;
(vii) except for property or equipment acquired in the ordinary
course of business, made any acquisition of all or any part of the
assets, properties, capital stock or business of any other Person;
(viii) paid, directly or indirectly, any of its material
liabilities before the same became due in accordance with its terms or
otherwise than in the ordinary course of business;
(ix) suffered or incurred any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting its
assets, properties, business, operations or condition (financial or
otherwise);
(x) entered into any other material contract or other agreement
or other material transaction; or
(xi) been advised or otherwise become aware that any of its
existing Contracts for the performance of services is to be terminated or
substantially modified other than in accordance with its terms or as
reflected in Exhibit 3.1.10.
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3.1.11. Title to and Condition of Purchased Assets. On the date of
this Agreement and on the Closing Date, Seller has and will have good and
marketable title to, is and will be the owner of, and has and will have
the right to sell, convey, transfer, assign and deliver the Purchased
Assets free and clear of any mortgage, lien, pledge, security interest,
option, lease (or sublease), conditional sales agreement, title retention
agreement, charge, claim, encumbrance, easement or encroachment, except
as disclosed on Exhibit 3.1.11 hereto. Except as otherwise provided in
Section 8.3 hereof with respect to certain specified insurance policies
and equipment leases of Seller, at and as of the Closing, Seller will
convey the Purchased Assets to Buyer by deeds, bill of sale, certificates
of title and instruments of assignment and transfer effective to vest in
Buyer, and Buyer will have, good and valid record and marketable title to
all of the Purchased Assets, free and clear of all encumbrances other
than those listed in Exhibit 3.1.11.
3.1.12. Real Property Leases; No Other Real Property. Exhibit 3.1.12
hereto lists all leases pursuant to which Seller holds any real property
used in connection with its business. Except as disclosed on Exhibit
3.1.12, all real property leases are in full force and effect, Seller is
current in its obligations thereunder, and Seller has not received any
notice of default thereunder, nor is Seller aware of any facts or
circumstances which may give rise to any default thereunder. Seller does
not have interest in any real property not listed on Exhibit 3.1.12.
Seller is not a party to any contract obligating it to purchase or
acquire any interest in real property.
3.1.13. Equipment. Exhibit 3.1.13 hereto sets forth a complete and
accurate list of all of the equipment, if any, acquired by Seller from
the date hereof through the Closing Date. Except as disclosed on Exhibit
3.1.13, all personal property leases are in full force and effect, Seller
is current in its obligations thereunder and Seller has not received any
notice of default hereunder, nor is Seller aware of any facts or
circumstances which may give rise to a default thereunder. Seller does
not have an interest in any equipment other than the equipment listed on
Exhibit 3.1.13 nor is Seller obligated to purchase, acquire, lease any
other equipment. Seller has delivered to Buyer true, correct and complete
copies of all personal property leases.
3.1.14. Intellectual Property.
(a) Exhibit 3.1.14 is an accurate and complete list of all of
Seller's Intellectual Property, and reflects the Seller's Intellectual
Property that has been duly and properly registered in any jurisdiction.
Except as otherwise specified in Exhibit 3.1.14, Seller owns, has the
right to use, sell, license, dispose of, and to bring actions for the
misappropriation of Seller's Intellectual Property, without any conflict
with or infringement of the rights of others, free and clear of all
liens, charges or encumbrances or other restrictions of any kind. There
is no pending or threatened claim contesting the validity, ownership or
right to use, sell, license, dispose of, or to
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bring actions for the misappropriation of, Seller's Intellectual Property
or any other Intellectual Property.
(b) Seller has taken reasonable steps to safeguard and maintain
the secrecy and confidentiality of, and protect its proprietary rights
in, Seller's Intellectual Property.
(c) To the knowledge of Seller, Seller has not infringed or
otherwise violated, and is not infringing on or otherwise violating, any
intellectual property rights of others, and the use by Buyer from and
after Closing of Seller's Intellectual Property will not infringe on or
otherwise violate the Intellectual Property rights of others; provided,
however, that such representation and warranty shall apply only to
Seller's Intellectual Property delivered on the Closing Date and shall
not apply to any use of Seller's Intellectual Property after the Closing
Date if Seller's Intellectual Property is altered in any way and/or used
in conjunction with any other product or process. To the knowledge of
Seller, no Person has infringed on or otherwise violated any of Seller's
Intellectual Property.
(d) Except as otherwise specified in Exhibit 3.1.14, there are
no Contracts pursuant to which Seller has authorized any Person to use,
sell, license, dispose of or otherwise have access to any of the Seller's
Intellectual Property; there are no Contracts pursuant to which any
Person has authorized Seller to use, sell, license, dispose of or
otherwise have access to any Seller's Intellectual Property; and there
are no royalties, fees or other payments payable by Seller to any Person
by reason of the ownership, use, license, sale, or disposition of the
Seller's Intellectual Property.
3.1.15. Contracts. Exhibit 3.1.15 lists all Contracts and
arrangements to which the Seller is a party or by which it is bound, or
to which any of its assets or properties is subject. Except as otherwise
specified in Exhibit 3.1.15, Seller is not in breach or in default under
any Contract and no event has occurred or will occur as a result of the
transfer and assignment of the Contracts by Seller to Buyer at Closing or
as promptly thereafter as practicable, which, with the giving of notice
or the lapse of time, or both, would constitute any default of any such
persons under any Contract.
3.1.16. Benefit Plans. The Seller does not sponsor or offer any
"employee welfare benefit plan" or "employee pension benefit plan" (as
those terms are respectively defined in Sections 3(1) and 3(2) of ERISA)
for its employees, nor does any person participate nor reasonably expect
to participate in any such plan, in either case, on account of his or her
employment with Seller, other than those plans listed on Exhibit 3.1.16.
Seller does not maintain any "employee benefit plan" (as defined in
Section 3(3) of ERISA), except as listed on Exhibit 3.1.16. There have
been no amendments to any of the employee pension benefit plans, employee
welfare benefit
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plans or fringe benefit arrangements (collectively "Benefit Plans")
listed on Exhibit 3.1.16 since September 1, 1995. All Benefit Plans on
Exhibit 3.1.16 comply in form and in operation in all material respects
with all applicable requirements of law and regulation; except as
specifically noted on Exhibit 3.1.16. A true and correct copy of each of
the Benefit Plans listed on Exhibit 3.1.16 as in effect on the date
hereof and each trust agreement relating to each such plan and
arrangement, has been supplied to Buyer. In the case of any Benefit Plan
which is not in written form, Buyer has been supplied with an accurate
description of such plan as in effect on the Closing Date. Seller has
incurred no liability or contingent liability with respect to such
Benefit Plans, except as disclosed on Exhibit 3.1.16.
3.1.17. No Defaults or Violations. Except as set forth on Exhibit
3.1.17, (a) Seller has not materially breached any provision of, nor is
it in material default under the terms of, any lease, contract,
commitment, agreement, mortgage, lien, instrument, plan or license to
which it is a party or under which it has any rights or by which it is
bound and which relates to the Seller's business, and to Seller's
knowledge, no other party to any such lease, contract, commitment,
agreement, mortgage, lien, instrument, plan or license is in default
thereunder in any material respect, (b) Seller is not in any material
violation or default of any law, governmental regulation or rule or order
of any Governmental Authority that is applicable in any way to the Seller
or the operation of its business.
3.1.18. Environmental Compliance.
(i) All real property leased by Seller has never been used by
Seller or, to Seller's knowledge, by any other person, to generate,
manufacture, refine, transport, treat, store, handle or dispose of any
Hazardous Substances.
(ii) To Seller's knowledge, all real property leased by Seller
is in compliance with all Environmental Laws.
(iii) To Seller's knowledge, all real property leased by Seller
does not contain any Hazardous Substances.
(iv) To Seller's knowledge, no tanks now or formerly used for
the storage of any liquid or gas above or below ground, are present or
were at any time present on or at any real property leased by Seller.
(v) Seller has not received a citation, directive, letter, or
other communication, written or oral, from any person or governmental
authority concerning the presence of any Hazardous Substances on any real
property owned or leased by Seller.
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(vi) Seller has no knowledge of or information regarding the
presence of any Hazardous Substances at adjacent properties, which
Hazardous Substances could migrate to, through, or under any real
property leased by Seller.
(vii) Seller has obtained all material licenses and permits
required by all material Environmental Laws.
(viii) Seller has not received any notice of any violation of
or potential or actual liability under any Environmental Laws at or
concerning any real property leased by Seller.
(ix) No action has been commenced or, to Seller's knowledge,
threatened regarding Seller's compliance with or liability under any
Environmental Laws at or concerning any real property leased by Seller.
3.1.19. Inventory. The Purchased Assets do not include inventory
subject to the Virginia or Maryland Commercial Code - Bulk Transfers
provisions.
3.1.20. Insurance. Exhibit 3.1.20 contains an accurate and complete
list of all policies of fire, liability, workers' compensation, title and
other forms of insurance owned, held by or applicable to Seller, and
Seller has heretofore delivered to Buyer a true and complete copy of all
such policies, including all occurrence-based policies applicable to
Seller for all periods prior to the Closing Date. To the Seller's
knowledge, there are no pending claims of the Seller under any of such
policies; such policies (and binders, if any), are valid and enforceable
in accordance with their terms and are in full force and effect; and all
the insurable properties and assets of the Seller, including the
Purchased Assets, are insured for the Seller's benefit, in amounts and
coverages deemed adequate by the Seller's management, against all risks
usually insured against by persons operating similar properties and
assets in the localities where such properties or assets are located,
under valid and enforceable policies issued by insurers of recognized
responsibility.
3.1.21. Accounts Receivable. All accounts receivable of Seller have
arisen out of bona fide transactions in the ordinary course of business,
and each such account receivable constitutes a valid and binding
obligation of the obligor, maker, comaker, guarantor, endorser or debtor
thereof or thereunder and, except as otherwise specified in Exhibit
3.1.21, is collectible in full within 60 days in at least the amount at
which they are carried on the books of Seller.
3.1.22. Capital Improvements and Expenditures. Exhibit 3.1.22 lists
all of the capital improvements or purchases or other capital
expenditures (as determined in accordance with GAAP), which Seller has
committed to or contracted for which have not been completed prior to the
date hereof and the cost and expense
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reasonably estimated to complete such work and purchases. Seller has not
contracted for or committed to any such work or purchases after the date
hereof.
3.1.23. Assets Sufficient for Conduct of Business. In the opinion of
Seller's management, the Purchased Assets and Assumed Liabilities
constitute substantially all of the assets and properties required for
the operation of the Seller's business as it is presently operated by
Seller in all material respects.
3.1.24. Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate or other information furnished or to be
furnished by or on behalf of Seller to Buyer in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact regarding Seller, the
Purchased Assets, the Assumed Liabilities or the Seller's business, or
omits or will omit to state a material fact necessary to make the
statements regarding Seller, the Purchased Assets, the Assumed
Liabilities or the Seller's business contained herein or therein, in
light of the circumstances in which they are made, not misleading.
3.1.25. No Other Agreement. Other than for sales of assets in the
ordinary course of business, neither Seller nor any of its Affiliates has
any contract, agreement, arrangement or understanding with respect to the
sale or other disposition of any of Seller's assets (including the
Purchased Assets) or capital stock of Seller except as set forth in this
Agreement.
3.1.26. Continuity of Business Enterprise. Seller operates at least
one historic line of business, or owns at least a significant portion of
its business assets, in each case within the meaning of Treas. Reg.
ss.1.368-1(d).
3.1.27. Improper and Other Payments. To the best of Seller's
knowledge, except as set forth on Exhibit 3.1.27, none of the Seller, any
director, officer, employee, agent or representative of the Seller, nor
any Person acting on behalf of any of them, has made, paid or received
(a) any bribes, kickbacks or other similar payments to or from any
Person, whether lawful or unlawful, (b) any contributions, directly or
indirectly, to a domestic or foreign political party or candidate or (c)
any improper foreign payment (as defined in the Foreign Corrupt Practices
Act).
3.1.28. Officers, Directors, Key Employees and Others. Exhibit
3.1.28 hereto sets forth (a) the name and total compensation of each
officer and director of the Seller and of each other employee,
consultant, agent or other representative of the Seller to whom the
Seller currently makes compensation or consulting payments, and (b) any
contract, commitment or other agreement with respect to any officer or
employee dealing with compensation, benefits or any other aspect of their
relationship with the Seller.
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3.1.29. No Labor Unions; Employee Relations.
(a) The Seller is not a party to any agreement or understanding
with any labor union or organized labor group.
(b) The Seller has not at any time during the last twelve
months immediately preceding the date of this Agreement had, nor, to the
knowledge of the Seller, is there now threatened, a strike, work
stoppage, work slowdown, or other labor trouble that had or may have a
material adverse effect on the assets, properties, business, operations
or condition (financial or otherwise) of the Seller. The Seller has not
made a commitment or agreement to increase the wages or to modify the
conditions or terms of employment of any of its employees, except as
listed on Exhibit 3.1.29(a) hereto. There are no outstanding loans or
other advances from the Seller to any officer, director or shareholder of
the Seller, other than the debts included in the March 31, 1995 balance
sheet, which is part of the Financial Statements, as adjusted to the
Closing Date, which adjustments and other debts are reflected in the
attached Financial Statements.
3.2. Representations and Warranties of Buyer. The Buyer represents and
warrants to the Seller as follows:
3.2.1. Corporate Existence. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Virginia, and has full corporate power and authority to own or
lease its assets and properties and to carry on its business as now
conducted. Buyer has delivered to Seller true and complete copies of
Buyer's Certificate of Incorporation and By-laws as amended to date.
Buyer is duly qualified to do business and (where the concept of "good
standing" is applicable) in good standing as a foreign corporation in the
States set forth on Exhibit 3.2.1.
3.2.2. Authorization. Buyer has full corporate power and authority
to enter into and perform its obligations under this Agreement and to
consummate the transactions contemplated herein. The execution, delivery
and performance of this Agreement by Buyer and the consummation of the
transactions contemplated herein have been authorized by all requisite
corporate action. This Agreement is the legal, valid and binding
obligation of Buyer enforceable in accordance with its terms, except as
enforceability may be limited by equitable principles or by bankruptcy,
fraudulent conveyance, insolvency or similar laws affecting creditors'
rights generally.
3.2.3. No Violation. The execution, delivery and performance of this
Agreement by Buyer and the consummation of the transactions contemplated
hereby will not violate (i) any provision of the Certificate of
Incorporation or By-laws of the Seller; (ii) any contract or other
agreement to which the Seller is a party or by or to which the Seller or
any of its assets or properties may be bound or subject; (iii) any
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order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, the Seller or
upon the securities, assets, properties or business of the Seller; (iv)
any statute, law or regulation of any jurisdiction as such statute, law
or regulation relates to the Seller or to the securities, assets,
properties or business of the Seller; or (v) any Permits. Except as set
forth on Exhibit 3.2.3, no consent is required to be obtained by Buyer in
connection with the execution and delivery of this Agreement by Buyer or
the consummation of the transactions contemplated herein.
3.2.4. Compliance with Laws. To the knowledge of the Buyer, the
Buyer is not in violation of (i) any applicable order, judgment,
injunction, award or decree, or (ii) any federal, state, local or foreign
law, ordinance or regulation or any other requirement of any court,
arbitrator or Governmental Authority applicable to the business of the
Buyer, except to the extent that non-compliance does not and will not
have a material adverse effect upon the assets, properties, business or
operations of the Buyer, including, but not limited to, the performance
of the Contracts, and would not be in violation of any such law,
ordinance, regulation or other requirement that has been enacted or
adopted but is not yet effective if it were effective at the date hereof.
3.2.5. Actions and Proceedings. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, governmental or
regulatory body or arbitration tribunal against or involving the Buyer;
and, there are no actions, suits or claims or legal, administrative or
arbitral proceedings or, to the knowledge of the Buyer, investigations
(whether or not the defense thereof or liabilities in respect thereof are
covered by insurance) pending or, to the knowledge of Buyer, threatened
against or involving the Buyer or any of its properties or assets, that,
individually or in the aggregate, could have a material adverse effect
upon the transactions contemplated hereby or upon the assets, properties,
business, operations, or condition (financial or otherwise) of the Buyer.
3.2.6. Ability to Perform. As of the Closing Date, Buyer will have
the ability and legal authority to deliver the Purchase Price at the
Closing and to take such other actions as may be required by it to
consummate the transactions contemplated herein and to operate the
Seller's assets and business as a division of Buyer after the Closing.
3.2.7. Capitalization. (a) The authorized capital stock of Buyer
consists of (i) 3,333,333 shares of Buyer Common Stock, of which 604,874
shares are currently issued and outstanding; and (ii) 500,000 shares of
Preferred Stock, par value $1.00 per share, of which 133,500 shares are
currently issued and outstanding. All of the shares of Buyer Common Stock
(i) are validly issued, fully paid and nonassessable and (ii) are, and
when issued were, free of preemptive rights. There are 201 shares of
Buyer Common Stock held in the treasury of Buyer. A total of 464,984
shares of
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Buyer Common Stock are currently reserved for issuance upon the exercise
of options or warrants that have been or may be granted by Buyer pursuant
to Buyer's 1995 Stock Option Plan, 1987 Stock Warrant Purchase Plan and
1981 Incentive Stock Option Plan, of which 259,453 shares are subject to
options issued thereunder. Other than such options, no Person has any
right (including preemptive rights) to acquire any of Buyer Common Stock.
(b) The shares of Buyer Common Stock issued and issuable to the
Shareholders pursuant to Section 2.2 are and shall be, upon issuance in
accordance with this Agreement, validly issued, fully paid and
nonassessable and free of preemptive rights.
3.2.8. Brokers; Finders. Buyer has not retained any broker or finder
in connection with the transactions contemplated herein so as to give
rise to any valid claim for any brokerage or finder's commission, fee or
similar compensation.
3.2.9. Continuity of Business Enterprise. It is the present
intention of Buyer to continue at least one historic business line of
Seller, or to use at least a significant portion of Seller's historic
business assets in a business, in each case within the meaning of Treas.
Reg. ss.1.368-1(d).
3.2.10. No Defaults or Violations. Buyer has not materially breached
any provision of, nor is it in material default under the terms of, any
lease, contract, commitment, agreement, mortgage, lien, instrument, plan
or license to which it is a party or under which it has any rights or by
which it is bound and which relates to the Buyer's business, and to
Buyer's knowledge, no other party to any such lease, contract,
commitment, agreement, mortgage, lien, instrument, plan or license is in
default thereunder in any material respect. Buyer is not in any material
violation or default of any law, governmental regulation or rule or order
of any Governmental Authority that is applicable in any way to the Buyer
or the operation of its business.
3.2.11. Environmental Compliance.
(i) All real property leased by Buyer has never been used by
Buyer or, to Buyer's knowledge, by any other person, to generate,
manufacture, refine, transport, treat, store, handle or dispose of any
Hazardous Substances.
(ii) To Buyer's knowledge, all real property leased by Buyer is
in compliance with all Environmental Laws.
(iii) To Buyer's knowledge, all real property leased by Buyer
does not contain any Hazardous Substances.
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(iv) To Buyer's knowledge, no tanks now or formerly used for
the storage of any liquid or gas above or below ground, are present or
were at any time present on or at any real property leased by Buyer.
(v) Buyer has not received a citation, directive, letter, or
other communication, written or oral, from any person or governmental
authority concerning the presence of any Hazardous Substances on any real
property owned or leased by Buyer.
(vi) Buyer has no knowledge of or information regarding the
presence of any Hazardous Substances at adjacent properties, which
Hazardous Substances could migrate to, through, or under any real
property leased by Buyer.
(vii) Buyer has obtained all material licenses and permits
required by all material Environmental Laws.
(viii) Buyer has not received any notice of any violation of or
potential or actual liability under any Environmental Laws at or
concerning any real property leased by Buyer.
(ix) No action has been commenced or, to Buyer's knowledge,
threatened regarding Buyer's compliance with or liability under any
Environmental Laws at or concerning any real property leased by Buyer.
3.2.12. Assets Sufficient for Conduct of Business. In the opinion of
Buyer's management, the assets of Buyer constitute substantially all of
the assets and properties required for the operation of the Buyer's
business as it is presently operated by Buyer in all material respects.
3.2.13. Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate or other information furnished or to be
furnished by or on behalf of Buyer to Seller in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact regarding Buyer or the
Buyer's business, or omits or will omit to state a material fact
necessary to make the statements regarding Buyer or the Buyer's business
contained herein or therein, in light of the circumstances in which they
are made, not misleading.
3.2.14. Improper and Other Payments. To the best of Buyer's
knowledge, none of the Buyer, any director, officer, employee, agent or
representative of the Buyer, nor any Person acting on behalf of any of
them, has made, paid or received (a) any bribes, kickbacks or other
similar payments to or from any Person, whether lawful or unlawful, (b)
any contributions, directly or indirectly, to a domestic or
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foreign political party or candidate or (c) any improper foreign payment
(as defined in the Foreign Corrupt Practices Act).
3.3 Representations and Warranties of Shareholders. The Shareholders
severally represent and warrant to Buyer to the best of the knowledge of each
of them as follows:
3.3.1. General. Each and every representation and warranty made by
the Seller under Section 3.1 of this Agreement is true and correct and
will be true and correct on each day from the date hereof to and
including the Closing Date as if made as and of each such day.
3.3.2. No Conflict of Interest. Except as disclosed on Exhibit
3.3.2, none of the Shareholders or any of their Affiliates has or claims
to have any direct or indirect interest in any tangible or intangible
property used in Seller's business, except as a holder of the Seller's
shares of capital stock. The Shareholders are the sole and exclusive
holders of all the outstanding shares of capital stock of Seller. Except
as disclosed on Exhibit 3.3.2, none of the Shareholders nor any of their
Affiliates have any direct or indirect interest in any other Person which
conducts a business similar to, has any Contract or arrangement with, or
does business or is involved in any way with, the Seller. Exhibit 3.3.2
contains a complete and accurate description of all such Persons,
interests, arrangements and other matters.
3.3.3. Purchase for Investment. With respect to the Buyer Common
Stock being delivered at the Closing and at the Post-Closing, each of the
Shareholders severally represents and warrants to Buyer as follows:
(a) Experience. Such Shareholder is capable of evaluating the
merits and risks of this investment, has the capacity to protect his or
her own respective interests, and has the financial ability to bear the
economic risks of the investment.
(b) Investment. Such Shareholder is acquiring the Buyer Common
Stock for investment for his or her own account and not as a nominee or
agent, and not with a view to, or for resale in connection with, any
distribution thereof. Such Shareholder understands that the Buyer Common
Stock to be delivered has not been registered under the Securities Act of
1933 (the "Securities Act") in reliance upon an exemption from the
registration provisions of the Securities Act, the availability of which
exemption depends upon, among other things, the bona fide nature of the
Shareholders' investment intent and the accuracy of their representations
as contained herein. Such Shareholder is domiciled in Maryland or
Virginia.
(c) Holding Period. Such Shareholder acknowledges that the
Buyer Common Stock may not be sold in the absence of an effective
registration statement
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under the Securities Act, or unless an exemption from such registration
is available, and such Shareholder has otherwise complied with the
provisions of Section 6.7.
(d) Access to Information. Such Shareholder has had an
unlimited opportunity to discuss Buyer's business, management and
financial affairs with its management and the opportunity to review in
detail Buyer's property, books, accounts, records, contracts and
documents and all other information related to such Shareholder's
investment in Buyer Common Stock. Such Shareholder's questions pertaining
to Buyer were answered fully and to the Shareholder's satisfaction.
(e) Transfer and Legend. Such Shareholder shall not sell,
pledge, hypothecate or otherwise transfer any Buyer Common Stock unless
it is registered under the Securities Act and applicable state securities
laws or is exempt therefrom, and unless such Shareholder has complied
with Section 6.7. Such Shareholder acknowledges that each certificate
representing the Buyer Common Stock shall be endorsed with a legend which
provides substantially as follows:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933 or the laws of any other jurisdiction, and
may not be sold, transferred, assigned, pledged or otherwise
distributed unless there is an effective registration statement
under such Act and applicable securities laws covering such
securities, together with compliance with the additional
restrictions on transfer as contained in the Agreement, dated as of
October 6, 1995, between Infodata Systems Inc. and the holder
hereof, or Infodata Systems Inc. receives an opinion of counsel for
the holder of the securities (concurred in by counsel for Infodata
Systems Inc.) stating that such sale, transfer, assignment, pledge
or distribution is exempt from the registration and prospectus
delivery requirements of such Act and applicable securities laws and
otherwise complies with any additional restrictions on transfer as
contained in said Agreement between Infodata Systems Inc. and the
holder hereof."
3.3.4. Shareholders' Taxes. Such Shareholder has timely filed and
paid all personal income taxes and payroll and employment taxes (as
defined in Section 3.1.7.) required to be paid by him or her through the
Closing Date, and all deficiencies or additions to tax, interest and
penalties owed by him or her, in connection with any such taxes.
ARTICLE IV
CERTAIN COVENANTS OF SELLER AND SHAREHOLDERS PRIOR TO CLOSING
Seller and the Shareholders covenant and agree as follows for the period
of time between and including the date of this Agreement and the Closing Date:
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4.1 Access to Facilities, Files and Records. Between the date of this
Agreement and the Closing Date, Seller shall allow Buyer and its officers,
employees, accountants, counsel and representatives (i) full access during
normal business hours to all facilities, property, accounts, books, minute
books, deeds, title papers, insurance policies, licenses, agreements,
contracts, commitments, tax returns, records, and files of every character,
equipment, machinery, fixtures furniture, vehicles, notes, and accounts
payable and receivable, and inventories, including copies thereof, related to
Seller's business, and (ii) all such other information concerning the affairs
of Seller's business as Buyer may reasonably request. Buyer may place one or
more of its managerial employees at Seller's headquarters to provide advice
and counsel to Seller's President.
4.2 Risk of Loss. Seller assumes all risk of loss, destruction or damage
of the Purchased Assets due to fire or other casualty up to the consummation
of the Closing. Upon said loss, destruction or damage of the Purchased Assets
due to fire or other casualty of all or a material amount of the Purchased
Assets, Buyer shall have the option to terminate this Agreement or accept the
proceeds of any applicable insurance policies of Seller or, with the mutual
agreement of Seller, to make an appropriate adjustment in the Purchase Price
separate from any Purchase Price Adjustment to be made under Section 2.2.
Seller assumes all risk of loss, destruction or damage of the Excluded Assets
both before and after Closing.
4.3 Employees and Compensation. Without Buyer's written consent, Seller
shall have not performed or agreed to perform any of the following acts: (i)
grant any increase in salaries or other compensation payable or to become
payable to any officer, employee, sales agent or representative; (ii) increase
benefits payable to any officer, employee, sales agent or representative under
any bonus or pension plan or other contract or commitment; or (iii) hire any
new employee. Seller shall permit Buyer to contact Seller's employees at all
reasonable times for the purpose of discussing with such employees prospective
employment by Buyer on or after the Closing Date. Seller shall use its best
efforts to encourage all employees of Seller to accept any employment offered
by Buyer. Seller shall assign to Buyer all employment agreements between
Seller and its employees if permissible under the terms of such employment
agreements.
4.4 Conduct of Business.
(a) From the date of this Agreement until the Closing Date, the
Shareholders shall cause the Seller to operate only in the ordinary and
usual course of business and consistent with past practice, and shall use
their best efforts to (i) maintain the assets of the Seller in
substantially their current state of repair, excepting normal wear and
tear, and preserve intact the present business organization and personnel
of the Seller, (ii) preserve the goodwill and advantageous relationships
of the Seller with customers, suppliers, independent contractors,
employees and other Persons material to the operation of its business,
(iii) not permit any action or omission which would cause any of the
representations or warranties of Seller or the
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Shareholders contained herein to become inaccurate or any of the
covenants of Seller or the Shareholders to be breached, (iv) perform
obligations under all Contracts to be conveyed to Buyer, and (v) maintain
in full force and effect current property damage, liability and other
insurance.
(b) Without limiting the generality of the foregoing, Seller will
not, without the prior written consent of Buyer (except as otherwise
contemplated under Section 2.2(b) hereof):
(i) incur any obligation or enter into any Contract which
requires a payment by any party in excess of, or a series of payments
which in the aggregate exceed, $25,000 or provides for the delivery of
goods or performance of services, or any combination thereof, having a
value in excess of $25,000;
(ii) take any action, or enter into or authorize any Contract
or transaction, other than in the ordinary course of business and
consistent with past practice;
(iii) sell, transfer, convey, assign or otherwise dispose of
any of its assets or properties, except sales of inventory in the
ordinary course of business and consistent with past practice;
(iv) waive, release or cancel any claims against third parties
or debts owing to it, or any rights which have any value;
(v) enter into, authorize, or permit any transaction with any
or all of the Shareholders or any Affiliate;
(vi) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any shares
of capital stock or any other securities of the Seller, or amend any of
the terms of any such capital stock or other securities;
(vii) terminate, modify, amend or otherwise alter or change any
of the terms or provisions of any Contract, or pay any amount not
required by Law or by any Contract, other than in the ordinary course of
business and consistent with past practices; or
(viii) declare or pay any dividends or other distributions to
the Shareholders.
4.5 Contact Clients. Seller shall permit Buyer, and Buyer shall have the
right to contact, subject to reasonable conditions, Seller's clients under the
Contracts and to make
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reasonable inquiries of such clients; provided, however, that Buyer shall
provide Seller with advance notice of any such contact and shall permit Seller
to participate in any such contacts with Seller's clients.
4.6 No Solicitation or Offers. Between the date hereof and the Closing
Date, neither Seller nor any of the Shareholders or their Affiliates or
representatives shall, directly or indirectly, solicit or initiate any
discussions with any Person regarding any sale, pledge, hypothecation,
assignment, transfer, acquisition, merger, license, or similar transaction,
involving all or any portion of Seller's assets, business or capital stock,
nor shall Seller or any of the Shareholders or their Affiliates or
representatives, directly or indirectly, negotiate with or provide any
information to any potential acquires concerning the sale, pledge,
hypothecation, assignment, transfer, acquisition, merger, license or similar
transaction involving the Purchased Assets or the Seller's assets, business or
capital stock generally; provided, however, Seller shall be permitted and
obligated to file any information required to be filed by applicable statute,
regulation, rule of court or court order.
4.7 Change of Corporate Name. On the Closing Date or as soon as
practicable thereafter, Seller shall do all acts reasonably necessary to
transfer the name "Merex" to the Buyer and each of Seller and any other
entities owned or controlled by any of the Shareholders shall change their
corporate names to new names which do not include the term "Merex" or any
other acronym, abbreviation, variation, translation or combination thereof or
similar names. From and after the Closing, neither Seller nor any Shareholder
shall use the term "Merex" or any other acronym, abbreviation, variation,
translation or combination thereof or similar names in connection with any
business or other activity.
4.8. Notice Regarding Change in Circumstances. Seller shall give Buyer
written notice promptly upon the occurrence of or becoming aware of the
impending or threatened occurrence of any event which would cause or
constitute a breach or would have caused a breach had such event occurred or
been known to Seller prior to the date hereof, of any Seller's representations
or warranties contained in this Agreement.
4.9. Approval By Shareholders; Liquidation of Seller. Seller will give
due notice of and call a meeting of the Shareholders, which meeting shall be
held prior to the Closing Date for the purpose of voting on the transactions
contemplated herein and for the change of name and liquidation and dissolution
of Seller. Immediately prior to the end of the twelve (12) month period
immediately following the Closing Date, Seller will take such action as may be
required to dissolve and terminate its corporate existence, to liquidate
completely, and to distribute directly to the Shareholders or their successors
in interest, pro rata, all its right, title and interest to the Buyer Common
Stock received pursuant to this Agreement, and any other assets not purchased
by the Buyer and held by the Seller, in exchange for the surrender by the
Shareholders of their shares of Seller common stock for cancellation;
provided, however, that Seller shall first obtain the prior written consent of
Buyer in the event Seller desires to liquidate or dissolve and terminate its
corporate existence prior to the end of the twelve (12) month period
immediately following the
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Closing Date. The arrangements for such liquidating distribution and exchange
shall include provision by Seller for the purchase or sale, for account of the
Shareholders, of any fractional interests in Buyer Common Stock with the
result being that no fractional shares will be required to be issued in
connection therewith.
ARTICLE V
ADDITIONAL COVENANTS OF BUYER
5.1 Employment of Seller Personnel. Except as otherwise provided in
Exhibit 5.1.1, upon consummation of the transactions contemplated in this
Agreement, Buyer shall offer employment to Seller's personnel employed by
Seller on the Closing Date. Such employment shall be at will of both parties
and, except as provided in Exhibit 5.1.1., shall be upon the same or
substantially the same terms as are now provided by the Seller to such
employees and shall credit all such employees with their years of service with
Seller. This Section shall not be construed to require that Buyer employ any
such persons on other than an at-will basis. Nothing herein shall obligate
Buyer to pay any pension, vacation, sick leave or other employee benefits to
such personnel which were the obligation of Seller with respect to the period
before the Closing Date, except for any such items which are Assumed
Liabilities. Notwithstanding the foregoing, Buyer has agreed to provide stock
options to purchase Buyer Common Stock on the terms and conditions set forth
in Exhibit 5.1.2.
5.2. Termination of NationsBank Loan Facility. At the Closing or as
promptly thereafter as practicable, Buyer shall pay to NationsBank the
outstanding balance due from the Seller to NationsBank, in an amount not to
exceed $155,322 plus any accrued interest from August 31, 1995 through the
date of such pay-off by Buyer, under the line of credit facility currently
maintained by Seller with NationsBank, which line is an Assumed Liability and
is collateralized by the Seller's trade accounts receivable and guaranteed by
Tworek.
5.3 Consulting Agreement with Styer. Buyer agrees to enter into a
Consulting Agreement with Styer, substantially in the form attached as Exhibit
5.3 hereto, which will provide for the retention by Buyer of the services of
Styer as an independent consultant at the gross monthly compensation of $5,333
for a period of six (6) months from the Closing Date, for the purpose of
assisting Buyer during its integration of the Purchased Assets into the
business of Buyer, as well as to assist Buyer in its business development
efforts. This Consulting Agreement shall be renewable by the mutual agreement
of Buyer and Styer, and contains a noncompetiton provision on the terms and
conditions set forth in Section 6.2 below. Styer shall be an independent and
self-employed consultant who shall be solely responsible for all of her own
taxes due with respect to all compensation paid to Styer by Buyer.
5.4 Employment Agreements With Tworek and Fregly. Buyer agrees to enter
into Employment Agreements with Tworek and Fregly, substantially in the form
attached hereto
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as Exhibits 5.4.1 and 5.4.2, respectively, which agreements will provide for
the employment by Buyer of Tworek as a Senior Vice President and Tworek and
Fregly as officers of the Merex Division of Buyer, at a base annual salary
rate of $125,000 and $90,000, respectively, for a period of twenty-four (24)
months from the Closing Date. The Employment Agreements shall be renewable
separately by the mutual agreement of Buyer and Tworek and Fregly. Each
employment agreement contains a noncompetition provision on the terms and
conditions set forth in Section 6.2 below.
ARTICLE VI
ADDITIONAL COVENANTS OF THE PARTIES
6.1 Expenses. Except as otherwise provided in Section 11.1, each of the
parties will bear their own respective expenses and costs incurred in
connection with the preparation, execution and performance of this Agreement
and the transactions contemplated hereby, including, without limitation, all
fees and expenses of agents, representatives, investment bankers, legal
counsel and accountants.
6.2 Noncompetition. Each of Shareholders agrees that the following
provisions of this Section are intimately linked to the other transactions
contemplated by this Agreement, and each Shareholder acknowledges that Buyer
would not enter into this Agreement without each Shareholder agreeing to be
bound by the following provisions from the date hereof until the Ending Date
(as hereinafter defined):
(a) Except as expressly approved (which approval shall not be
unreasonably withheld) by Buyer, each Shareholder agrees that from and
after the date of this Agreement until two (2) years after the date any
employment or consulting arrangement between such Shareholder and Buyer
terminates, unless a Shareholder-employee is terminated without Cause, as
defined in the Employment Agreements attached hereto as Exhibits 5.4.1
and 5.4.2, in which case the noncompetition provisions of the applicable
Employment Agreement and this Section 6.2 shall not apply for any period
after the termination of the employment of such Shareholder and Buyer
(with such termination date being referred to herein as the "Ending Date"
with respect to each Shareholder), that he or she shall not directly or
indirectly:
(i) except in connection with any duties as an officer or
employee of Buyer, solicit, divert or attempt to solicit or divert any
party who is or was a client, customer or supplier of Seller and/or
Buyer, or accept any business or remuneration, directly or indirectly,
from any party who is or was a client, customer or supplier of Seller
and/or Buyer;
(ii) during the one-year period immediately following the date
of termination of the employment or consulting arrangement, employ,
solicit for
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employment or encourage to leave their employment, in each case, either
as an employee, agent or representative, any person who was during the
two-year period prior to such employment, solicitation or encouragement
or is an officer, employee, agent or representative of Seller or Buyer;
(iii) disturb, or attempt to disturb, any business relationship
between any third party and Seller or Buyer; or
(iv) make any statement to any third party, including the press
or media, likely to result in adverse publicity for Seller or Buyer.
(b) In the event of actual or threatened breach of the provisions of
this Section, Buyer, in addition to any other remedies available to it
for such breach or threatened breach, including the recovery of damages,
shall be entitled to an injunction restraining any or all of
Shareholders, as appropriate, from such conduct.
(c) If at any time any of the provisions of this Section shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to duration, area, scope of activity or otherwise, then
this Section shall be considered divisible (with the other provisions to
remain in full force and effect) and the invalid or unenforceable
provisions shall become and be deemed to be immediately amended to
include only such time, area, scope of activity and other restrictions,
as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter, and each Shareholder
expressly agrees that this Agreement, as so amended, shall be valid and
binding as though any invalid or unenforceable provision had not been
included herein.
(d) The provisions of this Section shall be in addition to, and not
in limitation of, any other provisions contained in any other agreement
restricting competition by any or all of Shareholders.
(e) Shareholders shall not, directly or indirectly, (i) disclose, or
(ii) use for their own benefit, or for the benefit of any other Person
(other than, in the case of (a) below, the Seller or an Affiliate of the
Seller), (a) any secret or confidential information, lists of clients,
customers or suppliers, information relating to any clients, customers or
suppliers, or any other data of or pertaining to the Seller or to any
Affiliate of the Seller, their respective businesses or financial
affairs, or their products which are not a matter of public knowledge or
(b) any Buyer Confidential Information (collectively, the "Confidential
Information"). Each Shareholder agrees that upon termination of any such
Shareholder's employment or consulting agreement with Buyer for any
reason and upon the request of Buyer on or after the Closing Date, he or
she will immediately deliver to Buyer all original papers, books,
manuals, lists, correspondence and documents containing or relating to
the Confidential Information, together with all copies thereof, except
that each
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Shareholder may keep copies of such materials as shall be necessary to
permit such Shareholder to prepare his or her tax returns or to comply
with any other legal requirements.
6.3 Further Assurances. Each party will execute such documents and other
papers and take such further actions as may be reasonably required in the
opinion of Buyer's counsel or Seller's counsel, as the case may be, to carry
out the provisions hereof and the transactions contemplated hereby.
6.4. Use of Name. From and after the Closing Date, the Seller, the
Shareholders and each of their Affiliates will be prohibited from directly or
indirectly using in any manner any trade name, trademark, service mark or logo
used by the Seller or any word or logo that is similar in sound or appearance
without the prior approval of Buyer, other than for the benefit of Buyer.
6.5. Registration of Buyer Common Stock. Buyer covenants and agrees with
the Shareholders that Buyer, at its expense and within thirty (30) days of
Buyer's receipt of a written request of the Shareholders during the period
commencing on and after March 31, 1996 and ending on the date which is three
(3) years after the Closing Date, will use its best efforts to register the
shares of Buyer Common Stock being issued to Shareholders hereunder, subject
to the limitations contained in Section 6.7, under the applicable form of
Registration Statement to be filed by Company under the Securities Act of 1933
and updated and maintained current for a period of three (3) years thereafter.
Shareholders shall be prohibited from selling their Buyer Common Stock
received hereunder until such stock is registered as provided in this Section
6.5 or qualifies for an exemption from registration under federal and state
securities laws. Shareholders shall be further limited in any sales of their
Buyer Common Stock received hereunder as provided in Section 6.7.
6.6. Termination of Certain Agreements. Each Shareholder shall, and each
Shareholder agrees that he or she shall cause his or her Affiliates and the
Seller to, and that his or her Affiliates and the Seller shall, effective as
of the Closing, without any cost to the Seller, terminate, rescind, cancel and
render void and of no effect all of the Contracts between the Seller on the
one hand and such Shareholder or any of his or her Affiliates, as the case may
be (other than the Seller) on the other hand, except for those Contracts
listed in Exhibit 6.6 and those Contracts entered into pursuant to this
Agreement.
6.7. Agreement of Shareholders Not to Transfer Shares. Notwithstanding
any other provision contained in this Agreement to the contrary, each
Shareholder covenants and agrees that he or she will not dispose of any of the
Buyer Common Stock received from the Seller on or after the Closing Date or
the Post-Closing Date within two (2) years of the date of receipt of such
shares of Buyer Common Stock by the Seller if such disposition would reduce
the fair value of the Buyer Common Stock (measured as of the date of receipt
by the Seller) retained by such Shareholder to an amount less than fifty
percent (50%) of the fair value of the Buyer Common Stock held by the Seller
as of the date of receipt by
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the Seller, unless the Shareholder obtains an opinion of counsel satisfactory
to Buyer that such transfer will not violate the continuity of shareholder
interest requirement set forth in Treas. Reg. ss.1.368-1. Any Shareholder
desiring to dispose of any shares of Buyer Common Stock received in this
transaction during such two-year period shall provide Buyer with written
notice, not less than fifteen (15) days prior to the intended date of
disposition, specifying the number of shares of Buyer Common Stock the
Shareholder desires to dispose. At any time that any Shareholder desires to
dispose of any shares of Buyer Common Stock received by Seller in this
transaction, such Shareholder shall deliver to Buyer, not less than fifteen
(15) days prior to the intended date of disposition of such shares, the
written opinion of counsel referred to above in this Section.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES TO CLOSE
The rights, duties and obligations of the parties to this Agreement are
wholly contingent upon the satisfaction, on or prior to Closing of the
following:
7.1 Leases. Seller shall deliver to Buyer the current lease of the Seller
and the written assignment thereof to Buyer, together with any subleases
executed by Seller, with such lease, any subleases and form of assignment
being attached hereto as Exhibit 7.1, and with such assignment being duly
executed by Seller and The Perkin-Elmer Corporation ("Landlord"), with respect
to the Seller's office space located at 3206 Tower Oaks Boulevard, Suite 300,
Rockville, Maryland 20852.
7.2 Non-Competition Provisions. Buyer and Shareholders shall enter into
their respective employment or consulting agreements described in Sections 5.3
and 5.4 hereof and attached hereto as Exhibits 5.3, 5.4.1 and 5.4.2.
7.3 Conditions Precedent to Obligation of Seller and Shareholders to
Close. The rights, duties and obligations of Seller and Shareholders under
this Agreement are wholly contingent upon the satisfaction, on or prior to the
Closing, of the following:
7.3.1. Warranties True as of the Present Date, the Closing Date and
the Post-Closing Date. The representations and warranties of Buyer
contained herein shall have been accurate, true and correct on and as of
the date of this Agreement, and shall also be accurate, true and correct
on and as of the Closing Date and the Post-Closing Date, with the same
force and effect as though made by Buyer on and as of the Closing Date
and the Post-Closing Date.
7.3.2. Compliance with Agreement and Covenants. Buyer shall have
performed and complied with all of its covenants, obligations and
agreements contained in this Agreement to be performed and complied with
by Buyer on or prior to the Closing Date.
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7.3.3. Delivery of Buyer Common Stock. Buyer shall have delivered to
Seller and Escrow Agent, respectively, the number of shares of Buyer
Common Stock specified in Section 2.2 hereof.
7.3.4. Certification. Seller shall have received a certificate of
Buyer executed by its President, dated as of the Closing Date, in form
and substance satisfactory to Buyer, certifying as to the fulfillment of
the matters mentioned in Sections 7.3.1 and 7.3.2.
7.3.5. Opinion of Buyer's Counsel. Buyer's counsel, Freedman, Levy,
Kroll & Simonds, shall have delivered to Seller and the Shareholders an
opinion, dated as of the Closing Date, in the form attached hereto as
Exhibit 7.3.5. Such opinion shall conclude that the purchase by Buyer of
the Purchased Assets from Seller in the manner provided for herein will
qualify as a tax-free reorganization under Section 368(a)(1)(C) of the
Code.
7.3.6. No Action. No action shall have been instituted before any
court or Governmental Authority, or instituted or threatened by any
Governmental Authority, to restrain, modify or prevent the carrying out
of the transactions contemplated hereby, or to seek damages or a
discovery order in connection with such transaction and there shall not
be in effect any judgment, writ, order, injunction or decree of any court
or governmental entity of competent jurisdiction restraining, enjoining
or otherwise preventing consummation of the transactions contemplated by
this Agreement.
7.3.7. Termination of NationsBank Loan Facility. Buyer shall have
used its best efforts, at the Closing or as promptly thereafter as
practicable, to pay to NationsBank the outstanding balance due from the
Seller to NationsBank, in an amount not to exceed $155,322 plus any
accrued interest from August 31, 1995 through the date of such pay-off by
Buyer, under the line of credit facility currently maintained by Seller
with NationsBank, which line is an Assumed Liability and is
collateralized by the Seller's trade accounts receivable and guaranteed
by Tworek. In the event Buyer is not able to pay-off the subject line of
credit facility with NationsBank at the Closing, then the Closing shall
nevertheless occur hereunder (assuming all other conditions have been
satisfied or waived) and such obligation shall be satisfied by Buyer as
promptly as practicable after the Closing as provided in Section 8.6.
7.3.8. No Material Adverse Change in Buyer's Business. There shall
have been no material adverse change in the business of the Buyer.
7.4. Conditions Precedent to Obligation of Buyer to Close. The rights,
duties and obligations of Buyer under this Agreement are wholly contingent
upon the satisfaction, on or prior to the Closing, of the following:
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7.4.1. Warranties True as of the Present Date, the Closing Date and
the Post-Closing Date. The representations and warranties of Seller and
each Shareholder contained herein shall have been accurate, true and
correct on and as of the date of this Agreement, and shall also be
accurate, true and correct on and as of the Closing Date and the
Post-Closing Date with the same force and effect as though made by Seller
and each Shareholder on and as of the Closing Date and the Post-Closing
Date.
7.4.2. Compliance with Agreement and Covenants. Seller and
Shareholders shall have performed and complied with all of their
respective covenants, obligations and agreements contained in this
Agreement to be performed and complied with by them on or prior to the
Closing Date.
7.4.3. Consents and Approvals. Seller and Shareholders shall have
received written evidence satisfactory to Buyer that all consents and
approvals required for the consummation of the transactions contemplated
hereby or the ownership and operation by Buyer of the Purchased Assets
and Seller's business have been obtained, except only for Contracts that
are the subject of the novation and assignment process referred to in
Sections 2.4 and 8.4.
7.4.4. Certification. Buyer shall have received a certificate of
Seller executed by its Chief Executive Officer and Chief Financial
Officer/Controller, dated as of the Closing Date, in form and substance
satisfactory to Buyer, certifying as to the fulfillment of the matters
mentioned in Sections 7.4.1 and 7.4.2, and certifying that the tangible
net worth of Seller at September 29, 1995, is at least $39,400.
7.4.5. Opinion of Seller's Counsel. Seller's counsel, McGuire,
Woods, Battle and Boothe, shall have delivered to Buyer an opinion, dated
as of the Closing Date, in the form attached hereto as Exhibit 7.4.5.
7.4.6. No Action. No action shall have been instituted before any
court or Governmental Authority, or instituted or threatened by any
Governmental Authority, to restrain, modify or prevent the carrying out
of the transactions contemplated hereby, or to seek damages or a
discovery order in connection with such transaction and there shall not
be in effect any judgment, writ, order, injunction or decree of any court
or governmental entity of competent jurisdiction restraining, enjoining
or otherwise preventing consummation of the transactions contemplated by
this Agreement.
7.4.7. No Material Adverse Change in Seller's Business. There shall
have been no material adverse change in the Purchased Assets or the
business of the Seller.
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ARTICLE VIII
POST-CLOSING MATTERS
8.1. Purchase Price Adjustments. The Purchase Price Adjustments referred
to in Section 2.2 shall be made in accordance with that Section.
8.2. Escrow Agent. The Escrow Agent shall hold and distribute the
Additional Shares in accordance with the Escrow Agreement, attached as Exhibit
2.2(c), and the requirements of Section 2.2.
8.3. Further Instruments and Actions. From time to time after the
Closing, Seller and Shareholders shall execute and deliver to Buyer such
further instruments of sale and assignment as Buyer may reasonably request and
Seller and Shareholders shall take all other actions, as required by Buyer, in
order to fully vest and confirm in Buyer all right, title and interest of
Seller in and to the Purchased Assets and otherwise to carry out the purposes
of this Agreement. In this regard, Seller shall deliver to Buyer, within the
fifteen (15) day period immediately following the Closing Date, the written
consents of the insurance companies providing the Seller's health/medical,
dental, vision and long-term disability insurance coverage, which consents
shall confirm the continuation of such insurance coverages after the Closing
Date through at least October 31, 1995, for all employees of Seller who are
being hired by Buyer pursuant to Section 5.1 hereof. Seller shall also cause
all such insurance policies to be assigned and transferred to Buyer prior to
October 31, 1995, with such assignments and transfers to be without any
material change in the insurance coverage and premiums. Seller shall further
deliver to Buyer, within the fifteen (15) day period immediately following the
Closing Date, the written consents of Citicorp, ATT Capital Corporation and
XEROX regarding the assignment and transfer to Buyer of all capital leases for
equipment which is included as part of the Purchased Assets, with such
assignments and transfers to Buyer to be without any material change in the
terms of such capital leases. Buyer shall cooperate in assisting Seller in
obtaining all such consents, assignments and transfers, if necessary. On or
prior to October 18, 1995, Seller shall also deliver to Buyer a balance sheet
for Seller which updates the assets and liabilities of Seller through the
Closing Date.
8.4. Novation/Assignment of Contracts. Seller, with the continued
assistance of Tworek, Styer and Fregly, and Buyer shall obtain
Novation/Assignment Agreements for each of the Contracts, except as otherwise
waived in writing by Buyer.
8.5. Consents and Approvals. Seller, Buyer and the Shareholders shall
obtain all respective consents, approvals, certificates and other documents
required in connection with the performance by any such parties of this
Agreement and the consummation of the transactions contemplated hereby and
thereby.
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8.6. Termination of NationsBank Loan Facility. In the event Buyer has not
previously, at the Closing, paid to NationsBank the outstanding principal
balance due from the Seller to NationsBank of $155,322 plus any accrued
interest from August 31, 1995 through the date of such pay-off by Buyer, under
the line of credit facility currently maintained by the Seller with
NationsBank, then Buyer shall pay-off such obligation in such principal amount
and accrued interest as promptly as practicable after the Closing.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time on or prior
to the Closing Date:
(a) With the mutual consent of Seller, the Shareholders and Buyer;
(b) By the Seller or Buyer, if the Closing shall not have taken
place on or before October 16, 1995; provided, however, that the right to
terminate this Agreement under this Section 9.1(b) shall not be available
to any party whose wilful failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such date;
(c) By Buyer, if there shall have been a material breach of any
covenant, representation or warranty or other agreement of either or both
of Seller or of the Shareholders hereunder, and such breach shall not
have been remedied within ten (10) Business Days after receipt by Seller
or the Shareholders of a notice in writing from Buyer specifying the
breach and requesting such be remedied; or
(d) By Seller or all of the Shareholders, if there shall have been a
material breach of any covenant, representation or warranty or other
agreement of Buyer hereunder, and such breach shall not have been
remedied within ten (10) Business Days after receipt by Buyer of notice
in writing from Seller or all of the Shareholders specifying the breach
and requesting such be remedied.
9.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 9.1, all obligations of the parties hereunder shall terminate, except
for the obligations set forth in Article X and Section 11.1, which shall
survive the termination of this Agreement, and except that no such termination
shall relieve any party from liability for any prior wilful breach of this
Agreement.
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ARTICLE X
INDEMNIFICATION
10.1 Survival. Except as otherwise specified herein, the representations
and warranties of Shareholders and the Seller contained herein shall survive
the Closing for a period expiring at the close of business on the date that is
three (3) years after the Closing Date (the "Survival Date"), except that the
provisions of Sections 8.3, 8.4, 8.5 and 8.6 shall survive forever. The
representations and warranties of Buyer contained herein shall survive the
Closing for a period expiring at the close of business on the Survival Date.
10.2 Limits on Indemnification. The parties hereto agree that any
indemnification payments to be made pursuant to this Agreement by the Seller
or any or all of Shareholders on the one hand or Buyer on the other hand shall
be subject to the requirement that no claim may be made (i) until the
aggregate amount of indemnifiable Losses incurred by the Seller or
Shareholders on the one hand or Buyer on the other hand exceeds $5,000, at
which time such claim for indemnification may be made for the aggregate amount
of all indemnifiable Losses exceeding $1,000, or (ii) for any amount with
respect to the Shareholders in excess of $250,000. Further, the amount to be
paid hereunder by Seller or any or all of the Shareholders to the Buyer shall
be reduced in the aggregate by the amount of any insurance proceeds paid to
Buyer for such liability under any insurance policies purchased by Buyer from
Seller as part of the Purchased Assets, as well as any proceeds received by
Buyer from any claims by Seller against third-parties, which claims were
assumed by Buyer as part of the Purchased Assets.
10.3 Indemnification by Shareholders. Each of Shareholders, jointly and
severally, agrees to indemnify Buyer against, and agrees to hold Buyer
harmless from, any and all Losses incurred or suffered by Buyer relating to or
arising out of or in connection with any of the following; provided, however,
that such indemnification shall be the sole remedy for Buyer for any and all
such Losses:
(a) any breach of or any inaccuracy in any representation or
warranty made by the Seller or the Shareholders in this Agreement or any
document delivered at the Closing or pursuant to this Agreement; or
(b) any breach of or failure by any or all of Shareholders or the
Seller to perform any covenant or obligation of such party set out or
contemplated in this Agreement or any document delivered at the Closing
or pursuant to this Agreement; or
(c) any adjustments which result in any decrease in revenues under
any Contracts (net of any increases in the net proceeds actually received
by Buyer from any positive adjustments to the Contracts) which are made
after the Closing Date but which relate to facts or a time period prior
to the Closing Date, including but not
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limited to any adjustments to any Contracts as determined by the U.S.
Department of Defense Contract Audit Agency or any other governmental
audit agency.
10.4 Indemnification by Buyer. Buyer agrees to indemnify each Shareholder
against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection
with any of the following; provided, however that such indemnification shall
be the sole remedy for Shareholders for any and all such Losses:
(a) any breach of or any inaccuracy in any representation or
warranty made by Buyer in this Agreement or any document delivered at the
Closing or pursuant to this Agreement; or
(b) any breach of or failure by Buyer to perform any covenant or
obligation set out or contemplated in this Agreement or any document
delivered at the Closing or pursuant to this Agreement.
10.5 Claims. The provisions of this Section 10.5 shall be subject to
Section 10.6. As soon as is reasonably practicable after becoming aware of a
claim for indemnification under this Agreement, the indemnified person
("Indemnified Person") shall promptly give notice to the indemnifying person
("Indemnifying Person") of such claim and the amount the Indemnified Person
reasonably believes it will be entitled to receive hereunder from the
Indemnifying Person; provided that the failure of the Indemnified Person to
promptly give notice shall not relieve the Indemnifying Person of its
obligations except to the extent (if any) that the Indemnifying Person shall
have been prejudiced thereby. If the Indemnifying Person does not object in
writing to such indemnification claim within thirty (30) days of receiving
notice thereof, the Indemnified Person shall be entitled to recover, on the
thirty-fifth (35th) day after such notice was given, from the Indemnifying
Person the amount of such claim, and no later objection by the Indemnifying
Person shall be permitted; if the Indemnifying Person agrees that it has an
indemnification obligation but objects that it is obligated to pay only a
lesser amount, the Indemnified Person shall nevertheless be entitled to
recover, on the thirty-fifth (35th) day after such notice was given, from the
Indemnifying Person the lesser amount, without prejudice to the Indemnified
Person's claim for the difference. In addition to the amounts recoverable by
the Indemnified Person from the Indemnifying Person pursuant to the foregoing
provisions, the Indemnified Person shall also be entitled to recover from the
Indemnifying Person interest on such amounts at the rate of two times Prime
Rate from, and including, the thirty-fifth (35th) day after such notice of an
indemnification claim is given to, but not including, the date such recovery
is actually made by the Indemnified Person.
10.6 Notice of Third-Party Claims; Assumption of Defense. The Indemnified
Person shall give notice as promptly as is reasonably practicable to the
Indemnifying Person of the assertion of any claim, or the commencement of any
suit, action or proceeding, by any Person not a party hereto in respect of
which indemnity may be sought under this
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Agreement; provided that the failure of the Indemnified Person to promptly
give notice shall not relieve the Indemnifying Person of its obligations
except to the extent (if any) that the Indemnifying Person shall have been
prejudiced thereby. The Indemnifying Person may, at its own expense, (a)
participate in the defense of any claim, suit, action or proceeding and (b)
upon notice to the Indemnified Person and the Indemnifying Person's delivering
to the Indemnified Person a written agreement that the Indemnified Person is
entitled to indemnification for all Losses arising out of such claim, suit,
action or proceeding and that the Indemnifying Person shall be liable for the
entire amount of any Loss, at any time during the course of any such claim,
suit, action or proceeding, assume the defense thereof; provided, however,
that (i) the Indemnifying Person's counsel is reasonably satisfactory to the
Indemnified Person, and (ii) the Indemnifying Person shall thereafter consult
with the Indemnified Person upon the Indemnified Person's reasonable request
for such consultation from time to time with respect to such claim, suit,
action or proceeding. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right (but not the duty) to participate in
the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Person. If, however, the Indemnified
Person reasonably determines in its judgment that representation by the
Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest,
then such Indemnified Person may employ separate counsel to represent or
defend it in any such claim, action, suit or proceeding and the Indemnifying
Person shall pay the fees and disbursements of such separate counsel. Whether
or not the Indemnifying Person chooses to defend or prosecute any such claim,
suit, action or proceeding, all of the parties hereto shall cooperate in the
defense or prosecution thereof.
10.7 Settlement or Compromise. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any claim, suit, action or proceeding shall also be binding
upon the Indemnifying Person or the Indemnified Person, as the case may be, in
the same manner as if a final judgment or decree had been entered by a court
of competent jurisdiction in the amount of such settlement or compromise;
provided, however, that no obligation, restriction, injunction, agreement with
the effect of an injunction, or Loss shall be imposed on the Indemnified
Person as a result of such settlement without its prior written consent. The
Indemnified Person will give the Indemnifying Person at least thirty (30)
days' notice of any proposed settlement or compromise of any claim, suit,
action or proceeding it is defending, during which time the Indemnifying
Person may reject such proposed settlement or compromise; provided, however,
that from and after such rejection, the Indemnifying Person shall be obligated
to assume the defense of and full and complete liability and responsibility
for such claim, suit, action or proceeding and any and all Losses in
connection therewith in excess of the amount of unindemnifiable Losses which
the Indemnified Person would have been obligated to pay under the proposed
settlement or compromise.
10.8 Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then
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any failure of the Indemnified Person to defend or to participate in the
defense of any such claim, suit, action or proceeding or to cause the same to
be done, shall not relieve the Indemnifying Person of its obligations
hereunder.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. The Seller shall pay all expenses of Shareholders and the
Seller (including accounting and legal fees and expenses) and Buyer shall pay
all expenses of Buyer (including attorneys' fees and expenses), in each case
incurred in connection with this Agreement and the transactions contemplated
hereby; provided, however, that (i) in the event the Closing does not occur
hereunder due to a breach of this Agreement by the Seller or any of the
Shareholders, then the Seller shall pay for the cost of the audit of the
Financial Statements; (ii) in the event the Closing does not occur hereunder
due to any reason other than as referred to under the immediately preceding
clause of this Section 11.1, then the Seller and Buyer shall equally share the
cost of the audit of the Financial Statements; and (iii) in the event the
Closing does occur hereunder, then the Buyer shall assume as an Assumed
Liability and pay for the cost of the audit of the Financial Statements. Buyer
shall pay all sales, use, stamp, transfer, service, recording, real estate and
like taxes or fees, if any, imposed by any Governmental Authority in
connection with the transfer and assignment of the Purchased Assets.
11.2 Amendment. This Agreement may be amended, modified or supplemented
but only in writing signed by each of the parties hereto.
11.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a
courier service, (b) on the date of confirmed transmission if sent by telex,
facsimile or other wire transmission or (c) three (3) Business Days after
being deposited in the U.S. mail, certified or registered mail, postage
prepaid:
(a) If to Shareholders, addressed as follows:
Richard M. Tworek
3856 St. Clair Court
Monrovia, Maryland 21770
and
Mary Margaret Styer
621 Springvale Road
Great Falls, Virginia 22066
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Andrew M. Fregly
3151 K Covewood Court
Falls Church, Virginia 22042
with a copy to:
Robert S. Smith, Esq.
McGuire, Woods, Battle & Boothe, L.L.P.
1627 Eye Street, N.W., Suite 1000
Washington, D.C. 20006
Facsimile No.: (202) 857-1737
(b) If to Buyer, addressed as follows:
Infodata Systems Inc.
12150 Monument Drive, Suite 400
Fairfax, Virginia 22033
Attention: Harry Kaplowitz, President
Facsimile No.: (703) 934-7154
with a copy to:
Arthur H. Bill, Esq.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C. 20036
Facsimile No.: (202) 457-5151
(c) If to the Seller, addressed as follows:
Merex, Inc.
3206 Tower Oaks Boulevard, Suite 300
Rockville, Maryland 20852
Attention: Mr. Richard M. Tworek, President
Facsimile No.: (301) 816-0504
with a copy to:
Robert S. Smith, Esq.
McGuire, Woods, Battle & Boothe, L.L.P.
1627 Eye Street, N.W., Suite 1000
Washington, D.C. 20006
Facsimile No.: (202) 857-1737
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or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.4. Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.5. Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Exhibits attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of
the masculine, feminine or neuter gender herein shall not limit any provision
of this Agreement. The use of the terms "including" or "include" shall in all
cases herein mean "including, without limitation" or "include, without
limitation," respectively. Underscored references to Articles, Sections,
Subsections or Exhibits shall refer to those portions of this Agreement.
Consummation of the transactions contemplated herein shall not be deemed a
waiver of a breach of or inaccuracy in any representation, warranty or
covenant or of any party's rights and remedies with regard thereto. No
specific representation, warranty or covenant contained herein shall limit the
generality or applicability of a more general representation, warranty or
covenant contained herein. A breach of or inaccuracy in any representation,
warranty or covenant shall not be affected by the fact that any more general
or less general representation, warranty or covenant was not also breached or
inaccurate.
11.6 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Maryland
without giving effect to the principles of conflicts of law thereof.
11.7 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective estates, heirs, legal
representatives, successors and assigns; provided, however, that no assignment
of any rights or obligations shall be made by any party hereto without the
written consent of each other party hereto, except that Buyer may assign its
rights hereunder, but not its obligations, without such consent to any
Affiliate of Buyer.
11.8 No Third-Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and, to the extent provided herein, their
respective estates, heirs, successors, Affiliates, directors, officers,
employees, agents and representatives, and no provision of this Agreement
shall be deemed to confer upon other third parties any remedy, claim,
liability, reimbursement, cause of action or other right.
11.9 Publicity. Prior to the Closing Date, except as required by Law or
the rules of the National Association of Securities Dealers, Inc. Automated
Quotation System, no public announcement or other publicity regarding the
transactions referred to herein shall
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be made by Buyer, the Shareholders, the Seller or any of their respective
Affiliates, officers, directors, employees, representatives or agents, without
the prior written agreement of Buyer and Shareholders, in any case, as to
form, content, timing and manner of distribution or publication; provided,
however, that nothing in this Section shall prevent such parties from
discussing such transactions with those Persons whose approval, agreement or
opinion, as the case may be, is required for consummation of such particular
transaction or transactions.
11.10 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
11.11 Remedies Cumulative. Unless otherwise specified, the remedies
provided in this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
11.12 Entire Understanding. This Agreement set forth the entire agreement
and understanding of the parties hereto and supersede any and all prior
agreements, arrangements and understandings among the parties.
11.13 Jurisdiction of Disputes; Waiver of Jury Trial. In the event any
party to this Agreement commences any litigation, proceeding or other legal
action in connection with or relating to this Agreement, or any matters
described or contemplated herein or therein, the parties to this Agreement
hereby (a) agree under all circumstances absolutely and irrevocably to
institute any litigation, proceeding or other legal action in a court of
competent subject matter jurisdiction located within the City of Rockville,
Maryland, whether a state or federal court; (b) agree that in the event of any
such litigation, proceeding or action, such parties will consent and submit to
personal jurisdiction in any such court described in clause (a) of this
Section and to service of process upon them in accordance with the rules and
statutes governing service of process (it being understood that nothing in
this Section shall be deemed to prevent any party from seeking to remove any
action to a federal court in Montgomery County, Maryland); (c) agree to waive
to the full extent permitted by law any objection that they may now or
hereafter have to the venue of any such litigation, proceeding or action in
any such court or that any such litigation, proceeding or action was brought
in an inconvenient forum; (d) agree as an alternative method of service to
service of process in any legal proceeding by the mailing of copies thereof to
such party at its address set forth herein for communications to such party by
certified mail, return receipt requested with all applicable postage prepaid,
with copies thereof also being sent to each such party's attorney as set forth
herein; (e) agree that any service made as provided herein shall be effective
and binding service in every respect; and (f) agree that nothing herein shall
affect the rights of any party to effect service of process in any other
manner permitted by Law. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY
IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED
AGREEMENT OR ANY MATTERS DESCRIBED
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OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND ALL ACTION
NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
ATTEST: INFODATA SYSTEMS INC.
/s/Gregory Penel By:/s/Harry Kaplowitz
- ----------------------------- ---------------------------
Name:Gregory Penel Name: Harry Kaplowitz
Assistant Secretary Title:President
ATTEST: MEREX, INC.
/s/Mary Margaret Styer By:/s/Richard M. Tworek
- ----------------------------- ---------------------------
Name:Mary Margaret Styer Richard M. Tworek
Secretary President
The Shareholders:
/s/Richard M. Tworek /s/Mary Margaret Styer
- ----------------------------- ---------------------------
Richard M. Tworek Mary Margaret Styer
Individually Individually
/s/Andrew M. Fregly
- -----------------------------
Andrew M. Fregly
Individually
46
