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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): August 11, 1998
---------------
MICRODYNE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 0-4384 52-0856493
(State or other jurisdiction of (Commission file number) (IRS Employer
incorporation or organization) Identification No.)
3601 EISENHOWER AVENUE, ALEXANDRIA, VA 22304
(Address of principal executive office) (Zip Code)
(703) 329-3700
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On August 11, 1998, the Company, through its wholly owned subsidiary
MCTI Acquisition Corporation ("MCTI Acquisition"), acquired four affiliated,
privately held companies for cash. MCTI Acquisition purchased all the
outstanding stock of APCOM Inc. and Celerity Systems Inc., and the assets and
certain liabilities of Acceleration Systems, Inc. and Digital Telcom, Inc. for
approximately $16 million. The acquisition is being treated as a purchase for
accounting purposes. The Company obtained financing from NationsBank, N.A. to
finance the transaction. In conjunction with such financing, the Company
obtained a new line of credit facility from NationsBank, N.A. for $10 million
payable on October 31, 2000. The Company repaid the current borrowings under its
existing revolving line of credit facility totaling $4.5 million with the amount
available under this new line of credit. Operations of the companies will be run
in conjunction with those of the Company's wholly owned subsidiary, Microdyne
Communications Technologies Incorporated (MCTI) located in Ocala, Florida.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired:
The Company has determined that it is impracticable to file the
required financial statements in this Form 8-K filing. The
omitted financial statements will be filed as an amendment to
this Form 8-K filing on or before October 25, 1998.
(b) Pro Forma financial information:
The Company has determined that it is impracticable to file the
required pro forma financial statements in this Form 8-K filing.
The omitted financial statements will be filed as an amendment to
this Form 8-K filing on or before October 25, 1998.
(c) Exhibits:
2.2 Stock and Asset Purchase Agreement dated as of
August 11, 1998 by and among MCTI Acquisition
Corporation, Microdyne Corporation, Gary W.
Gallupe, Lillian M. Gallupe, Geoffrey D. Trimmer,
Jack Anderson, Dean Kobashigawa and the Other
Stockholders Named Herein and Digital Telcom, Inc.
and Acceleration Systems, Inc.
10.40 Credit Agreement Dated as of August 11, 1998 among
Microdyne Corporation as Borrower and NationsBank,
N.A. as Banks and NationsBank, N.A. as Agent
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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.
MICRODYNE CORPORATION
---------------------
Registrant
Date: August 26, 1998 /s/ Massoud Safavi
--------------- ------------------
Massoud Safavi
Chief Financial Officer
[Principal Financial Officer]
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STOCK AND ASSET PURCHASE AGREEMENT
DATED AS OF AUGUST 11, 1998
BY AND AMONG
MCTI ACQUISITION CORPORATION
MICRODYNE CORPORATION
GARY W. GALLUPE
LILLIAN M. GALLUPE
GEOFFREY D. TIMMER
JACK ANDERSON
DEAN KOBASHIGAWA
AND
THE OTHER STOCKHOLDERS NAMED HEREIN
AND
DIGITAL TELCOM, INC.
AND
ACCELERATION SYSTEMS, INC.
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TABLE OF CONTENTS
<TABLE>
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Page No.
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STOCK PURCHASE AGREEMENT..........................................................................................1
ARTICLE I: DEFINITIONS............................................................................................1
1.01 CERTAIN DEFINITIONS....................................................................................1
1.02 OTHER DEFINITIONS......................................................................................9
1.02 INTERPRETATION........................................................................................10
ARTICLE 11: SALE OF PURCHASED STOCK AND ASSETS; CLOSING..........................................................10
2.01 PURCHASE AND SALE.....................................................................................10
2.02 PURCHASE PRICE........................................................................................12
2.03 CLOSINGS..............................................................................................12
2.04 ESCROW................................................................................................13
2.05 EFFECT OF FAILURE OF ANY SELLER TO DELIVER............................................................14
2.06 EARN OUT AMOUNT.......................................................................................14
2.07 MICRODYNE'S GUARANTEE OF THE PURCHASER................................................................16
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SELLERS.....................................................16
3.01 ORGANIZATION AND QUALIFICATION........................................................................16
3.02 CAPITAL STOCK.........................................................................................16
3.03 AUTHORITY.............................................................................................17
3.04 SUBSIDIARIES; OFFICERS AND DIRECTORS; CHARTER AND BYLAWS..............................................17
3.05 NO CONFLICTS..........................................................................................17
3.06 GOVERNMENTAL APPROVALS AND FILINGS....................................................................18
3.07 MINUTE BOOKS AND RECORDS..............................................................................18
3.08 FINANCIAL STATEMENTS AND RECORDS......................................................................18
3.09 ABSENCE OF CHANGES....................................................................................20
3.10 NO UNDISCLOSED LIABILITIES............................................................................22
3.11 TAXES.................................................................................................22
3.12 LEGAL PROCEEDINGS.....................................................................................24
3.13 COMPLIANCE WITH LAWS AND ORDERS.......................................................................24
3.14 PLANS.................................................................................................24
3.15 REAL PROPERTY.........................................................................................26
3.16 TANGIBLE PERSONAL PROPERTY............................................................................27
3.17 INTELLECTUAL PROPERTY RIGHTS..........................................................................27
3.18 CONTRACTS AND ACQUIRED BUSINESSES.....................................................................28
3.19 PERMITS AND LICENSES..................................................................................31
3.20 INSURANCE.............................................................................................32
3.21 AFFILIATE TRANSACTIONS................................................................................32
3.22 EMPLOYEES, LABOR RELATIONS............................................................................33
3.23 ENVIRONMENTAL MATTERS.................................................................................33
3.24 SUBSTANTIAL CUSTOMERS AND SUPPLIERS...................................................................34
3.25 ACCOUNTS RECEIVABLE...................................................................................34
3.26 INVENTORY.............................................................................................34
3.27 BROKERS...............................................................................................34
3.28 RESTRICTIONS ON CONDUCT OF BUSINESS...................................................................34
3.29 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS........................................................35
3.30 WARRANTIES............................................................................................35
3.31 BUSINESS PLAN.........................................................................................35
3.33 CERTAIN PRACTICES.....................................................................................35
3.34 DISCLOSURE............................................................................................35
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MICRODYNE.....................................36
4.01 ORGANIZATION..........................................................................................36
</TABLE>
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<TABLE>
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4.02 AUTHORITY.............................................................................................36
4.03 NO CONFLICTS..........................................................................................36
4.04 GOVERNMENTAL APPROVALS AND FILINGS....................................................................37
4.05 LEGAL PROCEEDINGS.....................................................................................37
4.06 BROKERS...............................................................................................37
ARTICLE V: CERTAIN AGREEMENTS OF THE PARTIES.....................................................................37
5.01 CONDUCT OF BUSINESS PRIOR TO THE CLOSING..............................................................37
5.02 ACCESS TO INFORMATION.................................................................................40
5.03 BOOKS AND RECORDS.....................................................................................40
5.04 CONFIDENTIALITY.......................................................................................41
5.05 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.........................................................41
5.06 NO SOLICITATION OF OFFERS, ETC........................................................................42
5.07 NOTICE OF CERTAIN MATTERS.............................................................................42
5.08 INTERIM FINANCIAL STATEMENTS..........................................................................43
5.09 SELLERS' OBLIGATIONS..................................................................................43
5.10 FURTHER ACTION........................................................................................43
5.11 ALLOCATION OF PURCHASE PRICE..........................................................................43
5.12 HSR FILING............................................................................................43
5.13 CERTAIN EMPLOYEE AND SELLER MATTERS...................................................................43
5.14 CERTAIN PERFORMANCE BONUSES...........................................................................44
5.15 BULK SALES LAWS.......................................................................................44
5.16 USE AND CHANGE OF NAMES...............................................................................44
5.17 ESTOPPEL CERTIFICATES FOR LEASED REAL PROPERTY........................................................44
5.18 SELLING COMPANY ARTICLES OF TRANSFER..................................................................44
5.19 SECTION 1445..........................................................................................44
5.20 RELEASE OF LEASED PROPERTY LIENS......................................................................44
5.21 CERTAIN ASSUMED LIABILITIES, CERTAIN PAYMENTS.........................................................45
ARTICLE VI: CONDITIONS TO CLOSING................................................................................45
6.01 CONDITIONS TO OBLIGATIONS OF SELLERS..................................................................45
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENT...............................................45
(b) NO ORDER OR SUIT......................................................................................45
(c) GOVERNMENTAL FILINGS AND CONSENTS.....................................................................45
(d) LEGAL OPINION.........................................................................................46
(e) INCUMBENCY CERTIFICATE................................................................................46
(f) PROCEEDINGS...........................................................................................46
(g) NON-COMPETITION AGREEMENT.............................................................................46
(h) PAY-OFF OF TARGET COMPANY LOAN........................................................................46
(i) THIRD PARTY CONSENTS..................................................................................46
(j) ORGANIZATIONAL DOCUMENTS..............................................................................46
(k) GOOD STANDING.........................................................................................46
(l) NO MATERIAL ADVERSE EFFECT............................................................................46
(m) EMPLOYMENT AGREEMENTS..............................................................................47
6.02 CONDITIONS TO OBLIGATIONS OF THE PURCHASER............................................................47
(a) REPRESENTATIONS AND WARRANTIES, COVENANTS.............................................................47
(b) NO ORDER OR SUIT......................................................................................47
(c) GOVERNMENTAL FILINGS AND CONSENTS.....................................................................47
(d) THIRD PARTY CONSENTS..................................................................................48
(e) PURCHASER FINANCING...................................................................................48
(f) LEGAL OPINION.........................................................................................48
(g) RESIGNATION OF DIRECTORS AND OFFICERS OF TARGET COMPANIES.............................................48
(h) ORGANIZATIONAL DOCUMENTS..............................................................................48
(i) GOOD STANDING.........................................................................................48
(j) NO MATERIAL ADVERSE EFFECT............................................................................48
(k) INCUMBENCY CERTIFICATE................................................................................48
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(l) MINUTE AND STOCK BOOKS................................................................................48
(m) ASSIGNMENT AND RELEASE OF CLAIMS...................................................................48
(n) CERTAIN EMPLOYMENT MATTERS............................................................................48
(o) REPAYMENT OF INDEBTEDNESS.............................................................................49
(p) DISCHARGE OF LIENS....................................................................................49
(q) NON-COMPETITION AGREEMENT.............................................................................49
(r) PROCEEDINGS...........................................................................................49
(s) NON-FOREIGN CERTIFICATE...............................................................................49
(t) USE AND CHANGE OF NAMES...............................................................................49
(u) SELLING COMPANY ARTICLES OF TRANSFER..................................................................49
(v) ESTOPPEL CERTIFICATES.................................................................................49
ARTICLE VII: SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS...................................50
7.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.....................................50
ARTICLE VIII: INDEMNIFICATION....................................................................................50
8.01 INDEMNIFICATION.......................................................................................50
8.02 METHOD OF ASSERTING CLAIMS............................................................................51
ARTICLE IX: TERMINATION..........................................................................................53
9.01 GROUNDS FOR TERMINATION...............................................................................53
9.02 EFFECT OF TERMINATION.................................................................................54
ARTICLE X: SELLERS' REPRESENTATIVE...............................................................................55
10.01 APPOINTMENT OF SELLERS' REPRESENTATIVE................................................................55
10.02 LIMITATION OF LIABILITY...............................................................................55
10.03 ACTIONS BINDING.......................................................................................55
ARTICLE XI: ARBITRATION OF DISPUTES..............................................................................55
11.01 ARBITRATION...........................................................................................55
11.02 PROCEDURE FOR ARBITRATION.............................................................................55
11.03 LIMITATION ON POWERS OR ARBITRATORS...................................................................56
ARTICLE XII: MISCELLANEOUS.......................................................................................56
12.01 NOTICES...............................................................................................56
12.02 ENTIRE AGREEMENT, AMENDMENT...........................................................................58
12.03 EXPENSES..............................................................................................58
12.04 CUMULATIVE REMEDIES...................................................................................58
12.05 WAIVER................................................................................................58
12.06 NO ASSIGNMENT, BINDING EFFECT.........................................................................58
12.07 INVALID PROVISIONS....................................................................................58
12.08 GOVERNING LAW.........................................................................................59
12.09 CONSTRUCTION..........................................................................................59
12.10 TIME PERIODS..........................................................................................59
12.11 COUNTERPARTS..........................................................................................59
</TABLE>
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE DESCRIPTION
- -------- -----------
1.01 Certain Liens
2.03(b) Shareholder Percentage; Shares, Options and Loan Accounts to be Sold
3.01 Jurisdictions in which the Company is Qualified to do Business
3.02(b) Material Terms of Options to Acquire Target Company Stock
3.04 Directors and Officers of the Companies
3.05 Conflicts, Violations and Breaches
3.06 Governmental Approvals and Filings
iii
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3.08(a) Financial Statements
3.08(c) Accounting Principles for Certain Determinations
3.09 Absence of Changes
3.10 Certain Liabilities
3.11 Taxes
3.12 Legal Proceedings and Attorneys' Letters
3.14 Plans
3.15 Real Property
3.16 Tangible Personal Property
3.17 Intellectual Property
3.18 Contracts
3.18(e) Orders on Hand on Effective Date
3.19 Permits and Licenses
3.20 Insurance
3.21(a) Affiliate Transactions
3.21(b) Non-Arms Length Transactions
3.21(c) Inter-Company Transaction
3.22 Employees; Labor Relations
3.23 Environmental Matters
3.24 Largest Customers and Suppliers
3.26 Inventory
3.29 Bank and Brokerage Accounts; Investment Assets
3.30 Warranties
3.31 Business Plan
4.04 Purchaser Governmental Approvals and Filings
5.11 Allocation of Purchase Price
6.02(d) Required Consents - Purchaser Condition
EXHIBIT DESCRIPTION
- ------- -----------
Exhibit A Assignment and Release of Claims
Exhibit B Assignment of Options
Exhibit C Escrow Agreement
Exhibit D Non-Competition Agreement
Exhibit E Opinion of McGuire, Woods, Battle & Boothe LLP
Exhibit F Employment Agreement and Employees
Exhibit F-1: Form of Employment Agreement
Exhibit F-2: Certain Employees
Exhibit F-3: Form of Employee Non-Disclosure, Development and
Assignment of Proprietary Rights Agreement
Exhibit F-4: Certain Employees
Exhibit G Opinion of Tucker, Flyer & Lewis
Exhibit H Names and Addresses of Other Stockholders
Exhibit I Bill of Sale and Assignment
Exhibit J Instrument of Assumption of Certain Liabilities
Exhibit J-1: ASI
Exhibit J-2: DTI
Exhibit K Performance Bonus Plan
Exhibit L Certificate of Non-Foreign Status
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STOCK AND ASSET PURCHASE AGREEMENT
This STOCK AND ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
August 11, 1998, is entered into by and among MCTI Acquisition Corporation, a
Maryland corporation ("Purchaser"), Microdyne Corporation, a Maryland
corporation ("Microdyne"); Gary W. Gallupe ("Mr. Gallupe"), Lillian M. Gallupe
("Mrs. Gallupe"), Geoffrey D. Timmer ("Mr. Timmer"), Jack Anderson ("Mr.
Anderson"), and Dean Kobashigawa ("Mr. Kobashigawa") (collectively the
"Principal Stockholders" and each a "Principal Stockholder"); and those
individuals listed under the heading "Other Stockholders" on the signature pages
hereto (the "Other Stockholders", and collectively with the Principal
Stockholders, the "Individual Sellers" and each an "Individual Seller"), Digital
Telcom, Inc., a Maryland corporation ("DTI"), and Acceleration Systems, Inc., a
Maryland corporation ("ASI", and collectively with DTI, the "Selling Companies")
(the Individual Sellers and the Selling Companies being collectively referred to
as the "Sellers" and each a "Seller").
BACKGROUND
The Individual Sellers collectively own and desire to sell to the
Purchaser all of the issued and outstanding shares of capital stock of Apcom,
Inc., a Maryland corporation ("Apcom") consisting of 3,091,030 shares of common
stock of par value $0.01 per share (the "Apcom Stock") and of Celerity Systems
Incorporated, a California corporation ("Celerity," and with Apcom, the "Target
Companies" and each a "Target Company") consisting of 2,293,800 shares of common
stock of no par value per share, (the "Celerity Stock", and with the Apcom
Stock, the "Purchased Stock") (the Target Companies and the Selling Companies
being collectively referred to as the "Companies" and each a "Company"),
together with all rights or options to acquire any shares of capital stock of
the Target Companies and any and all shareholder loan accounts or other claims
of any of the Sellers or their Affiliates against the Target Companies. The
Selling Companies own and desire to sell to Purchaser their entire business,
assets and undertaking (the "Purchased Assets"). The Purchaser desires to
purchase the Purchased Stock and Purchased Assets from Sellers. The Purchaser
and the Sellers wish to make the economic benefits of the purchase and sale
transactions contemplated hereby effective (if the closings hereunder occur in
accordance herewith) as and from the close of business on May 31, 1998, such
that the Target Companies and the businesses of the Selling Companies shall be
considered to have been operated for the economic benefit of the Purchaser as
and from such date.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I: DEFINITIONS
1.01 CERTAIN DEFINITIONS. As used in this Agreement, the following
defined terms shall have the meanings set forth below:
"Acquired Businesses" means the businesses conducted by the
Target Companies and the businesses of the Selling Companies comprised of and
conducted with the Purchased Assets acquired by, and the Assumed Liabilities
assumed by, the Purchaser from the Selling Companies, at and as of the Closing
Date, together with, in the case of the determination of the Earn Out Amount,
any internally generated expansion of or growth in such businesses but excluding
therefrom any lines of business or products or services conducted or sold by the
Purchaser as of the Closing Date (to the extent not conducted by the Target
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Companies or the Selling Companies as of the Closing Date) and any lines of
business, products or services introduced to such businesses after the Closing
Date by acquisition from any Person after the Closing Date.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly controlling, controlled by or under common control
with such Person, (b) any other Person that owns or controls 5% or more of any
class of equity securities (including any equity securities issuable upon the
exercise of any option or convertible security) of such Person or any of its
Affiliates, or (c) any director, partner, officer, agent, employee or relative
of such Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities or
by contract or otherwise.
"Agreement" means this Stock and Asset Purchase Agreement, the
Exhibits and the Disclosure Schedule and the certificates delivered in
connection herewith, as the same may be amended from time to time in accordance
with the terms hereof.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Assignment and Release of Claims" means the assignment and
release of claims executed and delivered by each of the Individual Sellers
(other than those Individual Sellers transferring solely Purchased Options),
substantially in the form and to the effect of Exhibit A hereto, as such
assignment and release of claims may be amended, modified or restated from time
to time.
"Associate" means, with respect to any Person, (a) any
corporation or other business organization of which such Person is an officer or
partner or is the beneficial owner, directly or indirectly, of ten percent (10%)
or more of any class of equity securities, any trust or estate in which such
Person has a substantial beneficial interest or as to which such Person serves
as a trustee or in a similar capacity or (b) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as such Person.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Companies, including without
limitation financial statements, Tax Returns and related work papers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Permits, customer lists, computer files and programs, retrieval
programs, computerized records, operating data and plans, associated software
and documentation, and environmental studies, audits, reports and plans.
"Business Combination" means, with respect to any Person, any
(a) merger, amalgamation, consolidation or combination to which such Person is a
party, (b) any sale, dividend, split or other disposition of any capital stock
or other equity interests of such Person, (c) any tender offer (including
without limitation a self-tender), exchange offer, recapitalization,
liquidation, dissolution or similar transaction, (d) any sale
2
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(including, without limitation, a bulk sale), dividend or other disposition of
all or a material portion of the Assets and Properties of such Person or (e) the
entering into of any agreement or understanding, or the granting of any rights
or options, with respect to any of the foregoing.
"Business or Condition of the Company" means the business,
operations, assets, Liabilities, condition (financial or otherwise), results of
operations, Assets and Properties and prospects of a Company.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in Richmond, Virginia are authorized or obligated to
close.
"Cash Equivalents" of any Person means any investment in (i)
direct obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard and Poors and P-1 by Moody's, (iii) time deposits
with, including certificates of deposit issued by, any office located in the
United States of any bank or trust company which is organized under the laws of
the United States or any state thereof and has capital, surplus and undivided
profits aggregating at least $500,000,000 or (iv) repurchase agreements with
respect to securities described in clause (i) above entered into with an office
of a bank or trust company meeting the criteria specified in clause (iii) above;
provided in each case that such investment matures within one year from the date
of acquisition thereof by such Person.
"Claim Notice" means written notification pursuant to Section
8.02(a) of a Third Party Claim as to which indemnity under Section 8.01 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
on the Indemnified Party and otherwise describing the Indemnified Party's claim
against the Indemnifying Party under Section 8.01.
"Company" or "Companies" has the meaning ascribed to it in the
forepart of this Agreement (and, unless the context otherwise requires, shall
include any predecessor of such Company).
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract,
commitment or understanding (whether written or oral).
"Disclosure Schedule" means the schedules delivered to
Purchaser by or on behalf of the Sellers, and the schedules delivered by or on
behalf of Purchaser to the Sellers, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) calendar
days following receipt by an Indemnifying Party of an Indemnity Notice.
"$" or "Dollars" means lawful currency of the United States of
America.
"EBIT" of any Person means earnings, before interest and
taxes, as determined by excluding from earnings (a) all extraordinary gains and
losses and all fees and expenses relating thereto, and (b) all gains and losses
from the disposition of assets other than in the ordinary course of business.
"Effective Date" means the close of business on May 31, 1998.
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"Environment" means all air, surface water (including, without
limitation, navigable waters and ocean waters), groundwater, drinking water
supplies, stream sediments or land (including land surface or subsurface),
including all fish, wildlife, biota and all other natural resources.
"Environmental Claim" means any administrative or judicial
action, suit, order, claim, lien, notice, notice of violation, investigation,
complaint, request for information, proceeding, or other communication (written
or oral), whether criminal, penal or civil, pursuant to or relating to any
applicable Environmental Law by any Person (including but not limited to any
Governmental or Regulatory Authority, private person or citizens' group) based
upon, alleging, asserting, or claiming any actual or potential (a) violation of
or Liability under any Environmental Law, (b) violation of any Environmental
Permit, or (c) Liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property damage,
personal injury, fines or penalties arising out of, based on, resulting from or
related to the presence, Release, or threatened Release into the Environment of
any Hazardous Substances at any location, including but not limited to any
off-Site location to which Hazardous Substances or materials containing
Hazardous Substances were sent for handling, storage, treatment, or disposal.
"Environmental Law" means any and all current and future
United States federal, state and local, civil, penal and criminal Laws
(including administrative and judicial interpretations of these Laws by any
Governmental or Regulatory Authority), statutes, ordinances, orders, codes,
treaties, rules, regulations, Environmental Permits, policies, guidance
documents, judgments, decrees, injunctions, or agreements with any Governmental
or Regulatory Authority, relating to the protection of health and the
Environment, worker health and safety, and/or governing the handling, use,
generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or Release of Hazardous
Substances, whether now existing or subsequently amended or enacted, and the
foreign analogies thereof, all as amended or superseded from time to time; and
any common law doctrine, including but not limited to, negligence, nuisance,
trespass, personal injury, or property damage related to or arising out of the
presence, Release, or exposure to a Hazardous Substance.
"Environmental Liabilities" means Liabilities of a Person that
arise under any Environmental Law, including, but not limited to, all financial
responsibility under any Environmental Law for site assessments, investigatory
and testing costs, clean-up costs or corrective actions (including, without
limitation, for any removal, remedial or other response actions), and any other
costs, fines or penalties.
"Environmental Permit" means any United States federal, state,
or local permits, licenses, approvals, consents or authorizations required by
any Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Escrow Agent" means Crestar Bank, N.A., a national banking
association, or another financial institution satisfactory to Purchaser and the
Sellers' Representative.
"GAAP" means United States generally accepted accounting
principles (as defined by the United States Financial Accounting Standards
Board), consistently applied.
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"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, ministry, department, commission,
official or other instrumentality or regulatory body or governmental authority,
or of any state, territorial, provincial, county, city or other political
subdivision, of the United States or any foreign country and shall include,
without limitation, any stock exchange, quotation service and the National
Association of Securities Dealers.
"Government Contract" means any Contract pursuant to which any
products (including without limitation Intellectual Property) or services are to
be produced for or sold or supplied to any United States federal, state or local
or foreign Governmental or Regulatory Authority, including without limitation to
any other Person under a Contract pursuant to the terms of which compliance with
the rules and regulations of the relevant United States federal, state or local
or foreign Governmental or Regulatory Authority is required in connection with
the sale or supply to such other Person in connection with the resale or supply
of such products or services to such United States federal, state or local or
foreign Governmental or Regulatory Authority.
"Hazardous Substances" means all contaminants, pollutants,
chemicals, deleterious substances, wastes or industrial, toxic or hazardous
wastes or substances including, without limitation, petroleum and petroleum
products, asbestos in any form that is or could become friable, urea,
formaldehyde, foam insulation and transformers or other equipment that contain
dielectric fluid levels of polychlorinated biphenyls ("PCBs"), flammable
material, radioactive materials, (or any other chemical, material, substance or
waste, exposure to which is now or hereafter prohibited, limited or regulated by
any Governmental or Regulatory Authority), issued or discharged into the
Environment in a greater quantity or concentration than that provided for in any
Environmental Law or the presence of which in the Environment is prohibited
pursuant to any Environmental Law. For the purposes of this definition,
"contaminants" means any solid, liquid or gaseous matter, microorganism, sound,
vibration, ray, heat, water, radiation or a combination of any of them that
adversely alters the quality of the Environment.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"Indebtedness" of any Person means, at any date, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services (other than trade accounts payable
arising in the ordinary course of business), (d) all capital lease obligations
of such Person, (e) all obligations of such Person to purchase securities or
other property which arise out of or in connection with the sale of the same or
substantially similar securities or property, (f) all obligations of such Person
to reimburse any bank or other Person in respect of amounts paid under a letter
of credit, bankers' acceptance or similar instrument, (g) all obligations of
others secured by a Lien on any asset of such Person, whether or not such
obligation is assumed by such Person or for which such Person would be liable
therefor under applicable law or any agreement or instrument by virtue of such
Person's ownership interest in or other relationship with such entity, (h) all
obligations of others guaranteed by such Person, and (i) with respect to any
swaps, puts calls, collars, caps or other derivative transactions with respect
to or in connection with any of the foregoing.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article VIII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VIII.
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<PAGE> 11
"Indemnity Notice" means written notification pursuant to
Section 8.02(c) of a claim for indemnity under Article VIII by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"Intellectual Property" means all United States, and foreign
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, copyrights
and copyright rights, patents and patent rights, mask works, brand names, trade
dress, industrial or product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions (whether
or not patentable), invention disclosures, processes, formulae, industrial
models, designs, specifications, data, databases and data collections,
technology, methodologies, computer programs (including all source codes, object
codes, firmware, development tools, files, records and data), and any other
confidential and proprietary right or information, whether or not subject to
statutory registration, and all related technical information, manufacturing,
engineering and technical drawings, know-how and all common law and world-wide
rights to, pending United States, and foreign applications for and registrations
of, patents (including all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations in part), trademarks, service
marks and copyrights, and the right to sue for past infringement, if any, in
connection with any of the foregoing, and all documents, disks and other media
on which any of the foregoing is stored.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, financial assets, security entitlements,
securities (including rights to purchase and securities convertible into or
exchangeable for other securities), interests in joint ventures, limited
liability companies and general and limited partnerships, mortgage loans and
other investment or portfolio assets owned of record or beneficially by any
Company.
"IRS" means the Internal Revenue Service of the United States.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements of any Governmental or Regulatory Authority
having the effect of law in the United States or, any foreign country or any
state, county, province, territory, city or other political subdivision thereof.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due), including,
without limitation, fines, penalties, judgments, awards, settlements respecting
any judicial, administrative or arbitration proceedings, damages, losses, claims
or demands with respect to any Law.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any damage, fine, fee, penalty, deficiency,
diminution in value of investment, loss or expense, including without
limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation, arbitration or other proceedings or of any claim,
default or assessment (such fees and expenses to include
6
<PAGE> 12
without limitation all fees and expenses of attorneys incurred in connection
with (a) the investigation or defense of any Third Party Claim or (b) asserting
or disputing any right under this Agreement against any party hereto or
otherwise).
"Operative Agreements" means this Agreement, the Escrow
Agreement, the Gallupe Non-Competition Agreement, the Employment Agreements, the
Assignment and Release of Claims, the Assignment of Options, and the Employee
Non-Disclosure, Development and Assignment of Proprietary Rights Agreement.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (a) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (b) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Permitted Liens" means (a) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (b) statutory Liens of landlords and Liens of carriers,
contractors, warehousemen, mechanics, material men and other similar Persons
imposed by applicable Law and incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith and which, in the case
of Owned Real Property, shall have been discharged before the Closing; (c) Liens
relating to deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
or to secure the performance of leases, trade contracts or other similar
agreements; (d) Liens specifically identified in the Effective Date Balance
Sheet; (e) Liens securing executory obligations under any lease that constitutes
an "operating lease" under GAAP; and (f) other Liens set forth in Section 1.01
of the Disclosure Schedule; provided, however, that (X) with respect to each of
the foregoing clauses (a) through (f), to the extent that any such Lien arose on
or prior to the date of the Effective Date and relates to, or secures the
payment of, a Liability that is required to be accrued under GAAP, such Lien
shall not be a Permitted Lien unless adequate accruals for such Liability have
been established therefor on the Effective Date Balance Sheet in conformity with
GAAP, and (Y) with respect to the foregoing clause (f), to the extent that any
such Lien secures any Indebtedness (other than a lease of tangible personal
property secured only by, or with respect to which there exists only a notice
filing that relates only to the, the tangible personal property so leased and
proceeds thereof) has been discharged as of the Effective Date, such Lien shall
not be a Permitted Lien. Notwithstanding the foregoing, no Lien arising under
the Internal Revenue Code (other than as expressly referred to in (a) above)
shall be a Permitted Lien.
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<PAGE> 13
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any employee pension plan, and any bonus,
incentive compensation, deferred compensation, profit sharing, retirement,
savings, stock purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, leave of absence, layoff, vacation, day or dependent
care, legal services, cafeteria, life, medical, dental, health, accident,
disability, workers' compensation or other insurance, severance, separation or
other employee benefit plan, practice, policy, program or arrangement of any
kind providing money (other than as current salary or wages), services, property
or other benefits, written or oral, funded or unfunded, and including all that
have been frozen or terminated, and all trust, escrow or similar agreements
related thereto, funded or unfunded, which are maintained by any Company with
respect to any of its present or former employees, independent contractors,
directors, officers or shareholders or with respect to which any Company has
made or is required to make payments, transfers or contributions or is required
to administer and make regulatory filings.
"Purchased Loan Accounts" means any and all Indebtedness of
the Target Companies to the Sellers or their Affiliates.
"Purchased Options" means the Options of the Individual
Sellers to acquire shares of capital stock in or other securities of the Target
Companies.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Substance into the Environment.
"Representatives" means Purchaser and its Affiliates and each
of their respective officers, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives.
"Resolution Period" means the period ending thirty (30)
calendar days following receipt by an Indemnified Party of an Arbitration
Notice.
"Seller's Knowledge" means to the best of the knowledge and
belief of the Individual Sellers and the directors and officers of the Companies
after making reasonable and prudent inquiry and investigation in connection
therewith.
"Securities Act" means the (United States) Securities Act of
1933, as amended, and the rules and regulations thereunder.
"Site" means any of the real properties currently or
previously owned, leased or operated by any Company, any predecessors of any
Company or any entities previously owned by any Company, including all soil,
subsoil, surface waters and groundwater thereat.
"Subsidiary" means, with respect to any Company, (a) any other
corporation as to which more than 10% of the outstanding stock having ordinary
voting rights or power (and excluding stock having voting rights only upon the
occurrence of a contingency unless and until such contingency occurs and such
rights may be exercised) is owned or controlled, directly or indirectly, by such
Company, and (b) any partnership, joint venture or other similar relationship
between such Company (or any Subsidiary thereof) and any other Person (whether
pursuant to a written agreement or otherwise) and any limited liability company,
in each case if such Company has a 10% or more equity interest therein.
8
<PAGE> 14
"Tax" or "Taxes" means all United States and foreign federal,
state, territorial, provincial or local net or gross income, gross receipts, net
proceeds, sales, use, franchise, ad valorem, real or personal property (tangible
and intangible), value added, transfer, franchise, stamp, leasing, lease, user,
transfer, fuel, excess profits, undistributed profits, windfall profits, blank
share, issued share, bearer share, capital stock, customs duties, recapture,
license, employee income withholding, dividend withholding, interest
withholding, other withholding, payroll, employment, unemployment, social
security, pension, health, old age security, unemployment, excise, property,
disability, severance, alternative or add-on minimum, environmental, or other
taxes, assessments, duties, fees, levies or other charges of any nature whatever
imposed by any Governmental Authority, whether disputed or not, together with
any interest, penalties, additions to tax or additional amounts with respect
thereto.
"Tax Returns" means any and all United States and foreign
federal, state, territorial, provincial or local returns, reports or statements
(including any information returns) required to be filed for purposes of a
particular Tax.
"Taxing Authority" means the IRS and any other governmental or
Regulatory Authority in the United States federal, foreign jurisdiction, or any
state, country, province, territory, or local jurisdiction therein, having or
purporting to exercise jurisdiction with respect to any Tax.
1.02 OTHER DEFINITIONS. As used in this Agreement, the following
defined terms shall have the meanings set forth in the sections of this
Agreement referred to opposite each such defined term:
<TABLE>
<S> <C>
"AAA"..................................................................Section 11.01.
"Arbitration Notice"...................................................Section 11.02(b).
"Arbitrators' Report"..................................................Section 11.02(c).
"Assumed Liabilities"..................................................Section 2.01(c).
"Audited Financial Statements".........................................Section 3.08.
"Business Plans".......................................................Section 3.31
"Closing"..............................................................Section 2.03(a).
"Closing Date".........................................................Section 2.03(a).
"Disputes".............................................................Section 11.01.
"Earn Out Amount"......................................................Section 2.02.
"Effective Date Balance Sheet".........................................Section 3.08(a).
"Employees"............................................................Section 3.14(a).
"Employee Non-Competition Agreements"..................................Section 5.13(b).
"Employee Non-Disclosure, Development and
Assignment of Proprietary Rights Agreement"...................Section 5.13(b).
"Employment Agreements"................................................Section 5.13(a).
"Escrow Agreement".....................................................Section 2.04.
"Escrow Amount"........................................................Section 2.04.
"Escrow Fund"..........................................................Section 2(a) of the Escrow Agreement.
"Evaluation Material"..................................................Section 5.04(a).
"Excluded Assets"......................................................Section 2.01(d)
"Financial Statements".................................................Section 3.08.
"Gallupe Non-Competition Agreement"....................................Section 5.13(c).
"Individual Seller" or "Individual Sellers"............................the forepart of this Agreement.
"Initiating Party".....................................................Section 11.02(b)
"Intellectual Property License Agreements".............................Section 3.17(a).
</TABLE>
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<PAGE> 15
<TABLE>
<S> <C>
"Leased Real Property".................................................Section 3.15(a).
"Other Stockholders"...................................................the forepart of this Agreement.
"Owned Real Property"..................................................Section 3.15(a)
"Principal Stockholder" or "Principal Stockholders"....................the forepart of this Agreement.
"Purchase Price".......................................................Section 2.02.
"Purchased Stock"......................................................the forepart of this Agreement.
"Purchaser"............................................................the forepart of this Agreement.
"Purchaser Indemnities"................................................Section 8.01(a).
"Real Property"........................................................Section 3.15(a)
"Real Property Leases".................................................Section 3.15(a).
"Reviewed Financial Statement".........................................Section 3.08.
"Rules"................................................................Section 11.02(b).
"Seller" or "Sellers"..................................................the forepart of this Agreement.
"Seller Indemnities"...................................................Section 8.01(b).
"Sellers' Representative"..............................................Section 10.01.
"Selling Company" or "Selling Companies"...............................the forepart of this Agreement.
"Shareholder Percentage"...............................................Section 2.03.
"Target Company" or "Target Companies".................................the forepart of this Agreement.
"Third Party Claim"....................................................Section 8.02(a).
"Warranty Obligations".................................................Section 3.30.
</TABLE>
1.03 INTERPRETATION. As used in this Agreement, the word "including"
means without limitation; the word "or" is not exclusive; and the words
"herein", "hereof', "hereby", "hereto" and "hereunder" refer to this Agreement
as a whole. Any reference to any applicable Law shall be deemed also to refer to
all rules and regulations promulgated thereunder unless the context otherwise
requires. Whenever required by the context, any gender shall include any other
gender, the singular shall include the plural and the plural shall include the
singular. Unless the context otherwise requires, references herein: (a) to
Articles, Sections, Exhibits and Schedules mean the Articles and Sections of and
the Exhibits and Schedules attached to this Agreement; and (b) to an agreement,
instrument or other document means such agreement, instrument or other document
as amended, supplemented and modified through the date hereof unless the context
otherwise requires and thereafter from time to time to the extent permitted by
this Agreement. The Schedules and Exhibits referred to herein shall be construed
with and as an integral part of this Agreement to the same extent as if they
were set forth verbatim herein. The Table of Contents and titles to Articles and
headings of Sections or Schedules are inserted for convenience of reference only
and shall not be deemed a part of or to affect the meaning or interpretation of
this Agreement.
ARTICLE II: SALE OF PURCHASED STOCK AND ASSETS; CLOSING
2.01 PURCHASE AND SALE.
(a) The Individual Sellers agrees to sell to Purchaser, and Purchaser
agrees to purchase from the Individual Sellers, the Purchased Stock, the
Purchased Options and the Purchased Loan Accounts owned by the Individual
Sellers, and the Selling Companies each agree to sell to Purchaser, and the
Purchaser agrees to purchase from each Selling Company, the Purchased Assets
free and clear of all Liens other than Permitted Liens, and in connection
therewith to assume the Assumed Liabilities all on the terms and subject to the
conditions set forth in this Agreement.
(b) The Purchased Assets shall include, without limitation (other than
as expressly set forth in Section 2.01(d), all of the following assets of the
Selling Companies:
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(i) all Owned Real Property, together with the fixtures and
other improvements thereto and the appurtenances belonging thereto;
(ii) all machinery, equipment, furniture, vehicles, tools,
supplies, fuel, spare parts and other tangible personal property;
(iii) all raw materials, work-in-process and finished goods;
(iv) all Permits which are assignable;
(v) all Environmental Permits which are assignable;
(vi) all Intellectual Property;
(vii) the rights and interests of Selling Companies in, to and
under all Contracts;
(viii) all accounts receivable and notes receivable;
(ix) all Books and Records, wherever located;
(x) all forms, labels, stationery, shipping materials,
catalogues, brochures, art work, photographs and advertising materials;
(xi) all prepaid expenses and deferred charges;
(xii) all other Assets and Properties.
(c) Except to the extent set forth below, at the Closing the Purchaser
shall assume (X) all obligations of the Selling Companies under all Contracts,
to the extent that such obligations are to be performed after Closing in
accordance with their respective provisions; (Y) all such existing liabilities
and obligations of the Selling Companies as are reflected in the Effective Date
Balance Sheet, but only to the extent of the accrual therefor in the Effective
Date Balance Sheet; and (Z) those Liabilities of the Selling Companies whose
incurrence after the Effective Date would not breach the provisions of Section
3.10(b), including without limitation those set forth in Section 5.21 (the
"Assumed Liabilities"). Notwithstanding the preceding sentence, the following
Liabilities of the Selling Companies are expressly excluded from the Assumed
Liabilities:
(i) all Liabilities for Taxes (A) incurred by either Selling
Company prior to or payable with respect to any period preceding the
Effective Date, except to the extent that provision is made therefor in
the Effective Date Balance Sheet, or (B) incurred by the Selling
Companies with respect to any of the transactions contemplated hereby;
(ii) all Liabilities, whether civil or criminal in nature,
arising out of any actual or alleged violation by either Selling
Company, or by any previous owner of any of the Purchased Assets, of
any Laws or Permits.
(iii) all Liabilities arising from a breach of any Contract by
either Selling Company before the Closing;
(iv) all Liabilities arising from litigation pending or
threatened against either Selling Company at the time of the Closing;
(v) except to the extent expressly provided in Article VII
hereof, any liability or obligation in respect of severance or
separation pay or employee benefits for present or former employees of
either Selling Company; and
(vi) all present or future Liabilities to the Sellers and
their Affiliates, including without limitation to Harvey Novak or Mr.
Timmer for any commissions or bonuses, except as otherwise set forth in
Section 5.21.
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(d) The Selling Companies shall retain, and the Purchased Assets shall
not include, the following properties, assets and other rights of the Selling
Companies (collectively, the "Excluded Assets"):
(i) the consideration to be paid to the Selling Companies by
Purchaser pursuant to this Agreement;
(ii) the Selling Companies' rights arising under this
Agreement or any other Operative Agreement;
(iii) all claims, defenses, choses in action, causes of action
and judgment in respect of any Actions or proceedings identified in
Section 3.12 of the Disclosure Schedule, or with respect to any other
liability not assumed by Purchaser; and
(iv) all insurance policies other than those that are part of
or associated with any Plan; and
(v) the outstanding balance of not more than $95,000 on the
receivable of $178,769 owed to DTI by CSI and ASI as a commission for
products sold by and shipped by CSI and ASI prior to the Effective
Date, being the receivable referred to in Section 3.09(d)(ii)(A).
2.02 PURCHASE PRICE. The aggregate purchase price payable at the
Closing for the Purchased Stock, the Purchased Options, the Purchased Loan
Accounts, and the Purchased Assets is Fifteen Million Nine Hundred Thousand
Dollars ($15,900,000) (the "Purchase Price). In addition to the Purchase Price,
and in consideration for the sale by the Sellers to the Purchaser of the
Purchased Stock, the Purchased Options, the Purchased Loan Accounts, and the
Purchased Assets, the Purchaser shall, subject to the conditions and at the time
set forth in Section 2.06, pay to the Sellers an additional and contingent
amount of One Million Dollars ($1,000,000) (the "Earn Out Amount"), which, if
earned and payable pursuant to Section 2.06, shall be part of the Purchase
Price. The Purchase Price other than the Earn-Out Amount is payable in the
manner provided in Sections 2.03 and 2.04 and the Earn-Out Amount, if earned and
payable, is payable in the manner provided in Section 2.06. The Purchase Price,
including the Earn-Out Amount if earned and payable, is allocated between the
Purchased Stock, the Purchased Options, the Purchased Loan Accounts and the
Purchased Assets as provided in Section 5.11.
2.03 CLOSINGS.
(a) The closing (the "Closing") for the purchase and sale contemplated
hereunder will take place at the offices of McGuire, Woods, Battle & Boothe LLP,
8280 Greensboro Drive, 9th Floor, Tysons Corner, McLean Virginia 22102-3892, at
10:00 A.M. local time, on August 11, 1998 or such other date as the Purchaser
and the Sellers' Representative shall mutually agree (the date and time of the
Closing are herein referred to as the "Closing Date").
(b) At the Closing:
(i) Purchaser will pay an aggregate of Thirteen Million Nine
Hundred Thousand Dollars ($13,900,000) of the Purchase Price to the
Sellers by wire transfer of immediately available funds to such account
as each Seller may reasonably direct by written notice delivered to
Purchaser by such Seller at least three (3) Business Days before the
Closing Date, payable to each Seller in the amount obtained by
multiplying $13,900,000 by the percentage set forth opposite such
Seller's name
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<PAGE> 18
in Section 2.03(b) of the Disclosure Schedule (the "Shareholder
Percentage"); provided, however, that with respect to any such payment
to any Individual Seller which would constitute actual or deemed
compensation to such Individual Seller in connection with such
Individual Seller's employment with a Company or with respect to which
withholding is otherwise reflected in Section 2.03(b) of the Disclosure
Schedules, the Purchaser shall withhold from such payment all
withholding required in connection therewith under applicable federal
and state Tax or other relevant Laws, and such withheld amount shall be
deemed for all purposes hereunder to have been paid to such Individual
Seller. Any amounts so withheld by the Purchaser shall be paid by the
Purchaser to the Target Companies, as applicable. In addition, of the
amount of the Purchase Price payable to Mr. Timmer on the Closing Date
as reflected in in Section 2.03(a) of the Disclosure Schedule, Mr.
Timmer hereby authorizes the Purchaser to pay to Mr. Gallupe on his
behalf, and on the Closing Date the Purchaser shall pay to Mr. Gallupe
on Mr. Timmer's behalf, an amount of $850,000 in complete satisfaction
of the amount owed by Mr. Timmer to Mr. Gallupe, which amount shall for
all purposes hereunder be deemed to have been received by Mr. Timmer as
part of the Purchase Price. The balance of the Purchase Price other
than the Earn Out Amount, comprising $2,000,000, will be paid in the
manner provided for in Section 2.04.
(ii) Simultaneously, each Individual Seller will sell to
Purchaser those shares of Purchased Stock, those Purchased Options, and
those Purchased Loan Accounts set forth opposite the name of each such
Individual Seller on Schedule 2.03(b) of the Disclosure Schedule
(representing, in the aggregate, 100% of each class of outstanding
capital stock of each Target Company, all Options to acquire any
capital stock or other securities of each Target Company, and all
Liabilities of each Target Company to the Sellers and their
Affiliates), in each case free and clear of all Liens, and the Selling
Companies will sell the Purchased Assets to Purchaser free and clear of
all Liens other than Permitted Liens, by delivering to Purchaser (i)
stock certificates or stock indemnities evidencing all of the Purchased
Stock duly endorsed by the Individual Sellers in blank or accompanied
by stock powers duly executed by the Individual Sellers (and also, in
the case of any married (by Law, common law or otherwise) Individual
Seller resident in a community of property state, executed by the
spouse of such Individual Seller) in blank, with all required stock
transfer tax stamps affixed or provided for, (ii) assignments of all of
the Purchased Options in the form of Exhibit B, duly executed by the
Individual Sellers, reflecting the Purchaser as the assignee, (iii)
assignments of all of the Purchased Loan Accounts in the form of
Exhibit A, duly executed by every Seller on its own behalf and on
behalf of every Affiliate of every such Seller, and (iv) a bill of sale
and assignment in the form of Exhibit I hereto duly executed by each
Selling Company.
(iii) The Purchaser shall deliver to the Selling Companies an
instrument of assumption of liabilities in the form of Exhibit J-1
hereto with respect to ASI and Exhibit J-2 hereto with respect to DTI,
and shall deliver the Escrow Amount to the Escrow Agent and there shall
also be delivered by Purchaser and Sellers the opinions, certificates
and other agreements, documents and instruments to be delivered under
Sections 6.01 and 6.02.
2.04 ESCROW. On the Closing Date, the Purchaser, as collateral security
for the payment of the outstanding balance of the Purchase Price of Two Million
Dollars ($2,000,000) not paid to the Sellers at the Closing, shall execute and
deliver an Escrow Agreement in the form annexed hereto as Exhibit C (the "Escrow
Agreement") and Purchaser shall execute and deliver to and deposit with the
Escrow Agreements the sum of Two Million Dollars ($2,000,000) (the "Escrow
Amount"). The Escrow Amount shall be payable to the Sellers at the end of the
eighteenth month following the month in which the Closing occurs, pursuant to
the terms of the Escrow Agreement and subject to the right of the Purchaser and
Microdyne to indemnification hereunder pursuant to Article VIII hereof and the
provisions of the Escrow Agreement;
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<PAGE> 19
provided, however, that with respect to any such payment to any Individual
Seller which would constitute actual or deemed compensation to such Individual
Seller in connection with such Individual Seller's employment with a Company or
with respect to which withholding is otherwise reflected in Section 2.03(b) of
the Disclosure Schedules, the Escrow Agent shall, in accordance with the terms
of the Escrow Agreement, withhold from such payment all withholding required in
connection therewith under applicable federal and state Tax or other relevant
Laws, and such withheld amount shall be deemed for all purposes hereunder to
have been paid to such Individual Seller. Sellers shall not be entitled at the
time of deposit thereof with the Escrow Agent to any of the Escrow Amount
deposited by the Purchaser with the Escrow Agent, and shall be entitled to such
of the Escrow Amount that becomes payable to Sellers only at such time when such
amounts become payable to Sellers pursuant to the terms of the Escrow Agreement.
Any amounts paid or released by the Escrow Agent to the Purchaser under Section
4(a) of the Escrow Agreement, including without limitation following an
arbitration and an arbitrators report or on the order of a court, shall be
treated in the manner contemplated by Section 8.02(f) hereof or, if such
treatment is not proper and permissible as contemplated by Section 8.02(f), as
though such amount had been paid to the Sellers on account of the Purchase Price
and then returned by the Sellers to the Purchaser under Article VIII hereof.
2.05 EFFECT OF FAILURE OF ANY SELLER TO DELIVER. If any Individual
Seller shall fail to deliver on the Closing Date any shares of Purchased Stock
to be sold by him or her hereunder, such failure or refusal shall not relieve
any other Seller of his, her or its obligations hereunder, and Purchaser, at its
option and without prejudice to its rights against such defaulting Seller or
Sellers, shall have the right either to accept delivery of the remainder of the
shares of Purchased Stock and Purchased Assets that it is entitled to have
delivered to it hereunder with a reduction in the Purchase Price for such
undelivered securities, or to give notice of its refusal to accept delivery of
those shares of Purchased Stock and those Purchased Assets tendered, thereby
terminating all its obligations and liabilities to such tendering Sellers.
2.06 EARN OUT AMOUNT.
(a) The Purchaser shall, if the conditions in subsection (b) below are
met, pay the Earn Out Amount to the Sellers on September 1, 1999, by wire
transfer of immediately available funds to such account as each Seller may
reasonably direct by written notice delivered to the Purchaser by such Seller at
least three (3) Business Days before September 1, 1999, payable to each Seller
in the amount obtained by multiplying the Earn Out Amount by each Sellers'
Shareholder Percentage; provided, however, that with respect to any such payment
to any Individual Seller which would constitute actual or deemed compensation to
such Individual Seller in connection with such Individual Seller's employment
with a Company or with respect to which withholding is otherwise reflected in
Section 2.03(b) of the Disclosure Schedules, the Purchaser shall withhold from
such payment all withholding required in connection therewith under applicable
federal and state Tax or other relevant Laws, and such withheld amount shall be
deemed for all purposes hereunder to have been paid to such Individual Seller.
(b) The Earn Out Amount shall be payable if the Acquired Businesses,
during the twelve (12) calendar month period commencing June 1, 1998 and ending
May 31, 1999, achieve an EBIT of $3,923,000 or more and revenues of $19,615,000
or more, both determined in accordance with GAAP as historically implemented by
the Target Companies, consistently applied, and both achieved by the operation
of the business in a manner not materially inconsistent with the Business Plans,
including with respect to research and development and capital and marketing
expenditure, except as otherwise provided for the next sentence.
(i) The EBIT shall be determined: (A) without any amortization
of goodwill or write up of intangibles associated with the transactions
contemplated hereby; (B) without any charge against the Acquired
Businesses for any costs associated with the transactions contemplated
by this
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Agreement; (C) without any deduction or charge for any deemed
compensation attributed to any Individual Seller arising in connection
with the sale of the Purchased Stock or Purchased Options to the
Purchaser under this Agreement; (D) without any charge against the
Acquired Businesses for any general corporate or head office overhead
charge by Microdyne; (E) with costs for employee benefits taken into
account at whichever is the lower of the per employee (or, where a
percentage of salary, at the same percentage) levels that existed prior
to the Closing or the actual costs, provided however that if employee
benefits are increased after the Closing with the approval of Mr.
Timmer and such increase in benefits causes the costs per employee to
exceed the pre-Closing costs per employee, then the costs per employee
shall be taken into account at their actual amount; (F) after deduction
of all incentive compensation, bonuses and commissions paid (not
accrued) from June 1, 1998 through May 31, 1999 to employees and
executives of the Acquired Businesses; and (G) with a charge against
the Acquired Businesses for actual expenses incurred by Microdyne on
behalf of the Acquired Businesses, including without limitation for
insurance and other items purchased by Microdyne for its operating
subsidiaries on a group wide basis.
(ii) The EBIT shall be determined after excluding the effect
on the Acquired Businesses of any material changes to the Acquired
Businesses caused or made by the Purchaser to which the Principal
Stockholders then employed by the Acquired Businesses took exception or
objected to at the time thereof. If the Purchaser makes or causes any
material change to the Acquired Business to which the Principal
Stockholders then employed by the Acquired Businesses take exception or
object at the time thereof, and if it is reasonably likely that the
Earn Out Amount would have been earned but for such change, then the
Purchaser shall be obligated to pay the Earn Out Amount. Nothing herein
shall be construed as in any way constraining the right of the
Purchaser to make changes to the Acquired Businesses, subject to the
Purchaser's obligation to pay the Earn Out Amount if so required under
this paragraph (ii).
(iii) Any revenues, earnings and expenses derived from or
related to (A) the exploitation by the Purchaser in its other
facilities of any of the products or technology of the Acquired
Businesses in markets or applications not being exploited by the
Acquired Businesses on the Closing Date shall be excluded from the
revenues and EBIT hereunder, and (B) any products or product lines that
are transferred to the Acquired Businesses from Microdyne or its
Affiliates or that are acquired for the Acquired Businesses by
Microdyne.
(iv) The EBIT, revenue and balance sheet determinations will
be determined in accordance with GAAP (except as otherwise set forth in
this Section 2.06(b)) subject to all reserves with respect thereto, and
may be adjusted retrospectively at any time up to the date on which the
Earn-Out Amount is to be paid to reflect any matter or circumstance
relevant to the determination thereof for the relevant period,
including without limitation any receivables generated during such
period which are unpaid at the end of such period and with respect to
which a reserve is required to be made prior to the date on which the
Earn-Out Amount is to be paid.
(v) If any one of the EBIT or revenue criteria are not met or
achieved, then no Earn Out Amount shall be payable.
(c) During the month of June, 1999, the Purchaser and those Principal
Stockholders who are employed by the Purchaser or the Target Companies at that
time shall prepare a balance sheet, statement of operations and cash flow for
the Acquired Businesses at and for the twelve (12) month period ending May 31,
1999. If the Purchaser and the Sellers' Representative do not agree on whether
or not the conditions to
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the payment to Earn Out Amount have been met, then the disagreement shall be
resolved pursuant to the arbitration provisions set forth in Article XI.
2.07 MICRODYNE'S GUARANTEE OF THE PURCHASER. Microdyne shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by Purchaser.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated herein, and except as set forth in the
Disclosure Schedule (with Section references corresponding to those set forth
below), each of the Sellers hereby represents, warrants, covenants and agrees,
jointly and severally (subject to Article VIII), to and with Purchaser as
follows:
3.01 ORGANIZATION AND QUALIFICATION. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, in the case of Apcom, DTI and ASI, or California in the case of
Celerity, and has full corporate power and authority to conduct its business as
and to the extent now conducted and to own, use and lease its Assets and
Properties. Each Company is duly qualified, licensed or admitted to do business
and is in good standing in the jurisdictions listed in Section 3.01 of the
Disclosure Schedule, which are the only jurisdictions in which the ownership,
use or leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except
where the failure to be so qualified, licensed or admitted would not have a
material adverse effect on such Company. The business now being conducted by
each Company has not been conducted under any other name.
3.02 CAPITAL STOCK.
(a) The authorized capital stock of:
(i) Apcom consists of twenty million (20,000,000)
shares of shares of common stock, par value $0.01 per share; and
(ii) Celerity consists of five million (5,000,000)
shares of common stock without par value.
(b) The only issued and outstanding shares of common stock of
the Target Companies are the shares of Purchased Stock, all of which are validly
issued, fully paid and nonassessable, and the issuance of all of which was in
compliance with all applicable Laws. The only Options to acquire shares of stock
in the Target Companies are the Purchased Options, all of the material terms of
which are set forth in Section 3.02(b) of the Disclosure Schedule. The share
ledger of each Target Company accurately reflects all issuances and transfers of
such Target Company's capital stock since the incorporation of such Target
Company.
(c) Except for the Purchased Stock and for shares of common
stock of the Target Companies issuable upon exercise of the Purchased Options,
no shares of the capital stock of the Target Companies have been issued or
reserved for issuance. Except for the Purchased Options, there are no
outstanding Options with respect to the capital stock of the Target Companies,
or agreements, arrangements or understandings to issue Options with respect to
the capital stock of the Target Companies and there are
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no preemptive rights or agreements, arrangements or understandings to issue
preemptive rights with respect to the issuance or sale of the Target Companies'
capital stock.
(d) The Individual Sellers are the record and beneficial
owners of the Purchased Stock, the Purchased Options and the Purchased Loan
Accounts as set forth in Section 2.03(b) of the Disclosure Schedule free and
clear of all Liens. The delivery to the Purchaser at the Closing of the
certificates representing the Purchased Stock accompanied by a share transfer
form reflecting the Purchaser as the transferee and an assignment of the
Purchased Options reflecting the Purchaser as the assignee, executed in each
case by the Individual Seller identified in Section 2.03(b) of the Disclosure
Schedule as the owner thereof, will transfer to Purchaser good and valid title
to the Purchased Stock, the Purchased Options and the Purchased Loan Accounts,
free and clear of all Liens.
3.03 AUTHORITY. Each of the Sellers has the full legal capacity to
execute and deliver this Agreement and the Operative Agreements to which he, she
or it is a party and to perform his, her or its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Operative
Agreements by the Selling Companies and the consummation by the Selling
Companies of the transactions contemplated hereby and thereby have been duly and
validly approved by each of the Selling Companies, and no other action on the
part of any of the Selling Companies is necessary to authorize the execution,
delivery and performance of this Agreement and the Operative Agreements and the
consummation by each of them of the transactions contemplated hereby and
thereby. This Agreement has been duly and validly executed and delivered by each
of the Sellers and this Agreement constitutes, and each of the Operative
Agreements to which such Seller is a party (when so executed and delivered) will
constitute, legal, valid and binding obligations of each of the Sellers
enforceable against him, her or it in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
3.04 SUBSIDIARIES; OFFICERS AND DIRECTORS; CHARTER AND BYLAWS.
(a) No Company has any Subsidiaries.
(b) The name of each director and officer of each Company on the date
hereof, and the position with such Company is listed in Section 3.04 of the
Disclosure Statement.
(c) The Sellers, prior to the execution of this Agreement, have
delivered to Purchaser true and complete copies of the Certificate or Articles
of Incorporation and By-laws of each Company.
3.05 NO CONFLICTS. The execution and delivery by each of the Sellers of
this Agreement do not, and the execution and delivery by each of the Sellers of
the Operative Agreements to which he, she or it is a party, the performance by
each of the Sellers of his, her or its respective obligations under this
Agreement and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Certificate or Articles of
Incorporation or By-laws of any Company or of any agreement of the
shareholders of any Company;
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(b) subject to obtaining the consents and approvals and making
the filings and giving the notices referred to in Section 3.06 below or
described in Section 3.06 of the Disclosure Schedule, if any, conflict
with or result in a violation or breach of any term or provision of any
Law or Order applicable to any Company or any of their respective
Assets and Properties, the effect of which, individually or in the
aggregate, would reasonably be expected to have a material adverse
effect on the ability of the Sellers to consummate the transactions
contemplated by this Agreement or to materially hinder or delay such
consummation or would reasonably be expected to have a material adverse
effect on the assets, business, operations or financial performance of
the Acquired Businesses after the Closing; or
(c) except as described in Section 3.05 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default
under, (iii) require any Company or any of the Individual Sellers to
obtain any consent, approval or action of, make any filing with, or
give any notice to, any Person as a result or under the terms of, (iv)
result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or
give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under, or (vi) result in
the creation or imposition of any Lien upon the Purchased Stock or any
Company or any of their respective Assets and Properties (including
without limitation the Purchased Assets) under, any Contract or Permit
to which any Company or any of the Sellers is a party or by which any
of their respective Assets and Properties is bound, the effect of
which, individually or in the aggregate, would reasonably be expected
to have a material adverse effect on the ability of the Sellers to
consummate the transactions contemplated by this Agreement or to
materially hinder or delay such consummation or would reasonably be
expected to have a material adverse effect on the assets, business,
operations or financial performance of the Acquired Businesses after
the Closing.
3.06 GOVERNMENTAL APPROVALS AND FILINGS. Except for the applicable
requirements of the HSR Act and as described in Section 3.06 of the Disclosure
Schedule, no material permits, consents or approvals by, or filing with or
notice to, any Governmental or Regulatory Authority, including, without
limitation, any consents or approvals under any Environmental Law, is required
on the part of any Company or any of the Individual Sellers in connection with
the execution, delivery and performance of this Agreement or any of the
Operative Agreements to which he, she or it is a party or the consummation of
transactions contemplated hereby or thereby, for which purpose any permit
consent, approval, filing or notice required in connection with any Government
Contract shall be deemed to be material.
3.07 MINUTE BOOKS AND RECORDS. The minute books and other similar
records of each Company provided to Purchaser prior to the execution of this
Agreement contain a true and complete record, in all material respects, of all
action taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the boards of directors and committees of the boards of
directors of such Company.
3.08 FINANCIAL STATEMENTS AND RECORDS.
(a) Attached hereto as Section 3.08(a) of the Disclosure Schedule are
true and complete copies of the following financial statements:
(i) the audited balance sheets of Apcom as of October 31, 1996
and 1997, and the related statements of operations and cash flow for
each year then ended, in each case with the report thereon of Apcom's
Accountants, and the unaudited balance sheet of Apcom as of the
Effective Date
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and the related statements of operations and cash flow for the seven
month interim period then ended;
(ii) the audited balance sheets of Celerity as of December 31,
1996 and 1997 and the related statements of operations and cash flow
for each year then ended, in each case with the report thereon of
Celerity's Accountants, and the unaudited balance sheet of Celerity as
of the Effective Date and the related statements of operations and cash
flow for the five month interim period then ended;
(iii) the unaudited balance sheets of DTI as of December 31,
1996 and 1997 and the Effective Date, and the related statements of
operations and cash flow for each year or interim period then ended;
(iv) the unaudited balance sheets of ASI as of December 31,
1996 and 1997 and the Effective Date, and the related statements of
operations and cash flow for each year or interim period then ended.
Such unaudited balance sheets and related statements of operations and cash flow
are referred to herein as the "Unaudited Financial Statement", such audited
balance sheets of Apcom and Celerity and related statements of operations and
cash flow are referred to herein as the "Audited Financial Statements", and the
Unaudited Financial Statement together with the Audited Financial Statements,
the "Financial Statements". The balance sheets of the Companies as of the
Effective Date are herein referred to collectively as the "Effective Date
Balance Sheet".
(b) All such Financial Statements (i) were prepared from the books of
account or other financial records of the Companies , (ii) were prepared in
accordance with GAAP (except, in the case of the Unaudited Financial Statements,
for the absence of footnotes and audit adjustments) consistently applied
throughout the periods involved, and (iii) fairly present the financial
condition, results of operations, cash flow and EBIT of the Companies in all
material respects as of the dates thereof and for the periods covered thereby.
(c) On the Effective Date, determined in accordance with the accounting
requirements and principles set forth in Section 3.08(c) of the Disclosure
Schedule, and in each case as confirmed by and as set forth in the Effective
Date Balance Sheet, (i) the aggregate shareholders equity of the Companies
(comprising, for the purposes hereof, assets minus liabilities, for which
purpose any tax deduction, tax carry back or deferred tax asset arising from or
associated with the treatment of any part of the Purchase Price as deemed
compensation to any Seller shall be deemed to have zero value) shall be
$4,045,000 or greater, (ii) the aggregate Indebtedness of the Companies
(excluding all intercompany amounts due or payable where the debits and credits
offset one another other ) shall not exceed $400,000, and (iii) the aggregate
cash and Cash Equivalents of the Companies shall not be less than $234,000.
(d) The Companies each maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
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3.09 ABSENCE OF CHANGES. Except as set forth in Section 3.09 of the
Disclosure Schedule, since the Effective Date, each Company has been operated in
the ordinary course of business consistent with past practice and there has not
been any material adverse change, or any event or development which,
individually or together with other such events or developments, could
reasonably be expected to result in a material adverse change, in the Business
or Condition of the Company. None of the other representations or warranties set
forth in this Agreement shall be deemed to limit the foregoing. In addition,
without limiting the foregoing, except as disclosed in Section 3.09 of the
Disclosure Schedule, there has not occurred since the Effective Date:
(a) any amendment or change to the Articles or Certificate of
Incorporation of any Company or the by-laws of any Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of any Company, or any direct or
indirect redemption, purchase or other acquisition by any Company of any capital
stock or any other securities of, or any Options with respect to any capital
stock or other securities of, such Company or any other Company, or any payment
or discharge of or the giving of any security for the payment or discharge of
any Liability of any Company to any Individual Seller or his or her Affiliate,
other than for (i) salary as permitted by Section 5.01(f)(v), (ii) the payment
of the commissions referred to in Section 3.09(d)(ii)(A), (iii) the payment of
the bonuses referred to in Section 3.09(d)(i)(A), and (iv) the assignment by
Apcom to Mr. Gallupe of a split dollar life insurance policy carried on the
books of Apcom at a value of $94,000;
(c) any authorization, issuance, sale or other disposition by each
Company of any shares of capital stock of each Company, or any Option relating
to such capital stock or any modification or amendment of any right of any
holder of any outstanding shares of capital stock of any Company;
(d) (i) any payment of a regular, special or year end bonus to any
employee or officer or director of any Company, or any increase in salary, rate
of commissions or rate of consulting fees of any director, officer, employee or
consultant of any Company, other than (A) the payment of profit sharing bonuses
by CSI to its employees in July 1998 in an amount not exceeding $193,000, and
(B) salary increases to non-management employees in the ordinary course of
business and consistent with past practices; (ii) any payment of consideration
of any nature whatsoever to any officer, director, stockholder (including the
Individual Sellers), employee or consultant of any Company, other than (A) the
payment of commissions by ASI and Celerity to DTI for products sold and shipped
by ASI and Celerity prior to the Effective Date, accrued as a liability of ASI
and Celerity to DTI as of the Effective Date, in an aggregate amount not
exceeding $178,769 in respect of which the unpaid balance of DTI's receivable
for such commission is an Excluded Asset, and (B) salary paid in the ordinary
course of business consistent with past practices; (iii) any establishment or
modification of (A) targets, goals, pools, formula or similar provisions under
any Plan, employment contract or other employee compensation arrangement of any
Company, or (B) salary ranges, guidelines or similar provisions in respect of
any Plan, employment contract or other employee compensation arrangement of any
Company; (iv) any grant of any severance, continuation or termination pay to any
director, officer, stockholder (including the Individual Sellers) or employee of
any Company; or (v) any adoption, entering into, amendment, modification or
termination (partial or complete) of any Plan or employment contract of any
Company;
(e) (i) incurrences by any Company of Indebtedness or (ii) any
voluntary purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled payment date with respect to, or waiver of any right of
any Company under, any Indebtedness of or owing to any Company;
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(f) any change in or incurrence of any Liability of any Company other
than as permitted by Section 3.10(b);
(g) any physical damage, destruction or other casualty loss (whether or
not covered by insurance) affecting any of the Assets and Properties of any
Company in an aggregate amount exceeding $10,000;
(h) any write-off or write-down of or any determination to write off or
write down any of the Assets and Properties of any Company (other than the
assignment to Mr. Gallupe referred to in Section 3.09(b)(iv)) in an aggregate
amount exceeding $10,000;
(i) any purchase of any Assets and Properties of any Person or any
sale, license or other disposition of, or incurrence of a Lien (other than a
Permitted Lien) on, any Assets and Properties of any Company, other than
acquisitions or dispositions in the ordinary course of business of a Company
consistent with past practice and the terms of this Agreement and the Operative
Agreements;
(j) any entering into, amendment, modification, termination (partial or
complete) or granting of a waiver under or giving any consent with respect to
(i) any Contract which is required (or had it been in effect on the date hereof
would have been required) to be disclosed in the Disclosure Schedule pursuant to
Section 3.18, (ii) any Permit held by any Company, or (iii) any Intellectual
Property owned, held or used by any Company;
(k) any capital expenditures or commitments for additions to property,
plant, equipment or Intellectual Property of any Company in an aggregate amount
exceeding $10,000;
(l) any commencement or termination by any Company of any line of
business;
(m) any transaction by any Company with any other Company or with any
officer, director, stockholder (including any Individual Seller), Affiliate or
Associate of any Company, other than pursuant to a Contract in effect on the
Effective Date and disclosed to Purchaser pursuant to Section 3.18(a)(viii) or
other than pursuant to any contract of employment listed pursuant to Section
3.18(a)(I) of the Disclosure Schedule;
(n) the commencement or notice or threat of commencement of any lawsuit
or proceedings against, or investigation of, any Company or its affairs;
(o) any notice of any claim of ownership by a third party of the
Intellectual Property of any Company or notice of infringement by any Company of
any third party's Intellectual Property rights;
(p) any change in pricing or royalties set or charged by any Company to
clients, customers or licensees or in pricing or royalties set or charged by
Persons who have licensed Intellectual Property to any Company;
(q) any loan or advance by any Company to any Person, except for
advances to employees for travel and business expenses in the ordinary course of
business consistent with past practice;
(r) any change in the accounting methods or procedures of any Company;
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(s) any other material transaction involving or development affecting
any Company outside the ordinary course of business consistent with past
practice; or
(t) any entering into of an agreement to do or engage in any of the
foregoing, including without limitation with respect to any Business Combination
not otherwise restricted by the foregoing paragraphs.
3.10 NO UNDISCLOSED LIABILITIES.
(a) Except as specifically reflected or reserved against in
the Effective Date Balance Sheet or as described in Section 3.10 of the
Disclosure Schedule or as otherwise disclosed as liabilities in the other
sections of the Disclosure Schedules hereto, there are at the Effective Date no
liabilities or to the Seller's Knowledge contingent liabilities, whether or not
required to be reflected in financial statements in accordance with GAAP, of,
relating to or affecting any Target Company or any of its Assets and Properties
or any of the Purchased Assets or Assumed Liabilities.
(b) Except as set forth in Section 3.10(b) of the Disclosure
Schedule, no Company has since the Effective Date incurred any Liability other
than (i) Liabilities incurred in the ordinary course of business consistent with
past practice in connection with the purchase of goods and services for resale
(but excluding any purchases which constitute capital expenditure) and which in
aggregate amount outstanding from time to time do not exceed the amount
outstanding at the Effective Date, (ii) Liabilities accrued consistent with past
practice for United States federal and state income taxes and sales taxes for
profits accruing after the Effective Date and sales after the Effective Date,
(iii) other Liabilities incurred in the ordinary course of business consistent
with past practice which in the aggregate are not material to the Business or
Condition of such Company and are not for tort or for breach of contract and
which do not in the aggregate among all Companies exceed $50,000, and (iv)
Liabilities incurred in accordance with and as specifically permitted by the
provisions of this Agreement and the Operative Agreements, which do not in the
aggregate among all Companies exceed $50,000.
3.11 TAXES.
(a) All Tax Returns required to have been filed by or with respect to
any Company have been duly and timely filed, and such Tax Returns shall be duly
and timely filed through the period from the date hereof to the Closing Date,
and each such Tax Return correctly and completely reflects the Tax Liability and
all other information required to be reported thereon. All Taxes due and payable
by any Company have been paid (whether or not shown on any Tax Return),
including all payments of estimated Taxes and withholding Taxes (taking into
account any duly obtained extensions).
(b) The provisions for Taxes due by any Company (including those for
which Tax Returns are not yet required to be filed) in the Financial Statements
for the period ended on the Effective Date, determined without credit, offset or
deduction for any tax deduction, tax carry back or deferred tax asset arising
from or associated with the treatment of any part of the Purchase Price as
deemed compensation to any Seller, are sufficient for all unpaid Taxes of such
Company through the Effective Date or, if required by GAAP to have been accrued
on or before the Effective Date, after the Effective Date.
(c) No Company is a party to any agreement extending the time within
which to file any Tax Return. No claim has ever been made by any jurisdiction in
which any Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
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(d) Each Company has either (i) withheld or deducted all Taxes required
by Law to have been withheld or deducted in connection with amounts paid or
owing to any present or former employee, officer, director, shareholder,
creditor, licensor, licensee, distributor, independent contractor or other third
party, or (ii) if the Company did not itself make payments from which it could
withhold such amounts, has contractually required the Purchaser pursuant hereto
to transfer funds to such Company equal to the withholding amounts set forth in
Section 2.03(b) of the Disclosure Schedules; and each Company has duly paid all
amounts so withheld or deducted to the proper recipients thereof within the
times and in the manner required by such Laws, if such payment was required to
have been paid over as of the Closing.
(e) Section 3.11 of the Disclosure Schedule indicates those Tax
Returns, if any, of the Companies that have been audited by the IRS or any other
Taxing Authority, and indicates those Tax Returns of the Companies that are
currently the subject of audit. No deficiencies, adjustments or changes in
assessments for any Taxes have been proposed, asserted or assessed against any
Company, and no Company expects any Taxing Authority to assess additional Taxes
against or in respect of it for any past period. Except as disclosed in Section
3.1 1 of the Disclosure Schedule, (i) there are no investigations, examinations,
reassessments, claims, actions, suits or proceedings pending or to the Seller's
Knowledge threatened against any Company in respect of any Taxes, nor are there
any matters under discussion with the IRS or any other Taxing Authority relating
to any Taxes imposed, levied or assessed by any such Taxing Authority; and (ii)
there is no dispute concerning any Tax Liability of any Company claimed or
raised or to the Seller's Knowledge threatened by any Taxing Authority. There
are no Liens (other than Liens for Taxes or governmental assessments, charges or
claims the payment of which is not yet due) for Taxes upon the Assets and
Properties of any Company. Sellers have delivered to Purchaser complete and
correct copies of all Tax Returns filed by any Company and all Tax examination
reports since January 1, 1996. No issue has been raised since that date by the
IRS or any other Taxing Authority in any audit of any Company which, by
application of similar principles, could be expected to result in a material
proposed deficiency for any period prior to Closing not yet audited or under
audit.
(f) No Company has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(g) No Company has received any written ruling related to Taxes or
entered into any written and legally binding agreement with the IRS or any other
Taxing Authority relating to Taxes.
(h) No Company has any Liability for Taxes of any Person other than
such Company (i) as a transferee or successor, (ii) by reason of Section
1.1502-6 of the United States Treasury Regulations or any similar provision of
any other Law, (iii) by contract, or (iv) otherwise.
(i) Except as set forth in Section 3.11 of the Disclosure Schedule, no
Company has been a member of a consolidated, combined, affiliated or unitary
group and no Company has filed or consented to the filing of any consolidated,
combined, affiliated or unitary or similar return with any entity with respect
to any Tax. No Company is a party to or is bound by any obligations under any
Tax sharing, Tax indemnity or similar agreement or arrangement.
(j) No Company is a party to any joint venture, partnership or other
arrangement that is treated as a partnership for the purposes of any Tax or Tax
Return.
(k) No Company has made any payments, or is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payment, that would be nondeductible by reason of Section 280G of the Internal
Revenue Code. No payment made by any Principal Stockholder, which payment is or
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will be considered to have been paid by any Company for federal income tax
purposes under Section 83 of the Internal Revenue Code, will be nondeductible by
reason of Section 280G of the Internal Revenue Code.
(l) No Company has filed a consent under Section 341(f) of the Internal
Revenue Code.
(m) Immediately prior to the Closing, the Target Companies will be
corporations described in Section 280G(b)(5)(A)(i) of the Internal Revenue Code
3.12 LEGAL PROCEEDINGS.
(a) Except as disclosed in Section 3.12(a) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below):
(i) there are no Actions or Proceedings pending or, to the
Seller's Knowledge, threatened against, relating to or affecting any
Company or any Individual Seller (in his, her or its capacity as a
stockholder of a Company), or any of their respective Assets and
Properties or this Agreement and the transactions contemplated hereby;
(ii) there are no facts or circumstances known to any Company
or any Individual Seller that could reasonably be expected to give rise
to any Action or Proceeding that would be required to be disclosed
pursuant to clause (a) (i) above; and
(iii) neither any Company nor any Individual Seller has
received notice, or is aware, of any Orders outstanding against any
Company or any Individual Seller (relating to any Company or this
Agreement).
(b) Prior to the execution of this Agreement, the Companies have
delivered all responses of counsel for any Company to auditors' requests for
information regarding Actions or Proceedings pending or threatened against,
relating to or affecting any Company for the periods covered by the Audited
Financial Statements. Section 3.12(b) of the Disclosure Schedule sets forth all
Actions or Proceedings relating to or affecting any Company, any Individual
Seller (in his, her or its capacity as a stockholder of the Company) or any of
their respective Assets and Properties since January 1, 1995.
3.13 COMPLIANCE WITH LAWS AND ORDERS. No Company is, nor has any
Company been at any time, in any material violation of or in any material
default under any Law or Order applicable to any Company or any of its
respective Assets and Properties. In furtherance and not limitation of the
foregoing, no Company has violated any Law in any material way in connection
with the offer, sale or purchase of any securities.
3.14 PLANS.
(a) Set forth in Section 3.14(a) of the Disclosure Schedule is a
complete and correct list of all Plans maintained or contributed to by any
Company, Plans pursuant to which any Company may have any Liability, and Plans
covering employees or former or retired employees of any Company ("Employees")
with respect to their employment with any Company. Except as disclosed in
Section 3.14(a) of the Disclosure Schedule, each Plan is in writing or has been
properly summarized in writing and true and complete copies of the following
items relating to each Plan, where applicable, have heretofore been delivered to
Purchaser: (i) the Plan and any trust, custodial or other funding agreement,
including all amendments thereto; (ii) the three most recent actuarial reports
and annual reports filed with any Governmental or Regulatory Authority
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for the three most recent Plan years; (iii) the most recent summary plan
description, all summaries of material modifications to such summary plan
descriptions and all material Employee communications relating to such Plans
distributed within the last twelve (12) months, and (iv) the most recent
custodian or trustee reports or other financial statement for funded Plans.
(b) Each of the Plans that is a retirement, savings or other pension
plan as defined in Section 3(2) of ERISA has been determined by the IRS to be
tax-qualified under Section 401 of the Internal Revenue Code, and, each Company
has complied, in all material respects, with all applicable Laws in
administering such Plans, including specifically the provisions of ERISA. To the
Seller's Knowledge, no non-exempt prohibited transaction, as defined in Section
4975 of the Internal Revenue Code, has occurred with respect to any such Plans,
and no such Plan has incurred any accumulated funding deficiency, as defined in
Section 412 of the Internal Revenue Code, whether or not waived. There has not
been, with regard to any such Plan, any reportable event, as defined in Section
4043(b) of ERISA, that is required to be reported to the PBGC by any Law. The
fair market value of the assets of each such Plan that is subject to Title IV of
ERISA equals or exceeds the present value of all benefits accrued under such
Plan, whether or not vested, based on the actuarial assumptions that would be
used by the PBGC if the Plan were terminated as of the date of this Agreement or
as of the Closing Date. As to each of the Plans that is a health, severance,
insurance, disability and other employee welfare Plan, and all other employee
benefit plans and programs as defined in Section 3(1) of ERISA, except as set
forth in Section 3.14(b) of the Disclosure Schedule, the Company has complied,
in all material respects, with all applicable Laws in the administration thereof
including, without limitation, the provisions of ERISA when applicable. The
Company has not terminated any Plan or incurred any material liability to the
PBGC under Title IV of ERISA and, to the Seller's Knowledge, no condition exists
that could reasonably be expected to cause the Purchaser to incur any such
liability. All premiums payable to the PBGC have been paid when due. No
compensation or benefit that is or will be payable as a result of the
transactions contemplated by this Agreement will be characterized as an "excess
parachute payment" within the meaning of Section 280G of the Internal Revenue
Code.
(c) All required employer contributions, premium payments and
source-deducted Employee contributions under the Plans have been made or will be
timely made and remitted to the funding agents thereunder. All such
contributions to the Plans for any period ending before the Closing Date that
are not yet, but will be, required to be made are properly accrued and reflected
on the Effective Date Balance Sheet or are disclosed in Section 3.14 (c) of the
Disclosure Schedule. No oral or written promise, commitment or representation
has been made by any Individual Seller or any Company (i) to amend any of the
Plans or to provide increased benefits thereunder to any of the Companies
present or former employees, independent contractors, directors, officers or
shareholders, except pursuant to the requirements, if any, of the Plans or any
collective bargaining agreements, (ii) to establish any new Plans, or (iii) to
fund or continue any Plan beyond the Closing Date. Except as set forth in
Section 3.14 (c) of the Disclosure Schedule, each Plan can be terminated on the
Closing Date without making any additional contribution to such Plan other than
normal contributions with respect to the current plan year.
(d) Except as set forth in Section 3.14(d) of the Disclosure Schedule,
each Plan has been maintained, operated and administered in compliance with its
terms and all related documents or agreements and in compliance with all
applicable Laws. Except as set forth in Section 3.14(d) of the Disclosure
Schedule, any non-compliance or failure to properly administer a Plan or related
trust or fund has not exposed such Plan or related trust or fund or any Company,
nor could it result in any exposure of the Purchaser, to any Taxes, penalties or
Liabilities to any Person, or expose the Plan to disqualification or the trust
or fund to loss of tax exempt status.
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(e) There is no pending or, to the Seller's Knowledge threatened claim
(other than claims for benefits in the ordinary course), assessment, complaint,
proceeding or investigation of any kind before any Governmental or Regulatory
Authority with respect to any Plan.
(f) All insurance premiums required with respect to any Plan up to the
Closing Date have been or shall be paid on or prior to the Closing Date, and,
with respect to any such insurance policy, there shall be no Liability of any
Company or the Purchaser in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent Liability arising wholly or
partially out of events occurring prior to the Closing Date.
(g) All benefits, expenses and other amounts due and payable to or
under any Plan, and all contributions, transfers or payments required to be made
to any Plan, have been paid when due.
(h) No Plan provides benefits, including without limitation death or
medical benefits, beyond termination of service or retirement other than (i)
coverage mandated by Law, (ii) deferred compensation benefits reflected on the
books of a Company and described in Section 3.14(h) of the Disclosure Schedule
or (iii) a pension plan as defined in Section 3(2) of ERISA.
(i) Neither any Company nor any Plan has agreed to guarantee or
indemnify the performance of any Person with respect to any Plan.
(j) As a result of the purchase of the Purchased Stock and the
Purchased Assets by the Purchaser, neither any Company nor the Purchaser shall
be obligated to make a payment to any individual with respect to severance or
compensation for personal services (other than salary and benefits at current
rates for services performed), nor shall any benefit under any Plan be
accelerated or become vested, including any stock options or similar rights to
stock.
3.15 REAL PROPERTY.
(a) Section 3.15(a) of the Disclosure Schedule contains a true and
correct list of (i) all real property owned by any Company ("Owned Real
Property"), (ii) all real property leased, subleased or otherwise occupied by
any Company (as lessor or lessee), together with a brief description of the
terms thereof (the "Leased Real Property", and the leases relating thereto are
herein called the "Real Property Leases" and the Leased Real Property and Owned
Real Property collectively the "Real Property"), and (iii) all Liens relating to
or affecting any Real Property Lease.
(b) Each Company has a fee simple title in and to, and is the record
owner of, the Owned Real Property, free of any Lien other than Permitted Liens.
Subject to the terms of the Real Property Leases, each Company has a valid and
subsisting leasehold estate in and the right to quiet enjoyment and use of each
of the Leased Real Properties leased by it for the full term of the lease
thereof. Each Real Property Lease is in full force and effect and is a legal,
valid and binding agreement, enforceable in accordance with its terms against
the parties thereto, and except as set forth in Section 3.15(b) of the
Disclosure Schedule, there is no, and no Company or Individual Seller has
received notice of any, default (or any condition or event which, after notice
or lapse of time or both, would constitute a default) thereunder. No Company
owes brokerage, commissions or finders fees with respect to any such Real
Property Lease or Leased Real Property, except to the extent that a Company may
renew the term of any such Real Property Lease, in which case, any such
commissions and fees would be in amounts that are reasonable and customary for
premises similar to those leased, given their intended use and terms. No Company
has assigned, sublet, transferred, hypothecated or
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otherwise disposed of any interest in any Real Property Lease, except as
otherwise set forth in Section 3.15(b) of the Disclosure Schedule..
(c) Each Company has delivered to Purchaser prior to the execution of
this Agreement true and complete copies of all Real Property Leases (including
any amendments and renewal letters).
(d) The improvements on the Leased Real Property subject to the Real
Property Leases and the Owned Real Property are in good operating condition and
in a state of good maintenance and repair, ordinary wear and tear excepted.
(e) Except as disclosed in Section 3.15(e) of the Disclosure Schedule,
the current use and operation of all Real Property is in material compliance
with all Real Estate Leases to which such Real Property is subject.
3.16 TANGIBLE PERSONAL PROPERTY. Each Company is in possession of and
has good and marketable title to, or has valid leasehold interests in or valid
rights under Contract to use (in each case subject only to Permitted Liens), all
tangible personal property used in the conduct of its businesses, including all
tangible personal property reflected on the Financial Statements for the period
ending on the Effective Date and tangible personal property acquired since that
date, other than property disposed of since such date in the ordinary course of
business consistent with past practice and the terms of this Agreement and the
Operative Agreements. Except as otherwise set forth in Section 3.16 of the
Disclosure Schedule, the principal items of such tangible personal property
(which for the purpose of this Agreement shall mean those having an original
purchase price of $2,000 or more) are listed in Section 3.16 of the Disclosure
Schedule. All tangible personal property owned or used the Companies is free and
clear of all Liens, other than Permitted Liens and other Liens disclosed in
Section 3.16 of the Disclosure Schedule and, in the case of leased tangible
personal property, Liens which exists pursuant to the terms of the Contract
under which such property is leased, and are in good working order and
condition, ordinary wear and tear excepted, and their use complies in all
material respects with all applicable Laws.
3.17 INTELLECTUAL PROPERTY RIGHTS.
(a) The only Intellectual Property owned or licensed for use or
otherwise used by any Company is disclosed in Section 3.17(i) of the Disclosure
Schedule. No other Intellectual Property is used in the conduct of the business
of any Company. The Companies own all right, title and interest in each item of
Intellectual Property disclosed in Section 3.17(i) of the Disclosure Schedule
(none of which constitutes "work-made-for-hire" for customers or clients),
except for those items of software identified in Section 3.17(i) of the
Disclosure Schedule which have been exclusively (other than "shrink-wrap" or
similar commercial end user licenses) and irrevocably licensed to a Company in
perpetuity under valid and binding license agreements, true and correct copies
of which have been provided to Purchaser, which license agreements are in full
force and effect and which, in the case of lease agreements in favor of the
Selling Companies, will be validly and enforceably assigned to the Purchaser as
part of the Purchased Assets (the "Intellectual Property License Agreements").
The consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of the Intellectual Property License Agreements, and each Company is
in compliance with, and has not breached (or would breach after notice or lapse
of time) any term of, the Intellectual Property License Agreements and, to the
Seller's Knowledge, all of the other parties to such Intellectual Property
License Agreements are in compliance with, and have not breached, any of the
terms thereof. There is no dispute between any Company and any licensor of such
Intellectual Property regarding the scope of the license or
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performance under any applicable Intellectual Property License Agreement,
including with respect to any payments to be made by a Company thereunder.
(b) Except as disclosed in Section 3.17(ii) of the Disclosure Schedule,
all such Intellectual Property disclosed in Section 3.17(i) of the Disclosure
Schedule as owned by a Company is owned free and clear of any and all Liens,
other than Permitted Liens. Section 3.17(ii) of the Disclosure Schedule lists
all of the Companies' United States and foreign registrations or applications
issued by, filed with or recorded by any Governmental Regulatory Authority with
respect to the Intellectual Property listed in Section 3.17(i) of the Disclosure
Schedule (including patent, trademark, copyright and other registrations and
applications), and all of such registrations and applications are valid and in
full force and effect and all necessary registration, maintenance and renewal
fees in connection therewith have been made and all necessary documents and
certificates in connection therewith have been filed with the relevant patent,
copyright, trademark or other authority in the United States or foreign
jurisdictions, as the case may be, for the purpose of maintaining the
registrations or applications for registration of such Intellectual Property.
Except as described in Section 3.17(ii) of the Disclosure Schedule, (i) there
are no restrictions on the direct or indirect transfer of any such Intellectual
Property subject to the terms of any license described in Section 3.17(i) of the
Disclosure Schedule, (ii) the Companies have made available to Purchaser prior
to the execution of this Agreement documentation with respect to any invention,
process, design, computer software and program or other know-how or trade secret
or proprietary information included in such Intellectual Property, which
documentation is accurate in all material respects and reasonably sufficient in
detail and content to identify and explain such invention, process, design,
computer software and programs or other know-how or trade secret or proprietary
information, (iii) the Companies have taken reasonable security measures to
protect the secrecy, confidentiality and value of their trade secrets and
proprietary information (including the enforcement by the Companies of a policy
requiring each employee or contractor to execute proprietary information and
confidentiality agreements substantially in the Companies' standard form, and
all current and former employees and contractors of each Company have executed
such an agreement), and (iv) no Company has granted to any Person any license,
agreement or other permission to use such Intellectual Property. To the Seller's
Knowledge, no such Intellectual Property is being infringed by any other Person,
and no Company is infringing any Intellectual Property of any other Person. No
claim is pending or, to the Seller's Knowledge, has been threatened to such
effect or with respect to the ownership, validity, license or use of, or any
infringement resulting from, any Company's Intellectual Property, or the sale of
any products or services by any Company.
(c) The information systems (including all computer hardware and
software) owned, licensed or otherwise used by any Company upon which the
Acquired Businesses are materially dependent, all products and services
presently being purchased or acquired by the Companies or which the Companies
have any Contract to purchase or acquire or are planning to purchase or acquire,
and all products and services which the Companies currently produce, sell or
supply or are planning to produce, sell or supply, and all products or services
which the Companies have previously produced, sold or supplied subject to any
guaranty or warranty of freedom from any such problem (whether by Contract, Law
or otherwise), are free of any "Year 2000 Problem" and any "9/9/99 Problem" and
any "leap year problem" such that such systems, products and services do not and
will not, without requiring any modifications, experience any malfunctions or
other usage problems in connection with (i) the year 2000 (and later years) as
distinct from 1900's years, (ii) the premature cancellation or expiration of
contractual rights or deletion of data on September 9, 1999, or (iii) any leap
year.
3.18 CONTRACTS AND ACQUIRED BUSINESSES.
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(a) Section 3.18 of the Disclosure Schedule (with paragraph references
corresponding to those set forth below) contains a true and complete list of
each of the following Contracts or other arrangements (true and complete copies
or, if not in writing, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been delivered to Purchaser prior to the execution of
this Agreement), to which any Company (or any Individual Seller on behalf of any
Company) is a party or by which any of their respective Assets and Properties is
bound:
(i) (A) all Contracts (excluding Plans which are
listed on Section 3.14 of the Disclosure Schedule) providing for a
commitment of employment or consultation services for a specified or
unspecified term, specifying the name, position and rate of
compensation of each Person party to such a Contract and the expiration
date of each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses of
conduct involving an obligation of any Company to make severance or
other payments (with or without notice, passage of time or both) to any
Person in connection with, or as a consequence of, the transactions
contemplated hereby or by the Operative Agreements or to any employee
who is disclosed on Section 3.22(a) of the Disclosure Schedule, other
than with respect to salary payments in the ordinary course of business
consistent with past practice;
(ii) all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of any
Company or any Individual Seller (to the extent the restriction
directly or indirectly affects any Company) to engage in any business
activity or compete with any Person or prohibiting or limiting the
ability of any Person to compete with any Company (including, without
limitation, any restriction respecting the provision of services to
customers or potential customers or any class of customers, in any
geographic area, during any period of time or in any segment of the
market), or prohibiting or limiting disclosure of confidential or
proprietary information;
(iii) all partnership, joint venture, shareholders'
or other similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of any
Company and all guarantees of any Indebtedness or other obligations by
any Company of any third Person;
(v) all Contracts with independent contractors,
distributors, dealers, manufacturers' representatives, sales agencies
or franchisees;
(vi) all Contracts with respect to or in connection
with any Intellectual Property;
(vii) all Contracts relating to (A) the future
disposition or acquisition of any Assets and Properties, and (B) any
Business Combination;
(viii) all Contracts between or among any Company, on
the one hand, and any current or former officer, director, stockholder
(including any Individual Seller), Affiliate or Associate of such
Company or any other Company or any Associate of any such officer,
director, stockholder or Affiliate (other than a Company), on the other
hand, other than Contracts disclosed pursuant to Section 3.18(a)(i);
(ix) all collective bargaining or similar labor
Contracts;
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(x) all leases of personal property which involved or
which any Company anticipates will involve the payment of more than
$5,000 in 1998 or 1999 or which extends beyond 1999;
(xi) any Contract for the sale, purchase or lease of
goods, services or capital assets which involved or which any Company
anticipates will involve the payment of more than $25,000 in 1998 or
1999 or which extends beyond 1999;
(xii) any fidelity or surety bond or completion bond;
(xiii) all Contracts that (A) limit or contain
restrictions on the ability of any Company to declare or pay dividends
on, to make any other distribution in respect of, or to issue or
purchase, redeem or otherwise acquire, its capital stock, to incur
Indebtedness, to incur or suffer to exist any Lien, to purchase or sell
any Assets and Properties, to change the lines of business in which it
participates or engages or to engage in any Business Combination, (B)
require any Company to maintain specified financial ratios or levels of
net worth or other indicia of financial condition or (c) require any
Company to maintain insurance in certain amounts or with certain
coverages;
(xiv) all powers of attorney or comparable
delegations of authority;
(xv) all Contracts which are not in the ordinary
course of business or which are material to any Company; and
(xvi) all other Contracts, including but not limited
to Contracts with clients or customers, that involve the payment or
potential payment pursuant to the terms of any such Contract by or to a
Company of more than $10,000 or which is not cancelable without penalty
within thirty (30) days.
(b) Except for the need to obtain the third party consents identified
in Sections 3.05 and 3.06 of the Disclosure Schedule, each Contract required to
be disclosed in Section 3.18 of the Disclosure Schedule is in full force and
effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of each party thereto; and neither any Company nor
any Individual Seller, or to the Seller's Knowledge any other party to such
Contract, is or has received notice that it is in violation or breach of or
default in any material respect under any such Contract (or with notice or lapse
of time or both, would be in violation or breach of or default in any material
respect under any such Contract).
(c) Section 3.18 of the Disclosure Schedule contains a true and
complete list of all Contracts to which the Companies have been a party during
the thirty-six (36) month period preceding the Closing in which the Companies
have received or have had available to them any preferential or advantaged
category of business or business status, including without limitation as a small
business, identifying in each case the relevant preferential or advantaged
category.
(d) The execution, delivery and performance of this Agreement and the
Operative Agreements by the Sellers and the consummation by the Sellers of the
transactions contemplated hereby and thereby will not result in any material
increase in the costs associated with the conduct of the Acquired Businesses by
the Purchaser after such execution, delivery, and performance, including without
limitation costs associated with regulatory compliance or compliance with the
contracting requirements of any customer of the Companies that is a Governmental
or Regulatory Authority, associated with the status of the Companies or the
Acquired
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Businesses, or the loss of any such status as a small business or as any other
preferential or advantaged category of business or business ownership, and will
not result in the loss of any business associated with such status.
(e) Section 3.18(e) of the Disclosure Schedule contains a true and
complete list of all orders on hand of the Companies as at the Effective Date
and as of the fifth (5th) Business Day prior to the date of execution of this
Agreement. Each such order is, except as otherwise set forth on Section 3.18(e)
of the Disclosure Schedule, a fixed and firm order that is not changeable or
cancelable or subject to reduction or postponement or to any other material
change at the instance of the customer without the consent of the relevant
Company, and the Company is not obligated to give any such consent.
(f) From and after the Effective Date and at all times thereafter
through the completion of the Closing, the Sellers and the Target Companies have
not taken or allowed any act or action, and nor has any omission or circumstance
occurred, which act, action, omission or circumstance would, if taken, allowed
or occurred after the date of execution hereof, constitute a breach of Section
5.01.
(g) With respect to any Government Contract, there are no (A) past,
pending or to the Seller's Knowledge threatened (i) claims by any Governmental
or Regulatory Authority against any Company relating to any such Government
Contract; (ii) suspension or debarment actions by any Governmental or Regulatory
Authority against any Company; (iii) default terminations by any Governmental or
Regulatory Authority or Person who is a prime contractor with respect to any
Government Contract for the ultimate resale of products or services to any
Governmental or Regulatory Authority; or (B) civil or criminal investigations of
any Company by any Governmental or Regulatory Authority, including, but not
limited to, any federal agency Inspector General (IG), the Defense Criminal
Investigative Service (DCIS), the Defense Contract Audit Administration (DCAA),
and the General Accounting Office (GAO) of which the Target Companies have been
notified in writing or of which the Sellers have been notified or which are to
the Seller's Knowledge threatened.
(h) To the Seller's Knowledge, each Company and all current and former
employees, consultants and agents while employed or retained by or acting on
behalf of any Company and each Individual Seller has been and is in compliance
with and have not violated the conflict of interest law (18 U.S.C. 207),
Procurement Integrity Act (41 U.S.C. 423 et seq.), bribery and gratuity statute
(18 U.S.C. 201), Major Fraud Act (18 U.S.C. 1031), Anti-Kickback Act (41 U.S.C.
51 et seq.), Byrd Amendment (31 U.S.C. 1352), False Statements statute (18
U.S.C. 1001), Truth in Negotiations Act (10 U.S.C. 2306a), civil False Claims
Act (31 U.S.C. 3729 et seq.); criminal False Claims Act (18 U.S.C. 287); Program
Fraud Civil Remedies Act (31 U.S.C.3801 et seq.) or the Covenant Against
Contingent Fees (48 C.F.R. Subpart 3.4). Each Company, and the activities of
each Company, have been and are in compliance with the requirements of the
National Industrial Security Program Operations Manual.
3.19 PERMITS AND LICENSES. Section 3.19 of the Disclosure Schedule
contains a true and complete list of all Permits issued to or used in the
business or operations of any Company, setting forth the owner, the function and
the expiration and renewal date of each. Prior to the execution of this
Agreement, each Company has delivered to Purchaser true and complete copies of
all such Permits. Except as disclosed in Section 3.19 of the Disclosure
Schedule:
(a) the Companies own or validly hold all Permits that are required to
conduct, or are material to, their respective business or operations as
currently conducted or to own their respective Assets and Property;
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(b) each Permit listed in Section 3.19 of the Disclosure Schedule is
valid, binding and in full force and effect; and
(c) no Company is, nor has it received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any material provision of any such Permit.
3.20 INSURANCE. Section 3.20 of the Disclosure Schedule contains a true
and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the annual premiums and payment terms thereof, the
period of time covered thereby and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, fidelity, directors'
and officers' liability and other insurance policies currently in effect that
insure the business, operations or employees of each Company or affect or relate
to the ownership, use or operation of any of the Assets and Properties of the
Companies and that (i) have been issued to any Company or (ii) have been issued
to any Person (other than a Company) for the benefit of a Company. The insurance
coverage provided by the policies described in clause (i) above will not
terminate or lapse by reason of any of the transactions contemplated by this
Agreement or the Operative Agreements. Each policy listed in Section 3.20 of the
Disclosure Schedule is valid and binding and in full force and effect, all
premiums due thereunder have been paid when due and neither any Company nor any
Individual Seller, nor the Person to whom such policy has been issued, has
received any notice of cancellation or termination in respect of any such policy
or is in default thereunder (or would be in default with notice or upon lapse of
time), and neither any Company nor any Individual Seller knows of any reason or
state of facts that could reasonably lead to the cancellation of such policies.
Section 3.20 of the Disclosure Schedule contains a list of all claims made under
any insurance policies covering any Company since January 1, 1995. Neither any
Company nor any Individual Seller has received notice that any insurer under any
policy referred to in this Section is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause. Since the later of
January 1, 1995 or, in the case of each Company, the date on which such Company
commenced business, each Company has, in light of its business, location,
operations, Assets and Properties, maintained at all times without interruption
appropriate insurance, in scope and amount of coverages.
3.21 AFFILIATE TRANSACTIONS.
(a) Except as disclosed in Section 3.21 (a) of the Disclosure Schedule
(i) there are no Liabilities between any Company on the one hand, and any
current or former officer, director, stockholder (including any Individual
Seller), Affiliate (other than a Company) or Associate of any Company or any
Associate of any such officer, director, stockholder or Affiliate on the other
hand, (ii) no Company provides or causes to be provided any assets, services or
facilities to any such current or former officer, director, stockholder
(including any Individual Seller), or any such Affiliate or Associate, (iii) no
such current or former officer, director, stockholder (including any Individual
Seller) and no such Affiliate or Associate has any interest, directly or
indirectly, in any Person which furnishes or sells any goods or services or
provides any facilities to any Company, except that ownership of no more than 2%
of the outstanding capital stock of a publicly traded corporation shall not be
deemed to be an interest for the purposes of this Section 3.21(a), and (iv) no
Company beneficially owns, directly or indirectly, any Investment Assets of any
such current or former officer, director, stockholder (including any Individual
Seller), Affiliate or Associate.
(b) Except as disclosed in Section 3.21 (b) of the Disclosure Schedule,
each of the Liabilities and transactions listed in Section 3.21 (a) of the
Disclosure Schedule was incurred or engaged in, on an arm's-length basis on
competitive terms.
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(c) Except as disclosed in Section 3.21 (c) of the Disclosure Schedule
(i) there are no Liabilities of any Company to any other Company, (ii) no
Company provides or causes to be provided any assets, services or facilities to
any other Company, and (iii) no Company has any interest, directly or
indirectly, in any other Company.
3.22 EMPLOYEES, LABOR RELATIONS.
(a) Section 3.22(a) of the Disclosure Schedule contains a list of the
name of each officer, employee and consultant of each Company, together with
such person's position or function, years of employment, annual base salary or
wages and any incentives or bonus arrangement with respect to such person.
Neither any Company nor any Individual Seller has received any information that
would lead him, her or it to believe that any such individual will or may cease
to be engaged by a Company, or will refuse offers of engagement by a Company or
the Purchaser for any reason, including, without limitation, because of the
consummation of the transactions contemplated by this Agreement and the
Operative Agreements.
(b) Except as disclosed in Section 3.22(b) of the Disclosure Schedule,
(i) to the Seller's Knowledge, there are no material controversies between any
Company, on the one hand, and any employee or consultant of any Company, on the
other hand, (ii) no Company is a party to or bound by any collective bargaining
agreement or any other agreement with, or commitment to, any union of employees,
and, to the Seller's Knowledge, there are no threatened or contemplated attempts
to organize for collective bargaining purposes any of the employees of any
Company, and (iii) no unfair labor practice complaint or sex or age
discrimination or harassment claim has been brought against any Company before
any Governmental or Regulatory Authority and there are no facts or circumstances
known to any Company or any Individual Seller that could reasonably be expected
to give rise to such complaint or claim. There has been no work stoppage, strike
or other concerted action by employees of any Company. Each Company has complied
in all material respects with all applicable Laws relating to the employment of
labor, including without limitation those relating to wages, hours and
collective bargaining.
3.23 ENVIRONMENTAL MATTERS.
Except as set forth in Section 3.23 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below):
(a) Each Company has obtained and holds all necessary Environmental
Permits.
(b) Each Company, and the activities of each Company, have been and are
in compliance with all material terms, conditions and provisions of all
applicable (i) Environmental Permits and (ii) Environmental Laws.
(c) There are no past, pending or threatened Environmental Claims or
Environmental Liabilities against any Company, and neither any Company nor any
Individual Seller is aware of any facts or circumstances which could reasonably
be expected to form the basis for any Environmental Claim or Environmental
Liability against any Company.
(d) Neither any Company nor any predecessor of any Company nor any
entity previously owned by any Company has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substances to any off-Site location which could result in an Environmental Claim
or an Environmental Liability against any Company.
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3.24 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. Section 3.24(a) of the
Disclosure Schedule lists the ten (10) largest customers or clients of each
Company on the basis of revenues for goods sold or services provided in each of
1996, 1997 and 1998 (on an annualized basis). Section 3.24(b) of the Disclosure
Schedule lists the ten (10) largest suppliers of the Companies collectively on
the basis of cost of goods or services purchased in each of 1996, 1997 and 1998
(on an annualized basis). Except as set forth in Section 3.24(a) of the
Disclosure Schedule, no current customer, client or supplier has ceased or
materially reduced its purchases from or sales or provision of services to any
Company since the Effective Date, or to the Seller's Knowledge, has threatened
to cease or materially reduce such purchases or sales or provision of services
after the date hereof or by reason of this Agreement. To the Seller's Knowledge,
no such customer or supplier is threatened with bankruptcy or insolvency. Except
as set forth in Section 3.24 of the Disclosure Schedule, and except for deposits
or other non-material amounts paid in the ordinary course of business consistent
with past practice, no Company has accepted any prepayment of any sales price or
fee or license fee from any client or customer that relates to products not yet
delivered or services not yet performed by such Company.
3.25 ACCOUNTS RECEIVABLE. The accounts and notes receivable of each
Company reflected on the Effective Date Balance Sheet and all accounts and notes
receivable arising subsequent to the Effective Date, (i) arose from bona fide
sales transactions in the ordinary course of business consistent with past
practice and are payable on ordinary trade terms, (ii) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their respective terms, (iii) are not subject to any valid set-off or
counterclaim, (iv) do not represent obligations for goods sold on consignment,
on approval or on a sale-or-return basis or subject to any other repurchase or
return arrangement, (v) are collectible in the ordinary course of business
consistent with past practice in the aggregate recorded amounts thereof, net of
any applicable reserve reflected in the Effective Date Balance Sheet, as such
reserve has been adjusted on the books of the Companies since the Effective Date
in the ordinary course of business consistent with past practices, (vi) are not
the subject of any Actions or Proceedings brought by or on behalf of any Company
or by the account debtor, and (vii) have not been pledged as collateral by any
Company
3.26 INVENTORY. All inventory of each Company reflected on the
Effective Date Balance Sheet consisted, and all such inventory acquired since
the date of the Effective Date Balance Sheet consists, of a quality and quantity
usable and salable in the ordinary course of business consistent with past
practice and industry standards, except to the extent of the reserve with
respect thereto set forth on the Effective Date Balance Sheet. Except as set
forth on Section 3.26 of the Disclosure Schedule, all items included in the
inventory of each Company are the property of such Company, free and clear of
any Lien other than Permitted Liens, have not been pledged as collateral, are
not held by such Company on consignment from others and conform in all material
respects to all standards applicable to such inventory or its use or sale
imposed by any Governmental or Regulatory Authority.
3.27 BROKERS. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with the transactions contemplated by this Agreement
or the Operative Agreements on the basis of any act or statement made by any
Company, any Individual Seller, any of their respective Affiliates, or any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of any Company, any Individual Seller or
any Affiliate.
3.28 RESTRICTIONS ON CONDUCT OF BUSINESS. No Company is prohibited or
otherwise restricted from conducting its business as presently conducted or
intended to be conducted by any Contract, any Governmental or Regulatory
Authority or any Law.
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3.29 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS. Section 3.29 of
the Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which any Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship; (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of each
Company having signatory power with respect thereto; and (c) a list of each
Investment Asset, the name of the record and beneficial owner thereof, the
location of the certificates, if any, therefor, the maturity date, if any, and
any stock or bond powers or other authority for transfer granted with respect
thereto.
3.30 WARRANTIES. Section 3.30 of the Disclosure Schedule sets forth (i)
all written warranties, guarantees and warranty policies of each Company with
respect to its products and services (the "Warranty Obligations"), and the
duration of each such Warranty Obligation, (ii) those Warranty Obligations which
are subject to any dispute or, to the Seller's Knowledge, threatened dispute and
(iii) the claims experience of each Company since January 1, 1997 with respect
to warranties, guarantees and warranty policies. Except as set forth in Section
3.30 of the Disclosure Schedule, (x) there have not been any material deviations
from the Warranty Obligations, and salesmen, employees and agents of the
Companies are not authorized to undertake obligations to any customer or other
third parties in excess of such Warranty Obligations and (y) the Effective Date
Balance Sheet reflects adequate reserves for such Warranty Obligations.
3.31 BUSINESS PLAN. Attached hereto as Section 3.31 of the Disclosure
Schedule are the Sellers' current business plans (the "Business Plans") for the
planned operations of the Companies during the remainder of calendar year 1998
and during calendar years 1999 and 2000, which includes, without limitation, a
description of the capital requirements and staffing needs of each Company and a
pro forma income statement. The Sellers and the Companies used reasonable care
in preparing such business plan and the assumptions and projections therein are
reasonable having regard to the facts and circumstances which to the Sellers'
Knowledge exist or prevail at the time of the preparation of the plan; provided,
however, that no representation or warranty is made or given that the Companies
or the Acquired Businesses will in fact achieve or comply with any specific
figure or projection contained in the Business Plans; and that the information
in the Business Plans contains forward-looking statements that involve risks and
uncertainties. Important factors that could cause actual results to differ
materially include: rapid changes in products and technology that may displace
products sold by the Companies or Purchaser; the competitive industries within
which the Companies or Purchaser operate; the Companies' or Purchaser's success
in identifying, acquiring and incorporating commercially reasonable technology,
products or businesses, and in identifying and taking advantage of growth
opportunities; the effect on cash flow and liquidity of differences between the
expected and the actual timing of collection of accounts receivable; limited
product lines and service offerings relative to other suppliers; and
fluctuations in the Companies' or Purchaser's quarterly results of operations
and the timing of orders from customers.
3.32 CERTAIN PRACTICES. No shareholder, director, officer or, to the
Seller's Knowledge, employee or agent of any Individual Seller or any Company
has, directly or indirectly, made or agreed to make, any improper or illegal
payment, gift or political contribution to, or taken any other improper or
illegal action, for the benefit of any customer, supplier, governmental employee
or other Person who is or may be in a position to assist or hinder the business
of any Company.
3.33 DISCLOSURE. To the knowledge and belief of the Principal
Stockholders and of those other Individual Sellers who are directors and
officers of any of the Companies, no representation or warranty of Sellers
contained in this Agreement, and no statement contained in the Disclosure
Schedule (including without limitation in the Financial Statements attached
hereto as part of the Disclosure Schedule) contains
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any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading. The Principal
Stockholders and those other Individual Sellers who are directors or officers of
any of the Companies shall for the purpose of the preceding sentence only be
deemed to have knowledge or belief of any fact, matter or circumstance, or act
or omission if they would have had such knowledge or belief but for their
reckless disregard with respect thereto.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MICRODYNE
As an inducement to the Sellers to enter into this Agreement and to
consummate the transactions contemplated herein, and except as set forth in the
Disclosure Schedule (with Section references corresponding to those set forth
below), Purchaser and Microdyne hereby represent, warrant, covenant and agree to
and with the Sellers as follows:
4.01 ORGANIZATION. Purchaser and Microdyne are corporations duly
organized, validly existing and in good standing under the laws of the state of
Maryland, and have full corporate power and authority to conduct their business
as and to the extent now conducted..
4.02 AUTHORITY. Purchaser and Microdyne have full corporate power and
authority to enter into this Agreement and the Operative Agreements to which
each is a party and to perform their obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Operative Agreements to which
each is a party by Purchaser and Microdyne and the consummation by Purchaser and
Microdyne of the transactions contemplated hereby and thereby have been duly and
validly approved by their boards of directors and no other corporate proceedings
on the part of Purchaser and Microdyne are necessary to authorize the execution,
delivery and performance of this Agreement and the Operative Agreements to which
each is a party by Purchaser and Microdyne and the consummation by Purchaser and
Microdyne of the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by Purchaser and Microdyne and
constitutes, and the Operative Agreements to which Purchaser and Microdyne are a
party (when so executed and delivered) will constitute, the legal, valid and
binding obligation of Purchaser and Microdyne respectively, enforceable against
Purchaser and Microdyne in accordance with their respective terms, except as
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
4.03 NO CONFLICTS. The execution and delivery by Purchaser and
Microdyne of this Agreement do not, and the execution and delivery by Purchaser
and Microdyne of the Operative Agreements to which each is a party, the
performance by Purchaser and Microdyne of their obligations under this Agreement
and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach
of any of the terms, conditions or provisions of the Certificate of
Incorporation or By-laws of the Purchaser or Microdyne;
(b) conflict with or result in a violation or breach
of any term or provision of any Law or Order applicable to the
Purchaser or Microdyne or any of their Assets and Properties, the
effect of which, individually or in the aggregate, would reasonably be
expected to have a
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materially adverse effect on the ability of Purchaser to consummate the
transactions contemplated hereby or would materially hinder or delay
such consummation; or
(c) (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or
both) a default under or (iii) require Purchaser or Microdyne to obtain
any consent, approval or action of, make any filing with or give any
notice (other than filings, if any, with the Securities and Exchange
Commission and the National Association of Securities Dealers Automated
Quotation System and filings required under the HSR Act) to the extent
applicable to any Person as a result or under the terms of, any
Contract or Permit to which the Purchaser or Microdyne is a party or by
which their Assets and Properties are bound, the effect of which,
individually or in the aggregate, would reasonably be expected to have
a material adverse effect on the ability of the Purchaser to consummate
the transactions contemplated by this Agreement or would materially
hinder or delay such consummation.
4.04 GOVERNMENTAL APPROVALS AND FILINGS. Except for the applicable
requirement of the HSR Act and as disclosed in Section 4.04 of the Disclosure
Schedule, or as referred to in Section 4.03(c), no permits, consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of the Purchaser or Microdyne is required in connection with the
execution, delivery and performance of this Agreement or the Operative
Agreements to which they are a party or the consummation of the transactions
contemplated hereby or thereby.
4.05 LEGAL PROCEEDINGS. There are no Actions or Proceedings pending or,
to the knowledge of Purchaser or Microdyne, threatened against, relating to or
affecting Purchaser or Microdyne or any of their Assets and Properties which (i)
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Operative
Agreements or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the ability of the Purchaser to consummate the transactions
contemplated by this Agreement or would materially hinder or delay such
consummation.
4.06 BROKERS. Except for Robinson Humphrey, all of whose fees, expenses
and commissions will be paid by Microdyne, no agent, broker, finder, investment
banker, financial advisor or other similar Person will be entitled to any fee,
commission or other compensation in connection with the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by Microdyne or the Purchaser or their Affiliates, or any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of Microdyne or the Purchaser or any
Affiliate.
ARTICLE V: CERTAIN AGREEMENTS OF THE PARTIES
5.01 CONDUCT OF BUSINESS PRIOR TO THE CLOSING.
(a) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and the Closing Date,
they shall cause each Company to conduct its business in the ordinary course and
consistent with prior practice.
(b) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and prior to the
Closing Date, and without making any commitment on
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Purchaser's behalf, they will cause each Company to use all reasonable efforts
to preserve substantially intact the business organization of each Company, to
keep available to Purchaser the services of all of the employees of each Company
and to preserve the current relationships of each Company with its clients,
customers, suppliers and other persons with which each Company has significant
business relationships.
(c) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and prior to the
Closing Date, they will cause each Company to maintain their Books and Records
in the usual, regular and ordinary manner consistent with past practices; to use
all reasonable efforts to continue in full force and effect the policies of
insurance listed in Section 3.20 of the Disclosure Schedule or comparable
substitute policies and will promptly notify Purchaser of any cancellation or
non-renewal of such insurance; and to use all reasonable efforts to maintain all
of each Company's Assets and Properties in good repair, working order and
operating condition (subject only to ordinary wear and tear).
(d) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and prior to the
Closing Date, they will not permit any Company to amend its Certificate or
Articles of Incorporation or By-laws or merge, amalgamate or consolidate or sell
all or substantially all of its Assets and Property, or obligate itself to do
so, with or into or to any other Person, without the prior written consent of
Purchaser.
(e) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that between the date hereof and prior to the
Closing Date, they will cause each Company to (i) comply with all material
applicable Laws, (ii) file all Tax Returns required to be filed and make timely
payments of applicable Taxes when due; and (iii) take all reasonable actions
necessary to be in compliance with, and to maintain the effectiveness of, all
material Permits.
(f) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree that without the prior written consent of
Purchaser, they will not permit any Company between the date hereof and prior to
the Closing Date to:
(i) amend its Articles or Certificate of
Incorporation or Bylaws;
(ii) change its accounting methods, principles or
practices, except to the extent required by GAAP and concurred
in by such Company's independent accountants;
(iii) declare, set aside or pay any dividend or other
distribution (whether in cash, stock, property or any
combination thereof) in respect of the capital stock of such
Company or any other securities or redeem, repurchase or
otherwise acquire any equity or other securities of, or
Options with respect to any equity or other securities of,
such Company, or pay or discharge or give security for the
payment or discharge of any Liability to any Individual Seller
or his or her Affiliate, other than for salary as permitted by
(v) below;
(iv) revalue any of its Assets and Properties,
including, without limitation, writing off notes or accounts
receivable, other than in the ordinary course of business
consistent with past practice;
(v) establish any new, or amend or modify any
existing, Plan; pay any bonus or other payment to any
employee, officer or director except salary payments at the
rates prevailing on January 1, 1998 the payment of which has
not previously been deferred; or increase the compensation
payable or to become payable to any directors, officers or
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employees of such Company, except salary increases as may be
required by Law, and salary increases to non-management
employees in the ordinary course of business consistent with
past practice and not in excess or $5,000 per annum in the
aggregate for all such employees
(vi) enter into any employment or severance Contract
with any of its directors, officers or employees (whether new
hires or existing employees) or establish, adopt or enter into
any collective bargaining agreement, or enter into any
Contract or transaction any other Company or with any officer,
director, stockholder (including any Individual Seller),
Affiliate or Associate of any Company which, if it existed on
the date hereof, would be required to be listed in the
Disclosure Schedule;
(vii) create, incur, assume, maintain or permit to
exist any Lien on any of the Assets and Properties of such
Company other than Permitted Liens;
(viii) create, incur or assume any Indebtedness,
including obligations in respect of capital leases, or
guarantee any Indebtedness or any other obligation of any
other Person;
(ix) pay or discharge any material claim, Liability
or Lien (whether absolute, accrued, contingent or otherwise),
or waive any right, other than in the ordinary course of
business consistent with past practice or pursuant to binding
contractual obligations of such Company in existence on the
date hereof;
(x) transfer to any Person any rights to the
Intellectual Property of such Company, other than as
reasonably necessary in the ordinary course of business
consistent with past practice in rendering services to clients
and customers;
(xi) enter into any Contract granting marketing,
distribution or similar rights of any type or scope with
respect to any products or services of such Company;
(xii) commence any litigation;
(xiii) hire any new employees, agents or consultants,
except employees earning less than $50,000 per annum to
replace employees who have left the employ of such Company;
(xiv) authorize or make any capital expenditure in
excess of an aggregate of $10,000;
(xv) issue or agree to issue any shares of its
capital stock or Options with respect to such stock;
(xvi) become a party to any Contract which, if it
existed on the date hereof, would be required to be listed in
the Disclosure Schedule, or amend or terminate any Contact
listed on the Disclosure Schedule;
(xvii) acquire or agree to acquire by merging,
amalgamating or consolidating with, or by purchasing any
assets or equity securities of, or by any other manner, any
business or any corporation, limited liability company,
partnership or other business
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organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually
or in the aggregate, to its business;
(xviii) sell, lease, license, or otherwise dispose of
any material item of its Assets and Properties or any item of
Intellectual Property (except as described in subsection (x)
above);
(xix) make or change any material election in respect
of Taxes, adopt or change any accounting method in respect of
Taxes, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(xx) abandon, modify, waive, terminate or otherwise
change any of the Permits described in Section 3.19 of the
Disclosure Schedule;
(xxi) settle or compromise any material claims
against such Company;
(xxii) take any action or course of action
inconsistent with compliance with the covenants and agreements
contained in this Agreement; or
(xxiii) take or agree to commit to take any action
that would make any representation or warranty of the Sellers
contained herein inaccurate in any material respect at the
Closing or omit to take any action necessary to prevent any
such representation or warranty from being inaccurate in any
material respect at such time or which would diminish the
value of such Company as a going concern.
5.02 ACCESS TO INFORMATION. From the date hereof until the Closing,
upon reasonable notice, the Principal Stockholders shall, and shall cause each
Company's officers, directors, employees, auditors and agents to, (i) afford the
Representatives of Purchaser reasonable access, during normal business hours, to
the offices, properties, Books and Records of each Company and to each Company's
officers, employees, agents, accountants and actuaries, and (ii) furnish to the
Representatives of the Purchaser such additional financial and operating data
and other information regarding the assets, properties, goodwill and business of
each Company as Purchaser may from time to time reasonably request; provided,
however, that such investigation shall not unreasonably interfere with the
business or operations of any Company. No investigation or access to information
pursuant to this Section 5.02 shall affect any representation or warranty made
by Sellers to Purchaser hereunder or otherwise affect the rights and remedies
available to Purchaser hereunder.
5.03 BOOKS AND RECORDS.
(a) Purchaser agrees that it shall preserve and keep all material books
and records of each Selling Company for the period up to and including the
Closing Date in the possession of Purchaser or a Target Company for a period of
at least three (3) years from the Closing Date. After such three-year period,
before Purchaser or a Target Company shall dispose of any of such books and
records, at least ninety (90) calendar days' prior written notice to such effect
shall be given by Purchaser to the Sellers' Representative and the Sellers'
Representative, on his behalf and on behalf of any of the other Sellers, shall
be given an opportunity, at Sellers' cost and expense, to remove and retain all
or any part of such books and records as such Sellers' Representative may
select. During such three-year period, duly authorized representatives of the
Sellers' Representative shall, upon reasonable notice, have access thereto
during normal business hours
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to examine, inspect and copy such books and records, with any out-of-pocket
costs being borne by the Sellers, and such access shall be limited to such
pre-Closing Date books and records.
(b) If, in order properly to prepare documents required to be filed
with Governmental or Regulatory Authorities or financial statements, it is
necessary that any party hereto or any successors be furnished with additional
information relating to any Company, and such information is in the possession
of the other parties hereto, such possessing party agrees to use all reasonable
efforts to furnish such information to such other parties, at the cost and
expense of the party making the request, and excluding from any party's
obligation any information which is subject to a confidentiality agreement with
any third Person. In addition, the Sellers' Representative shall have the right
to review any and all work papers and work product in connection with the
Purchaser's determination of the Earn Out Amount.
5.04 CONFIDENTIALITY.
(a) The information which Purchaser acquires about any Company
as a result of the investigations permitted by this Agreement is termed
"Evaluation Material." Purchaser agrees that neither it nor any of its
Representatives will use any Evaluation Material for any purpose not related to
the transactions contemplated by this Agreement and will not disclose any
Evaluation Material to anyone except its Representatives who may need such
information to perform their respective duties and have been informed of its
confidential nature and directed to treat it confidentially. If the transactions
contemplated by this Agreement are not consummated, Purchaser agrees that it and
its representatives will return any written Evaluation Material in their
possession, or will destroy and will not retain any written Evaluation Material,
any copies thereof or any notes or memoranda made using such written Evaluation
Material.
(b) The confidentiality agreement contained herein will
terminate upon the earlier of five years after the date hereof or upon the
Closing.
(c) Notwithstanding the foregoing, the Purchaser and its
Representatives may use and disclose Evaluation Material and information
obtained from the Evaluation Material to the extent that (i) they acquired such
information on a non-confidential basis prior to receipt thereof from the
Sellers or a Company or their Representative, (ii) such information has become
generally available to the public, or (iii) such information is provided to the
Person using or disclosing it by a Person who obtained such information or may
disclose such information other than as a result of a breach of or in breach of
this Agreement or any other Contract between the Purchaser and the Selling
Companies or the Target Companies. Furthermore, the Purchaser and its
Representatives may disclose such information to the extent that they are
required to do so to comply with an Order, but upon receiving notice that any
such Order has been issued or is being sought, they will promptly notify Sellers
and will, at Sellers' expense, cooperate with Sellers' or Company's efforts to
contest the issuance of such Order.
5.05 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) Each of the Sellers and the Purchaser will use all reasonable
efforts to obtain all authorizations, consents, Orders and approvals of all
Governmental or Regulatory Authorities that may be or become necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement, and will cooperate fully with the other parties in promptly
seeking to obtain all such authorizations, consents, orders and approvals,
subject to the proviso in Section 5.05(b).
(b) Purchaser and Sellers will use all their respective reasonable
efforts to assist one another in obtaining the consents referred to in Sections
5.05(a), 6.01(c), 6.02(c) and, if any, the consents referred to
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in Section 6.02(d); provided, however, that Purchaser shall not be obligated
with respect to such assistance (i) to expend any funds except the payment of
the fees and expenses of any applicable attorneys, consultants or other advisors
retained by it and applicable filing fees or (ii) to take any actions with
respect to its business or the business of any Company which, in its reasonable
judgement, is materially adverse.
5.06 NO SOLICITATION OF OFFERS, ETC.
(a) Prior to the termination of this Agreement in accordance with its
terms, the Sellers and their Affiliates, including the Target Companies, shall
not, nor shall they authorize or permit any officer, director, employee,
investment banker, attorney, accountant or other representative of or Person
retained by them to, directly or indirectly, take any action to knowingly
solicit, encourage or facilitate any action that might lead to, or accept any
offers, initiate or participate in negotiations or discussions with, or provide
any non-public information to, or enter into any letter of intent, preliminary
agreement or definitive agreement with any Person with respect to, any possible
Business Combination of or with respect to any Company. Sellers and the Target
Companies shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect thereto or in connection therewith.
(b) Sellers acknowledge and agree that a violation by it of Section
5.06(a) will cause irreparable damage to Purchaser. Accordingly, each of the
Sellers agrees that, in the event of a breach of Section 5.06(a), Purchaser
shall be entitled to a temporary or permanent injunction or restraining order to
prevent breaches of Section 5.06(a) and to specifically enforce the terms and
provisions thereof without the need to post any security or bond, such rights to
be cumulative and in addition to whatever other remedies at law or in equity or
otherwise the Purchaser may have pursuant to this Agreement.
5.07 NOTICE OF CERTAIN MATTERS.
(a) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree to give prompt notice in writing to Purchaser of:
(i) any information that indicates that any representation or warranty of the
Sellers contained herein was not true and correct as of the date hereof or will
not be true and correct as of the Closing Date, (ii) the occurrence of any event
which will result, or has a reasonable prospect of resulting, in the failure to
satisfy a condition specified in Article VI hereof, (iii) any notice or other
communication from any third Person alleging that the consent of such third
Person is or may be required in connection with the transactions contemplated by
this Agreement, (iv) any notice of, or other communication relating to, any
default or event which, with notice or lapse of time or both, would become a
default under any Contract listed on the Disclosure Schedule, and (v) any change
in the officers or directors of any Company.
(b) The Principal Stockholders and the Selling Companies, jointly and
severally, covenant and agree to (i) promptly advise Purchaser of any fact,
condition or change that, individually or in the aggregate, has or results in a
material adverse effect on the Business or Condition of any Company, and (ii)
notify Purchaser of any governmental complaint, investigation or hearing (or
communications indicating that the same may be contemplated) or other Action or
Proceeding involving any Company or any of its respective Assets and Properties,
and will keep the Purchaser fully informed of such events and permit Purchaser's
Representatives reasonable access to all materials prepared in connection
therewith.
(c) The giving of any such notice under this Section 5.07 or the
providing of the financial statements contemplated by Section 5.08 shall in no
way change or modify the Sellers' representations and warranties or the
conditions to Purchaser's obligations contained herein or otherwise affect the
remedies available to Purchaser hereunder.
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5.08 INTERIM FINANCIAL STATEMENTS. The Principal Stockholders and the
Selling Companies shall, as soon as available, but no later than fifteen (15)
days after the end of the relevant month or quarter, as the case may be, deliver
promptly to Purchaser any and all final monthly (including without limitation as
of and for the period ended June 30, 1998) and quarterly financial statements
for each Company, audited or unaudited, prepared for the management of such
Company after the date of this Agreement and prior to the Closing Date, and the
Principal Stockholders shall cause the Companies to prepare such financial
statements.
5.09 SELLERS' OBLIGATIONS. Each Seller hereby agrees that in each
instance in this Agreement where any Company is obligated to act or refrain from
acting under this Agreement during the period prior to the Closing, such Seller
individually, or together with the other Sellers, shall cause such Company to
fulfill such obligations.
5.10 FURTHER ACTION. Each of the parties hereto shall execute and
deliver such documents and other papers and take such further actions as may be
reasonably required to carry out the provisions hereof and give effect to the
transactions contemplated hereby. Each Individual Seller hereby transfers,
conveys, assigns and delivers to the Purchaser, free and clear of all Liens,
except (other than in the case of Purchased Stock, Purchased Loan Accounts and
Purchased Options) for Permitted Liens and Assumed Liabilities all of such
Seller's respective Assets and Properties (other than the Excluded Assets) , if
any, used, held for use or related to the business or operations of the
Companies.
5.11 ALLOCATION OF PURCHASE PRICE. The Purchase Price has been agreed
upon by the parties and the values assigned to the various Purchased Assets and
Purchased Stock are listed in Section 5.11 of the Disclosure Schedule. Sellers
and the Purchaser agree that the values were separately established as a result
of good faith bargaining and that, in reporting the transactions contemplated by
this Agreement to the Internal Revenue Service, as is required by Section 1060
of the Internal Revenue Code they will use such prices.
5.12 HSR FILING. Within fifteen (15) days of the date hereof, the
Sellers, and the Purchaser will, if any such filing is required by Law, each
file with the United States Federal Trade Commission and the Antitrust Division
of the United States Department of Justice, pursuant to the HSR Act,
Notification and Report Forms with respect to the transactions contemplated by
this Agreement and respond as promptly as is practicable to all inquiries
received from either agency for additional information or documentation.
5.13 CERTAIN EMPLOYEE AND SELLER MATTERS
At the Closing, the Target Companies will enter into employment
agreements substantially in the form of the employment agreement attached hereto
as Exhibit F-1 with those employees identified in Exhibit F-2, in each case for
the duration of employment period set forth opposite the name of each such
employee in Exhibit F-2 ("Employment Agreements").
At the Closing, (i) the Purchaser will offer employment to all of the employees
of the Selling Companies on substantially the same terms and conditions as those
upon which such employees are employed by the Selling Companies, (ii) every
employee of each Company (including without limitation all of the employees of
the Selling Companies to whom the Purchaser so offers employment) and every
Individual Seller shall execute a confidentiality, non-disclosure, and
assignment agreement in favor of the Target Companies and the Purchaser in the
form of the agreement attached hereto as Exhibit F-3 (the "Employee
Non-Disclosure, Development and Assignment of Proprietary Rights Agreement"),
and (iii) those employees identified in
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Exhibit F-4 hereto shall execute the post-employment non-competition agreement
in the form of the agreement attached hereto as Exhibit F-4, in each case for
the period set forth opposite the name of each such employee in Exhibit F-4
hereto (the "Employee Non-Competition Agreements")
(b) At the Closing, Mr. Gallupe, in furtherance of his stated objective
of retiring, shall resign his employment with each Company and shall execute a
Non-Competition Agreement in favor of the Target Companies and the Purchaser in
the form of Exhibit D hereto (the "Gallupe Non-Competition Agreement"), and the
Purchaser shall pay to Mr. Gallupe the consideration therefor as set forth in
the Gallupe Non-Competition Agreement.
5.14 CERTAIN PERFORMANCE BONUSES. The Purchaser will implement a
performance bonus plan substantially in compliance with the factors and
parameters set forth in Exhibit K hereto, in which those employees of the Target
Companies identified in Exhibit K hereto may participate and receive benefits
pursuant to the terms thereof.
5.15 BULK SALES LAWS The Selling Companies and the Purchaser have
chosen to waive compliance with the provisions of any "bulk sales" Laws or any
other similar Laws which may be applicable to the purchase by the Purchaser of
the Purchased Assets. The Principal Stockholders and the Selling Companies
agree, covenant and undertake to pay promptly after the Closing, in full, and
without set-off or deduction, any and all Liabilities of the Selling Companies
which are not included among the Assumed Liabilities.
5.16 USE AND CHANGE OF NAMES. The Sellers confirm and agree that the
names "Digital Telcom" and "Acceleration Systems" are included among the
Purchased Assets, and pursuant thereto, the Sellers agree and undertake that the
Selling Companies will, at the Closing, change their names to names that are not
in any way similar to or possible of being confused with that the names "Digital
Telcom" and "Acceleration Systems" and to provide to the Purchaser confirmation
thereof in form and substance reasonably satisfactory to the Purchaser.
5.17 ESTOPPEL CERTIFICATES FOR LEASED REAL PROPERTY. The Sellers shall
obtain and deliver to the Purchaser executed estoppel certificates reasonably
satisfactory in form and substance to the Purchaser with respect to the Leased
Real Property.
5.18 SELLING COMPANY ARTICLES OF TRANSFER The Selling Companies and
Purchaser shall duly execute and shall file with the Maryland State Department
of Assessments and Taxation articles of transfer with respect to the sale of the
Purchased Assets to the Purchaser, pursuant to and in compliance with the
requirements of the Maryland General Corporation Law.
5.19 SECTION 1445 The parties shall comply with the provisions of
Section 1445 of the Internal Revenue Code and Treasury Regulations issued
thereunder. If any of the stockholders of the Target Companies provides to
Purchaser a certification of non-foreign status meeting the requirements of
Treas. Reg. Section 1.1445-2(b)(2) on or prior to the Closing Date in the form
of the certification attached as Exhibit L hereto, and if the Purchaser is
otherwise permitted to rely on such certificate under those Regulations, the
Purchaser shall not withhold under Section 1445 with respect to payments to such
stockholder.
5.20 RELEASE OF LEASED PROPERTY LIENS. Following the Closing, the
Sellers shall use reasonable efforts to obtain the release of all Liens that
secure or constitute notice filings with respect to leases of
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tangible personal property with respect to which such lease has at the Closing
been fully discharged or concluded and with respect to which the Companies have
no Liability at the Closing.
5.21 CERTAIN ASSUMED LIABILITIES, CERTAIN PAYMENTS. The Assumed
Liabilities shall include, to the extent not discharged prior to Closing,
commissions owed by ASI to Mr. Harvey Novak, Paul Lyons and Henry Lyons in an
aggregate amount not exceeding $4,300. The Liabilities of the Target Companies
at the time of Closing shall include interest accrued from the Effective Date to
the Closing on certain Indebtedness of the Target Companies to Mr.Covell in an
amount not exceeding $650 and to Mr. Timmer and Mr. Gallupe in an aggregate
amount not exceeding $950, which shall, notwithstanding the provisions of
Article 2 and the Assignment and Release of Claims, continue to be owed after
the Closing. The Purchaser undertakes to pay, or to cause the Target Companies
to pay, such commissions and interest within one week after the Closing.
ARTICLE VI: CONDITIONS TO CLOSING
6.01 CONDITIONS TO OBLIGATIONS OF SELLERS . The obligations of the
Sellers to consummate the transactions contemplated by this Agreement at the
Closing shall be subject to the fulfillment, at or prior to the Closing, of each
of the following conditions unless waived in writing prior to the Closing or
waived at the Closing by Sellers:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS. The
representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects as of the Closing Date, with the same
force and effect as if made on and as of the Closing Date, other than such
representations and warranties as are made as of another date, which shall be
true and correct as of such date; provided, however, that if any such portion of
any representation or warranty is already qualified by materiality, for purposes
of determining whether this Section 6.01(a) has been satisfied with respect to
such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects; and all the agreements, undertakings, covenants and obligations
contained in this Agreement to be complied with by Purchaser on or before the
Closing Date or at the Closing shall have been complied with in all material
respects, and Sellers shall have received a certificate of Purchaser to such
effect signed by a duly authorized officer thereof.
(b) NO ORDER OR SUIT. No Governmental or Regulatory Authority shall
have enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions or which would have a material
adverse effect on the Business or Condition of any Company or the Acquired
Businesses; in addition, no Action or Proceeding before any Governmental or
Regulatory Authority shall be pending or threatened and no investigation by any
Governmental or Regulatory Authority shall have commenced seeking to restrain or
prohibit (or questioning the validity or legality of) the transactions
contemplated by this Agreement or seeking to restrict in any material respect
the effective operation of the business of any Company after the Closing or
seeking material damages from any Company or seeking material damages from the
Purchaser in connection with this Agreement, which Purchaser, in good faith and
with the advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby; provided, however, that
the parties hereto shall use their reasonable best efforts to have any such
Order vacated.
(c) GOVERNMENTAL FILINGS AND CONSENTS. All governmental orders,
approvals and consents to the transactions contemplated by this Agreement shall
have been obtained and be in effect on the Closing
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Date, in form and substance reasonably acceptable to the Sellers except to the
extent that the failure to obtain any such consent would not have the effect of
making the transactions contemplated by this Agreement illegal or otherwise
restrain or prohibit consummation of such transactions or result in a material
liability to Sellers. The waiting period (if any), including extensions thereof,
applicable to the consummation of the transactions contemplated hereunder
required pursuant to the provisions of the HSR Act shall have either expired or
been previously terminated, and all statutory periods in connection with
notification procedures required under any Environmental Law (to the extent
applicable) for the purposes of the consummation of the transactions
contemplated hereby, shall have lapsed prior to the Closing Date.
(d) LEGAL OPINION. Sellers shall have received from McGuire, Woods,
Battle & Boothe, LLP, counsel to Purchaser, a legal opinion addressed to Sellers
and dated the Closing Date in the form annexed hereto as Exhibit E.
(e) INCUMBENCY CERTIFICATE. Sellers shall have received a certificate
of the Secretary or an Assistant Secretary of Purchaser certifying the names and
signatures of the officers of Purchaser authorized to sign this Agreement, the
Operative Documents to which Purchaser is a party and any other document
required to be delivered hereunder.
(f) PROCEEDINGS. All proceedings, corporate or otherwise, taken by
Purchaser in connection with the transactions contemplated hereby and all
instruments and documents incident thereto shall be reasonably satisfactory in
form and substance to the Sellers and their counsel.
(g) NON-COMPETITION AGREEMENT. The Purchaser shall have paid to Mr.
Gallupe the consideration for the Gallupe Non-Competition Agreement as such
consideration is set forth therein.
(h) PAY-OFF OF TARGET COMPANY LOAN. The Purchaser shall have repaid the
Indebtedness of the Target Companies to Mellon Bank, N.A., in an aggregate
amount not in excess of $825,000 owed by the Target Companies to Mellon Bank,
N.A. under a line of credit and under an equipment lease.
(i) THIRD PARTY CONSENTS. Sellers shall have received the third Person
consents, approvals, authorizations or actions to the transactions contemplated
by this Agreement, if any, in form and substance reasonably satisfactory to the
Sellers from the Persons listed in Section 6.02(i) of the Disclosure Schedule.
(j) ORGANIZATIONAL DOCUMENTS. Sellers shall have received a copy of (i)
the Certificate or Articles of Incorporation of the Purchaser, certified by the
Maryland State Department of Assessments and Taxation, as of a date not earlier
than ten (10) Business Days prior to the Closing Date, and accompanied by a
certificate of the Secretary or an Assistant Secretary of the Purchaser, dated
or of the Closing Date, stating that no amendments have been made to such
document since such date, and (ii) the By-laws of the Purchaser, certified by
the Secretary or an Assistant Secretary of the Purchaser.
(k) GOOD STANDING. The Sellers shall have received a Certificate of
Good Standing for the Purchaser from the Maryland State Department of
Assessments and Taxation dated as of a date not earlier than ten (10) Business
Days prior to the Closing Date.
(l) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, no
events or circumstances shall have occurred which individually or in the
aggregate have had or may reasonably be expected to have a material adverse
effect on the Business or Condition of the Companies.
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(m) EMPLOYMENT AGREEMENTS. Apcom and Celerity shall have executed
Employment Agreements with the Principal Stockholders other than Gallupe who are
referred to in Exhibit F-2.
6.02 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement at the
Closing shall be subject to the fulfillment, at or prior to the Closing, of each
of the following conditions unless waived in writing prior to the Closing or
waived at the Closing by the Purchaser:
(a) REPRESENTATIONS AND WARRANTIES, COVENANTS. Without giving effect to
any matter disclosed to Purchaser between the date hereof and the Closing Date,
the representations and warranties of Sellers contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same force and effect as if made on and as of the Closing Date, other than such
representations and warranties as are made as of another date, which shall be
true and correct as of such date; provided, however, that if any portion of any
representation or warranty is already qualified by materiality, for purposes of
determining whether this Section 6.02(a) has been satisfied with respect to such
portion of such representation or warranty, such portion of such representation
or warranty as so qualified must be true and correct in all respects; and all
the agreements, undertakings, covenants and obligations contained in this
Agreement to be complied with by Sellers and the Companies on or before the
Closing Date or at the Closing shall have been complied with in all material
respects, and Purchaser shall have received certificates of Sellers and the
Companies to such effect signed by a duly authorized officer of each Company and
by each Seller.
(b) NO ORDER OR SUIT. No Governmental or Regulatory Authority shall
have enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions or which would have a material
adverse effect on the Business or Condition of any Company or the Acquired
Businesses; in addition, no Action or Proceeding before any Governmental or
Regulatory Authority shall be pending or threatened and no investigation by any
Governmental or Regulatory Authority shall have commenced seeking to restrain or
prohibit (or questioning the validity or legality of) the transactions
contemplated by this Agreement or seeking to restrict in any material respect
the effective operation of the business of any Company after the Closing or
seeking material damages from any Company or seeking material damages from the
Purchaser in connection with this Agreement, which Purchaser, in good faith and
with the advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby; provided, however, that
the parties hereto shall use their reasonable best efforts to have any such
Order vacated.
(c) GOVERNMENTAL FILINGS AND CONSENTS. All governmental Orders,
approvals and consents to the transactions contemplated by this Agreement shall
have been obtained and be in effect on the Closing Date, in form and substance
reasonably acceptable to the Purchaser and the waiting period (if any),
including extensions thereof, applicable to the consummation of the transactions
contemplated hereunder required pursuant to the provisions of the HSR Act shall
have either expired or been previously terminated, all statutory periods in
connection with any Environmental Laws (to the extent applicable) for the
purposes of the consummation of the transactions contemplated hereby shall have
lapsed prior to the Closing Date, and such approvals as shall have been obtained
shall not impose upon Purchaser or any Target Company or the Acquired Businesses
any conditions or other requirements which would cause any material additional
costs or materially interfere with the continued operations of the business of
Purchaser or any Company or materially and adversely affect the Business or
Condition of any Company or the Acquired Businesses.
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(d) THIRD PARTY CONSENTS. Purchaser shall have received the third
Person consents, approvals, authorizations or actions to the transactions
contemplated by this Agreement, if any, in form and substance reasonably
satisfactory to the Purchaser from the persons listed in Section 6.02(d) of the
Disclosure Schedule.
(e) PURCHASER FINANCING. The Purchaser shall have obtained financing in
such amount and on such terms and conditions as the Purchaser, in its sole
discretion, shall consider necessary or desirable in connection with the
consummation of the transactions contemplated hereby.
(f) LEGAL OPINION. Purchaser shall have received from Tucker, Flyer &
Lewis, counsel to the Companies, a legal opinion addressed to Purchaser and
dated the Closing Date, in the form of Exhibit G.
(g) RESIGNATION OF DIRECTORS AND OFFICERS OF TARGET COMPANIES.
Purchaser shall have received the resignations, effective as of the Closing
Date, of all the directors and all the officers of each of the Target Companies,
except Geoffrey D. Timmer and Jack Anderson, and shall have received the
resignation, effective as of the Closing Date, of Mr. Gary W. Gallupe as an
employee of the Target Companies.
(h) ORGANIZATIONAL DOCUMENTS. Purchaser shall have received a copy of
(i) the Certificate or Articles of Incorporation of each Company, certified by
the Secretary of State or another appropriate official of the States of Maryland
or California, as the case may be, as of a date not earlier than ten (10)
Business Days prior to the Closing Date and accompanied by a certificate of the
Secretary or an Assistant Secretary of each such Company, dated as of the
Closing Date, stating that no amendments have been made to such document since
such date, and (ii) the By-laws of each Company, certified by the Secretary or
an Assistant Secretary of each Company, respectively.
(i) GOOD STANDING. The Purchaser shall have received a Certificate of
Good Standing for each Company from the appropriate official of the States of
Maryland and California dated as of a date not earlier than ten (10) Business
Days prior to the Closing Date.
(j) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, no
events or circumstances shall have occurred which, individually or in the
aggregate, have or that may be reasonably expected to have a material adverse
effect on the Business or Condition of the Companies.
(k) INCUMBENCY CERTIFICATE. Purchaser shall have received a certificate
of an officer of each Company certifying the names and signatures of the
officers of such Company authorized to sign any document required to be
delivered by each such Company hereunder.
(l) MINUTE AND STOCK BOOKS. Purchaser shall have received evidence
reasonably satisfactory to it that the complete and correct minute books and
stock certificate and transfer books (with all canceled and unused stock
certificates attached) and the corporate seal of each Target Company are in the
possession of the individual designated by Purchaser to the Sellers'
Representative in writing at least two (2) Business Days prior to the Closing
Date.
(m) ASSIGNMENT AND RELEASE OF CLAIMS. Each Seller shall have executed
and delivered to Purchaser and each Target Company the Assignment and Release of
Claims in the form of Exhibit A.
(n) CERTAIN EMPLOYMENT MATTERS. The Employment Agreements shall have
been executed by each of the employees of the Target Companies referred to in
Exhibit F-2, every employee of the Target
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Companies and every Individual Seller shall have executed an Employee
Development and Assignment of Proprietary Rights and Non-Disclosure Agreement in
the form of Exhibit F-3 hereto, and those employees of the Target Companies
referred to in Exhibit F-4 hereto shall also have executed the Employee
Non-Competition Agreements, in each case for the period set forth opposite the
name of each such employee in Exhibit F-4 hereto.
(o) REPAYMENT OF INDEBTEDNESS. All Sellers who are indebted to any
Company shall have repaid such indebtedness in full with interest thereon to the
date of payment.
(p) DISCHARGE OF LIENS. All Liens on the Assets and Properties of each
Company, other than Permitted Liens, shall have been fully satisfied, terminated
and discharged as evidenced by releases or satisfactions satisfactory to
Purchaser, or the Lien holders shall have furnished undertakings satisfactory to
the Purchaser to satisfy, terminate and discharge such Liens. Without limiting
the foregoing, Mellon Bank N.A., First Montgomery Bank (or its successor) and
Citibank shall have furnished undertakings satisfactory to the Purchaser to
satisfy, terminate and discharge such Liens.
(q) NON-COMPETITION AGREEMENT. Mr. Gallupe shall have executed and
delivered to each Target Company and Purchaser the Non-Competition Agreement in
the form of Exhibit D hereto.
(r) PROCEEDINGS. All proceedings, corporate or otherwise, taken by
Sellers and the Companies in connection with the transactions contemplated
hereby and all instruments and documents incident thereto shall be reasonably
satisfactory in form and substance to Purchaser and its counsel.
(s) NON-FOREIGN CERTIFICATE. Each Seller shall have executed and
delivered to Purchaser a certificate in the form attached hereto as Exhibit L
hereto with respect to Section 1445 of the Internal Revenue Code stating that
each such Seller is not a "foreign person" as defined in said Section 1445 and
applicable regulations thereunder.
(t) SECTION 1445. The parties shall have complied with the provisions
of Section 1445 of the Internal Revenue Code and Treasury Regulations issued
thereunder and Purchaser shall have received such certificates as it deems
necessary with respect to and in support of Purchaser's not withholding,
pursuant to Section 1445, amounts otherwise due stockholders.
(u) USE AND CHANGE OF NAMES. The Principal Stockholders and the Selling
Companies shall provide to the Purchaser confirmation in form and substance
reasonably satisfactory to the Purchaser that the Selling Companies have changed
their names to names that are not in any way similar to or possible of being
confused with that the names "Digital Telcom" and "Acceleration Systems".
(v) SELLING COMPANY ARTICLES OF TRANSFER. The Selling Companies shall
have duly executed and shall have filed with the Maryland State Department of
Assessments and Taxation, and such department shall have accepted for filing,
articles of transfer with respect to the sale of the Purchased Assets to the
Purchaser, pursuant to and in compliance with the requirements of the Maryland
General Corporation Law.
(w) ESTOPPEL CERTIFICATES. The Sellers shall have obtained and
delivered to the Purchaser executed estoppel certificates reasonably
satisfactory in form and substance to the Purchaser with respect to the Leased
Real Property.
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ARTICLE VII: SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
7.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any right of Purchaser and its Affiliates (whether or not
exercised) to investigate the affairs of each Seller and each Company or any
right of any party (whether or not exercised) to investigate the accuracy of the
representations and warranties of the other party contained in this Agreement or
the waiver of any provision hereof, each Seller, on the one hand, and Purchaser,
on the other, shall have the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.
The representations, warranties, covenants and agreements of Sellers and
Purchaser contained in this Agreement shall survive the Closing (a) indefinitely
with respect to the representations and warranties contained in Sections 3.01,
3.02 and 4.01; (b) until sixty (60) calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension, whether
automatic or permissive) with respect to representations and warranties
contained in Sections 3.14, 3.17, 3.23, and 3.27 and with respect to all
covenants and agreements which by their terms require performance after the
Closing Date; (c) the representations and warranties in Section 3.11 respecting
the Liability of the Companies for Taxes shall continue to survive until the
later of (x) the time at which all taxable periods to and including the Closing
Date shall be closed to any further assessment of Taxes or to any assessment of
any penalties or interest charges in respect of any such Taxes, by receipt of a
final assessment, in form and substance reasonably satisfactory to Purchaser,
from the appropriate Taxing Authorities, or (y) sixty (60) days following the
expiration of the applicable statute of limitations or any extension thereof, by
waiver or otherwise; (d) the representations and warranties in Section 3.18(d)
shall expire at the Closing; and (e) until November 15, 2000 with respect to all
other representations and warranties and any covenant or agreement to be
performed in whole or in part on or prior to the Closing, except that any
representation, warranty, covenant or agreement that would otherwise terminate
in accordance with clauses (b), (c) (d) or (e) above will continue to survive if
a Claim Notice or Indemnity Notice (as applicable) shall have been timely given
under Article VIII on or prior to such termination date, until the related claim
for indemnification has been satisfied or otherwise resolved as provided in
Article XI, but only with respect to matters described in the Claim Notice or
Indemnity Notice.
ARTICLE VIII: INDEMNIFICATION
8.01 INDEMNIFICATION.
(a) From and after the Closing Date and subject to the limitation on
indemnity provided in Section 8.01(c) and to the proviso at the end of this
Section 8.01(a), each of the Sellers shall indemnify the Target Companies, the
Purchaser, Microdyne and their respective stockholders and the general partners,
limited partners, officers, directors, employees, agents and Affiliates of each
of them (in each case, other than the Sellers) (collectively, the "Purchaser
Indemnities"), in respect of, and hold each of them harmless from and against,
and shall pay the full amount of, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation or breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of any Company or Seller contained in this Agreement or any Assignment and
Release of Claims or any Assignment of Options (including, without limitation,
any certificate delivered in connection herewith or therewith) during any
applicable survival period pursuant to Section 7.01 above; provided, however,
that (i) with respect to any Losses paid from the Escrow Agreement or which may
be deducted from or offset against the Earn-Out Amount, the indemnification
obligations of each Seller shall be limited to the extent of the pro rata
portion thereof that she, he or it would have received (as set forth in Schedule
A to the Escrow Agreement) were such amount to have been paid to the Sellers
absent such Losses; (ii) subject to the
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limitation on indemnity provided in Section 8.01(c) below and to (iii) below,
with respect to any Losses that exceed the Escrow Amount and the Earn-Out Amount
(if earned), the indemnification obligations of the Principal Stockholders and
the Selling Companies shall be joint and several for the full amount thereof and
each of the Other Stockholders shall not be liable therefor; and (iii) the
maximum amount of the indemnification obligations of each Principal Stockholder
shall be limited to the portion of the Purchase Price received by, or receivable
from the Escrow Amount by, each such Principal Stockholder, for which purpose
the entire Escrow Amount shall, notwithstanding the provisions of Section
8.02(f), be deemed to be part of the Purchase Price, and, as set forth in the
proviso to Section 2.01(a)(i), any amount of the Purchase Price withheld from a
Principal Stockholder under applicable Tax or other Laws shall be deemed to have
been paid to such Principal Stockholder.
(b) From and after the Closing Date and subject to the limitation on
indemnity provided in Section 8.01(d), Purchaser shall indemnify the Individual
Sellers and their respective heirs, executors, personal representatives,
successors and assigns, and the Selling Companies and their respective
stockholders, officers, directors, employees, agents and Affiliates (the "Seller
Indemnities"') in respect of, and hold each of them harmless from and against,
and shall pay the full amount of, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation or breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of Purchaser contained in this Agreement or any Assignment and Release of Claims
or any Assignment of Options (including, without limitation, any certificate
delivered in connection herewith or therewith) and the Assumed Liabilities
during any applicable survival period pursuant to Section 7.01 above.
(c) No amounts of indemnity shall be payable as a result of a claim
under Section 8.01(a) in respect of a misrepresentation or breach of warranty
(other than a claim based upon fraud or willful or criminal misconduct or any
claim pursuant to Sections 3.01 (first sentence) or 3.02 in which case the
following clauses (i) and (ii) shall not apply) (i) unless and until the
Purchaser Indemnities have suffered, incurred, sustained or become subject to
Losses with respect thereto in excess of $170,000 in the aggregate, in which
case the Purchaser Indemnities shall be entitled to seek indemnity for the
entire amount of such Losses, or (ii) to the extent that the Purchaser
Indemnities have suffered, incurred, sustained or become subject to Losses by
reason of all such claims in excess of the Purchase Price (for which purpose the
entire Escrow Amount shall, notwithstanding the provisions of Section 8.02(f),
be deemed to be part of the Purchase Price).
(d) No amounts of indemnity shall be payable as a result of a claim
under Section 8.01(b) in respect of a misrepresentation or breach of warranty
(other than a claim based upon fraud or willful or criminal misconduct or
pursuant to Section 4.01, in which case the following clauses (i) and (ii) shall
not apply) (i) unless and until the Seller Indemnities have suffered, incurred,
sustained or become subject to Losses with respect thereto in excess of $170,000
in the aggregate, in which case the Seller Indemnities shall be entitled to seek
indemnity for the entire amount of such Losses, or (ii) to the extent that the
Seller Indemnities have suffered, incurred, sustained or become subject to
Losses by reason of all such claims in excess of $2,000,000.
8.02 METHOD OF ASSERTING CLAIMS. All claims for indemnification by any
Indemnified Party under Section 8.01 will be asserted and resolved as follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 8.01 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
must deliver
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a Claim Notice to the Indemnifying Party within thirty (30) Business Days after
receipt by such Indemnified Party of written notice of the Third Party Claim;
provided, however, that failure to give such Claim Notice shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually prejudiced as a result of such failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party, provided that all Indemnifying Parties with respect to such
Third Party Claim jointly acknowledge to the Indemnified Party its right to
indemnity pursuant hereto in respect of the entirety of such claim (as such
claim may be modified through written agreement of the parties or arbitration
hereunder) and provide assurances reasonably satisfactory to the Indemnified
Party that the Indemnifying Parties will be financially able to satisfy such
claim in full if it is decided adversely. Should the Indemnifying Party so elect
to assume the defense of a Third Party Claim, the Indemnifying Party shall not
be liable to the Indemnified Party for legal expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof (except as
hereinafter provided), but shall continue to pay for any expenses of
investigation or any Loss suffered. If the Indemnifying Party assumes such
defense, the Indemnified Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense (except as hereinafter
provided), separate from the counsel employed by the Indemnifying Party.
Notwithstanding the foregoing, if (i) the Indemnifying Party shall not assume
the defense of a Third Party Claim with counsel satisfactory to the Indemnified
Party within five (5) Business Days of any Claim Notice, or (ii) legal counsel
for the Indemnified Party notifies the Indemnifying Party that there are or may
be legal defenses available to the Indemnified Party or to other Indemnified
Parties which are different from or additional to those available to the
Indemnifying Party, which, if the Indemnified Party and the Indemnifying Party
were to be represented by the same counsel, would constitute a conflict of
interest for such counsel or prejudice prosecution of the defenses available to
such Indemnified Party, or (iii) the Indemnifying Party shall assume the defense
of a Third Party Claim and fail to diligently and vigorously prosecute such
defense in a timely manner, then in each such case the Indemnified Party, by
notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party; and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party controls the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of all Indemnified Parties, and (ii) provides for no
relief other than the payment of monetary damages and such monetary damages are
paid in full by the Indemnifying Party, and in all other cases may not so settle
without the prior written consent of the Indemnified Party.
(c) In the event any Indemnified Party should have a claim under
Section 8.01 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been actually
prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described in such Indemnity Notice or fails
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to notify the Indemnified Party within the Dispute Period as to whether the
Indemnifying Party disputes the claim described in such Indemnity Notice, the
Loss in the amount specified in the Indemnity Notice will be conclusively deemed
a Liability of the Indemnifying Party under Section 8.01 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its Liability with respect to such
claim, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
arbitration as provided in Article 11.
(d) The indemnification provisions of this Article VIII shall
constitute the sole and exclusive remedy of the parties hereto, for any
inaccuracy, untruth, incompleteness or other breach of any representation or
warranty contained in or made pursuant to this Agreement or for any breach of or
failure to perform any covenant or agreement made in this Agreement or otherwise
arising out of the contemplated transactions, and the parties each waive any
other remedy, which they or any other Person entitled to indemnification
hereunder may have at law or in equity with respect thereto. The amount of
Losses suffered by any Person entitled to indemnification shall be reduced by an
amount equal to any insurance recovery received by such Person with respect to
such Loss and shall be reduced or increased by any Tax benefit or detriment
attributable to the realization of such Loss and any Tax benefit or detriment
attributable to the proper accounting of the Tax consequences of the receipt of
any indemnification payment payable hereunder.
(e) Notwithstanding anything contained in this Agreement to the
contrary, at and after the Closing, no Seller shall be entitled to any
indemnification, right of contribution or other right of recovery from either
Target Company in connection with any claim made by or which could be made by an
Indemnified Party against a Target Company or which a Target Company could be
liable for, all of which are irrevocably waived and released by each Seller.
(f) Any payment under this Article VIII shall be treated for tax
purposes as an adjustment of the Purchase Price to the extent such
characterization is proper and permissible under relevant Tax Laws, or,
alternatively, by Purchaser as an offset to a Tax benefit item, if such
characterization is proper under such Tax Laws.
ARTICLE IX: TERMINATION
9.01 GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing under the following provisions:
(a) by mutual written agreement of the Purchaser and the Sellers'
Representative;
(b) by Purchaser after written notice to Sellers' Representative if
Purchaser is not then in material breach of any material provision of this
Agreement and there has been any one or more material misrepresentations in or
breaches of the representations or warranties made by Sellers herein that, if
not cured on or prior to the Closing Date, could be reasonably expected to give
Purchaser grounds not to close under Section 6.02 when taken into account with
all other uncured misrepresentations in or breaches of such representations or
warranties as to which Purchaser shall have given notice to Sellers'
Representative as provided in this paragraph (b); a termination pursuant to this
paragraph (b) shall become effective (i) fifteen (15) days after such notice
with respect to such a misrepresentation or breach that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
with respect to such a misrepresentation or breach that is capable of being
cured, but is not cured, on or prior to the Closing Date;
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(c) by Purchaser if Purchaser is not then in material breach of any
provision of this Agreement after written notice to Sellers' Representative of
the failure by Sellers to perform and satisfy in any material respect any of
their material obligations required to be performed and satisfied by Sellers on
or prior to the Closing Date, if the aggregate of all such failures shall be
material; a termination pursuant to this paragraph (c) shall become effective
(i) fifteen (15) days after such notice with respect to such a failure that is
not capable of being cured on or prior to the Closing Date, or (ii) immediately
prior to the Closing with respect to such a failure that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(d) by Sellers after written notice by Sellers' Representative to
Purchaser if Sellers are not then in material breach of any material provision
of this Agreement and there has been one or more material misrepresentations in
or material breaches of the representations or warranties made by Purchaser
herein which, if not cured on or prior to the Closing Date, could be reasonably
expected to give Sellers grounds not to close under Section 6.01 when taken into
account with all other uncured misrepresentations in or breaches of such
representations or warranties as to which Sellers' Representative shall have
given notice to Purchaser as provided in this paragraph (d); a termination
pursuant to this paragraph (d) shall become effective (i) fifteen (15) days
after such notice with respect to such a misrepresentation or breach that is not
capable of being cured on or prior to the Closing Date, or (ii) immediately
prior to the Closing Date with respect to such a misrepresentation or breach
that is capable of being cured, but is not cured, on or prior to the Closing
Date;
(e) by Sellers if Sellers are not then in material breach of any
material provision of this Agreement after written notice by Sellers'
Representative to Purchaser of Purchaser's failure to perform and satisfy in any
material respect any of its material obligations under this Agreement required
to be performed and satisfied by Purchaser on or prior to the Closing Date, if
the aggregate of all such failures shall be material; a termination pursuant to
this paragraph (e) shall become effective (i) fifteen (15) days after such
notice with respect to such a failure that is not capable of being cured on or
prior to the Closing Date, or (ii) immediately prior to the Closing Date with
respect to such a failure that is capable of being cured, but is not cured, on
or prior to the Closing Date;
(f) by Purchaser or by Sellers' Representative, if the Closing shall
not have been consummated by September 30, 1998; provided, however, that neither
Purchaser nor Sellers may terminate this Agreement pursuant to this paragraph
(f) if the Closing shall not have been consummated within such time period by
reason of the failure of such party or any of its Affiliates to perform in all
material respects any of its covenants or agreements contained in this
Agreement; and
(g) by Purchaser or Sellers' Representative if any Law or Order shall
hereafter be enacted or become applicable that makes the transactions
contemplated hereby or the consummation of the Closing illegal or otherwise
prohibited, or if any Order enjoining any party hereto from consummating the
transactions contemplated hereby is entered and such Order shall become final
and nonappealable.
The party desiring to terminate this Agreement pursuant to the
foregoing provisions shall give written notice of such termination to the other
party.
9.02 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 9.01, such termination shall be without liability of any
party to any other party to this Agreement except as hereinafter expressly
provided in this Section 9.02. If such termination shall result from the breach
by any party of its representations, warranties or covenants contained in this
Agreement, such party shall be fully liable for any and all Losses incurred or
suffered by the other parties as a result of such failure or breach and such
termination shall not be deemed to be an election of remedies. The provisions of
Sections 5.04, this Section
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9.02 and Articles X, XI, and XII shall survive any termination of this Agreement
pursuant to this Article IX, and each party hereto shall be fully responsible
for any breach of Section 5.04, whether or not such breach occurs prior to the
termination of this Agreement.
ARTICLE X: SELLERS' REPRESENTATIVE
10.01 APPOINTMENT OF SELLERS' REPRESENTATIVE. Mr. Gary Gallupe is
hereby appointed as agent and attorney-in-fact (the "Sellers' Representative")
for each Seller, to give and receive notices and communications; to authorize
delivery to Purchaser of payments from the Escrow Fund in satisfaction of claims
by Purchaser; to object to such deliveries; to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with Orders
with respect to, any claims; to amend this Agreement (subject to Section 12.02)
or the Escrow Agreement; to take all other actions set forth in this Agreement
to be taken by the Sellers' Representative; and to take all actions necessary or
appropriate in the judgment of the Sellers' Representative for the
accomplishment of the foregoing. Such agency may be changed by the Sellers from
time to time upon not less than thirty (30) days prior written notice to
Purchaser and the Escrow Agent; provided that the Sellers' Representative may
not be removed unless Sellers holding Shareholder Percentages totaling more than
50% agree to such removal and select a substituted agent. No bond shall be
required of the Sellers' Representative, and the Sellers' Representative shall
not receive compensation for services as such. Notices or communications to or
from the Sellers' Representative shall constitute notice to or from each of the
Sellers or their permitted transferees.
10.02 LIMITATION OF LIABILITY. The Sellers' Representative shall not be
liable for any act done or omitted hereunder as Sellers' Representative while
acting in good faith and in the exercise of reasonable judgment. The Sellers
shall severally indemnify the Sellers' Representative and hold him or her
harmless against any loss, liability or expense incurred without negligence or
bad faith on the part of the Sellers' Representative and arising out of or in
connection with the acceptance or administration of the Sellers'
Representative's duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Sellers' Representative.
10.03 ACTIONS BINDING. A decision, act, consent or instruction of the
Sellers' Representative shall constitute a decision of all the Sellers and shall
be final, binding and conclusive upon each of such Sellers, and the Escrow Agent
and Purchaser may rely upon any such decision, act, consent or instruction of
the Sellers' Representative as being the decision, act, consent or instruction
of each and every such Seller. The Escrow Agent and Purchaser are hereby
relieved from any Liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction of the Sellers'
Representative.
ARTICLE XI: ARBITRATION OF DISPUTES
11.01 ARBITRATION. The parties agree that, except as provided in
Section 5.06(b) hereof arbitration shall be the exclusive and final means for
resolving any and every dispute, controversy, claim, or difference ("Disputes")
related to or arising out of or in connection with this Agreement, or any
commercial relationship or dealings of the parties that are related to or arise
out of or in connection with the subject matter of this Agreement (including
without limitation any questions concerning the scope and application of this
arbitration clause or the arbitrability of any Dispute under this clause), which
arbitration shall be conducted according to the rules then in effect of the
American Arbitration Association (the "AAA"), or such other rules as the AAA may
designate.
11.02 PROCEDURE FOR ARBITRATION
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(a) The right of any party to require the arbitration of any Dispute
hereunder and the arbitration of any Dispute hereunder shall be governed by the
Federal laws of the United States (including expressly, but without limitation,
the Federal Arbitration Act).
(b) The arbitration shall be held in Fairfax, Virginia and shall be
administered by the rules (the "Rules") then in effect of the AAA. Demand for
arbitration (an "Arbitration Notice") shall be delivered by the party demanding
arbitration under this Agreement (the "Initiating Party") to the party (or
parties) with whom arbitration is sought in accordance with the procedure set
forth in the Rules. The parties shall agree upon an arbitrator within thirty
(30) calendar days after the demand for arbitration is served. If they fail to
do so within such time, the arbitrator, or a panel of three arbitrators if so
requested by any party to the Dispute, shall be appointed by the AAA. If the
arbitrator dies, becomes disqualified or incapacitated, or fails or refuses to
act before the matter or matters subjected to such arbitration have been
determined, then, in place of such arbitrator, a new arbitrator shall promptly
be appointed in the same manner as such arbitrator. The arbitrator or
arbitration panel shall decide any matter before him or it in accordance with
this Agreement, including without limitation the law chosen by the parties in
Section 12.08 to govern this Agreement, which law shall also be the applicable
law to govern the arbitration proceedings. The arbitrator shall have the power
and the discretion to order discovery and the taking of depositions.
(c) The arbitrator or arbitration panel shall proceed promptly and
diligently and render his or its decision as soon as practicable. The decision
of the arbitrator or arbitration panel shall be in writing and presented in
separate findings of fact and conclusions of law (the "Arbitrators' Report")
which shall be a final and binding award on the parties from which no appeal may
be taken, and an order confirming the award or judgment upon the award may be
entered in any court having jurisdiction thereto.
(d) All fees, costs and expenses (including reasonable attorneys' fees
and expenses) incurred by a party that prevails on any issue in any arbitration
commenced hereunder or in any judicial proceeding seeking to enforce this
agreement to arbitrate disputes or seeking to enforce any order or award of any
arbitration hereunder shall be assessed against the party or parties that do not
prevail on such issue or issues.
11.03 LIMITATION ON POWERS OR ARBITRATORS. Notwithstanding the
foregoing, it is hereby agreed that the arbitrator or arbitration panel shall
only have the power to order or grant relief in a manner that is directly
related to the subject matter of the dispute before the arbitrator or
arbitration panel, that the relief or order that may be granted by the
arbitrator or arbitration panel shall be limited to that which a court of
competent jurisdiction would have had the power to order or grant were the
dispute to have been heard before such court, and that no arbitrator or
arbitration panel shall have any power to add to, alter or modify the terms and
conditions of this Agreement or any other agreement executed and delivered in
connection herewith or to decide any issue which does not arise from the
interpretation or application of the provisions of this Agreement.
ARTICLE XII: MISCELLANEOUS
12.01 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission or mailed by
prepaid first class certified mail, return receipt requested, or delivered by a
nationally recognized overnight courier service prepaid, to the parties at the
following addresses or facsimile numbers:
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(a) If to Purchaser, to:
MCTI Acquisition Corporation
c/o Microdyne Corporation
3601 Eisenhower Avenue
Alexandria Virginia 22304
Attention: Massoud Safavi, Chief Financial Officer
Fax 703-317-4051
with a copy to:
Clive R.G. O'Grady
McGuire, Woods, Battle & Boothe LLP
1627 Eye Street N.W.
Washington D.C. 20006
Fax: 202-828-2980
(b) If to Microdyne, to:
Microdyne Corporation
3601 Eisenhower Avenue
Alexandria Virginia 22304
Attention: Massoud Safavi, Chief Financial Officer
Fax 703-317-4051
with a copy to:
Clive R.G. O'Grady
McGuire, Woods, Battle & Boothe LLP
1627 Eye Street N.W.
Washington D.C. 20006
Fax: 202-828-2980
(c) If to the Sellers' Representative to:
Gary Gallupe
P.O. Box 119
or
25916 Reva Drive
Damascus, MD 20872
(301) 253-4664
Fax: (301) 253-1864
With a copy to:
Paul T. Kaplun
Tucker, Flyer & Lewis
1615 L Street, N.W. Suite 400
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Washington, D.C. 20036-5610
Fax 202-429-3231
(d) If to any other Seller to the address as it appears on Exhibit
H hereto.
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided for in this Section, be deemed given upon receipt, (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given on the earlier of the fourth Business Day
following mailing or upon receipt and (iv) if delivered by overnight courier to
the address as provided for in this Section, be deemed given on the earlier of
the first Business Day following the date sent by such overnight courier or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other
parties hereto.
12.02 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the Exhibits hereto,
the Disclosure Schedule and the Operative Agreements supersede all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof and thereof. This
Agreement may be amended, supplemented or modified only by a written instrument
duly executed by or on behalf of the Purchaser and the Sellers' Representative,
except that the consent of all Sellers shall be required to change the Purchase
Price. The terms and provisions of this Agreement are intended solely for the
benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights, and this Agreement does not confer any such rights, upon any
other Person other than any Person entitled to indemnity under Article VIII.
12.03 EXPENSES. Except as otherwise expressly provided in this
Agreement (including without limitation as provided in Article VIII), each party
will pay its own costs and expenses incurred in connection with this Agreement,
the Operative Agreements, and the transactions contemplated hereby and thereby.
12.04 CUMULATIVE REMEDIES. The rights, remedies, powers and privileges
herein provided are cumulative.
12.05 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term.
12.06 NO ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by Sellers or by Purchaser without the prior written consent of
Purchaser or the Seller's Representative, respectively, and any attempt to do so
will be void. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective heirs, executors, personal representatives, successors and assigns.
12.07 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable,
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(b) this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance here from and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
12.08 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the Commonwealth of Virginia without
giving effect to any choice of law or conflict of law provision or rule (whether
of the Commonwealth of Virginia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Virginia.
12.09 CONSTRUCTION.
(a) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
(b) The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
12.10 TIME PERIODS. When any provision of this Agreement provides for
the expiration of a time period or requires the giving of a notice on a day
which is other than a Business Day, such time period or day shall be extended to
the next succeeding Business Day.
12.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[Signature Page Follows]
59
<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be duly executed as of the day and year first above written.
PURCHASER: MCTI ACQUISITION CORPORATION
By: /s/ MICHAEL E. JALBERT
--------------------------
Name: Michael E. Jalbert
Title: President and Ceo
MICRODYNE: MICRODYNE CORPORATION
By: /s/ MICHAEL E. JALBERT
--------------------------
Name: Michael E. Jalbert
Title: President and Ceo
PRINCIPAL STOCKHOLDERS:
/s/ GARY W. GALLUPE
- ------------------- ----------------
Gary W. Gallupe Lillian M. Gallupe
/s/ GEOFFREY D. TIMMER /s/ JACK L ANDERSON
- ---------------------- -----------------
Geoffrey D. Timmer Jack Anderson
- --------------------
Dean Kobashigawa
SELLING COMPANIES:
DIGITAL TELCOM, INC.
By: /s/ GARY W. GALLUPE
-----------------------------------
Gary W. Gallupe, President
ACCELERATION SYSTEMS, INC.
By: /s/ GEOFFREY D. TIMMER
-----------------------------------
Geoffrey D. Timmer, Vice President
THE OTHER STOCKHOLDERS:
60
<PAGE> 1
CREDIT AGREEMENT
Dated as of August 11, 1998
among
MICRODYNE CORPORATION
as Borrower
and
NATIONSBANK, N.A.
as Banks
and
NATIONSBANK, N.A.
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS....................................1
ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES...................................23
ARTICLE 3 YIELD PROTECTION, ETC...............................................30
ARTICLE 4 PAYMENTS, COMPUTATIONS AND CERTAIN NOTICES..........................36
ARTICLE 5 SECURITY............................................................40
ARTICLE 6 CONDITIONS OF LENDING...............................................41
ARTICLE 7 REPRESENTATIONS AND WARRANTIES......................................45
ARTICLE 8 COVENANTS OF THE BORROWER...........................................50
ARTICLE 9 SUBSIDIARIES BECOMING LOAN PARTIES..................................60
ARTICLE 10 EVENTS OF DEFAULT...................................................62
ARTICLE 11 THE AGENT...........................................................65
ARTICLE 12 MISCELLANEOUS.......................................................67
</TABLE>
i
<PAGE> 3
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Schedule 7.1(f) Pending Litigation
Schedule 7.1(n) Material Contracts
Schedule 7.1(o) Intellectual Property
Schedule 8.2(a) Outstanding Liens
Schedule 8.2(b) Outstanding Debt
Schedule 8.2(g) Investments
Exhibit A Acceptable Foreign Customers
Exhibit B Form of Acquisition Note
Exhibit C Form of Assignment and Acceptance Agreement
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Revolving Note
Exhibit F Form of Security Agreement
Exhibit G Form of Intellectual Property Assignment
Exhibit H Form of Subsidiary Guaranty
Exhibit I Solvency Certificate
Exhibit J Form of Compliance Certificate
</TABLE>
ii
<PAGE> 4
CREDIT AGREEMENT
Dated as of August 11, 1998
This CREDIT AGREEMENT among MICRODYNE CORPORATION, a Maryland
corporation (the "Borrower"), each of the lenders that is a signatory hereto
under the caption of "BANKS" on the signature pages hereto or that, pursuant
to Section 12.19 hereof, shall become a "Bank" hereunder (individually, a
"Bank" and collectively, the "Banks") and NATIONSBANK, N.A., as agent (the
"Agent"), for the Banks hereunder, recites and provides as follows:
RECITALS
The Banks desire to make available to the Borrower a $10,000,000
revolving credit facility and a $16,500,000 acquisition loan facility on the
terms and conditions set forth herein. Accordingly, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged
by the parties hereto, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Acceptable Foreign Customers" means the Foreign Customers listed
on Exhibit A to this Agreement and any future Foreign Customer approved in
writing by the Agent in its sole discretion.
"Accounts Receivable" with respect to any Loan Party shall have
the meaning given to such term in the Security Agreement executed by such
Loan Party.
"Acquired Assets" means the assets, stock or other ownership
interests Acquired or to be Acquired by an Acquisition Company pursuant to
the terms of an Acquisition Agreement.
"Acquisition" means any transaction, or any series of related
transactions, consummated after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (a) acquires any going business or all or
substantially all of the assets of any Person, whether through the purchase
of assets, merger or otherwise, (b) directly or indirectly acquires control
of at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors,
or (c) directly or indirectly acquires control of a majority ownership
interest in any Person that is not a corporation. The terms "Acquire" ,
"Acquired" and "Acquiring" used as verbs shall have correlative meanings.
-1-
<PAGE> 5
"Acquisition Agreement" means the agreement between an
Acquisition Company and a Target or the seller or sellers of a Target,
pursuant to which such Acquisition Company agrees to Acquire substantially
all of the assets, stock or other ownership interests of a Target, or merge
with a Target, together with all amendments to such agreement.
"Acquisition Analysis" means, with respect to any proposed
Acquisition, an analysis, prepared by the chief financial officer of the
Borrower, of the structure and financial impact of the Acquisition in
question, including the Target's audited financial statements (or other
financial statements acceptable to the Agent) for the last three fiscal years
(two fiscal years, in the case of the Oasis Acquisition) and a summary of the
material tax and accounting consequences related to the Acquisition, which
analysis shall be in form and substance satisfactory to the Agent.
"Acquisition Company" means the Borrower or any Subsidiary of the
Borrower Acquiring a Target.
"Adjusted LIBOR" means, with respect to each Interest Period for
any LIBOR Loan, the rate obtained by dividing (a) LIBOR for such Interest
Period by (b) a percentage equal to one minus the stated maximum rate
(expressed as a decimal) of all reserves, if any, required to be maintained
against "Eurocurrency liabilities" as specified in Regulation D of the Board
of Governors of the Federal Reserve System (or against any other category of
liabilities by reference to which the interest rate for LIBOR Loans is
determined or any category of extensions of credit or other assets which
includes loans made by an office of any Bank outside of the United States of
America to residents of the United States of America).
"Advances" means advances made to the Borrower by the Banks
pursuant to the provisions of Section 2.1 of this Agreement.
"Advance Commitment" shall mean, for each Bank, the commitment of
such Bank to make Advances, expressed as an amount representing the maximum
aggregate principal amount of such Bank's Advances hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.8, and
(b) reduced or increased from time to time pursuant to assignments by or to
such Bank in accordance with Section 12.19. The initial amount of each
Bank's Advance Commitment is set forth below the name of such Bank on the
signature pages hereto under the caption "Advance Commitment," or in the
Assignment and Acceptance Agreement pursuant to which such Bank shall have
assumed its Advance Commitment, as applicable. The original aggregate
principal amount of the Advance Commitment is $10,000,000.
"Advance Termination Date" means October 31, 2000.
"Affiliate" means, with respect to any specified Person, any
other Person that, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control
with, such specified Person, and if such Person is an individual, any member of
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<PAGE> 6
the immediate family (including parent, spouse, children and siblings) of
such individual and any trust whose principal beneficiary is such individual
or one or more members of such immediate family and any Person who is
controlled by any such member or trust. The term "control" (including, with
its correlative meanings, "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of securities or other ownership interests, by contract or
otherwise; provided that, in any event, any Person that owns directly or
indirectly securities having 10% or more of the voting power for the election
of the directors or other governing body of a corporation or 10% or more of
the other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to control such corporation or
other Person, and any Person that is a general partner or controls a general
partner of a partnership or joint venture will be deemed to control such
partnership. Notwithstanding the foregoing, no individual shall be an
Affiliate of the Borrower or any of its Subsidiaries solely by reason of his
or her being a director, officer or employee of the Borrower or any of its
Subsidiaries.
"Aging" means a schedule of all outstanding Receivables of the
Loan Parties showing the initial invoice date of each Receivable of the Loan
Parties and the age of such Receivables in intervals of 30 days.
"Agreement" means this Credit Agreement, as the same may be
further amended, modified or supplemented from time to time.
"Applicable Base Rate Margin" shall mean, for any date of
calculation, the rate per annum opposite the Funded Debt Ratio (calculated as
of the end of the Borrower's immediately preceding fiscal quarter) set forth
below under the caption "Applicable Base Rate Margin." On the date hereof,
the Applicable Base Rate Margin is .25%. The Applicable Base Rate Margin
will be adjusted on a quarterly basis in accordance with the table set forth
below:
<TABLE>
<CAPTION>
Applicable Base
Funded Debt Ratio Rate Margin
----------------- -----------
<S> <C>
Less than or equal to 1.50 to 1 0.00%
Greater than 1.50 to 1 but less 0.25%
than or equal to 2.50 to 1
Greater than 2.50 to 1 0.375%
</TABLE>
-3-
<PAGE> 7
The Applicable Base Rate Margin will be adjusted to the amount
corresponding to the applicable Funded Debt Ratio in effect as of the last
day of each fiscal quarter of the Borrower. The adjustment will become
effective as of the first day of the calendar month next succeeding the last
day of the 45-day period within which the Borrower must deliver its quarterly
financial statements to the Banks. No decrease in the Applicable Base Rate
Margin shall become effective if, at such time, any Default or Event of
Default has occurred and is continuing. If the Borrower's financial
statements are not delivered to the Banks within the specified time periods,
the Applicable Base Rate Margin may be increased, at the option of the Agent,
to the highest applicable amount from the date on which the statements were
due through the next adjustment date.
"Applicable Lending Office" means, with respect to each Bank for
each Type of Loan, the "Lending Office" of such Bank specified on the
signature page hereto for such Bank under the caption "Applicable Lending
Office," or in the Assignment and Acceptance Agreement pursuant to which such
Bank shall have assumed its Commitments, or such other office of such Bank as
such Bank may from time to time specify to the Borrower and the Agent as the
office by which its Loans of such Type are to be made and maintained.
"Applicable LIBOR Margin" shall mean, for any date of
calculation, the rate per annum opposite the Funded Debt Ratio (calculated as
of the end of the Borrower's immediately preceding fiscal quarter) set forth
below under the caption "Applicable LIBOR Margin." On the date hereof, the
Applicable LIBOR Margin is 1.35 % for Advances and 1.50% for the Oasis
Acquisition Loan. The Applicable LIBOR Margin will be adjusted on a
quarterly basis in accordance with the table set forth below, for Advances
and for the Oasis Acquisition Loan:
<TABLE>
<CAPTION>
Applicable LIBOR
----------------
Margin (Oasis
Applicable LIBOR -------------
Funded Debt Ratio Margin (Advances) Acquisition Loan)
----------------- ----------------- -----------------
<S> <C> <C>
Less than or equal to 1.50 to 1 1.00% 1.00%
Greater than 1.50 to 1 but less 1.35% 1.50%
than or equal to 2.50 to 1
Greater than 2.50 to 1 but less 1.85% 2.00%
than or equal to 3.0 to 1
Greater than 3.0 to 1 2.35% 2.50%
</TABLE>
The Applicable LIBOR Margin will be adjusted to the amount corresponding to
the applicable Funded Debt Ratio in effect as of the last day of each fiscal
quarter of the Borrower. The adjustment will become effective as of the
first day of the calendar month next succeeding the
-4-
<PAGE> 8
last day of the 45-day period within which the Borrower must deliver its
quarterly financial statements to the Banks. No decrease in the Applicable LIBOR
Margin shall become effective if, at such time, any Default or Event of Default
has occurred and is continuing. If the Borrower's financial statements are not
delivered to the Banks within the specified time periods, the Applicable LIBOR
Margin may be increased, at the option of the Agent, to the highest applicable
amount from the date on which the statements were due through the next
adjustment date.
"Applicable Unused Fee Percentage" shall mean, for any date of
calculation, the rate per annum set forth opposite the Funded Debt Ratio
(calculated as of the end of the Borrower's immediately preceding fiscal
quarter) set forth under the caption "Applicable Unused Fee Percentage." On
the date hereof, the Applicable Unused Fee Percentage is .135%. The
Applicable Unused Fee Percentage will be adjusted on a quarterly basis, in
accordance with the table set forth below:
<TABLE>
<CAPTION>
Applicable Unused
Funded Debt Ratio Fee Percentage
----------------- --------------
<S> <C>
Less than or equal to 1.50 to 1 0.100%
Greater than 1.50 to 1 but less 0.135%
than or equal to 2.50 to 1
Greater than 2.50 to 1 but less 0.175%
than or equal to 3.0 to 1
Greater than 3.0 to 1 0.200%
</TABLE>
The Applicable Unused Fee Percentage will be adjusted to the amount
corresponding to the applicable Funded Debt Ratio in effect as of the last
day of each fiscal quarter of the Borrower. The adjustment will become
effective as of the first day of the calendar month next succeeding the last
day of the 45-day period within which the Borrower must deliver its quarterly
financial statements to the Banks. No decrease in the Applicable Unused Fee
Percentage shall become effective if, at such time, any Default or Event of
Default has occurred and is continuing. If the Borrower's financial
statements are not delivered to the Banks within the specified time periods,
the Applicable Unused Fee Percentage may be increased, at the option of the
Agent, to the highest applicable amount from the date on which the statements
were due through the next adjustment date.
"Assignee" shall have the meaning set forth in Section 12.19.
"Assignment and Acceptance Agreement" means an Assignment and
Acceptance Agreement among a Bank, an Assignee and the Agent, substantially
in the form of Exhibit C
-5-
<PAGE> 9
attached to this Agreement or such other form as may be agreed to by such Bank,
such Assignee and the Agent.
"Assignment of Claims Act" means, collectively, the Assignment of
Claims Act of 1940, as amended, 31 U.S.C. Section 3727, 41 U.S.C. Section 15,
any applicable rules, regulations and interpretations issued pursuant thereto,
and any amendments to any of the foregoing.
"Base Rate" means, for any day, the interest rate per annum equal
to the higher of (a) the Federal Funds Rate for such day plus 0.50% and
(b) the rate for such day established from time to time by NationsBank, N.A.
as its prime rate, whether or not such rate is otherwise published, it being
understood and agreed that such prime rate is established by NationsBank,
N.A. as an index and is not necessarily the lowest or most favorable rate of
interest charged by NationsBank, N.A. or any other Bank on such loans. Each
change in any interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect at the time of
such change in the Base Rate.
"Base Rate Acquisition Loan" means the Oasis Acquisition Loan or
portion thereof with respect to which the interest rate is calculated by
reference to the Base Rate.
"Base Rate Advance" means any Advance or portion thereof with
respect to which the interest rate is calculated by reference to the Base
Rate.
"Base Rate Loans" means the Base Rate Advances and the Base Rate
Acquisition Loan.
"Borrowing Base" means, at the time in question, the sum of the
following, without duplication: (a) 80% of the book value of Eligible Billed
MOI Receivables; plus (b) 85% of the book value of Eligible Billed MCTI
Receivables; plus (c) 90% of Eligible Guaranteed Foreign Receivables; plus
(d) 60% of the book value of (i) Eligible Unbilled MOI Receivables and (ii)
Eligible Unbilled MCTI Receivables, provided that the Borrowing Base
attributable to the total of subclauses (i) and (ii) of this clause (d) shall
not exceed $4,000,000; plus (e) 35% of the book value of Eligible Inventory.
"Borrowing Base Certificate" means a certificate of the Borrower
containing a computation of the Borrowing Base and certifying that no Default
or Event of Default has occurred and is continuing, in substantially the form
of Exhibit D attached to this Agreement.
"Borrowing Base Credit Extensions" means, at any time, the
aggregate amount of Advances and Letters of Credit then outstanding.
"Business Day" means (a) any day other than a Saturday, Sunday
or other day on which banks in Richmond, Virginia and Bethesda, Md., are
authorized or required to close and (b) with reference to a LIBOR Loan or
Floating LIBOR Loan, any such day that is also a day on which dealings in
U.S. dollar deposits are carried out in the London interbank market.
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<PAGE> 10
"Capital Expenditures" shall mean, for any Person for any period,
expenditures made by such Person or any of its Subsidiaries to acquire or
construct fixed assets, plant and equipment (including renewals, improvements
and replacements, but excluding repairs) during such period, computed in
accordance with GAAP.
"Capital Lease" means any lease that has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent under a Capital Lease, and, for
purposes of this Agreement the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"Closing Date" means the later of the date of this Agreement and
the date on which the conditions precedent set forth in Section 6.1 have been
fulfilled.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" means, collectively, all Accounts Receivable,
Equipment, General Intangibles, Intellectual Property, Inventory, Investment
Property, Real Estate, all stock and other ownership interests in
Subsidiaries and all other property of a Loan Party in which a Lien is
granted to the Agent for the ratable benefit of the Banks pursuant to a
Security Agreement, an Intellectual Property Assignment, a Mortgage or any
other Loan Document.
"Commitment Percentage" means, as to any Bank at any time, the
percentage of the aggregate Advance Commitment and Oasis Acquisition Loan
Commitment then constituted by such Bank's Advance Commitment and Oasis
Acquisition Loan Commitment.
"Compliance Certificate" shall have the meaning assigned in
Section 8.1(b)(8).
"Continue," "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.6 hereof of a LIBOR Loan from one Interest
Period to the next Interest Period.
"Convert," "Conversion" and "Converted" shall refer to a
conversion pursuant to Section 2.6 hereof of one Type of Loans into another
Type of Loans.
"Customer" means any Person obligated on a Receivable.
"Date Affected Information Technology" means a system comprised
of one or more components including computer hardware, computer software or
equipment with computerized functions, which reads, produces or processes
date data by input, output or otherwise.
"Debt" means, collectively, and includes, with respect to any
specified Person (a) indebtedness or liability for borrowed money whether by
loan, the issuance and sale of debt
-7-
<PAGE> 11
securities or the sale of assets to another Person subject to an understanding
or agreement, contingent or otherwise, to repurchase such assets from such
Person, or for the deferred purchase price of property or services; (b) Capital
Lease Obligations; (c) obligations to reimburse the issuer of letters of credit
or acceptances; (d) Debt of others Guaranteed by such Person; (e) obligations
under interest rate swap, cap or collar agreements or other similar agreements
or arrangements designed to protect that Person against fluctuations in interest
rates; (f) obligations under any foreign exchange contract, currency swap
agreements or other similar agreements or arrangements designed to protect that
Person against fluctuations in currency values; (g) obligations secured by any
Lien on property owned by the specified Person, whether or not the obligations
have been assumed; (h) the purchasers's obligations under seller-take-back
transactions; and (i) accrued and unpaid Earnout.
"Debt Coverage Ratio" means, at any time, the ratio of (a) EBITDA
of the Borrower and its Subsidiaries for the period of 12 months ended on the
last day of the most recently ended fiscal quarter of the Borrower, minus
Non-Financed Capital Expenditures of the Borrower and its Subsidiaries for
such period, to (b) Debt Service of the Borrower and its Subsidiaries for
such period; provided that if the Borrower or any of its Subsidiaries shall
have Acquired a business (or any part thereof) during such period, and if,
pursuant to the definition thereof, EBITDA is computed as if such business
(or part thereof) had been owned by such Borrower or Subsidiary for the whole
of such period, then Debt Service and Non-Financed Capital Expenditures shall
be computed as if such business (or part thereof) had been owned by the
Borrower or such Subsidiary for the whole of such period.
"Debt Service" means, for any period, the sum for the Borrower
and its Subsidiaries (determined on a consolidated basis without duplication
in accordance with GAAP) of (a) all payments of principal of long term Debt
(including the principal component of any payments in respect of Capital
Lease Obligations) scheduled to be made during such period plus (b) all
Interest Expense for such period.
"Default" means any event that, with the giving of notice, the
lapse of time, or both, would constitute an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
disposition of any assets (whether now owned or hereafter acquired) by the
Borrower or any of its Subsidiaries to any other Person, excluding any sale,
assignment, transfer or other disposition of any assets sold or disposed of
in the ordinary course of business and on ordinary business terms. The terms
"Dispose" and "Disposed" shall have correlative meanings.
"Earnout" shall mean any obligation of the Borrower or any
Subsidiary to pay compensation or consideration in connection with an
Acquisition in addition to the purchase price paid at the closing under an
Acquisition Agreement.
"EBITDA" shall mean, for any period, the sum for the Borrower and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP)
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<PAGE> 12
of (a) Net Income for such period, plus (b) taxes, Interest Expense,
depreciation, amortization and other non-cash charges (to the extent deducted to
determine Net Income) for such period; provided that (1) if the Borrower or any
of its Subsidiaries shall have Disposed of a business (or any part thereof)
during such period, EBITDA shall be computed as if such business (or part
thereof) had been Disposed of prior to the first day of such period, and (2) if
the Borrower or any of its Subsidiaries shall have Acquired a business (or any
part thereof) during such period, and if the Borrower has provided the Agent
with audited financial statements (prepared in accordance with GAAP by an
accounting firm acceptable to the Agent) of such business, or (if such
statements are unavailable) other due diligence as to the financial position of
such business acceptable to the Agent, for that portion of such period preceding
the Acquisition, EBITDA shall be computed as if such business (or part thereof)
had been owned by the Borrower or such Subsidiary for the whole of such period.
EBITDA may be increased by the amount (not to exceed $500,000 for any
Acquisition) of projected reductions in compensation of executive officers of a
Target which are substantiated by employment contracts or other documentation
acceptable to the Agent. If a Target has been generating a negative EBITDA, the
adjusted amount shall be deducted for purposes of calculating compliance with
Section 8.3.
"Eligible Assignee" means any Person who is: (a) currently a
Bank; (b) a commercial bank, trust company, insurance company, investment
bank or pension fund organized under the laws of the United States of
America, or any state thereof, and having total assets in excess of
$5,000,000,000; (c) a savings and loan association or savings bank organized
under the laws of the United States of America, or any state thereof, and
having a tangible net worth of at least $500,000,000; or (d) a commercial
bank organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development ("OECD"), or organized
under the laws of a political subdivision of any such country, and having
total assets in excess of $10,000,000,000, provided that such bank is acting
through a branch or agency located in the United States of America. If such
Person is not currently a Bank, such Person's senior unsecured long term
indebtedness must be rated BBB or higher by S&P, Baa2 or higher by Moody's,
or the equivalent or higher of either such rating by another Rating Agency
acceptable to the Agent. Notwithstanding the foregoing, if an Event of
Default shall have occurred and be continuing, the term "Eligible Assignee"
shall mean any Person that is not an individual.
"Eligible Billed MCTI Receivables" means Eligible Billed
Receivables due to MCTI, or any Subsidiary of MCTI that is a Subsidiary
Guarantor, from its Customers.
"Eligible Billed MOI Receivables" means Eligible Billed
Receivables due to MOI, or any Subsidiary of MOI that is a Subsidiary
Guarantor, from its Customers.
"Eligible Billed Receivables" means Eligible Receivables that
have been billed to the appropriate Customer and are aged not more than 90
days from the date of the initial invoice. For the purposes of this
Agreement, the term "initial invoice" shall mean the first invoice relating
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<PAGE> 13
to the applicable software or goods sold or installed or services rendered,
and not any subsequent invoice relating thereto.
"Eligible Guaranteed Foreign Receivables" means Eligible Billed
Receivables, due from Acceptable Foreign Customers, payable in United States
Dollars, the payment of which is guaranteed by (a) an insurance policy issued
by the Foreign Credit Insurance Association, or (b) a trade letter of credit
(not a standby or performance letter of credit) issued by a bank acceptable
to the Agent in its sole discretion, and the terms of which insurance policy
or letter of credit are acceptable to the Agent in its sole discretion.
"Eligible Inventory" shall mean Inventory, valued at the lower of
cost or market values, that the Agent in its sole discretion determines to
meet all of the following requirements: (a) such Inventory is owned by a
Loan Party, is subject to the security interest created by a Security
Agreement, which is perfected as to such Inventory, is subject to no other
Lien whatsoever other than a Lien permitted by this Agreement and is not
being sold, installed or provided under a contract secured by a surety bond,
(b) such Inventory consists of either raw materials, work in process or
finished goods (but does not include supplies and packaging used or consumed
in packaging, packing, shipping, advertising, selling or leasing such raw
materials or finished goods), (c) such Inventory is in good condition and
meets all standards imposed by any governmental agency, or department or
division thereof, having regulatory authority over such goods, their use or
sale, (d) such Inventory is currently either usable or salable, at prices
approximating at least cost, in the normal course of the Loan Party's
business, (e) such Inventory is located at one of the locations set forth in
Schedule 1 to the Security Agreement of such Loan Party and, if such location
is premises leased by such Loan Party, the landlord at such location has
agreed in writing, in form and substance satisfactory to the Agent, to waive
any Lien such landlord may have on the Inventory, and (f) such Inventory is
not determined by the Agent to be ineligible for any other reason based upon
such credit and collateral considerations as the Agent may establish from
time to time in its reasonable discretion.
"Eligible Receivables" means Accounts Receivable of a Loan Party
(a) that represent valid obligations incurred by a Customer for goods shipped
or delivered, software sold, installed or licensed, or services completed
under valid contracts of sale, license or service that have been formally
awarded to such Loan Party and for which all required contract documents have
been executed by the Customer and such Loan Party and, in the case of
Accounts Receivable owed by the Government, for which funds have been
appropriated and allocated; (b) that are due and payable not more than 60
days from the original invoice date for Foreign Customers and not more than
30 days from the original invoice date for all other Customers; (c) on which
the Customer is not an Affiliate or Subsidiary of such Loan Party; (d) with
respect to which such Loan Party has no knowledge or notice of any inability
of the Customer to make full payment; (e) from the face amounts of which have
been deducted all payments, setoffs, amounts subject to adverse claims,
contractual allowances, bad debt reserves and other credits applicable
thereto; (f) that are subject to no Liens other than those permitted by this
Agreement; (g) that continue to be in full conformity with the
representations and warranties made by such
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<PAGE> 14
Loan Party to the Banks in this Agreement and the other Loan Documents; (h) with
respect to which the Agent is and continues to be satisfied with the credit
standing of the Customer; (i) on which the Customer is not a creditor of such
Loan Party, provided, however, that if the Account Receivable due from such
Customer exceeds the liability of the Loan Party to such Customer, and if such
Account Receivable otherwise qualifies as an Eligible Receivable, then such
Account Receivable may be included in the Borrowing Base as an Eligible
Receivable in an amount equal to the amount by which such Account Receivable
exceeds the liability of a Loan Party to such Customer, but in no event shall
the aggregate amount included in the Borrowing Base pursuant to this clause (j)
exceed $250,000 at any time outstanding; (k) on which, unless an Acceptable
Foreign Customer, the Customer is not a Foreign Customer; (l) that are not
subject to any dispute; (m) with respect to which the applicable goods, software
or services have been delivered or provided to and accepted by the applicable
Customer on an absolute sale basis and not on a bill and hold sale basis, a
consignment sale basis, a guaranteed sale basis, a sale or return basis or on
the basis of any other similar understanding pursuant to which the Loan Party
would repurchase or accept a return of, or give a credit for, any such goods or
services; (n) that are not subject to any contingencies; and (o) that do not
arise out of any discontinued operations or business line of a Loan Party
provided, however, and without limiting any other provisions of this Agreement
with respect to the exclusion of Accounts Receivable from the category of
Eligible Receivables and the Borrowing Base, that (1) if the Agent reasonably
determines that the collectibility of any Account Receivable makes it
unacceptable for inclusion as an Eligible Receivable and the Agent gives written
notice to the Borrower indicating the reasons for such determination, then such
Account Receivable shall thereafter be excluded from the category of Eligible
Receivables, (2) if more than 50% of the aggregate face amount of Accounts
Receivable owed by a Customer other than the Government are aged more than 90
days from the dates of the initial invoices, then all Accounts Receivable owed
by such Customer, shall be excluded from the category of Eligible Receivables,
(3) in no case shall Eligible Receivables include any Account Receivable
representing or arising out of retainages, holdbacks, revenues recognized or
costs incurred in excess of approved or allowed reimbursement rates, cost
overruns, unauthorized work or work beyond the scope of a contract, progress
billings, rebillings or contracts secured by surety bonds, (4) an Account
Receivable arising out of the sale, licensing or other disposition of
Intellectual Property subject to United States copyright, patent or trademark
protection shall not be an Eligible Receivable unless such Intellectual
Property, and an appropriately completed Intellectual Property Assignment with
respect thereto, shall be duly registered and filed with the United States
Registry of Copyrights and the United Sates Patent and Trademark Office, as
applicable, and (5) an Account Receivable may not be included in more than three
month-end Borrowing Base calculations.
"Eligible Unbilled MCTI Receivables" means amounts carried on the
books of MCTI, or any Subsidiary of MCTI that is a Subsidiary Guarantor, as
unbilled accounts receivable, in accordance with GAAP, arising out of the
recognition of revenue to be derived from the sale of finished goods or the
provision of services by MCTI or such Subsidiary, provided that (a) with
respect to finished goods, (i) such finished goods are Eligible Inventory,
(ii) such finished goods have been completed and are ready for delivery under
a valid purchase
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<PAGE> 15
order or contract, (iii) such goods have been identified, tagged and segregated
from the Inventory of MCTI or such Subsidiary, (iv) the obligation of the
Customer under the applicable contract or purchase order with respect to such
goods satisfies all criteria for Eligible Receivables other than delivery of
such goods and the rendering of an invoice, and (v) such unbilled account
receivable may not be included in more than three month-end Borrowing Base
calculations; and (b) with respect to services, (i) such services have been
performed, (ii) such services have not been billed to a Customer solely as a
result of timing differences between the date the revenue is recognized on the
Borrower's or such Subsidiary's books and the date the invoice is actually
rendered, (iii) the obligation of the Customer under the applicable contract
with respect to such services satisfies all criteria for Eligible Receivables
other than the rendering of an invoice, and (iv) such unbilled account
receivable may not be included in more than three month-end Borrowing Base
calculations.
"Eligible Unbilled MOI Receivables" means amounts carried on the
books of MOI, or any Subsidiary of MCTI that is a Subsidiary Guarantor, as
unbilled accounts receivable, in accordance with GAAP, arising out of the
recognition of revenue to be derived from the provision of services by MOI or
such Subsidiary, provided that (a) such services have been performed, (b)
such services have not been billed to a Customer solely as a result of timing
differences between the date the revenue is recognized on the Borrower's or
such Subsidiary's books and the date the invoice is actually rendered, (c)
the obligation of the Customer under the applicable contract with respect to
such services satisfies all criteria for Eligible Receivables other than the
rendering of an invoice, and (d) such unbilled account receivable may not be
included in more than one month-end Borrowing Base calculation.
"Environmental Laws" means any applicable law, rule or regulation
relating to environmental protection or the manufacture, storage, disposal or
clean-up of Hazardous Materials, including, without limitation, the
following: Clean Air Act, 42 U.S.C. 7401 et seq.; Federal Water Pollution
Control Act, 33 U.S.C. 1251 et seq.; Solid Waste Disposal Act, 42 U.S.C. 6901
et seq.; Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. 9601 et seq.; National Environmental Policy Act, 42 U.S.C.
4321 et seq.; regulations of the Environmental Protection Agency and any
applicable rule of common law and any judicial interpretation thereof
relating primarily to the environment or Hazardous Materials.
"Epson" means Epson America, Inc.
"Epson Contract" means that certain Support Services Agreement
dated March 20, 1996 between the Borrower and Epson, as amended.
"Equipment" with respect to any Loan Party shall have the meaning
given to such term in the Security Agreement executed by such Loan Party.
"Equity Issuance" means any issuance or sale by a Person of its
capital stock or other similar equity security, or any warrants, options or
similar rights to acquire, or securities convertible into or exchangeable
for, such capital stock or other similar equity security.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Events of Default" has the meaning specified in Section 10.1.
"Federal Funds Rate" means, for any day, the simple interest rate
per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers
on such day, as published by the Federal Reserve Bank of New York on the
business day next succeeding such day in the daily statistical release
designated as the composite 3:30 P.M. Quotations for U.S. Government
Securities, or any successor publication, under the caption Federal Funds
Effective Rate, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on
the next succeeding Business Day and (b) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Rate for such day shall
be the average rate quoted to Agent on such day on such transactions as
determined by Agent.
"Floating LIBOR Loan" means means any Loan with respect to which
the interest rate is calculated by reference to the Floating LIBOR Rate, as
set forth in Section 2.6.
"Floating LIBOR Rate" means the fluctuating rate of interest
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the one-month London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London
time) on the second preceding Business Day as adjusted from time to time in
the Agent's sole discretion for then-applicable reserve requirements, deposit
insurance assessment rates and other regulatory costs. If, for any reason,
such rate is not available, the term "Floating LIBOR Rate" shall mean the
fluctuating rate of interest equal to the one-month rate of interest (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the one month London interbank offered rate for deposits
in Dollars at approximately 11:00 a.m. (London time) on the second preceding
Business Day as adjusted from time to time in the Agent's sole discretion for
then-applicable reserve requirements, deposit insurance assessment rates and
other regulatory costs; provided, however, if more than one rate is specified
on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean
of all such rates.
"Foreign Customer" means any Customer that is a foreign
government or an entity organized and existing under the laws of a country
other than the United States.
"Fully Date Capable" means the ability to process date data
correctly (including, but not limited to, reading, producing, calculating,
comparing, and sequencing date data) from, into, and between the twentieth
and twenty-first centuries) without material degradation in performance and
without unusual intervention, including correct and continuous processing
during the transition between 1999 and 2000, and correct processing if leap
years.
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<PAGE> 17
"Funded Debt Ratio" means, at any time, the ratio of (a) Debt of
the Borrower and its Subsidiaries outstanding on the last day of the most
recently ended fiscal quarter of the Borrower, to (b) EBITDA of the Borrower
and its Subsidiaries for the period of 12 months then ended.
"GAAP" shall mean generally accepted accounting principles
applied on a basis consistent with those that, in accordance with the last
sentence of Section 1.3 hereof, are to be used in making the calculations for
purposes of determining compliance with this Agreement.
"General Intangibles" with respect to any Loan Party shall have
the meaning given to such term in the Security Agreement executed by such
Loan Party.
"Government" means the United States of America or any agency or
instrumentality thereof.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of,
or otherwise to be or become contingently liable (including, without
limitation, as a general partner or joint venturer by operation of law or
pursuant to a partnership or joint venture agreement) under or with respect
to, the Debt, other obligations, net worth, working capital or earnings of
any other Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or an
agreement to purchase, sell or lease (as lessor or lessee) assets, products,
materials, supplies or services primarily for the purpose of enabling a
debtor to make payment of such debtor's obligations or an agreement to assure
a creditor against loss, and including causing a bank or other financial
institution to issue a letter of credit or other similar instrument for the
benefit of another Person, but excluding endorsements for collection or
deposit in the ordinary course of business. The terms "Guarantee" and
"Guaranteed" used as verbs shall have correlative meanings.
"Hazardous Materials" means all or any of the following:
(a) substances that are defined or listed in, or otherwise classified
pursuant to, any applicable Environmental Laws as "hazardous substances,"
"hazardous materials," "hazardous wastes," "toxic substances" or any other
formulation intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, "TLCP" toxicity, or "EP toxicity";
(b) oil, petroleum or petroleum derived substances, natural gas, natural gas
liquids or synthetic gas and drilling fluids, produced waters and other
wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; (d) asbestos in any form; or
(e) electrical equipment which contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of fifty parts per
million.
"Intellectual Property" with respect to any Loan Party shall mean
the "Collateral", as such term is defined in the Intellectual Property
Assignment executed by such Loan Party.
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<PAGE> 18
"Intellectual Property Assignment" shall have the meaning
assigned in Section 5.1.
"Interest Expense" means, for any period, the sum for the
Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) of the following: (a) all interest in
respect of Debt (including the interest component of any payments in respect
of Capital Lease Obligations) accrued or capitalized during such period plus
(b) the net amount payable (or minus the net amount receivable) under
interest rate protection agreements during such period.
"Interest Payment Date" means the first day of each calendar
month.
"Interest Period" means, with respect to any LIBOR Loan, each
period commencing on the date such LIBOR Loan is made or Converted from a
Base Rate Loan or Floating LIBOR Loan or the last day of the next preceding
Interest Period for a LIBOR Loan being Continued, and ending on the
numerically corresponding day in the first, second, third or fourth calendar
month thereafter, as the Borrower may designate pursuant to Section 4.6
hereof, except that each Interest Period for a LIBOR Loan that commences on
the last Business Day of a calendar month (or on any day for which there is
no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing: (a) if any Interest Period
for a LIBOR Advance would otherwise end after the Advance Termination Date or
for the LIBOR Acquisition Loan would otherwise end after the maturity date of
the LIBOR Acquisition Loan, such Interest Period shall end on such Advance
Termination Date or such maturity date, as applicable; (b) each Interest
Period that would otherwise end on a day which is not a Business Day shall
end on the next succeeding Business Day (or, if such next succeeding Business
Day falls in the next succeeding calendar month, on the next preceding
Business Day); (c) notwithstanding the preceding clause (a), no Interest
Period for any LIBOR Loan shall have a duration of less than one month and,
if the Interest Period for any LIBOR Loan would otherwise be a shorter
period, such LIBOR Loan shall not be available hereunder for such period; and
(d) no Interest Period for any LIBOR Acquisition Loan may commence before and
end after any Oasis Acquisition Loan Payment Date.
"Inventory" with respect to any Loan Party shall have the meaning
given to such term in the Security Agreement executed by such Loan Party.
"Investment" means, for any Person (a) the acquisition (whether
for cash, property, services, securities or otherwise) of capital stock,
bonds, notes, debentures, partnership, membership or other ownership
interests or other securities of any other Person or any agreement to make
any such acquisition (including any "short sale" or any sale of securities at
a time when such securities are not owned by the Person entering into such
sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the purchase of assets
from another Person subject to an understanding or agreement, contingent or
otherwise, to resell such assets to such Person); (c) the entering into of
any Guarantee of, or other
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<PAGE> 19
contingent obligation with respect to, the Debt or any other liability of any
other Person and (without duplications) any amount committed to be advanced,
lent or extended to such Person; or (d) the entering into any agreement of the
types described in clauses (e) and (f) of the definition of Debt.
"Investment Property" with respect to any Loan Party shall have
the meaning given to such term in the Security Agreement executed by such
Loan Party.
"LC Agreement" means, collectively and individually, each
standard form of Application and Agreement for Standby Letter of Credit to be
executed and delivered by the Borrower to the Agent in connection with each
Letter of Credit, as required by Section 2.2 of this Agreement, as any of the
same may be amended, modified or supplemented from time to time.
"Letter of Credit" means, individually and collectively, any
letter of credit issued by the Agent for the account of the Borrower pursuant
to Section 2.2 of this Agreement, as any of the same may be amended, modified
or supplemented, renewed or extended from time to time.
"Letter of Credit Obligations" means the Obligations of the
Borrower, contingent or matured, to reimburse the Agent for amounts paid by
it under a Letter of Credit.
"LIBOR" means for any LIBOR Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on the Dow Jones Markets Service (formerly known as
Telerate) display page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. dollars (for a period of time corresponding
to such Interest Period and commencing on the first day of such Interest
Period) at approximately 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period. If for any reason such rate is not
available, the term "LIBOR" shall mean, for any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in U.S. dollars (for a period of time
corresponding to such Interest Period and commencing on the first day of such
Interest Period) at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to such
Interest Period, provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
such rates.
"LIBOR Acquisition Loan" means the Oasis Acquisition Loan or
portion thereof with respect to which the interest rate is calculated by
reference to Adjusted LIBOR.
"LIBOR Advance" means any Advance or portion thereof with respect
to which the interest rate is calculated by reference to Adjusted LIBOR.
"LIBOR Loans" means LIBOR Advances and the LIBOR Acquisition Loan.
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<PAGE> 20
"Lien" means, with respect to any asset, (a) any mortgage, deed
of trust, pledge, security interest, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority
or other security agreement, or preferential arrangement, charge or
encumbrance of any kind or nature whatsoever, in, on or of such asset,
(b) the interest of any vendor or lessor under any conditional sale or other
title retention agreement, any Capital Lease (or any financing lease having
substantially the same economic effect as any of the foregoing), and (c) in
the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.
"Loan Documents" means this Agreement, the Notes, each Security
Agreement, each LC Agreement, each Letter of Credit, each Intellectual
Property Assignment, each Mortgage, each Subsidiary Guaranty and any other
document now or hereafter executed or delivered in connection with the
Obligations, in evidence thereof or as security therefor, as any of the same
may be amended, modified or supplemented from time to time.
"Loan Party" means the Borrower and each Subsidiary Guarantor.
"Loans" means the Advances and the Oasis Acquisition Loan to be
made to the Borrower pursuant to this Agreement, and "Loan" means any of the
foregoing.
"MCTI" means Microdyne Communication Technologies Incorporated, a
Maryland corporation.
"MOI" means Microdyne Outsourcing Incorporated, a Maryland
corporation.
"Majority Banks" shall mean (a) if there are not more than two
Banks, all Banks, (b) if there are three Banks, two of the Banks, and (c) if
there are more than three Banks, those Banks having more than 50% of the
aggregate amount of the Advance Commitment or, if the Advance Commitment
shall have terminated, Banks holding more than 50% of the sum of (1) the
aggregate unpaid principal amount of the Advances plus (2) the aggregate
amount of all Letter of Credit Obligations.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the
ability of any Loan Party to perform its material obligations under any Loan
Document or (c) the material rights of or benefits available to the Lenders
under any Loan Document.
"Material Contract" means any contract or other arrangement
(other than the Loan Documents), whether written or oral, to which the
Borrower or any Subsidiary is a party (a) requiring payments of more than
$5,000,000 per year by any party thereto, or (b) as to which the breach,
nonperformance, cancellation or failure to renew by any party thereto could
have a Material Adverse Effect.
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<PAGE> 21
"Maximum Amount" means $10,000,000.
"Minimum Compliance Level" means $12,700,000, (a) reduced,
effective as of August 11, 1998, by an amount (not to exceed $11,000,000) of
the write-off as a result of the purchase accounting for the Permitted
Acquisition of Oasis; and (b) adjusted upward, effective as of June 30, 1998,
and as of the end of each fiscal quarter thereafter, by an amount equal to
the sum of (i) 75% of the consolidated Net Income of the Borrower and its
Subsidiaries for such fiscal quarter, with each of the foregoing increases
being fully cumulative, and with no reduction being made on account of any
negative consolidated Net Income of the Borrower and its Subsidiaries for any
fiscal quarter, plus (ii) 100% of the aggregate amount of all cash and other
consideration received by the Borrower or any Subsidiary in respect of any
Equity Issuance during such fiscal quarter.
"Moody's" means Moody's Investors Services, Inc.
"Mortgage" means a deed of trust or mortgage, in form and
substance acceptable to the Agent, creating a lien on any Real Estate owned
by a Loan Party.
"Net Income" means, for any Person for any period, the
consolidated net income (or deficit) of such Person and its Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP;
provided that there shall be excluded from the calculation thereof any
extraordinary, unusual or non-recurring gains or losses during such period in
accordance with GAAP (which shall include non-recurring gains and
discontinued losses of the Network Products Division of the Borrower).
"Net Worth" means, at any date, all amounts that, in accordance
with GAAP, would be included under stockholders' equity on the consolidated
balance sheet of the Borrower and its Subsidiaries at such time.
"Non-Financed Capital Expenditures" means, for any Person,
Capital Expenditures that are not financed contemporaneously with the
incurrence of such Capital Expenditure or within 60 days thereafter, with
long-term Debt incurred by such Person other than any Advances, or pursuant
to a sale and lease-back transaction approved by the Majority Banks.
"Notes" means each Revolving Note and the Oasis Acquisition Note.
"Oasis Acquisition" means the Acquisition by an Acquisition
Company of Apcom, Inc., a Maryland corporation, Celerity Systems, Inc., a
California corporation, Acceleration Systems, Inc., a Maryland corporation,
and Digital Telcom, Inc., a Maryland corporation.
"Oasis Acquisition Loan" means, individually and collectively,
each loan to be made to the Borrower by the Banks pursuant to Section 2.4 of
this Agreement.
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<PAGE> 22
"Oasis Acquisition Loan Payment Date" means October 31, 1999 and
the last day of each consecutive month thereafter.
"Oasis Acquisition Loan Commitment" shall mean, individually and
collectively, the commitment of each Bank to make the Oasis Acquisition Loan,
expressed as an amount representing the maximum aggregate principal amount of
such Bank's Oasis Acquisition Loan hereunder, as such amount may be
(a) reduced from time to time pursuant to Section 2.8, and (b) reduced or
increased from time to time pursuant to assignments by or to such Bank in
accordance with Section 12.19. The initial amount of each Bank's Oasis
Acquisition Loan Commitment is set forth below the name of such Bank on the
signature pages hereto under the caption "Oasis Acquisition Loan Commitment,"
or in the Assignment and Acceptance Agreement pursuant to which such Bank
shall have assumed its Oasis Acquisition Loan Commitment, as applicable. The
original aggregate principal amount of the Oasis Acquisition Loan Commitment
is $16,500,000.
"Oasis Acquisition Note" means each promissory note, in
substantially the form of Exhibit B attached to this Agreement, evidencing
the obligation of the Borrower to repay the Oasis Acquisition Loan, together
with interest thereon, and all extensions, renewals, modifications and
amendments thereof.
"Obligations" shall have the meaning given to such term in the
Security Agreement.
"Participant" has the meaning assigned in Section 12.19(c).
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Permitted Acquisition" means an Acquisition by an Acquisition
Company pursuant to an Acquisition Agreement provided that (a) the Pro Forma
Financials reflect that, after giving effect to such Acquisition, the
Borrower and the Subsidiaries will be in compliance with all of the financial
covenants set forth in Section 8.3 of this Agreement, (b) the Net Income
(before any non-cash write-offs associated with purchase accounting) of the
Target for the most recent 12-month period is not less than $1, (c) the
Target is in substantially the same line of business as the Borrower or any
of its Subsidiaries, (d) such Acquisition was not preceded by an unsolicited
tender offer for the capital stock or other ownership interests of the Target
that was not recommended or approved by the Target's board of directors or
similar governing body, (e) no Default or Event of Default has occurred and
is continuing or shall occur after giving effect to such Acquisition, (f) the
Borrower has given the Agent at least 15 Business Days' prior written notice
of the closing, and (g) such Acquisition is in compliance with Section 8.2(g).
"Permitted Encumbrances" means: (a) Liens imposed by law for
taxes that are not yet due or are being contested in compliance with
Section 8.1(); (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law,
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<PAGE> 23
arising in the ordinary course of business and securing obligations that are not
overdue by more than 45 days; (c) pledges and deposits made in the ordinary
course of business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations; (d) deposits to secure
the performance of bids, trade contracts, leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature, in
each case in the ordinary course of business; (e) easements, zoning
restrictions, rights-of-way and similar encumbrances on Real Estate imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Borrower or any Subsidiary; provided that the term "Permitted Encumbrances"
shall not include any Lien securing Debt.
"Permitted Investments" means: (a) direct obligations of, or
obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the United
States of America), in each case maturing within one year from the date of
acquisition thereof; (b) investments in commercial paper maturing within
270 days from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued
or guaranteed by or placed with, and money market deposit accounts issued or
offered by, any Bank or any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which has
a combined capital and surplus and undivided profits of not less than
$500,000,000; and (d) fully collateralized repurchase agreements with a term
of not more than 30 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria described
in clause (c) above.
"Person" means an individual, partnership, limited liability
company, corporation (including a business trust), joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Pro Forma Financials" means, with respect to any Target or
Acquisition Company, consolidated and consolidating balance sheets and income
statements of the Borrower and Target or Acquisition Company, as applicable,
as of the closing of the applicable Acquisition, setting forth projections
for the two-year period following the Acquisition after giving effect to the
closing of the related Acquisition Agreement and (with respect to the Oasis
Acquisition) the Oasis Acquisition Loan, and setting forth in reasonable
detail the assumptions underlying such projections, which assumptions are
acceptable to the Agent in its sole discretion.
"Quarterly Payment Dates" means the last day of each January,
April, July and October in each year.
"Rating Agency" means S&P, Moody's or any other nationally
recognized securities rating agency selected by the Borrower and acceptable
to the Agent.
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"Real Estate" means all real estate assets now owned or hereafter
acquired by a Loan Party, other than occupancy leases.
"Receivables" means the Accounts Receivable and General
Intangibles, including, but not limited to, any right of a Loan Party to
payment for software licensed, sold or installed, goods sold or leased or for
services rendered, whether or not earned by performance.
"Regulatory Change" shall mean, with respect to any Bank, any
change after the date of this Agreement in federal, state or foreign law
(including, without limitation, Regulation D of the Board of Governors of the
Federal Reserve System) or the adoption or making after such date of any
interpretation, directive or request applying to a class of banks including
such Bank of or under any federal, state or foreign law or regulations
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Related Acquisition Documents" means the documents described in
any Acquisition Agreement and related in any manner to the acquisition of any
Acquired Assets, including, but not limited to, the buy/sell agreement,
historical financial statements of the Target and a detailed description of
the Acquired Assets, and every other document, instrument or certificate
executed in connection with such Acquisition Agreement.
"Revolving Note" means a promissory note of the Borrower in
substantially the form of Exhibit E hereto.
"Security Agreement" has the meaning assigned in Section 5.1(c).
"S&P" means Standard & Poor's Rating Group, a division of
McGraw-Hill Companies, Inc.
"Solvency Certificate" has the meaning assigned in Section 6.3(e).
"Subsidiary" means, with respect to any Person (the "Parent") at
any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the Parent in the Parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date,
as well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, Controlled or
held, directly or indirectly by the Parent, or (b) that is, as of such date,
otherwise Controlled by the Parent or one or more Subsidiaries of the Parent
or by the Parent and one of more Subsidiaries of the Parent. Unless the
context otherwise requires, the term "Subsidiary" shall mean a Subsidiary of
the Borrower.
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"Subsidiary Guarantor" means MOI, MCTI, the Targets of the Oasis
Acquisition which become Subsidiaries of the Borrower, and each Acquisition
Company, Target or other Subsidiary of any of the foregoing that becomes a
Loan Party pursuant to Section 9.1.
"Subsidiary Guaranty" has the meaning assigned in Section 5.3.
"Target" means any Person, a majority of the stock (or
comparable ownership interests) of which, a division or similar business unit
of which, or all or substantially all of the assets and business of any of
the foregoing of which, are to be Acquired by an Acquisition Company,
pursuant to the terms of an Acquisition Agreement.
"Type," when used in reference to any Loan, refers to whether the
rate of interest on such Loan is determined by reference to Adjusted LIBOR,
Floating LIBOR Rate, or the Base Rate.
"UCC" means the Uniform Commercial Code as adopted in the
Commonwealth of Virginia, and all amendments thereto.
SECTION 1.2. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding."
SECTION 1.3. Accounting Terms.
(a) Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to
be delivered to the Banks hereunder shall (unless otherwise disclosed to the
Banks in writing at the time of delivery thereof in the manner described in
subsection (b) below) be prepared, in accordance with generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the latest financial statements furnished to the Banks
hereunder (which, prior to the delivery of the first financial statements
under Section 8.1() hereof, shall mean the financial statements as of June
30, 1998). All calculations made for the purposes of determining compliance
with this Agreement shall (except as otherwise expressly provided herein) be
made by application of generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the latest annual or
quarterly financial statements furnished to the Banks pursuant to
Section 8.1() hereof (or, prior to the delivery of the first financial
statements under Section 8.1() hereof, used in the preparation of the
financial statements as at June 30, 1998) unless (i) the Borrower shall have
objected to determining such compliance on such basis at the time of delivery
of such financial statements or (ii) the Agent shall so object in writing
within 30 days after delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made (which, if objection is made in respect of
the first financial statements delivered under Section 8.1(b) hereof, shall
mean the financial statements as at June 30, 1998).
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(b) The Borrower shall deliver to the Banks at the same time as
the delivery of any annual or quarterly financial statement under
Section 8.1() hereof (1) a description in reasonable detail of any material
variation between the application of accounting principles employed in the
preparation of such statement and the application of accounting principles
employed in the preparation of the next preceding annual or quarterly
financial statements as to which no objection has been made in accordance
with the last sentence of subsection (a) above and (2) reasonable estimates
of the difference between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Article 8 hereof, unless the
Borrower shall have given the Agent 90 days' prior written notice, the
Borrower will not change the last day of its fiscal year from September 30 of
each year, or the last days of the first three fiscal quarters in each of its
fiscal years from December 31, March 31, and June 30 of each year,
respectively.
SECTION 1.4. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation." The word "will" shall be construed to have the same meaning and
effect as the word "shall." Unless the context requires otherwise, (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be deemed to
include such Person's successors and assigns, (c) the words "herein,"
"hereof" and "hereunder," and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (d) the word "or" shall not be exclusive, (e) all references herein
to Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement, and
(f) the words "asset" and "property" shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.
ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS AND LETTERS OF CREDIT
SECTION 2.1. The Advances.
(a) Each Bank severally agrees, subject to the terms and
conditions of this Agreement, to make Advances to the Borrower from time to
time on any Business Day during the period from the date hereof until the
Advance Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount of such Bank's Advance Commitment. Within the
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limits of the aggregate principal amount of the Advance Commitment, the Borrower
may borrow, prepay pursuant to Section 2.7 and reborrow the Advances; provided,
however, that no Advance will be disbursed by any Bank if, after such
disbursement, (1) a prepayment would be required under Section 2.7(d) or (2) the
aggregate amount of outstanding Advances and Letters of Credit would exceed the
Maximum Amount.
(b) The proceeds of the Advances shall be used (1) to refinance
existing loans made by Crestar Bank to the Borrower, (2) for short-term
working capital purposes, (3) for Capital Expenditures, (4) to pay such Debt
of the Targets of the Oasis Acquisition as shall be requested to be paid in
writing prior to such Advance and approved by the Agent, or (5) for other
ordinary and customary corporate purposes, and no other purpose.
(c) The Borrower shall submit to the Agent a written request
for Advances in accordance with Section 4.6 hereof. The Agent may also
accept telephonic or oral requests for Advances which are otherwise in
accordance with Section 4.6 hereof, and in so doing, may act upon such
request from anyone believed by the Agent to have the authority to make such
request. Each Bank shall, before 1:00 p.m. (Bethesda, Md., time) on the date
of the borrowing of such Advances as specified in the Borrower's written
request therefor, make available for the account of its Applicable Lending
Office to the Agent at its address referred to in Section 12.2, in same day
funds, such Bank's ratable portion of such Advances. After the Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article 6, the Agent shall deposit such funds to such account as the
Borrower may direct.
(d) The obligation of the Borrower to repay the Advances made
by each Bank, together with interest thereon, shall be evidenced by a
Revolving Note issued to such Bank in a principal amount equal to such Bank's
Advance Commitment. The unpaid principal balance of each Revolving Note
shall be payable to the applicable Bank on the Advance Termination Date.
SECTION 2.2. Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, the
Agent, in reliance on the agreements of the Banks set forth in Section 2.2()
below, may from time to time at the request of the Borrower issue Letters of
Credit for the account of the Borrower from time to time until the Advance
Termination Date; provided, however, that no Letter of Credit shall be issued
if, after such issuance, (1) a prepayment would be required under
Section 2.7(d), or (2) the aggregate amount of outstanding Advances and
Letters of Credit would exceed the Maximum Amount. The form of each such
Letter of Credit shall be approved by the Agent. The Advance Commitment of
each Bank shall be reduced by each Bank's Commitment Percentage of the
Letters of Credit. In no event shall (i) the aggregate amount of outstanding
Letters of Credit exceed $3,000,000 at any time; or (ii) the expiration of
any Letter of Credit extend beyond the earlier of the Advance Termination
Date and the date that is 12 months following the issuance of such Letter of
Credit.
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(b) Prior to the issuance of any Letter of Credit, the Agent
must receive an appropriately completed LC Agreement, executed by the
Borrower, not less than five Business Days prior to the date on which the
Letter of Credit is to be issued, and a written notice describing in
reasonable detail the proposed terms of such Letter of Credit and the nature
of the transactions or obligations to be supported thereby. In the event of
a conflict between the terms of any LC Agreement and the terms of this
Agreement, this Agreement shall control. The Borrower agrees to reimburse
the Agent on demand for any drawing paid by the Agent under a Letter of
Credit, together with interest thereon from the date of such demand at the
rate applicable to Base Rate Advances.
(c) (1) As consideration for the issuance of any Letters of
Credit, the Borrower agrees to pay to the Agent, for the ratable benefit of
the Banks, a letter of credit fee equal to the Applicable LIBOR Margin per
annum on the daily aggregate face amount of all Letters of Credit outstanding
and undrawn. The fee provided for in this Section 2.2()(1) shall be payable
quarterly in arrears on each Quarterly Payment Date, commencing with the
first such date to occur after the Closing Date on which any Letter of Credit
shall be outstanding, and on the Advance Termination Date.
(2) As additional consideration for the issuance of any
Letters of Credit, in addition to the fee payable under Section 2.2()(1)
hereof, the Borrower agrees to pay to the Agent, for its own account, an
opening fee of $200 per Letter of Credit and a fronting fee, in addition to
the processing, administrative, and similar fees of the Agent in connection
with the Letters of Credit, equal to 0.10% per annum on the daily aggregate
face amount of all Letters of Credit outstanding and undrawn; provided,
however, that the minimum fronting fee shall be $500 per Letter of Credit
issued and outstanding. The opening fee shall be paid on the date of
issuance of each Letter of Credit and the fronting fee provided for in this
Section 2.2()(2) shall be payable quarterly in arrears on each Quarterly
Payment Date, commencing with the first such date to occur after the Closing
Date on which any Letter of Credit shall be outstanding, and on the Advance
Termination Date.
(d) The Agent shall irrevocably grant to each Bank, and, to
induce the Agent to issue Letters of Credit hereunder, each Bank irrevocably
agrees to accept and purchase from the Agent, on the terms and conditions
hereinafter stated, for such Bank's own account and risk, an undivided
participation interest equal to such Bank's Advance Commitment Percentage in
the Agent's obligations and rights under each Letter of Credit issued
hereunder and any amounts paid by the Agent thereunder. Each Bank
unconditionally and irrevocably agrees with the Agent that, if any amounts
are paid under any such Letter of Credit for which the Agent is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such Bank shall pay to the Agent, upon demand, at the Agent's
address for notices specified in Section 12.2 below, such Bank's Advance
Commitment Percentage of such amounts paid by the Agent that are not so
reimbursed. Each Bank acknowledges and agrees that its obligation to make
such payment to the Agent is absolute and unconditional and shall not be
affected by any circumstance whatsoever, regardless of whether the conditions
precedent in Article 6 are then
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satisfied, the Advance Commitments are then in effect, a Default or an Event of
Default then exists or all of the Loans have been accelerated.
(e) If any amount required to be paid by any Bank to the Agent
pursuant to Section 2.2() in respect of any unreimbursed portion of any
payment made by the Agent under any Letter of Credit is not paid to the Agent
within three Business Days after the date such payment is due, such Bank
shall pay to the Agent, on demand, an amount equal to the product of (1) such
amount, times (2) the daily average Federal Funds Rate, as quoted by the
Agent, during the period from and including the date such payment is required
to the date on which such payment is immediately available to the Agent,
times (3) a fraction, the numerator of which is the number of days that
elapse during such period and the denominator of which is 360. If any such
amount required to be paid by any Bank pursuant to Section 2.2() is not in
fact made available to the Agent by such Bank within three Business Days
after the date such payment is due, the Agent shall be entitled to recover
from such Bank, on demand, such amount with interest thereon calculated from
such due date at the rate per annum then applicable to Base Rate Advances
hereunder. Further, such Bank shall be deemed to have assigned any and all
payments made of principal and interest on its Loans, and any other amounts
due to it hereunder to the Agent to fund its participation in the Letter of
Credit Obligations that such Bank failed to purchase under this Section until
such amount has been purchased (as a result of assignment or otherwise). A
certificate of the Agent submitted to any Bank with respect to any amounts
owing under this Section shall be conclusive in the absence of manifest error.
(f) Whenever, at any time after the Agent has made payment
under any Letter of Credit and has received from any Bank its pro rata share
of such payment in accordance with Section 2.2(), the Agent receives any
payment related to such Letter of Credit (whether directly from the Borrower
or otherwise, including proceeds of Collateral applied thereto by the Agent),
or any payment of interest on account thereof, the Agent will pay to such
Bank its pro rata share thereof; provided, however, that in the event that
any such payment received by the Agent shall be required to be returned by
the Agent, such Bank shall return to the Agent, for the account of the Agent,
the portion thereof previously distributed by the Agent to it.
(g) The Borrower's obligations under this Section 2.2 shall be
absolute and unconditional under any and all circumstances, irrespective of
any set-off, counterclaim or defense to payment that the Borrower may have or
have had against the Agent or any beneficiary of a Letter of Credit;
provided, however, that nothing in this Section 2.2(g) shall constitute a
waiver of any claim that the Borrower may have against the Agent in
connection with a Letter of Credit under applicable law, including a claim
for wrongful payment. The Borrower also agrees with the Agent that the Agent
shall not be responsible for, and the Borrower's Letter of Credit Obligations
shall not be affected by, among other things, the validity or genuineness of
any documents or of any endorsements thereon, even though such documents
shall prove in fact to be invalid, fraudulent or forged, or any dispute
between or among the Borrower and any beneficiary of any Letter of Credit or
any other party to which such Letter of Credit may be transferred, or any
claims whatsoever of the Borrower against any beneficiary of such Letter of
Credit or any
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such transferee, except for errors or omissions caused by the Agent's gross
negligence or willful misconduct. The Agent shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of Credit,
except for errors or omissions caused by the Agent's gross negligence or willful
misconduct. The Borrower agrees that any action taken or omitted by the Agent
under or in connection with any Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in the Uniform Customs and
Practice for Documentary Credits (1994 Revision), International Chamber of
Commerce Publication No. 500, and, to the extent not inconsistent therewith, the
UCC, shall be binding on the Borrower and shall not result in any liability of
the Agent to the Borrower.
(h) The issuance by the Agent of any modification, renewal or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions under this Section 2.2 to the issuance of new Letters of Credit,
and no such modification, renewal or supplement shall be issued hereunder
unless either (1) the respective Letter of Credit would have complied with
such conditions had it originally been issued hereunder in such modified or
supplemented form or (2) each Bank shall have consented thereto.
SECTION 2.3. [INTENTIONALLY DELETED]
SECTION 2.4. Oasis Acquisition Loan.
(a) Each Bank severally agrees, subject to the terms and
conditions of this Agreement, to make an Acquisition Loan to the Borrower on
the Closing Date in an aggregate principal amount not to exceed the amount of
such Bank's Oasis Acquisition Loan Commitment.
(b) The proceeds of the Oasis Acquisition Loan shall be used to
(1) finance the Oasis Acquisition by an Acquisition Company pursuant to the
terms of an Acquisition Agreement, which terms shall be satisfactory to the
Agent, and (2) to pay closing fees (which may include those expenses that are
reasonably likely to be incurred within 90 days after the closing of such
Acquisition Loan and are paid within six months of such closing) and no other
purpose.
(c) The Borrower shall submit to the Agent a written request
for the Oasis Acquisition Loan in accordance with Section 4.6 hereof. Each
Bank shall, before 1:00 p.m. (Bethesda, Md., time) on the date of the
borrowing of such Loan as specified in the Borrower's written request
therefor, make available for the account of its Applicable Lending Office to
the Agent at its address referred to in Section 12.2 in same day funds, such
Bank's ratable portion of such Loan. After the Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Article 6, the
Agent shall deposit such funds to such account as the Borrower may direct.
(d) [INTENTIONALLY DELETED]
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(e) The obligations of the Borrower to repay the Oasis
Acquisition Loan, together with interest thereon, shall be evidenced by an
Oasis Acquisition Note issued to each Bank in a principal amount equal to the
Oasis Acquisition Loan made by such Bank. The principal amount of the Oasis
Acquisition Note shall be payable in 60 equal consecutive monthly
installments of principal, payable on each Oasis Acquisition Loan Payment
Date, beginning on the first Oasis Acquisition Loan Payment Date. The amount
of each principal installment shall be equal to the original principal
balance of the Oasis Acquisition Loan divided by 60. If not sooner paid, the
entire unpaid principal balance of the Oasis Acquisition Note and all accrued
and unpaid interest thereon shall be due and payable in full on the date on
which the last scheduled principal installment under the Oasis Acquisition
Note is due.
(f) The disbursement of the Oasis Acquisition Loan shall occur
simultaneously with the closing of the transaction contemplated by the
applicable Acquisition Agreement. The Acquisition Company shall be the owner
of all of the Acquired Assets free and clear of all Liens, except Liens
permitted by this Agreement. The Acquisition Company shall have performed
all of its obligations to the sellers of the Targets of the Oasis Acquisition
under such Acquisition Agreement required to be performed on or before the
closing thereof, which shall be on the Closing Date. Each of the Acquisition
Company and any Target which, upon consummation of the Oasis Acquisition,
becomes a Subsidiary of the Borrower, shall become a Loan Party pursuant to
the provisions of Section 9.1.
SECTION 2.5. Interest. The Borrower shall pay interest on the
unpaid principal amount of each Loan from the date of such Loan until such
principal amount shall be paid in full, on each Interest Payment Date, and on
the Advance Termination Date and the maturity date of the Oasis Acquisition
Loan, as applicable, at the following rates per annum:
(a) Base Rate Loans. During such periods as such Loan is a
Base Rate Loan, a rate per annum equal at all times to the Base Rate plus the
Applicable Base Rate Margin in effect from time to time.
(b) Other Loans. During such periods as such Loan is a LIBOR
Loan or a Floating LIBOR Loan, at a rate per annum equal to, as applicable,
the Floating LIBOR Rate or the Adjusted LIBOR for the applicable Interest
Period, plus the Applicable LIBOR Margin in effect from time to time.
SECTION 2.6. Designation, Conversion or Continuation of LIBOR
Loans. The Borrower shall have the right (a) to designate any portion of an
Advance or the Oasis Acquisition Loan to be a LIBOR Loan, (b) to Continue any
LIBOR Loan or portion thereof into a subsequent Interest Period, and (c) to
Convert any Base Rate Loan or Floating LIBOR Loan into a LIBOR Loan, subject
in each case to the selection of Interest Periods in accordance with the
definition thereof, and the provisions set forth below. Each such
designation, Conversion or Continuation shall be made upon prior irrevocable
written or telephonic notice to the Agent. Each designation, Continuation
and Conversion shall be subject to the following:
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(1) in the case of a designation, Continuation or
Conversion of less than all Advances and the Oasis Acquisition Loan, the
aggregate principal amount of Loans designated, Continued or Converted shall
not be less than $500,000 or an integral multiple of $100,000 above $500,000;
(2) if a Loan is being Continued as a LIBOR Loan, the
first Interest Period with respect thereto shall commence on the date of such
Continuation;
(3) if a Loan or a portion thereof is being designated as
or Converted to a LIBOR Loan, the first Interest Period with respect thereto
shall commence on the second Business Day following the Agent's receipt of
the notice required above;
(4) a LIBOR Loan may be Converted to a Base Rate Loan or
Floating LIBOR Loan only on the last day of an Interest Period;
(5) each request for a LIBOR Loan or a Continuation
thereof which shall fail to state an applicable Interest Period, shall be
deemed to be a request for an Interest Period of a one month duration; and
(6) subject to Section 4.6, a Base Rate Loan may be
Converted to a Floating LIBOR Loan, and vice versa, at any time.
In the event that the Borrower shall not give the required notice to
designate a Loan as a LIBOR Loan, continue a Loan as a LIBOR Loan into a
subsequent Interest Period, or Convert any Loan into a LIBOR Loan, such Loan
(unless repaid) shall be made as a Floating LIBOR Loan or shall automatically
be or become a Floating LIBOR Loan at the expiration of the then-current
Interest Period, as applicable.
SECTION 2.7. Prepayments.
(a) Subject to Section 4.5, the Borrower shall have the right
at any time and from time to time to prepay any Base Rate Loan or Floating
LIBOR Loan, in whole or in part, without premium or penalty.
(b) Subject to Section 4.5, the Borrower shall have the right
to prepay any LIBOR Loan, in whole or in part, on the last day of the
then-current Interest Period in effect for such LIBOR Loan. The Borrower
shall not prepay any LIBOR Loan except at the end of the Interest Period in
effect for such Loan.
(c) Partial prepayments of the Oasis Acquisition Loan shall be
applied to installments due thereunder in the inverse order of their
maturities. Prepayments of the Oasis Acquisition Loan may not be reborrowed
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(d) The Borrower immediately shall, first prepay the Advances
and, second, provide cover for the Letters of Credit as specified below, to
the extent that the Borrowing Base is less than 100% of Borrowing Base Credit
Extensions. In the event the Borrower shall be required to provide cover for
the Letters of Credit, the Borrower shall effect the same by paying to the
Agent immediately available funds in an amount equal to the required amount,
which funds shall be retained by the Agent in a cash collateral account (as
collateral security in the first instance for the Letter of Credit
Obligations) until such time as the Letters of Credit shall have been
terminated and all of such Letter of Credit Obligations are paid in full.
SECTION 2.8. Reduction of Commitments.
(a) The Oasis Acquisition Loan Commitment shall be
automatically reduced on the date of the disbursement of the Oasis
Acquisition Loan to Zero Dollars ($0.00).
(b) The Borrower shall have the right at any time and from time
to time (1) so long as no Loans, Letters of Credit or Obligations are
outstanding, to terminate the Advance Commitments, and (2) to reduce the
aggregate unused amount of the Advance Commitments (for which purpose use of
the Advance Commitment shall be deemed to include the aggregate amount of
outstanding Letters of Credit); provided that (i) the Borrower shall give
notice of each such termination or reduction as provided in Section 4.5
hereof, and (ii) each partial reduction shall be in an aggregate amount equal
to at least $1,000,000 (or a larger integral multiple of $500,000).
(c) Any Advance Commitment once terminated or reduced may not
be reinstated.
ARTICLE 3
YIELD PROTECTION, ETC.
SECTION 3.1. Suspension of LIBOR Loans.
(a) If the Agent is unable to determine LIBOR for any LIBOR
Loan for any reason, (1) the Agent shall forthwith notify the Borrower and
the Banks of such determination, (2) any request for LIBOR Loans shall be
withdrawn or changed to a request for Base Rate Loans, at the discretion of
the Borrower, (3) each LIBOR Loan will automatically, on the last day of the
then-existing Interest Period therefor, Convert into a Base Rate Loan, and
(4) the obligation of the Banks to make, or Continue Loans as, or to Convert
Loans into, LIBOR Loans shall be suspended until the Agent shall notify the
Borrower and the Banks that the circumstances causing such suspension no
longer exist.
(b) If, with respect to any LIBOR Loan, any Bank notifies the
Agent that LIBOR for any Interest Period will not adequately reflect the cost
to such Bank of making, funding or maintaining its respective LIBOR Loans for
such Interest Period, the Agent shall
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forthwith so notify the Borrower and the Banks, whereupon (1) each LIBOR Loan
will automatically, on the last day of the then-existing Interest Period
therefor, Convert into a Base Rate Loan, (2) any request for LIBOR Loans shall
be withdrawn or changed to a request for Base Rate Loans, at the discretion of
the Borrower, and (3) the obligation of the Banks to make, or Continue Loans as,
or to Convert Loans into, LIBOR Loans shall be suspended until the Agent shall
notify the Borrower and the Banks that the circumstances causing such suspension
no longer exist.
SECTION 3.2. Additional Costs.
(a) The Borrower shall pay directly to each Bank from time to
time such amounts as such Bank may determine to be necessary to compensate
such Bank for any costs that such Bank determines are attributable to its
making or maintaining of any LIBOR Loans or its obligation to make any LIBOR
Loans hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of any of such Loans or such obligation (such increases
in costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change that:
(1) shall subject any Bank (or its Applicable Lending
Office for any of such Loans) to any tax, duty or other charge in respect of
such Loans or its Notes or changes the basis of taxation of any amounts
payable to such Bank under this Agreement or its Notes in respect of any such
Loans (excluding changes in the rate of tax on the overall net income of such
Bank or of such Applicable Lending Office by the jurisdiction in which such
Bank has its principal office or such Applicable Lending Office); or
(2) imposes or modifies any reserve, special deposit or
similar requirements (other than the reserve requirement utilized in the
determination of the Adjusted LIBOR for such Loan) relating to any extensions
of credit or other assets of, or any deposits with or other liabilities of,
such Bank (including, without limitation, any of such Loans or any deposits
referred to in the definition of "LIBOR" in Section 1.1 hereof), or any
commitment of such Bank (including, without limitation, the Advance
Commitments of such Bank hereunder); or
(3) imposes any other condition affecting this Agreement
or its Notes (or any of such extensions of credit or liabilities) or its
Advance Commitments.
(b) Without limiting the effect of the provisions of
paragraph (a) of this Section 3.2, in the event that, by reason of any
Regulatory Change, any Bank either (1) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Bank that includes deposits by
reference to which the interest rate on LIBOR Loans is determined as provided
in this Agreement or a category of extensions of credit or other assets of
such Bank that includes LIBOR Loans, or (2) becomes subject to restrictions
on the amount of such a category of liabilities or assets that it may hold,
then, if such Bank so elects by notice to the Borrower (with a copy to the
Agent), the obligation
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of such Bank to make or Continue, or to Convert Base Rate Loans into, LIBOR
Loans hereunder shall be suspended until such Regulatory Change ceases to be in
effect (in which case the provisions of Section 3.1 hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of
this Section 3.2 (but without duplication), the Borrower shall pay directly
to each Bank from time to time on request such amounts as such Bank may
determine to be necessary to compensate such Bank (or, without duplication,
the bank holding company of which such Bank is a subsidiary) for any costs
that it determines are attributable to the maintenance by such Bank (or any
Applicable Lending Office or such bank holding company), pursuant to any law
or regulation or any interpretation, directive or request (whether or not
having the force of law and whether or not failure to comply therewith would
be unlawful) of any court or governmental or monetary authority (1) following
any Regulatory Change or (2) implementing any risk-based capital guideline or
other requirement (whether or not having the force of law and whether or not
the failure to comply therewith would be unlawful) heretofore or hereafter
issued by any government or governmental or supervisory authority
implementing at the national level the Basle Accord (including, without
limitation, the Final Risk-Based Capital Guidelines of the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part
225, Appendix A) and the Final Risk-Based Capital Guidelines of the Office of
the Comptroller of the Currency (12 C.F.R. Part 3, Appendix A)), of capital
in respect of its Advance Commitments or Loans (such compensation to include,
without limitation, an amount equal to any reduction of the rate or return on
assets or equity of such Bank (or any Applicable Lending Office or such bank
holding company) to a level below that which such Bank (or any Applicable
Lending Office or such bank holding company) could have achieved but for such
law, regulation, interpretation, directive or request). For purposes of this
Section 3.2 and Section 3.4 hereof, "Basle Accord" shall mean the proposals
for risk-based capital framework described by the Basle Committee on Banking
Regulations and Supervisory Practices in its paper entitled "International
Convergence of Capital Measurement and Capital Standards" dated July 1988, as
amended, modified and supplemented and in effect from time to time or any
replacement thereof.
(d) Each Bank shall notify the Borrower of any event occurring
after the date of this Agreement entitling such Bank to compensation under
paragraph (a) or (c) of this Section 3.2 as promptly as practicable, but in
any event within 45 days, after such Bank obtains actual knowledge thereof;
provided that (1) if any Bank fails to give such notice within 45 days after
it obtains actual knowledge of such an event, such Bank shall, with respect
to compensation payable pursuant to this Section 3.2 in respect of any costs
resulting from such event, only be entitled to payment under this Section 3.2
for costs incurred from and after the date 45 days prior to the date that
such Bank does give such notice and (2) each Bank will designate a different
Applicable Lending Office for the Loans of such Bank affected by such event
if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Bank, be
disadvantageous to such Bank, except that such Bank shall have no obligation
to designate an Applicable Lending Office located in the United States of
America. Each Bank will furnish to the Borrower a certificate for
compensation under paragraph (a) or (c)
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of this Section 3.2. Determinations and allocations by any Bank for purposes of
this Section 3.2 of the effect of any Regulatory Change pursuant to paragraph
(a) or (b) of this Section 3.2, or of the effect of capital maintained pursuant
to paragraph (c) of this Section 3.2, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Bank
under this Section 3.2, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis.
SECTION 3.3. Compensation. The Borrower shall pay to the Agent for
account of each Bank, upon the request of such Bank through the Agent, such
amount or amounts as shall be sufficient (in the reasonable opinion of such
Bank) to compensate it for any loss, cost or expense that such Bank determines
is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion
of a LIBOR Loan made by such Bank for any reason (including, without
limitation, a mandatory prepayment of the Loans pursuant to Section 2.7(d) or
3.6 hereof or the acceleration of the loans pursuant to Section 10.1 hereof)
on a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any of the conditions precedent specified
in Article 6 hereof to be satisfied) to borrow a LIBOR Loan from such Bank on
the date for such borrowing specified in the relevant request for borrowing
given pursuant to Section 4.6 hereof.
Without limiting the effect of the preceding sentence, such compensation
shall include an amount equal to the excess, if any, of (i) the amount of
interest that otherwise would have accrued on the principal amount so paid,
prepaid, Converted or not borrowed for the period from the date of such
payment, prepayment, Conversion or failure to borrow to the last day of the
then current Interest Period for such Loan (or, in the case of a failure to
borrow, the Interest Period for such Loan that would have commenced on the
date specified for such borrowing) at the applicable rate of interest for
such Loan provided for herein over (ii) the amount of interest that otherwise
would have accrued on such principal amount at a rate per annum equal to the
interest component of the amount such Bank would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable
to such principal amount and with maturities comparable to such period (as
reasonably determined by such Bank).
SECTION 3.4. Additional Costs in Respect of Letters of Credit.
(a) Without limiting the obligations of the Borrower under
Section 3.2 hereof (but without duplication), if as a result of any
Regulatory Change or any risk-based capital guideline or other requirement
heretofore or hereafter issued by any government or governmental or
supervisory authority implementing at the national level the Basle Accord
there shall be imposed, modified or deemed applicable any tax, reserve,
special deposit, capital adequacy or similar requirement against or with
respect to or measured by reference to Letters of Credit
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issued or to be issued hereunder and the result shall be to increase the cost to
any Bank or Banks of issuing (or purchasing participations in) or maintaining
its obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Bank hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Bank's or Banks' reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Bank or Banks (through the Agent), the
Borrower shall pay immediately to the Agent for account of such Bank or Banks,
from time to time as specified by such Bank or Banks (through the Agent), such
additional amounts as shall be sufficient to compensate such Bank or Banks
(through the Agent) for such increased costs or reductions in amount. A
statement as to such increased costs or reductions in amount incurred by any
such Bank or Banks, submitted by such Bank or Banks to the Borrower shall be
conclusive in the absence of manifest error as to the amount thereof.
(b) Each Bank shall notify the Borrower of any event occurring
after the date of this Agreement entitling such Bank to compensation under
paragraph (a) of this Section 3.4 as promptly as practicable, but in any
event within 45 days, after such Bank obtains actual knowledge thereof;
provided that (1) if any Bank fails to give such notice within 45 days after
it obtains actual knowledge of such an event, such Bank shall, with respect
to compensation payable pursuant to this Section 3.4 in respect of any costs
resulting from such event, only be entitled to payment under this Section 3.4
for costs incurred from and after the date 45 days prior to the date that
such Bank does give such notice and (2) each Bank will designate a different
Applicable Lending Office for the Letters of Credit participations of such
Bank affected by such event if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole opinion of
such Bank, be disadvantageous to such Bank, except that such Bank shall have
no obligation to designate an Applicable Lending Office located in the United
States of America. Each Bank will furnish to the Borrower a certificate for
compensation under paragraph (a) of this Section 3.4. Determinations and
allocations by any Bank for purposes of this Section 3.4 of the effect of any
Regulatory Change pursuant to paragraph (a) of this Section 3.4, or of the
effect of capital maintained pursuant to paragraph (c) of Section 3.4, on its
costs or rate of return of issuing or participating in, or maintaining
Letters of Credit or its obligation to issue or participate in Letters of
Credit, or on amounts receivable by it in respect of Letters of Credit, and
of the amounts required to compensate such Bank under this Section 3.4, shall
be conclusive, provided that such determinations and allocations are made on
a reasonable basis.
SECTION 3.5. U.S. Taxes. The Borrower agrees to pay to each Bank
that is not a U.S. Person such additional amounts as are necessary in order
that the net payment of any amount due to any Bank that is a non-U.S. Person
hereunder after deduction for or withholding in respect of any U.S. Tax
imposed with respect to such payment (or in lieu thereof, payment of such
U.S. Tax by such non-U.S. Person), will not be less than the amount stated
herein to be then due and payable, provided that the foregoing obligation to
pay such additional amounts shall not apply:
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<PAGE> 38
(a) to any payment to a Bank hereunder unless such Bank is, on
the date hereof (or on the date it becomes a Bank as provided in Section
12.19 hereof) and on the date of any change in the Applicable Lending Office
of such Bank, either entitled to submit a Form 1001 (relating to such Bank
and entitling it to a complete exemption from withholding on all interest to
be received by it hereunder in respect of the Loans) or Form 4224 (relating
to all interest to be received by such Bank hereunder in respect of the
Loans), or
(b) to any U.S. Tax imposed solely by reason of the failure by
such non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or regulation of
the United States of America as a precondition to relief or exemption from
such U.S. Tax.
For the purposes of this Section 3.5, "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a
claim to which such Form relates), "U.S. Person" shall mean a citizen,
national or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under any laws of the
United States of America, or any estate or trust that is subject to Federal
income taxation regardless of the source of its income and "U.S. Taxes" shall
mean any present or future tax, assessment or other charge or levy imposed by
or on behalf of the United States of America or any taxing authority thereof
or therein. Within 30 days after paying any amount to the Agent or any Bank
from which it is required by law to make any deduction or withholding, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Borrower shall
deliver to the Agent for delivery to such non-U.S. Person evidence
satisfactory to such Person of such deduction, withholding or payment (as the
case may be). A certificate as to the amount of such increased cost or
additional tax, submitted to the Borrower and the Agent by such Bank, shall
be conclusive and binding for all purposes, absent manifest error.
SECTION 3.6. Illegality. Notwithstanding any other provision of
this Agreement, if any Bank shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it
is unlawful, for any Bank to perform its obligations hereunder to make LIBOR
Loans or to fund or maintain LIBOR Loans hereunder, (1) the obligation of the
Banks to make, to Continue Loans as or to Convert Loans or portions thereof
into LIBOR Loans, shall be suspended until the Agent shall notify the
Borrower and the Banks that the circumstances causing such suspension no
longer exist, and (2) the Borrower shall forthwith prepay in full all
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LIBOR Loans of all Banks then outstanding, together with interest accrued
thereon and any amount payable pursuant to Section 3.3.
ARTICLE 4
PAYMENTS, COMPUTATIONS AND CERTAIN NOTICES
SECTION 4.1. Payments.
(a) The Borrower shall make each payment hereunder and under
the Notes and the LC Agreements without setoff, deduction or counterclaim of
any kind not later than 11:00 a.m. (Bethesda, Md. time) on the day when due
in U.S. dollars to the Agent at its address referred to in Section 12.2 in
same day funds. Except to the extent otherwise provided herein, the Agent
will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest on the Advances, the Acquisition Loans or
fees ratably to the Banks for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount
payable to any Bank to such Bank for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement.
(b) If any payment of principal, interest or fees is not made
within ten days of its due date, the Borrower agrees to pay to the Agent, for
the ratable benefit of the Banks, a late charge equal to 5% of the amount of
the payment, provided that the foregoing shall not constitute a waiver of the
right of the Agent or the Majority Banks to declare an Event of Default under
Section 10.1(a). Upon the occurrence of an Event of Default and during the
continuation of such Event of Default, interest shall accrue on the Loans and
the Letter of Credit Obligations representing amounts paid by the Agent under
a Letter of Credit for which it has not been reimbursed, and the fee on the
undrawn Letters of Credit shall accrue, at a per annum rate of 2% above the
rate otherwise in effect.
(c) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or fee, as
the case may be; provided, however, if such extension would cause payment of
interest on or principal of LIBOR Loans to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
SECTION 4.2. Commitment Fees. In consideration of the Loans to be made by
the Banks, the Borrower agrees to pay to the Agent for the ratable benefit of
each Bank a commitment fee equal to the Applicable Unused Fee Percentage per
annum on the daily aggregate unused amount of the Advance Commitment (for which
purpose the use of the Advance Commitment shall include the outstanding amount
of Advances and Letters of Credit). The fees provided for in this Section 4.2
shall be calculated and shall be payable quarterly in arrears on each Quarterly
Payment Date, commencing with the first such date to occur after the Closing
Date and on the Advance Termination Date.
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SECTION 4.3. Agent's Fee. [INTENTIONALLY DELETED]
SECTION 4.4. Computations. All computations of interest, fees and other
charges hereunder and under any Loan Document shall be made by the Agent on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest or other amounts are payable. Each determination by
the Agent of an interest rate or fees hereunder shall be conclusive and binding
for all purposes, absent manifest error.
SECTION 4.5. Minimum Amounts. Except for mandatory prepayments
made pursuant to Section 2.7(d) hereof and Conversions or prepayments made
pursuant to Sections 3.1, 3.2 and 3.6 hereof, each borrowing, Conversion and
partial prepayment of principal of Loans shall be in an aggregate amount at
least equal to $500,000 or a larger multiple of $100,000 (borrowings,
Conversions or prepayments of or into Loans of different Types or, in the
case of LIBOR Loans, having different Interest Periods at the same time
hereunder to be deemed separate borrowings, Conversions and prepayments for
purposes of the foregoing, one for each Type or Interest Period), provided
that the aggregate principal amount of LIBOR Loans having the same Interest
Period shall be in an amount at least equal to $500,000 or a larger multiple
of $100,000 and, if any LIBOR Loans would otherwise be in a lesser principal
amount for any period, such Loans shall be Floating LIBOR Loans during such
period.
SECTION 4.6. Certain Notices. In addition to written request for
the Oasis Acquisition Loan required by Section 2.4, notices by the Borrower
to the Agent of terminations or reductions of the Advance Commitments, of
borrowings, Conversions, Continuations and optional prepayments of Loans and
of Types of Loans and of the duration of Interest Periods shall be in
writing, shall be irrevocable and shall be effective only if received by the
Agent not later than 10:00 a.m. Bethesda, Md., time on the number of Business
Days prior to the date of the relevant termination, reduction, borrowing,
Conversion, Continuation or prepayment or the first day of such Interest
Period specified below:
<TABLE>
<CAPTION>
Notice Number of Business Days Prior
------ -----------------------------
<S> <C>
Termination or reduction of Advance 3
Commitments
Borrowing or prepayment of, or
Conversions into, Base Rate Loans or 1
Floating LIBOR Loans
Borrowing or prepayment of, Conversions
into, Continuations as, or duration of 3
Interest Period for, LIBOR Loans
</TABLE>
Each such notice of termination or reduction shall specify the amount by
which the Advance Commitment is to be terminated or reduced. Each such
notice of borrowing, Conversion, Continuation or optional prepayment shall
specify the Loans to be borrowed, Converted,
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Continued or prepaid and the amount (subject to Section 4.5 hereof) and Type of
each Loan to be borrowed, Converted, Continued or prepaid and the date of
borrowing, Conversion, Continuation or optional prepayment (which shall be a
Business Day). Each such notice of the duration of an Interest Period shall
specify the Loans to which such Interest Period is to relate. The Agent shall
promptly notify the Banks of the contents of each such notice. In the event that
the Borrower fails to select the Type of Loan, or the duration of any Interest
Period for any LIBOR Loan, within the time period and otherwise as provided in
this Section 4.6, such Loan (if outstanding as a LIBOR Loan) will be
automatically Converted into a Floating LIBOR Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Floating LIBOR
Loan) will remain as, or (if not then outstanding) will be made as, a Floating
LIBOR Loan.
SECTION 4.7. Non-Receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Bank or the Borrower (the "Payor") prior to the
date on which the Payor is to make payment to the Agent of (in case of a
Bank) the proceeds of a Loan to be made by such Bank hereunder or (in the
case of the Borrower) a payment to the Agent for account of one or more of
the Banks hereunder (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that the Payor does
not intend to make the Required Payment to the Agent, the Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available
to the intended recipient(s) on such date; and, if the Payor has not in fact
made payment, the recipient shall, on demand, repay to the Agent the amount
so made available together with interest thereon in respect of each day
during the period commencing on the date (the "Advance Date") such amount was
so made available by the Agent until the date the Agent recovers such amount
at a rate per annum equal to the Federal Funds Rate for such day and, if such
recipient(s) shall fail promptly to make such payment, the Agent shall be
entitled to recover such amount, on demand, from the Payor, together with
interest as aforesaid, provided that if neither the recipient(s) nor the
Payor shall return the Required Payment to the Agent within five Business
Days of the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment from and after such fifth
Business Day as follows:
(a) if the Required Payment shall represent a payment to be
made by the Borrower to the Banks, the Borrower and the recipient(s) shall
each be obligated to pay interest in respect of the Required Payment at a
rate per annum equal to the Base Rate in effect from time to time plus 2%
(and, in case the recipient(s) shall return the Required Payment to the
Agent, without limiting the obligation of the Borrower under Section 4.1(b)
hereof to pay interest to such recipient(s) at the default rate in respect of
the Required Payment); and
(b) if the Required Payment shall represent proceeds of a Loan
to be made by the Banks to the Borrower, the Payor and the Borrower shall
each be obligated to pay interest in respect of the Required Payment at a
rate per annum equal to the Base Rate in effect from time to time plus 2%
(and, in case the Borrower shall return the Required Payment to the Agent,
without limiting any claim the Borrower may have against the Payor in respect
of the Required Payment).
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<PAGE> 42
SECTION 4.8. Sharing of Payments, etc. Except to the extent
otherwise expressly provided herein, (a) Advances and the Oasis Acquisition
Loan shall be made by the Banks pro rata in accordance with their respective
Commitment Percentages, (b) each reduction in the Advance Commitment shall be
made pro rata in accordance with the respective amounts thereof, (c) each
payment or prepayment of the principal of or interest on the Advances and the
Oasis Acquisition Loan or of fees shall be made for the account of the Banks
pro rata in accordance with the respective amounts thereof then due and
payable and held by them, provided that if immediately prior to giving effect
to any such payment the outstanding principal amount of Advances and the
Oasis Acquisition Loan shall not be held by the Banks pro rata in accordance
with their respective Commitment Percentage, then such payment shall be
applied to such Loans in such manner as shall result, as nearly as
practicable, in the outstanding principal amount of such Loans being held pro
rata in accordance with their respective Commitment Percentage, (d) the
making, Conversion and Continuation of Advances and the Oasis Acquisition
Loan of a particular Type (other than Conversions provided for in
Sections 3.1, 3.2 and 3.6) shall be made pro rata among the Banks in
accordance with their respective Commitment Percentage and the then current
Interest Period for each Bank's portion of each Loan of such Type shall be
conterminous; and (e) the Bank's participations in, and payment obligations
in respect of, Letters of Credit shall be pro rata in accordance with their
respective Commitment Percentage. If any Bank shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it or on account of
its share of the Oasis Acquisition Loan (other than pursuant to Sections 3.2,
3.3, 3.4 and 3.5) in excess of its ratable share of payments on account of
the Advances or the Oasis Acquisition Loan obtained by all the Banks, such
Bank shall forthwith purchase from the other Banks such participations in the
Advances made by them or in the Oasis Acquisition Loan as shall be necessary
to cause such purchasing Bank to share the excess payment ratably with each
of them; provided, however, that if all or any portion of such excess payment
is thereafter recovered from such purchasing Bank, such purchase from each
Bank shall be rescinded and such Bank shall repay to the purchasing Bank the
purchase price to the extent of such recovery together with an amount equal
to such Bank's ratable share (according to the proportion of (1) the amount
of such Bank's required repayment to (2) the total amount so recovered from
the purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower
agrees that any Bank so purchasing a participation from another Bank pursuant
to this Section 4.8 may, to the fullest extent permitted by law, exercise all
of its rights of payment (including the right of set-off) with respect to
such participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation.
SECTION 4.9. Several Obligations. No Bank shall be responsible
for the failure of any other Bank to make a Loan or to perform any other
obligation to be made or performed by such other Bank hereunder, and the
failure of any Bank to make a Loan or to perform any other obligation to be
made or performed by it hereunder shall not relieve the obligation of any
other Bank to make any Loan or to perform any other obligation to be made or
performed by such other Bank.
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<PAGE> 43
SECTION 4.10. Evidence of Obligations. The Agent shall maintain
accounts, in which it shall record (a) the date, amount, Type, interest rate
and duration of Interest Period ( if applicable) of each Loan and Letter of
Credit Obligation, (b) the amount of any principal, interest and fee due and
payable or to become due and payable hereunder, and (c) the amount of any sum
received by the Agent hereunder. The entries maintained in such accounts
shall be prima facie evidence of the existence of the amounts recorded
therein, provided that the failure of the Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the
Borrower to repay all amounts owed by it in accordance with the terms of this
Agreement and the other Loan Documents.
SECTION 4.11. Crediting of Payments and Proceeds. In the event
that the Borrower shall fail to pay any of the Obligations when due and the
Obligations have been accelerated pursuant to Section 10.1, all payments
received by the Banks upon the Notes and the other Obligations and all net
proceeds from the enforcement of the Obligations shall be applied first to
all expenses then due and payable by the Borrower hereunder, then to all
indemnity obligations then due and payable by the Borrower hereunder, then to
all Agent's fees then due and payable, then to all other fees and commissions
then due and payable, then to accrued and unpaid interest on the Revolving
Notes, the Oasis Acquisition Note and the Letter of Credit Obligations (pro
rata in accordance with all such amounts due), then to the principal amount
of the Revolving Notes, the Oasis Acquisition Note and the Letter of Credit
Obligations, and then to the cash collateral account described in Section
10.l to the extent of any Letters of Credit then outstanding, in that order.
ARTICLE 5
SECURITY
--------
SECTION 5.1. Collateral. The Obligations shall be secured by a
first Lien on all of the Collateral of each Loan Party, granted to the Agent
for the ratable benefit of the Banks. Each such Lien will be created by and
subject to the provisions of (a) a Security Agreement, in substantially the
form of Exhibit F attached hereto (each, a "Security Agreement"), (b) an
Intellectual Property Assignment, in substantially the form of Exhibit G
attached hereto (each, an "Intellectual Property Assignment"),and (c) with
respect to any Real Estate, a Mortgage.
SECTION 5.2. Assignments. Each Loan Party shall execute all
agreements, instruments and documents and shall perform all acts that the
Agent may require with respect to Receivables owing by the Government to
ensure compliance with the Assignment of Claims Act.
SECTION 5.3. Subsidiary Guaranty. The Obligations shall be
guaranteed by each Subsidiary that is formed or Acquired on or subsequent to
the date of this Agreement in accordance with the provisions of a Guaranty
Agreement in substantially the form of Exhibit H attached hereto (each, a
"Subsidiary Guaranty").
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ARTICLE 6
CONDITIONS OF LENDING
---------------------
SECTION 6.1. Condition Precedent to Initial Disbursement. The
obligation of any Bank to make an initial Advance or the Oasis Acquisition
Loan, as applicable, or of the Agent to issue a Letter of Credit, is subject
to the condition precedent that the Agent shall have received on or before
the day of the initial Loan or the issuance of the initial Letter of Credit
the following, each in form and substance satisfactory to the Agent:
(a) This Agreement, executed by all of the parties hereto.
(b) The Revolving Notes payable to the order of the Banks.
(c) A Security Agreement and an Intellectual Property
Assignment, duly executed by the Loan Parties, together with:
(1) Sufficient signed original financing statements to be
filed under the Uniform Commercial Code of all jurisdictions that the Agent
may deem necessary or desirable in order to perfect the security interests in
the Collateral,
(2) Evidence that all filings have been made in the U.S.
Copyright Office and the U.S. Patent and Trademark Office necessary to
perfect the assignments created by the Intellectual Property Assignment,
(3) Completed lien search requests from all jurisdictions
referred to in Section 6.1((c))((1)) above and for all Intellectual Property
filings in the U.S. Copyright Office and the U.S. Patent and Trademark Office,
(4) UCC-3 termination statements for all financing
statement filings, and releases of assignments under the Assignment of Claims
Act, that cover any portion of the Collateral except as otherwise permitted
hereby,
(5) Such landlord and mortgagee waivers as the Agent
shall request with respect to any landlord or mortgagee that may claim an
interest in any of the Collateral,
(6) Evidence of the insurance required by the terms of
the Security Agreement, and
(7) Evidence that all other actions necessary or, in the
opinion of the Agent, desirable to perfect and protect the priority of the
security interests in the Collateral of the Loan Parties created by the
Security Agreements and the Intellectual Property Assignments have been taken.
(d) All of the documents and instruments required by Section
8.1(m) with respect to Real Estate owned by the Loan Parties on the Closing
Date.
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(e) Certified copies of the resolutions of the Board of
Directors of each of the Loan Parties approving each Loan Document to which
it is a party, and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to each such Loan
Document.
(f) A certificate of the Secretary or an Assistant Secretary of
each of the Loan Parties certifying the names and true signatures of the
officers thereof authorized to sign each Loan Document to which it is a party
and the other documents to be delivered hereunder.
(g) Certified copies of the articles of incorporation and
bylaws of each of the Loan Parties, together with a good standing or
qualification certificate, dated not more than 30 days prior to the date
hereof, from the appropriate state official of any state in which the
Borrower is incorporated or qualified to do business.
(h) A Borrowing Base Certificate, an Aging and an Inventory
schedule, all of which shall be as of June 30, 1998, and shall be in form and
substance satisfactory to the Agent.
(i) A Compliance Certificate for the period ended on June 30,
1998.
(j) A favorable opinion of McGuire, Woods, Battle & Boothe,
counsel for the Loan Parties, in form and substance acceptable to the Agent.
(k) The .75% non-refundable loan origination fees set forth in
the commitment letter between the Borrower and the Agent dated July 23, 1998.
(l) Payment of all fees, costs and expenses related to the
Loans and the Loan Documents, including, but not limited to, the reasonable
fees and expenses of counsel to the Agent.
(m) [Intentionally Deleted].
(n) A satisfactory reference from Epson related to the
Borrower's performance under the Epson Contract as of the Closing Date.
(o) A satisfactory review by the Agent's counsel of all
transaction documents related to the Oasis Acquisition.
SECTION 6.2. Conditions Precedent to Each Borrowing. The
obligation of each Bank to make a Loan, and the obligation of the Agent to
issue any Letter of Credit, shall be subject to the further conditions
precedent that on the date of such Loan or the issuance of any Letter of
Credit:
(a) The following statements shall be true:
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(1) The representations and warranties contained in each
Loan Document are correct on and as of the date of disbursement of such Loan
or issuance of such Letter of Credit, before and after giving effect to such
Loan and the application of the proceeds therefrom and to the issuance of
such Letter of Credit, as though made on and as of such date (or if such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date), and
(2) No Default or Event of Default has occurred and is
continuing, or would result from such Loan or from the application of the
proceeds therefrom or from the issuance of such Letter of Credit;
(b) With respect to each Letter of Credit, the Borrower shall
have complied with the provisions of Section 2.2;
(c) If required by the Agent for any Advance or Letter of
Credit, the Borrower shall have delivered to the Agent, a current (as of a
date no more than 15 days prior to the date of said Loan) Borrowing Base
Certificate, duly executed by the chief financial officer of the Borrower and
appropriately completed, and a current (as of a date no more than 30 days
prior to the date of said Loan) Aging and valuation of Inventory;
(d) For the Oasis Acquisition Loan, the Agent shall receive the
Oasis Acquisition Note, appropriately completed, and payable to each Bank; and
(e) The Agent shall have received such other approvals,
opinions or documents as the Agent or any Bank through the Agent may
reasonably request, and all legal matters incident to the Loans and the
Letter of Credit shall be satisfactory to counsel for the Agent.
Each borrowing by the Borrower and each request for a Loan or the
issuance of a Letter of Credit by the Borrower hereunder shall constitute a
representation by the Borrower to the effect set forth in this Section 6.2(a)
(both as of the date of such request and as of the date of such borrowing or
issuance).
SECTION 6.3. Additional Conditions Precedent to the Oasis
Acquisition Loan. In addition to the conditions precedent stated in
Section 6.2, the disbursement of the Oasis Acquisition Loan shall be subject
to the following conditions precedent:
(a) True and complete copies of the applicable Acquisition
Agreement, any Related Acquisition Documents, a pro forma Compliance
Certificate and supporting Pro Forma Financials and an Acquisition Analysis
shall be delivered to the Agent at least five days prior to the disbursement
of such Loan, including Oasis' financial statements for the last two years
and its EBITDA for the last year.
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(b) The Acquisition Company shall deliver to the Agent a
certificate, dated as of the date of disbursement of the Oasis Acquisition
Loan, pursuant to which the Acquisition Company shall warrant and represent
to the Banks that (1) to the best of its knowledge, each of the
representations and warranties made by the sellers of the Targets of the
Oasis Acquisition to the Acquisition Company under such Acquisition Agreement
is true and correct; (2) no broker or finder brought about the making or
closing of such Loan made with respect to such Acquisition Agreement, and
neither the Borrower nor the Banks have any obligation to any Person in
respect of any finder's or brokerage fees in connection with such Loan;
(3) the parties to the Acquisition Agreement have complied with all
requirements of every bulk sales or transfer law that may be applicable to
the sale of the Acquired Assets to the Acquisition Company, or the
Acquisition Company has obtained indemnification against any and all
liability arising from the failure to so comply; (4) the Acquisition
Agreement and the Related Acquisition Documents have not been amended,
(5) the applicable Acquisition Analysis and Pro Forma Financials remain
accurate and complete in all material respects; and (6) as of the date
immediately after the consummation of all the agreements and transactions
under and pursuant to such Acquisition Agreement, the Borrower and its
Subsidiaries will not have any material amount of liabilities, contingent or
otherwise, not reflected in the Pro Forma Financials.
(c) Termination statements or releases shall have been filed
with respect to any financing statements or Liens covering all or any portion
of the Acquired Assets, except for financing statements perfecting Liens
permitted by this Agreement.
(d) Each of the Acquisition Company and any Target which
becomes, upon consummation of the Oasis Acquisition, a Subsidiary of the
Borrower, shall become Loan Parties pursuant to the provisions of Section 9.1.
(e) Each Bank shall have received evidence satisfactory to it
that, after giving effect to the Oasis Acquisition Loan, no Loan Party is or
will be rendered insolvent within the meaning of Section 548 of the Federal
Bankruptcy Code and any applicable state fraudulent conveyance laws. This
condition may be satisfied by delivering to the Agent a Solvency Certificate,
in substantially the form of Exhibit I attached to this Agreement (a
"Solvency Certificate"), dated as of the disbursement date of the Oasis
Acquisition Loan.
(f) The Acquisition complies with clauses (a) through (e) of
the definition of "Permitted Acquisition" in Section 1.1.
(g) All of the shares of capital stock or other ownership
interests of Oasis (except directors' qualifying shares) shall, as a result
of said Acquisition, be directly or indirectly owned by the Borrower.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 7.1. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Incorporation, Good Standing. The Borrower and each of its
Subsidiaries (1) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation,
(2) has all requisite corporate power, and has all material licenses,
governmental authorizations, consents and approvals necessary to own its
assets and carry on its business as now being or as proposed to be conducted,
and (3) is duly qualified to transact business in each jurisdiction in which
such qualification is required. As of the date of this Agreement, the
Borrower has no Subsidiaries other than MCTI, MOI, Microdyne UK, Inc.,
Microdyne, Ltd. and MCTI Acquisition Corporation, a Maryland corporation.
Upon consummation of the Oasis Acquisition, APCOM, Inc., a Maryland
corporation ("Apcom"), and Celerity Systems, Inc., a California corporaiton
("Celerity"), will be Subsidiaries of the Borrower, and as of such date,
MCTI, MOI, Apcom and Celerity will own assets with an aggregate book value of
30%, 13%, 20% and 21%, respectively, of the book value of the consolidated
assets of the Borrower and its Subsidiaries.
(b) Corporate Power and Authority. The execution, delivery and
performance by the Borrower and its Subsidiaries of each Loan Document are
within the powers of the Borrower and its Subsidiaries, have been duly
authorized by all necessary corporate action, and do not contravene, conflict
with, result in a breach of or require any consent under (1) the charter,
bylaws, or other organizational documents of the Borrower or any Subsidiary,
or (2) any law or regulation, or any order, writ injunction or decree of any
court or governmental authority or agency, or any contractual restriction
binding on or affecting the Borrower or any of its Subsidiaries, and do not
result in or require the creation of any lien, security interest or other
charge or encumbrance (other than pursuant hereto) upon or with respect to
any properties of the Borrower or any Subsidiary.
(c) No Authorizations. No authorization, approval or consent
of, or other action by, and no notice to or filing with, any governmental
authority or regulatory body, any securities exchange or stockholders is
required for the due execution, delivery and performance by the Borrower or
any Subsidiary of any Loan Document or for the legality, validity or
enforceability thereof, except for filings in respect of the Liens created in
the Loan Documents.
(d) Legally Enforceable Agreement. This Agreement is, and each
other Loan Document to which the Borrower or any Subsidiary will be a party
when delivered hereunder will be, legal, valid and binding obligations of the
Borrower or such Subsidiary, as applicable, enforceable against the Borrower
or such Subsidiary, as applicable, in accordance with their respective terms.
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(e) Financial Statements. The audited balance sheet of the
Borrower as of September 28, 1997, and the related statements of income, cash
flows and stockholders equity of the Borrower for the fiscal year then ended,
with the opinion thereon of Grant Thornton LLP, and the unaudited balance
sheet of the Borrower as of June 30, 1998, and the related statements of
income, cash flows and stockholders equity for the three-month period then
ended, copies of which have been furnished to each Bank, are complete and
correct and fairly present the financial condition of the Borrower as of such
dates and the results of the operations of the Borrower for the periods ended
on such dates, all in accordance with GAAP. The Borrower does not have any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for
in such financial statements as of such dates. The Pro Forma Financials,
when and as delivered to the Agent, will represent the Borrower's best
estimate of the future operations of the applicable Acquisition Company and
Target and will be based on the assumptions stated therein, all of which will
be believed by the Borrower to be reasonable assumptions.
(f) Litigation. Other than the actions or proceedings listed
on Schedule 7.1(f) attached to this Agreement, there is no pending or, to the
best of the Borrower's knowledge, threatened action or proceeding affecting
the Borrower or any Subsidiary before any court, governmental agency or
arbitrator, that, if adversely determined could, either individually or in
the aggregate, have a Materially Adverse Effect.
(g) Use of Proceeds. No proceeds of any Loan will be used to
acquire any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
(h) Regulation U. Neither the Borrower nor any Subsidiary is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Board
of Governors of the Federal Reserve System), and no proceeds of any Loan
shall be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
(i) Ownership and Liens. The Borrower and each Subsidiary has
title to all of its assets, including the Collateral, and none of the
Collateral or such assets is subject to any Lien, except such Liens as are
permitted by this Agreement.
(j) ERISA. Neither the Borrower nor any Subsidiary has incurred
any material "accumulated funding deficiency" within the meaning of Section 302
of ERISA or Section 412 of the Code, nor has the Borrower or any Subsidiary
incurred any material liability to the PBGC in connection with any "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) established or
maintained by the Borrower or any Subsidiary. None of the employee pension
benefit plans (as defined above) of the Borrower or any Subsidiary, nor any
trusts created thereunder, nor any trustee or administrator thereof, has engaged
in a "prohibited transaction," as such term is defined in Section 406 of ERISA
or Section 4975 of the Code, that could subject such plans or
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any of them, any such trust, or any trustee or administrator thereof, or any
party dealing with such plans or any such trust to any material liability or tax
or penalty on prohibited transactions imposed by such Sections 406 or 4975.
Neither the Borrower nor any Affiliate or Subsidiary of the Borrower is now, or
at any time in the past has been, obligated to make contributions to a
"multiemployer plan," as such term is defined in Section 4001(a)(3) of ERISA.
(k) Taxes. The Borrower and each Subsidiary has filed all tax
returns (federal, state and local) required to be filed and have paid all
taxes, assessments and governmental charges and levies shown thereon to be
due, including interest and penalties, and the charges, accruals and reserves
on the books of the Borrower in respect thereof are, in the opinion of the
Borrower, adequate. Neither the Borrower nor any Subsidiary has given or
been requested to give a waiver of the statute of limitations relating to the
payment of any taxes.
(l) Debt. The Borrower and its Subsidiaries are not in any
manner directly or contingently obligated with respect to any Debt that is
not permitted by this Agreement. Neither the Borrower nor any Subsidiary is
in default with respect to any Debt.
(m) Debarment and Suspension. No event has occurred and no
condition exists that is likely to result in the debarment or suspension of
the Borrower or any Subsidiary from any contracting with the Government, and
the Borrower has not, nor has any Affiliate or Subsidiary of the Borrower,
been subject to any such debarment or suspension prior to the date of this
Agreement.
(n) Material Contracts. Attached hereto as Schedule 7.1(n) is
a correct and complete list, as of the date of this Agreement, of each
Material Contract. Neither the Borrower, any Subsidiary nor any other party
thereto is in material default under any Material Contract.
(o) Intellectual Property. The Borrower and its Subsidiaries
do not own or hold any Intellectual Property subject to United States
copyright, patent or trademark protection, other than as listed on
Schedule 7.1(o) attached hereto, and all of such Intellectual Property has
been registered with the United States Patent and Trademark Office and the
Register of Copyrights. The Borrower and each Subsidiary owns or has the
right to use under valid license agreements or otherwise all Intellectual
Property that is required or necessary for the conduct of the business of the
Borrower and its Subsidiaries as now conducted or proposed to be conducted
without any conflict with any rights of any other Person.
(p) Compliance with Laws. The Borrower and each Subsidiary are
in compliance in all material respects with all applicable laws and
regulations.
(q) True and Complete Information. All factual and financial
information (taken as a whole) previously furnished to the Banks in
connection with this Agreement by the Borrower and each Subsidiary is, and
all factual and financial information (taken as a whole) furnished to the
Banks by the Borrower and each Subsidiary after the date of this Agreement
will be, true and accurate in all material respects on the date on which such
information is dated,
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certified or furnished, and is not, and will not be, incomplete by omitting to
state any fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
(r) Integrated Business. The Borrower and its Subsidiaries
will be engaged as an integrated group in providing services and goods to
their respective Customers. The integrated operation will require financing
on such a basis that credit supplied to the Borrower be made available from
time to time to Subsidiaries of the Borrower, as required for the successful
operation of the Borrower and its Subsidiaries separately, and the integrated
operation as a whole. In that connection, the Borrower and its Subsidiaries
will request that the Agent and the Banks provide the Loans to, and issue the
Letters of Credit for the account of, the Borrower (to be made available as
needed to the Subsidiaries) to finance such operation. To induce the Agent
and the Banks to extend credit, each Subsidiary will execute and deliver to
the Agent a Security Agreement, a Subsidiary Guaranty, an Intellectual
Property Assignment, and, if applicable, Mortgages for all Real Estate
Assets. Each Subsidiary will derive benefit, directly and indirectly, from
the credit so extended to the Borrower, both in its separate capacity and as
a member of the integrated group.
(s) Environmental Laws. The Borrower and its Subsidiaries have
obtained all governmental approvals which are required under Environmental
Laws, and are in compliance with all terms and conditions of such
governmental approvals, which the failure to obtain or to comply with could
reasonably be expected to have a Material Adverse Effect. Each of the
Borrower and its Subsidiaries is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in the Environmental Laws
the failure with which to comply could have a Material Adverse Effect.
Neither the Borrower nor any Subsidiary is aware of, or has received notice
of, any past, present, or future events, conditions, circumstances,
activities, practices, incidents, actions, or plans which, with respect to
the Borrower or any of its Subsidiaries may interfere with or prevent
compliance or continued compliance with Environmental Laws, or may give rise
to any common-law or legal liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study, or investigation,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling or the emission,
discharge, release or threatened release into the environment, of any
pollutant, contaminant, chemical, or industrial, toxic, or other Hazardous
Material that could be reasonably expected to have a Material Adverse Effect;
and there is no civil, criminal, or administrative action, suit, demand,
claim, hearing, notice, or demand letter, notice of violation, investigation,
or proceeding pending or, to the knowledge of the Borrower or any Subsidiary,
after due inquiry, threatened, against the Borrower or any of its
Subsidiaries relating in any way to Environmental Laws that could be
reasonably expected to have a Material Adverse Effect.
(t) Investment Company; Public Utility Holding Company.
Neither the Borrower nor any Subsidiary is an "investment company" within the
meaning of the Investment Company Act of 1940. Neither the Borrower nor any
Subsidiary is (i) a "holding company" or a
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"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended, or (ii) subject
to any other Applicable Law which purports to regulate or restrict its ability
to borrow money or to consummate the transactions contemplated by this Agreement
or to perform its obligations under any Loan Document to which it is a party.
(u) Year 2000. The Borrower and its Subsidiaries have
undertaken reasonable efforts to determine whether all material Date Affected
Information Technology used in the business operations of the Borrower and
its Subsidiaries is Fully Date Capable, and, to the extent necessary, the
Borrower and its Subsidiaries have initiated efforts to make Date Affected
Information Technology Fully Date Capable prior to the date that the failure
to be Fully Date Capable would adversely affect the operation thereof. For
purposes of this Agreement, Date Affected Information Technology is
"material" if the failure or degradation in performance of such Date Affected
Information Technology would result in a Material Adverse Effect.
(v) Employee Relations. As of the Closing Date, neither the
Borrower nor any of its Subsidiaries is a party to any collective bargaining
agreement nor has any labor union been recognized as the representative of
its employees except as set forth on Schedule 7.1(v). The Borrower knows of
no pending, threatened or contemplated strikes, work stoppage or other
collective labor disputes involving its employees or those of any of its
Subsidiaries, except for those which are not reasonably likely to have a
materially adverse effect on the operations of the Borrower or any Subsidiary.
(w) Burdensome Provisions. Neither the Borrower nor any
Subsidiary is a party to any indenture, agreement, lease or other instrument,
or subject to any corporate or partnership restriction, governmental approval
or applicable law which is so unusual or burdensome as in the foreseeable
future could be reasonably expected to have a Material Adverse Effect. The
Borrower and its Subsidiaries do not presently anticipate that future
expenditures needed to meet the provisions of any statutes, orders, rules or
regulations of a governmental authority will be so burdensome as to have a
Material Adverse Effect.
(x) No Material Adverse Change. Since March 31, 1998, there
has been no material adverse change in the business or financial condition of
the Borrower or any Subsidiary, and no event has occurred or condition arisen
that could reasonably be expected to have a Material Adverse Effect.
(y) Absence of Defaults. No event has occurred and is
continuing which constitutes a Default or an Event of Default. No event has
occurred and is continuing which constitutes, or which with the passage of
time or giving of notice or both would constitute, a default or event of
default by the Borrower or any Subsidiary under any Material Contract or
judgment, decree or order to which the Borrower or one or more of its
Subsidiaries is a party or by which the Borrower or one or more of its
Subsidiaries or any of their respective properties may be bound or which
would require the Borrower or one or more of its Subsidiaries to make any
payment thereunder prior to the scheduled maturity date therefor.
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SECTION 7.2. Survival of Representations and Warranties, Etc.
All statements contained in any certificate, financial statement or other
instrument delivered by or on behalf of the Borrower or any Subsidiary to an
Agent or any Bank pursuant to or in connection with this Agreement or any of
the other Loan Documents (including, but not limited to, any such statement
made in or in connection with any amendment thereto or any statement
contained in any certificate, financial statement or other instrument
delivered by or on behalf of the Borrower or any Subsidiary prior to the date
hereof and delivered to an Agent or any Bank in connection with closing the
transactions contemplated hereby) shall constitute representations and
warranties made by the Borrower under this Agreement. All representations
and warranties made under this Agreement and the other Loan Documents shall
be deemed to be made at and as of the date hereof, the Closing Date and at
and as of the date of the disbursement of any Loan or the issuance of any
Letter of Credit, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date) and except for changes in factual circumstances
specifically permitted hereunder. All such representations and warranties
shall survive the effectiveness of this Agreement, the execution and delivery
of the Loan Documents, the making of the Loans and the issuance of each
Letter of Credit.
ARTICLE 8
COVENANTS OF THE BORROWER
-------------------------
SECTION 8.1. Affirmative Covenants. So long as any Note shall
remain unpaid, any Letter of Credit is outstanding, or any Bank shall have
any Advance Commitment hereunder, the Loan Parties shall, unless the Banks
shall otherwise consent in writing:
(a) Compliance with Laws, etc. Comply and cause each
Subsidiary to comply in all material respects with all applicable laws,
rules, regulations and orders.
(b) Reporting Requirements. Furnish to the Banks:
(1) As soon as available and, in any event, within
45 days after the end of each of the first three quarters of each fiscal year
of the Borrower, unaudited financial statements consisting of consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries as of
the end of such quarter, and consolidated and consolidating statements of
operations, cash flows and stockholders' equity of the Borrower and its
Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the last day of the preceding quarter, all in reasonable
detail and stating in comparative form the respective consolidated figures
for the corresponding date and period in the previous fiscal year and all
prepared in accordance with GAAP. Such statements shall be accompanied by
reports itemizing raw materials, work in process and finished goods Inventory
by division and revenues and gross profits by division. Such financial
statements and reports shall be certified to be accurate by the chief
financial officer of the Borrower;
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(2) As soon as available and, in any event, (A) within
120 days after the end of each fiscal year of the Borrower, audited financial
statements consisting of consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such fiscal year, and
consolidated and consolidating statements of operation, cash flows and
stockholders' equity of the Borrower and its Subsidiaries for such fiscal
year, all in reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date and period in the prior
fiscal year and all prepared in accordance with GAAP; and (B) within 45 days
after the beginning of each fiscal year, a copy of the Borrower's formally
adopted annual budget or other form of Borrower's consolidated financial
projections (but in any event to include, without limitation, pro forma
income and cash flow) for the following fiscal year. The consolidated
statements shall be accompanied by an unqualified opinion thereon acceptable
to the Banks of an independent certified public accounting firm selected by
the Borrower and acceptable to the Agent;
(3) Promptly upon receipt thereof, copies of any reports
submitted to the directors of the Borrower or any Subsidiary by independent
certified public accountants in connection with examination of the financial
statements of the Borrower or any Subsidiary made by such accountants;
(4) Promptly after the commencement thereof, notice of
all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any Subsidiary, that, if determined
adversely to the Borrower or any such Subsidiary, could have a Material
Adverse Effect;
(5) As soon as possible and, in any event, within three
Business Days after the occurrence of each Default and Event of Default, a
written notice setting forth the details of such Default or Event of Default
and the action that is proposed to be taken by the Borrower with respect
thereto;
(6) Promptly after the sending or filing thereof, copies
of all proxy statements, financial statements and reports that the Borrower
or any Subsidiary sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements that the
Borrower or any Subsidiary files with the Securities and Exchange Commission
or any governmental authority that may be substituted therefor, or with any
national securities exchange;
(7) On or before the 15th day of each calendar month,
(i) an Aging as of the last day of the previous calendar month, (ii) reports
identifying, in sufficient detail for the Banks, all Inventory on hand as of
the end of the previous calendar month and all unbilled Accounts Receivable
as of the end of the previous calendar month, (iii) a Borrowing Base
Certificate signed by the chief financial officer of the Borrower, (iv) a
schedule of all outstanding accounts payable of the Loan Parties and the age
of such payables in intervals of 30 days, as of the last day of the previous
calendar month, (v) such other supporting documents to the schedules
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as the Agent from time to time reasonably may request, and (v) such invoices,
instruments, chattel paper and other evidence of indebtedness representing any
Accounts Receivable, duly endorsed in blank or to the Banks, as the Banks may
request;
(8) Within 45 days after the end of each fiscal quarter,
a certificate of the chief financial officer of the Borrower, in
substantially the form of Exhibit J attached to this Agreement (a "Compliance
Certificate"), to the effect that no Default or Event of Default occurred
during the prior quarter and containing calculations of the financial
covenants set forth in Section 8.3;
(9) As soon as possible and in any event within two
Business Days after the issuance thereof, a copy of each letter of intent,
proposal, term sheet or similar instrument issued by the Borrower or any
Subsidiary with respect to an Acquisition;
(10) Not less than 15 Business Days prior to the closing
of an Acquisition, Pro Forma Financials and an Acquisition Analysis
reflecting the consummation of such Acquisition and the transactions incident
thereto. The Pro Forma Financials shall be materially correct and complete,
and shall present fairly the consolidated financial condition of the Borrower
as of the date immediately after consummation of such Acquisition Agreement
and the transactions incident thereto;
(11) Prompt notice of any change in the business, assets,
liabilities, financial condition, results of operations or business prospects
of the Borrower or any Subsidiary which has had or may have a Material
Adverse Effect;
(12) Within 30 days after entering into any Material
Contract, a copy of such Material Contract;
(13) Written notice of the modification, termination or
breach by any Person of a Material Contract;
(14) Such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any Subsidiary as the
Banks from time to time reasonably may request in writing; and
(15) On the Closing Date and on the last day of every
consecutive six month period thereafter, a written list of each Customer and
the current telephone number or address for such Customer.
(c) Maintenance of Existence. Preserve and maintain and cause
each Subsidiary to preserve and maintain its corporate or other legal
existence and good standing in the jurisdiction of its incorporation, and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required.
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(d) Maintenance of Records. Keep, and cause each Subsidiary to
keep, adequate records and books of account, in which complete entries will
be made in accordance with GAAP, reflecting all financial transactions of the
Borrower and the Subsidiaries. The principal records and books of account,
including those concerning the Collateral of the Borrower and its
Subsidiaries, shall be kept at the chief executive office of the Borrower
described in the Security Agreement. The Borrower will not move such
records and books of account or change its chief executive office or the name
under which it does business without (1) giving the Agent at least 90 days'
prior written notice, and (2) executing and delivering financing statements
satisfactory to the Banks prior to such move or change.
(e) Maintenance of Properties. Maintain, keep and preserve,
and cause each Subsidiary to maintain, keep and preserve, all of its
franchises, licenses and other properties (tangible and intangible) necessary
or useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.
(f) Maintenance of Insurance. Maintain, and cause each
Subsidiary to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks
as are usually carried by companies engaged in the same or a similar business
and similarly situated, including the insurance required by the Security
Agreement.
(g) Right of Inspection. (i) At any reasonable time and from
time to time, permit the Agent, any Bank or any agent or representative of
the Agent or any Bank to audit and verify the Collateral, examine and make
copies of and abstracts from the records and books of account of, and visit
the properties of, the Borrower and any Subsidiary, and to discuss the
affairs, finances and accounts of the Borrower and any Subsidiary with any of
their respective officers and directors and the Borrower's independent
accountants; and (ii) no later than 90 days after the Closing Date, a
business credit diagnostic examination of the books, records, and systems of
the Borrower and its Subsidiaries to be performed by the Agent's Business
Credit division at the expense of the Agent.
(h) Business Line. Remain, and cause each Subsidiary to
remain, in substantially the same lines of business as those conducted by the
Borrower on the date of this Agreement.
(i) Primary Operating Account. Maintain the Borrower's primary
operating accounts with the Agent.
(j) Material Contracts. Comply, and cause each Subsidiary to
comply, in all material respects, with all terms and conditions of all
Material Contracts to which it is a party.
(k) Payment of Taxes and Claims. Pay or discharge, and cause
each Subsidiary to pay and discharge, when due (1) all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits
or upon any properties belonging to it,
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and (2) all lawful claims of materialmen, mechanics, carriers, warehousemen and
landlords for labor, materials, supplies and rentals which, if unpaid, might
become a Lien on any properties of such Person; provided, however, that this
Section shall not require the payment or discharge of any such tax, assessment,
charge, levy or claim which is being contested in good faith by appropriate
proceedings which operate to suspend the collection thereof and for which
adequate reserves have been established on the books of the Borrower or such
Subsidiary, as applicable, in accordance with GAAP.
(l) Environmental Matters. Comply, and cause all of its
Subsidiaries to comply, with all Environmental Laws, the failure with which
to comply could have a Material Adverse Effect. If a Borrower or any
Subsidiary shall (1) receive notice that any violation of any Environmental
Law may have been committed or is about to be committed by such Person,
(2) receive notice that any administrative or judicial complaint or order has
been filed or is about to be filed against a Borrower or any Subsidiary
alleging violations of any Environmental Law or requiring the Borrower or any
Subsidiary to take any action in connection with the release of Hazardous
Materials, or (3) receive any notice from a governmental authority or private
party alleging that a Borrower or any Subsidiary may be liable or responsible
for costs associated with a response to or cleanup of a release of Hazardous
Materials or any damages caused thereby, and such notices, individually or in
the aggregate, could have a Material Adverse Effect, such Borrower shall
provide the Agent with a copy of such notice within 10 days after the receipt
thereof by such Borrower or any of the Subsidiaries. The Borrower and the
Subsidiaries shall promptly take all actions necessary to prevent the
imposition of any Liens on any of their respective properties arising out of
or related to any Environmental Laws.
(m) Mortgages. Not later than 30 days after the date the Agent
gives notice (the "Mortgage Notice") to the Borrower requesting the granting
of Mortgages on Real Estate of the Borrower and its Subsidiaries , the
Borrower (1) will and will cause each of the applicable Subsidiaries to duly
execute, acknowledge and deliver Mortgages to the Agent in form and substance
satisfactory to the Agent, in recordable form (including full legal
descriptions of the Real Estate) and in such number of copies as the Agent
shall have requested and (2) will furnish or cause to be furnished to the
Agent:
(i) one or more policies of mortgagee title
insurance on a 1970 (as revised to October 17, 1984) ALTA form of
policy or, if unavailable, such other form of policy as shall be
acceptable to the Agent (the "Title Policies") issued to the Agent by
such title insurance company as the Agent shall approve (the "Title
Insurer"), in form and substance and in such amounts satisfactory to
the Agent, insuring the perfection, enforceability and first priority
of the Lien of each of the Mortgages subject only to such title
exceptions as the Agent in the exercise of its reasonable discretion
shall approve and including such affirmative coverage and endorsements
as the Agent shall require, together with copies of (A) all instruments
of record and (B) all other documents specified in the Title Policies
encumbering or otherwise affecting the Real Estate;
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(ii) if so requested by the Agent, as-built surveys
of the Real Estate dated not more than 90 days prior to the date of the
Mortgage Notice showing such matters as may be reasonably required by
the Agent, in form and content reasonably acceptable to the Agent,
certified to the Agent, the Banks and the Title Insurer and prepared by
a registered surveyor acceptable to the Agent;
(iii) written opinions of counsel ("Local Counsel")
issued to the Agent and in form and substance satisfactory to special
counsel to the Agent, that (A) the Mortgages have been duly authorized,
executed and delivered by the respective Mortgagors and, if
appropriate, by the trustee designated therein (such trustee to be
specified by the Borrower with the approval of the Agent), and that
such trustee has full power and authority to serve in such capacity and
to exercise all rights and powers under such Mortgages and (B) the
Mortgages are legal, valid and binding obligations enforceable in
accordance with their respective terms except as may be limited by
(x) bankruptcy, insolvency, reorganization, moratorium or similar laws
of general applicability affecting the enforcement of creditor's rights
and (y) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and
opining as to such other matters with respect to the Mortgages as such
special counsel to the Agent may require;
(iv) evidence satisfactory to the Agent of (A) the
due recordation of the Mortgages and filing of financing statements
reasonably satisfactory to the Agent in connection therewith in the
appropriate recording and filing offices and (B) the payment of all
filing and recording fees and expenses, of any mortgage, mortgage
recording, intangibles or other tax payable in connection with the
Mortgages or the obligations secured thereby, and of the premiums for
the Title Policies and all other charges in connection therewith;
(v) any consents required to grant any Mortgage and
such affidavits, releases, indemnities, undertakings or other documents
as the Title Insurer may require in order to issue the Title Policies
as provided above;
(vi) such direct access reinsurance agreements with
such other title insurance companies and in such amounts, all as the
Agent shall reasonably require;
(vii) if so requested by the Agent, an appraisal of
the Real Estate, in form and substance satisfactory to the Agent,
complying with the Appraisal Policies and Review Procedures of the
Board of Governors of the Federal Reserve System (12 CFR Part 323);
(viii) if so requested by the Agent, an environmental
survey and assessment with respect to the sites and facilities
comprising the Real Estate prepared by a firm of licensed engineers in
form and substance satisfactory to the Agent;
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(ix) the hazard, flood and other insurance policies
required by the Mortgages; and
(x) evidence that all expenses and fees of the
Title Insurer in connection with the issuance of the Title Policies
with respect to the Mortgages have been paid and that all recording and
filing fees and all mortgage recording, documentary, intangibles, stamp
and similar taxes payable in connection with the recording of each
Mortgage in the appropriate county land office have been paid.
(n) Year 2000 Compliance. (1) Initiate and maintain a program
to identify any Date Affected Information Technology used in the business
operations of the Borrower and its Subsidiaries that is not Fully Date
Capable, and, in connection therewith, undertake in good faith to make all
material Date Affected Information Technology used in such business
operations Fully Date Capable prior to the date that the failure to be Fully
Date Capable would adversely affect the operation thereof, (2) advise the
Agent in the event that it has reason to believe that any material Date
Affected Information Technology will not be Fully Date Capable prior to the
date that the failure to be Fully Date Capable would adversely affect the
operation thereof, (3) advise the Agent in the event that the Borrower has
reason to believe that it will be adversely affected by the failure of any
affiliated or nonaffiliated entity to have its Date Affected Information
Technology Fully Date Capable, (4) provide the Agent, upon request, access to
and copies of information necessary to permit the Agent to determine whether
the Borrower's Date Affected Information Technology is, or will be, Fully
Date Capable, including, without limitation, (i) minutes, resolutions and
reports to and from Borrower's Board of Directors or committee thereof;
(ii) internally generated reports, consultant reports or auditor's report
regarding the status of the Borrower's Date Affected Information Technology,
(iii) all documents relating to a "Year 2000" program, and (iv) officer
certificates or other statements requested by the Agent regarding status of
Date Affected Information Technology. The Borrower acknowledges that the
Agent's right to receive, or the Agent's receipt of, the foregoing
information does not impose any obligation on the Agent or any Bank to assess
the accuracy or effect of such information, or to recommend or require
remedial action of any kind. The Borrower further acknowledges that the
actual or potential failure or degradation of any material Date Affected
Information Technology due to its failure to be Fully Date Capable may
constitute a material adverse change in the Borrower's business or financial
condition.
(o) Novell Debt. Use its best efforts to deliver to the Agent,
not later than October 31, 1998, written confirmation of Novell, Inc. that
the Obligations constitute Senior Debt, as such term is defined in the
promissory notes of the Borrower held by Novell, Inc.
SECTION 8.2. Negative Covenants. So long as any Note shall
remain unpaid, any Letter of Credit shall remain outstanding, or any Bank
shall have any Advance Commitment hereunder, no Loan Party shall, without the
written consent of the Majority Banks:
(a) Liens, etc. Create, incur, assume or permit to exist, or
permit any Subsidiary to create, incur, assume or permit to exist, any Lien
upon or with respect to any of its
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assets, now owned or hereafter acquired, except: (1) Liens in favor of the Agent
for the ratable benefit of the Banks; (2) Permitted Encumbrances; (3) Liens on
fixed assets in existence on the date of this Agreement and described on
Schedule 8.2(a) attached to this Agreement; and (4) purchase-money Liens,
whether now existing or hereafter arising (including those arising out of a
Capital Lease) on any fixed assets provided that (i) any property subject to a
purchase-money Lien is acquired by the Borrower or any Subsidiary in the
ordinary course of its respective business and the Lien on any such property is
created contemporaneously with such acquisition, (ii) each such Lien shall
attach only to the property so acquired, and (iii) the Debt secured by all such
Liens shall be included in the amount permitted by Section 8.2(b).
(b) Debt. Create, incur, assume or permit to exist, or permit
any Subsidiary to create, incur, assume or permit to exist, any Debt which
would at any time cause the aggregate of all Debt of the Borrower and its
Subsidiaries taken as a whole, to exceed $5,000,000, except: (1) the
Obligations; (2) Debt in existence on the date of this Agreement and
described on Schedule 8.2(b) attached to this Agreement; (3) Debt of the
Borrower subordinated to the Obligations on terms satisfactory to the Banks;
and (4) Debt of a Loan Party to another Loan Party. All such Debt (other
than that described in clauses (1) and (2) of this subsection (b)) shall be
repayable in full in no less than 36 months.
(c) Dividends, etc. Declare or pay any dividends; or purchase,
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding; or make any distribution of assets to its stockholders
as such whether in cash, assets or obligations of the Borrower; or make any
payment on account of the purchase, redemption, retirement or acquisition of
any option, warrant or other right to acquire shares of the Borrower's or
Subsidiary's capital stock; or allocate or otherwise set apart any sum for
the payment of any dividend or distribution on, or for the purchase,
redemption or retirement of, any shares of its capital stock; or make any
other distribution by reduction of capital or otherwise in respect of any
shares of its capital stock; or permit any of its Subsidiaries to purchase or
otherwise acquire for value any stock of the Borrower or another Subsidiary,
except that, subject to the compliance by the Borrower with the provisions of
Section 8.3 below, (1) the Borrower may declare and deliver dividends and
make distributions payable in common stock of the Borrower, (2) the Borrower
may purchase or otherwise acquire shares of its capital stock by exchange for
or out of the proceeds received from a substantially concurrent issue of new
shares of its capital stock, and (3) any Subsidiary may pay dividends to the
Borrower or to another Subsidiary.
(d) Mergers, etc. Merge or consolidate with any Person, or
permit any Subsidiary to do so, except (1) for Permitted Acquisitions,
(2) that any Loan Party may merge into or transfer assets to the Borrower,
(3) that any Loan Party may merge into or consolidate with or transfer assets
to any other Loan Party, and (4) an Acquisition Company or a Target may merge
with the Borrower or any Loan Party provided that (i) the surviving entity
becomes a Loan Party pursuant to the provisions of Article 9 of this
Agreement, and (ii) after giving effect thereto, no Default or Event of
Default shall occur.
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(e) Sale and Leaseback. Sell, transfer or otherwise dispose
of, or permit any Subsidiary to sell, transfer or otherwise dispose of, any
real or personal property to any Person and thereafter, directly or
indirectly, lease back the same or similar property.
(f) Dispositions. Dispose of, or permit any Subsidiary to
Dispose of, any of its now owned or hereafter acquired assets (including,
without limitation, shares of stock and indebtedness of Subsidiaries,
Receivables and leasehold interests), except: (1) for Inventory sold or
leased in the ordinary course of business; (2) assets no longer used or
useful in the conduct of its business; and (3) that any Loan Party may sell,
lease, assign or otherwise transfer its assets to another Loan Party.
(g) Investments, Loans, Advances, Guarantees and Acquisitions.
Purchase, hold or acquire, or permit any Subsidiary to purchase, hold or
acquire, any Investment (including any option, warrant or other right to
acquire any Investment) of, make or permit to exist any loans or advances to,
Guarantee any obligations of, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any
other Person constituting a business unit, in excess of $4,000,000 in the
aggregate at any time with respect to the Borrower and its Subsidiaries,
taken as a whole, except:
(1) Permitted Investments;
(2) Investments existing on the date hereof and set forth
on Schedule 8.2(g), to the extent such Investments would not be permitted
under any other clause of this Section;
(3) Investments by the Borrower and its Subsidiaries in
the capital stock or other ownership interests of their Subsidiaries;
provided that any such shares of capital stock or ownership interests held by
a Loan Party shall remain held by such Loan Party, and such Loan Party shall
at no time sell, lease, grant options with respect to, pledge, hypothecate,
mortgage, or otherwise transfer or encumber in any way whatsoever, said
shares or interests and provided further that neither the Borrower nor any
Subsidiary shall make Investments in Subsidiaries that are not Loan Parties,
other than the existing Investments of the Borrower in the Subsidiaries
described in Section 7.1(a) above;
(4) Loans or advances made by a Loan Party to any other
Loan Party;
(5) Investments received in connection with the
bankruptcy or reorganization of, or settlement of delinquent accounts and
disputes with, Customers, in each case in the ordinary course of business;
(6) Travel advances made to employees in the ordinary
course of business;
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(7) Loans made by the Borrower or any Subsidiary to its
employees; provided that all such loans shall not exceed $1,000,000 in the
aggregate at any time outstanding; and
(8) Receivables acquired in connection with the sale of
goods or services in the ordinary course of business.
Within the above limitations, the Borrower or any Subsidiary may make any
Permitted Acquisition; provided that the Borrower shall have delivered to the
Agent a certificate signed by the Chief Financial Officer of the Borrower
certifying that at the time of and immediately after giving effect to such
Permitted Acquisition, (i) no Event of Default or Default shall have occurred
and be continuing, and (ii) the Borrower shall be in compliance on a pro
forma basis with the covenants set forth in Section 8.3, in each case as of
the last day of the most recent fiscal quarter adjusted to give effect (as if
such event had occurred on the first day of the four fiscal quarter period
ended on such last day) to such Permitted Acquisition and the financing
therefor, and the adjustments and calculations set forth in such certificate
shall be based on assumptions and otherwise in form and substance reasonably
satisfactory to the Agent.
(h) ERISA. With respect to any employee benefit plan or plans
covered by Title IV of ERISA, permit (1) any prohibited transaction or
transactions under ERISA or the Code that results, or may result, in
liability to the Borrower or any Subsidiary exceeding in the aggregate
$500,000, or (2) any reportable event under ERISA if, upon termination of the
plan or plans with respect to which one or more such reportable events shall
have occurred, there is or would be any liability of the Borrower or any
Subsidiary to the PBGC exceeding in the aggregate $500,000. Neither the
Borrower nor any Subsidiary or Affiliate of the Borrower shall adopt,
establish or become a party to any multiemployer plan.
(i) Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or
the rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any such transaction, with any Affiliate, except in the ordinary
course of and pursuant to the reasonable requirements of the Borrower's or
such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would be applicable in a
comparable arm's-length transaction with a Person not an Affiliate.
SECTION 8.3. Financial Covenants. So long as any Note shall
remain unpaid, any Letter of Credit remains outstanding, or any Bank shall
have any Advance Commitment hereunder, the Borrower shall maintain, unless
the Majority Banks shall otherwise consent in writing:
(a) Net Worth. As of the end of each fiscal quarter of the
Borrower, Net Worth of not less than the Minimum Compliance Level; provided,
that upon notice to the Agent of the termination of the Epson Contract, Net
Worth shall thereafter be measured monthly rather than quarterly.
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(b) Debt Coverage Ratio. For each 12-month period ending on
the last day of each fiscal quarter of the Borrower, a Debt Coverage Ratio of
not less than (1) 1.2 to 1 for the fiscal quarter ending on June 30, 1998,
and for each fiscal quarter thereafter through and including September 30,
1999, (2) 1.35 to 1 for the fiscal quarter ending on December 31, 1999, and
for each fiscal quarter thereafter through and including September 30, 2000,
and (3) 1.5 to 1 for each fiscal quarter thereafter; provided, that upon
notice to the Agent of the termination of the Epson Contract, the Debt
Coverage Ratio shall thereafter be measured monthly rather than quarterly.
(c) Funded Debt Ratio. For each 12-month period ending on the
last day of each fiscal quarter of the Borrower, a Funded Debt Ratio of not
greater than (1) 3.5 to 1 for the fiscal quarter ending on June 30, 1998, and
for each fiscal quarter thereafter through and including September 30, 1999,
(2) 3.25 to 1 for the fiscal quarter ending on December 31, 1999, and for
each fiscal quarter thereafter through and including September 30, 2000, and
(3) 3 to 1 for each fiscal quarter thereafter; provided, that upon notice to
the Agent of the termination of the Epson Contract, the Funded Debt Ratio
shall thereafter be measured monthly rather than quarterly.
ARTICLE 9
SUBSIDIARIES BECOMING LOAN PARTIES
----------------------------------
SECTION 9.1. Conditions. Each Subsidiary that is formed or
Acquired on or after the date of this Agreement, and each Acquisition Company
and Target that is not a Loan Party, shall become jointly and severally
liable with the other Subsidiaries, Acquisition Companies and Targets under
this Agreement and the other Loan Documents (provided that only the Borrower
may borrow hereunder), and the Borrower shall cause each such Subsidiary,
Acquisition Company and Target to satisfy each of the following conditions on
or before the date on which such Subsidiary, Acquisition Company or Target is
formed or Acquired:
(a) The Acquisition Company, Target or Subsidiary shall execute
and deliver to the Agent a Subsidiary Guaranty, a Security Agreement and an
Intellectual Property Assignment.
(b) No Default or Event of Default shall have occurred and be
continuing.
(c) All legal matters incident to such Acquisition Company,
Target or Subsidiary becoming a Loan Party shall be satisfactory to counsel
for the Agent, and the Acquisition Company, Target or Subsidiary shall
execute and deliver to the Agent such additional documents and certificates
relating to the Loans as the Agent reasonably may request.
(d) The Agent shall have received an opinion of counsel to the
Acquisition Company, Target or Subsidiary, addressed to the Agent, for the
benefit of the Banks, covering such matters as the Agent may request, in form
and substance satisfactory to the Agent.
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(e) Financing statements in form and substance satisfactory to
the Agent shall have been properly filed in each office where necessary to
perfect the security interest of the Banks in the Collateral of the
Acquisition Company, Target or Subsidiary, termination statements shall have
been filed with respect to any other financing statements covering all or any
portion of such Collateral (except with respect to Liens permitted by this
Agreement), all taxes and fees with respect to such recording and filing
shall have been paid by the Acquisition Company, Target or Subsidiary and the
Agent shall have received such lien searches or reports as it shall require
confirming that the foregoing filings and recordings have been completed.
(f) The Acquisition Company, Target or Subsidiary shall have
delivered the following documents to the Agent, each of which shall be
certified as of the date on which the Acquisition Company, Target or
Subsidiary is to become a Loan Party, by its secretary or representative
performing similar functions: (1) copies of evidence of all actions taken by
the Acquisition Company, Target or Subsidiary to authorize the execution and
delivery of the applicable Loan Documents; (2) copies of the articles or
certificate of incorporation and bylaws (or the organizational documents for
a Loan Party that is not a corporation) of the Acquisition Company, Target or
Subsidiary; and (3) a certificate as to the incumbency and signatures of the
officers of the Acquisition Company, Target or Subsidiary executing the Loan
Documents.
(g) The Agent shall have received current certificates of good
standing and qualification issued by the appropriate state official of the
state of formation of the Acquisition Company, Target or Subsidiary and in
each jurisdiction in which it is qualified to do business.
(h) The Agent shall have received an Aging, Borrowing Base
Certificate and Inventory schedule of the Acquisition Company, Target or
Subsidiary, together with any other information and documents the Agent may
reasonably request with respect to the Collateral of the Acquisition Company,
Target or Subsidiary.
(i) If required by the Agent, the Agent shall have received a
satisfactory field examination of the Collateral and internal control systems
of the Acquisition Company, Target or Subsidiary performed by a consultant
selected by the Agent, and the Borrower shall have reimbursed the Agent for
the cost of such consultant.
(j) If required by the Agent, it shall have received a landlord
waiver from each landlord of the Acquisition Company, Target or Subsidiary,
which shall be in form and substance acceptable to the Agent.
(k) Each Loan Party with an ownership interest in the
Acquisition Company, Target or Subsidiary shall have executed and delivered
to the Agent a Security Agreement, financing statements in form and substance
satisfactory to the Agent shall have been properly filed in each office where
necessary to perfect the security interest of the Banks in the applicable
Collateral, termination statements shall have been filed with respect to any
other financing statements covering all or any portion of such Collateral,
all taxes and fees with respect to such recording and filing shall have been
paid by such Acquisition Company, Target or Subsidiary,
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the Agent shall have received such lien searches or reports as it shall require
confirming that the foregoing filings and recordings have been completed, and
the Agent shall have received all instruments and certificated securities that
evidence such Collateral, endorsed in blank.
(l) All Intellectual Property of such Loan Party that is
subject to United States copyright, patent or trademark protection shall have
been duly registered with the Register of Copyrights or the United States
Patent and Trademark Office, as applicable, an Intellectual Property
Assignment shall have been recorded in such office, and the Agent shall have
received evidence that it has a first priority perfected Lien with respect
thereto.
SECTION 9.2. Contributions to Borrowing Base. The Borrower agrees no
Receivable or Inventory of an Acquisition Company, Target or Subsidiary shall
be included in the Borrowing Base prior to the date on which all of the
foregoing conditions are satisfied.
ARTICLE 10
EVENTS OF DEFAULT
-----------------
SECTION 10.1. Events of Default. If any of the following events
("Events of Default") shall occur, the Agent and the Banks shall have the
rights set forth in Section 10.2 below:
(a) Failure of the Borrower to pay (1) the principal amount of
any Loan, as applicable, including, without limitation, the principal
payments due under the Notes or the LC Agreements or any of the Loans, when
the same shall become due and payable, whether at maturity, as a result of
the Agent's demand for payment or otherwise, or (2) any interest or fee
payable under the Loan Documents when the same shall become due and payable,
and such failure shall continue unremedied for a period of five Business
Days; or
(b) If the Borrower refuses to permit any Bank to inspect,
examine, verify or audit the Collateral in accordance with the provisions of
this Agreement; or
(c) Failure of the Borrower to perform, observe or comply with
any term, condition, covenant, warranty, agreement or other provision
contained in Section 8.1 or 8.2 of this Agreement, and such failure remains
uncured to the satisfaction of the Majority Banks for 15 days after the
earlier to occur of (1) notice from the Agent specifying such failure or (2)
the date notice of such failure should have been given under Section
8.1(b)(5); or
(d) Failure of the Borrower or any other Loan Party to perform,
observe or comply with any other term, condition, covenant, warranty,
agreement or provision contained in this Agreement or any other Loan Document
(except any such failure resulting in the occurrence of another Event of
Default described in this Section), and such failure remains uncured to the
satisfaction of the Majority Banks for 30 days after the earlier to occur of
(1) notice from the Agent specifying such failure or (2) the date notice of
such failure should have been given under Section 8.1(b)(5); or
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(e) Discovery that any representation or warranty made or
deemed made by the Borrower or any Loan Party in this Agreement or any
statement or representation made in any certificate, report or opinion
delivered pursuant to this Agreement (including any Borrowing Base
Certificate) or in connection with any borrowing under this Agreement was
materially untrue or is breached in any material respect; or
(f) If the Borrower or any Subsidiary fails to make any payment
when due with respect to any Debt in excess of $500,000, or if any event or
condition occurs that results in such Debt becoming due and payable prior to
the expressed maturity thereof or that enables or permits the holder or
holders of such Debt to cause such Debt to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to the
expressed maturity thereof; or
(g) The Borrower or any Subsidiary makes an assignment for the
benefit of creditors, files a petition in bankruptcy, petitions or applies to
any tribunal for any receiver or any trustee of the Borrower or any
Subsidiary or any substantial part of its property, or commences any
proceeding relating to the Borrower or any Subsidiary under any
reorganization, arrangement, readjustments of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or
(h) If, within 60 days after the filing of a bankruptcy
petition or the commencement of any proceeding against the Borrower or any
Subsidiary seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, the proceeding shall not have been
dismissed, or, if, within 60 days after the appointment, without the consent
or acquiescence of the Borrower or a Subsidiary, of any trustee, receiver or
liquidator of the Borrower or such Subsidiary or of all or any substantial
part of the properties of the Borrower, the appointment shall not have been
vacated; or
(i) If any judgment is entered against the Borrower or any
Subsidiary in excess of $500,000 or any attachment in excess of $500,000
against any property of the Borrower or any Subsidiary and the same remains
unpaid, undischarged, unbonded or undismissed for a period of 30 days; or
(j) A material adverse change occurs in the financial or
business condition of the Borrower and its Subsidiaries; or
(k) If the Borrower fails to give the Agent or the Banks any
notice required by this Agreement within ten days after the date on which it
is required to give such notice, provided that such failure to give notice
shall not constitute an Event of Default if the applicable Event of Default
or breach is cured within any grace period that otherwise would have been
applicable had the notice been timely given; or
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(l) If any of the following events shall occur or exist with
respect to the Borrower or any employee benefit or other plan established,
maintained or to which contributions have been made by the Borrower, any
Affiliate of the Borrower or any other Person that, together with the
Borrower, would be treated as a single employer under Section 4001 of ERISA, and
the Majority Banks determine that the same would have a Material Adverse
Effect: (1) any prohibited transaction (as defined in Section 406 of ERISA or
Section 4975 of the Code), (2) any reportable event (as defined in Section 4043
of ERISA and the regulations issued thereunder), (3) the filing under
Section 4041 of ERISA of a notice of intent to terminate any such plan or the
termination of such plan, or (4) the institution of proceedings by the PBGC
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any such plan; or
(m) The occurrence of a default or an event of default under
any other Loan Document and the expiration of all grace periods, if any,
applicable thereto; or
(n) If the Borrower, any Subsidiary or any Affiliate of the
Borrower or Subsidiary shall be debarred or suspended from any contracting
with the Government; or
(o) The Loan Documents shall for any reason cease to create a
valid and perfected first priority security interest in any of the Collateral
purported to be covered thereby or if any Loan Document ceases to be in full
force and effect; or
(p) If:
(1) Any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), but excluding Philip T. Cunningham, is or becomes the
"beneficial owner" (as defined in Rules 13d- 3 and 13d-5 under the Exchange
Act, except that a Person will be deemed to have "beneficial ownership" of
all securities that such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 25% of the total voting power of the then
outstanding voting stock of the Borrower (provided, however, the Agent shall
not unreasonably withhold its consent to the sale or other disposition of
voting stock by Philip Cunningham to any Person if, after such sale or other
disposition, such Person would be the beneficial owner of more than 25% of
the total voting power of the then outstanding voting stock of the Borrower);
or
(2) During any twelve-month period (commencing on or
after the Agreement Date), a majority of the Board of Directors of the
Borrower shall no longer be composed of individuals (A) who were members of
such Board of Directors on the first date of such period, (B) whose election
or nomination to such Board of Directors was approved by individuals referred
to in clause (A) above constituting at the time of such election or
nomination at least a majority of such Board of Directors or (C) whose
election or nomination to such Board of Directors was approved by individuals
referred to in clauses (A) and (B) above constituting at the time of such
election or nomination at least a majority of such Board of Directors; or
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(q) Any indorsement or guaranty of the payment of the Loans
shall cease for any reason to be in full force and effect, or any indorser or
guarantor shall contest the validity or enforceability of the indorsement or
guaranty or deny that it has any further liability or obligation under the
indorsement or guaranty; or
(r) The failure of the Borrower to give notice of the
termination of the Epson Contract within 5 days after notice to or from Epson
of said termination.
SECTION 10.2. Remedies. Upon the occurrence of any Event of Default, the
Agent (a) shall at the request of the Majority Banks, by notice to the
Borrower, terminate the Commitments, whereupon the same shall forthwith
terminate, and (b) shall at the request of the Majority Banks, by notice to the
Borrower, declare the Notes, the Loans, the Letter of Credit Obligations and
all other Obligations, all interest thereon and all other amounts payable under
this Agreement, to be forthwith due and payable, whereupon the Obligations, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided, however,
that if an Event of Default occurs under Sections 10.1() or 10.1() above, (1)
Commitments shall automatically be terminated, and (2) the Obligations, all
such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower. After the occurrence of an
Event of Default, the Agent may require the Borrower to pay, and the Borrower
agrees to pay, to the Agent an amount of cash equal to the aggregate amount of
the Letters of Credit then outstanding, and any amounts paid by the Borrower
shall be held by the Agent in a cash collateral account for the benefit of the
Banks, over which the Agent shall have the exclusive power of withdrawal, as
security for the Letter of Credit Obligations.
ARTICLE 11
THE AGENT
----------
SECTION 11.1. Authorization and Action. Each Bank hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. The Agent shall not have any fiduciary duty to any Bank
or Loan Party. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall
be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Banks, and such instructions shall be binding
upon all Banks and all holders of Notes; provided, however, that the Agent
shall not be required to take any action that exposes the Agent to personal
liability or that is contrary to this Agreement, any other Loan Document or
applicable
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law. The Agent agrees to give to each Bank prompt notice of each notice given to
it by the Borrower pursuant to the terms of this Agreement.
SECTION 11.2. Agent's Reliance. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Agent: (1) may treat the payee of any Note as the holder thereof; (2) may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable
for any action taken or omitted to be taken in good faith by it in accordance
with the advice of such counsel, accountants or experts; (3) makes no
warranty or representation to any Bank and shall not be responsible to any
Bank for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement or any other Loan
Document; (4) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of
this Agreement or any other Loan Document on the part of the Borrower or any
other Loan Party or to inspect the property (including the books and records)
of the Borrower or any other Loan Party; (5) shall not be responsible to any
Bank for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; and (6) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) reasonably believed by it to be genuine
and signed or sent by the proper party or parties.
SECTION 11.3. NationsBank and Affiliates. With respect to its
Advance Commitment and Oasis Acquisition Loan Commitment, the Advances and
Oasis Acquisition Loan made by it, the Notes issued to it and the Obligations
due to it, NationsBank, N.A. shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though it were not
the Agent, and the term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include NationsBank, N.A. in its individual capacity.
NationsBank, N.A.and its affiliates may accept deposits from, lend money to,
act as trustee under indentures of, and generally engage in any kind of
business with, the Borrower and any Person who may do business with or own
common stock of the Borrower, all as if NationsBank, N.A. were not the Agent
and without any duty to account therefor to the Banks.
SECTION 11.4. Bank Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the Agent or any other Bank
and based on the financial statements referred to in Section 7.1(e) and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent
or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.
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SECTION 11.5. Indemnification. The Banks agree to indemnify the
Agent (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Notes then held by each of them (or
if no Notes are at the time outstanding or if any Notes are held by Persons
that are not Banks, ratably according to the respective amounts of their
Advance Commitment or Oasis Acquisition Loan Commitment), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the Agent
in any way relating to or arising out of this Agreement or any action taken
or omitted by the Agent under this Agreement, provided that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Bank agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
SECTION 11.6. Successor Agent. The Agent may resign at any time
by giving written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint a
successor Agent. If no Event of Default has occurred and is continuing, the
Borrower shall have the right to approve a successor Agent, which approval
shall not be unreasonably withheld. If no successor Agent shall have been so
appointed by the Majority Banks, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation,
then the retiring Agent, on behalf of the Banks, may appoint a successor
Agent, which shall be a commercial bank organized under the laws of the
United States of America or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation hereunder as Agent, the provisions of this
Article 11 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
ARTICLE 12
MISCELLANEOUS
-------------
SECTION 12.1. Amendments, Etc.. Except as otherwise expressly provided in
this Agreement, any consent or approval required or permitted by this Agreement
or in any Loan Document to be given by the Banks may be given, and any term of
this Agreement or of any other Loan Document may be amended, and the
performance or observance by the Borrower or any Subsidiary of any terms of
this Agreement or such other Loan Document or the continuance
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of any Default or Event of Default may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the written consent of the Majority Banks (and, in the case of an
amendment to any Loan Document, the written consent of the Borrower).
Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in
writing, and signed by all of the Banks (or the Agent at the written direction
of all of the Banks), do any of the following: (a) increase the Commitments of
the Banks or subject the Banks to any additional obligations; (b) reduce the
principal of, or interest rates that have accrued or that will be charged on the
outstanding principal amount of, any Loans or other Obligations; (c) reduce the
amount of any fees payable hereunder; (d) postpone any date fixed for any
payment of any principal of, interest on, or fees with respect to, any Loans or
any other Obligations; (e) change the Commitment Percentages; (f) amend this
Section or amend the definitions of the terms used in this Agreement or the
other Loan Documents insofar as such definitions affect the substance of this
Section; (g) release any Subsidiary from its obligations under a Subsidiary
Guaranty; (h) modify the definition of the term "Majority Banks" or modify in
any other manner the number or percentage of the Banks required to make any
determinations or waive any rights hereunder or to modify any provision hereof;
(i) release any Collateral; or (j) amend the definitions of "Borrowing Base" or
"Eligible Receivables." Further, no amendment, waiver or consent unless in
writing and signed by the Agent, or by NationsBank, N.A. in its capacity as the
issuer of the Letters of Credit, in addition to the Banks required above to take
such action, shall affect the rights or duties of the Agent, or NationsBank,
N.A. as such issuer under this Agreement or any of the other Loan Documents. No
waiver shall extend to or affect any obligation not expressly waived or impair
any right consequent thereon and any amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose set forth
therein. No course of dealing or delay or omission on the part of the Agent or
any Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. Except as otherwise explicitly provided for herein or in
any other Loan Document, no notice to or demand upon a Borrower shall entitle
such Borrower to other or further notice or demand in similar or other
circumstances.
SECTION 12.2. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied,
telegraphed, telexed, cabled or delivered by hand or sent, prepaid, by
Federal Express (or a comparable overnight delivery service), if to the
Borrower, at its address at 3601 Eisenhower Avenue, Alexandria, Virginia
22304, Attention: Chief Financial Officer, if to any Bank or to the Agent,
at its Applicable Lending Office specified below its name on the signature
page hereto or in the Assignment and Assumption Agreement pursuant to which
such Bank becomes a party hereto; or, as to each party, at such other address
as shall be designated by such party in a written notice to the other
parties. Any such notice or other communication, when mailed, telecopied,
telegraphed, telexed, cabled, delivered by hand or sent overnight, shall be
effective on the earliest of (a) the date it is actually received or
telecopied, telexed (confirmed by telex answerback), or delivered by hand,
(b) the Business Day after the day on which it is properly delivered to a
telegraph or cable company or to Federal Express (or a comparable
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overnight delivery service), as applicable, or (c) the third Business Day after
the day on which it is deposited in the United States mail.
SECTION 12.3. No Waiver; Remedies. No failure on the part of any
Bank or the Agent to exercise, and no delay in exercising, any right under
any Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 12.4. Captions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 12.5. Survival of Agreements. All agreements,
representations and warranties made herein shall survive the delivery of this
Agreement, the making of the Loans and the issuance of the Letters of Credit
hereunder.
SECTION 12.6. Cost, Expenses and Taxes. The Borrower agrees
(a) to pay or reimburse the Agent on demand for all its costs and expenses
incurred in connection with the preparation, execution and delivery of, and
any amendment, supplement or modification to, the Loan Documents and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Agent; (b) to pay or reimburse the Agent and each Bank for all of their
respective costs and expenses incurred in connection with the enforcement or
preservation of any rights under the Loan Documents and any such other
documents, including, without limitation, reasonable fees and disbursements
of counsel to the Agent and each Bank; and (c) to pay, indemnify and hold
each Bank and the Agent harmless from any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, that may be payable or
determined to be payable in connection with the execution and delivery or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification to, or any waiver or consent under or in respect
of, the Loan Documents and any such other documents.
SECTION 12.7. Indemnification.
(a) The Borrower shall and hereby agrees to indemnify, defend
and hold harmless each Agent, any affiliate of each Agent and each of the
Banks and their respective directors, officers, shareholders, agents,
employees and counsel (each referred to herein as an "Indemnified Party")
from and against any and all losses, costs, claims, damages, liabilities,
deficiencies, judgments or expenses of every kind and nature (including,
without limitation, amounts paid in settlement, court costs and the fees and
disbursements of counsel incurred in connection with any litigation,
investigation, claim or proceeding or any advice rendered in connection
therewith) (the foregoing items referred to herein as "Claims and Expenses")
incurred
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by an Indemnified Party in connection with, arising out of, or by reason of, any
suit, cause of action, claim, arbitration, investigation or settlement, consent
decree or other proceeding (the foregoing referred to herein as an "Indemnity
Proceeding") arising out of: (i) this Agreement or any other Loan Document or
the transactions contemplated thereby, (ii) the making of any Loans hereunder;
(iii) any actual or proposed use by the Borrower of the proceeds of the Loans;
(iv) an Agent's or any Lender's entering into this Agreement; (v) the fact that
the Agent and the Banks have established the credit facilities evidenced hereby
in favor of the Borrower; (vi) the fact that the Agents and the Banks are
creditors of the Borrower and have or are alleged to have information regarding
the financial condition, strategic plans or business operations of the Borrower
and its Subsidiaries; (vii) the fact that the Agent and the Banks are material
creditors of the Borrower and are alleged to influence directly or indirectly
the business decisions or affairs of the Borrower and its Subsidiaries or their
financial condition; (viii) the exercise of any right or remedy the Agent or the
Banks may have under this Agreement or the other Loan Documents; (ix) any
violation or non-compliance by the Borrower or any Subsidiary of any applicable
law (including any Environmental Law) including, but not limited to, any
Indemnity Proceeding commenced by (A) the Internal Revenue Service or state
taxing authority or (B) any governmental authority or other Person under any
Environmental Law, including any Indemnity Proceeding commenced by a
governmental authority or other Person seeking remedial or other action to cause
the Borrower or its Subsidiaries (or its respective properties) (or the Agent or
the Banks as successors to the Borrower) to be in compliance with such
Environmental Laws; or (x) an Indemnified Party's reliance on telephonic or oral
requests, as described in Section 2.1(c); provided, however, that the Borrower
shall not be obligated to indemnify any Indemnified Party for any acts or
omissions of such Indemnified Party in connection with matters described in this
Section 12.7(a) that constitute gross negligence or willful misconduct.
(b) The Borrower's indemnification obligations under this
Section shall apply to all Indemnity Proceedings arising out of, or related
to, the foregoing whether or not an Indemnified Party is a named party in
such Indemnity Proceeding. In this connection, this indemnification shall
cover all costs and expenses of any Indemnified Party in connection with any
deposition of any Indemnified Party or compliance with any subpoena
(including any subpoena requesting the production of documents). This
indemnification shall, among other things, apply to any Indemnity Proceeding
commenced by other creditors of the Borrower or any Subsidiary, any
shareholder of the Borrower or any Subsidiary (whether such shareholder(s)
are prosecuting such Indemnity Proceeding in their individual capacity or
derivatively on behalf of the Borrower), any account debtor of the Borrower
or any Subsidiary or by any governmental authority. This indemnification
shall apply to any Indemnity Proceeding arising during the pendency of any
bankruptcy proceeding filed by or against the Borrower or any Subsidiary.
(c) An Indemnified Party may conduct its own investigation and
defense of, and may formulate its own strategy with respect to, any
Indemnified Proceeding covered by this Section and, as provided above, all
costs and expenses incurred by the Indemnified Party shall be reimbursed by
the Borrower. No action taken by legal counsel chosen by an Indemnified
Party in investigating or defending against any such Indemnified Proceeding
shall vitiate or in any way
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impair the obligations and duties of the Borrower hereunder to indemnify and
hold harmless each such Indemnified Party, provided, however, that (i) if the
Borrower is required to indemnify an Indemnified Party pursuant hereto and (ii)
the Borrower has provided evidence reasonably satisfactory to such Indemnified
Party that the Borrower has the financial wherewithal to reimburse such
Indemnified Party for any amount paid by such Indemnified Party with respect to
such Indemnified Proceeding, such Indemnified Party shall not settle or
compromise any such Indemnified Proceeding without the prior written consent of
the Borrower (which consent shall not be unreasonably withheld or delayed).
(d) If and to the extent that the obligations of the Borrower
hereunder are unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law. The Borrower's
obligations hereunder shall survive any termination of this Agreement and the
other Loan Documents and the payment in full of the Obligations, and are in
addition to, and not in substitution of, any other of their obligations set
forth in this Agreement or any other Loan Document to which it is a party.
SECTION 12.8. Termination; Survival. At such time as (a) all of
the Advance Commitments have been terminated, (b) none of the Banks is
obligated any longer under this Agreement to make any Loans and (c) all
Obligations (other than obligations which survive as provided in the
following sentence) have been paid and satisfied in full, this Agreement
shall terminate. Notwithstanding any termination of this Agreement, or of
the other Loan Documents, the indemnities to which the Agent and the Banks
are entitled under the provisions of this Agreement and the other Loan
Documents, and the waivers of jury trial and submission to jurisdiction
contained in Sections 12.12 and 12.17, shall continue in full force and
effect and shall protect the Agent and the Bank against events arising after
such termination as well as before.
SECTION 12.9. Limitation of Liability. The Borrower hereby
waives, releases, and agrees not to sue the Agent or any Bank or any of the
Agent's or any Bank's affiliates, officers, directors, employees, attorneys,
or agents for punitive damages in respect of any claim in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or
financed hereby.
SECTION 12.10. Construction. The Agent, the Borrower and each
Bank acknowledge that each of them has had the benefit of legal counsel of
its own choice and has been afforded an opportunity to review this Agreement
and the other Loan Documents with its legal counsel and that this Agreement
and the other Loan Documents shall be construed as if jointly drafted by the
Agent, the Borrower and each Bank.
SECTION 12.11. Right of Set-off. Upon (a) the failure of the
Borrower to make any payment owed to the Banks when due (after any applicable
cure period) under any Loan Document or (b) the occurrence and during the
continuance of any Event of Default and the making of the request or the
granting of the consent specified by Section 10.1 to authorize the
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Agent to declare the Obligations due and payable pursuant to the provisions of
Section 10.1, each Bank and each Participant is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Bank or
Participant to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under any Loan
Document, whether or not such Bank or Participant shall have made any demand
under this Agreement or any such Loan Document and although such obligations may
be unmatured. Each Bank and Participant agrees promptly to notify the Borrower
after any such set-off and application made by such Bank, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank and Participant under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Bank or Participant may have.
SECTION 12.12. Waiver. THE BORROWER EXPRESSLY WAIVES ITS RIGHT TO A TRIAL
BY JURY WITH RESPECT TO ANY LITIGATION OR OTHER DISPUTE RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.
SECTION 12.13. Severability. If any provision of any Loan Document is
held to be illegal, invalid or unenforceable under present or future laws
during the term of this Agreement, such provision shall be fully severable,
such Loan Document shall be construed and enforced as if such illegal, invalid
or unenforceable provision had never comprised a part of such Loan Document,
and the remaining provisions of such Loan Document shall remain in full force
and effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Loan Document.
SECTION 12.14. Entire Agreement. Except for the other Loan Documents
expressly referred to herein, this Agreement represents the entire agreement
between the Banks, the Agent and the Borrower, supersedes all prior commitments
and may be modified only by an agreement in writing.
SECTION 12.15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Agent and each Bank and their
respective successors and assigns, except that no party shall have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the other parties.
SECTION 12.16. Governing Law. This Agreement, the Notes and each Loan
Document shall be governed by, and construed in accordance with, the laws of
the Commonwealth of Virginia, without reference to conflict of laws principles.
SECTION 12.17. Consent to Jurisdiction. Each party to this Agreement
hereby irrevocably submits generally and unconditionally for itself and in
respect of its property to the jurisdiction of the Circuit Court for Fairfax
County, Virginia, or the United States District Court for the Eastern District
of Virginia, Alexandria Division, over any suit, action or proceeding
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arising out of or relating to this Agreement, any Loan Document or the
Obligations. Each party to this Agreement hereby irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of venue in any such court and any claim that any such court is an
inconvenient forum. The Borrower hereby agrees and consents that, in addition to
any methods of service of process provided for under applicable law, all service
of process in any such suit, action or proceeding in the courts designated above
may be made by certified or registered mail, return receipt requested, directed
to the Borrower at its address for notice stated in Section 12.2 above, or at a
subsequent address of which the Agent received actual notice from the Borrower
in accordance with the terms hereof, and service so made shall be complete five
days after the same shall have been so mailed. The foregoing provisions shall
not limit the right of any Bank, the Agent or any other party hereto to serve
process in any other manner permitted by law or limit the right of any Bank or
the Agent or other party hereto to bring any suit, action or proceeding or to
obtain execution on any judgment rendered in any suit, action or proceeding in
any other appropriate jurisdiction or in any other manner.
SECTION 12.18. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 12.19. Assignments.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Borrower may neither assign nor otherwise
transfer any of its rights under this Agreement without the prior written
consent of the Banks.
(b) Any Bank may make, carry or transfer Loans or Letters of
Credit at, to or for the account of, any of its branch offices or the office
of an affiliate of such Bank except to the extent such transfer would result
in increased costs to the Borrower.
(c) Any Bank may at any time grant to one or more banks or
other financial institutions (each such bank or financial institution, a
"Participant") participating interests in the Advance Commitment, the Oasis
Acquisition Note, or the Obligations owing to such Bank; provided however,
(1) any such participating interest must be for a constant and not a varying
percentage interest, (2) no Bank may grant a participating interest in the
Advance Commitment, or if any part of the Advance Commitment has been
terminated, the aggregate outstanding principal balance of Revolving Notes
held by it, in an amount less than $5,000,000, and (3) after giving effect to
any such participation by a Bank, the amount of the Advance Commitment, or if
any of the Advance Commitment has been terminated, the aggregate outstanding
principal balance of Revolving Notes held by it, in which it has not granted
any participating interests must be at least $5,000,000. No Participant
shall have any rights or benefits under this Agreement or any other Loan
Document, except (i) as provided in Section 12.11, and (ii) a
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Participant shall be entitled to the benefits of the cost protection provisions
contained in Article 3 to the same extent as if it were a Bank but not in excess
of the cost protections to which the Bank from which it purchased its
participation would be entitled. In the event of any such grant by a Bank of a
participating interest to a Participant, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the Agent
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement. Any agreement pursuant
to which any Bank may grant such a participating interest shall provide that
such Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without limitation, the right
to approve any amendment, modification or waiver of any provision of this
Agreement; provided, however, such Bank may agree with the Participant that it
will not, without the consent of the Participant, agree to (A) increase, or
extend the term or extend the time or waive any requirement for the reduction or
termination of, the Advance Commitment, (B) extend the date fixed for the
payment of principal of or interest on the Loans or Letter of Credit Obligations
or portions thereof owing to such Bank, (C) reduce the amount of any such
payment of principal, or (D) reduce the rate at which interest is payable
thereon. An assignment or other transfer which is not permitted by subsection
(d) or (e) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (c). The selling Bank shall notify the Agent and the Borrower of the
sale of any participation hereunder and the terms thereof.
(d) Any Bank may with the prior written consent of the Agent
and, so long as no Default or Event of Default shall have occurred and be
continuing, the Borrower (which consent, in the case of the Agent and the
Borrower, shall not be unreasonably withheld) assign to one or more Eligible
Assignees (each an "Assignee") all or a portion of the Advance Commitment and
its other rights and obligations under this Agreement and the Revolving
Notes; provided, however, (1) no such consent by the Borrower or the Agent
shall be required in the case of any assignment to another Bank or any
affiliate of such Bank or another Bank; (2) any partial assignment shall be
in an amount at least equal to $5,000,000 and after giving effect to such
assignment the assigning Bank retains part of the Advance Commitment, or if
the Advance Commitment has been terminated, holds Revolving Notes having an
aggregate outstanding principal balance, of at least $5,000,000; and (3) each
such assignment shall be effected by means of an Assignment and Acceptance
Agreement. Upon execution and delivery of such instrument and payment by
such Assignee to such transferor Bank of an amount equal to the purchase
price agreed between such transferor Bank and such Assignee, such Assignee
shall be deemed to be a Bank party to this Agreement as of the effective date
of the Assignment and Acceptance Agreement and shall have all the rights and
obligations of a Bank with the Advance Commitment as set forth in such
Assignment and Acceptance Agreement, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (d), the
transferor Bank, the Agent and the Borrower shall make appropriate
arrangements so that new Revolving Notes are issued to the Assignee and such
transferor Bank, as appropriate. In connection with any such assignment, the
transferor Bank
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shall pay to the Agent an administrative fee for processing such assignment in
the amount of $2,500; provided, however, such fee shall not be payable in
connection with the first assignment of all or any portion of the Advance
Commitment of any Bank initially a party to this Agreement to an affiliate of
such Bank.
(e) The Agent shall maintain at its office specified in
Section 12.2 a copy of each Assignment and Acceptance Agreement delivered to
and accepted by it and a register for the recordation of the names and
addresses of the Banks and the Advance Commitment of each Bank from time to
time (the "Register"). The Agent shall give each Bank and the Borrower
notice of the assignment by any Bank of its rights as contemplated by this
Section. The Borrower, the Agent and the Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register and copies of each Assignment and Acceptance
Agreement shall be available for inspection by the Borrower or any Bank at
any reasonable time and from time to time upon reasonable prior notice to the
Agent. Upon its receipt of an Assignment and Acceptance Agreement executed
by an assigning Bank, together with each Revolving Note subject to such
assignment (the "Surrendered Note"), the Agent shall, if such Assignment and
Acceptance Agreement has been completed and if the Agent receives the
processing and recording fee described in subsection (d) above, (1) accept
such Assignment and Acceptance Agreement, (2) record the information
contained therein in the Register, and (3) give prompt notice thereof to the
Borrower.
(f) In addition to the assignments and participations permitted
under the foregoing provisions of this Section, any Bank may assign and
pledge all or any portion of its Loans and its Notes to any Federal Reserve
Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank, and such Loans and Notes shall
be fully transferable as provided therein. No such assignment shall release
the assigning Bank from its obligations hereunder.
(g) Anything in this Section to the contrary notwithstanding,
no Bank may assign or participate any interest in any Loan held by it
hereunder to the Borrower or any Subsidiary or Affiliate of the Borrower.
(h) Each Bank agrees that, without the prior written consent of
the Borrower and the Agent, it will not make any assignment hereunder in any
manner or under any circumstances that would require registration or
qualification of, or filings in respect of, any Loan or Note under the
Securities Act or any other securities laws United States of America or of
any other jurisdiction.
SECTION 12.20. Confidential Information. The Agent and the Banks
agree to keep confidential (and to cause their respective affiliates,
officers, directors, employees, agents and representatives to keep
confidential) all information, materials and documents furnished to the Agent
or any such Bank by or on behalf of the Borrower (whether before or after the
Closing Date) which relates to the Borrower or any of its Subsidiaries (the
"Information"). Notwithstanding the foregoing, the Agent and each Bank shall
be permitted to disclose
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Information (a) to its affiliates, officers, directors, employees, agents and
representatives in connection with its participation in any of the transactions
evidenced by this Agreement or any other Loan Documents or other administration
of this Agreement or any other Loan Documents; (b) to the extent required by
applicable laws and regulations or by any subpoena or similar legal process, or
requested by any governmental authority; (c) to the extent such Information (1)
becomes publicly available other than as a result of a breach of this Agreement
or any agreement entered into pursuant to clause (d) below, (2) becomes
available to the Agent or such Bank on a non-confidential basis from a source
other than the Borrower or any of its Subsidiaries or (3) was available to the
Agent or such Bank on a non-confidential basis prior to its disclosure to the
Agent or such Bank by the Borrower; (d) to any Assignee or Participant (or
prospective Assignee or Participant) so long as such Assignee or Participant (or
prospective Assignee or Participant) first specifically agrees in a writing
furnished to and for the benefit of the Borrower to be bound by the terms of
this Section 12.20; or (e) to the extent that the Borrower shall have consented
in writing to such disclosure.
[SIGNATURES ON FOLLOWING PAGES]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
--------
MICRODYNE CORPORATION,
a Maryland corporation
By: /s/ Massoud Safavi
---------------------------
Name: Massoud Safavi
Title: Chief Financial Officer
AGENT:
-----
NATIONSBANK, N.A.
By: /s/ Maria Manos
---------------------------
Maria Manos
Senior Vice President
<PAGE> 81
[Signature Page to Credit Agreement,
dated as of August 11, 1998, with Microdyne Corporation]
BANK:
----
NATIONSBANK, N.A.
By: /s/ Maria Manos
--------------------
Name: Maria Manos
--------------------
Title: Senior Vice President
---------------------
Advance Commitment:
$10,000,000.00
Oasis Acquisition Loan Commitment:
$16,500,000.00
Lending Office (all Types of Loans):
6610 Rockledge Drive, Third Floor
---------------------------------
Bethesda, Maryland 20817
---------------------------------
Attention: Ms. Maria Manos
----------------------
Telecopier: (301) 571-9098
----------------------
Telephone: (301) 493-7072
----------------------
<PAGE> 82
CREDIT AGREEMENT
Dated as of August 11, 1998
among
MICRODYNE CORPORATION
as Borrower
and
NATIONSBANK, N.A.
as Banks
and
NATIONSBANK, N.A.
as Agent
<PAGE> 83
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS................................1
ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES................................23
ARTICLE 3 YIELD PROTECTION, ETC............................................30
ARTICLE 4 PAYMENTS, COMPUTATIONS AND CERTAIN NOTICES.......................36
ARTICLE 5 SECURITY.........................................................40
ARTICLE 6 CONDITIONS OF LENDING............................................41
ARTICLE 7 REPRESENTATIONS AND WARRANTIES...................................45
ARTICLE 8 COVENANTS OF THE BORROWER........................................50
ARTICLE 9 SUBSIDIARIES BECOMING LOAN PARTIES...............................60
ARTICLE 10 EVENTS OF DEFAULT...............................................62
ARTICLE 11 THE AGENT.......................................................65
ARTICLE 12 MISCELLANEOUS...................................................67
i
<PAGE> 84
LIST OF SCHEDULES AND EXHIBITS
Schedule 7.1(f) Pending Litigation
Schedule 7.1(n) Material Contracts
Schedule 7.1(o) Intellectual Property
Schedule 8.2(a) Outstanding Liens
Schedule 8.2(b) Outstanding Debt
Schedule 8.2(g) Investments
Exhibit A Acceptable Foreign Customers
Exhibit B Form of Acquisition Note
Exhibit C Form of Assignment and Acceptance Agreement
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Revolving Note
Exhibit F Form of Security Agreement
Exhibit G Form of Intellectual Property Assignment
Exhibit H Form of Subsidiary Guaranty
Exhibit I Solvency Certificate
Exhibit J Form of Compliance Certificate
ii
<PAGE> 85
