SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 22, 1996
COMPTEK RESEARCH,INC.
__________________________________________________
(Exact Name of Registrant as Specified in Charter)
New York 1-8502 16-0959023
________________ _________________ ____________________
(State of Other (Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation)
2732 Transit Road,
Buffalo, New York 14224-2523
____________________ _______________
(Address of Principal (Zip Code)
Executive Offices)
Registrants telephone number, including area code: (716) 677-4070
_________________
Not Applicable
___________________________________________________________
(Former Name or Former Address, if Changed Since Last Year)
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 7, 1996, Comptek Research, Inc. (the
"Company") concluded the acquisition of Advanced
Systems Development, Inc. ("ASDI"), a privately held,
supplier of simulation, training, and software
validation systems related to electronic warfare for
domestic and international markets. The acquisition
was accomplished by the merger of ASDI, having its
principal place of business in East Elmhurst, New York,
into Comptek Federal Systems, Inc., a wholly owned
subsidiary of the Company. As a result of the
transaction, the Company acquired all of the
outstanding shares of stock of ASDI in exchange for
$329,842.50 in cash and 623,862 shares of common stock
of the Company. The number of shares issued was based
upon the average closing price of the Company's common
stock for the 30 days prior to March 1, 1996, resulting
in a total negotiated stock consideration value of
$4,905,950. The amount of consideration paid was based
upon arms-length negotiations between the Company and
the principals of ASDI.
In connection with the completion of the
acquisition, the Company restructured the existing debt
of the Company and of ASDI with $15,000,000 of new
credit facilities. Prior to the acquisition, the
Company had approximately $2,500,000 outstanding on a
$7,000,000 revolving credit facility. ASDI had
approximately $2,000,000 outstanding on a $3,000,000
working capital facility and approximately $3,800,000
of long term debt. The new financing package included
a $5,000,000, five-year term loan, bearing 8.5%
interest with monthly principal payments beginning in
April 1996 and a $10,000,000 two-year revolving credit
facility. The Company, subsequent to the acquisition
had approximately $3,300,000 outstanding on the
$10,000,000 revolving credit facility. The residual is
available for future working capital requirements.
Interest on the revolving credit facility is at the
Company's option either LIBOR plus 2.5%, or PRIME plus
.25%. This compares with the Company's prior revolving
credit facility of $7,000,000 bearing an interest rate
of LIBOR plus 2.25% or PRIME. The entire loan facility
is secured by substantially all of the Company's assets
including those acquired from ASDI.
The acquisition will be accounted for as a purchase as
of March 1, 1996.
The Company intends to continue the operation of the
business of ASDI from its East Elmhurst location as a
part of Comptek Federal Systems, Inc. and to continue
to use the assets and facilities of ASDI in furtherance
of such operations.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) and (b). It is currently impracticable to file the
required financial statements for the
business acquired, as well as the required
pro-forma financial information respecting
the acquisition at the time that this report
was filed. The omitted information will be
filed as soon as practicable, but in no event
later than sixty (60) days after this report
is required to be filed.
(c). The following exhibit is filed as part
of this report:
Exhibit 2.1, Merger Agreement dated as of
January 25, 1996 by and among Comptek
Research, Inc., Comptek Federal Systems,
Inc., Advanced Systems Development, Inc.,
Michael Gross, Matilda Gross, Nichan
Tchorbajian and Larry Diamond, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
COMPTEK RESEARCH
Date: March 22, 1996 By: /S/ John R. Cummings
______________ ______________________
John R. Cummings
Chairman, President
and CEO
<PAGE> 1
MERGER AGREEMENT
TABLE OF CONTENTS
Section 1.1 Merger 6
(a) CRI to Provide Stock and Cash. 6
(b) Agreement and Plan of Merger 6
(c) Pro-rata Distribution 7
(d) Effect on CFS Shares. 7
(e) Filings 7
Section 1.2 Pre-Closing Statement and Purchase Price
Adjustment 7
(a) Pre-Closing Statement. 7
(b) Net Asset Value. 8
(c) Closing Statement 8
(d) The Closing 8
(e) CRI Stock Price Floor 9
Section 1.3 Escrow 9
(a) Delivery of CRI Stock to Escrow Agent. 9
(b) Indemnification 9
(c) Notice to Escrow Agent 10
(d) Release of CRI Stock to the Shareholders 10
(e) Escrow Dispute Resolution 10
(f) Authority of Escrow Agent 11
(g) Escrow Agent 11
(h) Valuation of CRI Stock in Escrow 11
Section 2.1 Representations and Warranties by ASDI
and the Shareholders 11
(a) Organization and Qualification 11
(b) Capitalization 12
(c) Authority Relative to Agreement 12
(d) Lack of Conflict with Other Agreements 13
(e) Consents 13
(f) Financial Statements and Accounts Receivable 13
(g) Undisclosed Liabilities 14
(h) Events Subsequent to Balance Sheet Date 15
(i) Litigation and Proceedings 16
(j) Employee Benefit Plans 16
(k) Brokers 23
(l) Environmental Matters 23
(m) Material Contracts 28
<PAGE> 2
(n) Government Contracts; Backlog 30
(o) Intellectual Property 32
(p) Labor Relations. 33
(q) Legal Compliance 35
(r) Taxes 36
(s) Licenses, Permits and Authorizations 38
(t) Books and Records 39
(u) Insurance 39
Section 2.2 Representations and Warranties by
CFS and CRI. 40
(a) Organization and Qualification 40
(b) Authority Relative to Agreements 40
(c) Lack of Conflicts with Other Agreements 41
(d) Consents 41
(e) Brokers 41
(f) Public Reports 41
Section 3.1 Shareholder Approval 42
Section 3.2 Conduct of ASDI's Business 42
(a) Business Conducted in Ordinary Course 42
(b) Consent of CFS for Changes in Conduct of Business 45
Section 3.3 Other Actions 45
Section 3.4 Inquiries and Negotiations 46
Section 3.5 Notification of Certain Matters 46
Section 3.6 Access to Information 46
(a) Confidentiality 46
(b) Evaluation Materials 47
(c) Mandatory Disclosure 48
(d) Termination of the Agreement 48
Section 3.7 Public Announcements 48
Section 3.8 CRI Stock Acquired by the Shareholders 49
(a) Disclosure of Information 49
(b) Investment Experience 49
(c) Restricted Securities 49
(d) Further Limitations on Disposition 50
(e) Legends 50
(f) Accredited Investor 51
<PAGE> 3
Section 3.9 Restriction on Transferability of Shares,
Compliance with Securities Act of 1933 51
(a) Restrictions on Transferability 51
(b) Certain Definitions 51
(c) Required Registration 53
(d) Indemnification by CRI 54
(e) Indemnification by the Shareholder 56
(f) Cooperation, Furnishing of Information 56
(g) Expense 56
(h) Notice of Sale 57
Section 4.1 Conditions to the Merger 57
(a) Shareholder Approval by ASDI 58
(b) No Injunction 58
(c) Accuracy of Representations and Warranties;
Compliance with Covenants; and Absence of
Material Adverse Change 58
(d) Satisfaction of Conditions Precedent by ASDI
and the Shareholders 58
(e) Consents Required to be Obtained by ASDI 58
(f) Employment Agreements 59
(g) Material Changes to Operations of ASDI 59
(h) Accuracy of ASDI Representations and Warranties 59
(i) Financing 59
(j) Corporate Records of ASDI 60
(k) Transactional Materials of ASDI 60
(l) Sick Leave 60
(m) Vacation 60
Section 4.2 Conditions to the Merger 60
(a) No Injunction 60
(b) Accuracy of Representations and Warranties;
Compliance with Covenants; and Absence of
Material Adverse Change 61
(c) Satisfaction of Conditions Precedent by
CRI and CFS 61
(d) Employment Agreements 61
(e) Transactional Materials of CFS and CRI 61
(f) Assumption of Debt Obligations of the
Shareholders 61
(g) Lease of East Elmhurst Facility 62
Section 5.1 Termination by Mutual Consent 63
Section 5.2 Termination by ASDI or CFS and CRI 63
Section 5.3 Termination by ASDI 63
Section 5.4 Termination by CFS and CRI 64
<PAGE> 4
Section 5.5 Effect of Termination 64
Section 5.6 Amendment 65
Section 5.7 Waiver 65
Section 6.1 Notices 65
Section 6.2 Counterparts 67
Section 6.3 Headings 67
Section 6.4 Survival of Representations or Warranties 67
Section 6.5 Indemnification 67
Section 6.6 Entire Agreement 69
Section 6.7 Cooperation 69
Section 6.8 No Rights to Third Parties 69
Section 6.9 No Assignment 69
Section 6.10 Governing Law 70
Section 6.11 Consent to Jurisdiction 70
Certain Definitions 70
LIST OF SCHEDULES 77
<PAGE> 5
MERGER AGREEMENT
THIS AGREEMENT, dated as of January 25, 1996, by and among
COMPTEK RESEARCH, INC., a New York corporation having an office
and principal place of business at 2732 Transit Road, Buffalo,
New York 14224 (hereinafter called "CRI"), COMPTEK FEDERAL
SYSTEMS, INC., a New York corporation having an office and
principal place of business at 2732 Transit Road, Buffalo, New
York 14224 (hereinafter called "CFS"), ADVANCED SYSTEMS
DEVELOPMENT, INC., a New York corporation having an office and
principal place of business at 96-10 23rd Avenue, East Elmhurst,
New York 11369-1230 (hereinafter called "ASDI"), and MICHAEL
GROSS, MATILDA GROSS, NICHAN TCHORBAJIAN and LARRY DIAMOND. The
foregoing individuals other than Matilda Gross are hereinafter
collectively referred to as the "Shareholders".
WHEREAS, the Shareholders are the owners of all of the
issued and outstanding shares of capital stock of ASDI; and
WHEREAS, CRI and the Shareholders desire to effect the tax-
free merger hereinafter set forth under Section 368(a)(2)(d) of
the Internal Revenue Code whereunder ASDI will merge into CFS, a
wholly owned subsidiary of CRI, and all outstanding shares of
capital stock of ASDI (hereinafter called "Shares") will by the
merger be converted into shares of capital stock of CRI and cash
upon the terms and conditions set forth herein;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
<PAGE> 6
ARTICLE I
MERGER
Section 1.1 Merger
(a) CRI to Provide Stock and Cash. At the Closing,
CRI will deliver common stock of CRI (the "CRI Stock") and cash
to effectuate the Merger.
(b) Agreement and Plan of Merger. On the Closing Date
(as hereinafter defined), ASDI shall be merged (hereinafter
sometimes called the "Merger") into CFS, a New York corporation
and a wholly owned subsidiary of CRI, in accordance with the
terms of this Agreement and the statutory merger requirements of
the New York Business Corporation Law. CFS shall be the
corporation surviving the Merger and the separate existence of
ASDI shall cease as of the Merger. CFS shall then be vested with
and possess all of the assets, property, rights, privileges,
immunities, powers, franchises and authority of ASDI without
further act or deed and shall have assumed and be liable for all
obligations of ASDI as set forth in this Agreement. In the
Merger, the Shares owned by Matilda Gross shall be automatically
converted into the right to receive $329,842.50 in cash, and the
Shares owned by the Shareholders shall be automatically converted
into the right to receive a number of shares of CRI common stock
equal in value to $4,905,950, valued at the average closing price
for thirty (30) days prior to the Closing. At the Closing,
shares of CRI stock valued at $1,060,000 under the method
aforesaid, shall be delivered into escrow pursuant to the terms
of the provisions of Section 1.3, and the balance of the CRI
Stock shall be delivered to the Shareholders.
<PAGE> 7
(c) Pro-rata Distribution. The CRI common stock shall
be issued to each Shareholder pro-rata in proportion to the
number of Shares held by him.
(d) Effect on CFS Shares. None of the shares of
common stock of CFS issued and outstanding at the effective time
of the Merger shall be converted as a result of the Merger, but
all of such shares shall remain issued and outstanding shares of
common stock of CFS.
(e) Filings. On or about the date of the Closing, the
parties hereto shall cause to be filed the Certificate of Merger
and such other documents with the Secretary of the State of New
York, as shall be necessary for the consummation and
effectiveness of the Merger as contemplated hereby as of the
Closing Date.
Section 1.2 Pre-Closing Statement and Purchase Price
Adjustment
(a) Pre-Closing Statement. At least three (3) days
prior to Closing, the Shareholders shall cause ASDI to prepare a
pre-closing statement (the "Pre-Closing Statement") reflecting
the Net Asset Value of ASDI as defined in (b) below, as of
January 31, 1996. The Pre-Closing Statement shall be prepared on
a basis consistent with the September 30, 1995, Certified
Financial Statements, copies of which are referenced on Schedule
1.2(a). To the extent the Net Asset Value as of January 31,
1996, (as reflected on the Pre-Closing Statement) is less than
$282,985, then the value of the CRI stock set forth in Section
1.1(c) shall be adjusted downward on a dollar-for-dollar basis.
Although the purchase price will not be increased by excess net
worth, the excess net worth will be added to the liability
cushion defined in Section 1.3(b) of this Agreement.
<PAGE> 8
(b) Net Asset Value. For purposes of this Agreement,
equity determined in accordance with generally accepted
accounting principles applied on a basis consistent with those
applied in the preparation of the September 30, 1995, Certified
Financial Statements.
(c) Closing Statement. Within 15 business days after
the Closing Date, the Shareholders and ASDI shall cooperate in
the preparation and deliver to CFS a Balance Sheet showing the
Net Asset Value of ASDI as of the Closing Date (the "Closing
Statement"). The Closing Statement shall be prepared on a basis
consistent with the September 30, 1995, Financial Statements. To
the extent the Net Asset Value of ASDI on the Closing Statement
is less than the amount set forth on the Pre-Closing Statement,
then the value of CRI stock set forth in Section 1.1(b) shall be
adjusted downward on a dollar-for-dollar basis by reducing the
stock held in escrow pursuant to Section 1.1(b). Disputes in the
preparation of the Closing Statement shall be resolved in good
faith, and if not so resolved shall be conclusively determined by
Price Waterhouse, with the fees of such firm to be borne by the
parties in the proportion in which they have not prevailed, so
that for example if a dispute involves $10,000 and Price
Waterhouse rules in favor of CRI on $8,000 of this amount, the
Shareholders will bear 80% of such fees and CRI will bear 20% of
the such fees. Shareholders shall be obligated to indemnify CRI
and CFS under Section 6.5 (and subject to the limitations set
forth therein) to the extent that ASDI writes off accounts
receivable in excess of the bad debt reserve therefor on the
Closing Statement.
(d) The Closing. Subject to the provisions of this
Agreement, a closing (the "Closing") shall be held on March 1,
1996, or on such other date not later than the 45th day after the
date hereof as the parties shall agree (the "Closing Date") at
10:00 a.m.
<PAGE> 9
local time) at the offices of CRI and CFS, or at such other time
or place as the parties hereto may agree.
(e) CRI Stock Price Floor. If the CRI Stock shall, at
the later to occur of (i) the first anniversary of the Closing
Date and (ii) the date on which the registration statement
referred to in Section 3.9 (the "registration statement") shall
have been declared effective by the SEC, when valued at the
average closing price for the previous thirty (30) days, be less
than sixty-five percent (65%) of the value set forth in Section
1.1(c) of this Agreement, then CRI shall forthwith pay to each
Shareholder an amount equal to the shortfall from such 65%. Such
amount shall be paid in cash, or, at the option of CRI and CFS,
in CRI stock which is subject to an effective registration
statement and which has a then value equal to the shortfall.
Section 1.3 Escrow
(a) Delivery of CRI Stock to Escrow Agent. The CRI
stock to be delivered in escrow under Section 1.1(b) shall be
delivered in escrow to Purchaser's counsel (the "Escrow Agent"),
together with stock powers therefor endorsed in blank.
(b) Indemnification. If ASDI or any Shareholder is
obligated to indemnify CRI and CFS under any Section of this
Agreement, specifically including but not limited to Sections
2.1(f) and 2.1(n), Gross (as representative of the Shareholders)
shall join with CRI and CFS in a joint notice to Escrow Agent
wherein CRI and CFS and Gross jointly direct the Escrow Agent to
first apply such indemnified amounts against the liability
cushion, if any, until it is exhausted. For the purposes of this
Agreement, the "liability cushion" shall mean $100,000 plus any
amount by which the Net Asset Value of ASDI at the time of
Closing exceeds
<PAGE> 10
$282,985. If the liability cushion is exhausted, the Escrow
Agent shall release to CRI and CFS shares of CRI Stock which have
a value (as set forth in Section 1.1(b)) equal to the amount of
such indemnity liability.
(c) Notice to Escrow Agent. If ASDI or any Shareholder
is obligated to make any adjusting payment under any provision of
this Agreement, Gross (as representative of the Shareholders)
shall join with CRI and CFS in a joint notice to Escrow Agent
wherein CRI and CFS and Gross jointly direct the Escrow Agent to
exhaust the liability cushion, if any, then release to CRI and
CFS CRI shares of CRI Stock which have a value (as set forth in
Section 1.1(b)) equal to the amount of such adjustment.
(d) Release of CRI Stock to the Shareholders. On the
first anniversary of the date of this Agreement, Gross (as
representative of the Shareholders) agrees to join with CRI and
CFS in a joint notice to Escrow Agent wherein the persons signing
such notice direct the Escrow Agent to exhaust the liability
cushion, if any, then release to the respective Shareholders (in
accordance with their ownership as reflected in the Disclosure
Schedule) the CRI Stock then held in escrow, less any CRI Stock
theretofore released under any other provision of this Agreement
or as to which there is a dispute.
(e) Escrow Dispute Resolution. In the event of any
dispute on whether any such notice is required to be signed, such
dispute shall be determined exclusively by arbitration by the
American Arbitration Association ("AAA") at the Buffalo, New York
area offices of CRI and CFS, or at such site as the parties shall
agree.
<PAGE> 11
(f) Authority of Escrow Agent. The Escrow Agent shall
act only in accordance with a joint notice as aforesaid or in
accordance with a binding and final arbitration award.
(g) Escrow Agent. The parties acknowledge that Oscar
D. Folger has acted as counsel to ASDI and the Shareholders in
connection with this transaction, and that he may continue so to
act notwithstanding any dispute hereunder. The Escrow Agent shall
be permitted to rely on any notice he believes have been
genuinely signed. He may resign as Escrow Agent at any time and
thereafter hold the escrow assets as custodian until the parties
jointly appoint a successor escrow agent. He may interplead
disputing parties in actions filed by him hereunder in the New
York Federal or state courts. The parties hereby indemnify the
Escrow Agent for all actions taken by him on good faith
hereunder.
(h) Valuation of CRI Stock in Escrow. For the purposes
of this Section 1.3, each share of CRI Stock shall be deemed to
have a value as set forth in Section 1.1(b) of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties by ASDI and the
Shareholders. ASDI and the Shareholders warrant to CRI and CFS
as follows:
(a) Organization and Qualification. ASDI is a
corporation duly organized, validly existing and in good standing
under the laws of New York and has all requisite corporate power
and authority to own or lease and operate its properties and to
carry on its business as now conducted. ASDI is duly qualified
as a foreign corporation to do business, and is in good standing,
in each jurisdiction in which the nature of its business or the
<PAGE> 12
ownership or leasing of its properties makes such qualification
necessary, except for such jurisdictions where the failure to so
qualify would not have a Material Adverse Effect. For the
purposes of this Agreement, a "Material Adverse Effect" means a
material adverse effect on the business, operations or financial
condition of ASDI. ASDI has furnished or made available to CFS
accurate and complete copies of the Articles of Incorporation and
By-laws of ASDI. At the Closing, ASDI will provide a Certificate
of Good Standing from the State of New York and from any other
jurisdiction in which it is qualified, or needs to be qualified,
to do business.
(b) Capitalization. The authorized capital stock of
ASDI consists of (i) 1,000 Shares of Common Stock, of which 505
shares are issued and outstanding, par value $.01. All of such
issued and outstanding Shares of ASDI Common Stock were validly
issued and are fully paid and non-assessable. There are no
outstanding options, warrants, rights or other securities
exercisable or exchangeable for any capital stock or other
securities of ASDI, any other commitments or agreements providing
for the issuance of additional shares, the sale of treasury
shares, or for the repurchase of redemption of shares of ASDI
capital stock, or any agreements of any kind which may obligate
ASDI to issue, purchase, register for sale, redeem or otherwise
acquire any of its securities or other equity interests. The
foregoing does not take into account a shareholders' agreement
which the Shareholders agree to terminate as of the Closing.
(c) Authority Relative to Agreement. ASDI has all
requisite corporate power and authority to execute and deliver
this Agreement and the requisite approval to perform its
obligations hereunder and consummate the transactions
contemplated hereby. This Agreement has been approved by each of
the Shareholders. No other corporate proceedings on the part of
ASDI are necessary to authorize the Merger Transaction. This
Agreement has been duly
<PAGE> 13
executed and delivered by ASDI and this Agreement constitutes a
valid and binding obligation of ASDI enforceable against ASDI in
accordance with its terms.
(d) Lack of Conflict with Other Agreements. The
execution and delivery of this Agreement by ASDI and the
consummation by ASDI of the Merger Transaction will not conflict
with any provision of the Articles of Incorporation or By-laws,
as amended, of ASDI or result in any violation of or default
under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement or other instrument, permit
concession, grant, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to ASDI.
(e) Consents. No consent, approval, order or
authorization of, or registration, declaration of riling with,
any Federal, state, local or foreign governmental or regulatory
authority is required to be obtained or made by ASDI in
connection with the execution and delivery of this Agreement by
ASDI or the consummation by ASDI of the Merger Transaction,
except for the filing of the Certificate of Merger with the
Secretary of State of the State of New York.
(f) Financial Statements and Accounts Receivable. To
the best knowledge of ASDI and the Shareholders, the financial
statements of ASDI have been prepared in accordance with United
States generally accepted accounting principles applied on a
consistent basis ("GAAP") (except as may be indicated therein or
in the notes thereto) and fairly present the financial position
of ASDI as at the date thereof and the results of its operations
and changes in financial position for the periods then ended.
The Shareholders will reasonably cooperate with ASDI in seeking
to prepare financial statements which comply with Regulation S-X
of the Securities Exchange Act of 1934 so that CRI may make a
timely
<PAGE> 14
filing on Form 8-K with the Securities and Exchange Commission.
To the best of ASDI's and the Shareholders' knowledge and belief,
the aggregate gross receivables reflected in the September 30,
1995, Certified Financial Statements of ASDI represented bona
fide claims against debtors for sales or other charges arising on
or before that date and are not subject to offset or discount,
except for normal cash discounts. The amount carried for
doubtful accounts
and allowances in such Certified Financial Statements is
sufficient to provide for any losses which may be sustained on
realization of such receivables. The above notwithstanding, any
aggregate deficiency in accounts receivable for work done through
the Closing Date, either billed or unbilled at the Closing Date,
with Elettronica, Rainford and Deutsche Aerospace which arises
before June 30, 1997, shall be charged against the liability
cushion described in Section 1.3 of this Agreement until it is
exhausted, and then against the escrow amount as set forth in
Section 1.3 of this Agreement.
(g) Undisclosed Liabilities. To the best knowledge of
the Shareholders and of the management of ASDI, and except as
disclosed in this Agreement or any Schedule hereto:
(i) ASDI does not have any material liabilities
or obligations (whether absolute or contingent, liquidated or
unliquidated, or due or to become due) of a type normally
reflected on a balance sheet prepared in accordance with GAAP,
except for liabilities and obligations (A) reflected or reserved
for on the balance sheet of ASDI as of September 30, 1995 (the
"Balance Sheet Date"), or (B) that have arisen since the Balance
Sheet Date in the ordinary course of the operation of the
business and consistent with the past practice of ASDI (which are
disclosed on Schedule 2.1(g) hereto) and which are reflected on
the Closing Statement.
(ii) Set forth on Schedule 2.1(g) is the current
Reasonable Best Estimate (as hereinafter defined) of ASDI of all
<PAGE> 15
program cost reserves of ASDI with respect to the Material
Contracts referenced in Section 2.1(m) pursuant to which ASDI is
required to perform services, deliver products or both.
"Reasonable Best Estimate" means an estimate as to which there is
a reasonable basis and in no event shall it be construed as a
guarantee of other assurance of a future result. At the Closing,
ASDI shall deliver to CFS Certifications signed by each of the
Shareholders of the Reasonable Best Estimate of the program cost
reserves for each of the Material Contracts.
(iii) Schedule 2.1(g) references a New York State
Department of Labor dispute against ASDI. On or before the
Closing Date, ASDI will record an additional liability in the
amount of $25,000 to reflect potential losses in this matter and
for other similar situations. The Shareholders have no liability
if actual losses exceed $25,000.
(h) Events Subsequent to Balance Sheet Date. To the
best knowledge of the Shareholders and of the management of ASDI,
since the date of the Balance Sheet Date, (i) there has not been
any Material Adverse Effect, or any event, condition or
contingency that is, in the reasonable judgment of senior
management of ASDI and the Shareholders, likely to result in a
Material Adverse Effect, other than any changes in the prospects
of the business of ASDI which result from developments affecting
the defense industry generally, and (ii) ASDI has not (A) sold,
transferred, leased, pledged, or mortgaged any material assets,
properties or rights, except in the ordinary course of operations
of their respective businesses, consistent with past practices,
(B) made any change in any method of accounting, or (C) made any
capital expenditures or commitments for capital expenditures
which exceed $10,000 in any case, or $50,000 in the aggregate.
<PAGE> 16
(i) Litigation and Proceedings. Except as disclosed
in this Agreement or any Schedule hereto, there are no lawsuits,
actions, suits, claims or other proceedings at law or in equity,
or to the knowledge of ASDI or the Shareholders, investigations
(including, without limitation, investigations by any government
involving any Governmental Contract wherein a claim for improper
charges was made) before or by any court or governmental
authority or instrumentality or before any arbitrator pending or,
to the knowledge of ASDI or the Shareholders, threatened against
ASDI. To the knowledge of ASDI and the Shareholders, there are
no investigations (including, without limitation, investigations
by any governmental body or agent involving any Government
Contract wherein a claim for improper charges was made)
involving, directly or indirectly, ASDI. There is no unsatisfied
judgment, order or decree or any outstanding injunction binding
upon ASDI.
(j) Employee Benefit Plans.
(i) Definitions. The following terms, when used
in this Section 2.1(j), shall have the following meanings. Any
of these terms may, unless the context otherwise requires, be
used in the singular or the plural depending on the reference.
(A) Benefit Arrangement. "Benefit
Arrangement" shall mean any employment, consulting, severance or
other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment
providing for insurance coverage (including without limitation
any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, life, health, disability or accident
benefits (including without limitation any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the
Code providing for the same or other benefits) or for deferred
compensation,
<PAGE> 16
profit-sharing bonuses, stock options, restricted stock, stock
appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or
benefits which (1) is not a Welfare Plan, Pension Plan or
Multiemployer Plan, (2) is contributed to, as the case may be, by
ASDI or any ERISA Affiliate (with respect to their relationship
with any such entity).
(B) Employee Plans. "Employee Plans" shall
mean all Benefit Arrangements, Multiemployer Plans, Pension Plans
and Welfare Plans.
(C) ERISA. "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
(D) ERISA Affiliate. "ERISA Affiliate"
shall mean any entity which is (or at any relevant time was) a
member of a "controlled group of corporations" with, under
"common control" with, or a member of an "affiliated service
group" with ASDI as defined in Section 414(b), (c), (m) or (o) of
the Code.
(E) Multiemployer Plan. "Multiemployer
Plan" shall mean any "Multiemployer plan," as defined in Section
4001(a)(3) of ERISA, (1) which ASDI or any ERISA Affiliate
maintains, administers, contributes to or is required to
contribute to, and (2) which covers any employee or former
employee of ASDI or any ERISA Affiliate (with respect to their
relationship with such entities).
(F) PBGC. "PBGC" shall mean the Pension
Benefit Guaranty Corporation.
(G) Pension Plan. "Pension Plan" shall mean
any "employee pension benefit plan" as defined in Section 3(2) of
<PAGE> 18
ERISA (other than a Multiemployer Plan) (1) which ASDI or any
ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, and (2) which covers any employee or
former employee of ASDI or any ERISA Affiliate (with respect to
their relationship with such entities).
(H) Welfare Plan. "Welfare Plan" shall mean
any "employee welfare benefit plan" as defined in Section 3(1) of
ERISA, (1) which ASDI or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, and
(2) which covers any employee or former employee of ASDI or any
ERISA Affiliate (with respect to their relationship with such
entities).
(ii) Disclosure; Delivery of Copies of Relevant
Documents and Other Information. ASDI maintains a complete list
of Employee Plans, true and correct copies of which have been
previously furnished or made available to CRI and CFS.
(iii) Representations. ASDI and the
Shareholders represent and warrant as follows:
A. Pension Plans.
(1) No "accumulated funding deficiency"
(for which an excise tax is due or would be due in the absence of
a waiver) as defined in Section 412 of the Code or as defined in
Section 302(a)(2) of ERISA, whichever may apply, has been
incurred with respect to any Pension Plan with respect to any
plan year, whether or not waived. Neither ASDI nor any ERISA
Affiliate has failed to pay when due any "required installment,"
within the meaning of Section 214(m) of the Code and Section
302(e) of ERISA, whichever may apply with respect to any Pension
Plan. Neither ASDI nor any ERISA Affiliate is subject to any
lien imposed under
<PAGE> 19
Section 412(n) of the Code or Section 302(f) or 4068 of ERISA,
whichever may apply, with respect to any Pension Plan. All
"benefit liabilities" within the meaning of Section 4001(a)(16)
of ERISA, are fully funded as of the Closing Date with respect to
each Pension Plan, if any, on a termination basis.
(2) Neither ASDI nor any ERISA
Affiliate is required to provide security to a Pension Plan under
Section 401(a)(29) of the Code.
(3) Each Pension Plan and each related
trust agreement, annuity contract or other funding instrument is
qualified and tax exempt under the provisions of the Code
Sections 401(a) and 501(a) and each has been so determined by the
Internal Revenue Service.
(4) Each Pension Plan, related trust
agreement, annuity contract or other funding instrument is in
material compliance with its terms and, both as to form and in
operation, with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to
such Pension Plan, including without limitation ERISA and the
Code, and there exists no tax, penalty or other liability with
respect to such Pension Plan.
(5) ASDI or an ERISA Affiliate has paid
all premiums (and interest charges and penalties for late
payment, if applicable) due to the PBGC with respect to each
Pension Plan which is covered by Title IV of ERISA for each plan
year thereof for which such premiums are required. Neither ASDI
nor any ERISA Affiliate has engaged in, or is a successor or
parent corporation to an entity that has engaged in, a
transaction which is described in Section 4069 of ERISA. There
has been no unreported "reportable event" (as defined in Section
4043(b) of ERISA and the PBGC
<PAGE> 20
regulations under such Section) requiring notice to the PBGC with
respect to any Pension Plan. No filing has been made by ASDI or
any ERISA Affiliate with the PBGC, and no proceeding has been
commenced by the PBGC, to terminate any Pension Plan. No
condition exists and no event has occurred that could constitute
grounds for the termination of any Pension Plan by the PBGC, or
which could reasonably be expected to result in liability of ASDI
or any ERISA Affiliate to the PBGC with respect to any Pension
Plan, other than liabilities for premium payments. Neither ASDI
nor any ERISA Affiliate has, at any time, (a) ceased operations
at a facility so as to become subject to the provisions of
Section 4062(e) of ERISA, (2) withdrawn as a substantial employer
so as to become subject to the provisions of Section 4063 of
ERISA, or (3) ceased making contributions on or before the
Closing Date to any Pension Plan subject to Section 4064(a) of
ERISA to which ASDI or any ERISA Affiliate made contributions
during the six years prior to the Closing Date.
(B) Multiemployer Plans. There are no
Multiemployer Plans, and neither ASDI nor any ERISA Affiliate has
ever maintained, contributed to, or participated or agreed to
participate in any Multiemployer Plan.
(C) Welfare Plans.
(1) Each Welfare Plan is in material
compliance with its terms and, both as to form and operation,
with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Welfare Plan,
including without limitation ERISA and the Code, and there exists
no tax, penalty or other liability with respect to such Welfare
Plan.
<PAGE> 21
(2) There are no liabilities of ASDI
and or any ERISA Affiliate for providing retiree life and medical
benefits coverage to active and retired employees of ASDI and any
ERISA Affiliates. ASDI has the right to modify and to terminate
Welfare Plans, including the right to modify or terminate Welfare
Plans, including the right to modify or terminate Welfare Plans
that provide coverage or benefits for retired or active employees
or their beneficiaries.
(3) Each Welfare Plan which is a "group
health plan," as defined in Section 607(1) of ERISA, has been
operated in material compliance with provisions of Part 6 of
Title I, Subtitle B of ERISA and Section 4980B of the Code at all
times.
(D) Benefit Arrangements. Each Benefit
Arrangement is in material compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules
and regulations which are applicable to such Benefit Arrangement,
including without limitation the Code, and there exists no tax,
penalty or other liability with respect to such Benefit
Arrangement.
(E) Fiduciary Duties and Prohibited
Transactions. ASDI has no liability with respect to any
transaction in violation of Sections 404 or 406 of ERISA, or any
"prohibited transaction," as defined in Section 4975(c)(1) of the
Code, for which no exemption exists under Section 408 of ERISA or
Section 4975(c)(2) or (d) of the Code to which any Welfare Plan
or Pension Plan is subject. To the knowledge of ASDI and the
Shareholders, neither ASDI nor any of its ERISA Affiliates or any
other party has participated in a violation of Part 4 of Title I,
Subtitle B of ERISA by any plan fiduciary of any Welfare Plan or
Pension Plan and has no unpaid civil penalty under Section 502(1)
of ERISA.
<PAGE> 22
(F) Litigation. There is no material
action, order, writ, injunction, judgment or decree outstanding
or claim, suit, litigation, proceeding, arbitral action,
governmental audit or investigation relating to or seeking
benefits under any Employee Plan that is pending, or, or the
knowledge of ASDI, threatened or anticipated against ASDI or any
ERISA Affiliate.
(G) Unpaid Contributions. Neither ASDI nor
any ERISA Affiliate has any liability for unpaid contributions
with respect to any Employee Plan. ASDI has made all required
contributions under each Employee Plan for all periods through
and including the Closing Date, or proper accruals have been made
and are reflected on the appropriate balance sheet and books and
records.
(H) Copies of Documentation. ASDI has
delivered pursuant to this Agreement a true and complete set of
copies of (a) all Employee Plans and related trust agreements,
annuity contracts or other funding instruments as in effect
immediately prior to the Closing Date, together with all
amendments thereto which shall become effective at a later date;
(b) the latest Internal Revenue Service determination letter
obtained with respect to any such Employee Plan qualified or
exempt under Section 401 or 501 of the Code; (c) forms 5500 and
certified financial statements for the most recently completed
three fiscal years for each Employee Plan required to file such
form, together with the most recent actuarial report, if any,
prepared by the Employee's Plan's enrolled actuary; (d) all
summary plan descriptions for each Employee Plan required to
prepare, file and distribute summary plan descriptions; (3) all
summaries furnished or made available to employees, officers and
directors of ASDI or any ERISA Affiliate of all incentive
compensation, other plans and fringe benefits for which a summary
plan description is not required; and (f) the
<PAGE> 23
notifications to employees of their rights under Section 4980B of
the Code.
(k) Brokers. No broker, finder, or investment banker
is entitled to any brokerage, finder's or other fee or commission
in connection with the Merger Transaction based upon arrangements
made by or on behalf of ASDI or the Shareholders.
(l) Environmental Matters.
(i) Environmental Definitions.
(A) Environment. "Environment" means soil,
land, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), ground waters,
drinking water supply, stream sediments, ambient air and any
other environmental medium;
(B) Environmental, Health and Safety
Liabilities. "Environmental, Health and Safety Liabilities"
means any loss, cost, expense, claim, demand, liability,
obligation or other responsibility of whatever kind or otherwise,
based upon Environmental Law relating to:
(1) any environmental, health or safety
matters or conditions (including, but not limited to, on-site or
off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(2) fines, penalties, judgments,
awards, settlements, legal or administrative proceedings,
damages, losses, claims, demands and response, remedial or
inspection costs and expenses arising under Environmental Law;
<PAGE> 24
(3) financial responsibility under
Environmental law for cleanup costs or corrective action,
including for any removal, remedial or other response actions,
and for any nature resource damages;
(4) any other compliance, corrective or
remedial measures required under Environmental Law.
The terms "removal," "remedial" and
"response" action shall include the types of activities covered
by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.,
as amended ("CERCLA");
(C) Environmental Law. "Environmental Law"
means any provision of past or present federal, state, local or
any other legally enforceable governmental law, directive,
statute, ordinance, rule, regulation or standard, common law or
any judgment, order, writ, notice, decree, permit, license,
approval, consent or injunction, relating to any environmental,
health or safety matters or conditions, Hazardous Materials
(hereinafter defined), pollution or protection of the
Environment, including, but not limited to, on-site or off-site
contamination, occupational safety and health and regulation of
chemical substances or products, emissions, discharges, releases
or threatened release of pollutants, contaminants, chemicals, or
industrial, toxic, radioactive or Hazardous Materials or wastes
into the Environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, toxic, radioactive or
hazardous substances or wastes;
<PAGE> 25
(D) Facilities. "Facilities" means any real
property, leaseholds or other interests owned by ASDI and/or any
buildings, plants, structures or equipment of ASDI;
(E) Hazardous Materials. "Hazardous
Materials" means and includes, but shall not be limited to, any
(i) "hazardous substance," "pollutant" or "contaminant" (as
defined in Section 101(14), (33) of CERCLA, 42 U.S.C. Section
9701(14), (33) or the regulations designated pursuant to Section
102 of CERCLA, 42 U.S.C. Section 9602 and found at 40 C.F.R. Part
302), including any element, compound, mixture, solution, or
substance which is designated pursuant to Section 102 of CERCLA;
(ii) all substances which are designated pursuant to Section
311(b)(2)(A) of the Federal Water Pollution Control Act, 33
U.S.C. Section 1251, 1321(b)(2)(A), as amended ("FWPCA"); (iii)
any hazardous waste having the characteristics which are
identified under or listed pursuant to Section 3001 of the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
6921, as amended ("RCRA"); (iv) any substances containing
petroleum, as that term is defined in Section 9001(8) of RCRA, 42
U.S.C. Section 991(8) or 40 C.F.R. Part 280; (v) any toxic
pollutant which is listed under Section 307(a) of the FWPCA, 33
U.S.C. Section 1317(a); (vi)) any hazardous air pollutant which
is listed under Section 112 of the Clean Air Act, 42 U.S.C.
Sections 7401, 7412, as amended; (vii) any imminently hazardous
chemical substance or mixture with respect to which action has
been or may be taken pursuant to Section 7 of the Toxic
Substances Control Act, 15 U.S.C. Section 2601, 2602, as amended;
(ix) waste oil and other petroleum products; (x) any asbestos,
asbestos containing material or urea formaldehyde or material
which contains it; or (xi) any other toxic materials,
contaminants or hazardous substances or wastes pursuant to any
Environmental Law;
(F) Release. "Release" means any releasing,
spilling, leaking, pumping, pouring, emitting, emptying,
<PAGE> 26
discharging, injecting, escaping, leaching, disposing or dumping
into the Environment;
(G) Threat of Release. "Threat of Release"
means a substantial likelihood of a Release which, to the best of
ASDI's knowledge, might require action in order to prevent or
mitigate damage to the Environment that might result from such
Release;
(ii) Compliance with Environmental Laws.
(A) To the knowledge of ASDI and the
Shareholders, ASDI has, at times during the ten-year period prior
to the date hereof, been in material compliance with all
Environmental Laws applicable to ASDI, where any failure to so be
in compliance, or during the ten-year period prior to the date
hereof to have so been in compliance, would not have a Material
Adverse Effect, and ASDI has not received, during the five-year
period prior to the date hereof, any written order or notice from
any federal, state, or local governmental agency administering or
enforcing any Environmental Law, of any violation or failure to
comply with any such Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of
any Environmental, Health and Safety Liabilities with respect to
any of the Facilities or any other property now owned or
previously owned or leased by ASDI or to which Hazardous
Materials generated by ASDI may have been transported;
(B) ASDI has received and maintains in
effect all of the consents, licenses, permits, approvals, and
certificates relating to Environmental Laws on the date hereof,
which, in the reasonable judgment of senior management of ASDI,
constitute all of the consents, licenses, permits, approvals, and
certificates required, including those required under
Environmental Laws, for
<PAGE> 27
ASDI to lawfully own, operate, use, and maintain their assets and
to conduct their businesses. To the knowledge of ASDI, ASDI has
at all times prior to Closing, maintained their assets and
conducted their businesses in compliance in all material respects
with the terms of all such consents, licenses, permits,
approvals, and certificates, and all required filings and all
required applications with respect to and for renewal thereof
have been timely made and filed. All such consents, licenses,
permits, approvals, and certificates are in full force and effect
and there are no proceedings pending or, to the best knowledge of
ASDI, threatened that seek the revocation, cancellation,
suspension, or adverse modification thereof;
(C) To the knowledge of ASDI, ASDI has no
material Environmental, Health and Safety Liabilities with
respect to the Facilities or any other properties and assets
(real, personal and mixed, tangible and intangible) in which ASDI
has or had an interest;
(D) To the knowledge of ASDI, ASDI has not
generated, manufactured, refined, transported, treated, stored,
handled, disposed, transferred, produced, imported, used or
processed any toxic or Hazardous Materials except in compliance
in all material respects with all applicable Environmental Laws;
(E) To the knowledge of ASDI, ASDI has not
received any notice of any material violation of any
Environmental law, or any notice of any material potential
Environmental, Health and Safety Liabilities with respect to the
Facilities or, to the best of ASDI's knowledge, with respect to
any other properties and assets (real, personal and mixed,
tangible and intangible) in which ASDI has or had an interest, or
with respect to any other property or facility where toxic or
Hazardous Materials generated, manufactured, refined,
transferred, imported, used or processed by
<PAGE> 28
ASDI, or any ASDI Subsidiary, or any other Person for whose
conduct they are responsible, have been transported, treated,
stored, handled, disposed, transferred, recycled or received;
(F) To the knowledge of ASDI and the
Shareholders, there has been no illegal or reportable Release or
Threat of Release of any toxic or Hazardous Materials at or from
the Facilities. ASDI has not received any notice of any illegal
or reportable release or threat of release of any toxic or
hazardous materials at any other locations where any toxic or
Hazardous Materials generated, manufactured, refined,
transferred, produced, imported, used or processed from or by the
Facilities, or from or by any other properties and assets (real,
personal and mixed, tangible and intangible) in which ASDI has or
had an interest, have been transported, treated, stored, handled,
disposed, transferred, recycled or received, whether by ASDI or
by any other Person for whose conduct it is responsible;
(G) To the knowledge of ASDI and the
Shareholders, there are no Liens or any other restrictions of any
nature whatsoever, resulting from any Environmental, Health or
Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (real, personal and
mixed, tangible and intangible) in which ASDI has an interest.
(m) Material Contracts.
(1) A list of all Material Contracts to which
ASDI is a party as of December 31, 1995, has been provided to CRI
and CFS. "Contracts" means any bids, quotations, proposals,
contracts (including, without limitation, Government Contracts),
agreements, subcontracts, work authorizations, leases, memoranda
of understanding and purchase orders. For purposes of this
Agreement,
<PAGE> 29
the term "Material Contract" means any Contract providing for (i)
ASDI to refrain from engaging in conduct which is competitive
with the business of the other party to the contract in any way,
(ii) the license to or from any third party of any intellectual
property rights that are material to the operation of the
business of ASDI, (iii) the repayment of money borrowed from a
third party (hereinafter referred to as the "Credit Facilities"),
(iv) the sale by ASDI of goods and services pursuant to any
individual contract in an amount greater than Two Hundred Fifty
Thousand Dollars ($250,000.00), (v) the purchase by ASDI of goods
and services pursuant to any individual contract which ASDI
reasonably expects will account for at least five (5) percent of
its payments to suppliers during 1995, (vi) any other Contract
(however named) involving a sharing of profits, losses, costs, or
liabilities of ASDI with any other Person, (vii) each Contract
providing for payments to or by any Person or entity based on
sales, purchases or profits, other than direct payments for
goods, (viii) each power of attorney which is currently effective
and outstanding, (ix) each written warranty, guaranty or other
similar undertaking with respect to contractual performance
extended by ASDI other than in the ordinary course of business,
(x) any other Contract which, in the reasonable judgment of
senior management of ASDI, is material to the business or
operations of ASDI, and (xi) each legally binding amendment,
supplement, and modification in respect of any of the foregoing.
A list of all material contracts to which ASDI became a party
between December 31, 1995, and the Closing Date, shall be
provided to CRI and CFS on or before the Closing.
(2) ASDI has made available to CFS an accurate
and complete copy of each Material Contract.
(3) All of the Contracts defined pursuant to
paragraph 2.1(m)(1) hereof (A) are in full force and effect, (B)
represent the legal, valid and binding obligations of ASDI and
are
<PAGE> 30
enforceable against ASDI in accordance with their terms, and (C)
to the knowledge of ASDI and the Shareholders represent the
legal, valid and binding obligations of the other parties thereto
and are enforceable against such parties in accordance with their
terms. To the knowledge of ASDI and the Shareholders, no
condition exists or event has occurred which, with notice or
lapse of time or both, would constitute a default under any such
Contract by ASDI or any other party thereto or the basis for
force majeure or the claim of excusable delay or nonperformance
under any such Contract, except where the occurrence of such
event or existence of any such condition individually or in the
aggregate would not have a Material Adverse Effect.
(4) There are no renegotiations of, or, to the
knowledge of ASDI, attempts to renegotiate, or outstanding rights
to renegotiate, any material amounts paid or payable to ASDI
under current or completed Contracts, with any Person or entity
having the contractual or statutory right to demand or require
such renegotiation. ASDI has not received any written demand for
such renegotiation in respect of any such Contract. No customer
or government contract officer has asserted that any material
adjustments are required to the terms of any Contracts.
(5) Except as previously disclosed to CFS in
writing, no consent of any party to any such Contract is required
in connection with the Merger.
(n) Government Contracts; Backlog.
(1) ASDI has not received notice of any claim,
suit or investigation asserting or alleging the commission of
criminal acts or bribery, or other violation of applicable law
(either civil or criminal), by ASDI with respect to any Contract
between ASDI and the United States Government or a department or
agency thereof (a
<PAGE> 31
"Government Contract"). ASDI has not been debarred or suspended
from participation in the award of contracts with the United
States government or any agency or department thereof (it being
understood that debarment and suspension does not include
ineligibility to bid for certain contracts due to generally
applicable bidding requirements). ASDI has not received written
notice of any kind from the U.S. Government or any agency or
department thereof alleging any violation, or notifying ASDI of
any investigation of a possible violation, or any applicable law,
rule, or regulations by ASDI, or any act for which ASDI could be
debarred or suspended from contracting with any agency of any
government, or prohibiting or seeking to prohibit ASDI from
conducting, or restricting or seeking to restrict ASDI's ability
to conduct, all or any part of its business or operations or from
contracting with any government. No payment has been made by
ASDI, or to the best knowledge of ASDI and the Shareholders, by
any Person acting on its or their behalf, to any Person in
connection with any Government Contract in violation of
applicable procurement laws or regulations or in violation of (or
requiring disclosure pursuant to) the Foreign Corrupt Practices
Act. The cost accounting and procurement systems maintained by
ASDI with respect to Government Contracts are in compliance in
all material respects with all applicable United States laws and
regulations.
(2) ASDI has provided to CFS in writing the
current Reasonable Best Estimate of ASDI, as of November 30,
1995, of the "cost to complete" for each Material Contract
pursuant to which ASDI is required to perform services or deliver
products and ASDI's current Reasonable Best Estimate of the
aggregate amount of payments to be received under each such
Contract. None of such Contracts has accrued or, in the
reasonable judgment of ASDI's senior management, is expected by
ASDI to result in any losses. The above notwithstanding, if
there is an aggregate loss in the firm fixed price contracts in
place at the Closing Date with
<PAGE> 32
Elettronica, Rainford, Loral, Boeing, Thomson CSF, Hughes
Training, Hughes Aircraft and Manufacturing Technology, Inc.,
such loss shall first be charged against the liability cushion
(described in Section 1.3 of this Agreement) until it is
exhausted, and then against the escrow amount as set forth in
Section 1.3 of this Agreement. At the Closing, ASDI shall
deliver to CFS Certifications signed by each of the Shareholders
of the Reasonable Best Estimate of the "cost to complete" for
each of the Material Contracts.
(o) Intellectual Property.
(1) ASDI has provided to CFS in writing a list of
each material patent, registered and unregistered trademark,
service mark, trade dress, logo, trade name, copyright, mask
work, and registration or application for any of the foregoing
(the foregoing, together with all material know-how, trade
secrets, confidential information, software, technical
information, process technology, plans, drawings, and blue
prints, being hereinafter collectively referred to as the
"Intellectual Property"), owned by ASDI.
(2) The Contracts as described in Section 2.1(m)
include all license or sublicense agreements with respect to any
Intellectual Property to which ASDI is a party and which is
material to the business and operations of ASDI as presently
being conducted.
(A) ASDI has good title to each item of
Intellectual Property owned by it, free and clear of any Lien;
(B) ASDI owns or has the right to use
pursuant to license, sublicense, agreement or permission all
items of
<PAGE> 33
Intellectual Property used in the operation of the business of
ASDI, as presently conducted;
(C) ASDI's use of the Intellectual Property
and other trade rights, trade secrets, designs, plans,
specifications and other proprietary rights, whether or not
registered ("Proprietary Rights"), is not to the knowledge of
ASDI infringing upon or otherwise violating the Proprietary
Rights of any third party in or to such rights;
(D) no claims have been asserted by any
Person against ASDI with respect to the use of any Intellectual
Property or Proprietary Rights used by ASDI challenging or
questioning the validity or effectiveness of such use or any such
right, license or agreement;
(E) to the knowledge of ASDI and the
Shareholders, no Person has a right to a royalty or similar
payment, or has any other rights, in respect of any Intellectual
Property or Proprietary Rights; and
(F) ASDI is not in breach of any license or
sublicense with respect to any item of Intellectual Property.
(p) Labor Relations.
(1) The Contracts listed on Schedule 2.1(p)
include all written or oral employment or severance agreements to
which ASDI is a party with respect to any employee or former
employee, and which may not be terminated at will, or by giving
notice of 30 days or less, without cost or penalty. ASDI has
made available to CFS true, correct, and complete copies of each
such Contract, as amended to date. ASDI is not in breach of any
term of any such Contract.
<PAGE> 34
(2) Except as set forth on Schedule 2.1(p):
(A) ASDI has complied with the applicable
laws relating to the employment of labor, including, without
limitation, those relating to wages, hours, unfair labor
practices, discrimination and immigration;
(B) ASDI has not engaged in any unfair labor
practice and there are no complaints against ASDI pending before
the National Labor Relations Board or any similar state or local
labor agency by or on behalf of any current or former employee of
ASDI;
(C) there are no representation questions,
arbitration proceedings, labor strikes, slow downs or stoppages,
grievances or other labor disputes pending or, to the knowledge
of ASDI or the Shareholders, threatened with respect to the
employees of ASDI;
(D) other than as set forth on Schedule
2.1(p), ASDI has not entered into any severance or similar
arrangement in respect of any present employee of ASDI that will
result in any obligation (absolute or contingent) of CFS or ASDI
to make any payment to any present employee of ASDI following
termination of employment;
(E) ASDI has complied in all respects with
all laws, rules and regulations relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social
security and similar taxes, occupational safety and health, and
plant closing (hereinafter collectively referred to as the
"Employment Laws").
<PAGE> 35
(3) ASDI is not liable for the payment of taxes,
fines, penalties or other amounts, however designated, for
failure to comply with any of the Employment Laws.
(4) On or before the Closing Date, no employee of
ASDI shall be permitted to have accumulated more than ten (10)
days of sick leave. To the extent individual employees of ASDI
had accumulated more than ten (10) days of sick leave, ASDI shall
reduce each of the employees' sick leave to ten (10) days in such
a manner as shall be acceptable to CFS.
(5) On or before the Closing Date, ASDI shall
recognize as a liability on its Balance Sheet all accrued
vacation benefits and make a payment to each employee such that
ASDI shall have no vacation obligations to any individual.
(q) Legal Compliance. Except with respect to (1)
compliance with Environmental Laws (as to which certain
representations and warranties are made pursuant to Section
2.1(l)), (2) compliance with laws applicable to Government
Contracts (as to which certain representations and warranties are
made pursuant to Section 2.1(n)), and (3) compliance with
Employment Laws (as to which certain representations and
warranties are made pursuant to Section 2.1(p)), to the best
knowledge of the Shareholders and ASDI management, ASDI is in
material compliance with all laws (including rules and
regulations thereunder) of federal, state, local and foreign
governments (and all agencies thereof) applicable thereto.
<PAGE> 36
(r) Taxes.
(1) All federal, state, local and foreign tax
returns of ASDI and those of the Shareholders relating to ASDI
("Tax Returns"), including those Tax Returns relating to income,
employment, franchise, property, sales and use, and excise taxes,
and any other taxes due from and/or withheld by or required to be
withheld by ASDI (collectively, "Taxes") for all prior periods
have been duly filed, and are correct and complete in all
material respects. With respect to the personal Tax Returns of
the Shareholders, each Shareholder makes this representation and
warranty only to his personal Tax Returns, and not those of any
other Shareholder.
(2) All Taxes or estimates thereof that are due
have been timely paid.
(3) None of the Tax Returns has been audited or
is being audited by any taxing authority.
(4) No assessment, audit or other proceeding by
any taxing authority, court, or other governmental or regulatory
authority is proposed, pending, or, to the knowledge of ASDI or
the Shareholders, threatened with respect to the Taxes or Tax
Returns of ASDI or the Shareholders. Neither ASDI nor any
Shareholders have made any act or omission which has in any
material way violated the Subchapter S election of ASDI.
(5) There are no outstanding agreements, waivers,
or arrangements to indemnify any Shareholder or any other person
for any tax liability whatsoever, or extending the statutory
period of limitations applicable to any claim for or the period
for the collection or assessment of Taxes due for any taxable
period.
<PAGE> 37
(6) No consent to the application of Section
341(f)(2) of the Code (or any predecessor thereof) has been made
or filed by or with respect to ASDI or the Shareholders of any of
their assets and properties.
(7) None of the assets and properties of ASDI is
an asset or property that CFS or CRI is or will be required to
treat as being (i) owned by any other Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of
1954, as amended, and in effect immediately before the enactment
of the Tax Reform Act of 1986, or (ii) tax-exempt use property
within the meaning of Section 168(h)(l) of the Code.
(8) No closing agreement pursuant to Section 7121
of the Code (or any predecessor provision) or any similar
provision of any state, local, or foreign law has been entered
into by or with respect to ASDI or any assets thereof.
(9) All positions taken on Federal Tax Returns
that could give rise to a penalty for substantial understatement
pursuant to Section 6662 of the Code have been disclosed on such
Tax Returns, or there is or was substantial authority for such
treatment.
(10) ASDI has not made any payments, is not
obligated to make any payments, nor is a party to any agreement
that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the
Code or under Section 162(m) of the Code.
(11) ASDI is not a party to, is not bound by, nor
has any obligation under any tax sharing agreement or similar
agreement and no such agreement shall be entered into or amended
by ASDI prior to the Closing. ASDI does not have any liability
for
<PAGE> 38
the Taxes of any Person under Treasury Regulation Section 1.1502-
6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(12) ASDI is not a partner in any partnership.
(13) ASDI has not agreed to or is not required to
make any adjustment pursuant to Section 481(A) of the Code by
reason of any change in any accounting method. ASDI does not
have application pending with any taxing authority requesting
permission for a change in any accounting method.
(s) Licenses, Permits and Authorizations. ASDI has
provided to CFS in writing a list of all material licenses,
franchises and other permits of or with any governmental,
regulatory or administrative authority, whether foreign, federal,
state or local, which are held by ASDI. All such licenses,
franchises and other permits are in full force and effect and
there are no proceedings pending or, to the knowledge of ASDI or
the Shareholders, threatened that seek the revocation,
cancellation, suspension or adverse modification thereof. Such
licenses, approvals, consents, franchises and permits constitute,
in the reasonable judgment of senior management of ASDI, all of
the material licenses, approvals, consents, franchises and
permits necessary to permit ASDI to own, operate, use and
maintain their assets in the manner in which they are now
operated and maintained and to conduct the business of ASDI. All
required filings with respect to such licenses, approvals,
consents, franchises, and permits have been timely made and all
required applications for renewal thereof have been timely filed
except as to instances wherein the failure to so timely file
would not constitute a material noncompliance. Prior to the
Closing Date, ASDI will procure and maintain software licenses
for all computer software in its possession.
<PAGE> 39
(t) Books and Records. The books of account, all of
which have been made available to CFS, are complete and correct
in all material respects and have been maintained in accordance
with ordinary business practices, including, but not limited to,
the maintenance of a reasonable system of internal controls.
There has been no material failure by ASDI to follow the system
of internal controls as this system has been disclosed to CFS.
The minute books of ASDI contain records of all meetings held of,
and corporate action taken by, the Shareholders and the Board of
Directors of ASDI, and no meetings of such Shareholders or any
such Board of Directors has been held at which any significant
action was taken for which minutes have not been prepared and are
not contained in such minute books. To the extent the minute
books and other corporate records of ASDI are not complete as set
forth herein, the Directors of ASDI and the Shareholders,
including Matilda Gross, shall adopt such resolutions as are
necessary to bring the minute books and other corporate records
of ASDI into compliance with the requirements of this Section 2.1
(t).
(u) Insurance.
(1) Schedule 2.1(u) contains a summary
description of all policies of property, fire and casualty,
product liability, workers' compensation, and all other forms of
insurance held by ASDI. True, correct and complete copies of
such insurance policies have been made available to CFS.
(2) All policies described in paragraph (1)
hereof (A) are valid, outstanding, and enforceable policies, (B)
provide adequate insurance coverage for the assets and the
operations of ASDI for all material risks normally insured
against by a Person or entity carrying on the same business as
ASDI, and (C) will not terminate or lapse by reason of the
transactions contemplated by this Agreement.
<PAGE> 40
(3) ASDI has not received (A) any notice of
cancellation of any policy described in paragraph (1) hereof or
refusal of coverage thereunder, (B) any notice that any issuer of
such policy has filed for protection under applicable bankruptcy
laws or is otherwise in the process of liquidating or has been
liquidated, or (C) any other notice that such policies are no
longer in full force or effect or that the issuer of any such
policy is no longer willing or able to perform its obligations
thereunder.
Section 2.2 Representations and Warranties by CFS and CRI.
CFS and CRI each represent and warrant to ASDI and the
Shareholders, as follows:
(a) Organization and Qualification. CFS and CRI are
each corporations duly organized, validly existing and in good
standing under the laws of their jurisdictions of incorporation
and have all requisite corporate power and authority to own or
lease and operate their properties and to carry on their business
as it is now being conducted. CRI owns beneficially and of
record all of the issued and outstanding capital stock of CFS.
(b) Authority Relative to Agreements. Except as set
forth herein with respect to approval by their respective Boards
of Directors, CFS and CRI have all requisite corporate power and
authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this
Agreement by CFS and CRI and the consummation by CFS and CRI of
the Merger Transaction shall be subject to approval by the Boards
of Directors of CFS and CRI. Once the Boards of Directors of CFS
and CRI approve the Merger Transaction and this Agreement has
been duly executed and delivered by CFS and CRI, this Agreement
constitutes a valid and binding obligation of CFS and CRI, as the
case may be, enforceable against CFS and CRI in accordance with
its terms.
<PAGE> 41
(c) Lack of Conflicts with Other Agreements. The
execution and delivery of this Agreement by CFS and CRI and the
consummation by CFS and CRI of the Merger Transaction will not
(i) conflict with any provision of the Articles of Incorporation
or By-laws of CFS or CRI or (ii) result in any violation of or
default under, or permit the acceleration of any obligation
under, any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to CFS or CRI, which violation, default or
acceleration would have a material adverse effect on the
business, operations or financial condition of CFS or CRI, except
for the Revolving Credit Agreement by and between CRI and
Manufacturers and Traders Trust Company. CRI shall use its best
efforts to obtain a waiver of any default.
(d) Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with,
any Federal, state, local or foreign governmental or regulatory
authority is required to be made or obtained by CFS or CRI in
connection with the execution and delivery of this Agreement by
CFS or CRI or the consummation by CFS or CRI of the Merger
Transaction, except for filing with the Secretary of State of the
State of New York.
(e) Brokers. No broker, finder, or investment banker
is entitled to any brokerage, finder's or other fee or commission
in connection with the Merger Transaction based upon arrangements
made by or on behalf of CFS or CRI.
(f) Public Reports. The SEC and other public filings
of CRI are materially correct and accurate to the best of the
knowledge of CFS and CRI.
<PAGE> 42
ARTICLE III
ADDITIONAL COVENANTS
Section 3.1 Shareholder Approval.
As soon as reasonably practicable following the date of
this Agreement, ASDI and the Shareholders shall take all action
necessary in accordance with the applicable law and its Articles
of Incorporation and By-laws to call a meeting (the "Meeting") of
its shareholders to seek Shareholder Approval and for such other
purposes as may be appropriate.
Section 3.2 Conduct of ASDI's Business.
(a) Business Conducted in Ordinary Course. ASDI and
the Shareholders agree that from the date of this Agreement
through the Closing, unless CFS shall otherwise agree in writing
or as otherwise expressly contemplated by this Agreement, ASDI
shall conduct its business only in the ordinary course and shall
use all reasonable efforts to preserve their business
organizations, maintain their rights and franchises, keep
available the services of their officers and employees, and
preserve their relationships with customers, suppliers and others
having material business dealings with them. Specifically, and
without limiting the generality of the foregoing, ASDI shall not
without the written consent of CFS, which shall not be
unreasonably withheld or delayed:
(i) directly or indirectly do any of the
following: (A) issue, sell, pledge, dispose of or encumber any
material assets other than in the ordinary course of its business
consistent with past practice, (B) amend or propose to amend its
Articles of Incorporation or By-laws, (C) split, combine or
reclassify any outstanding shares of its capital stock, or
declare, set aside or
<PAGE> 43
pay any dividend in stock, property or otherwise with respect to
such shares, (D) redeem, purchase, acquire or offer to acquire
any shares of its capital stock, or (E) enter into any agreement
with respect to any of the matters set forth in this Section
3.2(a);
(ii) (A) issue, sell, pledge or dispose of, or
agree to issue, sell, pledge or dispose of, any additional shares
of, or securities convertible or exchangeable for, or any
options, warrants or rights of any kind to acquire any shares of,
its capital stock of any class or other property or assets
whether pursuant to any rights agreement, stock plan, or
otherwise, (B) acquire (by merger, consolidation or acquisition
of stock or assets) any corporation, partnership or other
business organization or division thereof, (C) incur any
indebtedness for borrowed money or issue any debt securities,
except in the ordinary course of its business, (D) enter into any
new Material Contract or modify any existing Material Contract in
any material respect except in the ordinary course of its
business consistent with past practice, (E) terminate, modify,
assign, waive, release or relinquish any material contract rights
or amend any material rights or claims not in the ordinary course
of its business consistent with past practice or except as
expressly provided herein, or (F) dissolve or liquidate;
(iii) grant any increase in the salary or
other compensation of its employees or grant any bonus to any
employee, except in the ordinary course of its business
consistent with past practice;
(iv) enter into any employment agreement or make
any loan to or enter into any material transaction of any other
nature with any officer or other executive employee;
<PAGE> 44
(v) take any action to institute any new
severance or termination pay practices with respect to any
directors, officers or employees or to increase the benefits
payable under its severance or termination pay practices;
(vi) hire any new employees except for employees
having an annualized salary of less than $50,000 who are
terminable at will;
(vii) adopt or amend, in any respect, except
as may be required by applicable law or regulation, any bonus,
profit sharing, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund, or arrangement for
the benefit or welfare of any directors, officers or employees,
except in the ordinary course of its business consistent with
past practice;
(viii) mortgage, pledge or otherwise subject to
any lien, security interest, encumbrance or charge of any nature,
any of its material assets, or become committed so to do, or
permit or suffer any of such material assets to become subject to
any mortgage, pledge, lien, security interest, encumbrance or
charge of any nature other than liens for current taxes not yet
due and payable, or become committed to do so;
(ix) make any new commitments for capital
expenditures in excess of $25,000 individually, or $75,000 in the
aggregate, except for expenditures for maintenance of capital
assets in the ordinary course of its business consistent with
past practice.
<PAGE> 45
(b) Consent of CFS for Changes in Conduct of Business.
Unless otherwise consented to in writing by CFS, from the Date of
this Agreement through the Closing, ASDI shall:
(i) use all reasonable efforts to maintain its
relationships with its suppliers and customers and, if requested
by CFS, make reasonable arrangements as reasonably requested by
CFS for representatives of CFS to meet with customers and
suppliers of ASDI;
(ii) maintain all of the assets used or useful to
the business of ASDI in good repair, order and condition,
maintain in full force and effect all material franchises,
licenses, permits, consents, approvals, rights, waivers and other
authorizations, governmental or otherwise, currently in effect
and maintain in full force all policies of insurance or
satisfactory substitute insurance policies insuring against the
risks, damages, and losses covered by the insurance policies
currently in force, in each case consistent with its past
practice; and
(iii) otherwise conduct its business in the
ordinary course consistent with past practice.
Section 3.3 Other Actions. Subject to the terms and
conditions herein provided, each of the parties hereby agrees to
use reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement,
including without limitation using reasonable efforts to obtain
all necessary waivers, consents and approvals and to effect all
necessary registrations and filings.
<PAGE> 46
Section 3.4 Inquiries and Negotiations. ASDI shall
immediately cease any existing discussions or negotiations with
any parties conducted prior to the date of this Agreement with
respect to the acquisition of all or substantially all the
business of ASDI, whether by sale of assets or shares of capital
stock of ASDI, or by merger, consolidation, or similar
transaction (collectively, an "Acquisition Transaction"). ASDI
shall not, and shall not permit its officers, employees,
representatives or agents to, directly or indirectly, (i) solicit
or initiate discussions or negotiations with, or provide any non-
public information to, any person other than CFS and CRI
concerning an Acquisition Transaction, or (ii) otherwise solicit
or initiate inquiries or the submission of any proposal
contemplating an Acquisition Transaction.
Section 3.5 Notification of Certain Matters. ASDI shall give
prompt notice to CFS and CRI, and CFS and CRI shall give prompt
notice to ASDI of (i) the occurrence, or failure to occur, of any
event which such party believes would likely cause any of its
representations or warranties contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the
date of this Agreement through the Closing and (ii) material
failure of ASDI, the Shareholders, CFS or CRI, as the case may
be, or any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
Section 3.6 Access to Information.
(a) Confidentiality. ASDI shall cause its officers,
directors and employees to, and shall use reasonable efforts to
cause its representatives and agents (including without
limitation its attorneys and accountants) to afford, from the
date of this Agreement through the Closing, the officers,
employees and agents of CFS and to their respective legal and
financial advisors,
<PAGE> 47
lenders, financing sources, and their respective legal advisors
and representatives, so long as such Persons agree to maintain
the confidentiality of such information in accordance with this
Agreement, complete access at all reasonable times to its
officers, employees, agents, properties, books, records, and work
papers, and shall furnish CFS all financial, operating and other
data and information as CFS, through its officers, employees or
agents, may reasonably request.
(b) Evaluation Materials. Except for any governmental
filings required in order to complete the transactions
contemplated herein, and except as CFS and ASDI may agree in
writing, each party hereto shall keep all Evaluation Materials
(hereinafter defined) confidential, and, except as required by
applicable law, no party shall disclose any Evaluation Materials
or any information contained therein to any Person; provided,
however, that any such information may be disclosed by any party
hereto (i) to its legal and financial advisors, lenders,
financing sources and their respective legal advisors and
representatives, so long as such Persons agree to maintain the
confidentiality of such information in accordance with this
Section 3.6, and (ii) to those of such party's directors,
officers, employees, agents and representatives who need to know
such information for the purposes of evaluating the transactions
contemplated hereby (it being understood that such directors,
officers, employees, agents and representatives shall be informed
by such party of the confidential nature of such information and
shall be directed by such party, and shall each agree to treat
such information confidentially in accordance with this Section
3.6). Without limiting the generality of the foregoing, in the
event that the transactions contemplated hereby are not
consummated, neither party hereto nor its directors, officers,
employees, agents or representatives shall use any of the
Evaluation Materials made available to it by another party hereto
for any purpose. The foregoing restrictions shall not apply to
any
<PAGE> 48
disclosure by CFS or CRI after the Closing of any information
disclosed by ASDI.
(c) Mandatory Disclosure. In the event that any party
hereto or any of its representatives receives a request or is
required (by applicable law, regulation or legal process) to
disclose all or any part of the information contained in the
Evaluation Materials, such party or its representatives, as the
case may be, shall (i) promptly notify the disclosing party of
the existence, terms and circumstances surrounding advisability
of taking legally available steps to resist or narrow such
request, and (iii) assist the disclosing party in seeking a
protective order or other appropriate remedy. In the event that
such protective order or other remedy is not obtained or that the
disclosing party waives compliance with the provisions hereof,
(i) such party or its representatives, as the case may be, may
disclose only that portion of the Evaluation Materials which such
party is advised by opinion of legal counsel is legally required
to be disclosed and shall exercise reasonable efforts to assist
the disclosing party in obtaining assurance that confidential
treatment will be accorded such and (ii) such party shall not be
liable for such disclosure unless disclosure to any such tribunal
was caused by or resulted from a previous disclosure by such
party or its representatives not permitted by this Section 3.6.
(d) Termination of the Agreement. If this Agreement
is terminated, the parties hereto shall comply with the terms of
the Confidentiality Agreement.
Section 3.7 Public Announcements. Except to the extent
otherwise required by applicable law, neither ASDI, the
Shareholders, CFS nor CRI shall make, issue or release any oral
or written public announcement or statement concerning, or
acknowledgment of the existence of, or reveal the terms,
conditions
<PAGE> 49
or status of, the Merger Transaction or make any other
communication to its shareholders or the investing public,
directly or indirectly (including without limitation press
releases and statements to securities analysts), without first
making a good faith attempt to obtain the prior approval of, or
concurrence in, the contents of such announcement, acknowledgment
or statement by the other of them, which approval or concurrence
shall not be unreasonably withheld or delayed.
Section 3.8 CRI Stock Acquired by the Shareholders.
(a) Disclosure of Information. ASDI and the
Shareholders have received all of the information they consider
necessary or appropriate for deciding whether to acquire the CRI
Stock. They further represent that they have had an opportunity
to ask questions and receive answers from CRI and CFS regarding
the terms and conditions of the offering of the CRI Stock.
(b) Investment Experience. ASDI and the Shareholders
have substantial experience in evaluating and investing in
private placement transactions so that they are capable of
evaluating the merits and risks of its investment in CRI Stock.
By reason of ASDI and the Shareholders' business or financial
experience or the business or financial experience of their
professional advisors who are unaffiliated with and who are not
compensated by CRI or any affiliate or selling agent of CRI,
directly or indirectly, they have the capacity to protect their
own interests in connection with the acquisition of the CRI
Stock.
(c) Restricted Securities. ASDI and the Shareholders
understand that the CRI Stock is characterized as "restricted
securities" under the federal securities laws inasmuch as it is
being acquired from CRI in a transaction not involving a public
offering and that under such laws and applicable regulations such
<PAGE> 50
CRI stock may be resold without registration under the Securities
Act only in certain limited circumstances. In this respect, ASDI
and the Shareholders represent that they are familiar with Rule
144 promulgated under the Securities Act, as presently in effect,
and understand the resale limitations imposed thereby and
otherwise by the Securities Act.
(d) Further Limitations on Disposition. Without in
any way limiting the representations set forth in this Section
3.8 or Section 3.9, each of the Shareholders severally and not
jointly further agrees not to make any disposition of all or any
portion of the CRI stock unless and until there is in effect a
Registration Statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance
with such Registration Statement; or (i) such of the
Shareholder(s) shall have notified CRI of the proposed
disposition and shall have furnished CRI with a detailed
statement of the circumstances surrounding the proposed
disposition, and (ii) if reasonably requested by CRI, such of the
Shareholder(s) shall have furnished CRI with an opinion of
counsel, reasonably satisfactory to CRI, that such disposition
will not require registration under the Securities Act. It is
agreed that CRI will not require opinions of counsel for
transactions certified by the respective Shareholder to be made
in accordance with Rule 144, except in unusual circumstances.
Any disposition of CRI Stock by a Shareholder while employed, or
within three months of being employed, by CFS (or its affiliate)
whether or not pursuant to an effective Registration Statement
shall not exceed the volume limits which are applicable under
Rule 144 once holding period requirements have been satisfied.
(e) Legends. It is understood that the securities
issued in respect thereof or exchange therefor, may bear one or
all of the following legends:
<PAGE> 51
(i) "THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. IT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITY UNDER SUCH ACT
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO
RULE 144 OF SUCH ACT."
(ii) Any legend required by the Blue Sky laws of
any state to the extent such laws are applicable to the security
so legended.
(f) Accredited Investor. ASDI and the Shareholders
are accredited investors as defined in Rule 501(a) of Regulation
D promulgated under the Securities Act.
Section 3.9 Restriction on Transferability of Shares,
Compliance with Securities Act of 1933.
(a) Restrictions on Transferability. The Shares shall
not be transferable except upon the conditions specified in
Section 3.8(d) or in this Section 3.9, which conditions are
intended to insure compliance with the provisions of the
Securities Act in respect of the transfer of the CRI Stock.
(b) Certain Definitions. As used in this Section 3.9,
the following terms shall have the following respective meanings:
"Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time
administering the Securities Act and the Exchange Act.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, or any successor federal statute, and
the
<PAGE> 52
rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"Securities Act" shall mean the Securities Act of
1933, as amended, or any successor federal statute, and the rules
and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
"Registration Stock" shall mean those shares of
the CRI Stock designated by the Shareholder pursuant to Section
3.9 as includable in the registration to be made by CRI
hereunder.
"Registration Expenses" shall mean all expenses
incurred by CRI or CFS in complying with Subsection 3.9,
including, without limitation, printing expenses, fees and
disbursements of counsel to CRI or CFS, the fees and expenses in
connection with all registrations or exemption from registration
under state securities law affecting the transfer of the
Registration Stock ("Blue Sky Expenses") in New York and up to
five other states, and the expenses of any regular or special
audits incident to or required by any such registrations (and
including the compensation of regular employees of CRI or CFS
involved in such registration).
"Registration Period" shall mean the period
beginning on the date on which the shelf registration is first
declared effective by the Commission and terminating when all of
the CRI Stock issued hereunder has been sold or otherwise
transferred or disposed of by the Shareholders but in no event
later than the third anniversary of the Closing Date.
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sales, and
all fees and disbursements of personal counsel to the
Shareholders.
<PAGE> 53
(c) Required Registration. Within nine (9) months after
the Closing, CRI shall forthwith proceed to:
(i) prepare and file with the Commission a Shelf
registration with respect to the Registration Stock, use its best
efforts to cause it to become and remain effective during the
Registration Period, and pay all Registration Expenses in
connection therewith;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to delivery of
prospectuses for the period during which the information
contained in the prospectus would not have to be updated pursuant
to Section 10(a)(3) of the Securities Act; provided, however,
that if at any time during such period of effectiveness CRI shall
request that the Shareholder withhold their Shares of
Registration Stock from sale because of CRI's temporary inability
to furnish the Shareholder with a prospectus meeting the
requirements of the Securities Act (other than as a result of the
application of Section 10(a)(3) of the Securities Act), the
Shareholder shall refrain from selling such Registration Stock on
the condition that CRI shall file such amendments and supplements
to such registration statement and prospectus issued in
connection therewith as may be necessary in order to permit the
sale of the Registration Stock to the public in compliance with
the Securities Act for an additional amount of time equal to the
period of time that the Shareholder was required to refrain from
selling such Registration Stock if Rule 144 would not then
provide an exemption from registration;
(iii) furnish to the Shareholders such number of
copies of a prospectus in conformity with the requirements of the
<PAGE> 54
Securities Act, and such other documents, as the Shareholders may
reasonably request in order to facilitate the public sale or
other disposition of the Registration Stock owned by the
Shareholders; and
(iv) use its best efforts to register or qualify the
Registration Stock covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as
the Shareholders shall reasonably request (not exceeding five in
number unless otherwise agreed by CRI) as shall be reasonably
appropriate for the distribution of the Registration Stock
covered by such registration statement, provided that CRI shall
not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service
of process in any such states or jurisdiction, and do any and all
other acts and things which may be necessary or desirable to
enable the Shareholder to consummate the public sale or other
disposition of the Registration Stock in such jurisdictions;
(d) Indemnification by CRI. In the event of any
registration of any Registration Stock under the Securities Act,
CRI shall, and hereby does, indemnify and hold harmless in the
case of any registration statement filed pursuant to Section 3.9,
the Shareholders, each other person who participates as an
underwriter in the offering or sale of Registration Stock and
each other person, if any, who controls such seller or any such
underwriter within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages or liabilities, joint or
several, to which the Shareholder or any such director or officer
or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact
<PAGE> 55
contained in any registration statement under which the
Registration Stock was were registered under the Securities Act,
any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances in which
they were made not misleading, and CRI shall reimburse the
Shareholder, and each such underwriter and controlling person for
any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that CRI shall not be
liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information
furnished to CRI by or on behalf of the Shareholder or such
underwriter, as the case may be, for use in the preparation
thereof; and provided further that CRI shall not be liable to any
person who participates as an underwriter in the offering or sale
of Registration Stock or any other person, if any, who controls
such underwriter within the meaning of the Securities Act, in any
such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense
arises out of such person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to
the written confirmation of the sale of Registration Stock to
such person if such statement or omission was corrected in such
final prospectus.
<PAGE> 56
(e) Indemnification by the Shareholder. In the event of
any registration of Registration Stock under Section 3.9(c), the
Shareholder shall, and hereby does indemnify and hold harmless
(in the same manner and to the same extent as set forth in
Section 3.9(d)) severally and not jointly, CRI, each director of
CRI, each officer of CRI and each other person, if any, who
controls CRI within the meaning of Section 15 of the Securities
Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement
thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with
written information about such Shareholder furnished to CRI by
such Shareholder for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement.
(f) Cooperation, Furnishing of Information. It shall be a
condition precedent to the obligation of CRI to take any action
pursuant to Section 3.9(c) that the Shareholder shall (i) appoint
a single counsel authorized to represent all of the Shareholders
in connection with registration of the Registration Stock and
(ii) furnish to CRI promptly in writing such information
regarding the Shareholder, the CRI Stock held by the Shareholder,
and the intended method of disposition of the Registration Stock
as CRI shall reasonably request and as shall be required in
connection with the registrations to be undertaken by CRI.
(g) Expense. CRI shall pay all Registration Expenses, as
defined herein, and the Shareholder shall pay all Selling
Expenses, as defined herein, pro rata in accordance with their
ownership of Registration Stock required in connection with
registration of the Registration Stock.
<PAGE> 57
(h) Notice of Sale. Until the third anniversary of the
Closing, and thereafter so long as he is an employee and a holder
of more than 5% of the total outstanding CRI Stock of CRI, each
Shareholder shall notify CRI, in writing, at least five (5)
business days prior to the date on which he intends to sell,
offer to sell or place an order to sell any share of Registration
Stock ("Sale Notice"). Upon receipt of any Sale Notice, CRI
shall have the right to delay the sale of Registration Stock
intended to be sold by Shareholder if, and for such time period
as, (i) in the opinion of legal counsel to CRI, such sale would
violate applicable federal or state securities laws and
regulations as a result of any material pending or proposed
transaction of CRI or any of its affiliates, or (ii) in the
opinion of management of CRI, CRI would be required to amend or
supplement the registration statement to disclose a previously
undisclosed development in its business or affairs and such
disclosure at such time would have a material adverse effect on
CRI; provided, however, that the aggregate period of all such
delays during any 12-month period shall not exceed 90 days, as
calculated from the date on which Shareholder intends to sell any
Registration Stock as specified in each applicable Sale Notice.
CRI shall exercise its right to delay any proposed sale by giving
written notice of such exercise to Shareholder within two (2)
business days following CRI's receipt of Shareholder's Sale
Notice.
ARTICLE IV
CONDITIONS TO THE MERGER
Section 4.1 Conditions to the Merger. The obligation of CFS
and CRI to effect the merger is subject to the satisfaction,
prior to the Closing of each of the following conditions unless
waived by CFS and CRI:
<PAGE> 58
(a) Shareholder Approval by ASDI. Shareholder
Approval shall have been obtained by the requisite vote of the
Shareholders. At the Closing, ASDI shall deliver a certified
resolution reflecting the outcome of the Shareholder vote.
(b) No Injunction. No order, decree, ruling or other
action of a court or governmental agency of competent
jurisdiction, restraining, enjoining or otherwise prohibiting the
Merger Transaction, shall be in effect.
(c) Accuracy of Representations and Warranties;
Compliance with Covenants; and Absence of Material Adverse
Change. The representations and warranties of ASDI and the
Shareholders herein shall be accurate in all material respects at
and as of the Closing (except to the extent that such
representation and warranty speaks as of another date). ASDI and
the Shareholders shall have complied in all material respects
with the covenants it has agreed herein to undertake; and no
material adverse change shall have occurred to the business,
operations or financial condition of ASDI since September 30,
1995.
(d) Satisfaction of Conditions Precedent by ASDI and
the Shareholders. ASDI shall have delivered to CFS certificates
signed by an officer of ASDI and the Shareholders, respectively,
dated the Closing, certifying that, to the best of the knowledge
of such officer and the Shareholder, the conditions specified in
Section 4.1 as they relate to ASDI have been fulfilled.
(e) Consents Required to be Obtained by ASDI. Any
consent required for the consummation of the Merger under any
agreement, contract or license described in a schedule hereto or
for the continued enjoyment by ASDI of the benefits of any
agreement, contract or license described in a schedule hereto
after
<PAGE> 59
the Merger shall have been obtained, except where the failure to
obtain such consent would not have a Material Adverse Effect.
(f) Employment Agreements. The Shareholders,
individually, shall have executed and delivered to CFS not later
than the Closing, employment agreements on the form attached
hereto as Exhibit 4.2(d).
(g) Material Changes to Operations of ASDI. CFS shall
not have been informed by a member of senior management of ASDI
that any customer intends to terminate or modify in any material
respect its existing contractual relationship with ASDI after the
effective time of the Merger.
(h) Accuracy of ASDI Representations and Warranties.
ASDI shall have delivered all assignments, consents, approvals
and other documents, certificates and instruments as CFS may
reasonably request for the purpose of (i) evidencing the accuracy
and completeness of any of the representations, warranties or
statements, the performance of any covenants or agreements of
ASDI or the compliance by ASDI with any of the conditions, all as
contained or referred to in this Agreement, or (ii) effectuating
or confirming the consummation of the transactions contemplated
hereby.
(i) Financing. CRI or CFS shall have obtained debt
financing from an outside lender in at least the amounts of
$5,000,000 (Five Million Dollars) in long-term debt at an annual
interest rate which does not exceed 10%, and an additional
$2,500,000 (Two Million Five Hundred Thousand Dollars) in net
working capital at an annual interest rate which does not exceed
the prime rate of interest. CRI and CFS have obtained a letter
proposal, and have given a copy of same to ASDI, from CRI's
lender, Manufacturers and Traders Trust Company, dated January
18, 1996, to
<PAGE> 60
provide such financing, and CRI will use its best efforts to
finalize and effectuate such financing within 30 days after the
date hereof.
(j) Corporate Records of ASDI. Prior to or at the
Closing, CFS shall have received possession of all corporate,
accounting, business and tax records of ASDI.
(k) Transactional Materials of ASDI. The form and
substance of all actions, proceedings, instruments and documents
required to consummate the transactions contemplated by this
Agreement shall be satisfactory in all reasonable and customary
respects to CRI, CFS, and their counsel.
(l) Sick Leave. Pursuant to Section 2.1(p)(4) of this
Agreement, at the Closing Date, no employee of ASDI shall have
accumulated more than ten (10) days of sick leave.
(m) Vacation. Pursuant to Section 2.1(p)(5) of this
Agreement, at the Closing Date, ASDI shall have no liability for
vacation on behalf of any individual, and the Balance Sheet of
ASDI shall have recognized the satisfaction of vacation
liabilities.
Section 4.2 Conditions to the Merger. The obligation of the
Shareholders and ASDI to effect the merger is subject to the
satisfaction, prior to the Closing of each of the following
conditions unless waived by ASDI and the Shareholders:
(a) No Injunction. No order, decree, ruling or other
action of a court or governmental agency of competent
jurisdiction, restraining, enjoining or otherwise prohibiting the
Merger Transaction, shall be in effect.
<PAGE> 61
(b) Accuracy of Representations and Warranties;
Compliance with Covenants; and Absence of Material Adverse
Change. The representations and warranties of CRI and CFS herein
shall be accurate in all material respects at and as of the
Closing (except to the extent that such representation and
warranty speaks as of another date). CRI and CFS shall have
complied in all material respects with the covenants it has
agreed herein to undertake; and no material adverse change shall
have occurred to the business, operations or financial condition
of CRI or CFS since December 29, 1995.
(c) Satisfaction of Conditions Precedent by CRI and
CFS. CRI and CFS shall have delivered to ASDI and the
Shareholders certificates signed by officers of CRI and CFS,
respectively, dated the Closing, certifying that, to the best of
the knowledge of such officer, the conditions specified in
Section 4.2 as they relate to CRI and CFS have been fulfilled.
(d) Employment Agreements. CFS shall have executed
and delivered the employment agreements on the form attached
hereto as Exhibit 4.2(d).
(e) Transactional Materials of CFS and CRI. The form
and substance of all actions, proceedings, instruments and
documents required to consummate the transactions contemplated by
this Agreement shall be satisfactory in all reasonable and
customary respects to ASDI and its counsel.
(f) Assumption of Debt Obligations of the
Shareholders. At the Closing, CFS and CRI shall release the
Shareholders from identified debts they have personally
guaranteed on behalf of ASDI.
<PAGE> 62
(g) Lease of East Elmhurst Facility. Messrs. Gross
and Tchorbajian shall enter into a lease with CFS on such terms
and conditions as are acceptable and have already been agreed to
between CFS and Messrs. Gross and Tchorbajian.
<PAGE> 63
ARTICLE V
TERMINATION AND ABANDONMENT
Section 5.1 Termination by Mutual Consent. This Agreement may
be terminated and the Merger Transaction may be abandoned at any
time prior to the Closing, before or after ASDI Shareholder
Approval or approval by the respective Boards of Directors of CFS
and CRI shall have been obtained, by the mutual consent of ASDI,
CRI and CFS (by action of the respective Boards of Directors of
CFS and CRI).
Section 5.2 Termination by ASDI or CFS and CRI. This
Agreement may be terminated and the Merger Transaction may be
abandoned by either ASDI or CFS and CRI (by action of their
respective Boards of Directors) if (a) the Merger shall not have
been consummated on or before 45 days after the date hereof, or
such later date as may be mutually agreed to by the parties
hereto (but only if the party seeking to terminate this Agreement
is not otherwise in breach in any material respect of any of its
obligations hereunder) or (b) any court or governmental agency of
competent jurisdiction shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger Transaction and such order,
decree, ruling, or other action shall have become final and
nonappealable.
Section 5.3 Termination by ASDI. This Agreement may be
terminated and the Merger Transaction may be abandoned by ASDI if
(a) CFS or CRI shall have failed to comply in any material
respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by it or them at or
prior to the Closing and such failure has not been cured within
30 days after receipt of notice thereof, or (b) it become
reasonably certain that CFS and CRI will be unable to satisfy any
material condition to the Merger Transaction as set forth in
Section 4.2 on or before the
<PAGE> 64
Closing, or (c) except as disclosed to and waived by ASDI and the
Shareholders, there shall have occurred an event which shall have
caused a Material Adverse Effect, or the representations and
warranties of CRI or CFS shall have been breached or become
inaccurate in a material respect as of the Closing.
Section 5.4 Termination by CFS and CRI. This Agreement may be
terminated and the Merger Transaction may be abandoned by CFS and
CRI (by action of the respective Boards of Directors of CFS and
CRI) if (a) ASDI shall have failed to comply in any material
respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by it at or prior to
the Closing and such failure has not been cured within 30 days
after receipt of notice thereof, (b) it becomes reasonably
certain that ASDI will be unable to satisfy any material
condition to the Merger Transaction as set forth in Section 4.1
on or before the 45th day after the date hereof, or (c) there
shall have occurred an event which shall have caused a Material
Adverse Effect, or the representations and warranties of ASDI
have been breached or become inaccurate in a material respect as
of the Closing.
Section 5.5 Effect of Termination. Except as provided in
Section 3.6(b) hereof with respect to information obtained in
connection with the transactions contemplated hereby, in the
event of the termination of this Agreement and the abandonment of
the Merger Transaction, this Agreement shall thereafter become
void and have no effect, and no party thereto shall have any
liability to any other party hereto or its shareholders or
directors or officers in respect thereof, and each party shall be
responsible for its own expenses, except that nothing herein
shall relieve any party from liability for any willful breach
thereof. Except as provided in the immediately preceding
sentence, and whether or not the Merger is consummated, all costs
and expenses incurred in connection with
<PAGE> 65
this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
Section 5.6 Amendment. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 5.7 Waiver. Any time prior to the Closing, any party
hereto may (a) in the case of CFS or CRI, extend the time for the
performance of any of the obligations or other acts of ASDI or,
subject to the provisions contained in Section 5.6 hereof, waive
compliance with any of the agreements of ASDI or with any
conditions to the respective obligations of CFS or CRI, or (b) in
the case of ASDI, extend the time for the performance of any of
the obligations or other acts of CFS or CRI, or waive compliance
with any conditions to its own obligations. Any agreement on the
part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf
of such party by a duly authorized officer.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Notices. All notices and other communications
among the parties shall be in writing and shall be deemed to have
been duly given when (i) delivered in person, or (ii) five days
after posting in the United States mail having been sent
registered or certified mail return receipt requested, or (iii)
delivered by facsimile and promptly confirmed by delivery in
person or post as aforesaid in each case, with postage prepaid,
addressed as follows:
<PAGE> 66
(a) If to CFS or CRI, to:
Comptek Federal Systems, Inc.
2732 Transit Road
Buffalo, New York 14224
Attention: John J. Sciuto
Facsimile No.: (716) 677-0014
With a copy to:
Comptek Research, Inc.
2732 Transit Road
Buffalo, New York 14224
Attention: Randy C. Fahs
Facsimile No.: (716) 677-0014
(b) If to ASDI, to:
Advanced Systems Development, Inc.
96-10 23rd Avenue
East Elmhurst, New York 11369-1230
Attention: Michael Gross
Facsimile No.: (718) 565-0288
With a copy to:
Oscar D. Folger, Esq
521 Fifth Avenue
New York, New York 10175
Facsimile No.: (212) 697-7833
<PAGE> 67
or such other address as shall be furnished available in writing
by any party to the others prior to the giving of the applicable
notice or communication.
Section 6.2 Counterparts. This Agreement may be executed in
more than one counterpart, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument. CFS, CRI, ASDI, the Shareholders (including
Matilda Gross) and their respective attorneys agree to treat a
facsimile of a signature as fully binding the individual in his
or her personal and/or corporate capacity, as the case may be.
Section 6.3 Headings. The headings herein are for convenience
or reference only, do not constitute a part of this Agreement,
and shall not be deemed to limit or affect any of the provisions
of this Agreement.
Section 6.4 Survival of Representations or Warranties. Each
of the representations or warranties, and the related
indemnities, included or provided for herein or in any schedule
or certificate or other document delivered pursuant to this
Agreement, shall survive after the Effective Time for all claims
for which notice is given on or before June 30, 1997, and shall
thereafter expire.
Section 6.5 Indemnification. If, as a result of the
transactions contemplated by this Agreement, and any agreements
related to or arising therefrom with respect to the transaction
contemplated by this Agreement, ASDI materially fails to fully
and properly perform all of its material obligations hereunder,
then the Shareholders, hereby agree to defend, indemnify, and
hold harmless CFS, its officers, directors, employees, and
agents, including those of its parent and affiliated companies,
in connection with any economic loss, and any threatened,
pending, or completed actions or proceedings or appeals therein,
whether civil,
<PAGE> 68
criminal, administrative or investigative, in accordance with and
to the fullest extent permitted by law. This obligation by the
Shareholders to defend, indemnify, and hold harmless shall
include, but not be limited to, advancing all costs, expenses,
and attorneys' fees reasonably expected to be incurred by or on
behalf of CFS and CRI.
All obligations of the Shareholders under this Agreement, whether
for representations or warranties, or for indemnification or
otherwise, are several (pro rata with their ownership in ASDI,
except that Michael Gross shall bear the liability which
otherwise would have attached to the 6.34% of the Shares of ASDI
held by Matilda Gross, in addition to the liability for the
38.66% of the ASDI Shares that he held.) and not joint. The
procedures for indemnification of CRI and CFS, including the
amounts subject thereto, and the liability cushion therefor shall
be as are set forth in Article I of this Agreement. In no event
shall any Shareholder have any liability for any representation
or warranty, or any related indemnity, it being understood that
the sole recourse of CRI and CFS shall be to proceed against the
escrow. Damages for misrepresentations shall be taken at the
actual amount thereof, without application of any multiple,
notwithstanding that multiples may have been used in negotiating
the purchase price. Effective at the date of Closing, each
Shareholder and Matilda Gross expressly waive any claims known
and unknown against ASDI, including but not limited to any rights
for indemnification.
The rights of defense and indemnification pursuant to this
Agreement are the only rights to which CFS, or any of its
directors, officers, employees, or agents, or those of its parent
and affiliated companies, may now or hereafter be otherwise
entitled.
<PAGE> 69
CRI and CFS will not assert any defense, offset or counterclaim
against the obligations of CRI and CFS to file and maintain the
effectiveness of the registration statement, and to permit sales
of stock by the Shareholders.
CRI and CFS will jointly and severally indemnify the Shareholders
for any material misrepresentation or breach of warranty or
covenant by CRI or CFS in this Agreement.
Section 6.6 Entire Agreement. This Agreement, which includes
the Exhibits and Schedules hereto, constitutes the entire
agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties, with respect to the
subject matter of this Agreement.
Section 6.7 Cooperation. Subject to the terms and conditions
of this Agreement, each of the parties hereto shall use its
reasonable efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such
governmental notifications and additional documents and
instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and
under applicable law to consummate and make effective the
transactions contemplated by this Agreement.
Section 6.8 No Rights to Third Parties. Nothing in this
Agreement express or implied is intended to confer upon any other
person, other than the Indemnified Parties, any rights or
remedies under or by reason of this Agreement.
Section 6.9 No Assignment. This Agreement shall not be
assigned, by operation of law or otherwise.
<PAGE> 70
Section 6.10 Governing Law. This Agreement shall be governed
in all respects, including without limitation its validity,
interpretation and effect, by the law of the State of New York
applicable to contracts made and to be performed therein.
Section 6.11 Consent to Jurisdiction. Each of the parties
hereto irrevocably and unconditionally (a) agrees that any suit,
action or other legal proceeding ("Suit") arising out of this
Agreement may be brought and adjudicated in Buffalo, New York, in
the United States District Court for the Western District of New
York, or, if such court will not accept jurisdiction, in any
court of competent civil jurisdiction sitting in Erie County, New
York, (b) submits to the non-exclusive jurisdiction of any such
court for the purposes of any such Suit and (c) waives and agrees
not to assert by way of motion, as a defense or otherwise in any
such Suit, any claim that is not subject to the jurisdiction of
the above courts, that such Suit is brought in an inconvenient
forum or that the venue of such Suit is improper. Each of the
parties hereto also irrevocably and unconditionally consents to
the service of any process, pleadings, notices or other papers in
a manner permitted by the notice provisions of Section 6.1
hereof.
ARTICLE VII
CERTAIN DEFINITIONS
Certain Definitions. As used herein, the following terms shall
have the following meanings:
"Acquisition Transaction" has the meaning specified in Section
3.4.
"ASDI Welfare Plan" has the meaning specified in Section 2.1(j).
"Affiliate" means, with respect to any specified Person, any
Person that, directly or indirectly, controls, is controlled by,
or is
<PAGE> 71
under common control with, such specified Person, through one or
more intermediaries or otherwise.
"Balance Sheet Date" has the meaning specified in Section 2.1(g).
"Benefit Arrangement" has the meaning specified in Section
2.1(j).
"CERCLA" has the meaning specified in Section 2.1(l).
"Closing" has the meaning specified in Section 1(e).
"Closing Date" has the meaning specified in Section 1(e).
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the letter agreement, dated
February 22, 1995, between CFS and ASDI, attached hereto as
Schedule 7.
"Contracts" has the meaning specified in Section 2.1(m).
"Employee Plans" has the meaning specified in Section 2.1(j).
"Employment Laws" has the meaning specified in Section 2.1(p).
"Environment" has the meaning specified in Section 2.1(l).
"Environmental, Health and Safety Liabilities" has the meaning
specified in Section 2.1(l).
"Environmental Laws" has the meaning specified in Section 2.1(l).
"ERISA" has the meaning specified in Section 2.1(j).
"ERISA Affiliate" has the meaning specified in Section 2.1(j).
"Evaluation Materials" means this Agreement (together with the
Schedules and Exhibits hereto) and, as to any party hereto, means
all other non-public information furnished or made available to
such party by the other parties hereto (the "disclosing party")
in connection with the transactions contemplated hereby relating
to the disclosing party or the disclosing party's Affiliates,
whether furnished or made available orally or in writing
(whatever the form or data storage medium) or gathered by
inspection and regardless of whether specifically identified as
"confidential," together with analyses, compilations, studies or
other documents prepared by any party, or by such party's agents,
representatives (including attorneys' accountants and financial
advisors) or employees, which contain or otherwise reflect such
information, provided that the term Evaluation Materials shall
not include information that (i) is or becomes generally
available to the public other than as a result of a disclosure in
violation of the terms hereof or the Confidentiality Agreement,
(ii) was or becomes available to a party hereto on a non-
confidential basis from a source other than any other party
hereto or their representatives and affiliates, provided that
such source is not prohibited from disclosing such information by
a contractual, legal or fiduciary obligation to any party hereto
or any of their respective representatives, or (iii) has been or
is independently developed by the party to which such information
was furnished or made available and not derived from the
Evaluation Materials.
"Facilities" has the meaning specified in Section 2.1(l).
"FWPCA" has the meaning specified in Section 2.1(l).
"GAAP" has the meaning specified in Section 2.1(f).
<PAGE> 72
"Government Contract" has the meaning specified in Section
2.1(m).
"Hazardous Materials" has the meaning specified in Section
2.1(l).
"Intellectual Property" has the meaning specified in Section
2.1(o).
"Knowledge" means the actual knowledge of senior management of
ASDI, CFS or CRI, respectively, after due inquiry.
"Liability Cushion" has the meaning specified in Section 1.3(b).
"Liens" means any mortgages, deeds of trust, pledges,
hypothecations, encumbrances, security interests, or liens of any
kind.
"Material Adverse Effect" has the meaning specified in Section
2.1(a).
"Material Contracts" has the meaning specified in Section 2.1(m).
"Merger" has the meaning specified in Section 1(a).
"Merger Transaction" has the meaning specified in Section 1(a).
"Multiemployer Plan" has the meaning specified in Section 2.1(j).
"PBGC" has the meaning specified in Section 2.1(j).
"Pension Plan" has the meaning specified in Section 2.1(j).
"Permitted Liens" means (i) mechanics, materialmen's and similar
Liens with respect to any amounts not yet due and payable or
which are being contested in good faith through appropriate
proceedings, (ii) Liens for Taxes not yet due and payable or
which are being
<PAGE> 74
contested in good faith through appropriate proceedings for which
adequate reserves have been established in accordance with GAAP,
(iii) Liens on goods in transit incurred pursuant to documentary
letters of credit, (iv) Liens securing rental payments under
capital lease agreements, (v) Liens arising in favor of the
United States Government as a result of progress payment clauses
contained in any Contract, (vi) encumbrances and restrictions on
real property that do not materially interfere with the present
uses of such real property and (vii) other Liens imposed by law
arising in the ordinary course of business and not incurred in
connection with the borrowing of money and which do not in the
aggregate materially detract from the value of the encumbered
property or materially impair the use thereof or which are being
contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale
of the property or assets subject to such Lien during the
pendency of such proceeding.
"Person" means any individual, firm, corporation, partnership,
limited liability company, incorporated or unincorporated
association, joint venture, joint stock company, governmental
agency or instrumentality or other entity of any kind.
"Plan of Merger" has the meaning specified in Section 1(a) of
this Agreement.
"Proprietary Rights" has the meaning specified in Section 2.1(o).
"RCRA" has the meaning specified in Section 2.1(l).
"Reasonable Best Estimate" has the meaning specified in Section
2.1(g)(ii).
"Release" has the meaning specified in Section 2.1(l).
<PAGE> 75
"Shareholder" means any holder of record of shares of ASDI Common
Stock immediately prior to the Closing except for Matilda Gross.
"Taxes" has the meaning specified in Section 2.1(r).
"Tax Returns" has the meaning specified in Section 2.1(r).
"Threat of Release" has the meaning specified in Section 2.1(l).
"Welfare Plan" has the meaning specified in Section 2.1(j).
<PAGE> 76
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
COMPTEK RESEARCH, INC.
By: /S/John R. Cummings
John R. Cummings
Title: Chariman, President & CEO
COMPTEK FEDERAL SYSTEMS, INC.
By: /S/John J. Sciuto
John J. Sciuto
Title: President & CEO
ADVANCED SYSTEMS DEVELOPMENT, INC.
By: /S/Nichan Tchorbajian
Title: President
SHAREHOLDERS:
/S/Michael Gross
______________________
Michael Gross
/S/Nichan Tchorbajian
______________________
Nichan Tchorbajian
/S/Larry Diamond
______________________
Larry Diamond
/S/Matilda Gross
______________________
Matilda Gross
<PAGE> 77
Escrow Agent, insofar as concerns Section 1.3:
/S/Oscar D. Folger
______________________
Oscar D. Folger
<PAGE> 78
MERGER AGREEMENT
BY AND BETWEEN
COMPTEK RESEARCH, INC.,
COMPTEK FEDERAL SYSTEMS, INC.,
AND
ADVANCED SYSTEMS DEVELOPMENT, INC.
___________________________________
LIST OF SCHEDULES
____________________________________
Schedule 1.2(a): Certified Financial Statements
Schedule 2.1(g): Liabilities and Reasonable Best Estimate of
Program Cost Reserves
Schedule 2.1(p): Employment Contracts and Labor Relations
Schedule 2.1(u): Insurance
Schedule 4.2(d): Employment Agreement Form
Schedule 7: Confidentiality Agreement
<PAGE> 79
SCHEDULE 1.2(a)
Certified Financial Statements
The audited financial statements for Advanced Systems
Development, Inc., as of September 30, 1995 and 1994, together
with the independent auditors' report of David Michael & Company
P.C., Certified Public Accountants, dated November 30, 1995, as
referenced in Section 1.2(a) of this Agreement, have been
delivered to CRI and CFS.
<PAGE> 80
Schedule 2.1(g)
Liabilities
(a) Advanced Systems Development, Inc. VS New York State
Department of Labor
On June 27, 1995, New York State Employment Insurance appeal
board ruled against Advanced Systems Development, Inc. (ASDI) in
the matter of Tung S. Wang. ASDI had contended that Mr. Wang was
hired as a consultant and the appeal board's decision ruled him
as an employee. ASDI has appealed. If the appeal is rejected,
ASDI's liability is estimated to be $5,000.
(b) If the appeal is rejected, this could have an impact on
three other consultants hired by ASDI. The potential liability
is estimated to be $25,000 but may exceed this amount.
(c) BWB Contract - Germany Import Duty
If ASDI is required to pay the import duty for equipment
delivered under this contract, ASDI will have to make a cash
payment of $250,000. As of this date, Customs has not invoiced
ASDI for this amount. If payment is made, ASDI may not be
reimbursed for a period of 2-4 months. The liability for the
interest cost may be $10,000 but may exceed this amount.
<PAGE> 81
Schedule 2.1(g)
Reasonable Best Estimate of Program Cost Reserves
<TABLE>
<CAPTION>
ASDI Reserves at 9/30/95
<S> <C> <C> <C>
Proj # Management Warranty
Elettronica 629/661 $40,000
Singapore 639 $70,000
Rainford 677 $40,000
Boeing 1695 $215,000
Thomson/CSF 1700 $20,000
Boeing 1701 $290,000
Hughes-Link 1703-1714 $250,000
Hughes 1704 $20,000
TOTAL $755,000 $190,000
</TABLE>
<PAGE> 82
Schedule 2.1(p)
Employment Contracts and Labor Relations
With respect to written contracts between ASDI and it's
employees, the following is a summary of the two known
agreements:
1. Between Michael Gross of ASDI and Harold Klipper. Effective
March 17, 1994, the parties agree that Mr. Klipper's annual
compensation will be $105,000 as of March 31, 1994.
Further, Mr. Klipper's annual bonus will be equal to $5,000
if the company's percentage of net income before income
taxes to revenue for a fiscal year will be 12%. For each
percentage point above 12%, an additional $5,000 will be
earned up to a maximum bonus of $50,000. This agreement is
dated March 18, 1994 and there are no known changes or
amendments to this contract.
2. Effective September 15, 1995 ASDI, as represented by Mr.
Larry Diamond, entered into an agreement to form a Bonus
Incentive Plan for the following Marketing personnel; Mr.
Ron Rich, Mr. Paul Boehm, Mr. Joe Gorelick and Mr. Bill
Gawreluk.
The plan will distribute a bonus pool consisting of 1% of
bookings in Fiscal 1996 above and beyond the target bookings
of $18,000,000. One-half percent of the 1% will be
distributed equally to the above named individuals. The
remaining one-half percent is to be distributed
proportionally based on booking goals discussed during the
meeting of September 15, 1995. Distribution of the bonus
pool is contingent upon the company obtaining net earnings
for Fiscal 1996 and the bonus pool cannot exceed 10% of the
companies pretax earnings. This agreement is dated
September 30, 1995 and there are no known changes or
amendments to this bonus plan.
<PAGE> 83
SCHEDULE 2.1(u)
Insurance
The following is a summary description of ASDI's insurance
policies as is set forth pursuant to Section 2.1(u) of the
Agreement:
<TABLE>
<CAPTION>
Policy Type Carrier Policy # Expiration
<S> <C> <C> <C>
Workers' State 532379-5 8/23/96
Compensation Insurance Fund
Business Auto Liberty Mutual AS2-121-079781- 2/1/96
015
Foreign Credit Credit 7/1/96
Insurance International
Associates,
Inc.
Commercial RLI Insurance OUL020741 2/1/96
Umbrella Co.
General Liberty Mutual YY2-121-079781- 2/1/96
Liability 035
Transportation Liberty Mutual MS2-121-07981- 2/1/96
Floater 025
</TABLE>
<PAGE> 84
SCHEDULE 4.2(d)
Employment Agreement Form
Attached to this Schedule 4.2(d) is the Employment Agreement form
to be utilized between CFS and the individual Shareholders.
<PAGE> 85
SCHEDULE 4.2(d)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the ____ day of ___________,
19__, by and between _____(NAME IN CAPS)_____, residing at
________________________, (hereinafter called "Employee"), and
COMPTEK FEDERAL SYSTEMS, INC., a New York corporation having its
office and principal place of business at 2732 Transit Road,
Buffalo, New York 14224 (hereinafter called the "Corporation").
W I T N E S S E T H :
WHEREAS, the Employee will be employed as ________________
of the Corporation, and shall be assigned duties which are
consistent with this executive position;
WHEREAS, the Employee acknowledges that he has and will
continue to develop specialized knowledge of, and personal
relationships with, the Corporation's customers and their
products and operations; and
WHEREAS, this Agreement is one of several similar agreements
by and between the Corporation and certain key executives; and
WHEREAS, it is the intention of the parties to have this
Agreement and such similar Agreements construed in a consistent
manner in accordance with the laws of the State of New York; and
WHEREAS, the Corporation wishes to be reasonably assured
that Employee will continue as an employee and desires to retain
his services, realizing that if he were to enter into competition
with the Corporation it would suffer financial loss;
<PAGE> 86
NOW, THEREFORE, in consideration of mutual covenants and
obligations contained herein, the parties hereto agree as
follows:
1. Term of Employment. The Corporation hereby employs
Employee and Employee agrees to work for the Corporation for a
period of three (3) years beginning _________, 19___, and ending
____________, 19___, subject, however, to earlier termination as
provided in paragraphs 4, 5, 10, and 11.
2. Duties and Responsibilities. Employee agrees that
during the term of this Agreement his principal area of
responsibility shall be that of __________ for the Advanced
Systems Division of the Corporation. Employee shall devote his
full business time and best efforts, skills, and ability to
promote the business of the Corporation and perform for the
Corporation such duties as are customarily performed by a
management or executive employee having responsibility in such
areas, and such other duties consistent with his executive
position as may be assigned to him by the President and CEO of
the Corporation and serve as an officer and/or a director of the
Corporation if duly elected. Employee shall have such power and
authority as shall reasonably be required to enable him to
perform his duties hereunder in an efficient manner; provided
that in the exercising of such power and authority and the
performance of such duties, he shall at all times be subject to
the supervision and direction of the President and CEO of the
Corporation and the authority and control of the Board of
Directors of the Corporation.
<PAGE> 87
3. Remuneration.
(a) So long as Employee is employed by the Corporation, he
will be paid a salary at such rate as may be fixed from time to
time by the Board of Directors of the Corporation, but not less
than $150,000 per year (his "Base Salary"), payable in
approximately equal installments at such intervals as the
Corporation pays the salaries of its executive employees
generally.
(b) It is understood that temporary disability (of less
than six (6) months in duration) will not result in termination
of Employee's employment, during which period of time Employee's
then Base Salary shall continue in effect.
(c) Employee will be entitled to reimbursement for all
reasonable travel and other business expenses incurred by him.
Employee will be included in any group life insurance, medical
insurance, pension, profit-sharing plans or other benefits which
the Corporation may have in force from time to time for its
executive personnel. Such benefits and any resulting payments
thereunder shall be in addition to his Base Salary.
(d) The Corporation agrees to permit the Employee to
participate in an incentive compensation bonus plan pursuant to
the terms which are more fully set forth on Exhibit A hereto. Of
the amount of the bonus agreed upon, 65% will be paid to the
Employee within thirty (30) days after the end of the fiscal year
(based upon the profit performance for such year shown on the
unaudited internal report). The remaining balance will be paid
to the Employee within thirty (30) days of the release of the
Corporation's audited financial statements by the Corporation's
independent certified public accountants and shall be final and
conclusive and binding on all parties.
<PAGE> 88
4. Death Benefits.
(a) If Employee should die while still in the employ of
the Corporation, the Corporation will pay to his designated
beneficiary
(i) his Base Salary in effect at
the time of death for the balance of the
month in which his death occurs, plus
(ii) in each of the first twelve
months following the month in which his death
occurs, an amount equal to one twelfth (1/12)
of his Base Salary in effect at the time of
death, plus
(iii) incentive compensation for the
first twelve months following the month in
which his death occurs, payable when the
Corporation generally makes such payments to
its employees. If this incentive
compensation period extends beyond the
current fiscal year of the Corporation, the
incentive compensation for the succeeding
fiscal year shall be computed pro rata from
the number of months needed to reach 12 total
months of incentive compensation.
(b) If the designated beneficiary is not alive at the time
of the making of any of such payments, the payments shall be made
to the Employee's estate in accordance with paragraph 12 of this
Agreement.
5. Termination of Employment Due to Illness or
Disability.
(a) In the event of the disability or illness of Employee
rendering him substantially unable to render service to the
Corporation of the character contemplated by this Agreement for a
period in excess of six (6) months, the Corporation shall have
the right to terminate this Agreement upon giving not less than
thirty (30) days' advance written
<PAGE> 89
notice given after such six (6) month period of its intention to
terminate Employee. If Employee shall have resumed his duties
hereunder within such thirty-day period and shall have
continuously performed his duties for at least two (2)
consecutive months thereafter, such notice of termination shall
be deemed of no force or effect and this Agreement shall
thereupon continue in full force, as though such notice of
termination had not been given. In the event a question arises
hereunder as to Employee's incapacity to perform his regular
duties, the Employee shall be examined by a physician selected by
the Corporation and the Employee, and such physician's
determination shall be final and conclusive and binding on all
parties for the purposes hereof.
(b) Upon termination of his employment because of such
illness or disability, the Corporation shall pay to the Employee
in each of the first twelve months following the effective date
of such termination, a monthly termination payment equal to one
twelfth (1/12) of his Base Salary in effect at the time of such
termination, plus incentive compensation for twelve (12) months
as computed pursuant to Section 4(a)(iii) of this Agreement.
(c) In the event of Employee's death after such
termination on account of such illness or disability, but before
the completion of the making of the payments to which he became
entitled as provided for above, the Corporation shall make such
payments to the Employee's designated beneficiary; or, if the
designated beneficiary is not alive at the time of the making of
any of such payments, the payments shall be made to the
Employee's estate in accordance with paragraph 12 of this
Agreement.
6. Non-Competition. It is understood and agreed that
during the term of his employment by the Corporation, and, in the
event that he resigns or is discharged, for the longer of one (1)
year or a period of one (1) year following the effective date of
termination of his employment by the Corporation, for whatever
reason, the Employee shall not engage directly or indirectly in
any business activities in the continental United States which
are substantially similar to the business of the Corporation,
either as a proprietor, stockholder
<PAGE> 90
(other than as a holder of less than 5% of any class of the
securities of a corporation registered under the Securities
Exchange Act of 1934, as amended), partner, officer, employee or
otherwise, unless the Corporation has first consented in writing
thereto. That notwithstanding, the Employee may work for a
company which conducts business activities which are similar to
those of the Corporation, but during the duration of the non-
competition period with the Corporation, the Employee may not in
any way participate in business activities which are competitive
to the then business of the Corporation without receiving the
advance written consent of the Corporation. In addition to the
foregoing covenants, and for the same period, it is also
understood and agreed that after the termination of the
Employee's employment with the Corporation, for whatever reason,
the Employee shall not solicit any of the Corporation's customers
with which he dealt while he was employed by the Corporation, for
any business which is competitive to the then business of the
Corporation, either on behalf of himself or any other person or
entity engaged in any business substantially similar to the
business of the Corporation, unless the Corporation has first
consented in writing thereto.
7. Trade Secrets. In the course of performing his
duties, the Employee will be engaged in the development,
manufacture and sale of a variety of computer hardware and
software products based upon experimental and inventive work, and
the Employee will receive, and acknowledges that he has received,
confidential information of the Corporation including, without
limitation, information not available to competitors relating to
the Corporation's existing and contemplated products,
manufacturing procedures, methods, machines, computations,
technology, formulae, trade secrets, know-how, research and
development programs, discoveries, improvements and ideas
(regardless of whether or not patentable), customer information,
all of which is hereinafter referred to as "Trade Secrets." The
Employee agrees that he will not, either during his employment or
subsequent to the termination of his employment by the
Corporation, directly or indirectly disclose, publish or
otherwise divulge any Trade Secrets to anyone outside the
Corporation or use such information in any manner which would
adversely affect the business or business prospects of the
Corporation, without prior written authorization from
<PAGE> 91
the Corporation to do so. Without limiting the generality of the
foregoing, the Employee agrees that while employed by the
Corporation he will not, except with the prior written consent of
a duly authorized superior officer of the Corporation, take out
of the Corporation's offices or facilities, or disclose or
otherwise divulge to any unauthorized person, any Trade Secrets
and that if, at the time of the termination of his employment by
the Corporation he is in possession of any documents or other
written materials constituting, containing or reflecting Trade
Secrets, he will return and surrender all such documents and
written materials to the Corporation upon leaving its employ.
The restrictions and protection provided for in this paragraph
shall be in addition to any protection afforded to Trade Secrets
by law or equity.
8. Inventions. The Employee agrees that all inventions,
discoveries and improvements, and all new ideas for manufacturing
and marketing products of the Corporation, which the Employee has
conceived or may conceive while employed by the Corporation,
whether during or outside business hours, on the premises of the
Corporation or elsewhere, alone or in collaboration with others,
or which he has acquired or may acquire from others, and whether
or not the same can be patented or registered under patent,
copyright, or trademark laws, shall be and become the sole and
exclusive property of the Corporation. The Employee agrees to
promptly disclose and fully acquaint the President or the
Chairman of the Board of the Corporation with any such
inventions, discoveries, improvements and ideas which he has
conceived, made or acquired, and shall, at the request of the
Corporation, make a written disclosure of the same and execute
such applications, assignments, and other written instruments as
may reasonably be required to grant to the Corporation sole and
exclusive right, title and interest thereto and therein and to
enable the Corporation to obtain and maintain patent, copyright,
and trademark protection therefor.
9. Enforcement of Covenants. The Corporation's
obligation to make any or all of the payments provided for under
this Agreement is conditioned upon and shall cease and terminate
in the event of the material breach by the Employee of any of the
covenants
<PAGE> 92
contained herein. In the event of an alleged breach by either
the Employee or the Corporation, the aggrieved party shall
provide written notice to the other of the fact and circumstances
giving rise to the alleged breach. The party receiving such a
notice shall have ten (10) business days to substantially cure
the alleged breach. The Employee acknowledges that such payments
are full and adequate compensation for his non-competition with
the Corporation.
The Corporation, however, shall not cease to perform any of
its covenants made under this Agreement, including without
limitation the payment of money, until any alleged breach of this
Agreement by Employee has been adjudicated by a court of
competent jurisdiction.
The Employee understands and agrees that because of the
personal relationships with the Corporation's customers which he
has and will continue to form during his employment, and because
of the specialized knowledge which he will develop of the
Corporation's and of its customers' products, services, or
operations, potential irreparable damage would result to the
Corporation from his competing with it or divulging its Trade
Secrets as restricted by this Agreement. Accordingly, Employee
expressly agrees that in addition to any and all remedies
available to it, the Corporation shall have the remedies of money
damages and a restraining order, or an injunction, and of any
other appropriate equitable relief, without the necessity of
posting any bond or surety, in the event that there is a breach
of any covenants contained in this Agreement. The Corporation
and the Employee agree to negotiate in good faith to resolve any
disputes which may arise which are directly related to this
Employment Agreement. However, if such disputes result in
litigation, the prevailing party shall be entitled to be
reimbursed for reasonable costs and attorneys' fees in the same
proportion to which they have prevailed.
10. Termination of Employment by the Corporation. The
Corporation may, of its own volition, terminate Employee's
employment at any time, other than on account of illness or
disability, upon giving at least thirty (30) days' advance
written notice to the
<PAGE> 93
Employee of the date when such termination shall become
effective. In the event of such termination, the Employee during
his life shall be entitled to receive, so long as he shall not
breach (and shall not have breached) any of the provisions of
this Agreement, or have been terminated for cause, monthly
payments for a period of twelve months next succeeding the
effective date of termination, each payment equal to one twelfth
(1/12) of his Base Salary in effect at the time of such
termination, plus incentive compensation for twelve (12) months
as computed pursuant to Section 4(a)(iii) of this Agreement. The
Employee's employment shall be deemed to be terminated for cause
where the Corporation determines after notice and opportunity to
cure as set forth in Section 9 of this Agreement, in good faith,
that there has been continuing neglect by the Employee of his
duties hereunder or willful misconduct on his part in connection
with the performance of such duties, or where the employee has
been convicted of a felony or a misdemeanor involving moral
turpitude.
11. Termination of Employment by the Employee. Employee
may, of his own volition, terminate his employment at any time
upon giving at least thirty (30) days' advance written notice to
the President or the Chairman of the Board of Directors of the
Corporation of the date when such termination shall become
effective.
12. Designation of Beneficiary; Lump Sum Payments. A
designated beneficiary entitled to receive the benefits payable
following the death of Employee under paragraph 4, or payable
following the death of the Employee after termination of
employment under paragraph 5, shall be named in a written
designation filed with the Secretary of the Corporation. Such
written designation may be revoked or amended by Employee at any
time. If no such written designation of beneficiary shall be
filed with the Secretary of the Corporation, or if the designated
beneficiary is not alive at the time of any payment to be made,
the same shall be paid in equal shares to the Employee's estate
in cash. In determining the eligibility and status of persons
entitled to receive payments under paragraphs 4 and 5 of this
Agreement, the Corporation may rely on its records and the good
faith determinations of its officers. In no event shall the
Corporation be liable to
<PAGE> 94
any person for any sums paid to any other persons pursuant to
such records and determinations.
13. Assignments, etc. Neither Employee nor any
beneficiary designated to receive payments under this Agreement
shall have any power to transfer, assign, anticipate, mortgage or
otherwise encumber in advance any of the benefits payable
hereunder, nor shall such benefits be subject to seizure for the
payment of any debts or judgments or any of them or be
transferable by operation in law in the event of bankruptcy,
insolvency or otherwise.
14. Participation in Other Plans. Nothing in this
Agreement shall affect any right which Employee may otherwise
have to participate in, or under any other retirement plan or
agreement which the Corporation may now or hereafter provide.
15. Binding Agreement. This Agreement shall be binding
upon the parties hereto, their heirs, executors, administrators
or successors.
16. Revocation. This Agreement may be amended or revoked
at any time only by mutual written agreement of the parties.
17. Cumulative Remedies. Any of the remedies provided for
herein shall be in addition to any remedy available to either of
the parties at law or equity.
18. Savings Clause. If any part of this Agreement shall
be determined to be unreasonable in duration or in area, then
this Agreement is intended to and shall extend only for such
period of time and in such area as is determined to be
reasonable.
19. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New
York.
<PAGE> 95
IN WITNESS WHEREOF, Employee has hereunto set his hand and
seal, and the Corporation has caused these presents to be
executed by its President or Chairman of the Board and its
corporate seal to be affixed hereto, the day and year first above
written.
__________________________________
Employee Name
COMPTEK FEDERAL SYSTEMS, INC.
By _____________________________
Name
Title
(Corporate Seal)
<PAGE> 96
STATE OF NEW YORK )
: SS.:
COUNTY OF ERIE )
On this ___ day of ___________, 19___ , before me personally came
(President or Chairman) to me known, who, being by me duly sworn,
did depose and say that he resides at
____________________________; that he is the __________________
of COMPTEK FEDERAL SYSTEMS, INC., the corporation described in
and which executed the above instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by the order of the
board of directors of said corporation, and that he signed his
name thereto by like order.
____________________________________
<PAGE> 97
STATE OF NEW YORK )
: SS.:
COUNTY OF ERIE )
On this ___ day of ____________, 19__, before me personally came
___(Employee)___, to me personally known and known to me to be
the same person described in and who executed the foregoing
instrument and acknowledged that he executed the same.
____________________________________
<PAGE> 98
EXHIBIT A
INCENTIVE COMPENSATION PLAN
FOR ____________________________________
<PAGE> 99
SCHEDULE 7
Confidentiality Agreement
Attached to this Schedule 7 is a copy of the Confidentiality
Agreement, dated February 22, 1995, between CFS and ASDI, as is
described in Section 7 of this Agreement.
<PAGE> 100
MUTUAL CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
THIS AGREEMENT is made and entered into the 22nd day of
February, 1995, by and between COMPTEK FEDERAL SYSTEMS, INC.,
with an office and principal place of business located at 2732
Transit Road, Buffalo, New York 14224 ("COMPTEK"), and ADVANCED
SYSTEMS DEVELOPMENT, INC., with an office and principal place of
business located at 9610 23rd Avenue, East Elmhurst, New York
11369 ("ASDI") (collectively "the Parties"), with respect to the
exchange and disclosure of proprietary, confidential and trade
secret information relative to our evaluation of the business
operations of COMPTEK and ASDI.
To ensure the satisfactory performance of the business
dealings between COMPTEK and ASDI as contemplated by the Parties,
it is necessary and desirable that such information be disclosed
to each other by the Parties. Accordingly, it is mutually agreed
as follows:
1. Proprietary information shall mean any and all information
not generally known or recognized as standard practice,
relating to the business of COMPTEK or ASDI or any third
parties with whom either COMPTEK or ASDI deals, including,
but not limited to, the fact that discussions have occurred
and are occurring between the Parties with respect to a
possible merger, acquisition, or other business combination,
and information relating to technology, research, test
procedures and results, machinery, equipment, manufacturing
processes and products, identity and description of raw
materials and services used, purchasing, accounting,
engineering, marketing, merchandising, selling and
servicing, and business methods used, manufactured or
developed by or for either of the Parties.
Information deemed to be proprietary and presented in
tangible form shall be clearly and conspicuously marked or
identified by the Disclosing Party with an appropriate
<PAGE> 101
legend, stamp, or other positive written or tangible
identification. Orally or other intangibly disclosed
proprietary information shall be considered proprietary from
the date of disclosure provided that it is reduced to
written or tangible form and marked as "Proprietary" by the
Disclosing Party within 14 business days after disclosure.
2. Without the prior written consent of the other Party,
neither COMPTEK nor ASDI shall make any disclosure that
discussions or negotiations are taking place between COMPTEK
and ASDI concerning a possible transaction between the
Parties, including the status thereof. Provided, however,
notwithstanding the previous sentence, a disclosure of
negotiations occurring between the Parties may be made by
either COMPTEK or ASDI if, based upon the advice of counsel,
such disclosure is necessary in order to comply with
applicable laws or stock exchange regulations.
3. All proprietary information disclosed to or known by either
Party in connection with its dealings with the other shall
remain the property of Disclosing Party and shall be used
solely in connection with discussions or work with the other
Party. Neither Party shall reproduce, use or disclose to
others proprietary information of the other Party without
prior written consent from the Disclosing Party except as
necessary for the performance of the dealings between the
Parties, or as required by law.
4 Nothing in this Agreement shall be deemed to grant a license
or other right, directly or by implication, under any
patent, patent application, and/or copyright in relation to
any proprietary information disclosed pursuant to this
Agreement. This Agreement is not intended to be, nor shall
it be construed as creating a joint venture, association,
partnership, teaming agreement, or other formal business
organization or agency relationship between the Parties.
5 If proprietary information is disclosed to a third party by
COMPTEK or ASDI in connection with the performance of
business dealings between ASDI and
<PAGE> 102
COMPTEK, such third party shall be required to hold such
proprietary information in confidence and subject to the
restrictions imposed by the Agreement.
6 COMPTEK and ASDI shall use their best efforts to prevent
inadvertent disclosure of proprietary information to any
third party. Immediately upon learning of inadvertent
disclosure, both COMPTEK and ASDI shall take all reasonable
measures to notify the inadvertent recipient of the
Disclosing Party's proprietary interest, notify the
Disclosing Party of the inadvertent disclosure, avoid any
further disclosure, and immediately recover the disclosed
materials together with any copies, notes, correspondence or
other memorialization concerning the proprietary information
contained in the disclosed material.
7 COMPTEK and ASDI agree that each other's proprietary
information is valuable and the unauthorized use and/or
disclosure thereof may result in significant harm. In the
event COMPTEK or ASDI intentionally discloses proprietary
information or inadvertently discloses proprietary
information and fails to take appropriate remedial steps as
required herein, the Party making the unauthorized
disclosure consents to the issuance by a court of competent
jurisdiction of injunctive relief in favor of the other
Party to mandate the return and prevent further disclosure
and/or use of such proprietary information, together with
damages, cost, attorney' fees, and other reasonable expenses
associated therewith.
8. COMPTEK and ASDI shall each take all proper precautions
against unauthorized disclosure of the other Party's
proprietary information by any of its officers, directors,
shareholders, employees, or agents (collectively its
"affiliates"). COMPTEK and ASDI shall each only provide the
proprietary information of the other Party to such of its
affiliates as have a need-to-know such information. COMPTEK
and ASDI each warrant to the other Party that each affiliate
receiving such information will be instructed as to
obligations to hold such information in confidence.
<PAGE> 103
9. Upon request or upon the completion of the business dealings
through which any item of proprietary information is
disclosed, both COMPTEK and ASDI shall promptly return to
the other Party, or destroy at the option of the Disclosing
Party, all tangible materials that disclose or relate to any
proprietary information.
10. The following is not proprietary and neither COMPTEK nor
ASDI shall be liable for disclosure of the same:
(a)is within the public domain at the time it was
disclosed; or
(b)is disclosed with the prior written consent of the
other Party; or
(c)is disclosed after the later of a lapse of a period
of (i) five (5) years from the date of this letter, or
(ii) three (3) years following the completion of
business dealings between COMPTEK and ASDI; or
(d)is not properly designated or confirmed as
proprietary; or
(e)has been lawfully received from a third party without
restrictions or breach of this Agreement; or
11. Neither COMPTEK nor ASDI shall be permitted to justify
disregard of its obligations of confidence under this
Agreement by using the disclosed proprietary information to
guide a search of publications and publicly available
material and by selecting a series of items of knowledge
from unconnected sources in the public domain and fitting
them together with the use of the proprietary information.
<PAGE> 104
12. This Agreement shall be binding upon and for the benefit of
ASDI and COMPTEK and their respective successors and
assigns.
13. In the event any provision of this Agreement is finally
determined to be invalid by a court of competent
jurisdiction, the Parties agree that such invalidity shall
not affect the validity of the remaining provisions of this
Agreement, and further agree to substitute for the invalid
provision a new provision which most closely approximates
the intent and economic effect of the invalid provision.
14. As evidence of mutual agreement to the terms of this
Agreement, the Parties have executed this Agreement on the
date(s) shown herein below. The effective date of this
Agreement shall be the date on which the Agreement is signed
by the last executing Party. This Agreement shall expire
five (5) years from its effective date or three (3) years
after completion of business dealings between COMPTEK and
ASDI, whichever date first occurs.
15. The failure by either Party to insist upon strict
performance of any provision of this Agreement, shall not be
deemed to be a waiver of its rights or remedies, nor a
waiver by it of any subsequent default by the other Party.
No modification of this Agreement, or waiver or renunciation
of a claim or right, shall be effective unless it is reduced
to writing and signed by authorized representatives of both
Parties.
<PAGE> 105
If the foregoing is fully acceptable to you, please sign and
return a copy of this Agreement, whereupon this document will
constitute a binding agreement between us.
COMPTEK FEDERAL SYSTEMS, INC. ADVANCED SYSTEMS DEVELOPMENT, INC.
By: \S\John J. Sciuto By: \S\Michael J. Gross
Name: John J. Sciuto Name: Michael J. Gross
Title: President & CEO Title: Executive Vice-President
Date: February 22, 1995 Date: March 2, 1995
<PAGE> 106
MEMORANDUM OF UNDERSTANDING
_______________________________________
This Memorandum of Understanding is made by and between
Comptek Research, Inc. ("CRI"), Comptek Federal Systems, Inc.
("CFS"), Advanced Systems Development, Inc. ("ASDI") and the
Shareholders of ASDI (the "Shareholders"), this 1st day of March,
1996.
The Shareholders will use their best efforts to obtain formal
consents to assignments or novations relative to the merger of
ASDI into CFS, as is more fully set forth in the January 25, 1996
Merger Agreement and its related documents ("the Merger
Agreement"), from the United States Air Force, Hughes Aircraft,
Hughes Training, the Government of Turkey, ERIM, and the
Government of Israel. Michael Gross is depositing into escrow
127,824 shares of the CRI stock against which CRI and CFS shall
be permitted to draw by way of indemnity only if, and to the
extent, that CRI and or CFS incur loss or damage by reason of the
failure to obtain such consents or novations on these contracts
on or before June 30, 1997. To the extent not drawn against by
June 30, 1997, or , if earlier, when all such consents or
novations have been obtained, said CRI stock deposited by Michael
Gross in escrow will be released out of escrow by Oscar D.
Folger, as escrow agent, to Michael Gross, upon receipt of joint
notice for Michael Gross, CRI and CFS to release such shares of
CRI stock. These shares of CRI stock held under this escrow will
not be subject to recovery or attack per any other claim by CRI
or CFS, including any claim for which CRI or CFS shall be
entitled to receive shares under the escrow provided in Article I
of the Merger Agreement. The other terms and conditions of this
escrow shall be the same as those provided in Article I of the
Merger Agreement.
Section 1.2 of the Merger Agreement is hereby amended to reflect
that at the Closing, the number of shares of CRI stock required
to be transmitted to the Shareholders pursuant to Section 1.1(b)
of the Merger Agreement shall be based upon a net asset valuation
of ASDI of $282, 985. The third sentence of Section 1.2 of the
Merger Agreement is hereby amended to read as follows: "To the
extent the Net Asset Value as of March 1, 1996 (as reflected on
the Closing Statement as hereinafter defined) is less than . . .
". The remainder of that sentence shall remain unchanged.
<PAGE> 107
Agreed and Accepted:
COMPTEK RESEARCH, INC.
By: /S/John R. Cummings
___________________________
John R. Cummings
Chairman, President and CEO
COMPTEK FEDERAL SYSTEMS, INC.
By: /S/John J. Sciuto
___________________________
John J. Sciuto
President and CEO
ADVANCED SYSTEMS DEVELOPMENT, INC.
By: /S/Michael Gross
___________________________
Michael Gross
Vice President
