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
Date of report (Date of earliest event reported)
May 14, 1998
COMPTEK RESEARCH, INC.
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(Exact Name of Registrant as Specified in Charter)
New York 1-8502 16-0959023
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(State of Other (Commission (IRS Employer Identi-
Jurisdiction of File Number fication No.)
Incorporation)
2732 Transit Road, Buffalo, New York 14224-2523
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(Address of Principal Executive Offices (Zip Code)
Registrant's telephone number, (716) 677-4070
including area code: ------------------
Not Applicable
- -----------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Year)
<PAGE 1>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 14, 1998, Comptek Research, Inc. (the
"Company"), concluded the acquisition of PRB
Associates, Inc. ("PRB"), a privately held supplier of
military mission planning systems. The acquisition was
accomplished by the purchase of all outstanding shares
of PRB for $19 million in cash and $1 million in
promissory notes. PRB will maintain a principal place
of business in Hollywood, Maryland and will be operated
as a wholly-owned subsidiary of the Company. The
amount of consideration paid was based upon arms-length
negotiations between the Company and the Shareholders
of PRB. The principal shareholders of PRB were
Lawrence M. Schadegg, James N. Agamaite, Richard A.
Bos, Allan D. Crane, and Daniel T. Doherty. In
connection with completing the transaction Messrs.
Schadegg, Crane, and Doherty entered into three-year
employment agreements with PRB providing for their
continued service as officers of PRB, as a subsidiary
of the Company.
In connection with the completion of the acquisition,
the Company's existing credit facility with
Manufacturers and Traders Trust Company ("M&T Bank")
was restructured and a new facility was established
with M&T Bank and KeyBank National Association for use
by the Company and its subsidiaries to fund the
acquisition and provide working capital. Prior to the
acquisition, the Company's credit facility consisted of
(i) a revolving credit agreement with a maximum
borrowing line of $10,000,000 and (ii) a five-year term
loan which was used to finance the Company's
acquisition of Advanced Systems Development, Inc. in
March 1996. On March 31, 1998, the Company had
approximately $550,000 outstanding on the revolving
credit agreement and a balance of $3,000,000 on the
five-year term loan.
The Company's credit facility has been revised, as
follows:
(a) A new, $12,000,000 revolving credit agreement
bearing interest at the prime rate or 1.5% above LIBOR
(at the Company's option). Borrowings under this
agreement mature March 31, 2001. Subsequent to the
acquisition, approximately $4,000,000 was outstanding
with the remaining available for working capital
requirements.
(b) A new, $15,000,000 seven-year term loan bearing
interest at 1.75% above LIBOR with monthly principal
payments beginning in July 1998. Principal payments
are based upon a ten-year amortization with a final
principal payment due at the end of the term for the
outstanding principal amount.
<PAGE 2>
(c) Continuation of the March 1996 five-year term
loan, with an outstanding balance of $3,000,000 as of
March 31, 1998, bearing interest at a fixed rate of
8.5% and a maturity date of March 31, 2001.
The entire credit facility is secured by
substantially all of the Company's assets, and is
guaranteed by the Company's subsidiaries, including PRB.
The acquisition of PRB will be accounted for as a
purchase as of May 1, 1998. The Company intends to
continue the operations of the business of PRB and to use
the assets and facilities of PRB 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 with respect to the acquisition at the
time that this report was filed. This information
will be filed within sixty (60) days after this
Current Report on Form 8-K is required to be filed.
(c). The following exhibits are filed as part of this
report:
Exhibit 2. Stock Purchase Agreement, dated May 8,
1998 by and among Comptek Research, Inc., and PRB
Associates, Inc., and Lawrence M. Schadegg, James N.
Agamaite, Richard A. Bos, Allan D. Crane, and Daniel
T. Doherty.
Exhibit 99. News Release dated May 14,
1998, issued by the Company announcing completion of
the acquisition of PRB Associates, Inc.
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, INC.
Date: May 26, 1998 By: /s/John J. Sciuto
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John J. Sciuto
Chairman, President and CEO
<PAGE 3>
Exhibits Attached to Stock Purchase Agreement
Exhibit 2.4(a)(ii) -- Form of Releases
Exhibit 2.4(a)(iii) -- Form of Employment Agreements
Exhibit 2.4(a)(iv) -- Form of Non-Competition Agreements
Exhibit 2.4(b) -- Form of Non-Negotiable Promissory Notes
The above Exhibits to the Stock Purchase Agreement are omitted and
will be filed with the Commission upon request.
<PAGE 4>
Stock Purchase Agreement
THIS AGREEMENT, made as of May 8, 1998, 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 referred to as "CRI"), and PRB Associates, Inc.,
a Maryland corporation having an office and principal place of
business at 43865 Airport View Drive, Hollywood, Maryland 20636
(hereinafter referred to as "PRB"), and LAWRENCE M. SCHADEGG, JAMES
N. AGAMAITE, RICHARD A. BOS, ALLAN D. CRANE and DANIEL T. DOHERTY
(hereinafter collectively referred to as the "PRINCIPAL
SHAREHOLDERS').
W I T N E S S E T H :
WHEREAS, the PRINCIPAL SHAREHOLDERS and all of the "Other
Shareholders" of PRB, as that term is defined herein, desire to
sell, and CRI desires to purchase, all of the issued and
outstanding shares (the "Shares") of capital stock of PRB, for the
consideration and on the terms set forth in this Agreement, and
WHEREAS, each of the Parties to this Agreement (collectively
sometimes hereinafter referred to as "the Parties") desires to make
certain representations, warranties and agreements in connection
with the acquisition by CRI of PRB, and also to prescribe
conditions thereto.
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements hereinafter set forth, the Parties hereto
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Article 1:
"Adjustment Amount"-- shall mean any amount by which the Book Value
as of the Closing Date is less than nine million and 00/100 dollars
($9,000,000).
"Applicable Contract"--any Contract (a) under which PRB has or may
acquire any rights, (b) under which PRB has or may become subject
to any obligation or liability, or (c) by which PRB or any of the
assets owned or used by it is or may become bound.
"Balance Sheet"--as defined in Section 3.4.
"Beyond the Reasonable Control of a Party"-- shall mean causes
which are unforeseeable, not due to a Party's (individually or
collectively) own negligence, and which cannot be overcome by the
exercise of due diligence, such as labor strikes, riots, fires,
earthquakes, floods, severely inclement weather, epidemics, war,
acts of God, and such other similar types of occurrences even if
not expressly listed herein.
"Book Value"--shall mean PRB's total shareholders' equity
determined in accordance with GAAP.
"Breach"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have
occurred if there is or has been (a) any material inaccuracy in or
breach of, or any material failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision,
or (b) any other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant,
obligation, or other provision which is material and adverse and
which is not beyond the Reasonable Control of a Party, and the term
"Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"Certified Financial Statements"--shall mean the Financial
Statements of PRB certified by PRB's chief executive officer and
PRB's chief financial officer (or individuals of similar capacity)
as having been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis and
fairly presenting the financial position of PRB as of the date
thereof and the result of its operations and changes in financial
position for the periods then ended.
"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing actually
takes place or such other date and time as is stipulated by the
parties.
"Closing Financial Statements"--as defined in Section 2.6(a).
"Commercially Reasonable Efforts"--the efforts that a prudent
Person desirous of achieving a result would use in similar
circumstances to ensure that such result is achieved as
expeditiously as possible; provided, however, that an obligation to
use Commercially Reasonable Efforts under this Agreement does not
require the Person subject to that obligation to take actions that
would result in a materially adverse change in the benefits to such
Person of this Agreement and the Contemplated Transactions.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated
by this Agreement, including:
(a) the sale of the Shares to CRI;
(b) the execution, delivery, and performance of the
Promissory Note, the Employment Agreements, the Noncompetition
Agreements and the PRINCIPAL SHAREHOLDERS' Releases;
(c) the performance by CRI, PRB, and the PRINCIPAL
SHAREHOLDERS of their respective covenants and obligations
under this Agreement; and
(d) CRI's acquisition and ownership of the Shares and
exercise of control over PRB.
"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or
implied) that is legally binding.
"Damages"--as defined in Section 10.2.
"DCAA"--the United States of America Defense Contract Audit Agency.
"DCAA Compensation Audit"-A claim that the DCAA has asserted
relating to the payment of executive compensation for the PRB
1993, 1994 and 1995 fiscal years which has been resolved to the
mutual satisfaction of PRB and the United States Government.
"Employment Agreements"--as defined in Section 2.4(a)(iii).
"Encumbrance"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of
income, or exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant
and animal life, and any other environmental medium or natural
resource.
"Environmental, Health, and Safety Liabilities"--any cost, damages,
expense, liability, obligation, or other responsibility arising
from or under Environmental Law or Occupational Safety and Health
Law and consisting of or relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination,
occupational safety and health, and regulation of chemical
substances or products);
(b) fines, penalties, judgments, awards, settlements, legal
or administrative proceedings, damages, losses, claims,
demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response actions
("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental
Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
? 9601 et seq., as amended ("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or
hazardous substances or materials, violations of discharge
limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are
generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable
risks to human health or the Environment when used or disposed
of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or
other potentially harmful substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such
clean up or prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment,
or permitting self-appointed representatives of the public
interest to recover for injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Facilities"--any real property, leaseholds, or other interests
currently or formerly owned or operated by PRB and any buildings,
plants, structures, or equipment (including motor vehicles)
currently or formerly owned or operated by PRB.
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4
were prepared.
"Governmental Authorization"--any approval, consent, license,
novation, permit, waiver, or other authorization issued, granted,
given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Hazardous Activity"--the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, release, storage, transfer, transportation, treatment,
or use (including any withdrawal or other use of groundwater) of
Hazardous Materials in, on, under, about, or from the Facilities or
any part thereof into the Environment, and any other act, business,
operation, or thing that increases the danger or poses an
unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value in a material and adverse
way of the Facilities or PRB.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to
be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including
any admixture or solution thereof, and specifically including
petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Intellectual Property Assets" --as defined in Section 3.22.
"Interim Balance Sheet"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code
or any successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department
of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually
aware of such fact or other matter or reasonably should have been
aware of such fact or other matter based on such individual's
office or position. (As applied to the PRINCIPAL SHAREHOLDERS,
each PRINCIPAL SHAREHOLDER will be deemed to have the "Knowledge"
of each other PRINCIPAL SHAREHOLDER.)
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual
who is serving, as a director, officer, partner, executor, or
trustee of such Person (or in any similar capacity) has, Knowledge
of such fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty.
"Liability Basket"-shall mean a $125,000 deductible to be utilized
to off-set claims by CRI under this Agreement.
"Liability Cushion"--shall mean any increase above nine million and
00/100 dollars ($9,000,000) in the Book Value of PRB on the Closing
Date, as evidenced by the Post-Closing Financial Statements.
"Noncompetition Agreements"--as defined in Section 2.4(a)(iv).
"Occupational Safety and Health Law"--any Legal Requirement
designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or
sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.
"Order"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered in a
proceeding with respect to which PRB was a named party by any
court, administrative agency, or other Governmental Body or by any
arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only
if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-
to-day operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of
Persons exercising similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising
similar authority), in the ordinary course of the normal day-
to-day operations of other Persons that are in the same line
of business as such Person.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general
partnership; (c) the limited partnership agreement and the
certificate of limited partnership of a limited partnership;
(d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and
(e) any amendment to any of the foregoing.
"Other Shareholders"-any owner of one or more Shares, excluding the
PRINCIPAL SHAREHOLDERS.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
"Plan"--as defined in Section 3.13.
"Post-Closing Financial Statements"--as defined in Section 2.6(a).
"PRB Disclosure Letter"-shall mean a disclosure letter provided by
PRB to CRI, identified as being provided pursuant to this Agreement
and including any updates thereof delivered to CRI prior to the
Closing Date. All representations and warranties of PRB or the
PRINCIPAL SHAREHOLDERS are qualified by disclosures made in the PRB
Disclosure Letter.
"PRINCIPAL SHAREHOLDERS"-Lawrence M. Schadegg, James N. Agamaite,
Richard A. Bos, Allan D. Crane and Daniel T. Doherty (individually
referred to as "PRINCIPAL SHAREHOLDER").
"Proceeding"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) relating to PRB
commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Promissory Notes"--the unsecured, non-negotiable and subordinated
notes of CRI to be issued to the PRINCIPAL SHAREHOLDERS.
"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.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's
Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or one
or more members of such individual's Family serves as a
director, officer, partner, executor, or trustee (or in a
similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar
capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and
former spouses, (iii) any other natural person who is related to
the individual or the individual's spouse within the second degree,
and (iv) any other natural person who resides with such individual,
and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a
Person or equity securities or other equity interests representing
at least 5% of the outstanding equity securities or equity
interests in a Person.
"Release"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
"Representative"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel,
accountants, and financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any
successor law.
"Shares"--as defined in the Recitals of this Agreement.
"SHAREHOLDERS' Releases"--as defined in Section 2.4.
"Subsidiary"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other
Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of that
corporation or other Person (other than securities or other
interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or
more of its Subsidiaries; when used without reference to a
particular Person, "Subsidiary" means a Subsidiary of PRB.
"Tax Return"--any return (including any information return),
report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement
has been made in writing or any notice has been given in writing,
that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
ARTICLE II
SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the
Closing, the PRINCIPAL SHAREHOLDERS will sell and transfer, and
cause to be sold and transferred, all of the Shares to CRI, and CRI
will purchase all of the Shares.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price"), subject to adjustment
provided for in Sections 2.5 and 2.6, for the Shares will be twenty
million and 00/100 dollars ($20,000,000) including the Promissory
Notes in the principal amount up to one million and 00/100 dollars
($1,000,000), to be paid as follows:
(a) (i) At the Closing CRI will pay the PRINCIPAL
SHAREHOLDERS and the Other Shareholders the sum of
nineteen million and 00/100 dollars ($19,000,000) or
more in cash (the "Cash") by either corporate checks
issued by CRI or wire transfers to bank accounts
designated by the PRINCIPAL SHAREHOLDERS;
(ii) At the Closing CRI will execute and deliver to the PRINCIPAL
SHAREHOLDERS Promissory Notes of CRI in the aggregate principal
amount of up to one million and 00/100 dollars ($1,000,000); and
(iii) The Cash and Promissory Notes shall be
allocated among the PRINCIPAL SHAREHOLDERS and Other
Shareholders in the percentages set forth on Exhibit
2.2(a)(iii) hereto.
(b) The Promissory Notes to be delivered by CRI will be
unsecured, non-negotiable, and subordinated to CRI's bank
debt. The Promissory Notes will bear simple interest at the
rate of 5.5% per annum, payable at maturity.
(c) The exact amount of Cash and Promissory Notes will be
subject to adjustment and allocation as provided for in
Sections 2.5 and 2.6.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this
Agreement will take place at the home offices of CRI, at 10:00 a.m.
(local time) on May 8, 1998, or on such other date not later than
the sixtieth (60th) day after the date hereof as the Parties shall
agree. Subject to the provisions of Section 9, failure to
consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this
Section 2.3 will not result in the termination of this Agreement
and will not relieve any party of any obligation under this
Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) The PRINCIPAL SHAREHOLDERS will deliver, or caused to be
delivered, to CRI:
(i) certificates representing all of the Shares, duly
endorsed (or accompanied by duly executed stock
powers),for transfer to CRI free and clear of all adverse
claims;
(ii) releases in the form of Exhibit 2.4(a)(ii) executed
by each of the PRINCIPAL SHAREHOLDERS (collectively,
"SHAREHOLDERS' Releases");
(iii) employment agreements in the form attached as
Exhibit 2.4(a)(iii), executed by PRB and such employees
of PRB designated by CRI (collectively, "Employment
Agreements");
(iv) noncompetition agreements in the form of Exhibit
2.4(a)(iv), executed by PRB and each of the PRINCIPAL
SHAREHOLDERS (collectively, the "Noncompetition
Agreements"); and
(v) a certificate executed by the PRINCIPAL
SHAREHOLDERS representing and warranting to CRI that each
of PRINCIPAL SHAREHOLDERS' representations and
warranties in this Agreement was accurate in all respects
as of the date of this Agreement, and is accurate in all
respects as of the Closing Date as if made on the Closing
Date, (giving full effect to any information that was
delivered by the PRINCIPAL SHAREHOLDERS to CRI prior to
the Closing Date in accordance with Section 5.5 or the
PRB Disclosure Letter).
(b) CRI will deliver to PRINCIPAL SHAREHOLDERS:
(i) Cash in the designated amounts by corporate checks
or bank wire transfers payable to the order of such
Persons designated by the PRINCIPAL SHAREHOLDERS;
(ii) Promissory Notes in the designated amounts payable
to such Persons designated by the PRINCIPAL SHAREHOLDERS
in the form of Exhibit 2.4(b); and
(iii) a certificate executed by CRI to the effect
that, except as otherwise stated in such certificate,
each of CRI's representations and warranties in this
Agreement was accurate in all respects to the Knowledge
of CRI as of the date of this Agreement and is accurate
in all respects as of the Closing as if made on the
Closing.
2.5 ADJUSTMENT AMOUNT
The Purchase Price for the Shares is based, in part, on the Book
Value of PRB being at least nine million and 00/100 dollars
($9,000,000) as of the Closing Date. If the Book Value of PRB as
reflected in the Closing Financial Statements is less than nine
million and 00/100 dollars, the Purchase Price shall be adjusted
downward, as appropriate on a dollar-for-dollar basis, with the
adjustment affecting the amount of Cash paid by CRI to the
PRINCIPAL SHAREHOLDERS' and the Other Shareholders of PRB (the "
Initial Adjustment Amount"). Provided, however, if the Initial
Adjustment Amount is greater than one million and 00/100 dollars
($1,000,000), the following terms apply:
(a) CRI may terminate this Agreement upon written notice provided
to PRB within five (5) days after delivery of the Closing Financial
Statements. Failure to deliver a timely notice of termination
shall constitute a waiver of the right to terminate.
(b) If CRI elects not to terminate this Agreement in
accordance with the terms of Subsection (a) above, PRB may
within five (5) days of the expiration of the five (5) day
period specified in Subsection (a) above elect to provide to
CRI a notice of its election to terminate this Agreement (a
"Termination Notice") unless CRI agrees to limit the Initial
Adjustment Amount to one million and 00/100 dollars
($1,000,000).
(c) The Termination Notice shall be effective to terminate
the Agreement unless CRI provides written notice to PRB within
five (5) days after the date of the Termination Notice that
CRI will limit the Initial Adjustment Amount to one million
and 00/100 dollars ($1,000,000).
(d) If CRI provides timely notice as specified in Subsection
(c) above, the Agreement shall not be terminated and the
Purchase Price shall be adjusted downward by one million and
00/100 dollars ($1,000,000).
2.6 ADJUSTMENT PROCEDURE
(a) At least three (3) business days prior to the Closing,
the PRINCIPAL SHAREHOLDERS will prepare and will cause the
Chief Financial Officer of PRB to certify as materially
accurate consolidated financial statements ("Closing Financial
Statements") of PRB for the period from December 31, 1997,
through March 31, 1998. Within sixty (60) days after the
Closing Date, the PRINCIPAL SHAREHOLDERS will deliver post-
closing consolidated financial statements of PRB prepared in
accordance with GAAP and reviewed by Deloitte & Touche, LLP,
PRB's certified public accountants, for the period from
December 31, 1997 through the Closing Date (the "Post-Closing
Financial Statements"). The Post-Closing Financial Statements
shall include a computation of the Book Value of PRB as of the
Closing Date and shall be certified by the Chief Financial
Officer of PRB to be in accordance with GAAP as applied on a
consistent basis. The review by Deloitte & Touche, LLP, shall
include a written report thereon. If within thirty (30) days
following delivery of the Post-Closing Financial Statements
(together with the Chief Financial Officer's certification and
Deloitte and Touche's report) to CRI, CRI has not given the
PRINCIPAL SHAREHOLDERS notice of its objection to the Post-
Closing Financial Statements (such notice must contain a
statement of the basis of CRI's objection), then the Book
Value of PRB reflected in the Post-Closing Financial
Statements will be used in computing the Adjustment Amount. If
CRI gives such notice of objection and CRI and the PRINCIPAL
SHAREHOLDERS fail to reach a mutually agreeable resolution,
then the issues in dispute will be submitted to Price
Waterhouse, LLP, certified public accountants (the
"Accountants"), for resolution. If issues in dispute are
submitted to the Accountants for resolution, (i) each party
will furnish to the Accountants such work papers and other
documents and information relating to the disputed issues as
the Accountants may request and are available to that party or
its Subsidiaries (or its independent public accountants), and
will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the
determination with the Accountants; (ii) the determination by
the Accountants, as set forth in a notice delivered to both
parties by the Accountants, will be binding and conclusive on
the parties; and (iii) CRI directly or through PRB after the
Closing will bear all of the fees of the Accountants for the
services contemplated by this Section 2.6(a). If the
Adjustment Amount reflects that the Purchase Price was
inappropriately adjusted downward under the terms of Section
2.5, an appropriate additional cash payment shall be made to
the PRINCIPAL SHAREHOLDERS and the Other Shareholders.
(b) Eighteen (18) months after the Closing, the Promissory
Notes, in an amount up to one million and 00/100 dollars
($1,000,000), would be reduced by the net amount of any
liabilities not properly recorded on the Post-Closing
Financial Statements, and the amount of receivables, net of
bad debt reserve, reflected on the Post-Closing Financial
Statements, which are not collected in full by CRI within
seventeen (17) months after the Closing Date. The Promissory
Notes referred to in this Section 2.6(b) would be subject to
any claim for indemnification or payment of damages to which
CRI may be entitled under this Agreement once the Liability
Basket and the Liability Cushion, if any exists, is exhausted.
Any uncollected accounts receivable which were reflected as
assets on the Post-Closing Financial Statements, but which
remain uncollected seventeen (17) months after the Closing
Date and are actually used to offset the Promissory Notes,
shall be assigned to the PRINCIPAL SHAREHOLDERS to the extent
of such offset.
(c) If at the time of final payment with respect to the
Promissory Notes, there is any unused Liability Cushion, the
unused amount of the Liability Cushion shall be paid to the
PRINCIPAL SHAREHOLDERS; provided, however, that the total
payments to the PRINCIPAL SHAREHOLDERS and Other Shareholders
for the Shares will not exceed twenty million dollars
($20,000,000).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PRINCIPAL SHAREHOLDERS AND PRB
The PRINCIPAL SHAREHOLDERS and PRB represent and warrant to CRI as
follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) PRB is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use,
and to perform all its obligations under any material
Applicable Contracts. PRB is a duly qualified to do business
as a foreign corporation and is in good standing under the
laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such
qualification and the failure to qualify would have a material
adverse effect on PRB.
(b) The PRINCIPAL SHAREHOLDERS have delivered to CRI copies
of the Organizational Documents of PRB, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of the PRINCIPAL SHAREHOLDERS and PRB, enforceable
against the PRINCIPAL SHAREHOLDERS, jointly and severally, in
accordance with its terms. Upon the execution and delivery by
PRINCIPAL SHAREHOLDERS of the Employment Agreements, the
PRINCIPAL SHAREHOLDERS' Releases, and the Noncompetition
Agreements (collectively, the "PRINCIPAL SHAREHOLDERS'
Closing Documents"), the PRINCIPAL SHAREHOLDERS' Closing
Documents will constitute the legal, valid, and binding
obligations of PRINCIPAL SHAREHOLDERS, enforceable against
PRINCIPAL SHAREHOLDERS in accordance with their respective
terms. The PRINCIPAL SHAREHOLDERS have the absolute and
unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and the PRINCIPAL SHAREHOLDERS'
Closing Documents and to perform their obligations under this
Agreement and the PRINCIPAL SHAREHOLDERS' Closing Documents.
(b) Except as specified in any Exhibit or Schedule hereto or
otherwise specified herein, neither the execution and delivery
of this Agreement, nor the consummation or performance of any
of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of
PRB, or (B) any resolution adopted by the board of
directors or the stockholders of PRB;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which PRB or any
PRINCIPAL SHAREHOLDER, or any of the assets owned or
used by PRB, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by PRB or that otherwise
relates to the business of, or any of the assets owned or
used by, PRB;
(iv) cause CRI or PRB to become subject to, or to become
liable for the payment of, any Tax;
(v) cause any of the assets owned by PRB to be
reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets
owned or used by PRB.
Notwithstanding the foregoing terms of this Section
3.2(b), no warranty or representation is made
regarding whether PRB will be required to obtain a
novation of any contracts with any Governmental Body
as a result of the contemplated transactions except
that to the Knowledge of the PRINCIPAL SHAREHOLDERS
and PRB no such novation is required. Except as to
a result of a Breach of a representation or warranty
by the PRINCIPAL SHAREHOLDERS or PRB, CRI assumes
the risk that novations may be required.
(c) The PRINCIPAL SHAREHOLDERS are acquiring the Promissory
Notes for their own account and not with a view to their
distribution within the meaning of Section 2(11) of the
Securities Act. Each PRINCIPAL SHAREHOLDER is an "accredited
investor" as such term is defined in Rule 501(a) under the
Securities Act.
3.3 CAPITALIZATION
The authorized equity securities of PRB consist of one million five
hundred thousand (1,500,000) shares of common stock, par value
$.01 per share, of which five hundred fifty-one thousand eight
hundred thirty (551,830) shares are issued and outstanding and
constitute the Shares. The PRINCIPAL SHAREHOLDERS are or will be
on the Closing Date the record and beneficial owners and holders of
all of the Shares, free and clear of all Encumbrances. Except as
disclosed in the PRB Disclosure Letter, no legend or other
reference to any purported Encumbrance appears upon any certificate
representing equity securities of PRB. All of the outstanding
equity securities of PRB have been duly authorized and validly
issued and are fully paid and nonassessable. Except as disclosed
in the PRB Disclosure Letter, there are no Contracts relating to
the issuance, sale, or transfer of any equity securities or other
securities of PRB. None of the outstanding equity securities or
other securities of PRB was issued in violation of the Securities
Act or any other Legal Requirement.
3.4 FINANCIAL STATEMENTS
The PRINCIPAL SHAREHOLDERS have, or will have as soon as is
practicable, delivered to CRI:
(a) audited consolidated balance sheets of PRB as at December
31, 1997 (the "Balance Sheet"), and December 31, 1996, and
the related audited consolidated statements of income, changes
in stockholders' equity, and cash flow for each of the fiscal
years then ended, including the notes thereto, together with
the report thereon of Deloitte & Touche, LLP, independent
certified public accountants;
(b) a balance sheet for the month ended immediately prior to
Closing (the "Interim Balance Sheet") certified by PRB's chief
executive officer and chief financial officer.
Such financial statements and notes fairly present the financial
condition and the results of operations, changes in stockholders'
equity, and cash flow of PRB as at the respective dates of and for
the periods referred to in such financial statements, all in
accordance with GAAP; the financial statements referred to in this
Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved. No financial
statements of any Person other than PRB and its Subsidiaries and
are required by GAAP to be included in the consolidated financial
statements of PRB. The PRINCIPAL SHAREHOLDERS will reasonably
cooperate with CRI and PRB 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 filing on Form 8-
K with the Securities and Exchange Commission regarding the
completion of CRI's acquisition of PRB.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of PRB and its subsidiaries, all of which have been made
available to CRI, are complete and correct in all material respects
and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of
internal controls. The minute books of PRB contain records accurate
and complete in all material respects of all meetings held of, and
corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of PRB, and no
formal meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of
those books and records will be delivered into the possession of
CRI.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
(a) PRB does not own any real property. PRB has provided, or
will provide prior to Closing, a complete and accurate list of
all real property leases to which PRB is a party. PRB owns
all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to
own, including all of the properties and assets reflected in
the Balance Sheet and the Interim Balance Sheet (except for
assets held under capitalized leases disclosed and personal
property sold or otherwise disposed of since the date of the
Balance Sheet and the Interim Balance Sheet, as the case may
be, in the Ordinary Course of Business), and all of the
properties and assets purchased or otherwise acquired by PRB
since the date of the Balance Sheet (except for personal
property acquired and sold or otherwise disposed of since the
date of the Balance Sheet in the Ordinary Course of Business
and consistent with past practice).
(b) All material properties and assets reflected in the
Balance Sheet and the Interim Balance Sheet are free and clear
of all Encumbrances except for liens for current taxes not
yet due and landlord's liens.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of PRB are
structurally sound, are in all material respects in good operating
condition and repair, and are adequate for the uses to which they
are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or
cost. The building, plants, structures, and equipment of PRB are
sufficient for the continued conduct of PRB's businesses after the
Closing in substantially the same manner as conducted prior to the
Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of PRB that are reflected on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of
PRB as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the
Ordinary Course of Business. Unless paid prior to the Closing Date,
the Accounts Receivable are or will be as of the Closing Date
current and collectible, net of the respective reserves shown on
the Balance Sheet or the Interim Balance Sheet or on the accounting
records of PRB as of the Closing Date (which reserves are adequate
and calculated consistent with past practice and, in the case of
the reserve as of the Closing Date, will not represent a greater
percentage of the Accounts Receivable as of the Closing Date than
the reserve reflected in the Interim Balance Sheet represented of
the Accounts Receivable reflected therein and will not represent a
material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, the
Accounts Receivable either has been or will be collected in full,
without any set-off, within seventeen (17) months from the Closing
Date. Except as disclosed in the PRB Disclosure Letter or as
otherwise disclosed herein, there is no contest, claim, or right
of set-off, other than returns in the Ordinary Course of Business,
under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. The
PRINCIPAL SHAREHOLDERS have provided to CRI a complete and
accurate list of all Accounts Receivable as of the date of the
Interim Balance Sheet, which list sets forth the aging of such
Accounts Receivable.
3.9 INVENTORY
All inventory of PRB, as reflected in the Balance Sheet or the
Interim Balance Sheet, consists of a quality and quantity usable
and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Balance
Sheet or the Interim Balance Sheet or on the accounting records of
PRB as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or net realizable
value on a first in, first out basis. The quantities of each item
of inventory (whether raw materials, work-in-process, or finished
goods) are not excessive, but are reasonable in the present
circumstances of PRB.
3.10 NO UNDISCLOSED LIABILITIES
To the Knowledge of the PRINCIPAL SHAREHOLDERS, PRB has no
liabilities or obligations of any nature (whether known or unknown
and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the
Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective
dates thereof.
3.11 TAXES
(a) PRB has filed or caused to be filed (on a timely basis
since January 1, 1991) all Tax Returns that are or were
required to be filed by or with respect to any of them, either
separately or as a member of a group of corporations,
pursuant to applicable Legal Requirements. The PRINCIPAL
SHAREHOLDERS have delivered to CRI copies of all such Tax
Returns filed for the tax year ending December 31, 1996. PRB
has paid, or made provision for the payment of, all Taxes that
have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by PRINCIPAL
SHAREHOLDERS or PRB, except such Taxes, if any, as to which
adequate reserves (determined in accordance with GAAP) have
been provided in the Balance Sheet and the Interim Balance
Sheet.
(b) The United States federal and state income Tax Returns of
PRB subject to such Taxes have been audited by the IRS, or
relevant state tax authorities, or are closed by the
applicable statute of limitations for all taxable years
through 1989. All deficiencies proposed as a result of such
audits, have been paid, reserved against, settled, or, are
being contested in good faith by appropriate proceedings. PRB
has not given or been requested to give waivers or extensions
(or is or would be subject to a waiver or extension given by
any other Person) of any statute of limitations relating to
the payment of Taxes or other deficiencies of PRB or for which
PRB may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of PRB are adequate (determined in
accordance with GAAP) and are at least equal to PRB's
liability for Taxes. There exists no proposed tax assessment
against PRB except as disclosed in the Balance Sheet. No
consent to the application of Section 341(f)(2) of the IRC has
been filed with respect to any property or assets held,
acquired, or to be acquired by PRB. All Taxes that PRB is or
was required by Legal Requirements to withhold or collect have
been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Body or other
Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) PRB are true, correct, and complete in all
material respects. There is no tax sharing agreement that will
require any payment by PRB after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties,
prospects, assets, or condition of PRB, and to the Knowledge of the
PRINCIPAL SHAREHOLDERS, no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have
the meanings set forth below.
"Company Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by PRB or an ERISA
Affiliate of PRB.
"Company Plan" means all Plans of which PRB or an ERISA
Affiliate of PRB is or was a Plan Sponsor, or to which
PRB or an ERISA Affiliate of PRB otherwise contributes or
has contributed, or in which PRB or an ERISA Affiliate of
PRB otherwise participates or has participated. All
references to Plans are to Company Plans unless the
context requires otherwise.
"Company VEBA" means a VEBA whose members include
employees of PRB or any ERISA Affiliate of PRB.
"ERISA Affiliate" means, with respect to PRB, any other
person that, together with PRB, would be treated as a
single employer under IRC ? 414.
"Multi-Employer Plan" has the meaning given in ERISA ?
3(37)(A).
"Other Benefit Obligations" means all obligations,
arrangements, or customary practices, whether or not
legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present
or former directors, employees, or agents, other than
obligations, arrangements, and practices that are Plans.
Other Benefit Obligations include consulting agreements
under which the compensation paid does not depend upon
the amount of service rendered, sabbatical policies,
severance payment policies, and fringe benefits within
the meaning of IRC ? 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Pension Plan" has the meaning given in ERISA Section
3(2)(A).
"Plan" has the meaning given in ERISA Section 3(3).
"Plan Sponsor" has the meaning given in ERISA Section
3(16)(B).
"Qualified Plan" means any Plan that meets or purports to
meet the requirements of IRC Section 401(a).
"Title IV Plans" means all Pension Plans that are subject
to Title IV of ERISA, 29 U.S.C. Section 1301 et seq.,
other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary
association under IRC Section 501(c)(9).
"Welfare Plan" has the meaning given in ERISA Section
3(1).
(b) (i) The PRINCIPAL SHAREHOLDERS and PRB have provided or
made available to CRI a complete and accurate list of all
Company Plans, Company Other Benefit Obligations, and
Company VEBAs, and identifies as such all Company Plans
that are (A) defined benefit Pension Plans, (B) Qualified
Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.
(ii) The PRINCIPAL SHAREHOLDERS and PRB have provided
or made available to CRI a complete and accurate list of
(A) all ERISA Affiliates of PRB, and (B) all Plans of
which any such ERISA Affiliate is or was a Plan Sponsor,
in which any such ERISA Affiliate participates or has
participated, or to which any such ERISA Affiliate
contributes or has contributed.
(iii) The PRINCIPAL SHAREHOLDERS and PRB have
provided or made available to CRI, for each Multi-
Employer Plan, as of its last valuation date, the amount
of potential withdrawal liability of PRB and PRB' other
ERISA Affiliates, calculated according to information
made available pursuant to ERISA ? 4221(e).
(c) The PRINCIPAL SHAREHOLDERS and PRB have delivered or
made available to CRI:
(i) all documents that set forth the terms of each
Company Plan, Company Other Benefit Obligation, or
Company VEBA and of any related trust, including (A) all
plan descriptions and summary plan descriptions of
Company Plans for which the PRINCIPAL SHAREHOLDERS or
PRB is required to prepare, file, and distribute plan
descriptions and summary plan descriptions, and (B) all
summaries and descriptions furnished to participants and
beneficiaries regarding Company Plans, Company Other
Benefit Obligations, and Company VEBAs for which a plan
description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all collective bargaining agreements pursuant
to which contributions have been made or obligations
incurred (including both pension and welfare benefits)
by PRB and the ERISA Affiliates of PRB, and all
collective bargaining agreements pursuant to which
contributions are being made or obligations are owed by
such entities;
(iv) a written description of any Company Plan or Company
Other Benefit Obligation that is not otherwise in
writing;
(v) all registration statements filed with respect to
any Company Plan;
(vi) all insurance policies purchased by or to provide
benefits under any Company Plan;
(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other
independent contractors that relate to any Company Plan,
Company Other Benefit Obligation, or Company VEBA;
(viii) all reports submitted within the four years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers,
consultants, or other independent contractors with
respect to any Company Plan, Company Other Benefit
Obligation, or Company VEBA;
(ix) all notifications to employees of their rights under
ERISA Section 601 et seq. and IRC Section 4980B;
(x) the Form 5500 filed in each of the most recent three
plan years, including all schedules thereto and the
opinions of independent accountants;
(xi) all notices that were given by PRB or any ERISA
Affiliate of PRB or any Company Plan to the IRS, the
PBGC, or any participant or beneficiary, pursuant to
statute, within the four years preceding the date of this
Agreement, including notices that are expressly mentioned
elsewhere in this Section 3.13;
(xii) all notices that were given by the IRS, the
PBGC, or the Department of Labor to PRB, any ERISA
Affiliate of PRB, or any Company Plan within the four
years preceding the date of this Agreement;
(xiii) with respect to Qualified Plans and VEBAs, the
most recent determination letter for each Plan of PRB
that is a Qualified Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1
filed for each of the three most recent plan years.
(d) The PRINCIPAL SHAREHOLDERS and PRB expressly represent
and warrant:
(i) PRB has performed all of its respective obligations
under all Company Plans, Company Other Benefit
Obligations, and Company VEBAs. PRB has made appropriate
entries in its financial records and statements for all
obligations and liabilities under such Plans, VEBAs, and
Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has been made
by PRB to any Person with regard to any Plan or Other
Benefit Obligation that was not in accordance with the
Plan or Other Benefit Obligation and that could have an
adverse economic consequence to PRB or to CRI.
(iii) PRB, with respect to all Company Plans, Company
Other Benefits Obligations, and Company VEBAs, are, and
each Company Plan, Company Other Benefit Obligation, and
Company VEBA is, in full compliance with ERISA, the IRC,
and other applicable Laws including the provisions of
such Laws expressly mentioned in this Section 3.13, and
with any applicable collective bargaining agreement.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) The PRINCIPAL SHAREHOLDERS and PRB expressly represent
and warrant:
(i) Except as disclosed in the PRB Disclosure Letter,
PRB is, and at all times since January 1, 1991 has been,
in compliance in all material respects with each Legal
Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or
use of any of its assets;
(ii) Except as disclosed in the PRB Disclosure Letter ,
no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute
or result in a violation by PRB of, or a failure on the
part of PRB to comply with, any Legal Requirement
material to its operations, or (B) may give rise to any
obligation on the part of PRB to undertake, or to bear
all or any portion of the cost of, any remedial action of
any nature which is material to PRB's operations; and
(iii) Except as disclosed in the PRB Disclosure
Letter, the PRINCIPAL SHAREHOLDERS and PRB have not
received, at any time since January 1, 1991, any written
notice from any Governmental Body or any other Person
regarding (A) any actual or alleged violation of, or
failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the
part of PRB to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature arising
out of any Legal Requirement.
(b) At or prior to Closing, PRB and/or the PRINCIPAL
SHAREHOLDERS will provide to CRI an accurate list of each
material Governmental Authorization that is held by PRB. Each
Governmental Authorization listed in the PRB Disclosure Letter
is valid and in full force and effect. Except as disclosed in
writing to CRI to the Knowledge of the PRINCIPAL SHAREHOLDERS:
(i) PRB is, and at all times since January 1, 1991 has
been, in full compliance with all of the terms and
requirements of each material Governmental Authorization
identified in the PRB Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly
or indirectly in a violation of or a failure to comply with any
term or requirement of any material Governmental Authorization, or
(B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification
to, any material Governmental Authorization;
(iii) PRB has not received, at any time since January
1, 1991, any written notice from any Governmental Body or
any other Person regarding (A) any actual or alleged
failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual or
proposed, revocation, withdrawal, suspension,
cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations have been duly
filed on a timely basis with the appropriate Governmental
Bodies, and all other filings required to have been made
with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate
Governmental Bodies.
The PRINCIPAL SHAREHOLDERS and/or PRB have received all of the
Governmental Authorizations necessary to permit PRB to lawfully
conduct and operate its business in the manner it is currently
conducted and operate such business and to permit PRB to own and
use its assets in the manner in which it currently owns and uses
such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) The PRINCIPAL SHAREHOLDERS and PRB represent and warrant
that, to their Knowledge except for the DCAA Compensation
Audit or otherwise disclosed in the PRB Disclosure Letter or
in this Agreement, there is no pending Proceeding:
(i) that has been commenced by or against PRB or that
otherwise materially and adversely may affect the
business of, or any of the assets owned or used by, PRB;
or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
To the Knowledge of PRINCIPAL SHAREHOLDERS and PRB, no such
Proceeding has been Threatened.
(b) Except as set forth in the PRB Disclosure Letter or any
Exhibit hereto:
(i) there is no Order to which PRB, or any of the
material assets owned or used by PRB, is subject;
(ii) no PRINCIPAL SHAREHOLDER is subject to any Order
that relates to the business of, or any of the material
assets owned or used by, PRB; and
(iii) to the Knowledge of the PRINCIPAL SHAREHOLDERS
and PRB, no officer, director, agent, or employee of PRB
is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to
the business of PRB.
(c) Except as set forth in the PRB Disclosure Letter or
herein:
(i) PRB is, and at all times since January 1, 1991 has
been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the
material assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that
may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with
any term or requirement of any Order to which PRB, or any
of the material assets owned or used by PRB, is subject;
and
(iii) PRB has not received, at any time since January
1, 1991, any material notice from any Governmental Body
or any other Person regarding any actual or alleged
violation of, or failure to comply with, any term or
requirement of any Order to which PRB, or any of the
material assets owned or used by PRB, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Since the date of the Balance Sheet, except as disclosed in the PRB
Disclosure Letter or otherwise disclosed herein, or contemplated
by this Agreement, PRB has conducted its businesses only in the
Ordinary Course of Business and there has not been any:
(a) change in PRB's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital
stock of PRB; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by PRB of any
shares of any such capital stock; or declaration or payment of
any dividend or other distribution or payment in respect of
shares of capital stock;
(b) amendment to the Organizational Documents of PRB;
(c) payment or increase by PRB of any bonuses, salaries,
or other compensation to any stockholder, director,
officer, or (except in the Ordinary Course of
Business) employee or entry into any employment,
severance, or similar Contract with any director,
officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee
benefit plan for or with any employees of PRB;
(e) damage to or destruction or loss of any asset or property
of PRB, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business,
financial condition, or prospects of PRB, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any material license, distributorship,
dealer, sales representative, joint venture, credit, or
similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to PRB of at
least $25,000;
(g) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset
or property of PRB or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of
PRB, including the sale, lease, or other disposition of any of
the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to PRB in excess of $25,000;
(i) material change in the accounting methods used by PRB; or
(j) agreement, whether oral or written, by PRB to do any of
the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) The PRINCIPAL SHAREHOLDERS and PRB have provided to CRI
or will provide prior to Closing, a complete and accurate
list, and if requested by CRI, the PRINCIPAL SHAREHOLDERS
and PRB have delivered, or will deliver prior to Closing, to
CRI true and complete copies, of:
(i) each Applicable Contract that involves performance
of services or delivery of goods or materials by PRB of
an amount or value in excess of $25,000;
(ii) each Applicable Contract that involves performance
of services or delivery of goods or materials to PRB of
an amount or value in excess of $25,000;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures or receipts of PRB in excess of $25,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing
of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal
property leases and installment and conditional sales
agreements having a value per item or aggregate payments
of less than $10,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights,
or other intellectual property, including agreements with
current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any
of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing
of profits, losses, costs, or liabilities by PRB with any
other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity
of PRB or any Affiliate of PRB or limit the freedom of
PRB or any Affiliate of PRB to engage in any line of
business or to compete with any Person;
(ix) each Applicable Contract providing for payments to
or by any Person based on sales, purchases, or profits,
other than direct payments for goods;
(x) each power of attorney that is currently effective
and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides
for an express undertaking by PRB to be responsible for
consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $25,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual
performance extended by PRB other than in the Ordinary
Course of Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the
foregoing.
(b) Except as set forth herein including any Exhibit or
Schedule hereto:
(i) no PRINCIPAL SHAREHOLDER (and no Related Person of
any PRINCIPAL SHAREHOLDER) has or may acquire any rights
under, and no PRINCIPAL SHAREHOLDER has or may become
subject to any obligation or liability under any Contract
that relates to the business of, or any of the assets
owned or used by, PRB; and
(ii) to the Knowledge of PRINCIPAL SHAREHOLDERS and PRB,
no officer, director, agent, employee, consultant,
or contractor of PRB is bound by any Contract that
purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor
to (A) engage in or continue any conduct, activity,
or practice relating to the business of PRB, or (B)
assign to PRB or to any other Person any rights to
any invention, improvement, or discovery.
(c) Except as set forth in the PRB Disclosure Letter or
herein, to the Knowledge of the PRINCIPAL SHAREHOLDERS
and PRB:
(i) PRB is, and at all times since January 1, 1995 has
been, in full compliance with all applicable terms and
requirements of each Contract under which PRB has or had
any obligation or liability or by which PRB or any of the
assets owned or used by PRB is or was bound, specifically
including, but not limited to, "Year 2000" compliance
within the meaning of the United States of America
Federal Acquisition Regulation (for the period after the
adoption of such regulation), and any like and applicable
legal requirements;
(ii) each other Person that has or had any obligation or
liability under any Contract under which PRB has or had
any rights is, and at all times since January 1, 1991 has
been, in full compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or
breach of, or give PRB or other Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) PRB has not given to or received from any other
Person, at any time since January 1, 1991, any written
notice regarding any actual or alleged, material
violation or breach of, or default under, any Contract,
excluding written notices of matters which were fully
resolved without adverse consequences to PRB.
(d) Except for the DCAA Compensation Adjustment, there are no
renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to
PRB under current or completed Contracts with any Person and,
to the Knowledge of PRINCIPAL SHAREHOLDERS and PRB, no such
Person has made written demand for such renegotiation.
(e) The Contracts relating to the sale, design, manufacture,
or provision of products or services by PRB have been entered
into in the Ordinary Course of Business and have been entered
into without the commission of any act alone or in concert
with any other Person, or any consideration having been paid
or promised, that is or would be in violation of any Legal
Requirement.
(f) The PRINCIPAL SHAREHOLDERS and PRB have , or will prior
to Closing, provide to CRI, in writing, the current Reasonable
Best Estimate of PRB, as of December 31, 1997, of the "cost to
complete" for each Applicable Contract pursuant to which PRB
is required to perform services or deliver products. None of
such Contracts has accrued or, in the reasonable judgment of
the PRINCIPAL SHAREHOLDERS, is expected by PRB to result in
any losses. At the Closing, PRB and the PRINCIPAL
SHAREHOLDERS shall deliver to CRI Certifications signed by
each of the PRINCIPAL SHAREHOLDERS of the Reasonable Best
Estimate of the "cost to complete" for each of the Applicable
Contracts.
(g) There are no Contracts between PRB and a Governmental
Body which contain material terms which cannot be disclosed to
CRI prior to the Closing because of security restrictions
imposed by the Governmental Body.
A list of all Applicable Contracts to which PRB became a party
between the date of this Agreement and the Closing Date shall be
provided to CRI on or before the Closing.
3.18 INSURANCE
(a) The PRINCIPAL SHAREHOLDERS and PRB have delivered or
made available to CRI:
(i) true and complete copies of all policies of
insurance to which PRB is a party or under which PRB, is
or has been covered at any time within the three (3)
years preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of PRB's financial
statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) The PRINCIPAL SHAREHOLDERS and PRB have disclosed to
CRI, or provided copies of applicable documents related to:
(i) any self-insurance arrangement relating to benefits
for PRB employees , or for the employees of a Subsidiary,
including any reserves established thereunder;
(ii) any contract, other than a policy of insurance, for
the transfer or sharing of any risk by PRB; and
(iii) all obligations of PRB to third parties with
respect to insurance (including such obligations under
leases and service agreements) and identifies the policy
under which such coverage is provided.
(iv) a summary of the loss experience under each policy;
(v) a statement describing each outstanding claim under
an insurance policy of which the PRINCIPAL SHAREHOLDERS
have Knowledge for an amount in excess of $10,000, which
sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(vi) all policies to which PRB is a party or that provide
coverage to either PRB, or any director or officer of
PRB in their capacity as a director or officer, to the
Knowledge of the PRINCIPAL SHAREHOLDERS:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially
sound and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of PRB
for all risks normally insured against by a Person
carrying on the same business or businesses as PRB;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which PRB is a party
or by which any of them is bound;
(E) will continue in full force and effect in
accordance with their terms following the
consummation of the Contemplated Transactions
provided that all premiums coming due after the
Closing are timely paid; and
(vii) The PRINCIPAL SHAREHOLDERS and/or PRB have not
received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or
(B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations
thereunder.
(viii) PRB has paid all premiums due, and has
otherwise performed all of their respective obligations,
under each policy to which PRB is a party or that
provides coverage to PRB.
(ix) PRB have given notice to the insurer of all material
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth herein including any Schedule or Exhibit
hereto, to the Knowledge of PRB and the PRINCIPAL SHAREHOLDERS:
(a) PRB is, and at all times has been, in full compliance
with, and has not been and is not in violation of, any
Environmental Law. Neither PRB nor or any other Person for
whose conduct it is or may be held to be responsible received,
any actual or Threatened order, notice, or other communication
from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or
of any actual or Threatened obligation to undertake or bear
the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which PRB has
had an interest, or with respect to any property or Facility
at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or
processed by PRB, or any other Person for whose conduct it is
or may be held responsible, or from which Hazardous Materials
have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of PRINCIPAL
SHAREHOLDERS or PRB, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental,
Health, and 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 (whether real,
personal, or mixed) in which PRB has or had an interest.
(c) Neither PRB nor any other Person for whose conduct it is
or may be held responsible, received, any citation, directive,
inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or
failure to comply with any 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 properties
or assets (whether real, personal, or mixed) in which PRB had
an interest, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by PRB, or any other
Person for whose conduct they are or may be held responsible,
have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(d) Neither PRB, nor any other Person for whose conduct it is
or may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Facilities or, to the
Knowledge of PRB, with respect to any other properties and
assets (whether real, personal, or mixed) in which the PRB (or
any predecessor), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any
such other property or assets.
(e) Except for small quantities maintained in commercial
products, there are no Hazardous Materials present on or in
the Environment at the Facilities or at any geologically or
hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or
any other part of the Facilities or such adjoining property,
or incorporated into any structure therein or thereon. Neither
PRB, nor any other Person for whose conduct it is or may be
held responsible, has permitted or conducted, or is aware of,
any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real,
personal, or mixed) in which PRB has or had an interest except
in full compliance with all applicable Environmental Laws.
(f) There has been no Release of any Hazardous Materials at
or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by
the Facilities, or from or by any other properties and assets
(whether real, personal, or mixed) in which PRINCIPAL
SHAREHOLDERS or PRB has or had an interest, or to the
Knowledge of PRINCIPAL SHAREHOLDERS and/or PRB any
geologically or hydrologically adjoining property, whether by
PRINCIPAL SHAREHOLDERS, PRB, or any other Person.
(g) PRINCIPAL SHAREHOLDERS or PRB has delivered to CRI true
and complete copies and results of any reports, studies,
analyses, tests, or monitoring possessed or initiated by
PRINCIPAL SHAREHOLDERS or PRB pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by PRINCIPAL
SHAREHOLDERS, PRB, or any other Person for whose conduct they
are or may be held responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) The PRINCIPAL SHAREHOLDERS and PRB have , or will prior
to Closing, make available to CRI, a copy of a complete and
accurate list of the following information for each employee
of PRB, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid
or payable and any change in compensation since January 1,
1996; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under PRB's pension,
retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee
stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee
Welfare Benefit Plan, or any other employee benefit plan.
(b) To the Knowledge of the PRINCIPAL SHAREHOLDERS, no
employee of PRB is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such
employee and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect
(i) the performance of his duties as an employee of PRB, or
(ii) the ability of PRB to conduct its business, including any
Proprietary Rights Agreement with PRINCIPAL SHAREHOLDERS or
PRB by any such employee. To PRINCIPAL SHAREHOLDERS'
Knowledge except as has been, or will be prior to Closing,
disclosed to CRI, no officer, or other key employee of PRB
intends to terminate his employment with PRB.
(c) PRB has, or will prior to Closing, provide a complete and
accurate list of the following information for each retired
employee or director of PRB, or their dependents, receiving
benefits or scheduled to receive benefits in the future: name,
pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other
benefits.
3.21 LABOR RELATIONS; COMPLIANCE
PRB has not been and is not currently a party to any collective
bargaining or other labor Contract. There has not been, and to the
Knowledge of the PRINCIPAL SHAREHOLDERS there currently is not
presently pending or existing, and there is not Threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance
process, (b) any Proceeding against or affecting PRB relating to
the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint
filed by an employee or union with the National Labor Relations
Board, the Equal Employment Opportunity Commission, or any
comparable Governmental Body, organizational activity, or other
labor or employment dispute against or affecting any of PRB or
their premises, or (c) any application for certification of a
collective bargaining agent. To PRB and the PRINCIPAL
SHAREHOLDERS' Knowledge, no event has occurred or circumstance
exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by PRB, and no
such action is contemplated by PRB. PRB has complied in all
respects with all material Legal Requirements 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. PRB is not liable for the payment of
any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
(i) the name "PRB Associates, Inc.", all fictional
business names, trading names, registered and
unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively,
"Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in
Mask Works"); and
(v) all know-how, trade secrets, confidential
information, customer lists, software, technical
information, data, process technology, plans, drawings,
and blue prints (collectively, "Trade Secrets"); owned,
used, or licensed by PRB as licensee or licensor.
(b) Agreements-PRB has, or will prior to Closing, provide a
complete and accurate list of any material Intellectual
Property Assets owned or used by PRB in its business, except
for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software
programs under which PRB is the licensee. There are no
outstanding and, to PRB and the PRINCIPAL SHAREHOLDERS'
Knowledge, no Threatened disputes or disagreements with
respect to any such agreement.
(c) Know-How Necessary for the Business
(i) To the Knowledge of the PRINCIPAL SHAREHOLDERS, the
Intellectual Property Assets , which have been or will be
disclosed to CRI prior to Closing, are all those
necessary for the operation of PRB's businesses as they
are currently conducted. PRB is the owner or lawful user
of each of the Intellectual Property Assets, subject to
any limitations set forth in the PRB Disclosure Letter.
(ii) All key former and current employees of PRB have
executed written Contracts with PRB that assign to PRB
all rights to any inventions, improvements, discoveries,
or information relating to the business of PRB to the
Knowledge of the PRINCIPAL SHAREHOLDERS. No key employee
of PRB has entered into any Contract that restricts or
limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his
work to anyone other than one or more of PRB.
(d) Patents
(i) The PRINCIPAL SHAREHOLDERS and PRB have provided,
or will provide prior to Closing, a complete and accurate
list and summary description of all patents issued to
PBB. PRB is the owner of all right, title, and interest
in and to each of the patents, free and clear of all
liens, security interests, charges, encumbrances,
entities, and other adverse claims.
(ii) All of the Patents issued to, PRB or any Subsidiary,
are currently in compliance with formal legal
requirements (including payment of filing, examination,
and maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No Patent issued to PRB has been or is now
involved in any interference, reissue, reexamination, or
opposition proceeding. To PRB and the PRINCIPAL
SHAREHOLDERS' Knowledge, there is no potentially
interfering patent or patent application of any third
party.
(iv) To the PRINCIPAL SHAREHOLDER's Knowledge, no Patent
issued to PRB is infringed or, to PRB and the PRINCIPAL
SHAREHOLDERS' Knowledge, has been challenged or
threatened in any way. To the PRINCIPAL SHAREHOLDERS
Knowledge, none of the products manufactured and sold,
nor any process or know-how used, by PRB infringes or is
alleged to infringe any patent or other proprietary right
of any other Person.
(v) All products made, used, or sold under the Patents
issued to PRB have been marked with the proper patent
notice.
(e) Trademarks
(i) The trade name "PRB Associates" is the only Mark
used by PRB.
(ii) No Marks have been registered by PRB with the
United States Patent and Trademark Office.
(f) Copyrights
PRB has all copyrights granted by law with respect
original works created by PRB.
(g) Trade Secrets
(i) PRB has taken commercially reasonable precautions to
protect the secrecy, confidentiality, and value of its
material Trade Secrets.
(iii) PRB has good title and right to use the Trade
Secrets. The material Trade Secrets owned by PRB are not
part of the public knowledge or literature. To the
Knowledge of the PRINCIPAL SHAREHOLDERS, no material
Trade Secret owned by PRB is subject to any adverse claim
or has been challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
Neither PRB or any director, officer, agent, or employee of PRB, or
to PRB and the PRINCIPAL SHAREHOLDERS' Knowledge, any other Person
associated with or acting for or on behalf of PRB, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property,
or services in violation of any Legal Requirement, (b) established
or maintained any fund or asset that has not been recorded in the
books and records of PRB.
3.24 DISCLOSURE
(a) No representation or warranty of PRB and the PRINCIPAL
SHAREHOLDERS in this Agreement omits to state a material fact
necessary to make the statements herein or therein, in light
of the circumstances in which they were made, not materially
misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of
the circumstances in which they were made, not materially
misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except for the lease of PRB's headquarters and related premises
(the "PRB Lease"), no PRINCIPAL SHAREHOLDER or any Related Person
of a PRINCIPAL SHAREHOLDER or of PRB has, or has had, any interest
in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to PRB's businesses.
Except for the PRB Lease, neither PRB nor any Related Person of a
PRINCIPAL SHAREHOLDER or of PRB is, or has owned (of record or as a
beneficial owner) an equity interest or any other financial or
profit interest in, a Person that has (i) had business dealings or
a material financial interest in any transaction with PRB, or (ii)
engaged in competition with PRB with respect to any line of the
products or services of PRB (a "Competing Business") in any market
presently served by PRB except for less than five percent (5%) of
the outstanding capital stock of any competing business that is
publicly traded on any recognized exchange or in the over-the-
counter market.
3.26 BROKERS OR FINDERS
The PRINCIPAL SHAREHOLDERS, PRB and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CRI
CRI represents and warrants to the PRINCIPAL SHAREHOLDERS as
follows:
4.1 ORGANIZATION AND GOOD STANDING
CRI is a corporation duly organized, validly existing, and in good
standing under the laws of the State of New York.
4.2 AUTHORITY; NO CONFLICT
This Agreement has been approved by CRI's Board of Directors and
constitutes the legal, valid, and binding obligation of CRI,
enforceable against CRI in accordance with its terms. Upon the
execution and delivery by CRI of the Promissory Notes and corporate
certifications (collectively, the "CRI's Closing Documents"), CRI's
Closing Documents will constitute the legal, valid, and binding
obligations of CRI, enforceable against CRI in accordance with
their respective terms. Except as provided for in Section 4.3
below, CRI has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the CRI's
Closing Documents and to perform its obligations under this
Agreement and the CRI's Closing Documents.
4.3 TRANSACTION FINANCING
CRI will use Commercially Reasonable Efforts to obtain a
satisfactory financing commitment with an institutional lender
within thirty (30) days after the signing of this Agreement. The
obligation of CRI to complete the acquisition is subject to its
obtaining asset-based financing in the amount of at least twenty
million and 00/100 dollars ($20,000,000) bearing an interest rate
of not greater than eight and one-half percent (8.5%) fixed, or a
variable rate tied to prime plus one-half percent (prime +.5%), and
a repayment term of not less than seven (7) years. At the present
time, CRI is in receipt of a written proposal from its existing
institutional lender which nominally meets the above-mentioned
criteria, however, this proposal does not constitute a financing
commitment by this institutional lender. If CRI has not been able
to obtain such financing commitment within thirty (30) days and has
not waived such condition, the PRINCIPAL SHAREHOLDERS may terminate
this Agreement on written notice.
4.4 INVESTMENT INTENT
CRI is acquiring the Shares for its own account and not with a view
to their distribution within the meaning of Section 2(11) of the
Securities Act.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against CRI
and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To CRI's Knowledge, no such Proceeding
has been Threatened.
4.6 BROKERS OR FINDERS
CRI has utilized the services of the investment banking firm of
Houlihan Lokey Howard & Zukin in relation to the transaction
contemplated by this Agreement. CRI, not PRB or the PRINCIPAL
SHAREHOLDERS, shall be solely responsible for any brokerage or
finders' fees or agents' commissions charged by Houlihan Lokey
Howard & Zukin relative hereto.
4.7 HART-SCOTT REPRESENTATIONS
Immediately prior to the Closing Date, the "total assets" and the
"annual net sales" of CRI (as those terms are used in the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended) will
not equal or exceed one hundred million dollars ($100,000,000).
ARTICLE V
COVENANTS OF THE PRINCIPAL SHAREHOLDERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, the
PRINCIPAL SHAREHOLDERS will, and will cause PRB and its
Representatives to, (a) afford CRI and its Representatives and
prospective lenders and their Representatives (collectively, "CRI's
Advisors") full and free access to PRB's personnel, properties
(including subsurface testing), contracts, books and records, and
other documents and data, (b) furnish CRI and CRI's Advisors with
copies of all such contracts, books and records, and other existing
documents and data as CRI may reasonably request, and (c) furnish
CRI and CRI's Advisors with such additional financial, operating,
and other data and information as CRI may reasonably request. The
access shall be provided during reasonable periods subject to
reasonable advance notice and subject to any limitations as access
imposed by governmental security regulations. All CRI advisors
shall agree to be subject to reasonable confidentiality agreements.
5.2 OPERATION OF THE BUSINESSES OF PRB
Between the date of this Agreement and the Closing Date, the
PRINCIPAL SHAREHOLDERS and PRB will, and will cause PRB to:
(a) conduct the business of PRB only in the Ordinary
Course of Business subject to any actions outside of the
Ordinary Course of Business which are approved by CRI, such
approval not to be unreasonably withheld or delayed;
(b) use their Commercially Reasonable Efforts to
preserve intact the current business organization of PRB,
keep available the services of the current officers,
employees, and agents of PRB, and maintain the relations and
good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships
with PRB;
(c) confer with CRI concerning operational matters of a
material nature; and
(d) otherwise report periodically to CRI concerning the status of
the business, operations, and finances of PRB.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, PRB and the
PRINCIPAL SHAREHOLDERS will not, and will cause PRB not to,
without the prior consent of CRI, take any affirmative action, or
fail to take any reasonable action within their or its control, as
a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, the
PRINCIPAL SHAREHOLDERS will, and will cause PRB to, obtain
approval of PRB's Board of Directors and stockholders, to the
extent these may be required, and to make all filings required by
Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and
the Closing Date, PRB and the PRINCIPAL SHAREHOLDERS will, and
will cause PRB to, (a) cooperate with CRI with respect to all
filings that CRI elects to make or is required by Legal
Requirements to make in connection with the Contemplated
Transactions, and (b) cooperate with CRI in obtaining all consents
required by this Agreement.
5.5 NOTIFICATION
(a) Between the date of this Agreement and the Closing
Date, PRB and each PRINCIPAL SHAREHOLDER will
promptly notify CRI in writing if such PRINCIPAL
SHAREHOLDER or PRB becomes aware of any fact or
condition that causes or constitutes a Breach of any
of PRB and/or the PRINCIPAL SHAREHOLDERS'
representations and warranties as of the date of
this Agreement, or if PRB has Knowledge of the
occurrence after the date of this Agreement of any
fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute
a Breach of any such representation or warranty had
such representation or warranty been made as of the
time of occurrence or discovery of such fact or
condition. During the same period, PRB and/or each
PRINCIPAL SHAREHOLDER will promptly notify CRI of
the occurrence of any Breach of any covenant of PRB
and/or the PRINCIPAL SHAREHOLDERS in this Section 5
or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7
impossible or unlikely.
(b) CRI shall promptly notify PRB and the PRINCIPAL SHAREHOLDERS
if it becomes aware form any source other than disclosure by PRB or
the PRINCIPAL SHAREHOLDERS or a Breach by PRB or any of the
PRINCIPAL SHAREHOLDERS of any of their representations and
warranties. If CRI shall Close with Knowledge of such a Breach, it
shall be deemed to have waived the Breach.
(c) Between the date of this Agreement and the Closing Date, CRI
will promptly notify PRB and each PRINCIPAL SHAREHOLDER in writing
if any executive officers of CRI become aware of any fact or
condition that causes or constitutes a Breach of any of CRI's
representations and warranties as of the date of this Agreement, or
if any executive officer of CRI has Knowledge of the occurrence
after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence
or discovery of such fact or condition. During the same period,
CRI will promptly notify PRB and each PRINCIPAL SHAREHOLDER of the
occurrence of any Breach of and covenant of Section 4 of this
Agreement or of the occurrence of any event that may make the
satisfaction of the conditions in Section 6 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, the PRINCIPAL
SHAREHOLDERS will cause all indebtedness owed to PRB by either any
PRINCIPAL SHAREHOLDER or any Related Person of any PRINCIPAL
SHAREHOLDER to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant
to Section 9, PRB and/or the PRINCIPAL SHAREHOLDERS will not, and
will cause PRB and each of their Representatives not to, directly
or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public
information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than CRI) relating to any
transaction involving the sale of the business or assets (other
than in the Ordinary Course of Business) of PRB, or any of the
capital stock of PRB, or any merger, consolidation, business
combination, or similar transaction involving PRB.
5.8 COMMERCIALLY REASONABLE EFFORTS
Between the date of this Agreement and the Closing Date, PRB and
the PRINCIPAL SHAREHOLDERS will use Commercially Reasonable
Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
ARTICLE VI
COVENANTS OF CRI PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, CRI
will, and will cause each of its Related Persons to, make all
filings required by Legal Requirements to be made by them to
consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, CRI will, and will cause each
Related Person to, cooperate with the PRINCIPAL SHAREHOLDERS with
respect to all filings that the PRINCIPAL SHAREHOLDERS are
required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with PRINCIPAL
SHAREHOLDERS in obtaining all necessary consents provided that this
Agreement will not require CRI to dispose of or make any change in
any portion of its business or to incur any other burden to obtain
a Governmental Authorization. Notwithstanding the foregoing terms
of this Section 6.1, neither PRB nor the PRINCIPAL SHAREHOLDERs
shall have any obligation to obtain a novation of any government
contract.
6.2 COMMERCIALLY REASONABLE EFFORTS
Except as set forth in the proviso to Section 6.1, between the date
of this Agreement and the Closing Date, CRI will use Commercially
Reasonable Efforts to cause the conditions in Sections 7 and 8 to
be satisfied.
ARTICLE VII
CONDITIONS PRECEDENT TO CRI'S OBLIGATION TO CLOSE
CRI's obligation to purchase the Shares and to take the other
actions required to be taken by CRI at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by CRI, in whole
or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of PRB's and the PRINCIPAL SHAREHOLDERS'
representations and warranties in this Agreement (considered
collectively), and each of these representations and
warranties (considered individually), must have been
accurate in all material respects as of the date of this
Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date. An
inaccuracy as to a representation or warranty (considered
either individually or collectively) will be deemed to be
material if such inaccuracy will, or could reasonably be
expected to, have an adverse effect on the business,
operations, or financial condition of PRB in amount of
$10,000 or more.
(b) Each of PRB's and the PRINCIPAL SHAREHOLDERS'
representations and warranties in Sections 3.3, 3.4, 3.12,
and 3.24 must have been accurate in all respects as of the
date of this Agreement, and must be accurate in all respects
as of the Closing Date as if made on the Closing Date.
7.2 PRB AND THE PRINCIPAL SHAREHOLDERS' PERFORMANCE
(a) All of the covenants and obligations that PRB and
the PRINCIPAL SHAREHOLDERS are required to perform or to
comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these
covenants and obligations (considered individually), must
have been duly performed and complied with in all material
respects.
(b) Each document required to be delivered pursuant to
Section 2.4 must have been delivered, and each of the other
covenants and obligations in Sections 5.4 and 5.8 must have
been performed and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified in Section 4.2, must have been
obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to CRI:
(a) an opinion of Counsel to the PRINCIPAL SHAREHOLDERS
and PRB, dated the Closing Date, which is reasonably
acceptable to CRI and its legal counsel;
(b) such other documents as CRI may reasonably request
for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 8.4(a), (ii) evidencing the
accuracy of any of PRB and/or the PRINCIPAL SHAREHOLDERS'
representations and warranties, (iii) evidencing the
performance by either PRB, or the compliance by any
PRINCIPAL SHAREHOLDER with, any covenant or obligation
required to be performed or complied with by PRB and/or such
PRINCIPAL SHAREHOLDER, (iv) evidencing the satisfaction of
any condition referred to in this Section 7, or
(v) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced or threatened against CRI, or against any Person
affiliated with CRI, any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
Except as disclosed in the PRB Disclosure Letter, there must not
have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in,
any of PRB, or (b) is entitled to all or any portion of the
Purchase Price payable for the Shares.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or
conflict with, or result in a material violation of, or cause CRI
or any Person affiliated with CRI to suffer any material adverse
consequence under, (a) any applicable Legal Requirement or Order,
or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental
Body.
7.8 FINANCING
CRI's obligation to complete the Acquisition would be subject to
its obtaining asset-based financing in the amount of at least $20
million bearing an interest rate of not greater than 8.5% fixed, or
a variable rate tied to prime at prime plus 1/2%, and a repayment
term of not less than 7 years. Currently, CRI is in receipt of a
written proposal from its existing institutional lender which
nominally meets the criteria set forth in this Section 7.8,
however, this proposal does not constitute a financing commitment.
CRI will use Commercially Reasonable Efforts to obtain a commitment
of satisfactory financing within thirty (30) days of the date of
signing of this Agreement. If such commitment in a form reasonably
satisfactory to CRI is not obtained or waived by CRI within such
thirty (30) day period, the PRINCIPAL SHAREHOLDERS may terminate
this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO PRINCIPAL SHAREHOLDERS'
OBLIGATION TO CLOSE
The PRINCIPAL SHAREHOLDERS' obligation to sell, or to cause the
sale of, the Shares and to take the other actions required to be
taken by PRB and/or the PRINCIPAL SHAREHOLDERS at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by PRB and the
PRINCIPAL SHAREHOLDERS, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of CRI's representations and warranties in this Agreement
(considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in
all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made
on the Closing Date. An inaccuracy as to a representation or
warranty (considered either individually or collectively) will be
deemed to be material if such inaccuracy will, or could reasonably
be expected to, have an adverse effect on the business, operations,
or financial condition of CRI in the amount of $10,000 or more.
8.2 CRI'S PERFORMANCE
(a) All of the covenants and obligations that CRI is
required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been performed and
complied with in all material respects.
(b) CRI must have delivered each of the documents
required to be delivered by CRI pursuant to Section 2.4 and
must have made the cash payments required to be made by CRI
pursuant to Sections 2.4(b)(i) and 2.4(b)(ii).
(c) PRB currently leases its principal office located at
43865 Airport View Drive, Hollywood, MD 20636 from Southern
Maryland Property Management Associates (?SMPMA?), an entity
controlled by the PRINCIPAL SHAREHOLDERS under a lease
agreement dated 1 March 1997. At Closing, CRI shall cause
PRB to enter into a new lease agreement with SMPMA on
substantially the same provisions as the current lease
except that the term of the new lease shall be three years
and the "triple net" annual rent shall be fixed at $15.90
per square foot, per year, for the term of the lease. The
new lease agreement shall be substantially in the form of
Exhibit 8.2(c) hereto.
8.3 CONSENTS
Each of the Consents identified in Sections 6.1 and 6.2 of this
Agreement must have been obtained, or will have been obtained prior
to Closing, and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
CRI must have caused the following documents to be delivered to the
PRINCIPAL SHAREHOLDERS:
(a) an opinion of Counsel to CRI, dated the Closing
Date, which is reasonably satisfactory to the PRINCIPAL
SHAREHOLDERS and their legal counsel; and
(b) such other documents as PRINCIPAL SHAREHOLDERS may
reasonably request for the purpose of (i) enabling their
counsel to provide the opinion referred to in
Section 7.4(a), (ii) evidencing the accuracy of any
representation or warranty of CRI, (iii) evidencing the
performance by CRI of, or the compliance by CRI with, any
covenant or obligation required to be performed or complied
with by CRI, (ii) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise
facilitating the consummation of any of the Contemplated
Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction
or other Order that (a) prohibits the sale of the Shares by the
PRINCIPAL SHAREHOLDERS and other PRB shareholders to CRI, and
(b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
ARTICLE IX
TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either CRI, PRB or the PRINCIPAL SHAREHOLDERS if
a material Breach of any provision of this Agreement has
been committed by the other party and such Breach has not
been waived;
(b) (i) by CRI if any of the conditions in Section 7 has
not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than
through the failure of CRI to comply with its obligations
under this Agreement) and CRI has not waived such condition
on or before the Closing Date; or (ii) by PRB and/or the
PRINCIPAL SHAREHOLDERS, if any of the conditions in Section
8 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible
(other than through the failure of PRB and/or the PRINCIPAL
SHAREHOLDERS to comply with their obligations under this
Agreement) and PRB and the PRINCIPAL SHAREHOLDERS have not
waived such condition on or before the Closing Date;
(c) by mutual consent of CRI, PRB and the PRINCIPAL
SHAREHOLDERS; or
(d) by either CRI, PRB or the PRINCIPAL SHAREHOLDERS if
the Closing has not occurred (other than through the failure
of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or
before May 15, 1998, or such later date as the parties may
agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition
to any other rights it may have under this Agreement or otherwise,
and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to
Section 9.1, all further obligations of the parties under this
Agreement will terminate, except that the obligations in Sections
11.1 and 11.3 will survive; provided, however, that if this
Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive
such termination unimpaired.
ARTICLE X
INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION IS AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the certificate delivered pursuant to Section 2.4(a)(v),
and any other certificate or document delivered pursuant to this
Agreement will survive the Closing. The right to indemnification,
payment of Damages or other remedy based on such representations,
warranties, covenants, and obligations will be affected by any
investigation conducted with respect to, or any Knowledge acquired
at any time, whether before or after the execution and delivery of
this Agreement and prior to the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY PRINICPAL
SHAREHOLDERS
The PRINCIPAL SHAREHOLDERS, jointly and severally, will indemnify
and hold harmless CRI, PRB, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively,
the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
the PRINCIPAL SHAREHOLDERS in this Agreement, or any other
certificate or document delivered by the PRINCIPAL
SHAREHOLDERS pursuant to this Agreement;
(b) any Breach of any representation or warranty made by
the PRINCIPAL SHAREHOLDERS in this Agreement as if such
representation or warranty were made on and as of the
Closing Date without, other than any such Breach that is
disclosed and is expressly identified in the certificate
delivered pursuant to Section 2.4(a)(v) as having caused the
condition specified in Section 7.1 not to be satisfied;
(c) any Breach by the PRINCIPAL SHAREHOLDER of any
covenant or obligation of such the PRINCIPAL SHAREHOLDER in
this Agreement;
(d) any product shipped or manufactured by PRB prior to
the Closing Date; or
(e) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any
such Person with the PRINCIPAL SHAREHOLDER or PRB (or any
Person acting on their behalf) in connection with any of the
Contemplated Transactions.
Excluding any claims for fraud, unpaid taxes, ERISA issues and
environmental issues as set forth herein ("Excluded Matters") with
respect to which no limit shall apply, the liability of the
PRINCIPAL SHAREHOLDERS under this Agreement shall be limited soley
to a right of set off by CRI against the Promissory Notes in
accordance with the terms of this Agreement. The Liability Basket
and the Liability Cushion shall be used before any right of set off
against the Promissory Notes and before any claims are made against
the PRINCIPAL SHAREHOLDERS with respect to the Excluded Matters.
The remedies provided in this Section 10.2 are exclusive and limit
any other remedies that may be available to CRI or the other
Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY CRI
CRI will indemnify and hold harmless PRB and the PRINCIPAL
SHAREHOLDERS, and will pay to the PRINCIPAL SHAREHOLDERS the
amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty
made by CRI in this Agreement or in any certificate delivered by
CRI pursuant to this Agreement, (b) any Breach by CRI of any
covenant or obligation of CRI in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged
to have been made by such Person with CRI (or any Person acting on
its behalf) in connection with any of the Contemplated
Transactions.
ARTICLE XI
GENERAL PROVISIONS
11.1 EXPENSES AND TAX CONSIDERATIONS
(a) Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its
respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and
accountants. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of
this Agreement by another party. In the event of Closing
under this Agreement reasonable expenses of the PRINCIPAL
SHAREHOLDERS related to the transactions contemplated by the
Agreement shall be paid by PRB and properly recorded on the
financial statement of PRB as of the Closing.
(b) CRI, PRB and the PRINCIPAL SHAREHOLDERS shall each
consider the requests of the other with respect to the
Agreement and the Contemplated Transactions in order to
accommodate income and other tax requirements. The
PRINCIPAL SHAREHOLDERS shall be solely responsible for any
personal income taxes resulting from this Agreement and the
Contemplated Transactions.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as CRI determines. Unless
consented to by CRI in advance or required by Legal Requirements,
prior to the Closing PRB and the PRINCIPAL SHAREHOLDERS shall, and
shall cause PRB to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. The
PRINCIPAL SHAREHOLDERS and CRI will consult with each other
concerning the means by which PRB's employees, customers, and
suppliers and others having dealings with PRB will be informed of
the Contemplated Transactions, and CRI will have the right to be
present for any such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, CRI, PRB
and the PRINCIPAL SHAREHOLDERS will maintain in confidence, and
will cause the directors, officers, employees, agents, and advisors
of CRI and PRB to maintain in confidence, any written, oral, or
other information obtained in confidence from another party or PRB
in connection with this Agreement or the Contemplated Transactions,
unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any
filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the
furnishing or use of such information is required by legal
proceedings.
If the Contemplated Transactions are not consummated, each party
will return or destroy as much of such written information as the
other party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return
receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other
parties):
PRB Associates, Inc.
43865 Airport View Drive
Hollywood, MD 20636
Attention: Lawrence M. Schadegg
Facsimile No.: (301) 373-3421
Roger A Klein, Esq.
Howrey & Simon
1299 Pennsylvania Avenue, NW
Washington, DC 20004
Facsimile No.: (202) 383-6610
Comptek Research, Inc.
2732 Transit Road
Buffalo, NY 14224
Attention: John J. Sciuto
Facsimile No.: (716) 677-0014
with a copy to:
Comptek Research, Inc.
2732 Transit Road
Buffalo, NY 14224
Attention: Randy C. Fahs
Facsimile No.: (716) 677-0014
11.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this Agreement may be brought
against any of the parties in the courts of the State of New York,
County of Erie, or, if it has or can acquire jurisdiction, in the
United States District Court for the Western District of New York ,
and each of the parties consents to the non-exclusive jurisdiction
of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the
world.
11.6 FURTHER ASSURANCES
The parties agree:
(a) to furnish upon request to each other such further
information,
(b) to execute and deliver to each other such other
documents, and
(c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to
in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under
this Agreement or the documents referred to in this Agreement will
operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege
will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no
waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to
or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this
Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties
with respect to its subject matter (including the Letter of Intent
between CRI, PRB and the PRINCIPAL SHAREHOLDERS dated March 17,
1998) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter.
This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties, which will not be
unreasonably withheld, except that CRI may assign any of its rights
under this Agreement to any Subsidiary of CRI. Subject to the
preceding sentence, this Agreement will apply to, be binding in all
respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than
the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to
this Agreement and their successors and assigns.
11.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held
invalid or unenforceable.
11.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to
the corresponding Section or Sections of this Agreement. All words
used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words
or terms.
11.12 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
11.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of New
York without regard to conflicts of laws principles.
11.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and
all of which, when taken together, will be deemed to constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
COMPTEK RESEARCH, INC. PRB ASSOCIATES, INC.
By: ______________________ By:_____________________
Title:_____________________ Title:____________________
Date:_____________________ Date:____________________
THE PRINCIPAL SHAREHOLDERS
__________________ ______ ___________________ ______
Lawrence M. Schadegg Date Richard A. Bos Date
__________________ ______ ___________________ ______
James N. Agamaite Date Allan D. Crane Date
__________________ ______
Daniel T. Doherty Date
FOR IMMEDIATE RELEASE
Contact: Christopher A. Head Internet Address:
Executive Vice President www.comptek.com
Comptek Research, Inc.
716-677-4070
COMPTEK RESEARCH, INC. COMPLETES ACQUISITION OF
PRB ASSOCIATES
________________
Buffalo, New York--(May 14, 1998) Comptek Research, Inc. (AMEX:CTK)
announced today the completion of its acquisition of PRB Associates,
Inc.
PRB Associates, headquartered in Hollywood, Maryland, has approximately
260 employees and annualized sales of approximately $30 million. The
company is recognized as a leader in military mission planning systems
which are used to automate complex military planning functions for the
most advanced aircraft and weapons systems in the world. In today's
high-tech military, such systems are an essential part of virtually
every high-tech tactical weapons targeting and delivery system. Over
its twenty year history, PRB has diversified its business base to also
include significant market share in the Command and Control and
Intelligence Processing sectors.
For its fiscal year ended December 31, 1997, PRB reported sales of $29.5
million and net earnings of $1 million. PRB will be operated as a
subsidiary of Comptek Research, Inc. under the management of Lawrence M.
Schadegg, its current president. Based upon expectations, the
acquisition will be accretive from day one, immediately adding to
Comptek's earnings per share (EPS) during the first full year of
operations.
Comptek's Chairman, President and Chief Executive Officer, John J.
Sciuto said, "The combining of Comptek and PRB will create a company of
almost 900 employees in eighteen different locations, with annualized
revenues of over $100 million. Obviously, we are extremely pleased to
have PRB on the Comptek team. Both companies are already highly
respected technologists in sophisticated military technology circles.
This combination not only represents significant growth to Comptek, but
it also synergistically creates a market leadership situation for
Comptek/PRB in some select key market segments. We are confident that
Comptek's acquisition of PRB represents significant milestones for both
companies, and that this union will provide substantial growth in
shareholder value well into the next millennium."
Comptek also noted that it expects to report the financial results for
its fiscal year ended March 31, 1998, on Monday, May 18, 1998.
This news release contains forward-looking statements about Comptek's
current expectations for future sales, earnings, and shareholder-value
based on the potential impact of the acquisition of PRB and on current
business conditions. Forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ materially.
These risks and uncertainties include Comptek's and PRB's dependence on
continued funding of U.S. Department of Defense programs. Some
additional risks and uncertainties, among others, that also need to be
considered are: the likelihood that actual future revenues that are
realized may differ from those inferred from existing total backlog; and
the ability to expand sales in international markets. Other risks and
uncertainties are described in Comptek's 1997 Form 10-K Annual Report
filed with the Securities and Exchange Commission.
Comptek Research, Inc., with offices and subsidiary locations in the
United States, is a domestic and international supplier of technically
advanced electronics and data communications systems to government and
industry.
Note: Today's news release and Comptek's news releases for the past
year are available on the Internet at http://www.cfonews.com under the
heading "Company News, Comptek Research". Additional information about
Comptek is also available at http://www.comptek.com.
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