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)
March 26, 1999
COMPTEK RESEARCH, INC.
(Exact Name of Registrant as Specified in Charter)
New York 1-8502 16-0959023
- ------------------- ----------- -----------------------------
(State of Other (Commissi (IRS Employer Identification
Jurisdiction of on File No.)
Incorporation) Number)
2732 Transit Road, Buffalo, New York 14224-2523
--------------------
(Address of Principal Exeuctive 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 March 26, 1999, Comptek Research, Inc. (the "Company") completed the
purchase of the business operations and substantially all of the related
assets and liabilities of Amherst Systems, Inc. ("Amherst"), a privately-
held company specializing in simulation/stimulation and evaluation
systems for electronic defense applications (the "Amherst Acquisition").
The Company paid a purchase price of $30 million and assumed long-term
debt of $5.1 million. The Company paid the purchase price by delivering
$20 million in cash and $10 million in subordinated promissory notes of
the Company. The amount of consideration paid was based upon arms-
length negotiations between the parties.
Amherst was founded in 1975 and is based in Buffalo, New York. Prior to
the acquisition by the Company, Amherst employed approximately 330
people and maintained offices in Huntsville, Alabama; Herdon, Virginia;
and Dayton, Ohio. Amherst also maintained a Canadian subsidiary based
in Ottawa, Ontario. As a result of the acquisition, the Company assumed
each of the office locations of Amherst and hired all of the former
Amherst employees. The Company placed the acquired assets and
liabilities into a newly formed wholly-owned subsidiary of the Company.
In addition, the Company intends to transfer the assets and operations
of its Advanced Systems Division into the new subsidiary, thereby
combining the Company's electronic warfare simulation/stimulation and
training resources into one strategic business unit.
In order to finance the Amherst Acquisition and provide working capital,
the Company issued, pursuant to Rule 506 of Regulation D, 8 1/2%
convertible subordinated debentures (the "Debentures"), due 2004. The
Company also amended and increased its existing credit facility in
connection with the Amherst Acquisition.
The Company initially sold $15 million of Debentures and has the
ability to sell, by April 23, 1999, an additional $5 million of
Debentures for an aggregate amount of $20 million. The Debentures,
issued only in denominations of 1,000 and multiples thereof, are
convertible into shares of common stock of the Company at a conversion
price of $9.50, which is subject to adjustment, including an
adjustment if the Company reports income before extraordinary
item and accounting change diluted earnings per share of less than
$0.80 per share for its fiscal year ending March 31, 2000. In such
case, the conversion price will be reset to $8.50. The Debentures bear
interest payable semiannually on April 1 and October 1 of each year,
commencing October 1, 1999 at the per annum rate of 8.5%. The
Debentures are not redeemable by the Company prior to March 1, 2002.
Thereafter, the Company may redeem the Debentures at any time together
with accrued and unpaid interest at the following premiums on or
after: (1) March 1, 2002 -103.4%; (2) March 1, 2003 - 101.7%; (3)
March 1, 2004 and thereafter - 100.0%. The Debentures are unsecured
obligations of the Company, subordinated in right of payment to all
present and future senior indebtedness, including the Company's
borrowings under its credit facility.
In connection with the Amherst Acquisition, the Company's credit
facility with Manufacturers and Traders Trust Company ("M&T Bank") has
been amended and increased, and includes the following: (1) a new
revolving credit agreement with a $27 million maximum borrowing limit
bearing interest, at the Company's option, of prime or LIBOR plus an
applicable margin based on a ratio of the Company's funded debt to
earnings before income taxes, depreciation and amortization (EBITDA)
minus capital expenditures; (2) remaining in place, the Company's
seven-year term loan bearing interest at LIBOR plus an applicable
margin based on a ratio of the Company's funded debt to EBITDA minus
capital expenditures, with an outstanding balance of $13.75 million
as of March 31, 1999; (3) remaining in place, the Company's five-year
term loan, with an outstanding balance of $2.0 million as of March 31,
1999, bearing interest at a fixed rate of 8.5%. Additionally,
remaining in place, is an interest rate swap
<PAGE 2>
agreement with KeyBank, N.A. that converts $7.5 million of the
outstanding debt to a fixed rate of 7.86% with a termination date of
June 1, 2003. The Company entered into this swap agreement in May
1998. Amounts drawn under the revolving credit agreement may be
converted into a four-year term loan at the Company's discretion at
any time prior to its maturity on January 31, 2001. The entire credit
facility is secured by substantially all of the Company's assets.
The revolving credit agreement stipulates that the Company maintain
minimum levels of: (1) working capital; (2) tangible net worth; (3)
funded debt to EBITDA minus capital expenditures; (4) EBITDA to fixed
charges; (5) senior funded debt to EBITDA minus capital expenditures.
Additionally, the Company may not exceed prescribed levels of capital
expenditures and operating lease expense. Furthermore, the agreement
prohibits the Company from the paying any cash dividends, without the
consent of M&T Bank.
Prior to the Amherst Acquisition, the Company reported its operating
activities in two defense-related segments: Defense Systems
("Systems") and Engineering and Technical Services ("Services"). The
Systems segment includes operating activities for tactical systems, as
well as simulation/stimulation and training systems. As a result of
the Amherst Acquisition, the Company will revise its segments in view
of expected increase in simulation/stimulation and training systems
sales. These new segments will be Tactical Systems,
Simulation/Stimulation and Training Systems, and Engineering and
Technical Services.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
The following financial information is being filed in order to satisfy
financial statement requirements.
(a) Financial Statements for Business Acquired.
1. Consolidated financial statements of Amherst Systems, Inc. as of
and for the years ended April 30, 1998, 1997, and 1996.
2. Consolidated financial statements of Amherst Systems, Inc. for
the eight months ended December 31, 1998 and 1997.
<PAGE 3>
AMHERST SYSTEMS, INC.
Consolidated financial statements of Amherst Systems, Inc.
for the years ended April 30, 1998, 1997, and 1996
<PAGE 4>
Independent Auditors' Report
The Board of Directors
Amherst Systems Inc.:
We have audited the accompanying consolidated balance sheets of Amherst
Systems Inc. as of April 30, 1997 and 1998, and the related consolidated
statements of operations, shareholders' equity and cash flows for each
of the years in the three-year period ended April 30, 1998. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the financial position of
Amherst Systems Inc. as of April 30, 1997 and 1998, and the results of
its operations and its cash flows for each of the years in the three-
year period ended April 30, 1998 in conformity with generally accepted
accounting principles.
KPMG LLP
Buffalo, New York
June 12, 1998
<PAGE 5>
<TABLE>
<CAPTION>
AMHERST SYSTEMS INC.
Consolidated Balance Sheets
April 30, 1997 and 1998
(dollars in thousands)
<S> <C> <C>
1997 1998
----------- ----------
Assets
Current assets:
Cash and equivalents $ 45 $ 825
Contract receivables (note 3) 5,505 10,939
Inventories (note 4) 1,241 1,905
Other 86 222
Deferred income taxes (note 7) 235 280
---------- ---------
Total current assets 7,112 14,171
---------- ---------
Plant and equipment, at cost:
Assets under capital leases 1,995 2,920
Computer equipment 1,814 2,234
Other equipment 1,901 2,095
Leasehold improvements 209 451
---------- ---------
5,919 7,700
Less accumulated depreciation and
amortization 3,515 4,207
---------- ---------
Net plant and equipment 2,404 3,493
Software costs, net of accumulated
amortization of $1,546 and $1,718 in
1997 and 1998, respectively 684 512
Other assets 13 233
---------- ---------
$ 10,213 $ 18,409
========== =========
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term
debt (note 5) $ 430 $ 586
Accounts payable 1,775 1,033
Accrued expenses 1,260 2,263
Customer advances 1,463 3,876
---------- --------
Total current liabilities 4,928 7,758
Long-term debt, excluding current
installments (note 5) 1,683 6,202
Other liabilities (note 7) 520 435
---------- ---------
Total liabilities 7,131 14,395
---------- ---------
Shareholders' equity (note 9):
Common stock, $.01 par value,
2,000,000 shares authorized,
1,030,721 and 1,042,021 shares
issued at April 30, 1997 and
1998, respectively 10 10
Additional paid-in capital 653 710
Retained earnings 2,424 3,320
Foreign currency translation
adjustment - (21)
---------- ---------
3,087 4,019
Less cost of 1,200 treasury shares 5 5
---------- ---------
Total shareholders' equity 3,082 4,014
Commitments and contingency (notes 3,
5, 10, and 13) ---------- ---------
$ 10,213 $ 18,409
========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE 6>
<TABLE>
<CAPTION>
AMHERST SYSTEMS INC.
Consolidated Statements of Operations
Years ended April 30, 1996, 1997 and 1998
(in thousands)
<S> <C> <C> <C>
1996 1997 1998
-------- -------- -------
Net sales $ 14,439 $ 16,922 $ 31,644
Costs of sales 11,834 11,866 24,436
-------- -------- -------
Gross profit 2,605 5,056 7,208
General and
administrative expenses
(note 6) 3,552 4,529 5,636
-------- -------- -------
Operating (loss)
income (947) 527 1,572
Interest expense (194) (262) (273)
-------- -------- -------
(Loss) income from
continuing
operations before
income taxes (1,141) 265 1,299
Income taxes (benefit)
(note 7) (443) 100 190
-------- -------- -------
Income (loss) from
continuing
operations (698) 165 1,109
Income (loss) from
discontinued operations,
net of income tax
(expense) benefit of
$(13), $260 and $40 in
1996, 1997 and 1998,
respectively (notes 7
and 12) 21 (295) (213)
-------- -------- -------
Net income (loss) $ (677) $ (130) $ 896
======== ======== =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE 7>
<TABLE>
<CAPTION>
AMHERST SYSTEMS INC.
Consolidated Statements of Shareholders' Equity
Years ended April 30, 1996, 1997 and 1998
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Foreign
cur-
rency
Addi- Re- trans- Total
tional Trea- tained lation share-
Common paid-in sury earn- adjust- holders'
Stock capital stock ings ment equity
Balances at
April 30,
1995 $ 10 $ 502 $ (4) $ 3,231 $ - $ 3,739
Sale of
8,000
common
shares
under stock - 32 - - - 32
option plan
(note 9)
Purchase of
200 common
shares for
treasury - - - - - (1)
Net loss - - - (677) - (677)
------ ------- ------ ------ ------ -------
Balances at
April 30,
1996 10 534 (5) 2,554 - 3,093
Sales of
26,510
common
shares
under stock - 119 - - - 119
option plan
(note 9)
Net loss - - - (130) - (130)
------ ------- ------ ------ ------ --------
Balances at
April 30,
1997 10 653 (5) 2,424 - 3,082
Sale of
11,300
common
shares
under stock - 57 - - - 57
option plan
(note 9)
Net income - - - 896 - 896
Foreign
currency
translation
adjustment - - - - (21) (21)
------ ------- ------ ------ ------ --------
Balances at
April 30,
1998 $ 10 $ 710 $ (5) $ 3,320 $ (21) $ 4,014
====== ======= ====== ====== ====== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE 8>
<TABLE>
<CAPTION>
AMHERST SYSTEMS INC.
Consolidated Statements of Cash Flows
Years ended April 30, 1996, 1997 and 1998
(in thousands)
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Cash flows from operating
activities:
(Loss) income from
continuing operations $ (698) $ 165 $ 1,109
Income (loss) from
discontinued
operations 21 (295) (213)
--------- --------- ---------
Net income (loss) (677) (130) 896
Adjustments to reconcile net
income (loss) to net cash
provided (used) by
operating activities:
Depreciation and
amortization of plant
and equipment 514 570 764
Amortization of
capitalized software
costs 226 200 172
Deferred income taxes (80) (150) (130)
Changes in assets and
liabilities providing
(using) cash:
Contract
receivables 1,319 (2,709) (5,042)
Inventories (307) (87) (316)
Accounts payable (733) 1,662 (977)
Accrued expenses 389 220 1,009
Customer advances (184) 765 2,423
Other (498) 614 (195)
--------- --------- ---------
Total
adjustments 646 1,085 (2,292)
--------- --------- ---------
Net cash
(used) provided
by operating
activities (31) 955 (1,396)
--------- --------- ---------
Cash flows from investing
activities:
Acquisition of
subsidiary - - (21)
Purchase of plant and
equipment (721) (412) (2,048)
Proceeds from disposal
of plant and equipment - 5 47
--------- --------- ---------
Net cash used by
investing
activities (721) (407) (2,022)
--------- --------- ---------
Cash flows from financing
activities:
Net proceeds from
(repayment of) lines of
credit 500 (400) 3,700
Proceeds from other long-
term debt 522 242 1,151
Repayment of other long-
term debt (451) (433) (709)
Purchase of common shares (1) - -
Proceeds from sale of
common shares 25 72 50
-------- --------- ---------
Net cash provided
(used) by
financing
activities 595 (519) 4,192
-------- --------- ---------
Effect of exchange
rate changes on
cash - - 6
--------- --------- ---------
Net (decrease)
increase in cash
and equivalents (157) 29 780
Cash and equivalents at
beginning of period 173 16 45
--------- --------- ---------
Cash and equivalents at
end of period $ 16 $ 45 $ 825
========= ========= =========
Supplemental cash flow information (note 2)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE 9>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
(1)Summary of Significant Accounting Policies
Amherst Systems Inc. (Amherst) and its subsidiary (the Company)
develop and sell computer software and hardware products. The
predominant source of revenue are products sold to the U.S.
Government under prime and subcontractual arrangements. Prime and
subcontractual arrangements are primarily in the form of cost
reimbursable or fixed-priced contracts. For 1997 and 1998, the
Company had net sales from two significant customers which
comprised 32% and 48%, respectively, of the consolidated totals.
Subsequent to the discontinuance of its Retail Systems divisions
(note 12), the Company operates in one business segment.
Significant accounting policies of the Company are as follows:
(a)Principles of Consolidation
The consolidated financial statements include the accounts of
Amherst and its two wholly-owned subsidiaries. One of these
subsidiaries, Omega Telemus, Inc. (Telemus), a Canadian
corporation, was acquired in September 1997 (note 11). All
significant intercompany balances and transactions have been
eliminated in consolidation.
(b)Revenue Recognition
Revenue on fixed-price contracts is recognized using the
percentage of completion method based on costs incurred in
relation to the total estimated costs. Cost reimbursable
contract revenues are recognized to the extent of project
costs incurred plus a proportionate amount of fee. As long-
term contracts extend over one year, revisions in estimated
costs and earnings are reflected in the accounting period in
which such revisions become known. The entire amount of any
estimated loss is accrued at the time the losses are
determined.
(c)Cash Equivalents
Cash equivalents consist of highly liquid investments,
primarily U.S. Treasury securities, with original maturities
of three months or less. At April 30, 1998, $647,752 of cash
was considered restricted for use pursuant to one specific
contract.
(d)Inventories
Inventories are stated at the lower of cost (first-in, first-
out) or market.
<PAGE 10>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
(e)Depreciation and Amortization
Depreciation of equipment is provided over the estimated
useful lives of the respective assets on the straight-line
method. Amortization of assets under capital leases is
computed on the straight-line method over the noncancellable
terms of the respective leases, or the assets' useful lives,
whichever is shorter. Equipment is depreciated over periods
which range from five to seven years.
(f)Income Taxes
The Company utilizes the asset and liability method of income
tax accounting. Pursuant to this method, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
(g)Capitalized Software Costs
The Company capitalizes computer software costs incurred in
the production of software products once the products'
technological feasibility has been established. Such costs
are carried at the lower of unamortized cost or net realizable
value. Amortization begins when the product is available for
general release. Amortization expense is based on the
straight-line method over the estimated economic life of the
product or the ratio of annual revenue from the product to
total estimated revenue, whichever is greater.
(h)Stock Option Plan
The Company has adopted the disclosure alternative permitted
in Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation. Accordingly, the
Company has elected to continue to apply the accounting
provisions of APB 25, which results in the measurement of
compensation expense on the date of an option grant to the
extent that the current market price of the underlying stock
exceeds the exercise price.
<PAGE 11>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
(i)Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions related to the reporting of
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(2)Supplemental Cash Flow Information
Cash received (paid) for (in thousands):
1996 1997 1998
--------------------------------------
Interest $ (193) $ (247) $ (284)
Income taxes - 234 -
======================================
Supplemental schedule of noncash investing and financing
activities (in thousands):
1996 1997 1998
-------------------------------------
Conversion of employee
vested vacation to
common shares under
stock option plan
(note 9) $ 7 $ 47 $ 46
Fair value of debt
assumed in acqui-
sition of subsi-
diary
(note 11) - - 533
======================================
<PAGE 12>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
(3)Contract Receivables
The components of contract receivables (primarily from the U.S.
Government) at April 30, 1997 and 1998 follow (in thousands):
1997 1998
---------------------------
Amounts billed $ 1,231 $ 3,769
Costs and estimated
earnings in excess
of billings on
uncompleted
contracts 4,274 7,170
-------------------------
$ 5,505 $ 10,939
=========================
Costs and estimated earnings in excess of billings on uncompleted
contracts represent amounts that could not be presented for
billing under the terms of the contracts as of the respective
balance sheet dates. It is anticipated that such unbilled amounts
will be recovered as units are delivered or upon completion of the
contract. Substantially all amounts are expected to be collected
within the next fiscal year. In situations where billings exceed
costs and estimated earnings, the excess is included in customer
advances.
Costs incurred by the Company in the performance of U.S.
Government contracts are subject to audit by the Defense Contract
Audit Agency (DCAA). In the opinion of management, the final
determination of allowable costs will not result in significant
adjustments to recorded amounts.
(4)Inventories
The components of inventories at April 30, 1997 and 1998 are as
follows (in thousands):
1997 1998
-----------------------------
Parts $ 605 $ 821
Work-in-process 348 768
Finished goods 288 316
-----------------------------
$ 1,241 $ 1,905
=============================
<PAGE 13>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
(5)Note Payable and Long-term Debt
A summary of long-term debt at April 30, 1997 and 1998 follows (in
thousands):
1997 1998
----------------------------
Bank revolving line
of
credit $ 1,100 $ 4,800
Bank term loans - 332
Capital lease
obligations 1,013 1,656
----------------------------
2,113 6,788
Less current
installments 430 586
----------------------------
Long-term debt,
excluding
current
installments $ 1,683 $ 6,202
============================
The Company has a revolving line of credit facility with a bank.
The total available credit under this facility is $7,000,000
subject to a borrowing base. Outstanding borrowings bear interest
at the bank's prime rate (8.5% at April 30, 1998) and are secured
by substantially all assets of the Company. The revolving credit
agreement, which expires on October 1, 2000, requires the Company
to maintain minimum working capital, debt service coverage and
total debt to net worth, as defined. At April 30, 1998, the
Company was either in compliance with the financial covenants or
obtained the applicable waiver letter from the bank. The credit
facility is used to advance working capital or issue standby
letters of credit to foreign customers to secure the Company's
performance on advance payments from these customers. There were
outstanding standby letters of credit in the amount of $1,682,672
under this facility at April 30, 1998.
The Company also has term loans payable to a bank in monthly
principal installments of $8,604 plus interest at various rates
(ranging from 7.25% to 8.25% at April 30, 1998) that mature
through February 2003. Outstanding borrowings are secured by
substantially all assets of Telemus.
Telemus also has a facility with a bank providing for the issuance
of a standby letter of credit. At April 30, 1998, a standby letter
of credit on $1,542,473 has been issued under this facility to
secure Telemus' performance under a contract.
<PAGE 14>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
Capital lease obligations, related primarily to computer equipment
purchases, are payable as follows (in thousands):
Fiscal year ending April 30:
1999 $ 660
2000 508
2001 399
2002 297
2003 200
---------
Total minimum lease payments 2,064
Less amounts representing interest, at
rates ranging from
5.04% to 14.81% (408)
---------
Present value of net minimum lease
payments 1,656
Less current installments of capital
lease obligations 492
---------
Obligations under capital leases,
excluding current installments $ 1,164
==========
Accumulated amortization of assets under capital leases was
$676,102 and $961,190 at April 30, 1997 and 1998, respectively.
(6)Research and Development Expenses
The cost of independent research and development is charged to
general and administrative expense when incurred. These costs
amounted to $1,328,327, $1,743,241 and $2,151,878 for the years
ended April 30, 1996, 1997 and 1998, respectively.
<PAGE 15>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
(7)Income Taxes
Components of income tax expense (benefit), attributable to
continuing and discontinued operations, for the years ended April
30, 1996, 1997 and 1998 are as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
1996 1997 1998
-------------------------------------
Current:
Federal $ (322) $ (9) $ 237
State (28) (1) 43
-------------------------------------
(350) (10) 280
-------------------------------------
Deferred:
Federal (68) (135) (117)
State (12) (15) (13)
-------------------------------------
(80) (150) (130)
-------------------------------------
Total $ (430) $ (160) $ 150
=====================================
</TABLE>
The income tax expense (benefit) has been allocated on the
consolidated statements of operations as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
1996 1997 1998
-------------------------------------
Continuing operations $ (443) $ 100 $ 190
Discontinued
operation 13 (260) (40)
-------------------------------------
$ (430) $ (160) $ 150
=====================================
</TABLE>
<PAGE 16>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
Total income tax expense (benefit) differs from "expected" taxes
(computed by applying the U. S. Federal corporate rate of 34% to
income (continuing and discontinued) before income taxes as
follows (in thousands):
<TABLE>
<S> <C> <C> <C>
1996 1997 1998
-------------------------------------
Computed "expected"
tax expense
(benefit) $ (376) $ (98) $ 354
Increase (decrease)
resulting from:
Permanent differ-
ences primarily
foreign sales
corporation
commission
in 1998 - 11 (119)
Tax credits - (96) (67)
State taxes, net of
Federal income
tax effect (42) (11) 20
Other (12) 34 (38)
-------------------------------------
$ (430) $ (160) $ 150
=====================================
</TABLE>
The tax effects of temporary differences that give rise to the net
deferred tax liability at April 30, 1997 and 1998 are as follows
(in thousands):
<TABLE>
<S> <C> <C>
1997 1998
------------------------
Deferred tax assets:
Accrued compensation $ 212 $ 280
Tax credit
carryforwards 235 220
Other 23 -
------------------------
Total deferred
tax assets 470 500
------------------------
Deferred tax liabilities:
Accumulated depreciation
of plant and
equipment $ 420 $ 380
Capitalized software
costs 280 220
------------------------
Total deferred
tax liabilities 700 600
------------------------
Net deferred tax
liability $ 230 $ 100
=======================
</TABLE>
<PAGE 17>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
Deferred taxes are presented in the accompanying consolidated
balance sheets as follows (in thousands):
1997 1998
------------------------
Current deferred tax
Assets $ 235 $ 280
Noncurrent deferred
tax liabilities
465 380
------------------------
$ 230 $ 100
========================
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some or all of
the assets will not be realized. Management considers, among
other things, projections of future taxable income and the
scheduled reversal of deferred tax liabilities in making this
assessment. Based on this assessment, management believes that
deferred tax assets are fully recoverable, accordingly, no
valuation allowance has been provided.
The Company's tax credit carryforwards at April 30, 1998 expire
from 2005 to 2012.
(8)Pension Plan
The Company has a defined contribution pension plan covering all
employees. The Company's maximum matching contribution is 4% of
compensation. Expense under the plan was $248,106, $262,361 and
$314,026 for the years ended April 30, 1996, 1997 and 1998,
respectively.
(9)Stock Option Plan
The Company has a stock option plan providing for options
representing up to 200,000 shares of common stock. The plan
covers substantially all employees and terminates in 2002. The
Company may repurchase any shares purchased under the plan at the
original purchase price if an employee leaves the Company within
three years of exercising options. Options generally expire one
year after the grant date. Exercise prices are equal to the
Company's estimate of the fair value per share of stock at the
date of grant.
<PAGE 18>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
A summary of stock option activity for years ended April 30, 1996,
1997 and 1998 is as follows:
1996 1997 1998
-------------------------------------
Outstanding, beginning
of year 2,000 - 41,540
Granted 5,000 71,600 6,500
Expired and subscribed 1,000 (3,550) (31,240)
Exercised (8,000) (26,510) (11,300)
-------------------------------------
Outstanding, end of
period - 41,540 5,500
=====================================
The estimated fair value of options granted in the fiscal years
ended April 30, 1997 and 1998 determined under the minimum was
insignificant. The pro forma effects of using these fair values in
the determination of net income as permitted by SFAS No. 123 are,
accordingly, not material. The risk-free interest rate used in
this determination was 5.43%. No dividends are paid on the
Company's stock.
The weighted average exercise prices of options granted in 1996,
1997 and 1998 were $4.50, $5.00 and $5.50, respectively. The
weighted average price of options exercised was $4.00, $4.50, and
$5.00 in 1996, 1997 and 1998, respectively. At April 30, 1997 and
1998 outstanding options were exercisable at $5.00 and $5.50 per
share, respectively, and expire prior to April 30, 1999.
Of the options exercised for the year ended April 30, 1998, 1,136
shares were issued in exchange for vested accrued vacation.
(10) Operating Leases
The Company recorded operating lease expense of $621,772, $641,303
and $800,777 for the years ended April 30, 1996, 1997 and 1998,
respectively.
Future annual minimum lease payments under all non-cancelable
operating leases are as follows (in thousands):
Year ending April 30:
1999 $ 933
2000 943
2001 899
2002 811
2003 783
Thereafter $ 415
========
<PAGE 19>
AMHERST SYSTEMS INC.
Notes to Financial Statements
April 30, 1996, 1997 and 1998
The Company subleases some of its facilities from a shareholder
pursuant to an operating sublease. Rental expense under the
sublease was $589,967, $602,748 and $621,413 for the years ended
April 30, 1996, 1997 and 1998, respectively.
(11) Acquisition of Subsidiary
On September 26, 1997, Amherst acquired all of the common stock of
Omega Telemus Inc., a Canadian defense electronics company with
operations in Kanata, Ontario. The purchase price of $554,000 was
funded primarily with cash of $21,000 and an assumption of debt of
approximately $533,000. The acquisition was accounted for under
the purchase method of accounting and, accordingly, the purchase
price was allocated to the acquired assets and liabilities based
upon estimated fair values. Telemus' results of operations are
included with the Company from the acquisition date.
(12) Discontinued Operation
In fiscal 1998, the Company discontinued the operations of its
commercial division, Retail Systems. The income (loss) from this
discontinued operation, net of income taxes of approximately
$21,000, $(295,000) and $(213,000) has been separately presented
in the 1996, 1997 and 1998 consolidated statements of operations,
respectively. The remaining net assets of this division totaling
approximately $93,000 at April 30, 1998 includes inventory and
capitalized software. The Company believes it will complete the
sale of this business in fiscal 1999.
(13) Contingent Liability
The Company is a defendant in a lawsuit which is in the early
stages of discovery. Management does not believe that the
resolution of this suit will have a material adverse effect on the
Company's financial statements.
<PAGE 20>
AMHERST SYSTEMS, INC.
Consolidated financial statements of Amherst Systems, Inc.
for the eight months ended December 31, 1998 and 1997
<PAGE 21>
<TABLE>
<CAPTION>
AMHERST SYSTEMS INC.
Consolidated Condensed Balance Sheet
December 31, 1998
(in thousands)
(unaudited)
<S> <C>
Assets
Current assets:
Cash and equivalents (note 8) $ 2,067
Contract receivables (note 3) 14,766
Inventories (note 4) 3,208
Other 783
-----------
Total current assets 20,824
-----------
Plant and equipment, at cost:
Assets under capital leases 2,920
Computer equipment 2,009
Other equipment 2,029
Leasehold improvements 801
-----------
7,759
Less accumulated depreciation and
amortization 4,638
-----------
Net plant and equipment 3,121
Software costs, net of accumulated amortization 405
Other assets 271
-----------
$ 24,621
===========
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt 654
Accounts payable 3,594
Accrued expenses 3,246
Customer advances 5,056
-----------
Total current liabilities 12,550
Long-term debt, excluding current installments 6,410
Other liabilities 436
-----------
Total liabilities 19,396
-----------
Shareholders' equity (note 6):
Common stock 10
Additional paid-in capital 712
Retained earnings 4,505
Net unrealized gain on securities available
for sale 38
Foreign currency translation adjustment (33)
-----------
5,232
Less cost of treasury shares 7
-----------
Total shareholders' equity 5,225
-----------
Commitments and contingency (notes 3 and 8) -----------
$ 24,621
===========
See accompanying notes to consolidated condensed financial
statements.
</TABLE>
<PAGE 22>
<TABLE>
<CAPTION>
AMHERST SYSTEMS INC.
Consolidated Condensed Statements of Operations and Comprehensive
Income
Eight-month periods ended December 31, 1997 and 1998
(in thousands)
(unaudited)
<S> <C> <C>
1997 1998
---------- --------
Net sales $ 18,456 $ 29,151
Costs of sales 14,457 22,488
---------- --------
Gross profit 3,999 6,663
General and administrative expenses
(note 5) 3,342 4,704
---------- --------
Operating income 657 1,959
Interest expense 135 350
---------- --------
Income from continuing
operations before income taxes 522 1,609
Income taxes 104 354
---------- --------
Income from continuing
operations 418 1,255
Loss from discontinued operations,
net of income taxes (note 7) (131) (70)
---------- --------
Net income 287 1,185
---------- --------
Other comprehensive income:
Foreign currency translation
adjustments - (12)
Unrealized holding gain on
marketable securities - 38
---------- --------
Other comprehensive income - 26
---------- --------
Comprehensive income $ 287 $ 1,211
========== ========
See accompanying notes to consolidated condensed financial
statements.
</TABLE>
<PAGE 23>
<TABLE>
<CAPTION>
AMHERST SYSTEMS INC.
Consolidated Condensed Statement of Shareholders' Equity
Eight-month period ended December 31, 1998
(in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net
unreal-
ized For-
gain on eign
secur- cur-
Addi- ities rency
tional Re- avail- trans- Total
paid-in Trea- tained able lation share-
Common capi- sury earn- for adjust- holders'
stock tal stock ings sale ment equity
------ ------- ------- ------- ------- ------- --------
Balances
at April
30, 1998 $10 $710 ($5) $3,320 $- ($21) $4,014
Purchase
of 1,610
treasury
shares - - (2) - - - (2)
Sale of
500 common
shares
under
stock
option
plan - 2 - - - - 2
Net income - - - 1,185 - - 1,185
Net
unrealized
gain on
securities
available
for sale - - - - 38 - 38
Foreign
currency
transla-
tion
adjustment - - - - - (12) (12)
------ ------- ------- ------- ------- ------- --------
Balances
at
December
31, 1998 $10 $712 ($7) $4,505 $38 ($33) $5,225
====== ======= ======= ======= ======= ======= ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE 24>
<TABLE>
<CAPTION>
AMHERST SYSTEMS INC.
Consolidated Condensed Statements of Cash Flows
Eight-month periods ended December 31, 1997 and 1998
(in thousands)
(unaudited)
<S> <C> <C>
1997 1998
----------- -----------
Cash flows from operating
activities:
Income from continuing
operations $ 418 $ 1,255
Loss from discontinued
operations (131) (70)
----------- -----------
Net Income 287 1,185
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization of plant and
equipment 311 431
Amortization of capitalized
software costs 97 107
Deferred income taxes 35 (30)
Changes in assets and
liabilities providing
(using) cash:
Contract receivables (296) (3,827)
Inventories (352) (1,304)
Accounts payable (627) 2,561
Accrued expenses 11 983
Customer advances 2,379 1,180
Other (775) (194)
----------- -----------
Total adjustments 783 (93)
----------- -----------
Net cash provided
by operating
activities 1,070 1,092
----------- -----------
Cash flows from investing
activities:
Purchase of plant and
equipment (1,046) (1,086)
Proceeds from disposal of
plant and equipment - 1,028
----------- -----------
Net cash used by
investing activities (1,046) (58)
----------- -----------
Cash flows from financing
activities:
Net proceeds from bank notes
payable 1,000 670
Proceeds from other long-
term debt 601 -
Repayment of other long-term
debt (187) (394)
Proceeds from sale of common
shares 51 2
Purchase of common stock for
treasury - (2)
----------- -----------
Net cash provided by
financing activities 1,465 276
----------- -----------
Effect of exchange rate
changes on cash 13 (68)
----------- -----------
Net increase in cash
and equivalents 1,502 1,242
Cash and equivalents at beginning
of period 45 825
----------- -----------
Cash and equivalents at end of
period $ 1,547 $ 2,067
Supplemental cash flow information (note 2)
See accompanying notes to consolidated condensed financial
statements.
</TABLE>
<PAGE 25>
AMHERST SYSTEMS INC.
Notes to Consolidated Condensed Financial Statements
December 31, 1997 and 1998
(Unaudited)
(1)Basis of Presentation
The consolidated condensed financial statements of Amherst Systems
Inc. and subsidiary (the Company) as of and for the eight-month
periods ended December 31, 1998 and 1997 have been prepared using
the same accounting principles employed in the preparation of the
annual financial statements for the years ended April 30, 1997 and
1998. These interim period statements should be read in
conjunction with the annual statements.
Effective May 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income."
The interim period financial statements contain all adjustments,
consisting of normal recurring items, necessary to fairly present
the Company's consolidated financial position at December 31, 1998
and its results of operations and cash flows for the eight-month
periods ended December 31, 1997 and 1998 in conformity with
generally accepted accounting principles.
The results of operations for the eight-month period ended
December 31, 1998 are not necessarily indicative of results to be
expected for the full year.
(2)Supplemental Cash Flow Information
1997 1998
-----------------------
Cash paid for (in thousands):
Interest $ (135) $ (350)
=======================
Taxes $ (2) $ (354)
=======================
Supplemental schedule of noncash investing and financing
activities (in thousands):
1997 1998
----------------------
Conversion of employee vested
vacation to common shares
under stock option plan $ 6 $ -
======================
Fair value of debt assumed
in acquisition of
subsidiary $ 533 $ -
======================
Receipt of investment
securities in exchange
for assets of discontinued
operation $ - $ 200
======================
<PAGE 26>
AMHERST SYSTEMS INC.
Notes to Consolidated Condensed Financial Statements
December 31, 1997 and 1998
(Unaudited)
(3)Contract Receivables
The components of contract receivables (primarily from the U.S.
Government) at December 31, 1998 follow (in thousands):
Amounts billed $ 5,916
Costs and estimated earnings in excess
of
Billings on uncompleted contracts 8,850
---------
$ 14,766
=========
Costs incurred by the Company in the performance of U.S.
Government contracts are subject to audit by the Defense Contract
Audit Agency (DCAA). In the opinion of management, the final
determination of allowable costs will not result in significant
adjustments to recorded amounts.
(4)Inventories
The components of inventories at December 31, 1998 are as follows
(in thousands):
Parts $ 1,114
Work-in-process 1,779
Finished goods 315
------
$ 3,208
======
(5)Research and Development Expenses
The cost of independent research and development, including an
allocation of overhead costs, is charged to general and
administrative expense when incurred. These costs amounted to
$1,475,545 and $1,927,189 for the eight-month periods ended
December 31, 1997 and 1998, respectively.
<PAGE 27>
AMHERST SYSTEMS INC.
Notes to Consolidated Condensed Financial Statements
December 31, 1997 and 1998
(Unaudited)
(6)Stock Option Plan
During the eight-month period ended December 31, 1998, 5,500 stock
options expired. At December 31, 1998, no options are
outstanding.
(7)Discontinued Operation
In the year ended April 30, 1998, the Company discontinued the
operation of its commercial division, Retail Systems. In the
eight-month period ended December 31, 1998, the Company eliminated
the remaining assets of this division and received common stock of
a third party buyer with a fair value of $200,000 in exchange for
certain of those assets. The investment in common stock of the
buyer, which is included in other current assets in the
accompanying 1998 balance sheet, is accounted for as a security
available for sale and, accordingly, is reported at its fair
value. Unrealized gains on this common stock investment are
reported as a separate component of other comprehensive income in
the accompanying consolidated financial statements. The losses
from operating this division and, in 1998, the net effect of the
disposition have been segregated in the accompanying statement of
operations and comprehensive income. The net effect of the
disposition was not significant.
(8)Contingent Liability
The Company is a defendant in a lawsuit which is in the early
stages of discovery. Management does not believe that the
resolution of this suit will have a material adverse effect on the
Company's financial statements.
At December 31, 1998, there are $2,597,913 of standby letters of
credit outstanding and $1,981,975 of cash restricted for use
pursuant to one specific contract.
(9)Long-Term Debt
In November 1998, the Company increased the borrowing base of its
revolving line of credit to $10,000,000.
(10) Subsequent Event
On March 26, 1998, the Company sold its business operations and
related assets and liabilities to Comptek Research, Inc.
(Comptek). The sale price was $30 million paid in a combination
of cash and notes. Comptek also assumed the Company's long-term
debt which had a balance of $5.1 million on the transaction date.
<PAGE 28>
(b) PRO FORMA FINANCIAL INFORMATION.
The accompanying Unaudited Pro Forma Consolidated Financial
Information gives effect to the following transactions as indicated
below:
- The acquisition by the Company of PRB Associates, Inc. in
May 1998.
- The acquisition by the Company of the business and
substantially all of the related assets and liabilities
of Amherst (the "Amherst Acquisition").
- The sale of the Debentures in the aggregate principal
amount of $15 million (the "Offering").
The Company completed its purchase of its wholly-owned subsidiary PRB
Associates, Inc. (the "PRB Acquisition") in May 1998. PRB is a leader
in the development of military mission planning systems used to
automate complex planning functions for routing, fuel, ordnance and
tactics for advanced aircraft weapons systems. PRB's annual net
sales, prior to the acquisition by the Company, were approximately
$30.0 million with the majority of such sales attributable to domestic
activities.
The unaudited pro forma consolidated balance sheet gives effect to the
Amherst Acquisition and the Offering as if such events had occurred as
of December 25, 1998. No pro forma effect is given to the PRB
Acquisition as the Company's historical consolidated balance sheet at
December 25, 1998 already gives effect to such acquisition.
The pro forma statement of operations for the year ended March 31,
1998 gives effect to the PRB Acquisition, the Amherst Acquisition, and
the Offering as if they had occurred on April 1, 1997. For this
purpose, the historical financial statements of Amherst for its fiscal
year ended April 30, 1998 and of PRB for its year ended December 31,
1997 have been used together with the Company's consolidated financial
statements for the year ended March 31, 1998.
The pro forma statement of operations for the nine-months ended
December 25, 1998 gives effect to the Amherst Acquisition and the
Offering as if they had occurred on April 1, 1997. The Company's
historical consolidated financial statements for this nine-month
period already reflect the PRB Acquisition from May 1, 1998 and,
accordingly, required the addition of PRB results for a one month
period through pro forma adjustment. The historical consolidated
financial statements of Amherst for the eight months ended December
31, 1998 have been used in this pro forma and, accordingly, required
the addition of Amherst results for a one month period through pro
forma adjustments.
The Amherst Acquisition pro forma adjustments are based on a
preliminary purchase price allocation using information currently
available. The pro forma results are not necessarily indicative of
operating results had the acquisitions or the Offering actually
occurred on April 1, 1997 or the results to be expected in the future.
<PAGE 29>
<TABLE>
<CAPTION>
Unaudited Pro Forma Consolidated Balance Sheet
As of December 25, 1998
(In thousands)
<S> <C> <C> <C>
Comptek Amherst Amherst
Research, Systems, Acquisition
Inc. Inc.
and and Adjustments
Subsidiaries Subsidiary
------------ ----------- ------------
Assets
Cash $1,161 $2,067
Receivables 24,432 14,766 (300) (A)
(1,762) (B)
Inventory 2,470 3,208 (250) (A)
Refundable income
taxes 932 -
Other current assets 707 783 (548) (B)
------------ ----------- ------------
Total current assets 29,702 20,824 (2,860)
Net fixed assets
3,856 3,121
Intangible assets 14,620 - 27,733 (A)
Other long term
assets 1,731 676 215 (A)
------------ ----------- ------------
Total assets $49,909 $24,621 $25,088
============ =========== ============
Liabilities and
shareholders'
equity
Current installments $3,527 $654
of long-term debt
Accounts payable 3,084 3,594
Accrued liabilities 7,517 3,246
Deferred income 2,893 -
taxes
Customer advances - 5,056
------------ ----------- ------------
Total current
liabilities 17,021 12,550 -
Deferred income
taxes 352 -
Due to Seller at
Closing 20,000 (D)
Long term debt,
excluding current
Installments 18,383 6,410 10,000 (D)
663 (C)
Other liabilities - 436 (350) (B)
------------ ----------- ------------
Total liabilities 35,756 19,396 30,313
------------ ----------- ------------
Shareholders'
equity:
Common stock 110 10 (10) (B)
Additional paid-in 16,082 712 (712) (B)
capital
Stock related awards (243) -
and loans
Retained earnings 1,433 4,505 (4,505) (B)
Foreign currency
translation - (33) 33 (B)
adjustment
Net unrealized loss
on securities
available for sale - 38 (38) (B)
Treasury stock (3,229) (7) 7 (B)
------------ ----------- ------------
Total shareholders' 14,153 5,225 (5,225)
equity
Total liabilities
and shareholders'
equity $49,909 $24,621 $25,088
============ =========== ============
Unaudited Proforma Consolidated Balance Sheet
As of December 25, 1998
(In thousands) (cont'd)
<S> <C> <C> <C>
Pro Forma
Including Offering
Amherst Adjustments
Acquisition (E) Pro Forma
----------- ------------ ------------
Assets
Cash $3,228 $3,228
Receivables
37,136 37,136
Inventory
5,428 5,428
Refundable income
Taxes 932 932
Other current assets 942 942
----------- ------------ ------------
Total current assets 47,666 - 47,666
Net fixed assets 6,977 6,977
Intangible assets 42,353 42,353
Other long term
assets 2,622 838 3,460
----------- ------------ ------------
Total assets $99,618 $838 $100,456
=========== ============ ============
Liabilities and Shareholders' Equity
Current installments $4,181 $4,181
of long-term debt
Accounts payable 6,678 6,678
Accrued liabilities 10,763 10,763
Deferred income
taxes 2,893 2,893
Customer advances 5,056 5,056
----------- ------------ ------------
Total current
liabilities 29,571 - 29,571
Deferred income
taxes 352 352
Due to Seller at
closing 20,000 (20,000) -
Long term debt,
excluding current
installments 35,456 20,000 56,294
838
Other liabilities 86 86
----------- ------------ ------------
Total liabilities 85,465 838 86,303
----------- ------------ ------------
Shareholders' equity:
Common stock 110 110
Additional paid-in
capital 16,082 16,082
Stock related awards
and loans (243) (243)
Retained earnings 1,433 1,433
Foreign currency
translation - -
adjustment
Net unrealized loss
on securities
available
for sale - -
Treasury stock (3,229) - (3,229)
----------- ------------ ------------
Total shareholders'
equity 14,153 - 14,153
Total liabilities
and shareholders'
equity $99,618 $838 $100,456
=========== ============ ============
</TABLE>
<PAGE 30>
<TABLE>
<CAPTION>
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended December 25, 1998
(In thousands)
<S> <C> <C> <C> <C>
Comptek Amherst
Research, Systems, Amherst
Inc. and Inc. and Acquisition
Subsidiaries Subsidiary Adjustments
----------------------------------------------
Net sales $67,991 $29,151 $3,010 (H)
5,257 (I)
Costs and expenses:
Cost of sales 51,569 22,488 1,561 (H)
4,200 (I)
Selling, general
and administra-
tive
9,512 2,777 1,114 (A)
1,140 (H)
535 (I)
(251) (F)
(163) (J)
Research and
development 1,900 1,927 115 (H)
210 (I)
------------ ------------ ------------
Operating
profit 5,010 1,959 (194)
Net interest
expense (1,099) (350) (413) (D)
(179) (H)
(55) (I)
(88) (C)
36 (K)
------------ ------------ ------------
Income before
income taxes 3,911 1,609 (893)
Income taxes (1,564) (354) 357 (G)
------------ ------------ ------------
Income from
continuing
operations $2,347 $1,255 ($536)
============ ============ ============
Basic earnings per
share $0.47
Diluted earnings
per share $0.45
Weighted average
shares outstanding-
basic 5,027
Weighted average
shares outstanding-
diluted 5,203
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended December 25, 1998
(In thousands) (cont'd)
<S> <C> <C> <C>
Pro Forma
Including Offering
Amherst Adjustments
Acquisition (E) Pro Forma
----------------------------------------
Net sales $105,409 $105,409
Costs and expenses:
Cost of sales 79,818 79,818
Selling, general
and administra-
tive 14,664 126 14,790
Research and
development 4,152 4,152
----------- ------------ ------------
Operating
profit 6,775 (126) 6,649
Net interest
expense (2,148) (1,251) (3,399)
------------ ------------ ------------
Income before
income taxes 4,627 (1,377) 3,250
Income taxes (1,561) 551 (1,010)
------------ ------------ ------------
Income from
continuing
operations $3,066 ($826) $2,240
============ ============ ============
Basic earnings per
share $0.45
Diluted earnings
per share $0.43 (N)
Weighted average
shares outstanding-
basic 5,027
Weighted average
shares outstanding-
diluted 5,203 (N)
</TABLE>
<PAGE 31>
<TABLE>
<CAPTION>
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended March 31, 1998
(In thousands)
<S> <C> <C> <C> <C> <C>
Comptek PRB PRB Pro Forma Amherst
Research, Associates, Acquisi- Before Systems,
Inc. and Inc. and tion Amherst Inc. and
Subsidi- Subsidiary Adjust- Acquisi- Subsi-
aries ments (L) tion diary
--------- ----------- --------- --------- --------
Net sales $72,008 $29,474 ($182) $101,300 $31,644
Costs and
expenses:
Cost of
sales 57,849 23,783 (326) 81,306 24,436
Selling,
general and
administra-
tive 8,644 2,573 576 11,793 3,484
Research and
development 772 1,052 3 1,827 2,152
Other income 100 44 - 144 -
--------- ----------- --------- --------- --------
Operating
profit 4,843 2,110 (435) 6,518 1,572
Net interest
expense (421) (390) (840) (1,651) (273)
Minority
interest in loss
of subsidiary - 36 (49) (13) -
--------- ---------- --------- --------- --------
Income from
continuing
operations
before
income
taxes (M) 4,422 1,756 (1,324) 4,854 1,299
Income taxes (1,727) (718) 443 (2,002) (190)
--------- ----------- --------- --------- --------
Net income from
continuing
operations $2,695 $1,038 ($881) $2,852 $1,109
========= =========== ========= ========= ========
Basic earnings
per share $0.52 $0.55
Diluted earnings
per share $0.51 $0.54
Weighted Average
Shares
Outstanding -
basic 5,184 5,184
Weighted Average
Shares
Outstanding -
diluted 5,316 5,316
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended March 31, 1998
(In thousands) (cont'd)
<S> <C> <C> <C> <C>
Amherst
Acquisi- Pro Forma
tion Including Offering
Adjust- Amherst Adjust-
ments Acquisition ments Pro Forma
(E)
-------- ----------- -------- ---------
Net sales $132,944 $132,944
Costs and
expenses:
Cost of
sales 105,742 105,742
Selling,
general and
administra-
tive 1,570 (A) 16,721 168 16,889
(126) (F)
Research and
development 3,979 3,979
Other income 144 144
-------- ----------- -------- ---------
Operating
profit (1,444) 6,646 (168) 6,478
Net interest
expense (550) (D) (2,636) (1,684) (4,320)
(124) (C)
(38) (K)
Minority
interest in loss
of subsidiary (13) (13)
-------- ---------- -------- ---------
Income from
continuing
operations
before
income
taxes (M) (2,156) 3,997 (1,852) 2,145
Income taxes 862 (G) (1,330) 741 (589)
-------- ----------- -------- ---------
Net income from
continuing
operations ($1,294) $2,667 ($1,111) $1,556
======== ============= ======== =========
Basic earnings
per share $0.30
Diluted earnings
per share $0.29 (N)
Weighted Average
Shares
Outstanding -
basic 5,184
Weighted Average
Shares
Outstanding -
diluted 5,316 (N)
</TABLE>
<PAGE 32>
Notes To Unaudited Pro Forma
Consolidated Financial Information
A. The Amherst Acquisition is being accounted for as a purchase,
accordingly, the purchase price of $30.0 million plus transactions
costs will be allocated to assets acquired and liabilities assumed
based on their estimated fair values. These adjustments reflect the
Company's estimate of fair value based on the preliminary information
available. The excess of the purchase price over the fair value of net
tangible assets acquired has been allocated to identifiable intangible
net assets (e.g. non-compete agreements and technology), and goodwill.
These intangible assets will be amortized over the period of estimated
benefit ranging from two to twenty-five years. The amount of goodwill
resulting from this preliminary allocation is approximately $27.0
million.
B. The Company acquired certain assets and assumed certain
liabilities of Amherst. This adjustment removes the assets of the
operations that were not acquired and the shareholders' equity of
Amherst, which remained with Amherst.
C. Adjustment represents a current estimate of the Company's
transaction costs, including the costs associated with the modification
of the Company's revolving credit and term loan facility. The pro forma
assumes that the transaction costs have been and will be funded by
borrowings from the revolving credit facility and that interest expense
will increase accordingly.
D. Reflects the $30.0 million purchase price payable as follows: (i)
$20.0 million due at closing to Amherst, of which $5.0 million was
financed through the Company's modified revolving credit facility and
$15.0 million financed through the Offering (ii) a two year, $6.5
million note payable to Amherst bearing interest at 5.5% and (iii) a
two year $3.5 million note payable to Amherst bearing interest at 5.5%.
The statements of operations effect of these adjustments consists of
the incremental interest expense on these notes. The terms of the
Amherst Acquisition required the Company to pay $20.0 million in cash
at closing to Amherst. For purposes of this pro forma presentation the
amount payable at closing has been presented as a liability in the
Amherst Acquisition adjustments as a means to isolate the impacts of
the Amherst Acquisition from those of the Offering.
E. The Offering Adjustments reflect the sale of Debentures in the
amount of $15.0 million and the borrowing of $5.0 million under the
Company's revolving credit and term loan facility. The associated
estimate of debt issuance costs, of approximately $838,000, have been
or will be financed with the revolving credit and term loan facility.
The Offering debt issuance costs will be amortized using the straight-
line method over the term of the Debentures. The Offering adjustments
to the pro forma statements of operations are as follows: (i)
amortization of the debt issuance costs; (ii) interest expense, on the
Debentures, at an assumed rate of 8.50%; (iii) interest expense
resulting from borrowings on revolving credit facility to fund the
Amherst Acquisition and Offering debt issuance costs; and (iv) the
income tax effect of these adjustments at the Company's estimated
effective tax rate.
F. Reflects an adjustment for historical expenses associated with a
legal action between Amherst and PRB that will be terminated as a
result as a result of the Amherst Acquisition.
G. Represents the income tax effect of pro forma adjustments at the
Company's estimated effective tax rate.
H. Represents an adjustment for one month's results of PRB, in order
to reflect nine months of operating results.
I. Represents an adjustment for one month's results of Amherst in
order to reflect nine months of operating results.
J. Represents an adjustment, to Amherst, for acquisition related
expenses.
K. Reflects a reduction in interest expense resulting from the
assumed use of the Company's lower rate revolving credit facility to
finance operations.
L. Reflects the purchase adjustments, for the PRB Acquisition,
consisting primarily of amortization of goodwill, additional interest
expense resulting from the financing of the $20.0 million purchase
price, and the removal of a consolidated subsidiary of which the
Company did not acquire a majority interest.
M. The financial results of Amherst exclude a loss from discontinued
operations, net of income tax benefit, of approximately $213,000 and
$70,000 in the year and nine month periods, respectively.
N. Excludes the effect of an assumed conversion of the Debentures.
At an assumed interest rate of 8.50%, and a conversion price of $9.50,
such assumed conversion would be anti-dilutive. Additionally, at a
conversion price of $8.50, such assumed conversion would be anti-
dilutive.
<PAGE 33>
(c) Exhibits.
The following exhibits are filed as part of this report:
Exhibit 2. Asset Purchase Agreement, dated as of December 23, 1998
by and among Comptek Research, Inc., Amherst Systems, Inc. and ASI
Acquisition Corp., as amended by the amendment dated as of February
23, 1999, included in this filing.
Exhibit 23. Consent of Independent Auditors.
Exhibit 99. News Release dated March 29, 1999, issued by the
Company announcing completion of the acquisition of the business
operations and related assets and liabilities of Amherst Systems,
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: April 9, 1999 By: /s/John J. Sciuto
------------------------ --------------------
John J. Sciuto
Chairman, President and
CEO
<PAGE 34>
EXHIBIT 2
Asset Purchase Agreement
THIS AGREEMENT, made as of December 23, 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"), AMHERST SYSTEMS, INC., a Delaware
corporation having an office and principal place of business at 30
Wilson Road, Williamsville, New York 14221 (hereinafter referred to as
"Amherst") and ASI Acquisition Corp., a Delaware corporation having its
principal place of business at 3539 South Eastern Avenue, Las Vegas,
Nevada 89109 (hereinafter referred to as "ASI").
W I T N E S S E T H :
WHEREAS, CRI desires to purchase from Amherst, and ASI desires to
cause Amherst to sell to CRI, substantially all of the assets,
properties, rights and business of Amherst upon the terms and
conditions and for the purchase price hereinafter set forth;
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 Amherst's assets, 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:
"Accounts Receivable"-- shall mean accounts receivable billed and
eligible to be billed to customers and other trade debtors of Amherst,
notes receivable and all other amounts owing to Amherst.
"Acquired Assets"-- shall mean all the assets, properties, rights and
business of Amherst (including, without limitation, the stock of its
subsidiary, Telemus Inc.) of every kind and description, wherever
located, including, without limitation, all property, tangible or
intangible, real, personal or mixed, cash, notes and Accounts
Receivable and other rights to receive payment owned by Amherst,
claims, causes of action and rights of recovery or set-off, reserves,
prepayments, deferred and other charges, inventories (including,
without limitation, raw materials, finished goods, work-in-process and
goods in transit), supplies, machinery, fixtures, equipment, tools,
dies, jigs and molds, inventions, samples, models, securities, claims
and rights under Contracts of Amherst (including noncompetition rights
pursuant to covenants of current and former shareholders, officers, and
employees of Amherst), all rights to use trade names, trademarks,
service marks and applications therefor, if any, and slogans used by
Amherst in connection with its business or products, the goodwill of
the business conducted by Amherst, all computer software owned or used
by Amherst, and all patents and copyrights and applications therefor,
if any, all trade secrets, know how, concepts, applications,
procedures, marketing and technical data, and the Acquired Books and
Records; provided, that the foregoing shall not include:
(i) The corporate charter, qualifications to conduct
business as a foreign corporation, arrangements with registered
agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books,
blank stock certificates, original Tax Returns and other documents
relating to the organization, maintenance, and existence of
Amherst as a corporation;
(ii) Any assets or rights which are not assignable pursuant
to the terms of the document or instrument creating same or which
are only assignable with the consent of a third party who refuses
to grant such consent, which shall be transferred as and when such
consent is obtained and otherwise as provided in Section 2.2 of
this Agreement;
(iii) Approximately $2,000,000 in value of: (a) trade
accounts receivable, at book value, (b) assets of Amherst relating
to Amherst's discontinued commercial operations, at book value and
(c) shares of common stock of Applied Cellular Technology
Incorporated and the related stock registration rights ("ACT
Stock"), at market value (which specific excluded assets are
identified on Schedule 1 attached hereto). The market value of
the ACT Stock was determined by reference to the closing bid price
of the ACT Stock on the NASDAQ stock market on December 3, 1998.
The specific excluded assets identified on Schedule 1 shall be
adjusted at Closing to account for (a) any change in the market
value of ACT Stock and (b) any liquidation of any ACT Stock, any
assets referred to in clause (b) of the first sentence of this
definition or any identified trade accounts receivable prior to
Closing. It is the intention of the Parties that the aggregate
value of such identified assets at Closing be $2,000,000.
Therefore, the market value of the ACT Stock will be revalued
immediately prior to Closing based on its closing bid price the
day before Closing. To account for such market fluctuation in the
value of ACT Stock and to account for any liquidation of ACT
Stock, any assets referred to in clause (b) of the first sentence
of this definition or any trade accounts receivable liquidated
prior to Closing, appropriate adjustments to Schedule 1 shall be
made immediately prior to Closing by addition to or deletions from
the schedule of retained trade accounts receivable;
(iv) The capital stock of Amherst's foreign investment
subsidiary, Amherst Systems International, Inc., a Barbados
corporation;
(v) The rights of Amherst under this Agreement; and
(vi) Any property or assets contributed by ASI to Amherst in
connection with the Permitted Merger or otherwise.
Assets covered by (i) to (vi), inclusive, being the "Excluded
Assets".
Without limiting the foregoing, the "Acquired Assets" shall include:
(i) all assets (including, without limitation, the stock of its
subsidiary, Telemus Inc.), property, rights and business of Amherst
shown or reflected on the Balance Sheet, (ii) all assets, property,
rights and business acquired by Amherst on or after the Balance Sheet
Date and prior to the Closing Date and (iii) all assets, properties,
rights and business of Amherst set forth on any Schedule or Exhibit to
this Agreement, except in each case for the Excluded Assets. To the
extent that any assets, property, rights or business of Amherst are
intended to be transferred to CRI pursuant to the general language of
this Agreement but do not appear on the applicable Schedules or
Exhibits to this Agreement, the general language shall govern and such
assets, property, rights and business shall nonetheless be deemed
transferred to CRI.
"Acquired Books and Records"-- shall mean all books, records and
documents pertaining to the assets, properties, business, operations,
accounts, financial condition or customers of Amherst, regardless of
whether such books and records are maintained for tax or financial
reporting purposes (including, without limitation, files, customer and
vendor lists, marketing literature, blueprints, plans, specifications
and drawings).
"Adjustment Amount"-- shall mean any amount by which the (i) Closing
Book Value of Amherst as of the Closing Date is less than two million
and 00/100 dollars ($2,000,000), plus (ii) 50% of the amount, if any,
by which Amherst's long-term debt (including the current portion of
long-term debt) is in excess of eight million and 00/100 dollars
($8,000,000) as of the Closing Date.
"Amherst Agreements" means the agreements, dated as of December 23,
1998 by which ASI acquired Amherst.
"Amherst Closing Documents" as defined in Section 3.2(a).
"Amherst Disclosure Letter"--shall mean a disclosure letter provided by
Amherst 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 Amherst or ASI are
qualified by disclosures made in the Amherst Disclosure Letter.
"Amherst Indemnified Person" as defined in Section 10.3.
"Applicable Contract"--shall mean any Contract (a) under which Amherst
has or may acquire any rights, (b) under which Amherst has or may
become subject to any obligation or liability, or (c) by which Amherst
or any of the assets owned by it is or may become bound.
"Balance Sheet"--as defined in Section 3.5.
"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 Amherst's total consolidated shareholders'
equity determined in accordance with GAAP.
"Breach"--shall mean a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any
instrument delivered pursuant to this Agreement; such a "Breach" 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 Amherst certified by Amherst's chief executive officer and Amherst'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 Amherst as of the date thereof and
the results of its operations and changes in financial position for the
periods then ended.
"Certifying Representative"-as defined in Section 2.7(a).
"Closing"--as defined in Section 2.4.
"Closing Book Value of Amherst" shall mean the Book Value of Amherst,
as of the Closing Date, adjusted downward by the value of the Excluded
Assets referred to, and determined as provided, in sub-clause (iii) of
the definition of Acquired Assets.
"Closing Date"--shall mean 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 2.7(a).
"Commercially Reasonable Efforts"--shall mean 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"--shall mean any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contemplated Transactions"--shall mean all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Acquired Assets to CRI;
(b) the execution, delivery, and performance of the Promissory
Notes (including the Escrow Notes) and the Noncompetition
Agreements;
(c) the performance by CRI, Amherst, and ASI of their respective
covenants and obligations under this Agreement; and
(d) CRI's acquisition and ownership of the Acquired Assets.
"Cost to Complete Certificate" as defined in Section 2.7(a).
"Contract"--shall mean any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied)
that is legally binding.
"CRI's Closing Documents" as defined in Section 4.2.
"CRI Indemnified Person" as defined in Section 10.2.
"Damages"--as defined in Section 10.2.
"DCAA"--shall mean the United States of America Defense Contract Audit
Agency.
"Encumbrance"--shall mean 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"--shall mean navigable waters, ocean waters, or any other
surface water, ground water, drinking water supply, land surface or
subsurface strata or ambient air.
"Environmental, Health, and Safety Liabilities"--shall mean 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, and Safety Matter;
(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.
Section 9601 et seq., as amended ("CERCLA").
"Environmental, Health and Safety Matter"--shall mean any matter
arising out of, resulting from or relating to any activity or conduct
regulated, prescribed or controlled by an Environmental Law or
Occupational Safety and Health Law.
"Environmental Law"--shall mean each of the following statutes and all
regulations promulgated thereunder, as well as any and all comparable
state or local statutes and regulations, in the form in which all
statutes and regulations exist on the closing date: United States
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section 9601, et. seq.; the Federal Water Pollution Control
Act, 33 U.S.C. Section 1251, et seq.; the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 3300F et seq.; and the Toxic Substances Control Act, 15 U.S.C.
Section 2601, et seq.
"ERISA"--shall mean 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.
"Escrow Notes" as defined in Section 2.3(a)(iii).
"Excluded Liabilities" as defined in Section 2.8.
"Excluded Matters" as defined in Section 10.2.
"Facilities"--shall mean any real property, leaseholds, or other
interests currently or formerly owned or operated by Amherst and any
buildings, plants or structures currently or formerly owned or operated
by Amherst.
"Fixed Assets"--shall mean all tools, dies, equipment, machinery, motor
vehicles and fixtures owned or used by Amherst, including, without
limitation, all buildings, land, and equipment leased by Amherst.
"GAAP"--shall mean 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
3.5 were prepared.
"Governmental Authorization"--shall mean 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.
"Government Bid" means any offer to sell made by Amherst prior to the
Closing Date which, if accepted, would result or may result in a
"Government Contract".
"Governmental Body"--shall mean 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.
"Government Contract" means any prime contract, subcontract, teaming
agreement or arrangement, joint venture, basic ordering agreement,
pricing agreement, letter contract, purchase order, delivery order,
change order, Government Bid or other arrangement of any kind between
Amherst and (i) the U.S. Government, (ii) any prime contractor of the
U.S. Government in its capacity as a prime contractor or (iii) any
subcontractor with respect to any contract of a type described in
clauses (i) or (ii) above.
"Government Disclosure" means any certification, representation,
warranty or statement by Amherst to the U.S. Government in that
capacity, or any agent or instrumentality thereof, which in any way
relates to the operation of the business of Amherst carried on prior to
the Closing Date.
"HSR Act"--shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, or any successor law, and the regulations and rules issued
pursuant to that Act or any successor law.
"Hazardous Activity"--shall mean 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.
"Hazardous Materials"--shall mean 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.
"Initial Adjustment Amount" as defined in Section 2.6.
"Intellectual Property Assets" --as defined in Section 3.24.
"Interim Balance Sheet"--as defined in Section 3.5.
"IRC" or "Code"--shall mean 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"--shall mean the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"Knowledge"--shall mean 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. 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 or served as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has,
Knowledge of such fact or other matter.
"Leased Premises"--shall have the meaning specified in Section 3.8(b)
herein
"Legal Requirement"--shall mean any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty.
"Liability" or "Liabilities" means any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, known or unknown, secured or unsecured, accrued,
absolute, contingent or otherwise.
"Liability Basket"--shall mean an aggregate $125,000 deductible to be
utilized to off-set claims by CRI under this Agreement for other than
Excluded Matters.
"Liability Cushion"--shall mean the excess, if any, of the Closing Book
Value of Amherst, as evidenced by the Post-Closing Financial
Statements, over two million and 00/100 dollars ($2,000,000). To the
extent the liability reserve for the DCAA rent matter on the Post-
Closing Financial Statements exceeds the actual liability incurred (if
such matter is finally resolved) within the eighteen months after the
Closing Date, the Liability Cushion shall be increased by the amount of
such difference.
"Noncompetition Agreements"--as defined in Section 2.5(a)(iii).
"Occupational Safety and Health Law"--shall mean 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"--shall mean any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered in a
proceeding with respect to which Amherst 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"--shall mean (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.
"Payroll Taxes"--shall mean all payroll, employment, social security,
workers' compensation, unemployment and other similar Taxes relating to
(i) each employee of Amherst and its Subsidiaries as of the Closing
Date that accepts employment with CRI and (ii) each employee of Amherst
and its Subsidiaries as of the Closing Date that declines employment
with CRI, but, with respect to this clause (ii), only such Taxes that
shall have been accrued or shall have arisen through the date that any
such employee shall have declined employment with CRI.
"Permitted Encumbrances" shall mean liens (i) set forth in the Amherst
Disclosure Letter and (ii) liens on the Acquired Assets associated with
any financing of the transactions contemplated by the Amherst
Agreements; provided, however, that the liens identified in sub-clause
(ii) shall be removed upon consummation of the Contemplated
Transactions.
"Permitted Merger"--shall mean the merger of ASI with and into Amherst,
with Amherst as the surviving corporation.
"Person"--shall mean 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 3.15.
"Post-Closing Financial Statements"--as defined in Section 2.7(a).
"Proceeding"--shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) relating to Amherst
commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Promissory Notes"--the unsecured and subordinated notes of CRI to be
issued to Amherst.
"Purchase Price"--as defined in Section 2.3.
"Reasonable Best Estimate"--shall mean an estimate as to which there is
a reasonable basis and in no event shall it be construed as a guarantee
or other assurance of a future result.
"Related Person"--with respect to a particular individual, shall mean:
(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, shall
mean:
(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"--shall mean any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other disposing into the
Environment, whether intentional or unintentional.
"Representative"--with respect to a particular Person, shall mean any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants,
and financial advisors.
"Securities Act"--shall mean the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"Subsidiary"--with respect to any Person (the "Owner"), shall mean 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 Amherst.
"Tax" and "Taxes" means all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign taxing
authority, whether disputed or not, including without limitation,
income, profits, gross receipts, capital, estimated, excise,
occupational, custom, duty, ad valorem, value-added, stamp, property,
sales, transfer, withholding, real estate, use, employment, payroll,
alternative or add-on minimum, environmental (including Taxes under
Section 59A of the Code) and franchise taxes and such terms shall
include any interest, penalties or additions attributable to or imposed
on or with respect to such assessments and any expenses incurred in
connection with the settlement of any tax liability.
"Tax Return"--shall mean 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"--shall mean 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"--shall mean a claim, Proceeding, dispute, action, or other
matter which 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
TRANSFER OF ASSETS; CLOSING
2.1 ASSETS
Based upon and subject to the terms, agreements, warranties,
representations and conditions of this Agreement, Amherst hereby agrees
to sell, convey, transfer, assign and deliver to CRI on the Closing
Date and CRI hereby agrees to purchase and accept on the Closing Date
the Acquired Assets.
2.2 CONSENTS
At or prior to Closing, Amherst shall cause to be delivered to CRI
consents to the Contemplated Transactions and waivers of rights to
terminate or modify any material rights or obligations of Amherst from
the Persons with whom Amherst has Applicable Contracts (excluding U.S.
government prime contracts which will be subject to a post-closing
Novation Agreement) as of a date not more than ten (10) days prior to
the Closing Date or such earlier date as the Parties may agree. To the
extent that the assignment of or the agreement to assign any such
Applicable Contract to CRI hereunder would constitute a breach of that
Applicable Contract unless the consent or waiver of another party
thereto has been obtained, this Agreement shall not constitute any such
assignment or agreement to assign unless and until such consent or
waiver is obtained. CRI and Amherst agree to use their best efforts to
obtain prior to the Closing Date all such consents and waivers. If any
such consent or waiver is not obtained before the Closing Date and the
Closing is nevertheless consummated, Amherst and ASI agree to continue,
at the sole cost and expense of CRI subject to the last sentence of
this paragraph, to use their best efforts to obtain all such consents
as have not been obtained prior to such date and Amherst further agrees
to cooperate with CRI after such date in any reasonable arrangement
(such as subcontracting, sublicensing or subleasing) designed to
provide for CRI, on terms commercially reasonable to CRI, the benefits
under such Applicable Contracts, including, without limitation,
enforcement, at the cost and for the benefit of CRI, of any and all
rights of Amherst against any other party thereto arising out of the
breach or cancellation thereof by such party or otherwise. To the
extent CRI incurs any cost or expense after the Closing in connection
with obtaining any such consent, such costs and expenses shall be
reflected as a liability on the Post-Closing Financial Statements.
2.3 PURCHASE PRICE
The purchase price (the "Purchase Price"), subject to adjustment
provided for in Sections 2.6 and 2.7, for the Acquired Assets will be
thirty million and 00/100 dollars ($30,000,000) including the
Promissory Notes (inclusive of the Escrow Notes) in the principal
amount of up to ten million and 00/100 dollars ($10,000,000), to be
paid as follows:
(a) (i) At the Closing CRI will pay Amherst the aggregate
sum of twenty million and 00/100 dollars ($20,000,000)
in cash (the "Cash") by wire transfers to a bank account
designated by Amherst;
(ii) At the Closing CRI will execute and deliver to
Amherst Promissory Notes of CRI in the aggregate
principal amount of up to six million five hundred
thousand and 00/100 dollars ($6,500,000); and
(iii) At the Closing CRI will execute and deliver to
Amherst Promissory Notes of CRI in the aggregate
principal amount of up to three million five hundred
thousand and 00/100 dollars ($3,500,000) (the "Escrow
Notes").
(b) The Promissory Notes (including the Escrow Notes) to be
delivered by CRI will be unsecured, non-negotiable, and
subordinated to CRI's bank debt and any other debt incurred by CRI
in connection with the Contemplated Transactions. The Promissory
Notes (including the Escrow Notes) will bear interest at the rate
of 5.5% per annum compounded annually, payable at maturity;
provided, however, that while a default in payment by CRI is
continuing, interest on the Promissory Notes shall accrue at a
rate of 11.5% per annum.
(c) The exact amount of Cash and Promissory Notes (including the
Escrow Notes) will be subject to adjustment and allocation as
provided for in Sections 2.6 and 2.7.
2.4 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement
will take place at a location to be mutually agreed to by the Parties
hereto, at 9:00 a.m. (local time) on (i) January 27, 1999, or (ii) the
date that is two (2) business days following the termination of the
applicable waiting period under the HSR Act or (iii) such other date
not later than the sixtieth (60th) day after the date hereof as the
Parties shall agree. Subject to the provisions of Article IX, 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
2.4 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.5 CLOSING OBLIGATIONS
At the Closing:
(a) Amherst will deliver, or caused to be delivered, to CRI:
(i) [Reserved];
(ii) employment agreements in the form attached as
Exhibit 2.5(a)(ii), executed by CRI and such employees
of Amherst designated by CRI;
(iii) a noncompetition agreement executed by
Amherst, a noncompetition agreement executed by ASI,
each in the form of Exhibit 2.5(a)(iii), and assignments
of the noncompetition agreements set forth on Schedule
2.5(a)(iii) (collectively, the "Noncompetition
Agreements");
(iv) certificates executed by Amherst and ASI
representing and warranting to CRI that each of their
representations and warranties in this Agreement was
accurate in all material respects as of the date of this
Agreement, and is accurate in all material respects as
of the Closing Date as if made on the Closing Date,
(except to the extent such representations are by their
express provisions made as of a specified date and
giving full effect to any information that was delivered
by ASI or Amherst to CRI prior to the Closing Date in
accordance with Section 5.5 or the Amherst Disclosure
Letter) and such other documents as CRI or its counsel
may reasonably request and the form of which is mutually
agreed to no later than five (5) days prior to Closing
for the purpose of (A) evidencing the performance or
compliance by Amherst and/or ASI with, any covenant or
obligation required to be performed or complied with by
Amherst and/or ASI; (B) evidencing the satisfaction of
any condition referred to in Article VII; or (C)
otherwise facilitating the consummation or performance
of any of the Contemplated Transactions;
(v) the Acquired Assets;
(vi) opinions of counsel, each dated the Closing Date,
for Amherst and ASI, reasonably acceptable to CRI and
its counsel and the form of which is mutually agreed to
no later than five (5) days prior to Closing; and
(vii) such other certificates, pay-off letters, UCC
releases, consents and documents reasonably requested by
CRI and its counsel and the form of which is mutually
agreed to no later than 5 days prior to Closing.
(b) CRI will deliver to Amherst:
(i) Cash by bank wire transfers to such account as
Amherst shall specify;
(ii) Ten million and 00/100 dollars of Promissory Notes
(Three Million Five Hundred Thousand and 00/100 dollars
of which shall be Escrow Notes) in the form of Exhibit
2.5(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 material respects to the
Knowledge of CRI as of the date of this Agreement and is
accurate in all material respects as of the Closing Date
as if made on the Closing Date.
(c) Such sale, assignment, transfer and delivery of the Acquired
Assets will be effected by delivery by Amherst to CRI of (i) a duly
executed bill of sale and assignment agreement in a form reasonably
acceptable to CRI and (ii) such other duly executed, good and
sufficient instruments of conveyance, transfer and assignment,
including without limitation, assignments of Patents, Marks and
Copyrights, as shall be reasonably necessary to convey to CRI all of
Amherst's rights, titles and interests in and to the Acquired Assets.
2.6 ADJUSTMENT AMOUNT
The Purchase Price for the Acquired Assets is based, in part, on the
Closing Book Value of Amherst being at least two million and 00/100
dollars ($2,000,000). If the Closing Book Value of Amherst as
reflected in the Closing Financial Statements is less than two million
and 00/100 dollars ($2,000,000) 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 Amherst (the
"Initial Adjustment Amount"); provided, however, if the Initial
Adjustment Amount is greater than five hundred thousand and 00/100
dollars ($500,000), the following terms shall apply:
(a) CRI may terminate this Agreement upon written notice provided
to Amherst 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 or waives its
right to do so in accordance with the terms of Subsection (a)
above, Amherst 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 five hundred thousand
and 00/100 dollars ($500,000).
(c) The Termination Notice shall be effective to terminate the
Agreement unless CRI provides written notice to Amherst
within five (5) days after the date of the Termination Notice
that CRI will limit the Initial Adjustment Amount to five
hundred thousand and 00/100 dollars ($500,000).
(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 five hundred thousand and
00/100 dollars ($500,000).
A termination of this Agreement pursuant to this Section 2.6
shall not be a Breach of this Agreement by any party hereto.
2.7 ADJUSTMENT PROCEDURE
(a) At least fifteen (15) days prior to the Closing, Amherst will
cause an appointed representative mutually agreeable to the
Parties (the "Certifying Representative") to prepare and
certify as materially accurate consolidated financial
statements ("Closing Financial Statements") of Amherst for
the period from April 30, 1998, through November 30, 1998.
Within sixty (60) days after the Closing Date, Amherst will
deliver post- closing consolidated financial statements of
Amherst prepared in accordance with GAAP and reviewed by KPMG
Peat Marwick, LLP, Amherst's certified public accountants,
for the period from April 30, 1998 through the Closing Date
(the "Post-Closing Financial Statements") and a certificate
which sets forth the Reasonable Best Estimate of the "cost to
complete" for each of the Applicable Contracts pursuant to
which Amherst is required to perform services or deliver
products (the "Cost to Complete Certificate"). CRI shall
make Amherst's Books and Records and its personnel available
to Amherst and said accountants in connection with the
preparation of the Post-Closing Financial Statements at no
cost to Amherst. The Post-Closing Financial Statements shall
include a computation of the Closing Book Value of Amherst
and the long-term debt of Amherst as of the date of the Post-
Closing Financial Statements and shall be certified by the
Certifying Representative to be in accordance with GAAP as
applied on a consistent basis. The Certifying Representative
shall also certify the Cost to Complete Certificate. The
review by KPMG Peat Marwick, LLP, shall include a written
report thereon. If within thirty (30) days following delivery
of the Post-Closing Financial Statements (together with the
Certifying Representative's certification and KPMG Peat
Marwick's report) to CRI, CRI has not given Amherst 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 Closing Book Value of Amherst and the
long-term debt of Amherst 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
Amherst fail to reach a mutually agreeable resolution, then
the issues in dispute will be submitted to
PricewaterhouseCoopers 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 will bear the
fees of the Accountants for the services contemplated by this
Section 2.7(a); provided, however, that if such dispute is
resolved in CRI's favor the fees paid to the Accountants for
services under this Section 2.7(a) shall be added to the
Adjustment Amount such that the Purchase Price is reduced by
the amount of such fees. If the Adjustment Amount reflects
that the Purchase Price was inappropriately adjusted downward
under the terms of Section 2.6, an appropriate additional
cash payment shall be made to Amherst.
(b) The Escrow Notes will 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, are exhausted. During
the eighteen (18) months following the Closing, after such
time as the Liability Basket and the Liability Cushion, if
any exists, are exhausted, the principal amount of the Escrow
Notes shall be adjusted downward from time to time for the
amount of any claims made by CRI for Damages or for
indemnification. Interest shall be deemed to accrue only on
such reduced principal balance of the Escrow Notes from the
Closing Date until final payment of the Escrow Notes.
2.8 ASSUMPTION OF LIABILITIES
On the terms and subject to the conditions of this Agreement, in
addition to the Purchase Price, on the Closing Date, CRI shall assume
and discharge when due the Liabilities of Amherst and its Subsidiaries
whether accrued or arising before or after the Closing, except for the
Excluded Liabilities (the "Assumed Liabilities"). Amherst and its
Subsidiaries shall retain, and shall be responsible for paying,
performing and discharging when due, and CRI shall not assume or have
any responsibility for, the following Liabilities (the "Excluded
Liabilities"): (i) all Liabilities relating to or arising out of the
Excluded Assets and (ii) all Liabilities of Amherst or ASI relating to
or arising out of this Agreement.
2.9 BULK SALES LAW COMPLIANCE
The Parties hereto agree to waive compliance with any applicable bulk
sales or transfer law.
2.10 ALLOCATION OF PURCHASE PRICE
The Parties to this Agreement agree to allocate, not later than March
15, 1999, the Purchase Price in accordance with the rules under Section
1060 of the Code and the Treasury Regulations promulgated thereunder.
The Parties recognize that the Purchase Price does not include CRI's
acquisition expenses and that CRI will allocate such expenses
appropriately. Amherst and CRI agree to act in accordance with such
allocations (including any modifications thereto reflecting any post-
closing adjustment of the Purchase Price pursuant to Sections 2.6 and
2.7, as applicable) in any relevant Tax returns or filings, including
any forms or reports required to be filed pursuant to Section 1060 of
the Code, the Treasury Regulations promulgated thereunder or any
provisions of local, state and federal law ("1060 Forms"), and to
cooperate in the preparation of any 1060 Forms and to file such 1060
Forms in the manner required by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
AMHERST AND ASI
As an inducement to CRI to enter into this Agreement, Amherst and ASI,
jointly and severally, represent and warrant to CRI, as of the date of
this Agreement and as of the Closing, as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Each of Amherst and its Subsidiaries 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. Each of
Amherst and its Subsidiaries is 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. The Amherst Disclosure Letter sets forth each
jurisdiction where (i) Amherst is so qualified, (ii) any
Subsidiary is incorporated and (iii) any Subsidiary is so
qualified. ASI is a corporation duly organized, validly
existing, and in good standing under the laws of its
jurisdiction of incorporation.
(b) The Amherst Disclosure Letter includes copies of the
Organizational Documents of Amherst and each Subsidiary, as
currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Amherst and ASI, enforceable against Amherst
and the ASI, jointly and severally, in accordance with its
terms. Upon the execution and delivery by ASI and/or Amherst,
as the case may be, of the Noncompetition Agreements
(collectively, the "Amherst Closing Documents"), the Amherst
Closing Documents will constitute the legal, valid, and
binding obligations of ASI and/or Amherst, as the case may
be, enforceable against ASI and/or Amherst, as the case may
be, in accordance with their respective terms. Each of
Amherst and ASI has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this
Agreement and the Amherst Closing Documents and to perform
their obligations under this Agreement and the Amherst
Closing Documents.
(b) Except as specified in the Amherst Disclosure Letter, 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
Amherst, or (B) any currently effective resolution
adopted by the board of directors or the stockholders of
Amherst;
(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 Amherst or ASI,
or any of the assets owned or used by Amherst, 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 Amherst or that otherwise
relates to the business of, or any of the assets owned
or used by, Amherst;
(iv) cause Amherst to become subject to, or to become liable
for the payment of, any Tax;
(v) 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
(vi) result in the imposition or creation of any Encumbrance
(other than Permitted Encumbrances and Encumbrances
resulting from acts of CRI) upon or with respect to any
of the assets owned or used by Amherst.
(c) Amherst is acquiring the Promissory Notes for its own account
and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act. Amherst 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 Amherst consist of two million
(2,000,000) shares of common stock, par value $.01 per share, of which
one million forty thousand nine hundred eleven (1,040,911) shares are
issued and outstanding. ASI is or will be on the Closing Date the
record and beneficial owner and holder of all of the issued and
outstanding shares of capital stock of Amherst. All of the outstanding
equity securities of Amherst and each of its Subsidiaries have been
duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale
or transfer of any equity securities or other securities of any
Subsidiary.
3.4 SUBSIDIARY AND INVESTMENTS
Except as set forth in the Amherst Disclosure Letter, Amherst has no
direct or indirect Subsidiaries and has not made any investments in,
and does not own any securities of or other interests in, any firm,
corporation, association, business organization, enterprise, entity or
other Person. Amherst is the record owner of all the capital stock of
each such Subsidiary.
3.5 FINANCIAL STATEMENTS
Amherst has delivered to CRI:
(a) audited consolidated balance sheets of Amherst as at April
30, 1998 (the "Balance Sheet"), and April 30, 1997, 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 KPMG Peat Marwick, LLP, independent
certified public accountants;
(b) a balance sheet as of October 31, 1998 (the "Interim Balance
Sheet") certified by the Certifying Representative.
Such financial statements and notes fairly present the financial
condition and the results of operations, changes in stockholders'
equity, and cash flow of Amherst as at the respective dates of and for
the periods referred to in such financial statements, all in accordance
with GAAP except that the Interim Balance Sheet is subject to year-end
adjustments; the financial statements referred to in this Section 3.5
reflect the consistent application of such accounting principles
throughout the periods involved. No financial statements of any Person
other than Amherst and its Subsidiaries are required by GAAP to be
included in the consolidated financial statements of Amherst.
3.6 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of Amherst and its Subsidiaries 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 Amherst contain records that are
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 Amherst, 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.
3.7 TITLE TO ASSETS; LIENS AND ENCUMBRANCES
Except for assets which are leased from third parties, Encumbrances
identified in the financial statements referenced in Section 3.5
(including the notes thereto), and except as set forth in the Amherst
Disclosure Letter, Amherst is the owner of, and has good and marketable
title to, all of the Acquired Assets, free and clear of all liens other
than the Permitted Encumbrances. Amherst owns all of the assets used
by it in the operation and conduct of its business, or required by
Amherst for the normal conduct of its business, except for those assets
leased by Amherst under leases specifically identified on a list set
forth in the Amherst Disclosure Letter; provided, however, that such
list may omit leased assets with annual lease payments less than
$2,500. The Acquired Assets constitute all of the assets used in,
related to or required by Amherst for, the normal conduct of its
business. Amherst does not own any real property.
3.8 FIXED ASSETS
(a) The Amherst Disclosure Letter includes a true, correct
and complete list of all Fixed Assets having an original cost of more
than $2,500 (whether expensed or capitalized, when purchased, and
including any such assets which have an original cost to Amherst less
than $2,500, but because such assets are related have an aggregate cost
in excess of $2,500), indicating the owner and location thereof, and
the cost applicable thereto (or, in those instances where the actual
cost is unknown to Amherst, the estimated cost). Except as set forth
in the Amherst Disclosure Letter, the buildings, plants, structures,
and equipment of Amherst 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 Amherst are sufficient for the continued conduct of
Amherst's businesses after the Closing in substantially the same manner
as conducted prior to the Closing. The dollar amount of the Fixed
Assets owned by Amherst as shown on the Balance Sheet does not in any
case exceed the cost of the same, less any previous write-downs and
less depreciation through the end of the most recent fiscal year of
Amherst determined in accordance with GAAP consistently applied, and
Amherst has not written up the value of any such assets.
(b) The Amherst Disclosure Letter includes a true, correct
and complete list of each lease of premises executed by or binding upon
Amherst as lessee, sub-lessee, tenant or assignee (the "Leased
Premises") setting forth in each case a description of any and all
leasehold improvements paid for by Amherst. Except as set forth in the
Amherst Disclosure Letter, each lease is in full force and effect on
the date hereof without any default or breach thereof by Amherst or, to
the Knowledge of Amherst, any other party thereto. Except as set forth
in the Amherst Disclosure Letter, to Amherst's Knowledge, no consent of
any landlord or any other party is required under any such lease in
order to assign each such lease to CRI (or its designee) or assignee
and to keep such lease in full force and effect after the execution and
delivery of this Agreement and the Contemplated Transactions. True,
correct and complete copies of all such leases, including all
amendments, addenda, waivers and all other binding documents affecting
the tenant's rights thereunder, will be made available to CRI upon
request.
(c) Amherst has not received any written notice of any
requirements or recommendations by any insurance company which has
issued a policy covering any part of any Leased Premises or by any
board of fire underwriters or other body exercising similar functions,
requiring or recommending any repairs or work to be done on any part of
any Leased Premises. All of the public utilities required for the
operation of the Leased Premises in the manner currently operated are
installed and operating, and all installation and connection charges
have been paid in full or provided for. Amherst has not received
written notice of any assessments, and has no Knowledge of any pending
assessments, affecting the Leased Premises.
The Leased Premises and the use thereof conform in all material
respects with all covenants and restrictions and all applicable
building, zoning, environmental, land use and other Laws.
3.9 ACCOUNTS RECEIVABLE
All Accounts Receivable of Amherst that are reflected on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of
Amherst as of the Closing Date represent or will represent valid
obligations arising from sales actually made or services actually
performed or otherwise arising from contractual obligations of
customers 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 Amherst 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 have
been or will be collected in full, without any set-off arising from
matters occurring prior to Closing, within seventeen (17) months from
the Closing Date. Except as disclosed in the Amherst Disclosure
Letter, 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 Amherst Disclosure Letter includes 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.
3.10 INVENTORY
All inventory of Amherst, 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 Amherst 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 an average
cost 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 Amherst.
3.11 PURCHASE AND SALES COMMITMENTS AND ORDERS; CUSTOMERS AND
VENDORS
Except as set forth in the Amherst Disclosure Letter, with respect to
the purchase and sales orders or commitments of Amherst outstanding on
the date hereof involving more than $10,000, all such purchase orders
have been made at arm's-length market prices and, in Amherst's
Reasonable Best Estimate, all sales orders have been made at prices and
on terms which will result in the normal profits of Amherst. Except as
set forth in the Amherst Disclosure Letter, no customer of Amherst has
requested that deliveries under any sales order or services to be
performed by it under any Applicable Contract be delayed and Amherst
and ASI do not have any Knowledge of (a) any plans of any customer to
order less from Amherst during the 12-month period beginning on the
date hereof than such customer has committed to order such Applicable
Contract or (b) any facts which would result in such a decrease in such
order. Neither Amherst nor ASI has Knowledge of any facts or
conditions which may result in or have an adverse effect on the future
sales, profits or business of Amherst; provided, however, neither
Amherst nor ASI makes any representation as to general economic,
political or industry conditions and how such conditions may have an
adverse effect on future sales, profits or business by Amherst.
(b) The Amherst Disclosure Letter includes a true, correct
and complete list of (i) the 20 largest customers of Amherst in terms
of revenues during the twelve-month period ending September 30, 1998,
showing the approximate total sales by Amherst to each such customer
during such period and (ii) the ten largest vendors of Amherst in terms
of purchases of goods or services during such twelve-month period,
showing the approximate total purchases by Amherst from each such
vendor during such period. Since September 30, 1998, there has been no
material adverse change in the business relationship of Amherst with
any such customer or vendor on such list. None of Amherst, ASI or any
of their respective affiliates has received any written notice, or to
the Knowledge of Amherst or ASI, oral notice from any existing customer
of Amherst that said customer (i) intends to file a petition for relief
under any bankruptcy or similar law or make an assignment for the
benefit of its creditors, (ii) intends to terminate its business
relationship with Amherst or (iii) has requested that Amherst grant
price concessions, rebates or reductions on products or services
provided by Amherst.
3.12 NO UNDISCLOSED LIABILITIES
On the date of the Interim Balance Sheet, there were no Liabilities of
Amherst (including, but not limited to, Liabilities for Taxes relating
to any prior period except for year end adjustments) other than those
Liabilities disclosed or provided for on the Interim Balance Sheet
except for liabilities which would not be required under GAAP to be
recorded on the Interim Balance Sheet. On the date hereof and on the
Closing Date, there are no and will be no other Liabilities of Amherst
except those incurred since the Interim Balance Sheet Date, in the
Ordinary Course of the Business of Amherst, and not in violation of or
in conflict with any of the terms, agreements, warranties,
representations and conditions of Amherst contained in this Agreement.
3.13 TAXES
(a) Amherst has filed or caused to be filed (on a timely basis
since January 1, 1994) 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. Amherst has
delivered to CRI copies of all such Tax Returns filed for the
tax years ending April 30, 1998, 1997 and 1996. Amherst 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 Amherst,
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
Amherst and its Subsidiaries 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 the taxable year ending April 30, 1994.
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. Amherst 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 Amherst or for
which Amherst may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on
the books of Amherst are adequate (determined in accordance
with GAAP) and are at least equal to Amherst's liability for
Taxes. There exists no proposed tax assessment against
Amherst 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 Amherst. No property of Amherst is
property which Amherst is or will be required to treat as
owned by another person pursuant to the provisions of Section
168 (f) (safe harbor leasing provisions) of the Code. All
Taxes that Amherst 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) Amherst are true, correct, and complete in all
material respects. There is no tax sharing agreement that
will require any payment by Amherst after the date of this
Agreement.
3.14 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, assets, or
condition (financial or otherwise) of Amherst and no event has occurred
or circumstance exists that may result in such a material adverse
change, other than those which may result from general economic,
political or industry conditions.
3.15 EMPLOYEE BENEFITS
(a) As used in this Section 3.15, the following terms have the
meanings set forth below.
"Company Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by Amherst or an ERISA
Affiliate of Amherst.
"Company Plan" means all Plans of which Amherst or an ERISA
Affiliate of Amherst is or was within the past five years a
Plan Sponsor, or to which Amherst or an ERISA Affiliate of
Amherst within the past five years otherwise contributes or
has contributed, or in which Amherst or an ERISA Affiliate of
Amherst 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 Amherst or any ERISA Affiliate of Amherst.
"ERISA Affiliate" means, with respect to Amherst, any other
person that, together with Amherst, would be treated as a
single employer under IRC Section 414.
"Multi-Employer Plan" has the meaning given in ERISA Section
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 Section 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) The Amherst Disclosure Letter contains true, correct and
complete lists of:
(i) 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) (A) all ERISA Affiliates of Amherst, 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) For each Multi- Employer Plan, as of its last
valuation date, the amount of potential withdrawal
liability of Amherst and Amherst's other ERISA
Affiliates, calculated according to information made
available pursuant to ERISA Section 4221(e).
(c) Except as provided in the Amherst Disclosure Letter, Amherst
has 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 ASI or Amherst 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 Amherst and the ERISA Affiliates of Amherst, 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 Amherst or any ERISA
Affiliate of Amherst 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
mentionedelsewhere in this Section 3.15;
(xii) all notices that were given by the IRS, the PBGC,
or the Department of Labor to Amherst, any ERISA
Affiliate of Amherst, 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 Amherst
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) Except as set forth in the Amherst Disclosure Letter:
(i) Amherst has performed all of its respective obligations
under all Company Plans, Company Other Benefit
Obligations, and Company VEBAs. Amherst 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 Amherst 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 Amherst.
(iii) Amherst, 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 material compliance with ERISA, the
IRC, and other applicable Laws including the provisions
of such Laws expressly mentioned in this Section 3.15,
and with any applicable collective bargaining agreement.
3.16 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) (i) Except as disclosed in the Amherst Disclosure
Letter, each of Amherst and its Subsidiaries 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 Amherst Disclosure Letter, to
Amherst's Knowledge, 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 Amherst of, or a failure on the part of
Amherst to comply with, any Legal Requirement material
to its operations, or (B) may give rise to any
obligation on the part of Amherst to undertake, or to
bear all or any portion of the cost of, any remedial
action of any nature which is material to Amherst's
operations; and
(iii) Except as disclosed in the Amherst Disclosure
Letter, Amherst 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 violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of Amherst
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) The Amherst Disclosure Letter includes an accurate list of
each material Governmental Authorization that is held by
Amherst or its Subsidiaries. Each Governmental Authorization
listed in the Amherst Disclosure Letter is valid and in full
force and effect. Except as set forth in the Amherst
Disclosure Letter:
(i) Each of Amherst and its Subsidiaries 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 Amherst
Disclosure Letter;
(ii) To Amherst's Knowledge, 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) Neither Amherst nor any of its Subsidiaries has
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.
Each of Amherst, its Subsidiaries and ASI have received all of the
Governmental Authorizations necessary to permit Amherst to lawfully
conduct and operate its business in the manner it is currently
conducted and operate such business and to permit Amherst to own and
use its assets in the manner in which it currently owns and uses such
assets.
3.17 LEGAL PROCEEDINGS; ORDERS
(a) Except as disclosed in the Amherst Disclosure Letter or in
this Agreement, there is no pending Proceeding:
(i) that has been commenced by or against Amherst or any of
its Subsidiaries; 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 Amherst, no such Proceeding has been Threatened.
(b) Except as set forth in the Amherst Disclosure Letter or any
Exhibit hereto:
(i) there is no Order to which Amherst, it Subsidiaries, or
any of the material assets owned or used by Amherst or
its Subsidiaries , is subject; and
(ii) to the Knowledge of Amherst, no officer, director,
agent, or employee of Amherst or its Subsidiaries 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 Amherst.
(c) Except as set forth in the Amherst Disclosure Letter or
herein:
(i) each of Amherst and its Subsidiaries 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) To Amherst's Knowledge, 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 Amherst, its Subsidiaries, or any of the
material assets owned or used by Amherst or its
Subsidiaries, is subject; and
(iii) each of Amherst and its Subsidiaries has not
received, at any time since January 1, 1991, any
material written 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 Amherst, its
Subsidiaries, or any of the material assets owned or
used by Amherst or it Subsidiaries, is or has been
subject.
3.18 ABSENCE OF CERTAIN CHANGES AND EVENTS
Since the date of the Interim Balance Sheet (or such other date as may
be set forth below), except as disclosed in the Amherst Disclosure
Letter or otherwise disclosed herein, or contemplated by this
Agreement, Amherst has conducted its businesses only in the Ordinary
Course of Business and there has not been any:
(a) change in Amherst's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital
stock of Amherst; issuance of any security convertible into
such capital stock; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by
Amherst 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 Amherst other
than in connection with the transactions contemplated by the
Amherst Agreements;
(c) payment of bonuses since the date of the Interim Balance
Sheet or increases by Amherst of any bonuses, salaries, or
other compensation to any stockholder, director, officer or
employee or entry into any employment, severance, or similar
Contract with any director, officer, or employee since
November 14, 1998;
(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 Amherst;
(e) damage to or destruction or loss of any asset or property of
Amherst, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business or
financial condition of Amherst and its Subsidiaries, taken as
a whole;
(f) entry into, termination of, or receipt of written 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 Amherst of at
least $10,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any material asset
or property of Amherst or mortgage, pledge, or imposition of
any lien or other encumbrance on any material asset or
property of Amherst (other than Permitted Encumbrances),
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 Amherst in excess of $10,000;
(i) material change in the accounting methods used by Amherst; or
(j) agreement, whether oral or written, by Amherst to do any of
the foregoing.
3.19 CONTRACTS; NO DEFAULTS
(a) The Amherst Disclosure Letter includes a list of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by Amherst 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 Amherst 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 or that involves
expenditures or receipts of Amherst 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);
(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 Amherst
with any other Person;
(viii) each Applicable Contract containing covenants that
in any way purport to restrict the business activity of
Amherst or any Subsidiary or limit the freedom of
Amherst or any Subsidiary 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 given by Amherst or any
Subsidiary 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 Amherst 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 Amherst 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 in the Amherst Disclosure Letter:
(i) to the Knowledge of Amherst, ASI (and no Related Person
of ASI) has not nor may not acquire any rights under,
and ASI has not nor may not 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, Amherst; and
(ii) to the Knowledge of Amherst, no officer, director,
agent, employee, consultant, or contractor of Amherst 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 Amherst, or (B) assign to Amherst or to any
other Person any rights to any invention, improvement,
or discovery relating to the business of Amherst.
(c) Except as set forth in the Amherst Disclosure Letter,
(i) Amherst is, and at all times since January 1, 1995 has
been, in full compliance with all applicable terms and
requirements of each Applicable Contract under which
Amherst has or had any obligation or liability or by
which Amherst or any of the assets owned or used by
Amherst 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) to the Knowledge of Amherst, each other Person that has
or had any obligation or liability under any Applicable
Contract is, and at all times since January 1, 1991 has
been, in full compliance with all applicable terms and
requirements of such Applicable Contract;
(iii) to the Knowledge of Amherst, 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 Amherst 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) Amherst 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 Applicable
Contract, excluding written notices of matters which
were fully resolved.
(d) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid
or payable to Amherst under current or completed Applicable
Contracts with any Person and, to the Knowledge of Amherst,
no such Person has made written demand for such
renegotiation.
(e) To the Knowledge of Amherst, the Applicable Contracts
relating to the sale, design, manufacture, or provision of
products or services by Amherst 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 Amherst Disclosure Letter contains the current Reasonable
Best Estimate of Amherst, as of October 31, 1998, of the
"cost to complete" for each Applicable Contract pursuant to
which Amherst is required to perform services or deliver
products. Except as provided in the Amherst Disclosure
Letter, none of such Contracts has accrued or, in the
Reasonable Best Estimate of Amherst, is expected by Amherst
to result in any losses.
(g) There are no Applicable Contracts between Amherst 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.
(h) With respect to each and every material Government Contract
or bid to obtain a material Government Contract to which
Amherst is a party and except as set forth in the Amherst
Disclosure Letter: (i) Amherst has fully complied with all
material terms and conditions of such Government Contract or
bid for a Government Contract as required as of the date
hereof and as of the Closing Date; (ii) Amherst has fully
complied with all material requirements of statute, rule or
regulation pertaining to such Government Contract or bid for
a Government Contract; (iii) all representations and
certifications executed with respect to such Government
Contract were accurate in every material respect as of their
effective date and Amherst has fully complied with all such
representations and certifications in every material respect;
and (iv) no termination or default, cure notice or show cause
notice has been issued in writing or, to the Knowledge of
Amherst, will be issued.
(i) To the Knowledge of Amherst, (i) none of Amherst's employees,
consultants or agents is (or during the last three years has
been) under administrative, civil or criminal investigation,
indictment or information by any Governmental Body, (ii)
there is not any pending audit or investigation of Amherst,
its officers, employees or representatives nor within the
last three years has there been any audit or investigation of
Amherst, officers, employees or representatives resulting in
a material adverse finding with respect to any alleged
irregularity, misstatement or omission arising under or
relating to any Government Contract or bid; and (iii) during
the last three years, Amherst has not made a voluntary
disclosure to the U.S. Government or any non-U.S. government,
with respect to any alleged irregularity, misstatement or
omission arising under or relating to a Government Contract
or bid. Amherst has not had any irregularities,
misstatements or omissions arising under or relating to any
Government Contract or bid that has led or is expected to
lead, either before or after the Closing Date, to any of the
consequences set forth in clause (i) or (ii) of the
immediately preceding sentence or any other material damage,
penalty assessment, recoupment of payment or disallowance of
cost.
(j) There are (i) no outstanding claims against Amherst either by
the U.S. Government or by any non-U.S. government or by any
prime contractor, subcontractor, vendor or other third party,
arising under or relating to any Government Contract or bid
referred to in the Amherst Disclosure Letter and (ii) no
disputes between Amherst and the U.S. Government or any non-
U.S. Government under the Contract Disputes Act or any other
Federal statute or between Amherst and any prime contractor,
subcontractor or vendor arising under or relating to any such
Government Contract or bid. To the Knowledge of Amherst,
there are no facts that could reasonably be expected to
result in a claim or a dispute under clause (i) or (ii) of
the immediately preceding sentence.
(k) Neither Amherst nor, to the Knowledge of Amherst, any of its
employees, consultants or agents is (or during the last three
years has been) suspended or debarred from doing business
with the U.S. Government or any non-U.S. government or is (or
during such period was) the subject of a finding of non-
responsibility or ineligibility for U.S. Government or non-
U.S. government contracting. Amherst and its affiliates
conducted their operations in material compliance with all
requirements of all material laws pertaining to all
Government Contracts and bids.
(l) No statement, representation or warranty made by Amherst in
any Government Contract, any exhibit thereto or in any
certificate, statement, list, schedule thereto or other
document submitted or furnished to the U.S. Government or any
non-U.S. government in connection with any Government
Contract or bid (i) contained on the date so furnished or
submitted any untrue statement of a material fact, or failed
to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which
they were made, not misleading or (ii) contains on the date
hereof any untrue statement of a material fact, or fails to
state a material fact necessary to make the statements
contained therein, in light of the circumstances in which
they are made, not misleading, except in the case of both
clauses (i) and (ii) any untrue statement or failure to state
a material fact that would not result in any material
liability to Amherst as a result of such untrue statement or
failure to state a material fact.
A list of all Applicable Contracts to which Amherst became a party
between the date of this Agreement and the Closing Date shall be
provided to CRI on or before the Closing.
3.20 INSURANCE
(a) The Amherst Disclosure Letter includes:
(i) a true and complete list of all policies of insurance to
which Amherst is a party or under which Amherst, is or
has been covered at any time within the two (2) years
preceding the date of this Agreement;
(ii) a true and complete list of all pending applications for
policies of insurance; and
(iii) any statement made in writing by the auditor of
Amherst's financial statements during the past two (2)
years with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) The Amherst Disclosure Letter identifies or contains:
(i) any self-insurance arrangement relating to benefits for
Amherst 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 casualty loss by Amherst;
(iii) all material obligations of Amherst to third
parties with respect to insurance (including such
obligations under leases and service agreements) and
identification of the policy under which such coverage
is provided.
(iv) a summary of the loss experience under each policy since
January 1, 1995;
(v) a statement describing each outstanding claim since
January 1, 1995 under an insurance policy 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 Amherst is a party or that provide
coverage to either Amherst, or any director or officer
of Amherst in their capacity as a director or officer:
(A) are valid, outstanding, and enforceable; (B) are
issued by an insurer that is financially sound and
reputable; (C) are sufficient for compliance with all
Legal Requirements and Contracts to which Amherst is a
party or by which any of them is bound; (D) 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;
(c) Since January 1, 1995, Amherst and/or ASI 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.
(d) Amherst has paid all premiums due, and has otherwise
performed, in all material respects, all of its obligations,
under each policy to which Amherst is a party or that
provides coverage to Amherst.
(e) To the Knowledge of Amherst, Amherst has given notice to the
insurer of all material claims that may be insured thereby.
3.21 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
(a) All representations and warranties of Amherst relative to
Environmental, Health and Safety Matters shall be governed
exclusively by this Section 3.21.
(b) Except as set forth in the Amherst Disclosure Letter:
(i) Each of Amherst and its Subsidiaries is, and at all
times has been, in full compliance with, and has not
been and is not in material violation of, any
Environmental Law. Amherst has not received any actual
or, to the Knowledge of Amherst, 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 material
violation or failure to materially 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
Amherst or any of its Subsidiaries 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
Amherst or any of its Subsidiaries, 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.
(ii) There are no pending or, to the Knowledge of Amherst,
Threatened claims, 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
Amherst or any of its Subsidiaries has or had a fee or
leasehold interest.
(iii) Neither Amherst nor, to Amherst's Knowledge, 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 material violation
or failure to materially 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 Amherst or
any of its Subsidiaries had a fee or leasehold interest,
or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by Amherst, 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.
(c) Neither Amherst, 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 Amherst, with respect to any other
properties and assets (whether real, personal, or mixed) in
which Amherst (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.
(d) Except for small quantities maintained in commercial
products, there are no Hazardous Materials present on, at, in
or under the Facilities, 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 incorporated into any structure
therein or thereon.
(e) 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 Amherst
has or had a fee or leasehold interest.
(f) Amherst has made available to CRI true and complete copies
and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Amherst pertaining to
Hazardous Materials or Hazardous Activities in, on, or under
the Facilities, or concerning compliance by Amherst, or any
other Person for whose conduct Amherst is or may be held
responsible, with Environmental Laws.
3.22 EMPLOYEES
(a) The Amherst Disclosure Letter includes a complete and
accurate list of the following information for each employee
of Amherst or its Subsidiaries, 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 November 14, 1998; vacation accrued; and
service credited for purposes of vesting and eligibility to
participate under Amherst's Employee Pension Benefit Plans or
Employee Welfare Benefit Plans, or any other employee benefit
plan. Within the one hundred eighty (180) days preceding the
date hereof, Amherst has not laid-off or otherwise terminated
without cause more than five (5) of its employees.
(b) To the Knowledge of Amherst, no employee of Amherst or any
Subsidiary 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 Amherst
or such Subsidiary, or (ii) the ability of Amherst or such
Subsidiary to conduct its business, including any
Proprietary Rights Agreement with Amherst by any such
employee. To the Knowledge of Amherst, except as has been,
or will be prior to Closing, disclosed to CRI, no officer,
or other key employee of Amherst intends to terminate his
employment with Amherst.
(c) The Amherst Disclosure Letter includes a complete and
accurate list of the following information for each retired
employee or director of Amherst, 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.
3.23 LABOR RELATIONS; COMPLIANCE
Neither Amherst nor any Subsidiaries has been nor is currently a party
to any collective bargaining or other labor Contract. There has not
been and 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
Amherst 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 of Amherst or any Subsidiary
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
any of Amherst or any Subsidiary, or (c) any application for
certification of a collective bargaining agent. 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 Amherst, and no such action is contemplated by Amherst. Amherst 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. Amherst 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.
3.24 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual Property
Assets" includes:
(i) the name "Amherst Systems, 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 Amherst as licensee or licensor.
(b) List--Amherst has, or will prior to Closing, provide to CRI a
complete and accurate list of any material Intellectual
Property Assets, other than Trade Secrets, owned or used by
Amherst (or any of its Subsidiaries) 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 Amherst (or any of its Subsidiaries) is
the licensee. There are no outstanding and, to Amherst's
Knowledge, no Threatened disputes or disagreements with
respect to any such Intellectual Property Assets.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets , which have been or
will be made available to CRI prior to Closing, are all
those necessary for the operation of Amherst's
businesses as they are currently conducted. Amherst is
the owner or lawful user of each of the Intellectual
Property Assets, subject to any limitations set forth in
the Amherst Disclosure Letter.
(ii) All former and current employees of Amherst who have
been employed since January 1, 1995 have executed
written Contracts with Amherst that assign to Amherst
all rights to any inventions, improvements, discoveries,
or information relating to the business of Amherst. To
the Knowledge of Amherst, no key employee of Amherst 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 Amherst.
(d) Patents
(i) Amherst has provided, or will provide prior to Closing,
a complete and accurate list and summary description of
all patents issued to Amherst (or any of its
Subsidiaries). Amherst 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, Amherst 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 Amherst has been or is now
involved in any interference, reissue, reexamination, or
opposition proceeding. To Amherst's Knowledge, there is
no potentially interfering patent or patent application
of any third party.
(iv) No Patent issued to Amherst is infringed or, to
Amherst's Knowledge, has been challenged or threatened
in any way. To the Knowledge of Amherst, none of the
products manufactured and sold, nor any process or know-
how used, by Amherst 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 Amherst have been marked with the proper
patent notice.
(e) Trademarks
(i) The trade names "Amherst Systems", "RetailTrak",
"Spiritrak", "Telemus" and "Amherst Systems
International" are the only Marks used by Amherst.
(ii) No Marks have been registered by Amherst with the
United States Patent and Trademark Office other than
Spiritrak.
(f) Copyrights
Amherst has all copyrights granted by law with respect
original works created by Amherst.
(g) Trade Secrets
(i) Amherst has taken commercially reasonable precautions to
protect the secrecy, confidentiality, and value of its
material Trade Secrets.
(ii) Amherst has good title or the lawful right to use the
Trade Secrets. Except for Trade Secrets made available
by customers, the material Trade Secrets owned by
Amherst are not part of the public knowledge or
literature. No material Trade Secret owned by Amherst
is subject to any adverse claim or, to the Knowledge of
Amherst, has been challenged or threatened in any way.
3.25 CERTAIN PAYMENTS
Neither Amherst (nor any of its Subsidiaries) nor any director,
officer, or to Amherst's Knowledge, any agent, or employee of Amherst
(or any of its Subsidiaries) any other Person associated with or acting
for or on behalf of Amherst (or any of its Subsidiaries), 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
Amherst.
3.26 DISCLOSURE
Neither this Agreement nor the Amherst Disclosure Letter, any Schedule
or other documents and written information furnished by or on behalf of
Amherst to the CRI in connection with this Agreement and the
Contemplated Transactions contains any untrue statement of a material
fact or omits to state any material fact necessary to make the
statements contained herein or therein not misleading.
3.27 RELATIONSHIPS WITH RELATED PERSONS
To the Knowledge of Amherst, except as set forth in the Amherst
Disclosure Letter, neither ASI nor any previous shareholder of Amherst
nor any Related Person of such Persons has, or has had, any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to Amherst's businesses. To the
Knowledge of Amherst, except as set forth in the Amherst Disclosure
Letter, neither Amherst nor any Related Person of ASI or of Amherst 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 Amherst, or (ii) engaged in competition with Amherst with respect
to any line of the products or services of Amherst (a "Competing
Business") in any market presently served by Amherst 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.
3.28 BROKERS OR FINDERS
ASI, Amherst 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
for which CRI could be responsible.
3.29 BANKING RELATIONSHIPS
The Amherst Disclosure Letter sets forth a complete and accurate
description of all arrangements that Amherst and each Subsidiary has
with any banks, savings and loan associations or other financial
institutions providing for any accounts, including, without limitation,
checking accounts, cash contribution accounts, safe deposit boxes,
borrowing arrangements, certificates of deposit or otherwise,
indicating in each case account numbers, if applicable, and the person
or persons authorized to act or sign on behalf of Amherst or such
Subsidiary in respect of any of the foregoing. No person holds any
power of attorney or similar authority from Amherst or any Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CRI
CRI represents and warrants to Amherst as of the date hereof and as of
the Closing 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 (including the
Escrow Notes) and corporate certifications hereto (collectively, "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 CRI's Closing
Documents and to perform its obligations under this Agreement and CRI's
Closing Documents.
4.3 TRANSACTION FINANCING
CRI will use Commercially Reasonable Efforts to obtain a satisfactory
financing commitments within thirty (30) days after the signing of this
Agreement. The obligation of CRI to complete the acquisition is
subject to its obtaining firm commitments, at least three (3) days
prior to Closing, for financing in the amount of at least thirty
million and 00/100 dollars ($30,000,000) and on reasonable financial
terms, conditions and pricing solely acceptable to CRI. If CRI has not
been able to obtain such financing commitments within thirty (30) days
and has not waived such condition, any Party may terminate this
Agreement on written notice. If this Agreement is terminated because
CRI is unable to obtain such financing, CRI will reimburse ASI for its
reasonable out-of-pocket costs incurred in connection with the
Contemplated Transactions up to $75,000.
4.4 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.
4.5 INVESTMENT BANKING FEES
CRI has utilized the services of the investment banking firm of
Houlihan Lokey Howard & Zukin in relation to the Contemplated
Transactions. CRI, not Amherst or ASI, shall be solely responsible for
any fees charged by Houlihan Lokey Howard & Zukin relative hereto.
ARTICLE V
COVENANTS OF AMHERST AND ASI PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Amherst, its
Representatives, and ASI will (a) afford CRI and its Representatives
and prospective lenders and their Representatives (collectively, "CRI's
Advisors") full and free access to Amherst's personnel, customers,
persons with whom it has a contractual relationship, 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 on access imposed by governmental
security regulations.
5.2 OPERATION OF THE BUSINESSES OF AMHERST
Between the date of this Agreement and the Closing Date, except as
provided in the Amherst Disclosure Letter Amherst will:
(a) conduct the business of Amherst 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; and
(b) use its Commercially Reasonable Efforts to preserve intact
the current business organization of Amherst, keep available
the services of the current officers, employees, and agents
of Amherst, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees,
agents, and others having business relationships with
Amherst; and
(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 Amherst; and
(e) not without the prior written consent of CRI:
(i) change Amherst's certificate of incorporation, by-laws
or other governing instruments, except as provided in Section
3.18;
(ii) borrow or agree to borrow any funds or guarantee or
agree to guarantee the obligations of others, except in the
Ordinary Course of Business, except in connection with
financing the transactions contemplated by the Amherst
Agreements;
(iii) except for the anticipated capital expenditures set
forth in the Amherst Disclosure Letter, make any capital
expenditure or commit itself to make any capital expenditure
in excess of $25,000 individually or $50,000 in the
aggregate;
(iv) increase the rate of salary of any officer, director or
employee;
(v) enter into any agreement, Contract or commitment or
incur any Liability other than in the Ordinary Course of
Business and consistent with its existing policies, except in
connection with financing the transactions contemplated by
the Amherst Agreements;
(vi) waive any rights of substantial value affecting the
Acquired Assets;
(vii) dispose of, permit to lapse, or otherwise fail to
preserve any of its Intellectual Property Assets or other
similar rights, dispose of or permit to lapse any license,
permit or other form of authorization, or dispose of or
disclose to any Person, other than an authorized
representative of CRI, any customer list, trade secret,
formula process or know-how;
(viii) make any change in any method of accounting or
accounting practice or in the application of such method of
accounting or account practice or make any change in
accounting estimate;
(ix) pay, loan or advance any amount to or in respect of, or
sell, transfer or lease any assets (whether real, personal or
mixed, tangible or intangible) to, or enter into any
agreement, arrangement or transaction with, any of its
officers or directors, any of its affiliates or associates or
any Person in which it or any of its officers, directors,
affiliates or associates, has any direct or indirect
interest, except for (A) directors' fees and compensation to
its officers and employees at rates not exceeding the rates
of compensation in effect on the Balance Sheet Date and (B)
advances made to employees for travel and other business
expenses in reasonable amounts consistent with past practice;
(x) agree, whether in writing or otherwise, to take any
action prohibited in this Section 5.2; or
(xi) without limiting any of the foregoing, take or refrain
from taking any action the result of which would render any
representation or warranty made to CRI in or in connection
with this Agreement inaccurate when deemed made on and as of
the Closing Date, provided that Amherst shall have the
opportunity to correct any such action during such period to
the satisfaction of CRI.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Amherst and ASI will not,
and will cause Amherst 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 3.18 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, ASI will,
and will cause Amherst to, obtain approval of Amherst'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 (including all
filings under the HSR Act, if applicable). Between the date of this
Agreement and the Closing Date, Amherst and ASI will, and will cause
Amherst 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 (including
taking all actions requested by CRI to cause early termination of the
applicable waiting period under the HSR Act).
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, Amherst and
ASI will promptly notify CRI in writing if ASI or Amherst becomes aware
of any fact or condition that causes or constitutes a material Breach
of any of Amherst's and/or ASI's representations and warranties as of
the date of this Agreement, or if Amherst or ASI 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 material 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, Amherst and/or ASI will promptly notify CRI of the occurrence
of any material Breach of any covenant of Amherst and/or ASI in this
Article V or of the occurrence of any event that may make the
satisfaction of the conditions in Article VII impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, ASI will cause all
indebtedness owed to Amherst by any affiliate or Related Person of
Amherst (other than a Subsidiary) 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 2.6 or Article IX, Amherst and/or ASI will not, and will cause
Amherst 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 Amherst, or any of the capital stock of Amherst, or any
merger, consolidation, business combination, or similar transaction
involving Amherst.
5.8 COMMERCIALLY REASONABLE EFFORTS
Between the date of this Agreement and the Closing Date, Amherst and
ASI will use Commercially Reasonable Efforts to cause the conditions in
Articles VII and VIII 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 (including filings under the HSR Act).
Between the date of this Agreement and the Closing Date, CRI will, and
will cause each Related Person to, cooperate with ASI with respect to
all filings that ASI is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with
ASI 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.
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 Articles VII and VIII to
be satisfied.
6.3 NOTIFICATION
Between the date of this Agreement and the Closing Date, CRI will
promptly notify Amherst and ASI in writing if any executive officers of
CRI become aware of any fact or condition that causes or constitutes a
material 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 material 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 Amherst
and ASI of the occurrence of any material Breach of any covenant of CRI
in this Article VI or of the occurrence of any event that may make the
satisfaction of the conditions in Article VIII impossible or unlikely.
ARTICLE VII
CONDITIONS PRECEDENT TO CRI'S OBLIGATION TO CLOSE
CRI's obligation to purchase the Acquired Assets and to take the other
actions required to be taken by CRI at the Closing is subject to the
satisfaction 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 Amherst's and ASI'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 (except to the extent such representations are by their
express provisions made as of a specified date and after
giving effect to any information that was delivered by ASI or
Amherst to CRI prior to the Closing Date in accordance with
Section 5.5 or the Amherst Disclosure Letter).
(b) Each of Amherst's and ASI's representations and warranties in
Sections 3.7, 3.14, and 3.26 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 AMHERST AND ASI'S PERFORMANCE
(a) All of the covenants and obligations that Amherst and ASI are
required to perform or to comply with pursuant to this
Agreement must be performed or complied with in all material
respects as of twenty-four (24) hours 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 at such
time.
(b) Each document required to be delivered pursuant to Section
2.5 must have been delivered.
7.3 CONSENTS
Each of the Consents referenced in Section 2.2, must have been obtained
and must be in full force and effect.
7.4 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Acquired Assets by
Amherst to CRI, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
7.5 CLOSING OF THE AMHERST AGREEMENTS; CONSUMMATION OF THE PERMITTED
MERGER
The transactions contemplated by the Amherst Agreements shall have been
consummated with no waiver by ASI of any condition to closing.
ARTICLE VIII
CONDITIONS PRECEDENT TO AMHERST'S OBLIGATION TO CLOSE
Amherst's obligation to sell the Acquired Assets and to take the other
actions required to be taken by Amherst and/or ASI 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 Amherst and ASI, 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 (except to the extent such representations are by their
express provisions made as of a specified date) , except as otherwise
contemplated or permitted by this Agreement as of the date of this
Agreement.
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 2.5(b)(iii) and must
have made the payments required to be made by CRI pursuant to
Section 2.3.
8.3 CONSENTS
Each of the Consents identified in Section 6.1 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 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Acquired Assets by
Amherst to CRI, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
8.5 CLOSING OF THE AMHERST AGREEMENTS
The transactions contemplated by the Amherst Agreements shall have been
consummated.
ARTICLE IX
TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by CRI, if a material Breach of any representation or
warranty of Amherst or ASI in this Agreement has been
committed by Amherst or ASI and such Breach has not been
waived;
(b) by Amherst or ASI, if a material Breach of any provision of
this Agreement has been committed by CRI and such Breach has
not been waived.
(c) (i) by CRI, if any of the conditions in Article VII has not
been satisfied as provided therein 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 Amherst and/or ASI, if any of
the conditions in Article VIII 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 Amherst
and/or ASI to comply with their obligations under this
Agreement) and Amherst and ASI have not waived such condition
on or before the Closing Date;
(d) by mutual consent of CRI, Amherst and ASI; or
(e) by any of CRI, Amherst or ASI 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 February 28, 1999, 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 Amherst Disclosure Letter, the certificate delivered
pursuant to Section 2.5(a)(iv), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing
indefinitely; provided, however, that (except as provided in the last
paragraph of Section 10.2 with respect to Excluded Matters) no claim
for indemnification under this Article X for a Breach of any such
representation or warranty may be asserted after the expiration of
eighteen (18) months following the Closing Date unless such claim has
been made in writing prior to the expiration of such period, in which
case such claim shall survive until final resolution thereof. Except
as provided in Section 11.6(g), the right to indemnification, payment
of Damages or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation
conducted with respect to, or any Knowledge acquired (or capable of
being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based
on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of Damages, or other
remedy based on such representations, warranties, covenants and
obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY AMHERST AND ASI
Amherst and ASI, jointly and severally, will indemnify and hold
harmless CRI and its respective Representatives, stockholders,
controlling persons and affiliates (collectively, the "CRI Indemnified
Persons") for, and will pay to the CRI 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 and distributions) 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 Amherst
or ASI in this Agreement, the Amherst Disclosure Letter or
any other certificate or document delivered by Amherst or ASI
pursuant to this Agreement;
(b) any Breach of any representation or warranty made by Amherst
or ASI in this Agreement as if such representation or
warranty were made on and as of the Closing Date, other than
any such Breach that is disclosed and is expressly identified
in the certificate delivered pursuant to Section 2.5(a)(iv)
as having caused the condition specified in Section 7.1 not
to be satisfied;
(c) any Breach by Amherst or ASI of any covenant or obligation of
Amherst or ASI in this Agreement;
(d) any product shipped or manufactured by Amherst prior to the
Closing Date;
(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 ASI or Amherst (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions;
(f) the entire amount of any Taxes, of any type, including,
without limitation, income, excise, franchise, gains,
transfer and sales and use taxes, and any interest or
penalties with respect thereto, owed by Amherst or of any
affiliated, combined or unitary group of which Amherst is or
was a part for tax purposes under federal, state, county or
local laws for any period prior to Closing;
(g) the Excluded Liabilities;
(h) any matter set forth on Schedule 10.2(h) of this Agreement;
or
(i) the failure to collect, within seventeen (17) months of the
Closing Date, Accounts Receivable of Amherst, net of bad debt
reserves on the Closing Date, reflected on the Post-Closing
Financial Statements.
Excluding any claims for (A) matters covered by subsections (e) and
(g), (B) fraud and (C) claims based on any misrepresentation or Breach
of a representation or warranty of Amherst or ASI which either Amherst
or ASI had Knowledge of prior to the Closing ("Excluded Matters"), with
respect to which no limit shall apply, the liability of Amherst and ASI
under this Agreement shall be limited solely to a right of set off by
CRI against the Escrow 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 any Escrow Notes and before
any claims are made against Amherst or ASI with respect to any matters
(other than Excluded Matters), provided, however, that (i) CRI shall
not set off against the Escrow Notes or reduce the Liability Basket or
Liability Cushion with respect to any matter covered by subsections (e)
and (g) above (it being the intention of the Parties that with respect
to such matters, CRI must recover directly from Amherst or ASI) and
(ii) CRI shall not be limited in making a claim hereunder (within the
time period permitted for set offs) for Damages arising from any non-
Excluded Matter to the extent that set off of such claim would be
precluded solely by reason of the fact that a claim based on an
Excluded Matter was previously applied as a set off against the Escrow
Notes. The remedies provided in this Section 10.2 are exclusive (other
than with respect to an Excluded Matter) and limit any other remedies
that may be available to CRI or the other CRI Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY CRI
CRI will indemnify and hold harmless Amherst, ASI and their respective
Representatives, stockholders, controlling persons and affiliates
(collectively, "Amherst Indemnified Persons") for, and will pay to the
Amherst Indemnified Persons 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, (c) any
Assumed Liability, (d) any Taxes with respect to the ownership and
operation of the Acquired Assets after the Closing 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 such Person with CRI (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions.
10.4 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Sections
10.2 or 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be
made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such
claim, but the failure to notify the indemnifying party will
not relieve the indemnifying party of any liability that it
may have to any indemnified party, except to the extent that
the indemnifying party demonstrates that the defense of such
action is prejudiced by the indemnifying party's failure to
receive such notice.
(b) If any Proceeding referred to in Section 10.4(a) is brought
against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding,
the indemnifying party will, unless the claim involves Taxes,
be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is
also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume
the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from
the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified party
under this Article X for any fees of other counsel or any
other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If
the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by
the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the
rights of any Person and no effect on any other claims that
may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by
the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or
settlement of such claims effected without its consent. If
notice is given to an indemnifying party of any compromise or
settlement of any Proceeding and the indemnifying party does
not, within ten days after the indemnified party's notice is
given, give notice to the indemnified party of its reasonable
objection to such compromise or settlement, the indemnifying
party will be bound by any such compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for
which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding. In any event, an
indemnifying party will not be bound by any determination of
a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably
withheld).
(d) Each of Amherst and ASI hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought
against any CRI Indemnified Person for purposes of any claim
that a CRI Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged
therein, and each agrees that process may be served on such
party with respect to such a claim anywhere in the world.
10.5 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by written notice to the party from whom
indemnification is sought.
10.6 OTHER
Following the final review of the Post-Closing Financial Statements
(including, if applicable, any resolution by the Accountants) as
provided in Section 2.7 hereto, to the extent a liability is reflected
on such Post-Closing Financial Statements, such liability shall not be
the basis for a claim for Damages by CRI.
10.7 CERTAIN LIMITS ON INDEMNIFICATION
Any indemnifying party hereunder shall be subrogated to the rights of
the indemnified party upon payment in full of the amount of the
relevant indemnifiable loss. An insurer who would otherwise be
obligated to pay any claim shall not be relieved of the responsibility
with respect thereto or have any subrogation rights with respect
thereto, solely by virtue of the indemnification provision hereof. If
any indemnified party recovers an amount from a third party in respect
of an indemnifiable loss for which indemnification is provided in this
Agreement after the full amount of such indemnifiable loss has been
paid by an indemnifying party and the amount received from such third
party equals or exceeds the amount of the indemnifiable loss previously
paid by the indemnifying party, then the indemnified party shall
promptly remit to the indemnifying party the amount theretofore paid by
such indemnifying party in respect of such indemnifiable loss.
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; provided
however that (i) all sales and transfer taxes and all filing
expenses or other charges in connection with the transfer of
the Acquired Assets shall be paid by CRI and (ii) all fees
and expenses of counsel and accountants of Amherst in
connection with this transaction, to the extent reflected on
the Post-Closing Financial Statements, shall be paid by the
CRI. 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.
(b) CRI, Amherst and ASI 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. ASI and its affiliates shall be solely
responsible for any income taxes resulting from this
Agreement and the Contemplated Transactions. Amherst, ASI
and CRI agree that for all tax purposes, the Contemplated
Transactions constitute a taxable sale of assets by Amherst,
as owned by it, to CRI, and to treat the Contemplated
Transactions consistent therewith on any Tax Return or other
filing made by any of them.
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, Amherst and ASI shall keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any
Person. ASI, Amherst and CRI will consult with each other concerning
the means by which Amherst's employees, customers, and suppliers and
others having dealings with Amherst 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, Amherst
and ASI will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of CRI and Amherst to
maintain in confidence, any written, oral, or other information
obtained in confidence from another party or Amherst 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):
Amherst Systems, Inc.
30 Wilson Road
Buffalo, NY 14221
Attn: President
Facsimile No.: 716-631-0629
ASI Acquisition Corp.
3539 South Eastern Avenue
Las Vegas, Nevada 89109
Facsimile No.: (702) 732-4503
with a copy to:
Law Offices of Joel Mallin
110 East 59th Street
Suite 3202
New York, NY 10022
Attention: Joel Mallin, Esq.
Facsimile No.: (212) 753-3058
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: Christopher A. Head, Esq.
Facsimile No.: (716) 677-0014
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Attention: James R. Tanenbaum, Esq.
Facsimile No.: (212) 806-6006
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 ADDITIONAL AGREEMENTS
(a) The Parties agree:
(i) to furnish upon request to each other such further
information,
(ii) to execute and deliver to each other such other
documents, and
(iii) 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.
(b) CRI shall offer to employ (effective as of the Closing Date)
all of the employees of Amherst as of the Closing Date at wage or
salary levels, as applicable, and with employee benefits that are no
less favorable than those of similarly situated employees of CRI but in
no event less favorable, in the aggregate, than those provided to
employees of Amherst immediately prior to the Closing Date. Consistent
with the foregoing, prior to the Closing Date the Parties shall
mutually agree to appropriate mechanisms for the orderly transition
from Amherst to CRI of those Amherst Employees who accept employment
with CRI.
(c) CRI shall not, at any time prior to sixty (60) days after the
Closing Date, effectuate a "plant closing" or "mass layoff" as those
terms are defined in the Workers Adjustment and Retraining Notification
Act of 1988 ("WARN"), affecting in whole or in part any site of
employment where current employees of Amherst shall be employed as of
the Closing Date without complying with the obligations, if any,
arising under WARN.
(d) As soon as reasonably practicable following the Closing,
Amherst shall, in accordance with Federal Acquisition Regulation Part
42, Section 42.12, submit in writing to each responsible Contracting
Officer (as such term is defined in Federal Acquisition Regulation Part
42, Section 42.102(a)), a request for the U.S. Government to (i)
recognize CRI in accordance with this Agreement and (ii) enter into a
Novation agreement (the "Novation Agreement") substantially in the form
contemplated by such regulations. Amherst shall thereby reasonably
assist CRI in obtaining all consents, approvals and waivers required
for the purpose of processing, entering into and completing the
Novation Agreement with regard to any of the Government Contracts,
including responding to any reasonable requests for information by the
U.S. Government with regard to such Novation Agreement.
(e) In order to facilitate the resolution of any claims made
against or incurred by ASI or Amherst or any of their respective
affiliates prior to the Closing, for a period of seven years after the
Closing, CRI shall (i) retain the books and records of Amherst and its
Subsidiaries delivered to CRI relating to periods prior to the Closing
in a manner reasonably consistent with the prior practice of Amherst
and (ii) upon reasonable notice, afford the officers, employees and
authorized agents and representatives of ASI or Amherst reasonable
access (including the right to make, at Amherst's on ASI's expense,
photocopies), during normal business hours, to such books and records.
(f) In order to facilitate the resolution of any claims made by
or against or incurred by CRI or any of its affiliates after the
Closing or for any other reasonable purpose, for a period of seven
years following the Closing, Amherst shall (i) retain the books and
records of Amherst and its Subsidiaries and their operations for
periods prior to Closing and which shall not otherwise have been
delivered to CRI and (ii) upon reasonable notice, afford the officers,
employees and authorized agents and representatives of CRI reasonable
access (including the right to make, at CRI's expense, photocopies),
during normal business hours, to such books and records.
(g) ASI or Amherst shall promptly notify CRI in writing of (i)
all events, circumstances, facts and occurrences arising subsequent to
the date of this Agreement which could result in any material breach of
a representation or warranty or covenant of ASI or Amherst in this
Agreement or which could have the effect of making any representation
or warranty of ASI or Amherst in this Agreement untrue or incorrect in
any material respect and (ii) all other material developments affecting
the assets, Liabilities, business, financial condition, operations,
results of operations, customer or supplier relations, employee
relations or projections of Amherst, any Subsidiary or the business;
provided, however, that in the event ASI or Amherst shall disclose in
writing to CRI any such events, circumstances, facts, occurrences or
developments prior to the Closing, then, if CRI shall effect the
Closing despite such disclosure, CRI shall be deemed to have waived
its right to indemnification under Article X for any such events,
circumstances, facts, occurrences or developments so disclosed to CRI.
(h) ASI and Amherst agree that CRI may perform or have performed
on behalf of CRI an environmental audit survey of any Facility of
Amherst (the "Environmental Study"), including without limitation,
scheduling site visits as necessary to complete the Environmental
Study prior to the Closing. CRI shall be responsible for all costs,
charges and expenses of any nature whatsoever associated with the
Environmental Study.
(i) ASI and Amherst acknowledge that from and after the Closing,
the names "Amherst", "Amherst Systems", each trade name referenced in
Section 3.24(e)(i) and all similar or related names, Marks and logos
(all of such names, Marks and logos being the "Amherst Names") shall be
owned by CRI or a Subsidiary of CRI, that none of Amherst or any of its
affiliates, nor ASI, shall have any rights in the Amherst Names, and
that none of Amherst or any of its affiliates, nor ASI, will contest
the ownership or validity of any rights of CRI in or to the Amherst
Names. Promptly after the Closing, ASI shall cause the corporate names
of Amherst and its Subsidiaries to be changed so as to eliminate the
Amherst Names from such corporate names. From and after the Closing,
neither Amherst or any of its affiliates, nor ASI, shall use any of the
Intellectual Property or any of the licensed Intellectual Property
transferred to CRI pursuant to this Agreement.
(j) ASI will cause Amherst and its Subsidiaries to pay and
discharge the Excluded Liabilities as and when the same become due and
payable.
(k) Amherst shall, for a period of not less than seven years
after Closing, maintain its corporate existence.
(l) The Permitted Merger shall be consummated within two (2)
business days after the Closing.
(m) The Parties agree to cooperate in the preparation of all Tax
Returns relating in whole or in part to taxable periods ending on or
before or including the Closing Date that are required to be filed
after such date. Such cooperation shall include, but not be limited
to, furnishing copies of prior years' Tax Returns or return preparation
packages illustrating previous reported practices or containing
historical information relevant to the preparation of such Tax Returns,
providing reasonable access to employees with Knowledge of such Tax
Returns during regular business hours and furnishing such other
information with such Party's possession reasonably requested by the
Party filing such Tax Returns as is relevant to their preparation.
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 dated
October 13, 1998) and constitutes (along with the documents referred to
in this Agreement and any other agreement executed contemporaneously
herewith) a complete and exclusive statement of the terms of the
agreement among 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
None of the Parties hereto 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. Notwithstanding
anything to the contrary contained in this Agreement, until
consummation of the Contemplated Transactions, ASI and Amherst may (i)
grant a security interest in respect of their rights hereunder to their
lenders and such lenders may exercise their rights in respect of that
security interest and (ii) enter into the Permitted Merger. 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.
By:
Title:
AMHERST SYSTEMS, INC.
By:
Title:
ASI ACQUISITION CORP.
By:
Title:
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment") to that certain Asset Purchase
Agreement (the "Agreement"), made as of December 23, 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"), AMHERST SYSTEMS, INC., a
Delaware corporation having an office and principal place of business
at 30 Wilson Road, Williamsville, New York 14221 (hereinafter referred
to as "Amherst") and ASI Acquisition Corp., a Delaware corporation
having its principal place of business at 3539 South Eastern Avenue,
Las Vegas, Nevada 89109 (hereinafter referred to as "ASI").
WHEREAS, CRI, Amherst and ASI desire to amend certain provisions
of the Agreement, each as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
sufficiency of which is hereby acknowledged, and intending to be
legally bound, the parties hereto agree as follows:
1. Section 2.4 of the Agreement is deleted in its entirety and
is replaced with the following new Section 2.4:
2.4 CLOSING
The purchase and sale (the "Closing") provided for in
this Agreement will take place at a location to be
mutually agreed to by the Parties hereto, at 9:00 a.m.
(local time) on (i) March 17, 1999 or (ii) such other
date as the Parties shall agree. Subject to the
provisions of Article IX, 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 2.4 will not result in the termination of
this Agreement and will not relieve any party of any
obligation under this Agreement.
2. The reference to "February 28, 1999" in Section 9.1(e) of the
Agreement is deleted and replaced with: April 1, 1999.
Defined terms used herein but not defined herein shall have the
meaning ascribed to them in the Agreement.
The Agreement is hereby amended and modified solely to the extent
of the above-referenced items. Nothing herein contained shall be
deemed to be an amendment or waiver of any other provision of the
Agreement, all of which shall remain in full force and effect.
Dated as of February 23, 1999
COMPTEK RESEARCH, INC.
By:
Title:
AMHERST SYSTEMS, INC.
By:
Title:
ASI ACQUISITION CORP.
By:
Title:
Exhibits Attached to Asset Purchase Agreement
Exhibit 2.5(a)(ii) -- Form of Employment Agreements
Exhibit 2.5(a)(iii) -- Form of Non-Competition Agreements
Exhibit 2.5(b) -- Form of Promissory Notes
The above Exhibits to the Asset Purchase Agreement are omitted and will be
filed with the Commission upon request.
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
Comptek Research, Inc.
2732 Transit Road
Buffalo, NY 14224
Gentlemen:
We consent to the incorporation by reference in the registration
statements (Nos. 33-54170, 33-82536, 333-11437 and 333-62753) on Form S-
8 of Comptek Research, Inc., of our report dated June 12, 1998, related
to the consolidated balance sheets of Amherst Systems Inc. as of April
30, 1997 and 1998, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years
in the three-year period ended April 30, 1998, which report appears in
the Form 8-K dated March 26, 1999 of Comptek Research, Inc.
KPMG LLP
April 9, 1999
Buffalo, New York
EXHIBIT 99
FOR IMMEDIATE RELEASE
Contact: Christopher A. Head
Executive Vice President
Comptek Research, Inc.
716-677-4070
COMPTEK RESEARCH COMPLETES AMHERST ACQUISITION
_____________________
Closes Private Placement of $15 Million in
8 1/2% Convertible Subordinated Debentures Due 2004
____________________
Buffalo, New York -- (March 29, 1999) Comptek Research, Inc.
(AMEX:CTK), announced today the completion of its acquisition of the
business operations and related assets and liabilities of Amherst
Systems, Inc., which was announced in October 1998. Comptek also
announced the formation of a new wholly-owned subsidiary, Comptek-
Amherst, Inc., to operate the acquired business. Comptek obtained
funding for the acquisition, as well as additional working capital,
through the sale of convertible subordinated debentures and expansion
of its revolving line of bank credit.
AMHERST ACQUISITION
Amherst Systems, Inc., a manufacturer of computer controlled
simulation/stimulation equipment and systems that are used to test
military avionics equipment including radar warning receivers, radar
counter-measures equipment, radars, and infrared sensor systems, was
founded in 1975 as a privately-held company, headquartered in
Williamsville, New York. As a result of the acquisition, Comptek will
now have a major subcontractor role on the United States Air Force's
F-22 Raptor program. Prior to the acquisition, Amherst Systems had
annualized defense systems sales of approximately $40 million and a
contract backlog, as of December 31, 1998, of over $60 million.
Comptek's Chairman, President and Chief Executive Officer, John Sciuto,
said, "The acquisition of Amherst Systems substantially fortifies
Comptek's position as a prominent international supplier of electronic
warfare simulation/stimulation and training systems. We are extremely
pleased to have Amherst Systems and the 300 plus Amherst Systems
employees join the Comptek team. The acquisition of Amherst Systems is
definitely a milestone event in Comptek's achieving the original goals
and objectives that were established in 1996, as part of Comptek's
strategic business plan, Comptek Vision 2000."
"The Comptek-Amherst combination provides Comptek with the critical mass
we have been seeking to effectively compete at the next higher level,
particularly in the international marketplace. In this regard, we
believe that the market results of this particular combination will
become apparent very quickly."
As a result of the acquisition, Comptek will now have approximately
1,200 employees in 24 different locations, including over 350 employees
and four major facilities in the Buffalo, New York area. The combined
annualized sales of Comptek and Amherst are approximately $140 million.
As a result of the acquisition, Comptek's contract backlog has increased
to well over $210 million.
PRIVATE PLACEMENT OF CONVERTIBLE SUBORDINATED DEBENTURES
In connection with the financing of the Amherst acquisition, Comptek has
made a private placement of $15 million of convertible subordinated
debentures to selected accredited investors. The debentures, which
mature on April 1, 2004, provide for an annual interest rate of 8 1/2%
and are convertible into shares of the common stock of Comptek at a
conversion price of $9.50 per share subject to certain adjustments. In
addition, the Company may, prior to April 24, 1999, issue up to an
additional $5 million of debentures on the same terms. Warburg Pincus
Asset Management acted as the lead investor in the transaction.
The debentures have not been registered under the Securities Act of 1933
and may not be offered or sold in the United States, except pursuant to
an applicable exemption from the Securities Act registration
requirements. This press release shall not constitute an offer to sell
or the solicitation of an offer to buy the debentures. This press
release is being issued pursuant to and in accordance with Rule 135c
under the Securities Act.
EXPANSION OF REVOLVING LINE OF CREDIT TO $27 MILLION
Also in connection with the acquisition, the Company has established a
new $27 million revolving credit facility. The credit facility, led by
Manufacturers and Traders Trust Company with KeyBank as a participant,
replaces Comptek's previous $12 million revolving credit facility. The
new credit facility provides the Company with an increased range of
flexibility supportive of the Company's growth profile.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements about Comptek's
current expectations for future sales based 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 dependence on continued
funding of U.S. Department of Defense programs and the likelihood that
actual future revenues that are realized may differ from those inferred
from existing backlog. Other risks and uncertainties are described in
Comptek's 1998 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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