SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): July 2, 1997
SALIENT 3 COMMUNICATIONS, INC. (FORMERLY KNOWN AS GILBERT ASSOCIATES, INC.)
(Exact name of registrant as specified in its charter)
Delaware 0-12588 23-2280922
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organizational) File Number) Identification No.)
P. O. BOX 1498, READING, PENNSYLVANIA 19603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 856-5500
<PAGE>
Item 2. Disposition of Assets.
On June 25, 1997, Salient 3 Communications, Inc.
(Nasdaq:NMS/STCIA) (formerly Gilbert Associates, Inc.) announced
the closing of the sale of its SRA Technologies, Inc. (SRA) to
Dames & Moore Inc. for $8.8 million in cash. Proceeds will be
used to reduce the Company's outstanding debt.
Item 5. Other Events.
The Company also announced it reached an agreement to sell
its real estate complex, Green Hills Corporate Center to
Brandywine Realty Trust of Newtown Square, Pennsylvania for $40
million, substantially all in cash. The Company has indicated that
they are positioned to move quickly and intend to close the real
estate transaction by July 30, 1997 and expects to report an
after-tax gain of approximately $8.5 million. Proceeds will be
used to reduce the Company's outstanding bank debt.
Separately, as an update to its May 22, 1997 announcement
regarding second quarter results, management stated that it now
expects to incur a loss from continuing operations in the second
quarter which could significantly exceed the loss of $0.10 per
share reported in the first quarter of 1997. In addition, the
Company will incur a $6,150,000 charge for the write-off of in-
process research and development associated with its April 1997
TEC Cellular acquisition.
Also, the Board of Directors has authorized an expansion of
the 1995 share repurchase plan to allow the Company to potentially
purchase up to one million shares in the open market.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Pro Forma Unaudited Consolidated Condensed Statement of Operation
has not been presented due to the fact that the Company elected
discontinued operations for this subsidiary during the first
quarter of 1997.
(b) Pro Forma Unaudited Consolidated Condensed Balance
Sheet as of April 4, 1997
(c) Exhibit 2. Stock Purchase Agreement between Salient 3
Communications, Inc. and Dames & Moore, Inc., dated June 19, 1997
<PAGE>
Salient 3 Communications, Inc. and Subsidiaries
Introduction to Pro Forma Unaudited Consolidated Condensed Balance Sheet
On June 25, 1997, the Company sold its SRA subsidiary for $8.8 million in
cash.
The following Pro Forma Unaudited Consolidated Condensed Balance Sheet
as of April 4, 1997 assumes the sale was consummated on April 4, 1997.
A Pro Forma Statement of Operation has not been presented due to the fact
that the Company elected discontinued operations for this subsidiary
during the first quarter of 1997.
Salient 3 Communications, Inc. and Subsidiaries
Pro Forma Unaudited Consolidated Condensed Balance Sheet
As of April 4, 1997
(000's)
Consolidated Pro Forma Consolidated
Historical Adjustments Pro Forma
ASSETS
Current assets:
Cash and cash equivalents $ 716 $ 7,909 (A) $ 716
(7,909)(B)
Accounts receivable, net of allowance
for doubtful accounts of $1,495 and
$1,565, respectively 18,554 18,554
Inventories 17,210 17,210
Deferred income taxes 4,180 4,180
Other current assets 2,854 2,854
Net assets held for sale 47,293 (7,314) 39,979
------ ----- ------
Total current assets 90,807 (7,314) 83,493
------ ----- ------
Property, plant and equipment, at cost: 36,010 36,010
Less accumulated depreciation and
amortization 18,338 18,338
------ ------
17,672 17,672
------ ------
Deferred income taxes 7,855 7,855
Other assets 500 500
Intangible assets 37,356 37,356
Total Assets $154,190 $ (7,314) $146,876
======= ===== =======
<PAGE>
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,224 $ $ 2,224
Accounts payable 6,903 6,903
Salaries and wages 1,478 1,478
Income taxes, currently payable 2,440 2,440
Estimated liability for contract losses 1,540 1,540
Other accrued liabilities 7,831 7,831
------ ------
Total current liabilities 22,416 22,416
------ ------
Long-term debt 27,218 (7,909)(B) 19,309
Other long-term liabilities 4,954 4,954
Self-insured retention 2,409 2,409
Stockholders' equity:
Common stock 8,985 8,985
Capital in excess of par value 38,064 38,064
Warrants outstanding 1,180 1,180
Retained earnings 89,454 595 (C) 90,049
Deferred Compensation-restricted stock (824) (824)
Treasury stock (39,666) (39,666)
------ --- ------
97,193 595 97,788
------ --- ------
Total Liabilities and Stockholders' Equity $154,190 $ (7,314) $146,876
======= ===== =======
Notes to Pro Forma Unaudited Condensed Balance Sheet as of April 4, 1997
(A) To reflect the cash proceeds net of disposition costs and income taxes.
(B) To reduce long-term debt.
(C) To record gain on sale of SRA Technologies.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Salient 3 Communications, Inc.
/s/ Paul H. Snyder
Paul H. Snyder
Senior Vice President
and Chief Financial Officer
<PAGE>
<EX-2>
TABLE OF CONTENTS
ARTICLE I - PRICE AND PAYMENT
Section 1.1 Acquisition of Stock
Section 1.2 Closing
Section 1.3 Closing Obligations
Section 1.4 Definitions
ARTICLE II - REPRESENTATIONS OF THE SELLER
Section 2.1 Ownership of Shares
Section 2.2 [Reserved]
Section 2.3 Existence and Good Standing
Section 2.4 Capitalization
Section 2.5 Subsidiaries and Investments
Section 2.6 Financial Statements; No Material Changes
Section 2.7 Books and Records
Section 2.8 Title to Real and Personal Properties; Encumbrances
Section 2.9 Leases
Section 2.10 Real Property
Section 2.11 Contracts
Section 2.12 Restrictive Documents
Section 2.13 Claims and Litigation
Section 2.14 Taxes
Section 2.15 Liabilities
Section 2.16 Intellectual Property
Section 2.17 Compliance with Laws
Section 2.18 Employment Relations
Section 2.19 Employee Benefit Plans
Section 2.20 Interest in Clients, Supplier, etc.
Section 2.21 Bank Accounts
Section 2.22 Powers of Attorney
Section 2.23 Compensation of Employees
Section 2.24 No Changes
Section 2.25 Post Closing Purchase Price Adjustment
Section 2.26 Disclosure
Section 2.27 Copies of Documents
Section 2.28 Certain Definitions
Section 2.29 Environmental
Section 2.30 Certain Payments
Section 2.31 Insurance
Section 2.32 Security Clearances; Export Control Compliance
Section 2.33 Broker's of Finder's Fees
Section 2.34 Life Insurance Loans to Officers
and other Deferred Compensation Matters
Section 2.35 HSR Compliance
ARTICLE III - REPRESENTATIONS OF BUYER
Section 3.1 Representations of Buyer
Section 3.2 Existence and Good Standing of Buyer
Section 3.3 Restrictive Documents
Section 3.4 Broker's or Finder's Fees
Section 3.5 Investment
Section 3.6 Cooperation
Section 3.7 Notification
ARTICLE IV - CONDITIONS TO OBLIGATIONS OF BUYER
Section 4.1 Conditions to Obligations of Buyer
Section 4.2 Opinion of the Counsel for SRA
Section 4.3 [Reserved]
Section 4.4 [Reserved]
Section 4.5 Bank Accounts
Section 4.6 Resignation of Certain Directors and Officers
Section 4.7 Good Standing Certificate and Board Resolution
Section 4.8 Proceedings
Section 4.9 [Reserved]
Section 4.10 Noncompetition, Nonsolicitation, Confidentiality
Section 4.11 Accuracy of Representations
Section 4.12 Seller's Performance
Section 4.13 Consents
Section 4.14 No Proceedings
Section 4.15 No Claim Regarding Stock Ownership or Sale Proceeds
Section 4.16 No Prohibition
Section 4.17 Transactions with Related Parties
Section 4.18 Deferred Acquisition Fee
Section 4.19 Backlog
Section 4.20 Net Sales and EBIT
Section 4.21 Real Property Leases
Section 4.22 Minimum Book Value
Section 4.23 Outstanding Indebtedness
Section 4.24 Vehicles
ARTICLE V - CONDITIONS TO THE SELLER'S OBLIGATION
Section 5.1 Conditions to the Seller's Obligations
Section 5.2 Opinion of the Counsel of Buyer
Section 5.3 Proceedings
Section 5.4 Accuracy of Representations
ARTICLE VI - INDEMNIFICATION
Section 6.1 Survival; Right to Indemnification
Not Affected By Knowledge
Section 6.2 Indemnification and Payment of Damages By Seller
Section 6.3 Indemnification and Payment of Damages By Seller--
Environmental Matters
Section 6.4 Indemnification and Payment of Damages By Buyer
Section 6.5 Time Limitations
Section 6.6 Limitations on Amount--Seller
Section 6.7 Limitations on Amount--Buyer
Section 6.8 Post Closing Purchase Price Adjustment and Escrow
Section 6.9 Procedure For Indemnification--Third Party Claims
Section 6.10 Procedure For Indemnification--Other Claims
Section 6.11 Special Agreement and Indemnification Regarding Taxes
ARTICLE VII - MISCELLANEOUS
Section 7.1 Post-Closing Tax Return
Section 7.2 Expenses
Section 7.3 Disputes
Section 7.4 HSR Act Filing
Section 7.5 Governing Law; Jurisdiction, Service of Process
Section 7.6 Captions
Section 7.6A Further Assurances
Section 7.7 Publicity
Section 7.8 Notices
Section 7.9 Parties in Interest
Section 7.10 Counterparts
Section 7.11 Entire Agreement
Section 7.12 Amendments
Section 7.13 Severability
Section 7.14 Third Party Beneficiaries
Section 7.15 Termination
Section 7.16 Effect of Termination
ARTICLE VIII - TAX MATTERS
Section 8.1 Returns for Periods Through the Closing Date
Section 8.2 Tax Periods Beginning Before and
Ending After the Closing Date
Section 8.3 Cooperation on Tax Matters
Section 8.4 Certain Taxes
Section 8.5 Carrybacks
Section 8.6 Indemnification
The schedules listed below are not included in this filing, but will be
furnished to the Commission upon request.
SCHEDULES
2.5 Subsidiaries and Investments
2.6 Financial Statements
2.7 Books and Records Held By Third Parties
2.8 Title to Real and Personal Properties; Encumbrances
2.9 Leases
2.11 Material Contracts
2.12 Restrictive Documents
2.13 Claims and Litigation
2.14 Taxes
2.15 Liabilities
2.16 Intellectual Property
2.16(d) Patents
2.16(e) Trademarks
2.16(f) Copyrights
2.17 Compliance With Laws
2.18 Employment Relations
2.19 Employee Benefit Plans
2.20 Interest in Clients, Suppliers, etc.
2.21 Bank Accounts
2.22 Powers of Attorney
2.23 Compensation of Employees
2.24 Changes
2.26 Disclosure
2.27 Documents
2.29 Environmental Liabilities
2.30 Certain Payments
2.31(b) Certain Agreements
2.31(c) Loss Experience
2.31(d) Special Coverage
2.32 Security Clearances; Export Control Compliance
4.2 Opinion of the Counsel for SRA
4.6 Resignation of Certain Directors and Officers
4.10 Form of Noncompetition, Nonsolicitation,
Confidentiality Agreement
4.21 Real Property Leases
5.2 Form of Opinion of Buyer's Counsel
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of the 23rd
day of June, 1997, by and among GCBC INC., a Delaware holding company
and SALIENT 3 COMMUNICATIONS, INC., a Delaware corporation (hereinafter
collectively "Seller"), the sole stockholder of SRA TECHNOLOGIES, INC.,
a District of Columbia corporation ("SRA") and DAMES & MOORE, INC.
("Buyer").
W I T N E S S E T H:
WHEREAS, SRA is a wholly-owned subsidiary of GCBC Inc., which is
a wholly-owned subsidiary of Salient 3 Communications, Inc.;
WHEREAS, Seller, which was previously known as Gilbert
Associates, Inc., changed its name to Salient 3 Communications, Inc.,
effective May 1, 1997, in a transaction in which GAI Sub, Inc., a newly
formed wholly owned subsidiary of Seller, with no assets, was merged
with and into Seller in accordance with the provisions of Section 253
of the General Corporation Law of Delaware, under a Certificate of
Ownership and Merger which provided that Seller's name would become
Salient 3 Communications, Inc., and which made no change in the
Certificate of Incorporation of Seller, other than the change of its
name, with the result that any reference to "Seller", in any part of
this Agreement, or in any document referenced in this Agreement, shall
be deemed to refer to Salient 3 Communications, Inc. and/or Gilbert
Associates, Inc., as appropriate, recognizing that "Seller", "Gilbert
Associates, Inc.", and "Salient 3 Communications, Inc." are the same
corporation;
WHEREAS, Seller owns 13,697 shares of common stock of SRA, $0.10
par value per share, being all of the outstanding shares of capital
stock of SRA (the "Shares");
WHEREAS, Seller desires to sell and Buyer desires to purchase the
Shares pursuant to the terms and conditions of this Agreement; and
WHEREAS, it is the intention of the parties hereto that, upon
consummation of the purchase and sale of the Shares pursuant to this
Agreement, Buyer shall own all of the outstanding shares of capital
stock of SRA and the entire voting power of SRA;
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
CONDITIONS HEREIN CONTAINED, AND INTENDING TO BE LEGALLY BOUND HEREBY,
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
PRICE AND PAYMENT
1.1 Acquisition of Stock. Subject to the terms and conditions
herein stated, in consideration for the sale and delivery by Seller to
Buyer, and/or a wholly-owned subsidiary of Buyer, of all of the issued
and outstanding capital stock of SRA by purchase of all of the Shares,
Buyer and/or its wholly-owned subsidiary shall pay to Seller or place
in escrow, by wire transfer at the Closing, the amounts specified in
Section 1.3(b), subject to adjustment as provided in Section 2.25
herein. At the Closing, Buyer, and/or a wholly-owned subsidiary of
Buyer, agrees to acquire the Shares from Seller, and Seller agrees to
sell, assign, transfer and deliver the Shares to Buyer, and/or its
wholly-owned subsidiary, by outright sale.
1.2 Closing. The purchase and sale (the "Closing") provided
for in this Agreement will take place at the offices of Ross & Hardies,
888 16th Street, N.W., Washington, D.C. 20006, at 10:00 a.m. (local
time) on June 24, 1997, if all conditions and obligations set forth in
Articles IV and V hereof which are required to be satisfied prior to
closing have been met, or such other date as may be agreed upon in
writing by the Parties (the "Closing Date"). Subject to the provisions
of Section 7.15, 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 1.2 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this
Agreement.
1.3 Closing Obligations. At the Closing:
(a) Seller will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to Buyer;
(ii) A release in the form of Exhibit 1.3(a)(ii) executed
by Seller ("Seller's Release");
(iii) Reserved;
(iv) A noncompetition agreement in the form of Exhibit
2.4(a)(iv), executed by Seller (the "Noncompetition Agreement");
(v) a certificate executed by Seller representing and
warranting to Buyer that each of Seller's representations and
warranties in this Agreement was accurate in all respects as of the
date of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date (giving effect to any
supplements to the Schedules that were delivered by Seller to Buyer
prior to the Closing Date in accordance with Section 3.7); and
(vi) the legal opinion described in Section 4.2;
(b) Buyer will deliver to Seller:
(i) the amount of $7,800,000 by wire transfer to the
accounts specified in Schedule 1.3(b);
(ii) the sum of $1,000,000 to the escrow agent referred to
in Section 1.3(c) by bank cashier's or certified check; and
(iii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date.
(c) Buyer and Seller will enter into an escrow agreement in the
form of Exhibit 1.3(c) (the "Escrow Agreement") with Riggs Bank N.A.;
and
(d) Subsequent to the Closing, or when due, Seller will pay the
Transfer and other taxes specified at section 8.4, if any.
1.4 Definitions. For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section 1.4:
"1996 Balance Sheet Date"--as defined in Section 2.6 by reference
to "The Balance Sheet".
"Acquisition Date"--as defined in Section 2.11.
"Applicable Contract"--as defined in Section 2.11.
"Backlog"--the value of work which SRA is scheduled to perform
under Applicable Contracts and with respect to which SRA has received
no communication, to the Knowledge of Seller, or other indication of a
decision by any Person to terminate or reduce the scope of such
scheduled work.
"Best Efforts"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"Breach"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if
there is or has been (a) any inaccuracy in or breach of, or any failure
to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (b) any claim (by any Person) or
other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and
the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"Buyer"--as defined in the first paragraph of this Agreement.
"Closing"--as defined in Section 1.2.
"Closing Balance Sheet"--as defined in Section 2.25.
"Closing Date"--as defined in Section 1.2.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated
by this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the execution, delivery, and performance of the
Noncompetition Agreement, the Seller's Release, and the Escrow
Agreement;
(c) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and
exercise of control over SRA.
"Contract"--as defined in Section 2.11.
"Employee Benefit Plans"--as defined in Section 2.19.
"Encumbrance"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of
any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal
life, and any other environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities"--any cost,
damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and
Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational
safety and health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal
or administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or
other remediation or response actions ("Cleanup") required by
applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
s 9601 et seq., as amended ("CERCLA").
"Environmental Law"--any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up
or prevention; or
(h) making responsible parties pay private parties, or
groups of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"Escrow Agreement"--as defined in Section 1.3.
"Facilities"--any real property, leaseholds, or other interests
currently or formerly owned or operated by SRA and any buildings,
plants, structures, or equipment (including motor vehicles) currently
or formerly owned or operated by SRA.
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which The Balance Sheet
and the other financial statements referred to in Section 2.6 were
prepared.
"Governmental Authorization"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"Government Contract"--as defined in Section 2.11(g).
"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"Hazardous Activity"--the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or
use (including any withdrawal or other use of groundwater) of Hazardous
Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment, and any other act, business, operation,
or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or SRA.
"Hazardous Materials"--any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a contaminant
under or pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
"Intellectual Property Assets" --as defined in Section 2.16.
"Knowledge"--an individual will be deemed to have "Knowledge" of
a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
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 who has at any time served, as a director, officer,
partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other
matter.
"Legal Requirement"--any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty.
"Marks"--as defined in Section 2.16.
"Materially Adverse Effect"--as defined in Section 2.28.
"Noncompetition Agreement"--as defined in Section 1.3.
"Occupational Safety and Health Law"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by
industry associations and insurance companies), designed to provide
safe and healthful working conditions.
"Order"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered 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, including, in the case of SRA, officers
of Seller with supervisory responsibility for SRA); 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.
"Patents"--as defined in Section 2.16.
"Person"--any individual, including, but not limited to, officers
and directors of SRA, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, unincorporated
organization, labor union, or other entity or Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest as defined hereinafter; and
(d) any Person with respect to which such individual or one
or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity);
and
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse,
(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 10% of the
outstanding voting power of a Person or equity securities or other
equity interests representing at least 10% of the outstanding equity
securities or equity interests in a Person.
"Release"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"Representative"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants,
and financial advisors.
"Seller"--as defined in the first paragraph of this Agreement.
"Seller's Release"--as defined in Section 1.3.
"Shares"--as defined in the Recitals of this Agreement.
"Tax Return"--any return (including any information return),
report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any tax or in
connection with the administration, implementation, or enforcement of
or compliance with any Legal Requirement relating to any tax.
"The Balance Sheet"--as defined in Section 2.6.
"Threat of Release"--a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has been
given (orally or in writing), or if any other event has occurred or any
other circumstances exist, 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
REPRESENTATIONS OF THE SELLER
2.1 Ownership of Shares. Seller represents, warrants and
agrees that it is the lawful owner of all of the issued and outstanding
capital stock of SRA, free and clear of all liens, security interests,
pledges, encumbrances, restrictions and claims of every kind
(hereinafter collectively referred to as "Liens"); that Seller has full
legal right and power and the authority to enter into this Agreement
and to sell, assign, transfer and convey the Shares and otherwise
perform Seller's obligations pursuant to this Agreement; that this
Agreement is Seller's valid and legally binding obligation, enforceable
against Seller; that Seller has made no offering or sale of the Shares
in violation of any state or federal securities law; and that the
delivery to Buyer of the Shares pursuant to the provisions of this
Agreement will transfer to Buyer valid title thereto, free and clear of
all liens, encumbrances, restrictions and claims of every kind.
2.2 Reserved.
2.3 Existence and Good Standing. SRA is a corporation duly
organized, validly existing and in good standing under the laws of the
District of Columbia, and is duly qualified to do business in, and is
in good standing in, every jurisdiction in which the character or
location of the properties owned or leased by SRA or the nature of its
business makes such qualification necessary and in which the failure to
be so qualified would have a Materially Adverse Effect. SRA has the
power to own its property and to carry on its business as now being
conducted, including all licenses required to be obtained by SRA from
any Governmental Body having jurisdiction over its properties and
business operations.
2.4 Capitalization. SRA's entire authorized capital stock
consists of 100,000 shares of common stock, $0.10 par value per share
(the "Common Stock"), of which 13,697 shares of Common Stock are
presently issued and outstanding. All issued and outstanding shares of
SRA have been duly authorized and validly issued, and are fully paid
and nonassessable, were not issued in violation of the terms of any
agreement or understanding binding upon SRA and were issued in
compliance with all applicable charter documents of SRA and all
applicable federal, state and foreign securities laws, rules and
regulations. There are no outstanding options, warrants, rights,
calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase, issuance
or sale of any shares of the capital stock of SRA. No legend or other
reference to any purported Encumbrance appears upon any certificate
representing equity securities of SRA.
2.5 Subsidiaries and Investments. Except as described on
Schedule 2.5, SRA does not own, directly or indirectly, or have any
Contract to acquire, any equity securities or other securities of any
Person or any direct or indirect equity or ownership interest in any
other corporation, partnership, association, trust, joint venture or
other entity. Except as noted on Schedule 2.5, SRA has not acquired
the stock or assets of any other corporation within the five years
preceding the date of this Agreement.
2.6 Financial Statements; No Material Changes. Seller has
heretofore furnished Buyer with certain financial statements, including
the balance sheet of SRA as of January 3, 1997 (such balance sheet is
hereinafter referred to as "The Balance Sheet" and January 3, 1997 is
hereinafter referred to as the "1996 Balance Sheet Date") and the
related statements of income (loss) and stockholder's equity for the
period ended January 3, 1997, attached hereto as Schedule 2.6 and
hereinafter collectively referred to as the "Financial Statements".
The Financial Statements have been prepared in accordance with GAAP,
except as noted thereon, and using the same historic practices, methods
and criteria employed by SRA in connection with the preparation of its
routine year end financial statements. The Financial Statements
present fairly the financial condition, results of operations, and
stockholder equity of SRA as and for the period presented, and reflect
all claims against and all debts and liabilities of SRA, fixed or
contingent, which are required to be shown on such Financial Statements
in accordance with GAAP (except for the omission of certain footnote
information not required in subsidiary financial statements, none of
which relates to an item which could have a Materially Adverse Effect
on SRA). Except as set forth in Schedule 2.6, since the 1996 Balance
Sheet Date there has been (a) no Material Adverse Change in the assets
or liabilities, or in the business or condition, financial or
otherwise, or in the results of operations of SRA, (b) no fact or
condition exists or, to the best of Seller's knowledge, is contemplated
or threatened, other than the transactions contemplated by this
Agreement, which might cause such a change in the future.
2.7 Books and Records. The minute books of SRA as made
available to Buyer and its representatives, contain accurate records of
all meetings of, and corporate actions or written consents by, the
respective stockholders of SRA from time to time, including Seller as
sole stockholder, and the Board of Directors and Committees of SRA to
the date hereof, and no meeting of any such stockholders, Board of
Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing,
all of those books and records will be in the possession of SRA. The
books of account, stock record books, inventory records and other
records of SRA, all of which have been made available to Buyer and its
Representatives, are in all material respects complete, correct and up
to date and are maintained in accordance with good business practices
and GAAP, including the maintenance of an adequate system of internal
controls. Except as set forth in Schedule 2.7, SRA does not have any
of its records, systems, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or
held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and
direct control of SRA or Seller.
2.8 Title to Real and Personal Properties; Encumbrances.
Schedule 2.8 contains an accurate and complete listing and description
of all fixed assets owned by SRA and all leases for real property to
which SRA is a party (as lessee or lessor), including the date of
commencement of such lease. Buyer has been provided with full and
complete copies of all such leases and every modification or amendment
thereto. Except as set forth in Schedule 2.8 or Schedule 2.9, SRA has
good, valid and marketable title to all its material properties and
assets (real and personal, tangible and intangible), (including,
without limitation, all the properties and assets reflected in The
Balance Sheet) except to the extent disposed of since such date in the
Ordinary Course of Business. Except as set forth in Schedule 2.8 or
Schedule 2.9, such properties and assets are not subject to any
encumbrance, lien, charge or other restriction of any kind or
character, except for (i) liens consisting of zoning or planning
restrictions, easements, permits or other restrictions or limitations
on the use of real property which do not materially detract from the
value of, or impair the use of, such property by SRA in the operation
of its business, (ii) liens for current taxes, assessments or
governmental charges or levies on property not yet due and delinquent,
and (iii) liens consisting of purchase money security interests
covering property acquired since the 1996 Balance Sheet Date in the
Ordinary Course of Business; and no such lease agreement contains any
requirement to obtain the consent of any person in connection with the
Closing of the transactions contemplated by this Agreement, except as
has been obtained.
2.9 Leases. Schedule 2.9 contains an accurate and complete
listing of all leases for personal property and equipment to which SRA
is a party (as lessee or lessor), including the dates of commencement
and termination of such leases. Buyer has been provided with full and
complete copies of all such leases and every amendment or modification
thereto. Each lease set forth in Schedule 2.9 (or required to be set
forth in Schedule 2.9) is in full force and effect; all rents and
additional rents due to date on each such lease have been paid; in each
case the lessee is in peaceable possession and is not in material
default thereunder and no continuing waiver, indulgence or
postponement of the lessee's obligation thereunder has been granted by
the lessor; and there exists no event of default or event, occurrence,
condition or act (including the purchase of the Shares hereunder)
which, with the giving of notice, the lapse of time, or the happening
of any further event or condition, would become a default under such
lease. SRA has not violated any of the material terms or conditions
under any such lease in any respect, and all of the material covenants
to be performed by any other party under any such lease have been fully
performed. The property leased by SRA is in a state of commercially
acceptable maintenance and repair and is adequate and suitable for the
purposes for which it is presently being used.
2.10 Real Property. SRA does not own any real property.
2.11 Contracts.
(a) Schedule 2.11 contains a complete and accurate list, and
Seller has made available to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by SRA of an amount or value
in excess of $5,000, where the term "Contract" means any agreement,
Contract, obligation, promise, or understanding (whether written or
oral and whether express or implied) that is legally binding and where
the term "Applicable Contract" means any contract (a) under which SRA
has or may acquire any rights, (b) under which SRA has or may become
subject to any obligation or liability, or (c) by which SRA or any of
the assets owned or used by it is or may become bound;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to SRA of an amount or value
in excess of $5,000, including any contract of employment with any
person;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or
receipts of SRA in excess of $5,000;
(iv) 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;
(v) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vi) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs,
or liabilities by SRA with any other Person;
(vii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of SRA or limit the
freedom of SRA to engage in any line of business or to compete with any
Person;
(viii) each Applicable Contract providing for payments to
or by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(ix) each power of attorney that is currently effective and
outstanding;
(x) each Applicable Contract that contains or provides for
an express undertaking by SRA to be responsible for consequential
damages;
(xi) each Applicable Contract for capital expenditures in
excess of $5,000;
(xii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by SRA;
and
(xiii) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Schedule 2.11 sets forth reasonably complete details concerning
such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of SRA under the Contracts, and SRA's office
where details relating to the Contracts are located.
(b) Except as set forth in Schedule 2.11(b):
(i) Seller does not have and will not acquire any rights
under, and does not have and will 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 SRA; and
(ii) to the Knowledge of Seller and SRA, no officer,
director, agent, employee, consultant, or contractor of SRA 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 SRA, or (B) assign to SRA or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Schedule 2.11(c), each Contract
identified or required to be identified in Schedule 2.11(a) is in full
force and effect and is valid and enforceable in accordance with its
terms, does include any provision which would result in termination or
a penalty to SRA as a result of the transactions contemplated in this
Agreement.
(d) Except as set forth in Schedule 2.11(d):
(i) SRA is, and at all times since the date of Seller's
acquisition of SRA (the "Acquisition Date") has been, in full
compliance with all applicable terms and requirements of each Contract
under which SRA has or had any obligation or liability or by which SRA
or any of the assets owned or used by SRA is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which SRA has or had any rights is,
and at all times since the Acquisition Date has been, in full
compliance with all applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give SRA or any 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;
(iv) consummation of the purchase and sale provided for in
this Agreement will not contravene, conflict with, or result in a
violation or breach of, or give SRA 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; or require the consent of any Contracting Officer
or other Person; and
(v) SRA has not given to or received from any other Person,
at any time since the Acquisition Date, any notice or other
communication (whether oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or default under, any
Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable
to SRA under current or completed Contracts, including future payments
which are part of the Backlog under such Contracts, with any Person and
no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by SRA 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, including any Code of Conduct
incorporated into and made a requirement by the terms of an Applicable
Contract.
(g) For purposes of the representations in Section 2.15 of this
Agreement, the representation that SRA has no liability or indebtedness
or obligations of any nature except as provided in a Schedule, includes
but is not limited to, the absence of claims or actions based on the
following during the period prior to the date hereof:
(1) the establishment of a final indirect cost rate under
a Government Contract which is lower than SRA's provisional or billing
rate under the contract;
(2) the disallowance of a cost or costs under a
Government Contract for any reason, including but not limited to the
disallowance of a cost or costs which SRA has previously recognized as
revenue on its books of account;
(3) the submission of defective pricing data by SRA or
Seller; or
(4) a default or failure to comply with any terms and
conditions of a Government Contract by SRA or Seller. Seller may, in a
schedule, disclose the possibility that Government Contracts are
subject to price reduction based on adjustment of provisional indirect
billing rates or for defective cost or pricing data. Such a disclosure
will not adversely affect Buyer's ability to rely on the
representations made in this section 2.11 as the basis for relief under
Article VI or otherwise, even if such schedule refers to specific
contracts or fixed price jobs.
The term "Government Contract" shall mean any contract -
whether of the cost-reimbursement type or otherwise - which was awarded
to SRA by a Governmental Body prior to the date hereof ("Government
Contract").
2.12 Restrictive Documents. Except as set forth in Schedule
2.12, SRA is not subject to, or a party to, any charter, by-law,
mortgage, lien, lease, license, permit, contract, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any
kind or character (i) which materially adversely affects the business
practices, operations or conditions of SRA or any of its assets or
property, or (ii) which would be in default as a result of, or require
any consent or approval as a result of, or prevent consummation of the
transactions contemplated by this Agreement, compliance by the Seller
with the terms, conditions and provisions hereof or the continued
operation of the business of SRA after the date hereof on substantially
the same basis as heretofore operated or which would restrict the
ability of SRA to acquire any property or conduct business in any area.
Seller further represents and warrants that the execution, delivery and
performance by Seller of this Agreement will not conflict with, result
in a breach of or default under, or the creation of any Lien on any of
Seller's assets pursuant to any charter, by-law, mortgage, lien, lease,
contract, order, law, rule, regulation, judgment or decree, or any
other restriction of any kind or character, which would prevent
consummation of the transactions contemplated by this Agreement.
2.13 Claims and Litigation. (a) Except as set forth in Schedule
2.13, there is no pending Proceeding:
(i) that has been commenced by or against SRA or that
otherwise relates to or may affect the business of, or any of the
assets owned or used by SRA; 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 Seller and SRA, (1) no such Proceeding has
been Threatened, and (2) no event has occurred or circumstance exists
that may give rise to or serve as a basis for the commencement of any
such Proceeding.
Seller has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed
in Schedule 2.13. The Proceedings listed in Schedule 2.13 will not
have a material adverse effect on the business, operations, assets,
condition, or prospects of SRA.
(b) Except as set forth in Schedule 2.13:
(i) there is no Order to which SRA, or any of the assets
owned or used by SRA, is subject;
(ii) Seller is not subject to any Order that relates to the
business of, or any of the assets owned or used by SRA; and
(iii) to the Knowledge of Seller and SRA, no officer,
director, agent, or employee of SRA 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 SRA.
(c) Except as set forth in Schedule 2.13:
(i) SRA is, and at all times since the Acquisition Date has
been, in full compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has
been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which SRA, or any of the assets owned or used by SRA, is
subject; and
(iii) SRA has not received, at any time since the
Acquisition Date, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or failure to
comply with, any term or requirement of any Order to which SRA, or any
of the assets owned or used by SRA, is or has been subject.
2.14 Taxes. (a) Except as set forth in Schedule 2.14, (i) SRA
has filed or caused to be filed, within the time and within the manner
prescribed by law, all federal, state, local and foreign tax returns
and tax reports which are required to be filed prior to the Closing
Date by, or with respect to, SRA, and each affiliated group has filed
all income tax returns and tax reports that it was required to file for
each taxable period during which SRA was a member of the group, (ii)
all such returns and reports were correct and complete in all respects,
and (iii) all taxes, penalties and interest owed by SRA and (whether or
not income taxes (and penalties and interest in respect thereof) owed
by any affiliated group (whether or not shown on any tax return or
report) have been paid for each taxable period during which SRA was a
member of the group. No examination of any tax return of SRA is
currently in progress, and no examination of any tax return of any
affiliated group is currently in progress for any period during which
SRA was a member of the group. However, the IRS is currently reviewing
Gilbert Associates, Inc. consolidated returns for the tax years 1994
and 1995. Except as shown in Schedule 2.14(a), there are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of SRA, or any tax return of
any affiliated group for any taxable period during which SRA was a
member of the group. SRA has not been a member of any affiliated group
other than the affiliated group of which it is currently a member.
(b) The United States federal and state income Tax Returns of
SRA and all affiliated groups that included SRA as a member, 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
1993, and SRA and/or Seller have received verbal assurances from the
Revenue Agent responsible for the audit of SRA's 1994 and 1995 federal
income tax returns that the audits for such years will be closed
without adjustment. Schedule 2.14 contains a complete and accurate
list of all audits of all such Tax Returns, including a reasonably
detailed description of the nature and outcome of each audit. Schedule
2.14 describes all adjustments to the United States federal income Tax
Returns filed by SRA or any affiliated group of corporations that
included SRA as a member for all taxable years since the Acquisition
Date, and the resulting deficiencies proposed by the IRS.
Except as described in Schedule 2.14, neither Seller nor SRA has
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 of SRA or for
which SRA may be liable. There exists no proposed tax assessment
against SRA except as disclosed in The Balance Sheet or in Schedule
2.14. 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 SRA.
(c) All Taxes that SRA 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. SRA has not made any payment, is not obligated to make
any payment, and is not a party to any agreement that could obligate it
to make any payment that will be nondeductible by reason of Internal
Revenue Code ("Code") Section 280G. SRA was not a United States real
property holding corporation within the meaning of Code Section 897(c)
during the applicable period specified in Code Section
897(c)(1)(a)(ii).
(d) There is no tax sharing agreement that will require any
payment by SRA after the date of this Agreement.
2.15 Liabilities. Except as set forth in Schedule 2.15, SRA
does not have any liability or indebtedness for or under any loans,
lines or letters of credit, surety bonds, capitalized lease
obligations, notes payable, subscription agreements, guarantees,
disallowed costs on government contracts, or other similar types or
kinds of indebtedness and liabilities, current or contingent, or any
liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise), including any
contingent, standby, or secondary liability for any liability or
indebtedness of Seller or any affiliate of Seller or SRA. Except as
set forth in Schedule 2.15, or as described in Section 2.34, SRA does
not have any other outstanding claims, liabilities or indebtedness,
contingent or otherwise, in excess of $10,000 except as set forth in
The Balance Sheet, other than liabilities incurred subsequent to the
1996 Balance Sheet Date in the Ordinary Course of Business not
involving borrowings by SRA, and such liabilities including but not
limited to accruals for bonuses and profit sharing and commissions,
subsequent to the 1996 Balance Sheet Date have been properly recorded
as of the date hereof. SRA is not in default in respect of any
material terms or conditions of any indebtedness.
2.16 Intellectual Property.
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
(i) the Company's name, 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 SRA as licensee or licensor.
(b) Agreements--Schedule 2.16 contains a complete and accurate
list and summary description, including any royalties paid or received
by SRA, of all Contracts relating to the Intellectual Property Assets
to which SRA is a party or by which SRA is bound, except for any
license implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with an original
purchase price of less than $1,000 under which SRA is the licensee.
There are no outstanding and, to Seller's Knowledge, no Threatened
disputes or disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those
necessary for the operation of the business of SRA as currently
conducted. SRA is the owner of all right, title, and interest in and
to each of the Intellectual Property Assets, free and clear of all
liens, security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to Seller or
any third party all of the Intellectual Property Assets.
(ii) Except as set forth in Schedule 2.16(b), to the best
of the knowledge of Seller, SRA has required all former and current
employees, as a condition of employment, to execute written Contracts
with SRA that assign to SRA all rights to any inventions, improvements,
discoveries, or information relating to the business of SRA. No
employee of SRA 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 SRA.
(d) Patents
(i) Schedule 2.16(d) contains a complete and accurate list
and summary description of all Patents. SRA 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 issued Patents 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 has been or is now involved in any
interference, reissue, reexamination, or opposition proceeding. To
Seller's Knowledge, there is no potentially interfering patent or
patent application of any third party.
(iv) No Patent is infringed or, to Seller's Knowledge, has
been challenged or threatened in any way. None of the products
manufactured and sold, nor any process or know-how used, by SRA
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 have
been marked with the proper patent notice.
(e) Trademarks
(i) Schedule 2.16(e) contains a complete and accurate list
and summary description of all Marks. SRA is the owner of all right,
title, and interest in and to each of the Marks, free and clear of all
liens, security interests, charges, encumbrances, equities, and other
adverse claims.
(ii) All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), 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 Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Seller's Knowledge,
no such action is Threatened with the respect to any of the Marks.
(iv) To Seller's Knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Mark is infringed or, to Seller's Knowledge, has
been challenged or threatened in any way. None of the Marks used by
SRA infringes or is alleged to infringe any trade name, trademark, or
service mark of any third party.
(vi) All products and materials containing a Mark bear the
proper federal registration notice where permitted by law.
(f) Copyrights
(i) Schedule 2.16(f) contains a complete and accurate list
and summary description of all Copyrights. SRA is the owner of all
right, title, and interest in and to each of the Copyrights, free and
clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the date of Closing.
(iii) No Copyright is infringed or, to Seller's Knowledge,
has been challenged or threatened in any way. None of the subject
matter of any of the Copyrights infringes or is alleged to infringe
any copyright of any third party or is a derivative work based on the
work of a third party.
(iv) All works encompassed by the Copyrights have been
marked with the proper copyright notice.
(g) Trade Secrets
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in
detail and content to identify and explain it and to allow its full and
proper use.
(ii) Seller and SRA have taken all reasonable precautions
to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) SRA has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and, to
Seller's Knowledge, have not been used, divulged, or appropriated
either for the benefit of any Person (other than SRA) or to the
detriment of SRA. No Trade Secret is subject to any adverse claim or
has been challenged or, to the Knowledge of Seller, threatened in any
way.
2.17 Compliance with Laws. Except as set forth in Schedule
2.17, SRA is in compliance in all material respects with all applicable
laws and regulations with respect to the procurement and performance of
contracts with any federal, state or local government or any agency or
agencies thereof, and all other applicable laws, regulations, orders,
judgments and decrees. SRA has complied with all applicable federal,
state and local laws and regulations with respect to its use, handling
and disposal of any hazardous substance, pollutant, contaminant,
nuclear or by-product material, petroleum, gas or other hazardous or
toxic substance.
2.18 Employment Relations. Except as set forth in Schedule
2.18, SRA is in substantial compliance with all federal, state, or
other applicable laws, domestic and foreign, respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and has not and is not engaged in any unfair labor practice.
2.19 Employee Benefit Plans.
(a) List of Plans. Set forth in Schedule 2.19 is an accurate
and complete list of all employee benefit plans ("Employee Benefit
Plans") within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), that have been
established, maintained or contributed to by SRA, whether or not any
such Employee Benefit Plans are otherwise exempt from the provisions of
ERISA.
(b) Status of Plans. SRA does not maintain or contribute to
any such Employee Benefit Plan subject to ERISA which is not in
substantial compliance with ERISA, or which has incurred any
accumulated funding deficiency or which has applied for or obtained a
waiver from the Internal Revenue Service of any minimum funding
requirement under Section 412 of the Internal Revenue Code (the
"Code"). SRA has not incurred any liability to the Pension Benefit
Guaranty Corporation ("PBGC") in connection with any Employee Benefit
Plan covering any employees of SRA or ceased operations at any facility
or withdrawn from any such Plan in a manner which could subject it to
liability under ERISA, and the Majority Stockholders know of no facts
or circumstances which might give rise to any liability of SRA to the
PBGC under Title IV of ERISA which could reasonably be anticipated to
result in any claims being made against SRA by the PBGC.
(c) Contributions. Full payment has been made of all amounts
which SRA is required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee Benefit Plan to
which SRA is a party, to have paid as contributions thereto as of the
date hereof. SRA has made adequate provision for reserves in The
Balance Sheet to meet any contributions that have not been made because
they are not yet due under the terms of any Employee Benefit Plan or
related agreements. Benefits under all Employee Benefit Plans are as
represented in Schedule 2.19 and have not been increased subsequent to
the 1996 Balance Sheet Date.
(d) Tax Qualification. Each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined to be
so qualified by the Internal Revenue Service (or the period for
applying for such a determination has not yet expired) and nothing has
occurred since the date of the last such determination, if any, which
resulted or is likely to result in the revocation of such
determination.
(e) Transactions. No Reportable Event (as defined in Section
4043 of ERISA other than any such events for which the reporting
requirements have been waived by regulation) has occurred with respect
to any Employee Benefit Plan, and SRA has not engaged in any
transaction with respect to the Employee Benefit Plans which would
subject it to a tax, penalty or liability for prohibited transactions
under ERISA or the Code, nor has any of its directors, officers or
employees, to the extent they or any of them are fiduciaries with
respect to such plans: (i) breached any of their responsibilities or
obligations imposed upon fiduciaries by ERISA, or (ii) taken actions
that would result in any claim being made under or by or on behalf of
any such plans by any party with standing to make such claim.
2.20 Interest in Clients, Suppliers, etc. Except as set forth
in Schedule 2.20, neither Seller nor, to the best of Seller's
knowledge, no employee of SRA possesses, directly or indirectly, any
financial interest in, or is a director, officer or employee of, any
corporation, firm, partnership, association or business organization
which is a client, supplier, customer, lessor, lessee, contractor or
subcontractor, or competitor or potential competitor of SRA. Ownership
of not in excess of 1% of any class of securities of a company whose
securities are registered under the Securities Exchange Act of 1934
shall not be deemed to be a financial interest for purposes of this
Section 2.20.
2.21 Bank Accounts. Set forth in Schedule 2.21 is an accurate
and complete list showing the name and address of each bank in which
SRA has an account or safe deposit box, the number of any such account
or box and the names of all persons authorized to draw thereon or to
have access thereto.
2.22 Powers of Attorney. Set forth in Schedule 2.22 is an
accurate and complete list of the names of all persons holding powers
of attorney from SRA and a summary statement of the terms thereof.
2.23 Compensation of Employees. (a) Schedule 2.23 contains a
complete and accurate list of the following information for each
employee or director of SRA, 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 the
later of the Acquisition Date or the date of employment of such
employee; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under SRA's pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension
Benefit Plan or Employee Welfare Benefit Plan, or any other employee
benefit plan or any Director Plan.
(b) No employee or director of SRA is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director 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 or director of SRA, or
(ii) the ability of SRA to conduct its business, including any
Proprietary Rights Agreement with Seller or SRA by any such employee or
director. To Seller's Knowledge, no director, officer, or other key
employee of SRA intends to terminate his employment with SRA.
(c) Schedule 2.23 also contains a complete and accurate list of
the following information for each retired employee or director of SRA,
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.
2.24 No Changes. During the period from the 1996 Balance Sheet
Date to the date hereof, except as set forth in Schedule 2.24, SRA has
not, (a) incurred any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise), except in the Ordinary
Course of Business, (b) permitted any of its assets to be subjected to
any lien, of any kind, (c) sold, transferred or otherwise disposed of
any assets except in the Ordinary Course of Business, (d) made any
capital expenditure or commitment therefor in excess of $5,000, (e)
declared or paid any dividend or made any distribution on any shares of
its capital stock, or redeemed, purchased or otherwise acquired any
shares of its capital stock or any option, warrant or other right to
purchase or acquire any such shares, (f) made any bonus or profit
sharing distribution or payment of any kind (other then routine year
end performance bonuses which have been fully accrued on The Balance
Sheet), (g) increased its indebtedness for borrowed money or made any
loan to any Person, (h) written off as uncollectible any notes or
accounts receivable (i) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or
any general increase in the rate of wages, salaries, bonuses or other
remuneration of other employees, (j) cancelled or waived any claims or
rights of substantial value, (k) made any change in any method of
accounting or auditing practice, (l) otherwise conducted its business
or entered into any transaction other than in the Ordinary Course of
Business, or (m) agreed, whether or not in writing, to do any of the
foregoing.
2.25 Post Closing Purchase Price Adjustment.
(a) Within thirty (30) days after the Closing, Seller shall
prepare and deliver to Buyer a balance sheet as of the Closing Date
(the "Closing Balance Sheet"), which shall be prepared in accordance
with GAAP and applied consistently with SRA's past practices, and in
particular consistent with the preparation of The Balance Sheet, but
which shall include elimination from the Closing Balance Sheet of: the
transactions with related parties referenced in Section 4.17;
outstanding indebtedness to financial institutions referenced in
Section 4.23; the vehicles referenced in Section 4.24; the deferred
acquisition fee referenced in Section 4.18. In addition, the Closing
Balance Sheet shall not include any deferred expense for the items
referenced in Section 4.17. Seller shall be afforded such access to
the books and records of SRA post Closing as is reasonably necessary
for the preparation of such Closing Balance Sheet.
(b) Buyer, at its own expense, shall have the right to audit
such Closing Balance Sheet, and may employ Arthur Andersen & Co. for
such audit by agreement with such firm. Buyer shall be afforded the
opportunity to review, copy and to have made available to them all of
the working papers and computations used in the preparation of the
Closing Balance Sheet. The Closing Balance Sheet and the net worth so
transferred determined on the basis thereof shall be deemed accepted by
Buyer and shall be conclusive for the purpose of the payment provided
for in Section 2.25(e), unless within sixty (60) days after delivery of
the Closing Balance Sheet to Buyer, Buyer shall propose adjustments to
the Closing Balance Sheet for consideration and shall submit an
adjusted Closing Balance Sheet to Seller. All such adjustments shall
be consistent with GAAP applied in accordance with Seller's past
practices.
(c) The adjusted Closing Balance Sheet and the book value
determined on the basis thereof shall be deemed to be accepted by
Seller and shall be conclusive for the purposes of the payment provided
for in Section 2.25(e) unless Seller shall, within thirty (30) days
after the date on which the adjusted Closing Balance Sheet was
delivered, deliver a written notice to Buyer objecting to the adjusted
Closing Balance Sheet.
(d) Buyer and Seller shall attempt to resolve all differences
and agree upon the proper treatment of the item or items subject to
such exception on a mutually acceptable basis. If Buyer and Seller are
unable to resolve any disagreements respecting the treatment of any
items relating to the adjusted Closing Balance Sheet within thirty (30)
days after receipt of the notice referred to in (c) above, the dispute
shall be referred for decision to a mutually agreed third party. If
the parties fail to select a third party within ten (10) days after
such thirty (30) day period expires, then either party may submit all
items remaining in dispute for resolution to Price Waterhouse & Co., or
such other independent accounting firm as may be agreed upon by the
parties (the "Independent Accounting Firm"), which shall, within thirty
(30) days of such submission, determine and report to Seller and Buyer
upon such remaining disputed items. Such report shall have the legal
effect of an arbitral award and shall be final, binding and conclusive
on the parties. Fees and expenses of the Independent Accounting Firm
shall be allocated between Seller and Buyer in the same proportion that
the aggregate amount of such disputed items so submitted to the
Independent Accounting Firm which is unsuccessfully disputed by each
such party (as finally determined by the Independent Accounting Firm)
bears to the total amount of all disputed items so submitted.
(e) Not later than the fifth (5th) day following the final
agreement/determination with respect to the Closing Balance Sheet,
Seller shall pay to Buyer, on a dollar for dollar basis, the amount, if
any, by which the book value as shown on the Closing Balance Sheet is
less than $2,600,000, in either case with interest at the annual rate
of seven percent (7%) from the Closing Date to the date of payment.
The Escrow Fund provided in the Escrow Agreement referenced in Section
1.3 shall provide security for Seller's obligation under this Section
2.25 and shall continue in existence until satisfaction of Seller's
obligation, if any, under Section 2.25(e). Nothing in this Section
2.25 shall have the effect of limiting the rights of Buyer under the
Indemnification provisions of Article VI, except to the extent payments
hereunder may reduce the amount of damages or adjustments paid
thereunder.
2.26 Disclosure. Except as set forth in Schedule 2.26, nothing
contained in this Agreement, the Financial Statements referred to in
Section 2.6 above, or any schedule or certificate delivered in
accordance with the terms hereof in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact,
or omits any statement of a material fact necessary in order to make
the statements contained herein or therein not misleading. There are
no facts known to Seller which, when taken as a whole, materially and
adversely affect the business, or financial condition of SRA or its
respective properties or assets which have not been set forth in this
Agreement or in the Schedules or certificates or statements in writing
furnished in connection with the transactions contemplated by this
Agreement.
2.27 Copies of Documents. Except as set forth in Schedule 2.27,
Seller has provided or made available to Buyer and its advisors, true,
complete and correct copies of all documents referred to in this
Article II or in any Schedule attached hereto.
2.28 Certain Definitions. For purposes of this Agreement,
(a) the term "Materially Adverse Effect" shall mean a
material adverse effect on the business, financial condition or results
of operations of SRA, taken as a whole.
(b) the term "to the best of knowledge" shall mean the
personal knowledge of the person making the representation or warranty,
after having made due and diligent inquiry of the person or persons
with primary responsibility for the specific functional area to which
such representation or warranty relates.
2.29 Environmental. Except as set forth in Schedule 2.29:
(a) SRA is, and at all times has been, in full compliance with,
and has not been and is not in violation of or liable under, any
Environmental Law. Neither Seller nor SRA has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may
be held to be responsible received, any actual or Threatened order,
notice, or other communication from (i) any Governmental Body or
private citizen acting in the public interest, or (ii) the current or
prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of
the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller or SRA 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 Seller, SRA, or any other Person for whose conduct they
are or may be held responsible, or from which Hazardous Materials have
been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
With respect to the RAMP Industries Site described at Schedule
2.29, and laboratory sites at Durham, N.C.; Maryland Taft Court;
Medical Center Drive; and the Research Court Laboratory in Rockville,
Maryland; Seller, with the intent of assuming financial responsibility
for SRA's contingent liability for investigation and clean-up of such
Ramp Industries site, or such laboratory sites, if any clean-up is
required, represents that Buyer will qualify for a de minimis
settlement and/or will otherwise incur no costs with respect to the
investigation and clean-up of such sites. Without altering the legal
effect of the preceding sentence, Buyer represents that with respect to
the Ramp Industries site, such statement is based on preliminary
discussions with EPA and that Seller has reason to believe that such
statement is likely to be true and correct.
If Seller reasonably requests, Buyer will cooperate with Seller
in processing reimbursement claims to the appropriate Governmental Body
for recovery of clean-up costs relating to wastes generated on
government contracts, or otherwise assisting Buyer in presenting its
case, provided, however, that Seller shall indemnify Buyer for any
costs incurred by Seller with respect to such reimbursement claims,
including any loss of funds available to SRA for performance of
contracts with such Governmental Body, and provided that Seller shall
reimburse Buyer at its standard rates with respect to the time of its
personnel involved in such cooperation.
(b) There are no pending or, to the Knowledge of Seller and
SRA, Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with
respect to or affecting any of the Facilities or any other properties
and assets (whether real, personal, or mixed) in which Seller or SRA
has or had an interest.
(c) Neither Seller nor SRA has Knowledge of or any basis to
expect, nor has any of them or any other Person for whose conduct they
are or may be held responsible, received, any citation, directive,
inquiry, notice, Order, summons, warning, or other communication that
relates to Hazardous Activity, Hazardous Materials, or any alleged,
actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Seller
or SRA had an interest, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by Seller, SRA or any other
Person for whose conduct they are or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled,
or received.
(d) Neither Seller nor SRA, or any other Person for whose
conduct they are or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or, to
the Knowledge of Seller and SRA, with respect to any other properties
and assets (whether real, personal, or mixed) in which Seller or SRA,
has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or
assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits,
dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water,
sumps, or any other part of the Facilities or such adjoining property,
or incorporated into any structure therein or thereon. Neither Seller,
SRA, any other Person for whose conduct they are or may be held
responsible, or to the Knowledge of Seller or SRA, any other Person,
has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or
assets (whether real, personal, or mixed) in which Seller or SRA has or
had an interest.
(f) There has been no Release or, to the Knowledge of Seller
and SRA, Threat of 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
Seller or SRA has or had an interest, or to the Knowledge of Seller and
SRA any geologically or hydrologically adjoining property, whether by
Seller, SRA, or any other Person.
(g) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Seller or SRA pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by Seller, SRA, or any other Person for whose
conduct they are or may be held responsible, with Environmental Laws.
2.30 Certain Payments. Since the Acquisition Date, neither SRA
nor any director, officer, agent, or employee of SRA, or any other
Person associated with or acting for or on behalf of SRA, 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 (i)
to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in
respect of SRA, or (iv) in violation of any Legal Requirement, or (b)
established or maintained any fund or asset that has not been recorded
in the books and records of SRA.
2.31 Insurance. (a) Seller has delivered to Buyer:
(i) true and complete copies of all policies of insurance
to which SRA is a party or under which SRA, or any director of SRA, is
or has been covered at any time since the Acquisition Date; and
(ii) any statement by the auditor of SRA's or Seller's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Schedule 2.31(b) describes:
(i) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by SRA; and
(ii) all obligations of SRA to third parties with respect
to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is
provided.
(c) With respect to SRA's Worker's Compensation Insurance,
Schedule 2.31(c) sets forth, by year, for the current policy year and
each of the five preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage;
(C) the amount and a brief description of the claim;
and
(D) the disposition of such claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost
of such claims.
(d) Except as set forth in Schedule 2.31(d):
(i) All policies to which SRA is a party or that provide
coverage to either Seller, SRA, or any director or officer of SRA:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially
sound and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of SRA for all risks
normally insured against by a Person carrying on the same business or
businesses as SRA;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which SRA is a party or by which it is
bound;
(E) will, with respect to SRA's Worker's Compensation
Insurance, continue in full force and effect following the consummation
of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of SRA.
(ii) Neither Seller nor SRA has 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;
(iii) SRA has paid all premiums due, and has otherwise
performed all of its respective obligations, under each policy to which
it is a party or that provides coverage to SRA or any director thereof;
and
(iv) SRA has given notice to the insurer of all claims that
may be insured thereby.
(e) Prior to August, 1996, Seller maintained Errors and
Omissions insurance coverage for SRA as Described on Schedule 2.31(d),
but terminated such insurance for periods thereafter. Seller provided
Directors and Officers Liability and Company Reimbursement Insurance
for SRA through policies issued to Seller, and will continue such
coverage through the Closing. Seller represents, with the intent of
assuming financial responsibility for the risks of operation of SRA
prior to Closing, that SRA is not subject to any liability, contingent
or otherwise, for amounts which would have been paid by Directors and
Officers insurance and Errors and Omissions coverage for SRA of the
type described in paragraph (d)(i)(C) above, without regard to any
exclusions thereunder for the conduct of officers, directors, or
employees of SRA or Seller, and without reduction for any retention of
risk provisions, such that such coverage is deemed available from the
first dollar of loss. Seller further represents and warrants that the
officers and directors of SRA will be provided the same coverage for
any liability, contingent or otherwise, that was provided by Seller for
any officer and director of SRA or Seller at anytime prior to Closing
with respect to claims made after Closing for occurrences prior
thereto, and that such officers and directors are not subject to any
liability, contingent or otherwise, for amounts that would have been
paid by such insurance, in this case taking into account the most
favorable retention provision provided to any officer of SRA since the
Acquisition Date. With respect to the Company Reimbursement portion of
Directors and Officers coverage, Seller represents and warrants that
SRA will be reimbursed for any amounts reasonably paid in good faith to
an officer or director of SRA under the Indemnification provisions of
its by-laws with respect to liabilities for claims made after Closing
with respect to occurrences prior to Closing.
2.32 Security Clearances; Export Control Compliance. Schedule
2.32 is a true and accurate listing of SRA personnel with industrial
security clearances granted for work in programs of the Department of
Defense (the "DOD") and/or the Department of Energy ("DOE"), including
the level and type of clearance. SRA has facility security clearances
at the Secret and Secret RD level from DOD and DOE, respectively. SRA
has sufficient personnel with security clearances to conduct its
operations as now conducted and to provide the services which it has
contracted to provide. Seller and SRA have not been advised of any
Proceedings involving SRA or any of its personnel, whether or not
listed on Schedule 2.32, with respect to any violation of the
industrial security regulations of DOD or DOE and has not, since the
Acquisition Date, been fined or penalized or denied any participation
in any procurement on the grounds of a failure to meet security
requirements. Schedule 2.32A is a true and accurate listing of SRA
employees with access to non-public technology who are not citizens of
the United States and who do not have permanent resident status, and of
the areas of technology in which such employees work. For the purpose
of accepting liability for operations prior to the Closing, Seller and
SRA represent that it is in compliance with the requirements of the
United States Export Control Act with respect to the work of its
employees, including the provisions which treat such access as a deemed
export of technology to the home country of such employees who are not
citizens of the United States, and that SRA has no liability,
contingent or otherwise, for costs, fines, or penalties imposed by any
Governmental Body with respect to any non-compliance with the Export
Control Act. Seller and SRA also state, without intending to alter the
acceptance of liability with respect to operations prior to the Closing
by reason of the prior sentence, that such statement is true and
accurate to the best of its knowledge and belief.
2.33 Broker's or Finder's Fees. Except as provided in Section
4.18 with respect to Tucker, Anthony, Incorporated, no agent, broker,
person or firm acting on behalf of Seller or SRA is, or will be,
entitled to any commission or broker's or finder's fees from any of the
parties hereto in connection with any of the transactions contemplated
herein.
2.34 Life Insurance Loans to Officers and Other Deferred
Compensation Matters. Seller represents that the deferred expenses
relating to certain employee compensation plans will be fully
recognized prior to Closing, prior to determining that SRA meets the
minimum net worth requirement at Section 2.25(e), and that Seller will
indemnify Buyer and SRA under the terms of this Agreement against any
current or future expense impact to the financial statements of SRA
after the 1996 Balance Sheet Date related to any loan to any officer
under a life insurance agreement, any deferred compensation rabbi
trust, or any other deferred compensation agreement, including any
employee life insurance policy, provided, however, that such loans, and
deferred compensation packages may be reflected on the balance sheet of
SRA until repayment is made.
2.35 HSR Compliance. Seller represents that SRA is not engaged
in "manufacturing," as defined for purposes of the HSR Act, and that
its assets are less than $10,000,000.
ARTICLE III
REPRESENTATIONS OF BUYER
3.1 Representations of Buyer. Buyer represents, warrants and
agrees as follows:
3.2 Existence and Good Standing of Buyer. Buyer is a
corporation duly organized, validly existing and in good standing under
the laws of Delaware and is duly qualified to do business in, and is in
good standing in, every jurisdiction in which the character or location
of the properties owned or leased by Buyer or the nature of its
business makes such qualifications necessary, except where the failure
to so qualify does not have a Material Adverse Effect on its
operations. Buyer has corporate power and authority to make, execute,
deliver and perform this Agreement, and this Agreement has been validly
executed by a duly authorized officer or representative of Buyer, and
this Agreement and performance of all obligations hereunder have been
duly authorized and approved by all required corporate action of Buyer.
3.3 Restrictive Documents. Buyer is not subject to any
charter, by-law, mortgage, lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment
or decree, or any other restriction of any kind or character, which
materially adversely affects the business practices, operations or
conditions of Buyer or any of its assets or property, or which would
prevent consummation of the transactions contemplated by this
Agreement.
3.4 Broker's or Finder's Fees. No agent, broker, person or
firm acting on behalf of Buyer is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto
in connection with any of the transactions contemplated herein.
3.5 Investment. Buyer represents that it has such knowledge
and experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the Shares
including but not limited to the accuracy of forecasts and projections,
that it is capable of bearing the economic risks of such investment,
that it is purchasing the Shares with no present intention of
distributing or selling any of the Shares or any interest therein and
that it has not been organized or formed solely for the purpose of
investing in the Shares.
3.6 Cooperation. Buyer confirms that the Seller has fully
cooperated with Buyer and its representatives and agents and granted
them full opportunity to ask questions of the officers and management
of SRA and to acquire such additional information about the business
and financial condition of SRA as Buyer has requested and no such
requested information has been refused, provided, however, that such
access and cooperation does not reduce Seller's obligation under the
Indemnity provisions of this Agreement at Article VI. To the Knowledge
of Buyer, Seller's representations and warranties in this Agreement
meet the standard specified in section 4.11, except as Buyer has been
put on notice of any change by the means specified in Section 6.2.
3.7 Notification. Between the date of this Agreement and the
Closing Date, Seller will promptly notify Buyer in writing if Seller
becomes aware of any fact or condition that causes or constitutes a
Breach of any of Seller's representations and warranties as of the date
of this Agreement, or if Seller becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except
as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation
or warranty been made as of the time of occurrence or discovery of such
fact or condition. Should any fact or condition require any change in
a Schedule if the Schedule were dated the date of the occurrence or
discovery of any such fact or condition, Seller will promptly deliver
to Buyer a supplement to such Schedule specifying such change. During
the same period, Seller will promptly notify Buyer of the occurrence of
any Breach of any covenant of Seller in this Agreement or of the
occurrence of any event that may make the satisfaction of the
conditions in Section 4 impossible or unlikely.
ARTICLE IV
CONDITIONS TO OBLIGATIONS OF BUYER
4.1 Conditions to Obligations of Buyer. The purchase of the
Shares by Buyer is conditioned upon receipt by Buyer of the legal
opinion and other documents listed in this Article V and satisfaction
of all other conditions set out in this Article IV.
4.2 Opinion of the Counsel for SRA. Seller shall have
furnished Buyer with a favorable opinion of its General Counsel, dated
the date hereof in form and substance reasonably satisfactory to Buyer
and its counsel, to the effect set forth in Schedule 4.2 hereto.
4.3 Reserved.
4.4 Reserved.
4.5 Bank Accounts. Seller shall have funded the checking
accounts of Seller prior to Closing in an amount sufficient to pay the
full amount of any outstanding checks written on such accounts.
4.6 Resignation of Certain Directors and Officers. Buyer shall
have received the written resignation, effective as of the Closing
Date, of all directors and the officers of SRA set forth in Schedule
4.6 hereto.
4.7 Good Standing Certificate and Board Resolution. Seller
shall have furnished Buyer with a Certificate of Good Standing of SRA.
4.8 Proceedings. All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents
incident thereto shall be reasonably satisfactory in form and substance
to Buyer and its counsel, and Buyer shall have received such other
instruments and documents as it may reasonably request.
4.9 Reserved.
4.10 Noncompetition, Nonsolicitation, Confidentiality. Seller
shall have executed Noncompetition, Nonsolicitation and Confidentiality
Agreements as set forth in Schedule 4.10 hereto.
4.11 Accuracy of Representations. (a) All of Seller'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, without giving effect to any supplement to the Schedules.
(b) Each of Seller's representations and warranties in Sections
2.1, 2.4, 2.6, and 2.24 must have been accurate in all respects as of
the date of this Agreement, and must be accurate in all respects as of
the Closing Date as if made on the Closing Date, without giving effect
to any supplement to the Schedules.
4.12 Seller's Performance. All of the covenants and obligations
that Seller is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing, and each of these covenants and
obligations, must have been duly performed and complied with in all
material respects.
4.13 Consents. Each Consent identified in Schedule 2.11(c)
(Germantown and Falls Church leases and Upjohn and Roche Agreements),
must have been obtained and must be in full force and effect.
4.14 No Proceedings. Since the date of this Agreement,
there must not have been commenced or Threatened against Buyer, or
against any Person affiliated with Buyer, any Proceeding (a) involving
any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
4.15 No Claim Regarding Stock Ownership or Sale Proceeds.
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner
of, or has the right to acquire or to obtain beneficial ownership of,
any stock of, or any other voting, equity, or ownership interest in,
any of SRA, or (b) is entitled to all or any portion of the Purchase
Price payable for the Shares.
4.16 No Prohibition. Neither the consummation nor the
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time), materially
contravene, or conflict with, or result in a material violation of, or
cause Buyer or any Person affiliated with Buyer to suffer any material
adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
4.17 Transactions with Related Parties. Except for the
repayment of certain loans to officers under life insurance agreements
and the other transactions which are permitted to continue under the
provisions of Section 2.34, all financial transactions between SRA and
current and/or former shareholders of SRA and/or any related entitles
or individuals shall have been concluded such that the Closing Balance
Sheet shall reflect no assets or liabilities related to such
transactions and/or appropriate adjustments for such matters shall have
been made to the cash consideration due at closing.
4.18 Deferred Acquisition Fee. The deferred Acquisition Fee
payable to Tucker Anthony, Incorporated in connection with the
acquisition of SRA by Seller shall be expensed in 1996 or transferred
to Seller's books. At the Closing Date, SRA shall have no financial or
other obligation to Tucker Anthony, Incorporated.
4.19 Backlog. Buyer shall have been provided commercially
acceptable information with respect to SRA's Backlog, and shall have
verified that such Backlog as of The Balance Sheet Date shall be not
less than $35,000,000.
4.20 Net Sales and EBIT. The Financial Statements shall reflect
Net Sales in the twelve months ending on the 1996 Balance Sheet Date of
not less than $20,130,000 and EBIT of not less than the greater of 9.9%
of Net Sales or $1,993,000.
4.21 Real Property Leases. SRA shall not be obligated on leases
of real property other than as listed on Schedule 4.21, and all such
leases shall have commercially reasonable terms.
4.22 Minimum Book Value. The net equity value of SRA on Closing
Balance, as adjusted for the items specified herein, shall exceed
$2,600,000.
4.23 Outstanding Indebtedness. All outstanding indebtedness of
SRA to financial institutions shall have been repaid or assumed by
Seller such that the Closing balance Sheet shall reflect no assets or
liabilities related to such indebtedness.
4.24 Vehicles. The Closing Balance Sheet shall only reflect
assets and liabilities related to vehicles in general use in SRA's
business (such as pool, field and specialty vehicles) and shall not
include vehicles for personal use by any employee or director of SRA.
ARTICLE V
CONDITIONS TO THE SELLER'S OBLIGATIONS
5.1 Conditions to the Seller's Obligations. The sale of the
Shares by the Seller on the date hereof is conditioned upon receipt by
Seller of (i) a certificate of good standing of Buyer; (ii) a
certificate or certificates of incumbency confirming the authority of
the officers of Buyer executing this Agreement; (iii) a Secretary's
Certificate confirming Buyer's Board of Director's authorization of
this transaction; and (iv) the legal opinion set forth in Schedule 5.2.
5.2 Opinion of the Counsel of Buyer. Buyer shall have
furnished the Seller with the opinion of Ross & Hardies, dated the date
hereof, in form and substance satisfactory to the Seller and its
counsel to the effect set forth in Schedule 5.2 hereto.
5.3 Proceedings. All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents
incident thereto shall be reasonably satisfactory in form and substance
to the Seller and its counsel.
5.4 Accuracy of Representations. All of Buyer'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.
ARTICLE VI
INDEMNIFICATION; REMEDIES
6.1 Survival; Right To Indemnification Not Affected By
Knowledge. All representations, warranties, covenants, and obligations
in this Agreement, the Schedules, the supplements to the Schedules, the
certificate delivered pursuant to Section 1.3, and any other
certificate or document delivered pursuant to this Agreement will
survive the Closing. The right to indemnification, payment of Damages
or other remedy based on such representations, warranties, covenants,
and obligations will 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.
6.2 Indemnification and Payment Of Damages By Seller. Seller
will indemnify and hold harmless Buyer, SRA, and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including
costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Seller
in this Agreement (without giving effect to any supplement to the
Schedules), the Schedules, the supplements to the Schedules, or any
other certificate or document delivered by Seller pursuant to this
Agreement; provided, however, that if Seller discloses a Breach of any
such representation or warranty and specifically identifies it in the
certificate delivered pursuant to Section 1.3(a)(v) as having caused
the condition specified in Section 4.11 not to be satisfied, and Buyer
agrees to Close, notwithstanding such identification, then Buyer waives
the right to seek indemnity for such a Breach up to the amount or value
disclosed. If Seller discloses a change in the representations and
warranties by means of a notice under section 3.7, the delivery of a
supplement to Schedules, a reference in the certificate delivered
pursuant to Section 1.3(a)(v), or otherwise, but does not, in the
certificate delivered pursuant to Section 1.3(a)(v), identify such
change as having caused the condition specified in Section 1.3(a)(v)
not to be satisfied, then if Buyer agrees to Close, notwithstanding
such disclosure of a change, Buyer shall not be deemed to have waived
any right or remedy which Buyer may otherwise have to seek
indemnification under this Article VI.
(b) any Breach of any representation or warranty made by Seller
in this Agreement as if such representation or warranty were made on
and as of the Closing Date without giving effect to any supplement to
the Schedules, other than any such Breach that is disclosed in a
supplement to the Schedules and is expressly identified in the
certificate delivered pursuant to Section 1.3(a)(v) as having caused
the condition specified in Section 4.11 not to be satisfied;
(c) any Breach by Seller of any covenant or obligation of such
Seller in this Agreement;
(d) any product shipped or manufactured by, or any services
provided by, SRA prior to the Closing Date; or
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either
Seller or SRA (or any Person acting on their behalf) in connection with
any of the Contemplated Transactions.
The remedies provided in this Section 6.2 will not be exclusive
of or limit any other remedies that may be available to Buyer or the
other Indemnified Persons.
6.3 Indemnification and Payment of Damages By Seller --
Environmental Matters. In addition to the provisions of Section 6.2,
Seller will indemnify and hold harmless Buyer, SRA, and the other
Indemnified Persons for, and will pay to Buyer, SRA, and the other
Indemnified Persons the amount of, any Damages (including costs of
cleanup, containment, or other remediation) arising, directly or
indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising
out of or relating to: (i) (A) the ownership, operation, or condition
at any time on or prior to the Closing Date of the Facilities or any
other properties and assets (whether real, personal, or mixed and
whether tangible or intangible) in which Seller or SRA has or had an
interest, or (B) any Hazardous Materials or other contaminants that
were present on the Facilities or such other properties and assets at
any time on or prior to the Closing Date; or (ii) (A) any Hazardous
Materials or other contaminants, wherever located, that were, or were
allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Seller or SRA or by any other Person for whose
conduct they are or may be held responsible at any time on or prior to
the Closing Date, or (B) any Hazardous Activities that were, or were
allegedly, conducted by Seller or SRA or by any other Person for whose
conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property damage
(including trespass, nuisance, wrongful eviction, and deprivation of
the use of real property), or other damage of or to any Person,
including any employee or former employee of Seller or SRA or any other
Person for whose conduct they are or may be held responsible, in any
way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted with respect to the Facilities or the
operation of SRA prior to the Closing Date, or from Hazardous Material
that was (i) present or suspected to be present on or before the
Closing Date on or at the Facilities (or present or suspected to be
present on any other property, if such Hazardous Material emanated or
allegedly emanated from any of the Facilities and was present or
suspected to be present on any of the Facilities on or prior to the
Closing Date) or (ii) Released or allegedly Released by Seller or SRA
or any other Person for whose conduct they are or may be held
responsible, at any time on or prior to the Closing Date.
Seller will be entitled at its discretion, to control any
Cleanup, any related Proceeding, and, except as provided in the
following sentence, any other Proceeding with respect to which
indemnity may be sought under this Section 6.3, provided, however, that
Seller acknowledges in writing that it is financially responsible for
such Cleanup. The procedure described in Section 6.9 will apply to any
claim solely for monetary damages relating to a matter covered by this
Section 6.3.
6.4 Indemnification and Payment of Damages By Buyer. Buyer
will indemnify and hold harmless Seller, and will pay to Seller the
amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made
by Buyer in this Agreement or in any certificate delivered by Buyer
pursuant to this Agreement, (b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement, or (c) any claim by any Person
for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection
with any of the Contemplated Transactions.
6.5 Time Limitations. If the Closing occurs, Seller will have
no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed
and complied with prior to the Closing Date, other than those in
Sections 2.1, 2.4, 2.14, 2.19, and 2.29, unless on or before five years
Buyer notifies Seller of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer; a claim
with respect to Section 2.1, or 2.4, or a claim for indemnification or
reimbursement not based upon any representation or warranty or any
covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time; a claim with respect to Section
2.14 and 2.29 may be made at any time within the applicable statute of
limitation. If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with
prior to the Closing Date, unless on or before the First Anniversary of
the Closing Date Seller notifies Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then
known by Seller.
6.6 Limitations On Amount -- Seller. Seller will have no
liability (for indemnification or otherwise) with respect to the
matters described in clause (a), clause (b), clause (d), or, to the
extent relating to any failure to perform or comply prior to the
Closing Date, clause (c) of Section 6.2 until the total of all Damages
with respect to such matters exceeds $50,000, and then for the entire
amount of such Damages, provided, however, that Seller shall not be
liable for the payment of Damages under this Article VI until the total
of all such Damages exceeds the amount, if any, by which the book value
of SRA, as shown on the adjusted Closing Balance Sheet of SRA,
referenced in section 2.25(d), after the final resolution of any items
in dispute which were referred to the Independent Accounting Firm for
final agreement/determination as provided therein, exceeds $3,000,000,
such difference is designated the "Value Increment," provided further,
that except with respect to claims arising out of product or service
liability, malpractice, taxes, damage to the environment, and employee
claims, including pension, benefit and compensation, and employee
torts, such as harassment, where there shall be no limit, Seller shall
not be liable for Damages hereunder in excess of $8,800,000. The
benefit of the threshold amount and the deduction of the Value
Increment from the amount of Damages payable under this Section 6.6
will not apply to any Breach of any of Seller's representations and
warranties of which Seller had Knowledge at any time prior to the date
on which such representation and warranty is made or any intentional
Breach by Seller of any covenant or obligation.
6.7 Limitations On Amount -- Buyer. Buyer will have no
liability (for indemnification or otherwise) with respect to the
matters described in clause (a) or (b) of Section 6.4 until the total
of all Damages with respect to such matters exceeds $50,000, and then
only for the entire amount of such Damages. However, this Section 6.7
will not apply to any Breach of any of Buyer's representations and
warranties of which Buyer had Knowledge at any time prior to the date
on which such representation and warranty is made or any intentional
Breach by Buyer of any covenant or obligation, and Buyer will be liable
for all Damages with respect to such Breaches.
6.8 Post Closing Purchase Price Adjustment and Escrow. The
obligations of Seller to indemnify Buyer under the provisions of this
Article VI shall not be limited or reduced by Seller's obligation, if
any, in Section 2.25 to make a Post Closing Purchase Price Adjustment
and to provide for an Escrow Fund.
6.9 Procedure For Indemnification -- Third Party Claims. (a)
Promptly after receipt by an indemnified party under Section 6.2, 6.4,
or (to the extent provided in the last sentence of Section 6.3) Section
6.3 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 give
such notice.
(b) If any Proceeding referred to in Section 6.9(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
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 VI 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 the commencement 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 election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such
Proceeding or any 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, but the 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) Seller hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified
Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on Seller with
respect to such a claim anywhere in the world.
6.10 Procedure For Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
6.11 Special Agreement and Indemnification Regarding Taxes.
Seller shall be responsible for all state and federal tax liability of
SRA for periods prior to Closing in accordance with Section 8.6.
ARTICLE VII
MISCELLANEOUS
7.1 Post-Closing Tax Return. All future tax returns
including, but not limited to, any short year income tax returns and
any returns filed with respect to any Employee Benefit Plans, for the
period up to the Closing Date shall be filed under the direction of
Seller.
7.2 Expenses. The parties hereto shall pay all of their own
expenses relating to the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of their
respective counsel and advisers.
7.3 Disputes. Any dispute arising hereunder which cannot be
amicably resolved by the parties shall be submitted to binding
arbitration in accordance with the rules and regulations of the
American Arbitration Association, including the provisions governing
the selection of arbitrators. The location for any such arbitration
shall be in Washington, D.C. There shall be limited discovery prior
to the arbitration hearing, subject to the discretion of the
arbitrators, as follows: (a) exchange of witness lists and copies of
documentary evidence and documents related to or arising out of the
issues to be arbitrated, (b) depositions of all party witnesses, and
(c) such other depositions as may be allowed by the arbitrators upon a
showing of good cause. Each party shall pay its own costs and expenses
(including counsel fees) of any such arbitration. The fees and
expenses of the arbitrators shall be divided in the manner provided in
Section 2.25(d) for the fees and expenses of the Independent Accounting
Firm. The arbitrators shall decide the matter to be arbitrated
pursuant hereto within sixty (60) days after the appointment of the
last arbitrator. The final decision of the majority of the arbitrators
shall be furnished to the parties in writing and shall constitute a
conclusive determination of the issue in question, binding upon the
parties and shall not be contested by any of them. Such decision may
be used in a court of law only for the purpose of seeking enforcement
of the arbitrators' award.
7.4 HSR Act Filing. If necessary, the parties will cooperate
with one another in the preparation and filing of all notice and
reports required pursuant to the HSR Act and will comply with the
requirements for providing information made pursuant thereto.
7.5 Governing Law; Jurisdiction, Service of Process. The
interpretation and construction of this Agreement, and all matters
relating hereto, shall be governed by the laws of the State of Maryland
applicable to contracts to be made and performed in that State. 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 Maryland, County of
Montgomery, or, if it has or can acquire jurisdiction, in the United
States District Court for the District of Maryland, and each of the
parties consents to the 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.
7.6 Captions. The Article and Section captions used herein are
for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement.
7.6A Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and
deliver to each other such other documents, and (c) to do such other
acts and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents
referred to in this Agreement. Seller shall cooperate with Buyer in
any government audit or investigation relating to any Government
Contract, including any Defense Contract Audit Agency audit of Seller's
home office expenses, direct or indirect costs, and/or general and
administrative expenses.
7.7 Publicity. Except as otherwise required by law, none of
the parties hereto shall issue any press release or make any other
public statement, in each case relating to or connected with or arising
out of this Agreement or the matters contained herein, without
obtaining the prior approval of SRA, Seller, and Buyer to the contents
and the manner of presentation and publication thereof.
7.8 Notices. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person
or sent by certified mail, postage prepaid, addressed as follows:
(a) If to the Seller:
Then to:
GCBC, Inc.
1105 N. Market Street
Suite No. 1148
Wilmington, DE 19801
and
Salient 3 Communications, Inc.
P.O. Box 1498
Reading, PA 19603
Attn: Mr Paul H. Snyder
Tel: 610-856-5535
Fax: 610-856-5511
with a copy to:
Mr. Thomas F. Hafer
Salient 3 Communications, Inc.
P.O. Box 1498
Reading, PA 19603
Tel: 610-856-5514
Fax: 610-856-5511
(b) If to the Buyer:
Then to:
Mr. Richard C. Tucker
Senior Vice President
Dames & Moore, Inc.
7101 Wisconsin Avenue, Suite 700
Bethesda, Maryland 20814
Tel: 301-652-2215
Fax: 301-657-3043
and
Mr. Mark Snell
Executive Vice President and Chief Financial Officer
Dames & Moore, Inc.
911 Wilshire Boulevard, Suite 700
Los Angeles, California 90017
with a copy to:
Charles W. Petty, Jr.
Ross & Hardies
888 16th Street, N.W.
Washington, DC 20006
Tel: 202-835-7459
Fax: 202-778-4772
Such notice or communication shall be deemed to have been given as of
the date so received.
7.9 Parties in Interest. Except for the option granted to
Buyer to effectuate the acquisition either itself or through a wholly-
owned subsidiary, this Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto, other than by operation of
law. This Agreement shall be binding on and shall inure to the benefit
of the parties hereto and their respective heirs, executors,
administrators and successors.
7.10 Counterparts. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one
instrument.
7.11 Entire Agreement. This Agreement, including the other
documents referred to herein which form a part hereof, contains the
entire understanding of the parties hereto with respect to the subject
matter contained herein and therein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to
such subject matter.
7.12 Amendments. This Agreement may be changed only by an
agreement in writing signed by all parties hereto.
7.13 Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions will not in any way be
affected or impaired thereby.
7.14 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action
in or on behalf of any Person other than the parties hereto.
7.15 Termination. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or Seller if a material Breach of any
provision of this Agreement has been committed by the other party and
such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Article IV has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer
has not waived such condition on or before the Closing Date; or (ii) by
Seller, if any of the conditions in Article V 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 Seller to comply with
their obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller 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 Close of Business June 30, 1997, or such later date as the
parties may agree upon.
7.16 Effect of Termination. Each party's right of termination
under Section 7.15 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 7.15, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections
7.2 and 7.7 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 VIII
TAX MATTERS
8.1 Returns for Periods Through the Closing Date. Seller will
include the income of SRA (including any deferred income triggered into
income by Reg. Section 1.1502-13 and Reg. Section 1.1502-14 and any
excess loss accounts taken into income under Regulation Section 1.1502-
19) on its consolidated federal income tax returns for all periods
through the Closing Date and will pay any federal income taxes
attributable to such income. The income of SRA will be apportioned to
the period up to and including the Closing Date and the period after
the Closing Date by closing the books of SRA as of the end of the
Closing Date. Seller shall prepare, or cause to be prepared, all tax
returns of SRA required to be filed by SRA for periods ending on or
prior to the Closing Date which are filed after the Closing Date.
Seller shall submit such returns to SRA for review and signature.
Seller shall be required to pay any taxes attributable to such returns.
8.2 Tax Periods Beginning Before and Ending After the Closing
Date. Buyer shall prepare or cause to be prepared and file or cause to
be filed any Tax Returns of SRA for tax periods which begin before the
Closing Date and end after the Closing Date. Seller shall pay to Buyer
within fifteen (15) days after the date on which taxes are paid with
respect to such periods an amount equal to the portion of such taxes
which relates to the portion of such taxable period ending on the
Closing Date. For purposes of this Section, in the case of any taxes
that are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the Closing Date, the
portion of such tax which relates to the portion of such taxable period
ending on the Closing Date shall (x) in the case of any taxes other
than taxes based upon or related to income or receipts, be deemed to be
the amount of such tax for the entire taxable period multiplied by a
fraction the numerator of which is the number of days in the taxable
period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (y) in the case of any
tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant taxable period ended on
the Closing Date. Any credits relating to a taxable period that begins
before and ends after the Closing Date shall be taken into account as
though the relevant taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of SRA.
8.3 Cooperation on Tax Matters. Buyer, SRA and Seller shall
cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. SRA and Seller agree (A) to retain all books and records
with respect to tax matters pertinent to SRA relating to any taxable
period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Buyer or Seller,
any extensions thereof) of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing
authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, SRA or Seller, as the case
may be, shall allow the other party to take possession of such books
and records.
8.4 Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such taxes and fees (including any
penalties and interest) incurred in connection with this Agreement
shall be paid by Seller when due, and Seller will, at its own expense,
file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and
other taxes and fees, and, if required by applicable law, Buyer will,
and will cause its affiliates to, join in the execution of any such Tax
Returns and other documentation.
8.5 Carrybacks. Seller will immediately pay to the Buyer any
tax refund (or reduction in tax liability) resulting from a carryback
of a postacquisition tax attribute of SRA into Seller's Consolidated
Tax Return, when such refund or reduction is realized by the Seller
group. Seller will cooperate with SRA in obtaining such refunds (or
reduction in tax liability), including through the filing of amended
Tax Returns or refund claims. The Buyer agrees to indemnify Seller for
any taxes resulting from the disallowance of such postacquisition tax
attribute on audit or otherwise.
8.6 Indemnification. Seller agrees to indemnify the Buyer from
and against the entirety of any loss the Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any
liability of SRA for any taxes of SRA with respect to any tax year or
portion thereof ending on or before the Closing Date (or for any tax
year beginning before and ending after the Closing Date to the extent
allocable (determined in a manner consistent with Section 8.2 to the
portion of such period beginning before and ending on the Closing
Date). Seller shall also be entitled to receive any refund or
overpayment applicable to such periods. Buyer shall be responsible for
all tax liability arising for periods after the Closing Date. Buyer
shall promptly pay, when due, all state, federal, and local taxes,
interest, and penalties.
IN WITNESS WHEREOF, Seller and Buyer have caused their corporate
names to be hereunto subscribed by its duly authorized representatives
all as of the day and year first above written.
SELLER:
GCBC INC.
By: /s/Maurice D. James
Title: Vice President and Treasurer
SALIENT 3 COMMUNICATIONS, INC.
By: /s/Paul H. Snyder
Title: Senior Vice President and CFO
BUYER:
DAMES & MOORE, INC.
By: /s/Richard C. Tucker
Title: Senior Vice President
