Exhibit 2.4
ASSET PURCHASE AGREEMENT
BY AND AMONG
INDUS CORPORATION,
INDUS SECURE NETWORK SOLUTIONS,
LLC,
AND
HALIFAX CORPORATION
Dated as of June 30, 2005
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 30, 2005
(this “ Agreement ”), by and among INDUS
Corporation, a Virginia corporation (“ Parent
”), INDUS Secure Network Solutions, LLC, a Virginia limited
liability company and a wholly-owned subsidiary of Parent (the
“ Buyer ”), and Halifax Corporation, a Virginia
corporation (the “ Seller ”). Certain
capitalized terms in this Agreement are defined in Section 8.1
hereof.
W I T N E S S E T H:
WHEREAS, each of Parent and the Buyer desires for the Buyer
to purchase or acquire from the Seller, and the Seller wishes to
sell, assign and transfer to the Buyer, substantially all of the
assets and properties used in connection with the business of the
“Secure Network Services” division of the Seller as
such business is presently conducted and has been conducted in the
past (such business, the “ Business ”), all for
the purchase price and the assumption of the liabilities set forth
herein, and upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants,
representations and warranties made herein, and of the benefits to
be derived hereby, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1 Assets . On the basis of the representations,
warranties, covenants and agreements and subject to the
satisfaction or waiver of the conditions set forth in this
Agreement, at the Closing (as defined in Section 2.1), the
Seller will sell, transfer, convey, assign and deliver to the
Buyer, and the Buyer will purchase or acquire from the Seller, all
right, title and interest of the Seller in and to the assets,
properties and other rights (excluding the Excluded Assets (as
defined in Section 1.2)) owned, leased, licensed or used by
the Seller solely in the operation of the Business (the “
Assets ”) including, without limitation:
(a) all
accounts, notes and other receivables solely relating to the
Business;
(b) all
of the Seller’s rights arising under the Contracts listed on
Schedule 1.1(b) and any other Contracts solely
applicable to the Business;
(c) all
of the Seller’s ownership or leasehold rights, as the case
may be, in the Equipment and the other assets set forth on
Schedule 1.1(c) ;
(d) all
of the Seller’s rights in and to the Purchased Intellectual
Property;
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(e) all
of the Seller’s intangible assets used solely in conducting
the Business (to the extent not otherwise already included within
Purchased Intellectual Property);
(f) all
of the Seller’s written or electronic information relating to
the Business (including, without limitation, documentation,
databases, downloads, product descriptions, vulnerability alerts,
interoperability testing, general technical data, partner
extranets, customer lists, customer files and other written
accounts of the Seller), and other reasonably and specifically
requested information, in each case, to the extent
transferable;
(g) all
of the Seller’s permits, franchises and licenses used solely
in conducting the Business, to the extent such licenses are
transferable under applicable Law;
(h) all
of the Seller’s goodwill and going concern value relating
solely to the Business and the business appurtenant
thereto;
(i) all
of the Seller’s deposits, credits, pre-paid expenses,
deferred charges, advance payments, security deposits, rights to
escrows and prepaid items relating solely to the
Contracts;
(j) all
of the Seller’s books, records, manuals, documents,
correspondence, sales and credit reports, customer lists,
literature, brochures, advertising material and the like incidental
to or used in conducting the Business;
(k)
[intentionally omitted]
(l) all
of the Seller’s claims, claims in action, causes of action
and judgments related solely to the Business;
(m) all
of the Seller’s inventories used solely in conducting the
Business, including all inventories of raw materials, work in
process, finished products, goods, spare parts, replacement and
component parts, and office and other supplies, including
inventories held at any location controlled by any Seller and
inventories previously purchased and in transit to any Seller at
such locations; and
(n) rights
with respect to the employment of the Division Employees (as
defined in Section 3.1.13.
Subject to the terms and
conditions hereof, at the Closing, the Assets shall be transferred
or otherwise conveyed to the Buyer free and clear of all
liabilities, obligations and Liens of any nature whatsoever
excepting only Assumed Liabilities (as defined in
Section 1.3).
1.2 Excluded Assets . Notwithstanding the foregoing,
the Assets shall not include the assets, properties and other
rights of the Seller listed or described in
Schedule 1.2 attached hereto (collectively, the “
Excluded Assets ”), which Excluded Assets shall not be
sold or transferred to Buyer and shall be retained by the
Seller:
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1.3 Assumption of Liabilities . Subject to the terms
and conditions set forth herein, at the Closing, the Buyer shall
assume and agree to pay, honor and discharge promptly as they
become due the liabilities reflected on Schedule 1.3
attached hereto, including, without limitation, any and all
liabilities, obligations, commitments and claims of any nature
whatsoever related to or arising out of the Contracts, bids,
proposals and other agreements listed on Schedule 1.3
after the Closing Date (including, without limitation the CBA (as
defined in Section 3.1.13), except for any obligation,
liability or claim resulting from any breach by any Seller of any
such Contract occurring prior to the Closing Date (as defined in
Section 2.1) (collectively, all such items contemplated by
this sentence shall be referred to herein as the “ Assumed
Liabilities ”); provided, however, subject to the terms
contained in the Subcontract (as defined in Section 4.4(a))
(including, without limitation, Article I thereof), that the
Buyer’s assumption of the Assumed Liabilities with respect to
the prime Government Contracts listed on
Schedule 4.4(a) shall be effective upon the novation of
such prime Government Contracts to the Buyer and in such case
Assumed Liabilities shall not include any obligation, liability or
claim resulting from any breach by Seller of any such Contract
occurring prior to such novation.
1.4 Excluded Liabilities . Notwithstanding any
provision hereof or any schedule or exhibit hereto and regardless
of any disclosure to Buyer, except for the Assumed Liabilities, the
Buyer shall not assume any liabilities, obligations or commitments
of the Seller relating to or arising out of the operation of the
Business or the ownership of the Assets prior to the Closing,
including, but not limited to accounts payable, Taxes or
obligations or liabilities relative to the employment or
termination of any employees of the Seller as of the Closing Date
(the “ Excluded Liabilities ”).
ARTICLE II
THE CLOSING
2.1 Place and Date . The parties shall use
commercially reasonable efforts to consummate the closing of the
sale and purchase of the Assets and the assumption of the Assumed
Liabilities (the “ Closing ”) without being
physically present at one location. If Closing at one location is
required, such Closing shall take place at the offices of Venable
LLP, 8010 Towers Crescent Drive, Suite 300, Vienna, Virginia,
and in any event, at 10:00 a.m., Eastern time, on the date of
this Agreement, which date shall be referred to as the “
Closing Date .”
2.2 Purchase Price . On the terms and subject to the
conditions set forth in this Agreement, Parent agrees to deliver or
cause to be delivered the amounts set forth in clauses (a) and
(b) of this Section 2.2 (collectively, the “
Purchase Price ”). The Purchase Price shall be payable
as follows:
(a) An
amount, in cash, equal to (i) Twelve Million Five Hundred
Thousand Dollars ($12,500,000), less (ii) the Escrow Amount
(as defined in subsection (b) below), plus or minus
(iii) the amount by which the Estimated Closing Date Net
Assets (as defined in Section 2.4(a)) is greater than, or less
than, $1,271,000 (which amount the parties agree is the amount of
the “Net Assets” of the Business as of
December 31, 2004, defined as the total amount (in U.S.
Dollars) of the assets of the Business less the liabilities of the
Business as of such date, all as
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determined on a pro forma basis
and set forth in the balance sheet of the Business prepared by
Seller as of December 31, 2004 previously provided to Parent
and attached hereto as Schedule 2.4(a)(2)) (the “
Cash Payment ”), shall be paid to the Seller at
Closing by wire transfer of immediately available funds to such
bank account or accounts as per written instructions of the Seller,
given to Parent at least five days prior to the Closing;
and
(b) Three
Million Dollars ($3,000,000) (the “ Escrow Amount
”) shall be delivered to the Escrow Agent pursuant to the
terms and conditions of Section 2.3.
2.3 Escrow Amount . At Closing, Parent shall pay or
cause to be paid the Escrow Amount to the Escrow Agent in cash
payable by wire transfer of immediately available funds for deposit
in an escrow account in accordance with the terms and conditions of
the Escrow Agreement to be entered into by and among Parent, the
Seller and the Escrow Agent in substantially the form attached
hereto as Exhibit A (the “ Escrow
Agreement ”). Six Hundred Twenty Five Thousand Dollars
($625,000) of the Escrow Amount (the “ Indemnification
Escrow Amount ”), plus any interest or other income
earned thereon (such collective amount, the “
Indemnification Escrow Fund ”), shall serve as
security for the payment of indemnification obligations of the
Seller pursuant to Section 6.1 of this Agreement and shall be
held and distributed by the Escrow Agent in accordance with the
terms and conditions of the Escrow Agreement. One Million Dollars
($1,000,000) of the Escrow Amount (the “ Assignment
Failure Escrow Amount ”), plus any interest or other
income earned thereon (such collective amount, the “
Assignment Failure Escrow Fund ”), shall serve as
security for the payment of the Assignment Failure Amount if and
when the Seller becomes obligated to pay such Assignment Failure
Amount pursuant to Section 6.8 of this Agreement and shall be
held and distributed by the Escrow Agent in accordance with the
terms and conditions of the Escrow Agreement. The entire Escrow
Amount, plus any interest or other income earned thereon (such
collective amount, the “ Escrow Fund ”), shall
serve as security for the payment of the Novation Failure Amount if
and when the Seller becomes obligated to pay such Novation Failure
Amount pursuant to Section 6.7 of this Agreement and shall be
held and distributed by the Escrow Agent in accordance with the
terms and conditions of the Escrow Agreement.
2.4 Purchase Price Adjustment .
(a) The
Purchase Price shall be adjusted on a dollar-for-dollar basis
(either up or down, as the case may be) in accordance with this
Section 2.4 based on the amount by which the Closing Date Net
Assets (as defined below) either is greater than or less than
$1,300,000 (the “ Estimated Closing Date Net Assets
”), which amount was determined from the estimated pro forma
balance sheet of the Business as of the Closing Date (the “
Closing Date Balance Sheet ”) attached hereto as
Schedule 2.4(a)(1) , prepared by Seller consistently
with the pro forma balance sheet of the Business as of
December 31, 2004 previously provided to Parent and attached
hereto as Schedule 2.4(a)(2) . The term “
Closing Date Net Assets ” shall mean the total amount
(in U.S. Dollars) of the assets of the Business less the
liabilities of the Business determined from on the Closing Date
Balance Sheet (as defined in Section 2.4(b)).
(b) Within
forty-five (45) days after the Closing Date, Seller shall
cause to be prepared and delivered to the Parent (i) a pro
forma balance sheet of the Business as of the
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Closing Date (the “
Closing Date Balance Sheet ”) and (ii) a
statement of the Closing Date Net Assets, each prepared
consistently with Schedule 2.4(a)(1) and Schedule
2.4(a)(2) , together with the work papers or other supporting
documentation used to prepare the Closing Date Balance Sheet. The
Parent shall cooperate with Seller after the Closing Date in
furnishing information, documents, evidence and other assistance to
Seller to facilitate the completion of the Closing Date Balance
Sheet within the aforementioned time period. If within thirty
(30) days following delivery of the Closing Date Balance
Sheet, the Parent does not give Seller written notice of its
objection to the statement of the Closing Date Net Assets
determined from the Closing Date Balance Sheet (which such notice
must contain a statement of the basis of the Parent’s
objection), then such statement shall be conclusive and binding on
the parties.
(c) If
the Parent gives Seller a timely written notice of objection to the
statement of the Closing Date Net Assets determined from the
Closing Date Balance Sheet (which such notice must contain a
statement of the basis of the Parent’s objection), and if the
parties are unable to resolve the Parent’s objections within
fifteen (15) days following such objection, then the issue(s)
in dispute will be submitted to the Washington, D.C. office of BDO
Seidman, LLP, or to another independent public accounting firm of
national standing mutually agreed upon by Parent and Seller (the
“ Auditor ”), for resolution. The determination
of the Auditor shall be set forth in a written notice delivered to
Parent and the Seller by the Auditor and will be conclusive and
binding on the parties. The fees and expenses of the Auditor shall
be split equally and severally by Buyer and Parent, on the one
hand, and Seller, on the other hand.
(d) At
such time as the statement of Closing Date Net Assets is finalized
pursuant to Section 2.4(b) or Section 2.4(c), as the case may
be, if the Closing Date Net Assets are:
(i) less
than the Estimated Closing Date Net Assets, the Seller shall pay to
Parent the amount of such deficiency in cash within ten
(10) Business Days after (x) expiration of the thirty-
(30-) day period referred in Section 2.4(b) above or
(y) the Auditor delivers written notice of its determination
pursuant to Section 2.4(c) above; and
(ii) greater
than the Estimated Closing Date Net Assets, the Parent shall pay or
caused to be paid to Seller the amount of such deficiency in cash
within ten (10) Business Days after (x) expiration of the
thirty- (30-) day period referred in Section 2.4(b) above or
(y) the Auditor delivers written notice of its determination
pursuant to Section 2.4(c) above.
2.5 Procedure at Closing . On the Closing Date, the
parties agree to take the following steps listed below (provided,
however, that upon their completion all such steps shall be deemed
to have occurred simultaneously):
(a) Parent
shall pay the Cash Payment and the Escrow Amount in accordance with
Sections 2.2, 2.3 and 5.3.
(b) The
Seller shall deliver to Parent and the Buyer the Closing documents
specified in Section 5.1.
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(c) The
Seller shall deliver to the Buyer such bills of sale, deeds,
assignments, assumption agreements, certificates of title and other
documents and take other necessary action as may be reasonably
requested by the Buyer in order to convey good and marketable title
to all of the Assets, free and clear of all Liens and in order to
carry out the intentions and purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Seller .
The Seller hereby represents and warrants to Parent and Buyer,
subject to such exceptions as are specifically disclosed in the
disclosure schedule and schedule of exceptions (the “
Seller Disclosure Schedules ”) delivered herewith and
dated as of the date hereof, as follows:
3.1.1 Organization and Qualification . The Seller is
a corporation duly organized, validly existing and in good standing
under the Laws of the Commonwealth of Virginia and has the
necessary corporate power and authority to conduct the Business as
now conducted and to own, use, license and/or lease the
Assets.
3.1.2 Authorization, etc . The Seller has the
necessary corporate power and authority to execute and deliver this
Agreement and the other agreements which are attached (or forms of
which are attached) as exhibits hereto (such agreements,
collectively with the novations to Buyer of prime Government
Contracts listed on Schedule 4.4(a) , the “
Ancillary Agreements ”) to which the Seller is a
party, to perform fully its obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by the Seller of this Agreement and each
of the Ancillary Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby,
have been duly authorized by all requisite corporate action of the
Seller. The Seller has duly executed and delivered this Agreement
and each of the Ancillary Agreements to which it is a party. This
Agreement and each the Ancillary Agreements to which the Seller is
or will become a party constitute or will constitute, as
applicable, the legal, valid and binding obligations of the Seller
enforceable against it in accordance with their respective
terms.
3.1.3 [intentionally omitted]
3.1.4 Meetings Regarding Business . Within the past
five years , no deliberations by Sellers’ board of
directors or any committee of such board have ever addressed the
Assets or the Business, including without limitation relating to
the performance of the Business, any lack of customer satisfaction
related to the Business, or the Business’ performance of its
Government Contracts or any other Assets.
3.1.5 No Conflicts . The execution and delivery by
the Seller of this Agreement and the Ancillary Agreements to which
the Seller is or will be a party do not, and the performance by the
Seller of its obligations under this Agreement and the Ancillary
Agreements
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to which the Seller is or will be
a party and the consummation of the transactions contemplated
hereby and thereby do not and will not:
(a) conflict
with or result in a violation or breach of any of the terms,
conditions or provisions of the articles of incorporation or bylaws
of the Seller;
(b) subject
to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in
Schedule 3.1.5(b) of the Seller Disclosure Schedules,
if any, conflict with or result in a violation or breach of any Law
or Order applicable to the Seller or any of its assets and
properties, including, without limitation, the Assets;
or
(c) except
as disclosed in Schedule 3.1.5(c) of the Seller
Disclosure Schedules, (i) conflict with or result in a violation or
breach of, (ii) constitute a default (or an event that, with
or without notice or lapse of time or both, would constitute a
default) under, (iii) require the Seller to obtain any
consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of,
(iv) result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed
payments or performance under, (vi) result in any contract
termination or the imposition of any reduction in price, labor
rate, direct rates, indirect rates or other economic benefit of the
Contracts, (vii) result in the creation or imposition of (or
the obligation to create or impose) any Lien upon the Seller or any
of its assets and properties, including, without limitation, the
Assets, under or (viii) result in the loss of any material
benefit under, any of the terms, conditions or provisions of any
Contract.
3.1.6 Seller Financial Statements .
Schedule 3.1.6 of the Seller Disclosure Schedules
attaches (a) the pro forma balance sheet of the Business as at
December 31, 2004 and related statement of statement of income
for the nine (9) months ended December 31, 2004
(excluding the notes related thereto), and (b) the pro forma
balance sheet of the Business as at March 31, 2005 (the
“ Most Recent Balance Sheet ”) and related
statement of income for the twelve (12) months ended March 31,
2005 (excluding the notes related thereto) (together, the “
Business Financials ”). The accounting principles used
in calculating individual line item balances contained in the
Business Financials are consistent with GAAP; provided, however,
that the form of presentation, including, but not limited to, the
absence of footnotes, is not in conformity with GAAP. The Business
Financials are materially complete and correct, are in accordance
with the books and records of the Seller and present fairly, in all
material respects, the financial condition and operating results of
the Business as of the dates and during the periods indicated
therein.
3.1.7 Assets . Except as disclosed in
Schedule 3.1.7 , the Seller has good title to all the
Assets free and clear of any and all Liens other than Permitted
Liens. The Assets constitute all assets necessary for the conduct
of the Business as now conducted and as conducted in the past two
years and will be sufficient in all material respects to carry on
the Business after Closing as now conducted and as conducted in the
past two years, without interruption or disruption. The Assets are
in reasonably good repair and operating condition (subject to
normal wear and tear) and there are no facts or conditions
affecting the Assets which
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could, individually or in the
aggregate, interfere in any material respect with the use,
occupancy or operation thereof as currently used, occupied or
operated, or their adequacy for such use.
3.1.8 Absence of Changes . The Seller has conducted
the Business only through the Seller and not through any direct or
indirect Subsidiary or Affiliate of the Seller. No part of the
Business is operated by the Seller through any entity other than
the Seller. Since March 31, 2005, there has been no change in
the condition (financial or otherwise), business, net worth,
assets, properties or Liabilities of the Business which has had or
is likely to have a Material Adverse Effect, and there has been no
occurrence, circumstance or combination thereof which would
reasonably be expected to result in any such Material Adverse
Effect before or after the Closing Date. In addition, without
limiting the generality of the foregoing, except as expressly
contemplated by this Agreement and except as disclosed in
Schedule 3.1.8 of the Seller Disclosure Schedules,
since December 31, 2004:
(a) the
Seller has not entered into any Contract, other than with Parent or
its Affiliates, commitment or transaction or incurred any
Liabilities with respect to the Business outside of the ordinary
course of business consistent with past practice;
(b) there
has not been any material amendment or other material modification
(or agreement to do so) or violation of the terms of any of the
Contracts;
(c) the
Seller has not entered into or amended any Contract pursuant to
which any other Person is granted by the Seller production,
marketing, distribution, licensing, sublicensing or similar rights
with respect to any products or services of the Business or
Purchased Intellectual Property;
(d) no
Action or Proceeding has been commenced or, to the Knowledge of the
Seller, has been threatened (whether orally or in writing), by or
against the Seller relating to the Assets or the
Business;
(e) there
has not been any transfer (by way of a Contract or otherwise) by
Seller to any Person of Seller’s rights in and to any
Purchased Intellectual Property;
(f) the
Seller has not made or agreed to make any material disposition or
sale of, waiver of rights to, license or lease of, or incurrence of
any Lien on, any Assets;
(g) the
Seller has not made or agreed to make any purchase of any assets
and properties of any Person in connection with or related to the
Business other than (i) acquisitions of inventory, or licenses
of assets or properties, in the ordinary course of the Business
consistent with past practice, and (ii) other acquisitions in
an amount not exceeding ten thousand dollars ($10,000) in the case
of any individual item or twenty-five thousand dollars ($25,000) in
the aggregate;
(h) the
Seller has not made or agreed to make any capital expenditures in
connection with the Business or commitments for additions to
property, plant or equipment used in the Business constituting
capital assets in the aggregate in an amount exceeding twenty-five
thousand dollars ($25,000);
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(i) the
Seller has not made or agreed to make any write-off or write-down,
any determination to write off or write-down, or revalue, any of
the Assets, or change any reserves or Liabilities associated
therewith, in the aggregate in an amount exceeding five thousand
dollars ($5,000);
(j) the
Seller has not made or agreed to make payment, discharge or
satisfaction, in an amount in excess of five thousand dollars
($5,000), in any one case, or twenty-five thousand dollars
($25,000) in the aggregate, of any claim, Liability or obligation
(whether absolute, accrued, asserted or unasserted, contingent or
otherwise) relating to or adversely affecting the Business, other
than the payment, discharge or satisfaction in the ordinary course
of business of Liabilities reflected or reserved against in the
Business Financials and other than Liabilities incurred in the
ordinary course of the Business since December 31,
2004;
(k) the
Seller has not failed to pay or otherwise satisfy any Liabilities
presently due and payable of the Seller relating to the Business
(other than delays in the ordinary course of the Seller’s
business consistent with past practices that would not reasonably
be expected to have a Material Adverse Effect), except such
Liabilities relating to the Business which are being contested in
good faith by appropriate means or procedures and which,
individually or in the aggregate, are not material;
(l) except
for borrowings against receivables in the ordinary course of
business at the Seller corporate level, the Seller has not incurred
any Indebtedness or guaranteed any Indebtedness of any other Person
in connection with the Business;
(m) other
than in the ordinary course of business for non-executive employees
and other than entering into the CBA, the Seller has not entered
into, amended, modified or terminated any employment or
compensation agreement with, or increased or otherwise changed any
compensation or benefits payable or to become payable by the Seller
to, any director, employee, agent or consultant of the Seller who
is employed by or providing service to the Seller in connection
with the Business;
(n) there
has been no material physical damage, destruction or other casualty
loss (whether or not covered by insurance) affecting any of the
Assets; and
(o) neither
the Seller or any of its Affiliates has entered into or approved
any contract, arrangement or understanding or acquiesced in respect
of, any arrangement or understanding, to do, engage in or cause, or
having the effect of any of the foregoing.
3.1.9 No Undisclosed Liabilities . There are no
Liabilities arising out of or otherwise directly or indirectly
relating to the Assets or the Business except (i) as disclosed
in Schedule 3.1.9 of the Seller Disclosure Schedules
and (ii) as disclosed or reserved against in the Business
Financials.
3.1.10 Taxes .
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(a) The
Seller has properly prepared and timely filed all Tax Returns
required to be filed. All such Tax Returns are true, correct and
complete in all material respects. All Taxes owed by the Seller
(whether or not shown on any Tax Return) have been paid except for
Taxes not yet due. The Seller has not received any notice of Tax
deficiency or additional assessment from any Governmental Authority
with respect to Liabilities for Taxes payable by the Seller. Since
December 31, 2001, no claim has ever been made by any Governmental
Authority in any jurisdiction where the Seller does not file Tax
Returns that the Seller is or may be subject to taxation by that
jurisdiction. There are no Liens with respect to Taxes on any of
the Assets.
(b) The
Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other
third party, and all Forms W-2 and 1099 required with respect
thereto have been properly completed and timely filed.
(c) There
is no material dispute or claim concerning any Tax Liability of the
Seller either (A) claimed or raised by any Governmental
Authority in writing or (B) as to which any of the
stockholders, directors or officers of the Seller has Knowledge
based upon personal contact with any agent of such Governmental
Authority.
(d)
Schedule 3.1.10(d) of the Seller Disclosure Schedule
lists all federal, state, local, and foreign Tax Returns filed with
respect to the Seller for taxable periods ended on or after
December 31, 2001, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the
subject of audit. The Seller has delivered to Buyer correct and
complete copies of all federal Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by the
Seller since January 1, 2001. The Seller has not waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or
deficiency.
(e) None
of the Assumed Liabilities represent an obligation by the Seller to
make any payments that are not fully deductible as a result of the
provisions set forth in Sections 162(m) or 280G of the Code or the
Treasury Regulations thereunder (or any corresponding provisions of
state, local or foreign Tax Law) or would result in an excise Tax
to the recipient of any such payment under Section 4999 of the
Code. The Seller is not a party to any Tax allocation or sharing
agreement. The Seller (A) has never been a member of an
“affiliated group” (within the meaning of Section
1504(a) of the Code) filing a consolidated federal Income Tax
Return, and (B) has no Liability for the Taxes of any Person
other than the Seller (i) under Treasury Regulation
§1.1502-6 (or any similar provision of state, local or foreign
Law), (ii) as a transferee or successor, (iii) by
contract, or (iv) otherwise.
(f) The
unpaid Taxes of the Seller (A) did not, as of the most recent
fiscal month end, exceed the reserve for Tax Liabilities (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of
the most recent balance sheet (rather than in any notes thereto)
and (B) do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past custom
and practice of the Seller in filing its Tax Returns.
10
(g) The
Seller has not been, and will not be, required to include any item
of income in, or exclude any item of deduction from, taxable income
for any Tax period (or portion thereof) ending on or after the
Closing Date as a result of (A) any change in method of
accounting for a Tax period ending on or prior to the Closing Date
under Section 481 of the Code (or any corresponding or similar
provision of state, local or foreign Income Tax Law); (B) any
“closing agreement” as described in Section 7121
of the Code (or any corresponding or similar provision of state,
local or foreign Income Tax Law); or (C) any installment sale
or open transaction disposition made on or prior to the Closing
Date.
(h) The
Seller has not distributed stock of another Person, and has not had
its stock distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by
Sections 355 or 361 of the Code.
3.1.11 Legal Proceedings . Except as set forth in
Schedule 3.1.11 of the Seller Disclosure
Schedules:
(a) there
are no Actions or Proceedings pending or, to the Knowledge of the
Seller, threatened (whether orally or in writing), against or
adversely affecting the Seller relating to the Assets or the
Business or in connection with or relating to the transactions
contemplated by this Agreement;
(b) to
the Knowledge of the Seller, there are no facts or circumstances
that could reasonably be expected to give rise to any material
Action or Proceeding against or adversely affecting the Seller
relating to the Assets or the Business or in connection with or
relating to the transactions contemplated by this Agreement;
and
(c) with
respect to or otherwise affecting the Business or the Assets, the
Seller has not received notice, and does not otherwise have
Knowledge of any Orders outstanding against the Seller.
Schedule 3.1.11 of the Seller Disclosure Schedules sets forth
all Actions or Proceedings against or affecting, or, to the
Knowledge of the Seller, threatened (whether orally or in writing)
against, the Seller relating to the Assets or the Business during
the three (3)-year period prior to the date hereof.
3.1.12 Compliance with Laws and Orders . The
operation of the Business as currently conducted does not violate
any Law or Order applicable to the Business, the Seller or any of
its assets and properties. Neither the Seller nor any of its
directors, officers, Affiliates, agents or employees has violated
in any material respect or is currently in default or violation in
any material respect under, any Law or Order applicable to the
Business or any of the Assets. The Seller is not aware of any claim
of violation, or of any actual violation, of any such Laws or
Orders by the Seller, other than violations which could not
reasonably be expected to have a Material Adverse
Effect.
3.1.13 Employees, Labor Matters, etc .
Schedule 3.1.13(a) lists each Person currently employed
by the Seller solely in connection with the Business (the “
Division Employees ”), and
Schedule 3.1.13(b) lists each Person currently employed
by the Seller in part
11
in connection with the Business
and in part in connection with other of the Seller’s
businesses or operations. The Division Employees constitute all
persons necessary for the conduct of the Business as now conducted
and as conducted in the past two years and will be sufficient,
assuming they continue to be employed by the Parent or Buyer after
the Closing in connection with the Business, in all material
respects to carry on the Business after Closing as now conducted
and as conducted in the past, without interruption or disruption.
Except for that certain Agreement between Seller and Local 99-99A
International Union of Operating Engineers effective April 1,
2005 (the “ CBA ”) and except as disclosed on
Schedule 3.1.13(c) , the Seller is not a party to any
collective bargaining agreement with respect to any of its
employees. The Seller has made all contributions and payments
required under the CBA, including without limitation all
contributions to (a) the Health and Welfare Trust Fund of the
International Union of Operating Engineers, Local 99-99A
(Article V), (b) the Central Pension Fund of the
International Union of Operating Engineers and Participating
Employers (Article V), and (c) the Local 99 IUOE Joint
Apprenticeship Trust (Article IV) (collectively, the “
Trust Funds ”). The Seller has no Liability under any
of the Trust Funds except as expressly set forth in the CBA and, to
the Knowledge of the Seller, none of the Trust Funds is
underfunded. Furthermore, there is no pending dispute, and the
Seller has no knowledge of any potential dispute, between the
Seller and any of the Trust Funds concerning the payment of any
contributions. With respect to the Business, the Seller is in
material compliance with all applicable Laws respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and occupational safety and health pertaining to
the Seller and is not engaged in any unfair labor practice within
the meaning of any applicable Law, including Section 8 of the
National Labor Relations Act. With respect to the Business, there
is no unfair labor practice, charge or complaint or any other
matter against or involving the Seller pending or, to the
Seller’s Knowledge, threatened (whether orally or in writing)
before any Governmental Authority. With respect to the Business,
here is no labor strike, dispute, slowdown or stoppage pending or
to the Seller’s Knowledge, threatened (whether orally or in
writing) against the Seller. No certification or decertification
question or organizational drive exists or has existed within the
past twelve (12) months respecting the Business. The Seller
has not experienced any organized work stoppage or other similar
labor difficulty involving the Division Employees. There are no
charges, investigations, administrative proceedings or formal
complaints of discrimination (including discrimination based upon
sex, age, marital status, race, national origin sexual preference,
handicap or veteran status) pending or, to the Seller’s
Knowledge, threatened (whether orally or in writing) before any
Governmental Authority, including the Equal Employment Opportunity
Commission, against the Seller, and, to the Seller’s
Knowledge, no basis for any such material charge, investigation,
administrative proceeding or complaint exists. With respect to the
Business, except as set forth on Schedule 3.1.13(d) ,
there have been no audits of the equal employment opportunity
practices of the Seller. The Seller has not mis-characterized or
mis-classified any Division Employee as an independent
contractor.
3.1.14 Plans; ERISA .
(a)
Employee Benefit Plans . Schedule 3.1.14 sets
forth a true and complete list of each “employee benefit
plan,” as such term is defined in section 3(3) of ERISA,
whether or not subject to ERISA, and each bonus, incentive or
deferred compensation, severance, termination, retention, change of
control, stock option, stock appreciation, stock
12
purchase, phantom stock or other
equity-based, performance or other employee or retiree benefit or
compensation plan, program, arrangement, agreement, policy or
understanding, whether written or unwritten, other than
“multiemployer plans” within the meaning of section
4001(a)(3) of ERISA or as described in Section 413 of the Code
(each, a “ Multiemployer Plan ”), that provides
benefits or compensation with respect to any Division Employee
(collectively, the “ Plans ”). The Seller has
provided or made available to the Parent complete and correct lists
of all the benefits enjoyed by the Division Employees and copies of
all written Plans and descriptions of all unwritten Plans. The
Seller has not communicated to any Division Employee any intention
or commitment to modify any Plan or to establish or implement any
other employee or retiree benefit or compensation arrangement
applicable to any Division Employee.
(b) Each
Plan has been administered in material compliance with all
applicable Laws, including without limitation ERISA, if applicable,
and the applicable provisions of the Code, and in accordance with
its terms and any related agreements or documents. There is no
pending or, to the Seller’s Knowledge, threatened (whether
orally or in writing) assessment, complaint, proceeding or
investigation of any kind before any Governmental Authority related
to any Plan, nor is there any basis therefore.
(c) Except
with respect to the Central Pension Fund of the International Union
of Operating Engineers and Participating Employers, Seller does not
contribute to any Multiemployer Plan or any Plan subject to
Section 412 of the Code or Section 302 or Title IV of
ERISA; nor has Seller maintained any such Multiemployer Plan or
such other Plan for any employees for the 5 year period
preceding the date of this Agreement for which Seller has liability
under Title IV of ERISA as of the date of this Agreement. The
Seller has no current responsibility to make any withdrawal
liability payments to any such multiemployer plan, nor would the
transaction contemplated by this Agreement result in any withdrawal
liability of Seller under any multiemployer plan, as determined in
accordance with Section 4203 and 4205 of ERISA, regardless of
whether Parent or Buyer assumes such multiemployer plan.
Furthermore, there is no pending claim, and the Seller has no
knowledge of any potential claim, between the Seller and any
multiemployer plan concerning payment of any withdrawal liability
payments. The Seller has not received any notice of any failure by
a multiemployer plan to satisfy the minimum funding requirements of
Section 412 of the Code, and has not applied for, and has not
received, a waiver of such minimum funding requirements with
respect to any multiemployer plan. Seller has provided or made
available to the Parent a copy of any opinion letter or
determination letter issued by the IRS with respect to any
Plan’s qualification under Code Section 401(a) or
(k).
3.1.15 Real Property .
(a)
Schedule 3.1.15(a) of the Seller Disclosure Schedules
contains a true and correct list of (i) each parcel of real
property leased, utilized and/or operated by the Seller (as lessor
or lessee or otherwise) in connection, directly or indirectly, with
the Business (the “ Leased Real Property ”) and
(ii) all Liens relating to or affecting any parcel of Leased
Real Property. True, correct and complete copies of the documents
under which the Leased Real Property is leased, subleased (to or by
the Seller or otherwise), utilized, and/or operated (the “
Lease Documents ”) have been made available to Parent
and such Lease Documents are
13
unmodified and in full force and
effect. The Seller does not own any real property other than Seller
owned leasehold improvements, if any, on Leased Real
Property.
(b) Subject
to the terms of the Lease Documents, the Seller has a valid and
subsisting leasehold estate in and the right to quiet enjoyment of
each of the Leased Real Properties for the full term of the leases
(including renewal periods) relating thereto. Each Lease Document
referred to in Schedule 3.1.15(a) is a legal, valid and
binding agreement, enforceable in accordance with its terms in all
material respects, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar Laws relating to the enforcement of
creditors’ rights generally and by general principles of
equity, of the Seller, and of each other Person that is a party
thereto, and except as set forth in Schedule 3.1.15(b)
of the Seller Disclosure Schedules, there is no, and neither the
Seller nor any of its Affiliates has received notice of any,
default (or any condition or event which, after notice or lapse of
time or both, would constitute a default) thereunder. The Seller
does not owe brokerage commissions or finders fees with respect to
any such Leased Real Property.
(c) Except
as disclosed in Schedule 3.1.15(c) of the Seller
Disclosure Schedules, all improvements on the Leased Real Property
(i) comply in all material respects with and are operated in
material accordance with applicable Laws and all applicable Liens,
Consents, contracts, covenants and restrictions and (ii) are
in all material respects in good operating condition and in a state
of good maintenance and repair, ordinary wear and tear excepted,
and such improvements are in all material respects adequate and
suitable for the purposes for which they are presently being used
and there are no condemnation or appropriation proceedings pending
or, to the Knowledge of the Seller, threatened (whether orally or
in writing) against any of such real property or the improvements
thereon.
3.1.16 Tangible Personal Property . The Seller is in
possession of and has good and marketable title to, or has valid
leasehold interests in or valid rights under contract to use, all
tangible personal property used in the conduct of the Business,
including tangible personal property reflected on the Business
Financials and tangible personal property of the Business acquired
since March 31, 2005, other than property disposed of since
such date in the ordinary course of business consistent with past
practice. Except (a) for the Liens disclosed in
Schedule 3.1.16 of the Seller Disclosure Schedules and
purchase money liens on equipment purchases or product purchases in
the ordinary course of the Business for which the purchase price is
not yet due and payable, or (b) as disclosed in
Schedule 3.1.16 of the Seller Disclosure Schedules, all
such tangible personal property of the Business (including plant,
property and equipment) is owned by the Seller free and clear of
all Liens and is suitable in all material respects for the conduct
by the Seller of the Business as presently conducted, and is in
good working order and condition in all material respects, ordinary
wear and tear excepted, and its use complies in all material
respects with all applicable Laws.
3.1.17 Intellectual Property .
(a)
Schedule 3.1.17(a) of the Seller Disclosure Schedules
lists all Registered Purchased Intellectual Property owned by the
Seller as well as all material Purchased Intellectual Property that
is not Registered Purchased Intellectual Property.
14
(b) The
Seller has all requisite right, title and interest in or valid and
enforceable rights under Contracts or Law to use all Purchased
Intellectual Property that is used by the Seller to conduct the
Business in the ordinary course. Each item of Purchased
Intellectual Property listed in Schedule 3.1.17(a) of
the Seller Disclosure Schedules is owned exclusively by the Seller
(excluding Intellectual Property licensed to the Seller under any
license) in its own name and is free and clear of any
Liens.
(c) Except
as identified in Schedule 3.1.17(c) of the Seller
Disclosure Schedules, since December 31, 2003, other than in
the ordinary course of business, the Seller has not transferred
ownership of or granted any license of or other right to use or
authorized the retention of any rights to use any Intellectual
Property that is or was, as of that date, Purchased Intellectual
Property to any other Person.
(d) The
Purchased Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of the Business as
currently conducted, including the design, development,
distribution, marketing, manufacture, use, import, license, and
sale of the products, technology and services of the
Business.
(e)
Schedule 3.1.17(e) of the Seller Disclosure Schedules
lists all Contracts (including all inbound licenses) to which the
Seller is a party with respect to any Purchased Intellectual
Property. Except as specifically identified in
Schedule 3.1.17(e) of the Seller Disclosure Schedules,
no Person other than the Seller has ownership rights to
improvements made by the Seller in Purchased Intellectual Property
that has been licensed to the Seller.
(f) Except
as disclosed in Schedule 3.1.17(f) of the Seller
Disclosure Schedules, the operation of the Business by the Seller
as currently conducted, including the design, development, use,
import, manufacture and sale of the products, technology or
services (including products, technology or services currently
under development) of the Business (to the extent such is performed
by the Seller in the operation of the Business as currently
conducted), does not infringe, violate or misappropriate the
Intellectual Property rights of any Person, and the Seller has not
received written notice from any Person within the past two
(2) years claiming that such operation of the Business
infringes, violates or misappropriates the Intellectual Property
rights of any Person, including notice of infringement of
third-party patent or other Intellectual Property rights from a
potential licensor of such rights.
(g) Each
item of Registered Purchased Intellectual Property which has
actually been and currently actually is registered in the name of
the Seller is, to the Seller’s knowledge, valid and
subsisting, and all necessary registration and registration-related
maintenance fees, renewal fees, and annuity fees in connection with
such Registered Purchased Intellectual Property have been paid and
all necessary registration-related documents and certificates in
connection with such Registered Purchased Intellectual Property
have been filed with the relevant patent, copyright, trademark or
other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered
Purchased Intellectual Property. In each case in which the Seller
has acquired ownership of any Purchased Intellectual Property from
any Person, the Seller has obtained a valid and enforceable
assignment
15
sufficient to irrevocably
transfer all rights in such Intellectual Property (including the
right to seek past and future damages with respect to such
Intellectual Property) to the Seller and, to the maximum extent
provided for by and required to protect the Seller’s
ownership rights in and to such Intellectual Property in accordance
with applicable Laws, the Seller has recorded each such assignment
of Registered Purchased Intellectual Property with the relevant
Governmental Authority, including the PTO or the United States
Copyright Office.
(h) There
are no licenses or other contracts between the Seller and any other
Person with respect to Purchased Intellectual Property under which
there is any dispute (or, to the Knowledge of the Seller, facts
that may reasonably lead to a dispute) regarding the scope of such
license or contract, or performance under such license or contract,
including with respect to any payments to be made or received by
the Seller thereunder.
(i) To
the Knowledge of the Seller, no Person is infringing, violating or
misappropriating any of the Seller’s rights in or to the
Purchased Intellectual Property.
(j) The
Seller has taken all commercially reasonable steps to protect and
preserve Seller’s ownership of Purchased Intellectual
Property, except where the failure to so protect and preserve
Purchased Intellectual Property could not reasonably be expected to
have a material adverse effect on the Business. The Seller has
secured valid written assignments from all current and former
consultants, third parties, Affiliates and employees (including any
prior employees) who contributed to the creation or development of
the Purchased Intellectual Property. In the event that the
consultant is or was concurrently employed by the Seller and a
third party or that Purchased Intellectual Property has been
developed (in whole or in part) by an Affiliate, the Seller has
taken appropriate steps to ensure that any Purchased Intellectual
Property developed by such a consultant or Affiliate does not
belong to the third party or Affiliate or conflict with the third
party’s or Affiliate’s employment agreement (such steps
include ensuring that all research and development work performed
by such a consultant is not performed on the facilities of the
third party or using the resources of the third party).
3.1.18 Contracts .
(a)
Schedule 3.1.18(a) of the Seller Disclosure Schedules
contains a true and complete list of each of the Contracts (true,
correct and complete copies or, if none, reasonably complete and
accurate written descriptions of which, together with all
amendments and supplements thereto and all waivers of any terms
thereof, have been made available to Parent prior to the execution
of this Agreement).
(b) Each
Contract required to be disclosed in Schedule 3.1.18(a)
of the Seller Disclosure Schedules is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in
all material respects in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws
relating to the enforcement of creditors’ rights generally
and by general principles of equity. Except as disclosed in
Schedule 3.1.18(b) of the Seller Disclosure Schedules,
prior to the novation to Buyer of each Contract disclosed in
Schedule 3.1.18(a) there is no reduction in price, labor
rate, direct costs, indirect costs or other
16
reduction of economic benefit, or
event of default or event or condition that, after notice or lapse
of time or both, would constitute a violation, breach or event of
default under any Contract on the part of the Seller or, to the
Knowledge of the Seller, any other party thereto.
(c) Except
as disclosed in Schedule 3.1.18(c) of the Seller
Disclosure Schedules, the Seller is not a party to or bound by any
Contract that (i) automatically terminates or allows
termination by the other party thereto upon consummation of the
transactions contemplated by this Agreement or the Ancillary
Agreements or (ii) contains any covenant or other provision
which limits the Seller’s ability to compete with any Person
in any line of business or in any area or territory.
(d)
Schedule 3.1.18(d) of the Seller Disclosure Schedules
lists (i) the customers of the Business and (ii) the ten
(10) largest suppliers of the Business on the basis of cost of
goods or services purchased or accrued for in the Business
Financials. Except as disclosed in Schedule 3.1.18(d)
of the Seller Disclosure Schedules, no such customer or supplier
has ceased or materially reduced its purchases from or sales or
provision of services to the Seller since December 31, 2003
or, to the Knowledge of the Seller, has threatened (whether orally
or in writing) to cease or materially reduce such purchases or
sales or provision of services after the date hereof. Except as
disclosed in Schedule 3.1.18(d) of the Seller
Disclosure Schedules, to the Knowledge of the Seller, no such
customer or supplier is threatened with bankruptcy or insolvency.
With regard to supplier supporting the Business at Fort Bragg,
Seller represents that the existing “Customer
Maintenance” agreement obligates the supplier, Lenel, to
maintain a level of service necessary for Buyer to provide support
to Fort Bragg.
3.1.19 Government Contracts .
(a) (i)
Schedule 3.1.19(a)(i) of the Seller Disclosure
Schedules lists all Government Contracts (except for task orders
and blanket purchasing agreements pursuant to Government
Contracts), and with respect to each such listed Government
Contract, Schedule 3.1.19(a)(i) of the Seller
Disclosure Schedules accurately lists: (A) the contract name;
(B) the award date; (C) the customer; (D) the
contract end date; (E) the contract’s ceiling value;
(F) the contract’s funded value; and (G) as
applicable, whether the current Government Contract is premised on
the Seller’s small business status or other preferential
status.
(ii)
Schedule 3.1.19(a)(ii) of the Seller Disclosure
Schedules lists the Seller’s current project charge codes,
and with respect to each such charge code, Schedule
3.1.19(a)(ii) of the Seller Disclosure Schedules accurately
lists: (A) the customer; (B) the customer’s
contract number corresponding to the charge code; (C) the
customer’s order number; (D) the Seller’s internal
project charge code number for each Government Contract; or if
Seller tracks only by task/delivery order, the Seller’s
internal project charge code number for each task/delivery order;
(E) the corresponding project name; (F) the end date;
(G) inception to June 30, 2005 funding; (H) inception to
May 31, 2005 revenue received; (I) the ceiling value; and
(J) payments due as of thirty (30) days or more prior to the
date of this Agreement for work previously performed and
billed.
17
(iii)
Schedule 3.1.19(a)(iii) of the Seller Disclosure
Schedules lists all Government Bids, including task order bids
under current Government Contracts submitted by the Seller and for
which no award has been made thirty (30) days or more prior to
the date of this Agreement, and with respect to each such
Government Bid, Schedule 3.1.19(a)(iii) of the Seller
Disclosure Schedules accurately lists: (A) the customer agency
and title; (B) the request for proposal (RFP) number or, if
such Government Bid is for a task order under a prime contract, the
applicable prime contract number; (C) the date of proposal
submission; (D) the expected award date, if known; (E) the
estimated period of performance; (F) the estimated value based
on the proposal, if any; and (G) whether such Government Bid is
premised on the Seller’s small business status or other
preferential status. The Seller has delivered to Parent true,
correct, and complete copies of all Government Contracts and of all
Government Bids and provided access to Parent to true and correct
copies of all documentation related thereto requested by
Parent.
(b) Except
as set forth in Schedule 3.1.19(b) of the Seller
Disclosure Schedules, (i) the Seller has not received any written,
or, to Knowledge of the Seller, oral notification of cost,
schedule, technical or quality problems that could reasonably
result in claims against the Seller (or successors in interest) by
a Governmental Authority, a prime contractor, or a higher-tier
subcontractor; (ii) there are no Government Contracts pursuant
to which the Seller is reasonably likely to experience cost,
schedule, technical or quality problems that could reasonably
result in claims against the Seller (or successors in interest) by
a Governmental Authority, a prime contractor or a higher-tier
subcontractor; (iii) all of the Government Contracts were
legally awarded, are binding on the parties thereto, and are in
full force and effect; (iv) the Government Contracts are not
currently the subject of bid or award protest proceedings, and, to
the Knowledge of the Seller no Government Contracts or Government
Bids are reasonably likely to become the subject of bid or award
protest proceedings; and (v) no Person has notified the Seller
or any Affiliate, either in writing or, to Knowledge of the Seller,
orally, that any Governmental Authority intends to seek the
Seller’s agreement to lower rates under any of the Government
Contracts or Government Bids.
(c) Except
as set forth in Schedule 3.1.19(c) of the Seller
Disclosure Schedules: (i) the Seller has fully complied with all
terms and conditions of each Government Contract and Government Bid
to which it is a party, and has performed all obligations required
to be performed by it thereunder; (ii) the Seller and any
Affiliate has complied with all statutory, regulatory and legal
requirements, including, but not limited to, the Service Contract
Act, the Contract Disputes Act, the Procurement Integrity Act, the
Federal Procurement and Administrative Services Act, the Federal
Acquisition Regulations (“FAR”) and related cost
principles and the Cost Accounting Standards, where and as
applicable to each of the Government Contracts and Government Bids;
(iii) the representations, certifications and warranties made by
the Seller with respect to the Government Contracts or Government
Bids were accurate in all respects as of their effective date, and
the Seller has fully complied with all such certifications;
(iv) no termination for default, cure notice, show cause
notice or other similar notice, either written or, to the Knowledge
of the Seller, orally, has been issued and remains unresolved with
respect to any Government Contract or Government Bid, and no event,
condition or omission has occurred or exists that would constitute
grounds for such action; (v) no past performance evaluation
received by the Seller or any Affiliate with respect to any
such
18
Government Contract has set forth
a default or other failure to perform thereunder or termination or
default thereof; and (vi) no money due to the Seller
pertaining to any Government Contract or Government Bid has been
withheld or set-off nor has there been any attempt to withhold or
set-off any money due under any Government Contract; (vii) all
invoices and claims (including requests for progress payments and
provisional costs payments) submitted under each Government
Contract were current, accurate and complete in all material
respects as of their submission date; and (viii) neither the
execution, delivery nor performance of this Agreement and the
Ancillary Agreements does or will conflict with or result in a
breach or default under any Government Contract.
(d) Except
as set forth in Schedule 3.1.19(d) of the Seller
Disclosure Schedules, with respect to the Government Contracts, no
Governmental Authority, prime contractor or higher-tier
subcontractor under a Government Contract or any other Person has
notified the Seller or any Affiliate, either in writing or, to the
Knowledge of the Seller, orally, of any actual or alleged violation
or breach of any statute, regulation, representation,
certification, disclosure obligation, contract term, condition,
clause, provision or specification that could reasonably be
expected to have a Material Adverse Effect on the
Business.
(e) The
Seller has not taken any action and is not a party to any
litigation that could reasonably be expected to give rise to
(i) liability under the False Claims Act, (ii) a claim
for price adjustment under the Truth in Negotiations Act, or
(iii) any other request for a reduction in the price of any
Government Contract, including claims based on actual or alleged
defective pricing. There exists no basis for a claim of any
liability of the Seller by any Governmental Authority as a result
of defective cost and pricing data submitted to any Governmental
Authority. The Seller is not participating in any pending claim and
to the Knowledge of the Seller there is no potential claim under
the Contract Disputes Act, or any other legal authority, against
the United States Government or any prime contractor, subcontractor
or vendor arising under or relating to any Government Contract or
Government Bid.
(f) Except
as set forth in Schedule 3.1.19(f) of the Seller
Disclosure Schedules, (i) no Government Contract has been
terminated for default in the past ten (10) years; and
(ii) neither the Seller nor any Affiliate has received any
written or, to the Knowledge of the Seller , oral notice
terminating any Government Contract for convenience or indicating
an intent to terminate any of the Government Contracts for
convenience.
(g) Except
as set forth in Schedule 3.1.19(g) of the Seller
Disclosure Schedules, neither the Seller nor any Affiliate has
received any written or oral notice of any outstanding claims or
contract disputes to which the Seller or any Affiliate is a party
relating to the Government Contracts or Government Bids and
involving either a Governmental Authority, any prime contractor,
any higher-tier subcontractor, vendor or any third
party.
(h) Neither
the Seller nor any of its respective directors, officers,
Transferred Employees, or, to the Knowledge of the Seller, its
non-Transferred employees, has ever been, nor is currently,
suspended, debarred or proposed for suspension or debarment from
bidding on any Government Contract, declared ineligible, or
otherwise excluded from participation in the award of any
Government Contract or for any reason been listed on the
List
19
of Parties Excluded from Federal
Procurement and Non-procurement programs. No suspension, debarment
or exclusion proceeding actions with respect to Government
Contracts have been commenced or threatened (whether orally or in
writing) against the Seller, or any of their respective directors,
officers, Transferred Employees, or, to the Knowledge of the
Seller, its non-Transferred employees. No circumstances exist that
would warrant the institution of suspension or debarment
proceedings against the Seller or its respective directors,
officers, Transferred Employees, or, to the Knowledge of the
Seller, its non-Transferred employees.
(i) No
negative determination of responsibility has been issued against
the Seller or any Affiliate with respect to any quotation, bid or
proposal submitted to a Governmental Authority.
(j) Except
as set forth in Schedule 3.1.19(j) of the Seller
Disclosure Schedules, since January 1, 1998, (i) the
Seller has not undergone and is not undergoing any audit,
inspection, or investigation of records by any Governmental
Authority relating to any Government Contract; (ii) neither
the Seller nor any Affiliate has received written or oral notice
of, and neither the Seller nor any Affiliate has undergone, any
investigation, inspection or audit relating to any Government
Contract, and (iii) no such audit, inspection, or
investigation, of records is threatened, either in writing or, to
Knowledge of the Seller, orally. Except as set forth in
Schedule 3.1.19(j) of the Seller Disclosure Schedules,
with respect to any Government Contract neither the Seller nor any
Affiliate has received any official notice that Seller is or was
being specifically audited or investigated by the Government
Accountability Office, the Defense Contract Audit Agency of the
United States Government (the “ DCAA ”), any
state or federal agency Inspector General, the contracting officer
with respect to any Government Contract, or the Department of
Justice (including any United States Attorney). The Seller has not
received any written or, to the Knowledge of the Seller, oral
notice that any audit, inspection, or investigation of records
described in Schedule 3.1.19(j) of the Seller
Disclosure Schedules, has revealed any fact, occurrence or practice
which could reasonably be expected to have a Material Adverse
Effect. Seller shall not be required to pay, repay, remit or
otherwise refund, directly or indirectly, any amount to any
Governmental Authority as a result of any audit, inspection, or
examination of records by any Governmental Authority, including the
DCAA, with respect to services of the Seller or any Affiliate, at
any time on or prior to December 31, 2004.
(k) During
the last (5) years neither the Seller nor any Affiliate has
conducted any internal audit or investigation in connection with
which the Seller has used any legal counsel, auditor, accountant or
investigator, and (ii) neither the Seller nor any Affiliate
has made any disclosure to any Governmental Authority or other
customer or prime contractor or higher-tier subcontractor related
to any suspected, alleged or possible violation of a contract
requirement, any apparent or alleged irregularity, misstatement, or
material omission arising under or relating to a Government
Contract or Government Bid, or any violation of law or
regulation.
(l) Except
as set forth in Schedule 3.1.19(l) , neither Seller,
nor any Affiliate, nor their respective directors, officers or
employees, have been engaged in or been charged with, or received
or been advised in writing by any source, or advised verbally by an
authorized governmental officer or authorized point of contact of
any prime contractor or higher
20
tier subcontractor, of any
charge, investigation, claim or assertion of, nor has Seller, nor
any Affiliate, nor their respective directors, officers or
employees, been subject to any criminal indictment or information,
lawsuit, subpoena, civil investigative demand, administrative
proceeding, voluntary disclosure, claim, dispute, mediation or
arbitration with regard to, any material violation of any
requirement pertaining to a Government Contract or Government Bid,
including material violations of any statutory or regulatory
requirements, including without limitation (i) defective
pricing within the meaning of the Truth in Negotiations Act, as
amended; (ii) accounting, estimating, inventory, material
requirements planning, material management and accounting systems,
government property records or purchasing system deficiencies;
(iii) mischarging of Direct Costs or Indirect Costs;
(iv) delivery to the Government or to a Government prime or
subcontractor of material, components, items or services that do
not or did not meet specifications or standards therefore, or
delivery to the Government or to a Government prime or
subcontractor of f
