MEMBERSHIP INTEREST PURCHASE AGREEMENT

Exhbit 2.1

 

EXECUTION VERSION

MEMBERSHIP INTEREST PURCHASE AGREEMENT

among

DYNAMICS RESEARCH CORPORATION,

KADIX SYSTEMS, LLC

and

DAISY D. LAYMAN, THE SOLE MEMBER OF

KADIX SYSTEMS, LLC

July 30, 2008

 

 

TABLE OF CONTENTS

PAGE

 

LIST OF EXHIBITS AND SCHEDULES

 

 

 

 

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of July 30, 2008, by and among Dynamics Research Corporation, a Massachusetts corporation (the “ Buyer ”), Kadix Systems, LLC, a Virginia limited liability company (the “ Company ”), and Daisy D. Layman, an individual and resident of Virginia (“ Seller ”).

RECITALS

WHEREAS, the Seller owns all of the issued and outstanding membership interest of the Company (the “ Interests ”); and

WHEREAS, the Buyer desires to purchase from the Seller, and the Seller desires to sell to the Buyer the Interests all upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises, the mutual covenants, agreements, representations, and warranties herein contained, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE 1

DEFINITIONS AND RULES OF CONSTRUCTION

1.1       Definitions .  As used in this Agreement, the following terms have the meanings set forth below:

“ 2009 Earnout Payment ” has the meaning set forth in Section 2.7(a)(ii).

“ 2010 Deficit ” has the meaning set forth in Section 2.7(b)(iii)

“ 2010 Earnout Payment ” has the meaning set forth in Section 2.7(b)(ii).

“ 8(a) Contracts ” has the meaning set forth in Section 2.7(c)(i).

“ 8(a) Migration Payment ” has the meaning set forth in Section 2.7(c)(ii).

“ Accounts Receivable ” shall mean all of the billed and unbilled, current and long term accounts receivable of the Company.

“ Affiliate ”   of a Person shall mean a Person that directly or indirectly controls, is controlled by or is under common control with that Person.

“ Aggregate Rights Termination Payment ” has the meaning set forth in Section 7.8.

“ Agreement ” has the meaning set forth in the preamble hereto.

“ Agreement Documents ” has the meaning set forth in the definition of “Materiality Qualifications” contained in this Section 1.

“ Anticipated 2009 Gross Margin ” has the meaning set forth in Section 2.7(a)(i).

“ Anticipated 2010 Gross Margin ” has the meaning set forth in Section 2.7(b)(i).

 

 

“ Anti-Kickback Act ” has the meaning set forth in Section 5.17(i).

“ Articles of Organization ” has the meaning set forth in Section 5.4.

 “ Benefit Plan ” has the meaning set forth in Section 5.9(a).

“ Business Day ” shall mean any day other than a Saturday, Sunday or any other day in which banks in the Commonwealth of Massachusetts are authorized to be closed for business.

“ Buyer ” has the   meaning set forth in the preamble to this Agreement.

“ Buyer Party ” shall mean, prior to Closing, the Buyer (and its directors, officers, agents and employees), and from and after Closing shall mean each of the Buyer and the Company (and their respective directors, officers, agents and employees).

“ Buyer’s Accountant ” has the meaning set forth in Section 7.7.

“ Buyer Determined Revenue “ has the meaning set forth in Section 2.7(c)(i).

“ Buyer Determined 2009 Gross Margin ” has the meaning set forth in Section 2.7(a)(i).

“ Buyer Determined 2010 Gross Margin ” has the meaning set forth in Section 2.7(b)(i).

“ Capital Lease Obligations ” shall mean the obligations of the Company that are required to be classified and accounted for as capital lease obligations under GAAP, and the amount of such obligations at any date shall be the capitalized amount of such obligations at such date determined in accordance with GAAP together with all obligations to make termination payments under such capitalized lease obligations.

“ Cash ” shall mean, as of an applicable date and time, the difference of (a) the aggregate amount of cash and cash equivalents held in the bank accounts of the Company, including non-cleared deposits, minus (b) the aggregate balance of all outstanding checks and non-cleared debits against such accounts.

“ Claim ” shall mean any claim, action, litigation, proceeding (arbitral, administrative, legal or otherwise), suit, settlement, stipulation, hearing, charge, complaint, demand or similar matter.

“ Claims Escrow ” shall mean the amount of Four Million Dollars ($4,000,000) (less an amount up to a maximum of $75,000 (such actual amount to be withheld to be determined by Buyer prior to the Closing) to reimburse Buyer for Buyer's out of pocket expenses to be incurred in connection with the completion of Government Contract close-outs following the Closing), placed into escrow to cover any claims that arise out of Seller’s obligations under Article 10, together with all interest and other earnings thereon.

“ Closing ”   has the meaning set forth in Section 3.1.

“ Closing Adjustment ” has the meaning set forth in Section 2.4(a).

“ Closing Balance Sheet ” has the meaning set forth in Section 2.4(a).

“ Closing Date ”   has the meaning set forth in Section 3.1.

 

 

“ Closing Payment ”   has the meaning set forth in Section 2.2.

“ Code ” shall mean the Internal Revenue Code of 1986 and rules and regulations promulgated pursuant thereto, each as amended and in effect from time to time.

“ Cognizant Agency ” means the U.S. Department of Defense through its representatives in the Defense Security Service and each and every agency sponsoring or acting as Cognizant Security Authority for the Sensitive Compartmented Information Facilities maintained by the Company, or for any access held by employees of the Company to the extent the Defense Security Service is not recognized as the Cognizant Agency for the Classified Facility or for sponsorship of those accesses.

“ Contracts ” means all contracts, agreements, binding arrangements, bonds, notes, indentures, mortgages, debt instruments, licenses (and all other contracts, agreements or binding arrangements concerning Intellectual Property), franchises, leases and other instruments or obligations of any kind, written or oral (including any amendments and other modifications thereto), to which the Company is a party or which are binding upon Company or its assets, and which are in effect on the date hereof or as of the Closing Date.

“ Company ” has the   meaning set forth in the preamble to this Agreement.

“ Company Permits ” has the meaning set forth in Section 5.12(a).

“ Company Products ” has the meaning set forth in Section 5.13(f).

“ Company Rights Plans ” means the Kadix Systems, LLC, Phantom Unit Plan and the Kadix Systems, LLC Ownership Appreciation Rights Plan, as each has been amended.

“ Company Securities ” has the meaning set forth in Section 5.2.

“ Confidentiality Agreement ” shall mean the Confidentiality and Non-Disclosure Agreement, dated as of February 29, 2008, between the Buyer and KippsDeSanto & Co., on behalf of the Company.

“ Copyrights ” has the meaning set forth in the definition of “Intellectual Property” contained in this Section 1.

“ Costs ”   has the meaning set forth in Section 9.3.

“ Current Government Contracts ” has the meaning set forth in Section 5.17(a)(i).

“ Customs Laws ” has the meaning set forth in Section 5.17(j)(iii).

“ Damages ” shall mean any and all losses, charges, Claims, investigations, damages, liabilities (whether contingent, fixed or unfixed, liquidated, unliquidated or otherwise), Liens, obligations, judgments, settlements, fines, penalties, awards, demands, offsets, reasonable out-of-pocket costs, expenses, Taxes, interest, fines, penalties and fees of attorneys, accountants and other experts (including any such reasonable costs, expenses and attorneys’ fees incurred in enforcing a party’s right to indemnification against any indemnifying party or with respect to any appeal); provided , however , that Damages shall exclude consequential, special, exemplary or punitive damages, unless they are actually incurred by an indemnified party and (i) result from a third party claim or (ii) are otherwise reasonably foreseeable consequential, special, exemplary or punitive damages.

 

 

“ DHS ” shall mean U.S. Department of Homeland Security.

“ Discharges ” has the meaning set forth in Section 2.3.

“ DCAA ”   shall mean the Defense Contract Audit Agency of the United States.

“ Determination ” has the meaning set forth in the definition of “Dispute Resolution Procedures” contained in this Section 1.

“ Direct Contract Costs ” shall mean with respect to any period, the aggregate amounts of labor and other direct expenses, including expenses for materials, subcontracts, consultants and travel incurred by the Company in providing services under an applicable contract or task order and shall exclude fringe benefits, overhead and general and administrative expenses, in each case in accordance with the FAR.

“ Discharges ” has the meaning set forth in Section 2.3.

“ Disclosure Schedules ” means the disclosure schedules to this Agreement.

“ Dispute ” has the meaning set forth in Section 11.8.

“ Dispute Resolution Procedure ” means the procedure pursuant to which the items in dispute under Section 2.4 or Section 2.7 are referred by either the Buyer or the Seller for determination as promptly as practicable to the Independent Accounting Firm, which will be jointly engaged by the Buyer, on the one hand, and the Seller, on the other hand, pursuant to an engagement letter in customary form which each of the Buyer and the Seller must execute.  The Independent Accounting Firm must prescribe procedures for resolving the disputed items and in all events must make a written determination, with respect to such disputed items only (i.e., in connection with Section 2.4, whether and to what extent, if any, the Closing Balance Sheet and the accompanying calculations of the Cash and/or Tangible Net Asset Value at the Closing require an adjustment to the Purchase Price based on the terms and conditions of this Agreement (a “ Determination ”)).  The Determination must be based solely on presentations with respect to such disputed items by the Buyer and the Seller to the Independent Accounting Firm and not on the Independent Accounting Firm’s independent review; provided, that such presentations will be deemed to include any work papers, records, accounts or similar materials delivered to the Independent Accounting Firm by the Buyer or the Seller in connection with such presentations and any materials delivered to the Independent Accounting Firm in response to requests by the Independent Accounting Firm.  Each of the Buyer and the Seller must use commercially reasonable efforts to make its presentation as promptly as practicable following submission to the Independent Accounting Firm of the disputed items, and each such party will be entitled, as part of its presentation, to respond to the presentation of the other party and any question and requests of the Independent Accounting Firm.  The Buyer and the Seller must instruct the Independent Accounting Firm to deliver the Determination to the Buyer and the Seller no later than thirty (30) days following the date on which the disputed items are referred to the Independent Accounting Firm.  In deciding any matter, the Independent Accounting Firm (i) will be bound by the provisions of Section 2.4 and Section 2.7, as applicable, (ii) may not assign a value to any item greater than the greatest value for such item claimed by either Buyer or the Seller or less than the smallest value for such item claimed by the Buyer or the Seller, and (iii) will be bound by the express terms, conditions and covenants set forth in this Agreement, including the definitions contained herein.  The Independent Accounting Firm may consider only those items and amounts in dispute (as applicable) which the Buyer and the Seller were unable to resolve.  In the absence of fraud or manifest error, the Determination will be conclusive and binding upon Buyer and the Seller and the Buyer and the Seller will act in accordance with the Determination, including without limitation issuing joint instructions in accordance with the

 

 

Determination to the Escrow Agent with respect to any Dispute Resolution Procedure undertaken pursuant to Section 2.4 or 2.7 hereof.  The determination of the Independent Accounting Firm shall not be deemed an award subject to review under the Federal Arbitration Act or any other Law.  All fees and expenses of the Independent Accounting Firm incurred in connection with any dispute under Section 2.4 or Section 2.7 will be borne one-half by the Seller and one-half by the Buyer; provided that such the cost to the Seller in connection with any dispute under Section 2.4 shall not exceed Twenty Thousand Dollars ($20,000).

 “ Employment Letters ”   shall mean the employment letter agreements and (in the case of the Seller) the consulting letter agreement, in the forms attached hereto as Exhibits D-1 through D-5 (including all attachments thereto), between the Company and each of the employees listed on Schedule 1.1 attached hereto.

“ End Date ” has the meaning set forth in Section 9.1(b).

“ Environmental Laws ”   shall mean any Law relating to pollution or protection of the environment or public health and safety including Laws relating to the use, treatment, storage, transportation or handling of Hazardous Materials or the release, discharge, spill, emission, treatment, transportation  or disposal of Hazardous Materials; or to exposure to toxic, hazardous or other controlled, prohibited or regulated substances; and, in particular, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq. (“ CERCLA ”), the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq. (“ RCRA ”), the Toxic Substances Control Act, 15 U.S.C. 2601, et seq. (“ TSCA ”), the Occupational, Safety and Health Act, 29 U.S.C. 651, et seq., the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1802 et seq. (“ HMTA ”) and the Emergency Planning and Community Right to Know Act, 42 U.S.C. 11001 et seq. (“ EPCRA ”), and other comparable state and local Laws and all rules, regulations and policy or guidance documents promulgated pursuant thereto or published thereunder.

“ ERISA ”   has the meaning set forth in Section 5.9(m).

“ Escrow Agent ” has the meaning set forth in Section 2.2(b).

“ Escrow Agreement ” has the meaning set forth in Section 2.2(b).

“ External Investigation ” has the meaning set forth in Section 5.17(c)(i).

“ Facility Security Clearances ” has the meaning set forth in Section 5.17(g).

“ FAR ” means the Federal Acquisition Regulations.

“ FCPA ” has the meaning set forth in Section 5.17(i).

“ Final Company Cash ” has the meaning forth in Section 2.4(b).

“ Final Tangible Net Asset Value ” has the meaning set forth in Section 2.4(b).

“ Financial Statements ”   has the meaning set forth in Section 5.6(a).

“ Flow of Funds Memorandum ” has the meaning set forth in Section 2.2(c).

 

 

“ Fundamental Representations ” has the meaning set forth in Section 10.1(a).

“ GAAP ”   shall mean United States generally accepted accounting principles, consistently applied.

“ Government Bid ” shall mean any bid, offer or proposal made by the Company prior to the Closing Date which, if accepted or successful, would result in a Government Contract.

“ Government Contract ” shall mean any prime contract, subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, pricing agreement, letter contract or other similar arrangement of any kind, between the Company, on the one hand, and (i) any Governmental Authority, (ii) any prime contractor of a Governmental Authority in its capacity as a prime contractor, or (iii) any subcontractor with respect to any contract of a type described in clauses (i) or (ii) above, on the other hand.  A task, purchase or delivery order under a Government Contract shall not constitute a separate Government Contract, for purposes of this definition, but shall be part of the Government Contract to which it relates.

“ Government Furnished Items ” has the meaning set forth in Section 5.17(f)(ii).

“ Governmental Authority ” shall mean any foreign, federal, state or local governmental or quasi-governmental or administrative body or entity or subdivision of any of the foregoing including any authority, department, agency, commission, board, bureau, agency, court, tribunal, administrative hearing body, or other instrumentality, in particular, and without limiting the foregoing, the following federal departments, office and agencies: Environmental Protection Agency, Equal Employment Opportunity Commission, Defense Contract Management Agency, Defense Contract Audit Agency, Defense Security Service, Department of Defense/Office of Special Investigations, the General Accounting Office and the General Services Administration.

“ Gross Margin ” shall be calculated as revenue minus (i) Direct Contract Cost and (ii) benefit costs on direct labor applied to direct labor at a rate of 27.5%.

“ Gross Margin Threshold ” means Eleven Million Four Hundred Thousand Dollars ($11,400,000), as may be adjusted in accordance with Section 2.7(a) and/or Section 2.7(b) hereof.

“ GSA ” shall mean the General Services Administration of the United States.

“ Hazardous Materials ”   shall mean each and every element, compound, chemical mixture, contaminant, pollutant, material, waste or other substance which is defined, determined or identified as hazardous or toxic under Environmental Laws or the release of which is regulated under Environmental Laws, or that poses a hazard to the health and safety of persons or the environment.  Without limiting the generality of the foregoing, the term includes: “hazardous substances” as defined in CERCLA; “extremely hazardous substances’’ as defined in EPCRA; “hazardous waste” as defined in RCRA; “hazardous materials” as defined in HMTA; “chemical substance or mixture” as defined in TSCA; crude oil, petroleum products or any fraction thereof; radioactive materials including source, byproduct or special nuclear materials; asbestos or asbestos-containing materials; chlorinated fluorocarbons (“ CFCs ”); and radon.

“ HUBZone ” has the meaning set forth in Section 5.17(a)(v).

“ Indebtedness ” shall mean with respect to the Company, at any date, without duplication, (i) all obligations of the Company for borrowed money, including, without limitation, all principal,

 

 

interest, premiums, fees, expenses, overdrafts and penalties with respect thereto, (ii) all obligations of the Company evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of the Company to pay the deferred purchase price of the property or services, except trade payables incurred in the Ordinary Course of Business, (iv) all obligations of the Company to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (v) all Capital Lease Obligations, and (vi) all Indebtedness of any other Person of the type referred to in clauses (i) to (v) above directly or indirectly guaranteed by the Company or secured by any assets of the Company.

“ Indemnification Cap ” has the meaning set forth in Section 10.4(a).

“ Indemnification Threshold ” has the meaning set forth in Section 10.4(a).

“ Independent Accounting Firm ”   shall mean BDO   Seidman, LLP, or such other recognized accounting firm with expertise in Government Contracts mutually agreed upon by the Purchaser and the Seller, or otherwise selected by the American Arbitration Association; provided, however , that the Independent Accounting Firm may not have, or have had in the last three (3) years, a business relationship with any of the Seller, the Company or the Buyer.  The parties agree that BDO Seidman, LLP   will be deemed to be independent even though the Buyer may, in the future, designate BDO Seidman, LLP   to resolve disputes of the type described in Section 2.4 or Section 2.7.  If BDO Seidman, LLP   is unable to serve as the Independent Accounting Firm and the Buyer and the Seller have failed to reach agreement on an Independent Accounting Firm within ten (10) days following the termination of the time period set forth in Section 2.4 or Section 2.7 for the Buyer and Seller to resolve such dispute prior to initiation of the Dispute Resolution Procedure, then the parties will jointly engage the American Arbitration Association to select the Independent Accounting Firm, in accordance with the procedures of the American Arbitration Association to make such election.

“ Indirect Costs ” shall mean any costs other than Direct Contract Costs, including fringe benefits, general and administrative expenses and overhead expenses.

“ Intellectual Property ”   means all of the following as they exist in any jurisdiction throughout the world: (a) patents, patent applications and the inventions, designs and improvements described and claimed therein, patentable inventions, and other patent rights (including any divisionals, continuations, continuations-in-part, substitutions, or reissues thereof, whether or not patents are issued on any such applications and whether or not any such applications are amended, modified, withdrawn, or refiled) (collectively, “ Patents ”);  (b) trademarks, service marks, trade dress, trade names, brand names, Internet domain names, designs, logos, or corporate/company names (including, in each case, the goodwill associated therewith), whether registered or unregistered, and all registrations and applications for registration and renewal thereof (collectively, “ Trademarks ”); (c) works of authorship, mask works and all copyrights therein, including all renewals and extensions, copyright registrations and applications for registration and renewal, and non-registered copyrights (collectively, “ Copyrights ”); (d) trade secrets, confidential business information, concepts, ideas, designs, research or development information, processes, procedures, techniques, technical information, specifications, operating and maintenance manuals, drawings, methods, know-how, data, formulas, compositions, and methods, technical data, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals, discoveries, inventions, modifications, extensions, improvements, and other proprietary rights (whether or not patentable or subject to copyright, trademark, or trade secret protection) (collectively, “ Trade Secrets ”); (e) all domain name and domain name registrations, web sites and web pages and related rights, registrations, items and documentation related thereto (f) computer software, including all source code, object code, and documentation related thereto and all software modules, assemblers, applets, compilers, flow charts or diagrams, tools and databases (“ Software ”); and (g) all licenses, sublicenses, permissions, and other agreements related to the preceding property.

 

 

“ Interests ” has the meaning set forth in the Recitals hereto.

“ Internal Investigation ” has the meaning set forth in Section 5.17(c)(ii).

“ IP License ” has the meaning set forth in Section 5.13(a)(ii).

“ Knowledge ” shall mean, (i) with respect to the Buyer, the actual knowledge of any director or officer of the Buyer; (ii) with respect to the Seller Parties, the actual knowledge of any of Seller, Douglas Layman, Chuck Schefer, Rick Bostian, Ivan Santos or Osborn Leroy, which shall include such knowledge that any of the foregoing would have after reasonable inquiry of direct or indirect subordinate employees and with respect to relevant documents in the normal course of his or her duties on behalf of the Company.

“ Law ” shall mean any federal, state, local, foreign or other law, statute, constitution, principle of common law, ordinance, code, Order, edict, rule, regulation, requirement issued, enacted, adopted, promulgated, implemented or otherwise put into legal effect by or under the authority of any Governmental Authority.

“ Lien ” shall mean any mortgage, pledge, hypothecation, collateral assignment, security interest, lease, sublease, occupancy agreement, adverse claim or interest, easement, covenant, encroachment, burden, option, lien (statutory or otherwise), right of first refusal or other encumbrance or restriction of any kind whatsoever.

“ Listing ” has the meaning set forth in Section 5.17(d)(i).

“ Material Adverse Effect ”   means, with respect to the Company, any event, fact, condition, change, circumstance, occurrence or effect, which, either individually or in the aggregate with all other events, facts, conditions, changes, circumstances, occurrences or effects, (a) has had, or would reasonably be expected to cause, result in or have, a material adverse effect on the business, properties, prospects, assets, liabilities, capitalization, stockholders’ equity, condition (financial or otherwise), operations, licenses or other franchises or results of operations of the Company, or materially diminish the value of the Company or the Interests or (b) does or would reasonably be expected to materially impair or delay the ability of the Company or Seller to perform her obligations under this Agreement or to consummate the transactions contemplated hereby (including any announcement with respect to this Agreement or any of the transactions contemplated hereby); provided , however , that none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect:  Any adverse effect arising from or attributable or relating to (A) the announcement or pendency of the transactions contemplated by this Agreement due to the identity of the Buyer (and excluding in any event any resignation by employees), (B) conditions affecting (1) any of the industries in which Company operates or participates, or (2) the U.S. economy or financial markets (except that such conditions in clauses “(1)” and “(2)”  of this clause “(B)” shall be taken into account to the extent they have adversely affected the Company’s business disproportionately to the degree they have affected the business of the other companies in the same industry sector as Company), (C) the taking of any action required to cause compliance with the terms of, or the taking of any action required by, this Agreement, or (D) any change in accounting requirements or principles or any change in applicable Law or the interpretation thereof, provided such change does not adversely affect the Company’s business disproportionately to the degree it affects the business of the other companies in the same industry sector as Company.

 “ Materiality Qualifications ” means any “material,” “materially,” “in all material respects,” “Material Adverse Effect” and similar qualifications contained in any representations and

 

 

warranties under this Agreement (including the Disclosure Schedules hereto), any certificate delivered pursuant to Articles 3 and/or 8 hereof, the Seller Noncompetition Agreement or the Transaction Bonus Agreement (collectively, the “ Agreement Documents ”).

 “ Migrated ” has the meaning set forth in Section 2.7(c)(iii).

“ Migrated Work Revenue ” has the meaning set forth in Section 2.7(c)(i).

“ OARs ” shall have the same meaning as set forth in the Kadix Systems, LLC Ownership Appreciation Rights Plan.

“ Open Source Materials ” has the meaning set forth in Section 5.13(n).

“ Operating Agreement ” has the meaning set forth in Section 5.4.

 “ ORCA ” has the meaning set forth in Section 5.17(b)(iii)(c).

“ Order ” means any order, decree, ruling, judgment, injunction, writ or other action of any Governmental Authority.

“ Ordinary Course of Business ” means, with respect to a Person, an action taken by such Person if such action is recurring in nature, is consistent with the past practices of the Person and is taken in the ordinary course of the normal day-to-day operations of the Person.

“ Patents ” has the meaning set forth in the definition of “Intellectual Property” contained in this Section 1.

“ Permitted Liens ” shall mean (i) Liens for water, sewage and similar charges and Taxes and assessments not yet due and payable, and (ii) statutory encumbrances of landlords, carriers, warehousemen, mechanics and materialmen and other similar encumbrances imposed by applicable Law in the Ordinary Course of Business for sums not yet due and payable.

“ Person ”   shall   mean any natural person, firm, partnership, association, corporation, company, limited liability company, trust, business trust, Governmental Authority or other entity.

“ Pre-Closing Costs ” has the meaning set forth in Section 9.3.

“ Preferred Bidder Status ” has the meaning set forth in Section 5.17(a)(v).

“ Professional Fees Certificate ” has the meaning set forth in Section 7.9.

“ Preliminary Statement ”  has the meaning set forth in Section 2.4(a).

“ Professional Fees ” has the meaning set forth in Section 7.9.

“ Purchase Price ”   has the meaning set forth in Section 2.2.

“ Real Property ”   has the meaning set forth in Section 5.14(b).

 “ Real Property Leases ” has the meaning set forth in Section 5.14(b).

“ Rights Award ” has the meaning set forth in Section 7.8.

 

 

“ Rights Termination Payment ” has the meaning set forth in Section 7.8.

“ Rules ” has the meaning set forth in Section 11.8.

“ SEC ” shall mean the United States’ Securities and Exchange Commission.

“ Section 409A Plan ” has the meaning set forth in Section 5.9(l).

“ Security Clearances ” has the meaning set forth in Section 5.17(g).

“ Securities Act ” shall mean the Securities Act of 1933, as amended.

“ Seller ”   has the meaning set forth in the preamble to this Agreement.

“ Seller’s  Accountants ” has the meaning set forth in Section 7.7.

“ Seller’s Counsel ” has the meaning set forth in Section 8.2(d).

“ Seller’s Investment Banker ” has the meaning set forth in Section 5.8.

“ Seller Noncompetition Agreement ” has the meaning set forth in Section 3.2(d).

“ Seller Party ” shall mean, prior to Closing, each of the Seller and the Company and from and after Closing shall mean the Seller.

“ Small Business Act ” means the Small Business Act, U.S. Public Law 85-536, as amended, and the rules and regulations promulgated thereunder.

“ Software ” has the meaning set forth in the definition of “Intellectual Property” contained in this Section 1.

“ Tangible Net Asset Value ” shall mean the difference determined by subtracting (i) all liabilities of the Company, excluding Indebtedness but including liabilities to pay amounts under the  Company's MRICD Program Account, from (ii) all tangible assets of the Company, excluding Cash other than Cash in the Company's MRICD Program Account, determined in accordance with GAAP (except to the extent modified by this definition) and, solely to the extent consistent with GAAP, in a manner consistent with the Company’s past accounting practices.

“ Tangible Net Asset Escrow ” shall mean the amount of Five Hundred Thousand Dollars ($500,000) placed into escrow by the Buyer from the Purchase Price pending the determination of Tangible Net Asset Value pursuant to Section 2.4, together with all interest and other earnings thereon.

“ Target Tangible Net Asset Value ” shall mean Five Million Eight Hundred Thousand Dollars ($5,800,000).

“ Tax ”   or “ Taxes ” shall mean, however denominated, all federal, state, local, foreign and other taxes, levies, imposts, assessments, impositions or other similar government charges, including, without limitation, all net income, gross income, estimated income, gross receipts, business, occupation, franchise, real property, payroll, personal property, sales, transfer, stamp, use, employment, social security, unemployment, worker’s compensation, commercial rent, withholding, occupancy, premium, gross receipts, profits, windfall profits, deemed profits, license, lease, severance, capital, production, corporation, ad valorem, excise, duty, escheat, including interest, penalties and additions (to the extent

 

 

applicable) thereto whether disputed or not.

“ Tax Return ”   shall mean any report, return, document, declaration or other information or filing (including any amendments) required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect to Taxes, including, without limitation, information returns, where permitted or required, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information.

“ Trade Compliance Laws ” means any requirement of Law relating to the regulation of exports, re-exports, transfers, releases, shipments, transmissions or any other provision of goods, technology, software or services including:  Angola (UNITA) Sanctions Regulations, 31 C.F.R. Part 590; Anti-Terrorism and Effective Death Penalty Act, Pub. L. 104-132 (Apr. 24, 1996); Arms Export Control Act, 22 U.S.C. § 2751 et seq.; Burmese Sanctions Regulations, 31 C.F.R. Part 537; Cuban Assets Control Regulations, 31 C.F.R. Part 515; Cuban Democracy Act, 22 U.S.C. §§ 6001-6010; Cuban Liberty and Democratic Solidarity Act, 22 U.S.C. § 6021 et seq.; Export Administration Act, 50 U.S.C. §§ 2401-2420 (2000); Export Administration Regulations, 15 C.F.R. Parts 730 et seq.; Federal Republic of Yugoslavia (Serbia and Montenegro) and Bosnian Serb-Controlled Areas of the Republic of Bosnia and Herzegovina Sanctions Regulations, 31 C.F.R. Part 585; Federal Republic of Yugoslavia (Serbia and Montenegro) Kosovo Sanctions Regulations, 31 C.F.R. Part 586; Federal Republic of Yugoslavia (Serbia and Montenegro) Milosevic Sanctions Regulations, 31 C.F.R. Part 587; Foreign Assets Control Regulation, 31 C.F.R. Part 500; Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1 to 78dd-3; Foreign Terrorist Organizations Sanctions Regulations, 31 C.F.R. Part 597; Global Terrorism Sanctions Regulations, 31 C.F.R. Part 594; Highly Enriched Uranium Agreement Assets Control Regulations, 31 C.F.R. 540; ILSA Extension Act of 2001, 50 U.S.C. §1701 note; International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-1706 (2000); International Traffic in Arms Regulations, 22 C.F.R. Parts 120-130; Iran and Libya Sanctions Act, Pub. L. 104-172 (Aug. 5, 1996); Iranian Assets Control Regulations, 31 C.F.R. Part 535; Iranian Transactions Regulations, 31 C.F.R. Part 560; Iran-Iraq Arms Nonproliferation Act, Pub. L. 102-484 (Oct. 23, 1992); Iraqi Sanctions Regulations, 31 C.F.R. Part 575; Iraq Sanctions Act, Pub. L. 101-513 (Nov. 5, 1990); Libya Sanctions Regulations 31 C.F.R. 550; Narcotics Trafficking Sanctions Regulations, 31 C.F.R. Part 536; Nuclear Non-Proliferation Act, 22 U.S.C. §§ 3201 et seq.; Nuclear Proliferation Prevention Act of 1994, Pub. L. 103-236 (Apr. 30, 1994); Rough Diamonds (Sierra Leone and Liberia) Sanctions Regulations, 31 C.F.R. Part 592; Sudanese Sanctions Regulations, 31 C.F.R. Part 538; Syria Accountability and Lebanese Sovereignty Restoration Act of 2003, Pub. L. 108-175; Syrian Sanctions Regulations, 31 C.F.R. Part 542; Taliban (Afghanistan) Sanctions Regulations, 31 C.F.R. Part 545; Terrorism List Governments Sanctions Regulations, 31 C.F.R. Part 596; Terrorism Sanctions Regulations, 31 C.F.R. Part 595; Tiananmen Square Sanctions, Pub. L. 101-246, Title IX (Feb. 16, 1990); Trade Sanctions Reform and Export Enhancement Act of 2000, 22 U.S.C. §§ 7201-7209; Trading With the Enemy Act, 50 U.S.C. App. 5(b); Weapons of Mass Destruction Trade Control Regulations, 31 C.F.R. 539; Western Balkans Stabilization Regulations, 31 C.F.R. 588; Zimbabwe Sanctions Regulations, 31 C.F.R. Part 541; the Money Laundering Control Act of 1986, 18 U.S.C. §§ 1956-1957; and the Bank Secrecy Act, 31 U.S.C. §§ 5311-5332, 12 U.S.C. §§ 1818(s), 1829(b) and 1951-1959.

“ Trademarks ” has the meaning set forth in the definition of “Intellectual Property” contained in this Section 1.

“ Trade Secrets ” has the meaning set forth in the definition of “Intellectual Property”

contained in this Section 1.

 “ Transaction Bonus Agreement ” shall have the meaning set forth in Section 3.2(d).

 

 

“ Transaction Bonus Payment ” means the $100,000 payment due to Douglas Layman at the Closing under the Transaction Bonus Agreement.

“ Transaction Documents ” shall mean this Agreement and all agreements, documents, certificates or instruments being delivered pursuant to this Agreement.

“ Unbilled Receivables ”   shall have the meaning set forth in Section 5.23(c).

“ USMC ” shall mean the United States Marine Corps.

“ Vendor Government Subcontract ” means any Contract between the Company and another Person for the purpose of obtaining goods or services to be delivered under or used in performance of a Government Contract.

1.2       Certain Interpretive Matters .  In this Agreement, unless the context otherwise requires:

(a)           words of the masculine or neuter gender shall include the masculine and/or feminine gender, and words in the singular number or in the plural number shall each include the singular number or the plural number;

(b)           reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity;

(c)           reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof;

(d)           any accounting term used and not otherwise defined in this Agreement or any Transaction Document has the meaning assigned to such term in accordance with GAAP;

(e)           “ including ” (and with correlative meaning “ include ”) means including without limiting the generality of any description preceding or succeeding such term;

(f)           relative to the determination of any period of time, “ from ” means “from and including,” “ to ” means “to but excluding” and “ through ” means “through and including;”

(g)           reference to any Law means such Law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; and

(h)           any agreement, instrument, insurance policy, statute, regulation, rule or order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, insurance policy, statute, regulation, rule or order as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein.

The parties further acknowledge that:  (i) this Agreement is the result of negotiations between the parties and shall not be deemed or construed as having been drafted by any one party, (ii) each party and its counsel have reviewed and negotiated the terms and provisions of this Agreement (including any

 

 

Exhibits and Schedules attached hereto) and have contributed to its revision, (iii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement, and (iv) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement.

ARTICLE 2

SALE AND PURCHASE OF THE INTERESTS

2.1       Sale and Purchase of the Interests .  Upon and subject to the terms and provisions of this Agreement, the Buyer shall purchase and accept delivery from the Seller, and the Seller shall sell, assign, transfer, and deliver to the Buyer, at the Closing, all of the Interests, free and clear of all Liens.

2.2       Purchase Price; Closing Payment .  The total purchase price for the Interests will be Forty-Two Million Dollars ($42,000,000), subject to adjustment at and following the Closing pursuant to Section 2.4 and Section 2.7 (the “ Purchase Price ”).  The Purchase Price will be paid by the Buyer to the Seller as follows:

(a)           At the Closing, the Buyer shall (i) deliver to the Seller Forty-Two Million Dollars ($42,000,000) plus or minus , as applicable (A) the amount of the Closing Adjustment, plus (B) the estimated amount of Cash (not previously distributed pursuant to Section 2.6) as of the close of business on the Business Day immediately preceding the Closing Date, as set forth in the updated Preliminary Statement delivered pursuant to Section 2.4(a), less (C) the sum of (1) aggregate amount of the Tangible Net Asset Escrow and the Claims Escrow (which amounts total Four Million Five Hundred Thousand Dollars ($4,500,000)), (2) the aggregate amount of the Indebtedness as of the close of business on the Closing Date, (3) the amount of the Aggregate Rights Termination Payment, (4) the aggregate amount of the discretionary bonuses set forth on Schedule 2.2(a) , (5) the amount of the Transaction Bonus Payment and (6) the amount of the Professional Fees (the aggregate amount payable by the Buyer to the Seller at the Closing is sometimes referred to herein as the “ Closing Payment ”), and (ii) deliver to the Escrow Agent the Tangible Net Asset Escrow and the Claims Escrow and to the parties listed on the Professional Fees Certificate the Professional Fees.  Payment will be via wire transfer to the an account of the Seller that is designated by the Seller in writing at least one Business Day prior to the Closing, or if no account is so designated, by cashier’s check.  The Indebtedness will be paid by the Buyer to the parties listed in the Discharges in accordance with Section 2.3.  The Aggregate Rights Termination Payment, the Transaction Bonus Payment and the aggregate amount of the discretionary bonuses set forth on Schedule 2.2(a) will be paid by the Buyer directly to the Company at the Closing, and the Company will remit the Aggregate Rights Termination Payment, the Transaction Bonus Payment and the amounts of such discretionary bonuses to the applicable recipients; provided , that the amount so remitted will be net of applicable withholding Taxes which will be retained by the Company and paid over the applicable Governmental Authority when due.  The Professional Fees will be paid by the Buyer to the parties listed on the Professional Fees Certificate at the Closing in accordance with the payment instructions set forth therein.

(b)           The term, conditions and procedures by which the Tangible Net Asset Escrow and the Claims Escrow shall be disbursed shall be set forth in an Escrow Agreement in substantially the form attached hereto as Exhibit A (the “ Escrow Agreement ”) to be entered into among the Buyer, the Seller and Brown Brothers Harriman & Co. (the “ Escrow Agent ”).

 (c)           Not later than one (1) Business Day prior to the Closing Date, the Company shall prepare and deliver to Buyer a flow of funds memorandum containing the Company’s good faith estimate

 

 

(including all calculations in reasonable detail) of: (a) the aggregate amount of Indebtedness as of the close of business on the Closing Date, together with payoff letters from the applicable creditors, (b) the amount of the Professional Fees as of the Closing, (c) the amount of the Rights Termination Payments and each recipient thereof, (d) the amount of the Transaction Bonus Payment and (e) the amounts of the discretionary bonuses set forth on Schedule 2.2(a) and each recipient thereof, and (f) the amount of the Closing Payment (such statement, the “ Flow of Funds Memorandum ”).  These calculations together with the updated information with respect thereto as of the Closing (including pursuant to the Preliminary Statement delivered pursuant to Section 2.4(a)) will be used in connection with the payments described in this Section 2.2.  The Flow of Funds Memorandum shall be reasonably acceptable to the Buyer and also will contain wire instructions for all of the foregoing payments (or instructions to pay certain amounts by check).

2.3       Payment of Indebtedness .  At the Closing, the Buyer will pay or cause the payment of (to the extent not already paid by the Company) the unpaid Indebtedness of the Company set forth on the updated Flow of Funds Memorandum (including interest, penalties and Capital Lease Obligations) in exchange for written releases, payoff letters and UCC-3s from each payee, as appropriate, each to be in a form reasonably acceptable to the Buyer (collectively, the “ Discharges ”).

2.4       Adjustment to Purchase Price

(a)           Not later than one (1) Business Day prior to the Closing Date, the Company will deliver to Buyer a certificate signed by an officer of  the Company (the “ Preliminary Statement ”) setting forth the Company’s good faith estimate (including all calculations in reasonable detail) of (i) the Tangible Net Asset Value as of the close of business on the Business Day immediately preceding the Closing Date (the “ Tangible Net Asset Value ”), (ii) the balance sheet for the Company as of the close of business on the Business Day immediately preceding the Closing Date (the “ Closing Balance Sheet ”), (iii) the amount of the Cash (that will not otherwise have been distributed pursuant to Section 2.6) as of the close of business on the Business Day immediately preceding the Closing Date.  The Company will provide to the Buyer immediately prior to Closing an update of the Preliminary Statement to reflect any events or occurrences (such as payment of accounts receivables or writing of checks) or other information that would make the initially-delivered Preliminary Statement inaccurate in any material respects. The Company must prepare the Preliminary Statement and each element thereof by applying GAAP (as modified by the definition of “Tangible Net Asset Value”) and, but only to the extent consistent with GAAP, in a manner consistent with the Company’s past accounting practices.  The Preliminary Statement shall be subject to Buyer's written approval, and not later than one (1) day prior to the Closing, the Buyer shall identify any adjustments that it believes are required to the Preliminary Statement.  If Seller disputes any such adjustments, Buyer and Seller shall use commercially reasonable efforts resolve such dispute. In the event the Buyer provides its written approval of the Preliminary Statement, the Purchase Price will be adjusted (up or down) at the Closing by the amount of the “ Closing Adjustment ,” equal to the estimated Tangible Net Asset Value set forth on the Seller’s updated Preliminary Statement minus the Target Tangible Net Asset Value.  In the event that Buyer does not provide its written approval of the Preliminary Statement, the Closing shall proceed subject to the fulfillment or waiver in accordance herewith of the conditions set forth in Article 8, and any adjustment to the Purchase Price with respect to Tangible Net Asset Value and/or Cash shall be determined in accordance with Section 2.4(b) and (c).

(b)           No later than ninety (90) days following the Closing Date, the Buyer will prepare and deliver to the Seller, the Buyer’s good faith determination of the Closing Balance Sheet and actual Tangible Net Asset Value as of the close of business on the Business Day immediately preceding the Closing Date and the actual Cash as of the close of business on the Business Day immediately preceding

Closing Date, and identifying any adjustments to the Purchase Price under Section 2.4(c) as a result of such determinations.  The Buyer must prepare such information by applying GAAP (as modified by the

 

 

definition of “Tangible Net Asset Value”) and, but only to the extent consistent with GAAP, in a manner consistent with the Company’s past accounting practices.  If the Seller does not object to the Buyer’s determinations within thirty (30) days after receipt thereof, or accepts such determinations in writing during such thirty (30) day period, the Purchase Price will be adjusted as set forth in the Buyer’s notice of its determinations, and payment made in accordance with Section 2.4(c).  If the Seller objects to all or part of the Buyer’s determinations, the Seller will notify the Buyer in writing of such objections within thirty (30) days after the Seller’s receipt thereof (such notice setting forth in reasonable detail the basis for such objections).  During such thirty (30) day period,  the Buyer will permit the Seller access to such work papers relating to the preparation of Buyer’s determinations as may be reasonably necessary to review in detail the manner in which Buyer’s determinations were prepared.  The Buyer and Seller will thereafter negotiate in good faith to resolve any such objections.  If Buyer and the Seller are unable to resolve all of such differences within twenty (20) days after Buyer’s receipt of Seller’s objections, either the Buyer or Seller may require the other party to resolve such dispute by way of the Dispute Resolution Procedure by providing such other party written notice of such demand.  The terms “ Final Tangible Net Asset Value ,” “ Final Company Cash ” mean the definitive Tangible Net Asset Value and the definitive amount of Cash, respectively, as each is finally determined pursuant to this Section 2.4(b) .

(c)           In accordance with the terms of the Escrow Agreement, within five (5) Business Days of the determination of the Final Tangible Net Asset Value and Final Company Cash:

(i)           If the sum of (A) (1) Final Tangible Net Asset Value minus (2) the estimated Tangible Net Asset Value set forth on the Seller’s updated Preliminary Statement (or, in the event the Preliminary Statement is not approved by Buyer, the Target Tangible Net Asset Value), plus (B) (1) Final Company Cash minus estimated Cash set forth on the Seller’s updated Preliminary Statement (or, in the event the Preliminary Statement is not approved by Buyer, zero), is a positive number, then the Buyer and Seller shall instruct the Escrow Agent to pay to the Seller the Tangible Net Asset Escrow and the Buyer shall additionally pay to the Seller an amount equal to such positive sum;

(ii)           If the sum of (A) (1) Final Tangible Net Asset Value minus (2) the estimated Tangible Net Asset Value set forth on the Seller’s updated Preliminary Statement (or, in the event the Preliminary Statement is not approved by Buyer, the Target Tangible Net Asset Value), plus (B) (1) Final Company Cash minus (2) estimated Cash set forth on the Seller’s updated Preliminary Statement (or, in the event the Preliminary Statement is not approved by Buyer, zero) is a negative number, then the Buyer and Seller shall instruct the Escrow Agent to pay to the Buyer from the Tangible Net Asset Escrow the amount by which such negative sum is less than zero (0) (such deficit, the “ Deficit Amount ”), up to and including the entire amount of the Tangible Net Asset Escrow as necessary.  If the Deficit Amount is greater than the amount of the Tangible Net Asset Escrow, then the Seller shall pay to the Buyer in Cash an amount equal to such shortfall.  If the Deficit Amount is less than the amount of the Tangible Net Asset Escrow, then the Buyer and Seller shall instruct the Escrow Agent to pay the remaining balance of the Tangible Net Asset Escrow to the Seller.

2.5       Other Assets .  Any assets, whether contracts, employees property or otherwise, which are necessary to operate the Company but which are not owned or leased by the Company but instead are owned by the Seller, all of which are listed in Schedule 2.5 attached hereto, will be conveyed by the Seller to the Buyer at the Closing at no charge or will be the subject of a free and unencumbered exclusive use right granted by the Seller to the Company at the Closing at no charge.

2.6       Cash .  The Company shall have the right to distribute to the Seller prior to the Closing all Cash, other than Cash contained in the Company's MRICD Program Account.

2.7       Earnout .

 

 

(i)           On or before January 31, 2009, the Buyer will deliver to the Seller Buyer’s determination of the anticipated aggregate Gross Margin for calendar year 2009 to be derived from (A) the Company’s unrestricted Government Contracts (assuming anticipated renewals, options exercises and/or successful recompetes of such Government Contracts in 2009, as applicable) as of December 31, 2008 with DHS and for which the period of performance has not expired or terminated as of December 31, 2008, (B) the Company’s unrestricted Government Contracts as of December 31, 2008 (assuming anticipated renewals, options exercises and/or successful recompetes of such Government Contracts in 2009, as applicable) with the USMC and for which the period of performance has not expired or terminated as of December 31, 2008 and (C) any other Government Contract(s) proposed by the Seller to Buyer and approved in writing by Buyer in its sole and absolute discretion (which written approval shall set forth the mutually agreed adjustment, if any, to the Gross Margin Threshold with respect to such Government Contract(s)) (the “ Buyer Determined 2009 Gross Margin ”).  Notwithstanding the methodology that may have been used by the parties to determine the Gross Margin Threshold, each of Gross Margin, Buyer Determined 2009 Gross Margin and Anticipated 2009 Gross Margin shall be determined in a manner consistent with the methodology set forth in this subsection (a)(i).  To the extent that the Seller has any dispute with the Buyer Determined 2009 Gross Margin, the Seller shall, no later than February 27, 2009, notify the Buyer in writing of its specific objections to Buyer’s determination.  Prior to such date, the Buyer will permit the Seller access to such work papers relating to the preparation of Buyer’s determinations as may be reasonably necessary to review in detail the manner in which Buyer’s determinations were prepared.  If the Seller does not provide written notice of any such dispute on or prior to February 27, 2009, the Seller shall be deemed to have accepted the Buyer Determined 2009 Gross Margin. If the Seller provides the Buyer with written notice of a dispute of the Buyer Determined 2009 Gross Margin on or prior to February 27, 2009, the Buyer and Seller shall attempt to resolve such dispute on or prior to March 9, 2009.  In the event the Buyer and Seller are unable to resolve such dispute on or prior to March 9, 2009, (A) either the Buyer or Seller may require the other party to resolve such dispute by way of the Dispute Resolution Procedure by providing such other party written notice of such demand, and (B) the obligation to pay the 2009 Earnout Payment shall be suspended until the final resolution of the dispute.  The anticipated aggregate Gross Margin for calendar year 2009 from the Government Contracts described in the first sentence of this Section 2.7(a)(i) finally determined in accordance with this Section 2.7(a)(i) shall be referred to as the “ Anticipated 2009 Gross Margin .”

(ii)           On or prior to March 2, 2009, or, in the event there is a pending Dispute Resolution Procedure with respect to the Buyer Determined 2009 Gross Margin as of March 2, 2009, five (5) Business Days following the final determination of the Anticipated 2009 Gross Margin,  the Buyer shall pay the Seller an amount (the “ 2009 Earnout Payment ”) equal to (A) the Anticipated 2009 Gross Margin minus (B) the Gross Margin Threshold, provided the 2009 Earnout Payment is a positive number.

(iii)           For purposes of this Agreement, an “ unrestricted Government Contract ” means a Government Contract (including any subcontract within the definition of “Government Contract” at Section 1.1 hereof) with respect to which the procurement therefor (including the eligibility for any such subcontract) was not restricted to contractors qualified as any one or more of the following: a “small business;” “small disadvantaged business;” protégé status; woman-owned small business status or other preferential status (including, but not limited to, participation in preferential status programs such as the HUBZone program and participation under Section 8(a) of the Small Business Act) or otherwise having a Preferred Bidder Status, and shall include any GSA Schedule contract or award thereunder.

 

 

(i)           On or before January 29, 2010, the Buyer will deliver to the Seller Buyer’s determination of the anticipated aggregate Gross Margin for calendar year 2010 to be derived from (A) the Company’s unrestricted Government Contracts (assuming anticipated renewals, options exercises and/or successful recompetes of such Government Contracts in 2010, as applicable) as of December 31, 2009 with DHS and for which the period of performance has not expired or terminated as of December 31, 2009, (B) the Company’s unrestricted Government Contracts (assuming anticipated renewals, options exercises and/or successful recompetes of such Government Contracts in 2010, as applicable) as of December 31, 2009 with the USMC and for which the period of performance has not expired or terminated as of December 31, 2009 and (C) any other Government Contract(s) proposed by the Seller to Buyer and approved in writing by Buyer in its sole and absolute discretion (which written approval shall set forth the mutually agreed adjustment, if any, to the Gross Margin Threshold with respect to such Government Contract(s)) (the “ Buyer Determined 2010 Gross Margin ”).  Notwithstanding the methodology that may have been used by the parties to determine the Gross Margin Threshold, each of Gross Margin, Buyer Determined 2010 Gross Margin and Anticipated 2010 Gross Margin shall be determined in a manner consistent with the methodology set forth in this subsection (b)(i).  To the extent that Seller has any dispute with the Buyer Determined 2010 Gross Margin, Seller shall, no later than February 26, 2010, notify the Buyer in writing of its specific objections to Buyer’s determination.  Prior to such date,  the Buyer will permit the Seller access to such work papers relating to the preparation of Buyer’s determinations as may be reasonably necessary to review in detail the manner in which Buyer’s determinations were prepared.  If the Seller does not provide written notice of any such dispute on or prior to February 26, 2010, the Seller shall be deemed to have accepted the Buyer Determined 2010 Gross Margin. If the Seller provides the Buyer with written notice of a dispute of the Buyer Determined 2010 Gross Margin on or prior to February 26, 2010, the Buyer and Seller shall attempt to resolve such dispute on or prior to March 8, 2010.  In the event the Buyer and Seller are unable to resolve such dispute on or prior to March 8, 2010, (A) either the Buyer or Seller may require the other party to resolve such dispute by way of the Dispute Resolution Procedure by providing such other party written notice of such demand, and (B) the obligation to pay the 2010 Earnout Payment shall be suspended until the final resolution of the dispute.  The anticipated aggregate Gross Margin for calendar year 2010 from the Government Contracts described in the first sentence of this Section 2.7(b)(i) finally determined in accordance with this Section 2.7(b)(i) shall be referred to as the “ Anticipated 2010 Gross Margin .”

(ii)           On or prior to March 1, 2010, or, in the event there is a pending dispute of the Buyer Determined 2010 Gross Margin as of March 1, 2010, five (5) Business Days following the final determination of the Anticipated 2010 Gross Margin, the Buyer shall pay the Seller   an amount (the “ 2010 Earnout Payment ”)  equal to (A) the Anticipated 2010 Gross Margin minus (B) the greater of (x) the Anticipated 2009 Gross Margin and (y) the Gross Margin Threshold, provided the 2010 Earnout Payment is a positive number.

(iii)           If the Seller earned the 2009 Earnout Payment, but the Anticipated 2010 Gross Margin is determined to be less than the Gross Margin Threshold, Seller shall pay to Buyer, on or prior to March 1, 2010 or, in the event there is a dispute of the Buyer Determined 2010 Gross Margin, five (5) Business Days following the final determination of the Anticipated 2010 Gross Margin, an amount equal to (A) the Gross Margin Threshold minus (B) the Anticipated 2010 Gross Margin (the “ 2010 Deficit ”), such amount not to exceed the 2009 Earnout Payment. Any payment owed by the Seller to the Buyer pursuant to this subparagraph (c)(iii) will be payable from the Claims Escrow upon written demand by the Buyer and the Seller shall provide with the Buyer with joint written instructions to the Escrow Agent to deliver from the Claims Escrow to the Buyer an amount equal to the 2010 Deficit.

 

 

(i)           In the event that, subsequent to April 30, 2008, any of the work (as set forth in the applicable 8(a) Contract's statement of work) under any Government Contract awarded pursuant to Section 8(a) of the Small Business Act and in effect as of April 30, 2008 or as of the Closing Date, which Government Contracts are set forth on Schedule 2.7(c) hereto (the “ 8(a) Contracts ”), has been or is Migrated on or before the termination or expiration of the performance period under such 8(a) Contract, the Buyer shall deliver to Seller, within five (5) Business Days following the date of commencement of such work, Buyer’s calculation of the actual awarded revenue value for the 12-month period following the Migration from such Migrated work (assuming anticipated renewals, options exercises and/or successful recompetes in such 12-month period of the applicable Government Contracts to which such work is Migarated, as applicable) (with respect to any such work, the “ Buyer Determined Revenue ”).  To the extent that the Seller has any dispute with the Buyer Determined Revenue with respect to any Migrated work, the Seller shall, no later than thirty (30) days after receipt of the Buyer Determined Revenue, notify the Buyer in writing of its specific objections to the Buyer Determined Revenue.  Prior to such date, the Buyer will permit the Seller access to such work papers relating to the preparation of Buyer’s determinations as may be reasonably necessary to review in detail the manner in which Buyer’s determinations were prepared.  If the Seller does not provide written notice of any such dispute on or prior to such thirtieth (30 ^th ) day, the Seller shall be deemed to have accepted the Buyer Determined Revenue with respect to such Migrated work.  If the Seller provides the Buyer with written notice of a dispute of the Buyer Determined Revenue on or prior to such thirtieth (30 ^th ) day, the Buyer and Seller shall attempt to resolve such dispute on or prior the forty-fifth (45 ^th ) day from the date of delivery of the applicable Buyer Determined Revenue.  In the event the Buyer and Seller are unable to resolve such dispute on or prior to such forty-fifth (45 ^th ) day, (A) either the Buyer or Seller may require the other party to resolve such dispute by way of the Dispute Resolution Procedure by providing such other party written notice of such demand, and (B) payment of the 8(a) Migration Payment with respect to such Migrated work shall be suspended until the final resolution of the dispute.  The actual awarded revenue value for the applicable 12-month period from any applicable Migrated work finally determined in accordance with this Section 2.7(c)(i) shall be referred to as the “ Migrated Work Revenue .”

(ii)           On or prior to the thirty-first (31 ^st ) day following the commencement of any Migrated work or, if there is a pending Dispute Resolution Procedure with respect to the Buyer Determined Revenue, within five (5) Business Days of the final determination of the Estimated Migrated Revenue with respect to the applicable Migrated work, the Buyer shall pay the Seller   an amount (an “ 8(a) Migration Payment ”) equal to the product of (A) the Migrated Work Revenue and (B) Seventy-Five Hundredths (.75).

(iii)           For purposes of this Section 2.7, work under an 8(a) Contract shall be deemed to have been “ Migrated ” to an unrestricted Government Contract if (A) such 8(a) Contract is reclassified as or otherwise becomes an unrestricted Government Contract of the Company, (B) such 8(a) Contract is recompeted as an unrestricted government Contract, and such recompete is won by and awarded to the Company as the prime contractor, (C) work substantially similar to that set forth in the applicable 8(a) Contract’s statement of work is demonstrated by the Seller to the Buyer’s reasonable satisfaction to have been transferred to, and is intended to be performed by the Company under, an unrestricted Government Contract of the Company, or (D) any other work is demonstrated by the Seller to the Buyer’s satisfaction (determined in Buyer’s sole discretion) to have been transferred to, and is intended to be performed by the Company under, an unrestricted Government Contract of the Company in replacement of work under an 8(a) Contract.

(d)           Notwithstanding anything to the contrary contained herein, the maximum aggregate amount that shall be paid to the Seller under this Section 2.7, including without the limitation the aggregate of the 2009 Earnout Payment, the 2010 Earnout Payment and any and all 8(a) Migration Payments, shall not exceed Five Million Dollars ($5,000,000).  Any payments to be made by Buyer to

 

 

Seller under this Section 2.7 shall be made by wire transfer of immediately available funds to an account designated by Seller at least two (2) Business Days prior to the making of such payment.

(e)            Covenants with respect to Earnout .  From and after the Closing and through December 31, 2009 (or, with respect to clauses (i) and (ii) below, until the termination or expiration of the period of performance remaining with respect to any 8(a) Contract and provided that the maximum earnout amount set forth in Section 2.7(c) above has not been paid to the Seller), the Buyer shall:

(i)           Make reasonable efforts to permit the Company to achieve the earnout, consistent with the Buyer’s obligations under applicable Law as a publicly traded company;

(ii)           Comply with its obligations set forth on Schedule 2.7(e)(ii) ;

(iii)           Maintain a financial reporting system for the Company that will enable the determination of Anticipated 2009 Gross Margin and Anticipated 2010 Gross Margin; and

(iv)           Not transfer the work performed by the Company for USMC or DHS to any other operating unit of Buyer.

Notwithstanding anything to the contrary in this Agreement or otherwise, and without limiting any other rights and privileges that the Buyer and the Company may have following the Closing, neither the Buyer nor the Company shall have any obligation to make any sale in respect of its products or services or enter into any agreement, contract, understanding or arrangement to make any sale in respect of its products or services if the Buyer or Company in good faith determines that it will not be able to earn what it believes to be a reasonable fee or profit from such sale.

2.8             Tax Treatment; Purchase Price Allocation. It is the intent of the Buyer, the Seller and the Company that the acquisition of the Interests hereunder by the Buyer from the Seller qualifies for and will be treated for tax purposes as the equivalent of an asset purchase.  As soon as reasonably practicable after the Closing but in no event later than sixty (60) days after the Closing, the Buyer and Seller shall endeavor in good faith to reach mutual agreement regarding the allocation of the consideration delivered hereunder for the assets purchased, which allocation shall be (a) documented in writing and (b) in accordance with Section 1060 of the Code and the Treasury Regulations thereunder (and any similar provision of Law, as appropriate); provided, that the Buyer and Seller agree that the allocation of the portion of the consideration to the Seller Noncompetition Agreement shall be such allocation (not to exceed $100,000) as determined by the independent valuation firm engaged by Buyer in connection with the allocation.  The Buyer and Seller shall report, act and file Tax Returns (including Internal Revenue Service Form 8594) in all respects and for all purposes consistent with the foregoing allocation, including as determined pursuant to the foregoing sentence.  Neither the Buyer nor Seller shall take any position (whether in audits, Tax Returns or otherwise), which is inconsistent with such tax treatment and such allocation unless required to do so by applicable Law.

ARTICLE 3

THE CLOSING

3.1       Closing and Closing Date .  Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned in accordance with the provisions of Article 9 hereof, the Closing (the “ Closing ”) of the transactions contemplated by this Agreement shall take place at 10:00 a.m. (Eastern Time) on the later of (a) August 1, 2008 and (b) the third  (3 ^rd ) Business Day after the satisfaction or waiver (to the extent permitted by this Agreement and applicable Law) of the

 

 

last to be satisfied or waived of the conditions set forth in Article 8 other than those conditions that by their terms are to be satisfied at the Closing (but subject to the satisfaction or waiver, to the extent permitted by this Agreement or applicable Law, of such conditions), or such other date to be designated by the Buyer and the Seller as promptly as practical after all of the conditions to the respective obligations of the parties set forth in Article 8 hereof shall have been satisfied or waived (such date and time on and at which the Closing actually occurs being referred to herein as the “ Closing Date ”).  The Closing shall take place at the offices of the Buyer’s counsel, Holland & Knight LLP, 1600 Tysons Boulevard, Suite 700, McLean, VA 22102.

3.2       Documents to be delivered to the Buyer by the Seller Parties .  At the Closing, the Seller Parties will deliver to the Buyer:

(a)           Certificates representing 100% of the Interests, duly endorsed for transfer in blank or accompanied by powers duly executed in blank, in proper form for transfer by the Seller;

(b)           A certificate, in form and substance reasonably acceptable to the Buyer, executed by the Seller, as the manager of the Company, dated the Closing Date, and certifying that attached thereto are true and complete copies of:  (i) the Articles of Organization, as in effect as of the Closing Date; (ii) the Operating Agreement, as in effect as of the Closing Date; and (iii) the resolutions duly adopted by the manager of the Company authorizing the execution, delivery, and performance of this Agreement and each Transaction Document to which the Company is a party, which resolutions have not been modified, rescinded, or amended and are in full force and effect as of the Closing Date;

(c)           Certificates, in form and substance reasonably acceptable to the Buyer, dated the Closing Date, executed by (i) the President of the Company, certifying as to the accuracy of the Company’s representations and warranties at and as of the Closing and the performance by the Company of its covenants and agreements set forth in this Agreement and each Transaction Document to which the Company is a party to be performed prior to the Closing Date, and (ii) by the Seller certifying as to the accuracy of her and the Company’s representations and warranties at and as of the Closing and the performance by the Seller and the Company of her and its covenants and agreements set forth in this Agreement and each Transaction Document to be performed prior to the Closing Date;

(d)           Each of (i) the Seller Noncompetition Agreement, in substantially the form attached hereto as Exhibit B (the “ Seller Noncompetition Agreement ”), duly executed by the Seller, (ii) the Transaction Bonus Agreement, substantially in the form attached hereto as Exhibit C (the “ Transaction Bonus Agreement ”), duly executed by the Company and Douglas Layman; and (iii) the Noncompetition Agreement, in substantially the form attached hereto as Exhibit E (the “ Osborn Leroy Noncompetition Agreement ”), duly executed by the Company and Osborn Leroy.

(e)           Resignations of the manager of the Company and all of the officers of the Company;

(f)           A cross-receipt executed by the Seller, in a form reasonably satisfactory to the Buyer;

(g)           An IRS Form W-9, completed by the Seller, in a form reasonably satisfactory to the Buyer;

(h)           All of the Company’s contracts, books, records, and other data relating to the Company’s operations, including the Company’s minute and ownership record books;

(i)           The assignment documents or use right documents described in Section 2.5, if applicable;

 

 

(j)           Each of the Employment Letters (including all attachments thereto) duly executed by the employees listed on Schedule 3.2(j) attached hereto;

(k)           Certificate of good standing of the Company from the State Corporation Commission of the Commonwealth of Virginia, and a certificates of good standing (or their equivalent) from the Secretaries of State of the jurisdictions listed at Schedule 5.1 , each dated not earlier than twenty (20) days prior to the Closing Date;

(l)           The opinion of counsel for the Seller Parties referred to in Section 8.2(d);

(m)           Consents of third parties with respect to the contracts listed in Schedule 5.5 in form reasonably satisfactory to Buyer;

(n)           The Escrow Agreement, duly executed by Seller and the Escrow Agent;

(o)           The Discharges duly executed by each payee;

(p)           Evidence of termination, effective as of Closing, of the Rights Plans, and any other Contracts between the Company and its senior management, directors, officers or the Seller (other than Contracts specifically contemplated by this Agreement).

(q)           The Flow of Funds Memorandum, updated as of the Closing Date, and duly executed by the Company.

(r)           The Preliminary Statement, dated as of the Closing Date, and certified by an officer of the Company as provided in Section 2.4.

3.3       Documents and Items to be Delivered to the Seller Parties by the Buyer .  At the Closing, the Buyer will deliver to the Seller Parties:

(a)           Against receipt of certificates for the Interests, in accordance with Sections 3.2(a), the Closing Payment, and all other amounts required to be paid by Buyer to the applicable recipient pursuant to Section 2.2;

(b)           A certificate, in form and substance reasonably acceptable to the Seller Parties, executed by an authorized officer of the Buyer, dated the Closing Date, and certifying that attached thereto are true and complete copies of (i) the Articles of Organization of the Buyer as in effect as of the Closing Date; (ii)  the By-Laws of the Buyer, as amended and as in effect as of the Closing Date; and (iii) the resolutions duly adopted by the Board of Directors of the Buyer authorizing the execution, delivery, and performance of this Agreement and each Transaction Document to which it is a party, which resolutions have not been modified, rescinded or amended and are in full force and effect;

(c)           A certificate, in form and substance reasonably acceptable to the Seller Parties, executed by an authorized officer of the Buyer, dated the Closing Date, certifying as to the accuracy of the Buyer’s representations and warranties at and as of the Closing and the performance by the Buyer of its covenants and agreements set forth in this Agreement and each Transaction Document to which it is a party to be performed prior to the Closing Date; and

(d)           The Escrow Agreement, duly executed by Buyer and the Escrow Agent.

ARTICLE 4

 

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER

  Seller hereby represents and warrants to the Buyer as follows:

4.1       Authority; Binding Agreement .  This Agreement and each Transaction Document to which the Seller is a party have been duly and validly executed and delivered by the Seller and, assuming such agreements constitute the legal, valid and binding obligations of the Buyer, constitute the legal, valid and binding agreements of the Seller, enforceable against the Seller in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and similar Laws affecting creditors’ rights generally and general principles of equity (whether considered in a proceeding in equity or at law).

4.2       Title .  The Seller is the owner of one hundred percent (100%) of the Interests.  The Interests owned by the Seller are owned of record by the Seller free and clear of all Liens of any kind or nature whatsoever, and there is no Person who has any beneficial interest in such Interests other than the Seller.  Delivery of the certificates for the Interests by the Seller to the Buyer on the Closing Date as contemplated in Section 3.2(a) will transfer to the Buyer good and marketable title thereto free and clear of all Liens of any kind whatsoever.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLER

The Company and the Seller, jointly and severally, hereby represent and warrant to the Buyer as follows:

5.1       Organization and Qualifications of the Company .  The Company is a duly organized and validly existing limited liability company in good standing under the Laws of the Commonwealth of Virginia with all power and authority to own or lease all of its properties and assets and to conduct its business as currently conducted, and is duly qualified and in good standing as a foreign entity authorized to do business in each of the jurisdictions in which the character of the properties owned or held under lease by it or the nature of the business transacted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not cause a Material Adverse Effect.   Schedule 5.1 lists the jurisdictions where the Company is qualified as a foreign entity.  The Company does not own or control or have the right or obligation to acquire, directly or indirectly, any interest in or control over any Person.

5.2       Capitalization; Record Ownership of Interests .  Schedule 5.2 sets forth the authorized, issued and outstanding membership interests of the Company. Except as set forth on Schedule 5.2 , there are no outstanding (i) membership interests, voting securities or other ownership interests of the Company, (ii) securities of the Company convertible into or exchangeable for membership interests, voting securities or other ownership interests in the Company, or (iii) options, warrants, rights or other agreements or commitments to acquire from the Company, and no obligation of the Company to issue, any membership interest, voting securities or other ownership interests in, or securities convertible into or exchangeable for membership interest or voting securities or other ownership interests in, the Company, and no obligation of the Company to grant, extend or enter into any subscription, warrant, option, right, convertible or exchangeable security or other similar agreement or commitment (the items in clauses (i), (ii) and (iii) being referred to herein collectively as the “ Company Securities ”).  None of the Company Securities were issued in violation of the Securities Act or other applicable Law.  There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any Company Securities.  Except

 

 

for the Operating Agreement, there are no voting trusts, membership agreements, or other agreements, contracts or understandings relating to the ownership, voting or transfer of the Company Securities to which the Company or the Seller is a party.  Except for the Operating Agreement, there are no other agreements, contracts or understandings with respect to the ownership, voting or transfer of any membership interest of the Company.  No Person other than the Seller owns of record or beneficially any Company Securities.  The Interests are duly authorized, validly issued, fully paid and non-assessable.  The membership interest records of the Company indicate that the Seller is the sole owner of the Interests as set forth in Schedule 5.2 .  Neither the Seller nor the Company has received any notice of Lien or other Claim against any of the Interests.

5.3       Actions and Authority; Enforceability .  The Company has all requisite corporate power and authority to execute and deliver this Agreement and each Transaction Document to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance of this Agreement and each Transaction Document to which the Company is a party by the Company and the consummation by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by the Manager of the Company and no other proceedings on the part of the Company are necessary to authorize this Agreement and each Transaction Document to which the Company is a party or to consummate the transactions so contemplated.  This Agreement and each Transaction Document to which the Company is a party has been duly and validly executed and delivered by the Company and, assuming such agreements constitute the legal, valid and binding obligations of the Buyer, constitute the legal, valid and binding agreements of the Company, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and similar Laws affecting creditors’ rights generally and general principles of equity (whether considered in a proceeding in equity or at law).

5.4       Schedules; Delivery of Documents; Corporate Records .  The Company has delivered or otherwise made available to the Buyer copies of the Articles of Organization of the Company and all amendments thereto (the “ Articles of Organization ”) and the Operating Agreement of the Company and all amendments thereto (the “ Operating Agreement ”).  The minute and membership record books of the Company, which have been made available to the Buyer for its inspection, contain complete and correct copies of all charter documents and the records of all meetings and consents in lieu of meeting of the manager and members of the Company since the date of its organization.

5.5       Consents and Approvals; No Violation .  Neither the execution and delivery of this Agreement and each Transaction Document to which any of the Seller Parties is a party by the Seller Parties nor the performance by the Seller Parties of their respective obligations hereunder and thereunder, nor the consummation of the transactions contemplated hereby and thereby will (i) conflict with or result in any breach of any provision of the Articles of Organization or Operating Agreement of the Company, (ii) except as set forth on Schedule 5.5 , require any consent, waiver, approval, authorization, novation or permit of, or filing with or notification to, any Governmental Authority, (iii) except as set forth on Schedule 5.5 , violate, breach, be in conflict with, require notice under, or constitute a default under (with notice or lapse of time or both) or result in, or permit the termination of the acceleration of the maturity, or the performance of any obligation of the Company or the Seller, or any of them, or cause an indemnity payment to be made by the Company under, or result in the creation or imposition of any Lien upon any properties, assets or business of the Company under, any note, bond, indenture, mortgage, deed of trust, lease, franchise, permit, authorization, license, contract, instrument or other agreement or commitment or any Order to which the Company or the Seller, or any of them, is a party or by which the Company or the Seller or any of their respective assets or properties is bound or encumbered, or give any Person the right to require the Company to purchase or repurchase any notes, bonds or instruments of any kind, or (iv) violate any Law applicable to the Company or the Seller, or any of them, or any of their respective

 

 

properties or assets.

5.6       Financial Statements; No Undisclosed Liabilities; Financial Controls .

(a)           Attached to Schedule 5.6 are true, correct and complete copies of (i) the audited balance sheet, income statement and statement of cash flows of the Company as of and for the fiscal years ended December 31, 2006 and 2007 (including any related notes and schedules) (the “ Audited Financial Statements ”), (ii) the balance sheet and income statement of the Company as of June 30, 2008 and for the six (6) month period ended on such date (the “ Interim Financial Statements ” and, together with the Audited Financial Statements, the “ Financial Statements ”).  The Financial Statements were prepared in accordance with the books and records of the Company, are true, correct and complete in all material respects, and present fairly and accurately the financial condition and the results of operations of the Company as of the respective dates thereof.  The Financial Statements have been prepared in accordance with GAAP, consistently applied throughout and among the periods indicated (provided that the unaudited statements do not contain footnotes required by GAAP).

(b)           Except as and to the extent specifically reflected or reserved against in the Financial Statements (including the footnotes thereto) or otherwise disclosed in Schedule 5.6 , as of December 31, 2007 the Company did not have any liabilities or obligations of any nature, whether absolute, accrued, contingent, matured or unmatured or otherwise, and whether due or to become due (including, without limitation, any liability for Taxes and interest, penalties and other charges payable with respect to any such liability or obligation) that are required by GAAP to be disclosed in a balance sheet or in the footnotes thereto.  Except as disclosed on Schedule 5.6 , the Company does not have any liabilities or obligations of any nature, whether known or unknown, accrued, absolute, fixed, contingent, liqui