EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
DATED AS OF MARCH 23, 2001,
BY AND AMONG
▇▇▇▇▇▇▇ TECHNOLOGIES SYSTEMS DIVISION, INC.,
▇▇▇▇▇▇▇ TECHNOLOGIES INC.
AND
TITAN SYSTEMS CORPORATION
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
March 23, 2001, by and among ▇▇▇▇▇▇▇ Technologies, Inc, a California corporation
("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ Technologies Systems Division Inc., a California
corporation ("Seller"), and Titan Systems Corporation, a Delaware corporation
("Buyer").
A. Seller is engaged in the business of development of advanced
pulsed power systems and development and operation of x-ray simulators (the
"Business").
B. Seller is a majority-owned subsidiary of ▇▇▇▇▇▇▇.
C. Buyer is a publicly traded company conducting operations
worldwide and is engaged in, among other things, a business similar to the
Business.
D. Seller, ▇▇▇▇▇▇▇ and Buyer wish to enter into this Agreement
covering the sale and assignment by Seller and purchase and assumption by Buyer
of substantially all the assets and certain specified liabilities related to the
operation of the Business.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties agree as
follows:
I.
PURCHASE AND SALE OF ASSETS
1.1 ASSETS. Subject to and in reliance upon the representations,
warranties and agreements set forth herein, and on the terms and conditions
contained herein, Seller agrees to sell, assign, transfer and deliver to Buyer
on the Closing Date (as defined in Section 1.5 below), and Buyer agrees to
purchase, assume and receive, all right, title and interest in those certain
assets shown on the Statement of Net Assets as of December 31, 2000, attached as
Schedule 1.1(a) hereto, consisting of accounts receivable (billed and unbilled),
personal property, inventory, certain leasehold improvements and pre-paid assets
of the Business, as well as the intellectual property (including intellectual
property that is jointly-owned with a third party(ies)) and goodwill associated
with the Business and the rights under contracts, leases and other agreements
assumed under section 1.2 below (collectively, the "Assets"), as all such Assets
exist on the Closing Date. Notwithstanding anything herein to the contrary, the
Assets shall not include those items set forth on Schedule 1.1(b) attached
hereto (the "Excluded Assets").
1.2 LIABILITIES.
(a) The Assets shall be sold and conveyed to Buyer free
and clear of all debts, mortgages, liens, deeds of trust, security interests,
pledges, restrictions, prior assignments, charges, claims, defects in title and
encumbrances of any kind or type whatsoever except for:
those obligations of Seller, if any, which Buyer expressly assumes at the
Closing as set forth on Schedule 1.1(a) attached hereto, consisting of accounts
payable, accrued compensation for those certain employees of Seller hired by
Buyer, accrued liabilities related to the Assets, as well as executory
obligations under contracts listed or described on Part 2.21 of the Disclosure
Schedule attached hereto (the "Assumed Liabilities").
(b) Except as otherwise specifically provided herein,
Buyer shall not assume or be liable for any other liability or obligation of
Seller. Seller shall retain and shall hereafter pay, satisfy, and fulfill all
such obligations and liabilities not expressly assumed by Buyer hereunder as
they become due, without any charge or cost to Buyer, and Seller hereby agrees
to indemnify and hold Buyer and its successors and assigns harmless from and
against any and all such liabilities in accordance with the terms of Article VII
below ("Excluded Liabilities"). Excluded Liabilities shall be set forth on
Schedule 1.1(b).
1.3 THE PURCHASE PRICE. The purchase price for the Assets
("Purchase Price") shall consist of the following:
(a) a cash payment of $9,800,000.00, plus an Interest
Payment, shall be paid on April 2, 2001 by wire
transfer to accounts designated by the Seller. The
Interest Payment shall be equal to $2,684.98 per day
(10% annual interest rate on $9,800,000.00) beginning
on the Closing Date through April 1, 2001;
(b) a $1,700,000.00 holdback amount ("Holdback") shall be
payable to Seller on or before one hundred eighty
(180) days after the Closing in accordance with the
Net Assets Adjustment described in Section 1.6 below
and the Transferring Employee 401(k) Loan Guarantee
described in Section 1.12 below.
(c) $500,000 of the $1,700,000.00 Holdback shall be
subject to additional conditions for release in
accordance with Section 1.11 below.
1.4 ALLOCATION OF PURCHASE PRICE. Not later than thirty days after
the Closing Date, the Buyer shall prepare and deliver to the Seller a proposed
allocation of the Purchase Price among the Purchased Assets substantially in the
form of Schedule 1.4 hereto. Unless Seller objects to such allocation within
five (5) days after completion by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP of its audit of Statement
of Net Assets, such allocation shall be considered to be final. Should Seller
object to Buyer's proposed allocation, the Parties shall negotiate in good faith
to reach agreement upon a final allocation. Neither Seller nor Buyer shall take
any position on any Tax Return or other filing with a governmental authority
that is inconsistent with the final allocation as determined by the Parties (the
"Final Allocation"). Buyer and Seller shall duly prepare and timely file such
reports and information returns as may be prescribed or appropriate under
section 1060 of the Code and any regulations thereunder and any corresponding
provisions of applicable state income tax laws to report the allocation of the
Purchase Price in accordance with such Final Allocation. Any adjustments to the
Purchase Price after the Closing shall be allocated among the Purchased Assets
in a manner consistent with the foregoing.
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1.5 CLOSING. The consummation of the transactions contemplated
hereby (the "Closing") shall take place at 10:00 a.m on a business day (the
"Closing Date") designated by mutual agreement of the parties as soon as
practicable following the satisfaction or waiver of all conditions to the
Closing. Unless otherwise agreed, the Closing shall take place at 10:00 a.m. at
the offices of The Titan Corporation at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇ on March 23, 2001 or such other date as is agreed upon by the parties.
1.6 NET ASSETS ADJUSTMENT.
(a) The purchase price for the Assets has been predicated
on $4,500,000 of Net Assets as reflected on the Statement of Net Assets included
as Schedule 1.1(a) hereto, updated to the Closing Date. Net Assets are defined
as the net book value of the Assets and Assumed Liabilities as determined in
accordance with Generally Accepted Accounting Principles (GAAP) and applied on a
consistent basis. As of the Closing Date, Seller shall perform a full closing of
its books to derive a balance sheet of Seller and a Statement of Net Assets in
the form of Schedule 1.1(a). The amount of Net Assets shown on such Closing Date
Statement of Net Assets shall be the "Closing Date Net Assets." As soon as
practicable but no later than thirty (30) days after the Closing, Seller shall
deliver to the Buyer or, at the request of Buyer, to Buyer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, such Statement of Net Assets and balance sheet, and Seller shall make
available to Buyer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP such books and records relating to
said financial statements as they may request. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP shall audit
said balance sheet of Seller as of the Closing Date and the Statement of Net
Assets as of the Closing Date. Buyer shall use its best efforts to cause ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP to complete such audit and to calculate and provide the Seller with
a report, which may be in draft form, on the amount of any adjustments to the
Closing Date Net Assets (the "Report") within sixty (60) days following receipt
of the Closing Date balance sheet and Statement of Net Assets from Seller. To
the extent the Closing Date Net Assets is greater or less than $4,500,000.00,
such difference will result in a dollar for dollar increase or decrease,
respectively, in the Purchase Price (the "Closing Adjustment"). If the Closing
Adjustment is $500,000.00 or less, then it will either be paid in conjunction
with the release of the Holdback payment (in the case of a increase in the
Purchase Price) or will be deducted from the Holdback (in the case of a decrease
in the Purchase Price) one hundred eighty (180) days following the Closing, or
such later date on which the parties reach agreement on the Closing Adjustment.
If the Closing Adjustment is greater than $500,000.00, then the Closing
Adjustment will be paid in cash by the Buyer (in the case of an increase in the
Purchase Price) or the Seller (in the case of a decrease in the Purchase Price)
within ten (10) days from the date on which the parties reach agreement on the
Closing Adjustment.
(b) If, by the date which is 180 days after the Closing
Date, Buyer has not collected all accounts receivable included in the Closing
Date Net Assets determination, despite its commercially reasonable collection
efforts, then the Purchase Price will be decreased dollar for dollar to the
extent that such receivables are not collected as of that date. Buyer shall be
permitted to deduct, in its sole discretion, dollar-for-dollar from the Holdback
for such deficiency. Upon such Purchase Price decrease, whether by deduction
from the Holdback or cash payment by Seller to Buyer, Buyer shall re-convey to
Seller all such unpaid accounts receivable, and all records relating thereto,
and Seller shall be responsible for their collection thereafter.
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(c) If Seller disagrees with the determination of the
Closing Adjustment, Seller shall so notify Buyer in writing within twenty days
after Seller's acknowledgement of receipt of the Report by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
specifying in detail the basis of such disagreement; provided, however, that if
Seller fails to notify Buyer of any disagreement within such twenty day period,
then the determination of the Closing Date Net Assets and the Closing Adjustment
as reflected in the Report shall be final, conclusive and binding upon the
Parties.
(d) Seller and Buyer shall negotiate in good faith to
resolve any disagreement related to the Closing Adjustment. If any such
disagreement cannot be resolved by the parties within ten days after Buyer's
receipt of Seller's notice of disagreement, then the Parties shall jointly
select a nationally recognized independent public accounting firm (the
"Accounting Firm"), to act as an arbitrator to resolve as expeditiously as
possible all points of disagreement with respect to the Closing Adjustment (or,
in the event they are unable to agree to the selection, either may request the
San Diego, CA office of the American Arbitration Association to make such
selection, which shall be final and binding on the Parties). All determinations
made by the Accounting Firm with respect to the Closing Adjustment shall be
final, conclusive and binding on the Parties hereto. Each Party shall be
responsible for its own fees and expenses, as well as one-half of the fees and
expenses of the Accounting Firm, incurred in connection with the resolution of
the dispute.
1.7 SUBLEASES AND LEASES. Concurrent with the Closing, Seller and
Buyer shall enter into the subleases and leases set forth in Exhibit A attached
hereto.
1.8 EMPLOYEES. Buyer shall identify, at its sole discretion,
certain employees of Seller as either Key Employees or Desired Employees and
shall extend offers of employment to such individuals prior to the Closing. The
terms and conditions of such employment shall be at Buyer's sole discretion, but
shall include compensation levels comparable to such employees' current
compensation as employees of Seller. Prior to Closing, Buyer must receive
written acceptances of employment for all Key Employees and for 80% of Desired
Employees. These individuals are set forth in Schedule 1.8 attached hereto.
(a) With the sole exception of accrued compensation or
other Assumed Liabilities, Buyer is not assuming, under this Agreement or
otherwise, and the Seller is and shall remain fully responsible for any
obligation, responsibility or liability, whether contractual or statutory,
arising out of the termination of employees not hired by Buyer, or, in the case
of employees hired by Buyer, as such obligations, responsibilities or
liabilities relate to their employment with Seller for the period of time up
until the Closing including without limitation, any liability or obligation with
respect to wages, salaries, bonuses, health care plans or employee benefit plans
or any other compensation arrangement whatsoever which arise from or relate to
any such individual's employment by Seller.
(b) The service hours accrued by any individual during
their employment by Seller will be recognized by Buyer for purposes of
eligibility for benefits under any employee benefit plan or program maintained
by Buyer. In addition, Buyer will recognize and assume responsibility for
accrued vacation hours for hired employees so long as such vacation hours do not
exceed the individual maximum accruals permitted under Buyer's policy. Seller
will be
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responsible for payout to each employee of the total number of vacation hours in
excess of Buyer's maximum accrual amounts.
1.9 TRANSITION PERIOD. The Transition Period is defined as the
period commencing on the Closing Date and ending as set forth in the Transition
Services Agreement set forth in Exhibit B attached hereto. During the Transition
Period, Buyer and Seller shall work collectively in the manner outlined in the
Transition Services.
1.10 CONTRACT ASSIGNMENT AND NOVATION. Seller and Buyer agree that
Buyer shall seek assignment or novation of the contracts which are included as
part of the Assets being transferred hereunder ("Contracts"). Seller shall use
its best efforts to supply Buyer with all approvals and representations to third
parties, as may be required, as well as to provide any other reasonable
assistance to Buyer, in obtaining the assignment or novation of the Contracts to
Buyer. Buyer and Seller shall work collectively in the manner outlined in the
Master Subcontract Agreement set forth in Exhibit C until such time as all of
the Contracts have been completely assigned or novated to Buyer.
1.11 ADDITIONAL CONDITIONS FOR RELEASE OF HOLDBACK. $500,000.00
of the Holdback (the "Reserved Holdback") shall be subject to the following
criteria for release. These criteria constitute conditions to payment of a
portion of the Holdback which are in addition to the Net Asset criteria
described in Section 1.6. Seller has projected the 2001 revenue of the
Defense Threat Reduction Agency (DTRA) Facilities Operations and Facilities
Maintenance contracts at approximately $5,500,000. Of this current
year-revenue, a portion is projected by Seller to result from current funding
under existing contracts. The remainder is projected to result from future
funding under existing or follow-on contract awards from DTRA (for Facilities
Operations and Facilities Maintenance contracts). Buyer's release of the full
Reserved Holdback shall be conditioned on Buyer's receipt of additional
funding after January 31, 2001 which is at least $1,500,000. To the extent
such additional funding is less than $1,500,000, Buyer shall retain from the
Reserved Holdback, and not pay to Seller, the lesser of (i) the Reserved
Holdback or (ii) one half (1/2) of the amount by which the additional funding
is less than $1,500,000. The determination of Reserve Holdback payment
reductions shall be made on the earlier of: i) the attainment of the criteria
described above (in which case there will be no reduction in Reserve Holdback
payment), or ii) October 1, 2001. In the event that October 1, 2001 is the
date of determination, payment of the Reserved Holdback shall be made to
Seller by October 15, 2001, unless otherwise reduced or eliminated under the
terms of the Net Asset determination defined previously.
1.12 TRANSFERRING EMPLOYEE 401(k) LOAN GUARANTEE.
(a) Buyer intends to provide short term, interest-free loans
(documented in a form approved by Seller) to Seller's transferring personnel who
currently hold personal loans against equity in personal balances under Seller's
401(k) program. Buyer intends to require that, as soon as practicable but no
later than one hundred twenty (120) days after the Closing Date, borrowers repay
these loans after enrolling in Buyer's 401(k) program, rolling over their
balances from Seller's program, and obtaining loans against their balances in
Buyer's 401(k) plan. Buyer and Seller anticipate the total value of such loans
to be approximately $200,000. To the extent that
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such loans are provided by Buyer to Seller's transferring employees, Seller
agrees to guarantee repayment by Seller's transferring employees. The value of
defaults on these short-term loans to Sellers transferring employees shall be
directly deducted from the payment to Seller of the Holdback. Prior to
performing such deduction, Buyer shall make best efforts to obtain repayment
from individuals receiving short-term loans, and if repayment is not made, Buyer
shall assign its interest in the defaulted loans to Seller. No deduction shall
occur which relates to a transferring employee who is denied a loan against
Buyer's 401(k) plan unless the original loan to the employee under Seller's
401(k) Plan was issued in noncompliance with IRS Regulations.
(b) Notwithstanding Section 1.12(a), Buyer and Seller agree to
work together to accomplish direct rollovers of the employee loans described
above from Seller's 401(k) Plan to Buyer's 401(k) Plan if such direct rollovers
are permissible under both Seller's and Buyer's respective 401(k) Plans and if
such direct rollovers offer a mutually agreeable alternative to the loan
guarantee procedure outlined above in 1.12 (a). If the parties do proceed with
such direct rollovers, then this Section 1.12(b) will supersede Section 1.12(a)
in its entirety.
II.
REPRESENTATIONS AND WARRANTIES OF SELLER AND ▇▇▇▇▇▇▇
Except as disclosed in the disclosure schedule which references the
specific representations and warranties as to which the exception is made and
which is provided to Buyer on or before the date of this Agreement (the "Seller
Disclosure Schedule"), Seller and ▇▇▇▇▇▇▇ jointly and severally represent and
warrant to Buyer as follows (any items disclosed in the Seller Disclosure
Schedule shall be considered an exception to other representations and
warranties not referenced therein if a reasonable business person who was not
familiar with Seller or its operations would reasonably expect such item to
apply to such other representations or warranties):
2.1 STATUS AND AUTHORITY. Seller is a corporation duly organized,
validly existing and in good standing under the laws of California. Seller is
duly qualified to do business in New Mexico and Virginia. Seller does not do
business in any other jurisdiction where the failure to be qualified to do
business would have a material adverse effect on the Business or the Assets.
Seller has the requisite power and authority to enter into and complete the
transactions contemplated by this Agreement and the documents set forth in
Section 6.1 hereto (collectively, the "Transaction Documents").
2.2 NO COMPETING INTERESTS OR OPTIONS. No person or entity has an
interest in, or option to acquire, any of the Assets. No entity that owns or
controls, is owned or controlled by, or is under common control with Seller does
business of a material nature with the Business.
2.3 NECESSARY ACTION. All actions and proceedings to be taken by
or on the part of Seller in connection with the transactions contemplated by the
Transaction Documents have been duly and validly taken. The Transaction
Documents have been duly and validly authorized, executed, and delivered and
constitute the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with their respective terms except as may be
limited by
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applicable bankruptcy, insolvency, moratorium, reorganization and other laws
affecting creditor's rights and equitable remedies generally.
2.4 NO DEFAULTS. Neither the execution, delivery and performance
by Seller of the Transaction Documents nor the consummation by Seller of the
transactions contemplated thereby is an event that, of itself or with the giving
of notice or the passage of time or both, will: (a) conflict with the provisions
of the organizational documents of Seller; (b) constitute a violation of,
conflict with or result in any breach of or any default under, result in any
termination or modification of, or cause any acceleration of any obligation
under, any material contract, mortgage, agreement, lease or other instrument to
which Seller is a party, or by which any of the Assets may be affected, or
result in the creation of any Security Interest upon any of the Assets; (c)
violate any judgment, decree, order, law, rule or regulation applicable to
Seller, the Business or any of the Assets; or (d) result in the creation or
imposition of any lien, charge or encumbrance against the Assets.
2.5 BREACH. Seller is not in violation or breach of any of the
material terms, conditions or provisions of any mortgage or deed of trust or
other contract, lease, instrument, court order, judgment, arbitration award, or
decree relating to or affecting the Assets or the Business and Seller has not
received any notices of any such violation or breach which have not been cured
or otherwise resolved.
2.6 LIABILITIES. There are no material liabilities or obligations
of Seller relating to the Assets or the Business, whether due or not yet due,
liquidated or unliquidated, fixed, contingent or otherwise, required to be
reflected on the Financial Statements (as hereinafter defined) by GAAP that are
not so reflected.
2.7 TAXES AND FEES. Seller has filed all applicable federal,
state, local and foreign tax returns required to be filed to date, all of which
are accurate and complete in all material respects, and has paid all taxes,
interest, penalties and assessments (including without limitation income,
withholding, excise, unemployment, Social Security, occupation, transfer,
franchise, property, sales and use taxes, import duties or charges, regulatory
fees and all penalties and interest in respect thereof) required to have been
paid to date with respect to or involving the Assets or the Business. Seller has
not been advised that any of its tax returns are being audited as of the date
hereof.
2.8 COMPLIANCE. All reports and filings required to be filed with
any governmental regulatory authority, agency or court by Seller with respect to
the Assets have been timely filed. All such reports and filings are accurate and
complete in all material respects, and from the date hereof will be filed on a
timely basis. Seller is not aware of any facts and Seller has not received any
communication from any governmental authority indicating that Seller is not in
compliance with all requirements of applicable statutes, regulations and
ordinances.
2.9 APPROVALS AND CONSENTS. No approvals or consents of persons or
entities not a party to this Agreement are legally or contractually required to
be obtained by Seller in connection with the consummation of the transactions
contemplated by this Agreement. No permit, license, or authorization of, or
filing with, any governmental regulatory authority or
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agency is required by Seller in connection with the execution, delivery and
performance of this Agreement, or the consummation of the transactions
contemplated hereby.
2.10 CONDITION OF ASSETS. Seller has good, valid and marketable
title to all of the Assets, as of the Closing Date, free and clear of all
security interests of every kind or character, other than liens for taxes not
yet due or statutory liens arising in the ordinary course of business which will
not individually or in the aggregate materially affect the Assets or Business.
All of the Assets are in good condition and repair, ordinary wear and tear
excepted, and are free from known defects and damage. Seller shall convey to
Buyer at Closing good and marketable title to the Assets. Other than the
Excluded Assets and other than government furnished property or equipment, the
Assets constitute all of the tangible and intangible assets used by Seller in
connection with the Business.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11, Seller has not
been notified that it is a responsible or potentially responsible party for any
response cost or natural resource damages under Section 107(a) of CERCLA, or
under any other so-called "superfund" or "superlien" law or similar Legal
Requirement, at or with respect to any site.
(b) Except as set forth in Schedule 2.11, Seller has
never received any notice or other written communication from any governmental
body or other Person regarding any actual, alleged, possible or potential
Liability arising from or relating to the presence, generation, manufacture,
production, transportation, importation, use, treatment, refinement, processing,
handling, storage, discharge, release, emission or disposal of any Hazardous
Material as defined below. No Person has ever commenced or threatened to
commence any contribution action or other Proceeding against Seller in
connection with any such actual, alleged, possible or potential Liability; and
no event has occurred, and no condition or circumstance exists, that may
directly or indirectly give rise to, or result in Seller becoming subject to,
any such Liability.
(c) Except as set forth in Schedule 2.11, Seller has never
generated, manufactured, produced, transported, imported, used, treated,
refined, processed, handled, stored, discharged, released or disposed of any
Hazardous Material in violation of applicable environmental laws or regulations.
Except as set forth in the Schedule 2.11, Seller has never permitted any
Hazardous Material to be generated, manufactured, produced, used, treated,
refined, processed, handled, stored, discharged, released or disposed of in
violation of applicable environmental laws or regulations:
(i) on or beneath the surface of any real
property that is, or that has at any time been, owned by, leased to, controlled
by or used by Seller;
(ii) in or into any surface water, groundwater,
soil or air associated with or adjacent to any such real property; or
(iii) in or into any well, pit, pond, lagoon,
impoundment, ditch, landfill, building, structure, facility, improvement,
installation, equipment, pipe, pipeline, vehicle or
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storage container that is or was located on or beneath the surface of any such
real property or that is or has at any time been owned by, leased to, controlled
by or used by Seller.
(d) All property that is owned by, leased to, controlled
by or used by Seller, and all surface water, groundwater, soil and air
associated with or adjacent to such property:
(i) is in clean and healthful condition;
1. except as set forth in
Schedule 2.11 is free of any Hazardous Material and any harmful chemical or
physical conditions; and
2. is free of any
environmental contamination of any nature.
(ii) Each storage tank or other storage container
that is or has been owned by, leased to, controlled by or used by Seller, or
that is located on or beneath the surface of any real property owned by, leased
to, controlled by or used by Seller:
1. is in sound condition; and
has been demonstrated by accepted testing methodologies to be free of any
corrosion or leaks.
(e) For purposes of this Agreement "Hazardous Material"
shall include:
(i) any petroleum, waste oil, crude oil,
asbestos, urea formaldehyde or polychlorinated biphenyl;
(ii) any waste, gas or other substance or
material that is explosive or radioactive;
(iii) any "hazardous substance," "pollutant,"
"contaminant," "hazardous waste," "regulated substance," "hazardous chemical" or
"toxic chemical" as designated, listed or defined (whether expressly or by
reference) in any statute, regulation or other Legal Requirement (including
CERCLA, any other so-called "superfund" or "superlien" law, the Resource
Conservation Recovery Act, the Federal Water Pollution Control Act, the Toxic
Substances Control Act, the Emergency Planning and Community Right-to-Know Act
and the respective regulations promulgated thereunder);
(iv) any other substance or material (regardless
of physical form) or form of energy that is subject to any Legal Requirement
which regulates or establishes standards of conduct in connection with, or which
otherwise relates to, the protection of human health, plant life, animal life,
natural resources, property or the enjoyment of life or property from the
presence in the environment of any solid, liquid, gas, odor, noise or form of
energy; and
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(v) any compound, mixture, solution, product or
other substance or material that contains any substance or material referred to
in clause "(i)," "(ii)", "(iii)" or "(iv)" above.
2.12 COMPLIANCE WITH LAW AND REGULATIONS. The Seller (with respect
to the Assets and Business) is in compliance in all material respects with all
requirements of law, and all requirements of all governmental bodies or agencies
having jurisdiction over any of them, the operation of the Business and the use
of its properties and assets (including the Assets). Without limiting the
foregoing, Seller has paid all monies and obtained all licenses, permits,
authorizations and inspections needed or required for the operation of the
Business, the use of the equipment of the Business and the use of the Premises.
Seller has not received any notice, not heretofore complied with, from any
federal, state or municipal authority or any insurance or inspection body that
any of Seller's properties, facilities, equipment or business procedures or
practices fails to comply with any applicable law, ordinance, regulation or
requirement of any public authority or body.
2.13 LABOR RELATIONS. Seller is not a party to or bound by any
collective bargaining agreement. There has not been any labor union organizing
activity affecting the Business. There is no unfair labor practice complaint
against Seller pending or threatened to the knowledge of Seller.
2.14 INSURANCE. Seller maintains insurance policies providing
general coverage as set forth in Schedule 2.14 attached hereto. All of such
policies are in full force and effect and Seller is not in default of any
provision thereof. Seller has not received notice from any issuer of any such
policies of its intention to cancel, terminate or refuse to renew any policy
issued by it. Seller will continue to maintain such insurance coverage in full
force and effect through the Closing Date.
2.15 LITIGATION. There are no suits, judgments, arbitrations,
administrative charges or other legal proceedings, claims or governmental
investigations pending against, or to Seller's knowledge, threatened against,
the Business or Seller relating to or affecting the Assets nor, to Seller's
knowledge, is there any basis for any such suit, arbitration, administrative
charge or other legal proceeding, claim or governmental investigation.
Furthermore, there are no claims or threatened claims, or disputes of any kind
between any current or former employee of Seller against Seller or any of
Seller's management, and, to Seller's knowledge, there are no disputes between
or among any employees of Seller relating to the Business. Seller has not been
operating under or subject to, or in default with respect to, any order, writ,
injunction or decree of any court or governmental department, commission, board,
agency or instrumentality.
2.16 BROKERS. There is no broker or finder or other person who
would have any valid claim against Buyer or any of the parties to this Agreement
for a commission or brokerage fee or payment in connection with this Agreement
or the transactions contemplated hereby as a result of any agreement of, or
action taken by, the Seller.
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2.17 ACCURACY OF INFORMATION. No statement made by Seller in this
Agreement or in any document to be provided by Seller to Buyer hereunder
including those documents described in Article VI hereof, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading.
Seller is not aware of any occurrence or event or circumstance that would cause
any of the representations and warranties contained herein not to be true and
complete in all material respects on the date hereof.
2.18 INSOLVENCY PROCEEDING. No insolvency proceeding of any kind,
including, without limitation, bankruptcy, receivership or reorganization, and
no arrangement with creditors, affecting Seller or any of its assets or
properties is pending or, to Seller's knowledge, threatened, and Seller has not
made any assignment for the benefit of creditors, nor taken any actions with a
view to, or which would constitute the basis for, the institution of any such
insolvency proceedings, nor will Seller do any such act prior to Closing.
2.19 INTELLECTUAL PROPERTY.
(a) Seller is not a party to any material licenses,
sublicenses and other agreements pursuant to which Seller is authorized to use
any third party technology, trade secret, know-how, process, patent, trademark
or copyright, including software (other than licenses for off-the-shelf software
used in the conduct of the Business) or other intellectual property licensed
from third parties and used in the Business as currently conducted or currently
proposed to be conducted (the "Licensed Intellectual Property"). Seller owns, or
has the right to use, all processes, formulas, methods, schematics, technology,
know-how, computer software programs, data or applications and tangible or
intangible proprietary information or material, patents, trademarks, trade
names, service marks, registered copyrights, applications for and registrations
of such patents, trademarks, trade names, service marks, copyrights,
(collectively, the "Seller Intellectual Property Rights") required for the
conduct of the Business as currently conducted. Seller has not entered into any
licenses and sublicenses, distribution agreements and other agreements pursuant
to which any person is authorized to use any Seller Intellectual Property Rights
or has the right to manufacture, reproduce, market or exploit any product of
Seller (a "Seller Product") or any adaptation, translation or derivative work
based on any Seller Product or any portion thereof.
(b) Schedule 2.19(b) sets forth a complete and accurate
description of all patents or registered trademarks in Seller's Intellectual
Property Rights, including a brief description of the Seller Intellectual
Property Rights, and the names of the jurisdictions covered by the applicable
registration or application.
(c) Seller is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any material license, sublicense or other
agreement relating to the Seller Intellectual Property Rights.
(d) To the best knowledge of Seller, after reasonable
inquiry, the manufacturing, marketing, licensing or sale of the Seller Products
do not infringe any patent, trademark, service ▇▇▇▇, copyright, trade secret or
other proprietary right of any third party.
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Seller (i) has not received notice that it has been sued in any suit, action or
proceeding which involves a claim of infringement of any patent, trademark,
service ▇▇▇▇, copyright, trade secret or other proprietary right of any third
party and (ii) has no knowledge of any claim challenging or questioning the
validity or effectiveness of any license or agreement relating to any Seller
Intellectual Property Rights.
(e) All designs, drawings, specifications, source code,
object code, documentation, flow charts, data and diagrams incorporated,
embodied or reflected in any Product at any stage of its development were
written, developed and created solely and exclusively by (i) employees of Seller
without the assistance of any third party or (ii) third parties who assigned
ownership of their rights with respect thereto to Seller by means of valid and
enforceable agreements. Seller has at all times used commercially reasonable
efforts to protect its trade secrets and has not acted in such a manner as to
cause the loss of such trade secrets by their release into the public domain.
2.20 FINANCIAL STATEMENTS. Buyer has received copies of Seller's
statement of net assets dated as of December 31, 2000 and statement of
operations for the twelve-month period then ended, each as applicable to the
Business (collectively, the "Financial Statements").
(a) The Financial Statements were complete and in
accordance with the books and records of Seller and present fairly in all
material respects the financial position of Seller as of December 31, 2000. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") and applied on a consistent basis. Except and to
the extent reflected or reserved against in the Financial Statements, Seller
does not have, as of the dates of such Financial Statements, any liabilities or
obligations (absolute or contingent) of a nature required by GAAP to be
reflected in the Financial Statements. The reserves, if any, reflected on the
Financial Statements were adequate in light of the contingencies with respect to
which they were made.
(b) From the date of the execution of this Agreement by
both Parties until the Closing Date:
(i) there has not been any damage, destruction
or loss of property of Seller, whether or not covered by insurance, in an
aggregate amount in excess of Ten Thousand Dollars ($10,000);
(ii) no grant or agreement to make any increase
in the compensation payable or to become payable by Seller to its officers or
employees, has been made except those occurring in the ordinary course of
business;
(iii) Seller has not issued any additional equity
or any warrants, rights, options or entered into any commitment relating to the
ownership of Seller except to the extent that such issuance does not materially
affect the Assets or the Business;
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(iv) Seller has not sold, leased, abandoned or
otherwise disposed of any real property or any machinery, equipment or other
operating property other than in the ordinary course of business;
(v) Seller has not sold, assigned, transferred,
licensed or otherwise disposed of any Seller Intellectual Property Rights or
other intangible assets, except in the ordinary course of its business;
(vi) Seller has not been involved in any legal
proceeding or received any threat of litigation which may result in a material
liability to Seller, or affect the Assets or the Business;
(vii) Seller has not engaged in any activity or
entered into any material commitment or transaction (including without
limitation any borrowing or capital expenditure) other than in the ordinary
course of business;
(viii) Seller has not permitted or allowed any of
its material property or assets to be subjected to any mortgage, deed of trust,
pledge, lien, security interest or other encumbrance of any kind, other than any
purchase money security interests incurred in the ordinary course of business;
(ix) Seller has not made any capital expenditure
or commitment for additions to property, plant or equipment individually in
excess of Ten Thousand Dollars ($10,000) or in the aggregate, in excess of Fifty
Thousand Dollars ($50,000);
(x) Seller has not paid, loaned or advanced any
amount to, or sold, transferred or leased any properties or assets to, or
entered into any agreement or arrangement with any of its officers, directors or
members or, to Seller's knowledge, any affiliate or associate of any of the
foregoing, except for normal intercompany cash management transactions;
(xi) Seller has not agreed to take any action
described in this Section 2.20 or outside of its ordinary course of business or
which would constitute a breach of any of the representations contained in this
Agreement
(xii) There has been no material adverse change in
the Business or the Assets.
2.21 CONTRACTS.
(a) Part 2.21 of the Disclosure Schedule
identifies each customer contract and real property lease, without regard to
contract amount, as well as those other contracts or agreements of Seller under
which Seller is obligated to pay, or entitled to receive, $25,000 or more, all
of which are included as a part of the Assets being transferred hereunder
("Contracts"). Seller has made available to the Buyer accurate and complete
copies of all Contracts identified in Part 2.21 of the Disclosure Schedule,
including all amendments thereto.
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(b) Each Contract is valid and in full force and
effect, and is enforceable by Seller in accordance with its terms.
(c) Except as set forth in Part 2.21 of the
Disclosure Schedule:
(i) To the best knowledge of Seller,
after reasonable inquiry, no Person has violated or breached, or declared or
committed any default under, any Contract which is continuing and not cured or
resolved;
(ii) To the best knowledge of Seller,
after reasonable inquiry, no event has occurred, and no circumstance or
condition exists, that might (with or without notice or lapse of time) (A)
result in a violation or breach of any of the provisions of any Contract, (B)
give any Person the right to declare a default or exercise any remedy under any
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Contract, or (D) give any Person the right to cancel,
terminate or modify any Contract;
(iii) Seller has not received any written
notice or communication regarding any actual, alleged, possible or potential
violation or breach of, or default under, any Contract; and
(iv) Seller has not waived any of its
rights under any Contract.
(d) To the best knowledge of Seller, each Person
against which Seller has any rights under any Contract is solvent and is able to
satisfy all of such Person's current and future monetary obligations and other
obligations and Liabilities to Seller.
(e) Except as set forth in Part 2.21 of the
Disclosure Schedule:
(i) Seller has never guaranteed or
otherwise agreed to cause, insure or become liable for, and Seller has never
pledged any of its assets to secure, the performance or payment of any
obligation or other Liability of any other Person;
(ii) Seller has not had any
determination of noncompliance, entered into any consent order or undertaken any
internal investigation relating directly or indirectly to any Government
contract or Government bid;
(iii) Seller has complied in all material
respects with all Legal Requirements with respect to all Government contracts
and Government bids. "Legal Requirement" shall mean any federal, state, local,
municipal, foreign or other law, statute, legislation, constitution, principle
of common law, resolution, ordinance, code, edict, decree, proclamation, treaty,
convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation that is
currently issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
governmental body.
(iv) Seller has not, in obtaining or
performing any Government contract, violated (A) the Truth in Negotiations Act
of 1962, as amended, (B) the Service
14
Contract Act of 1963, as amended, (C) the Contract Disputes Act of 1978, as
amended, (D) the Office of Federal Procurement Policy Act, as amended, (E) the
Federal Acquisition Regulations (the "FAR") or any applicable agency supplement
thereto, (F) the Cost Accounting Standards, (G) the Defense Industrial Security
Manual (DOD 5220.22-M), (H) the Defense Industrial Security Regulation (DOD
5220.22-R) or any related security regulations, or (I) any other applicable
procurement law or regulation or other Legal Requirement;
(v) all facts set forth in or
acknowledged by Seller in any certification, representation or disclosure
statement submitted by Seller with respect to any Government Contract or
Government Bid were current, accurate and complete in all material respects as
of the date of submission;
(vi) there are not and have not been any
irregularities, misstatements or omissions relating to any Government contract
or Government bid that have led to or could reasonably be expected to have a
material adverse affect on the Business or the Assets.
(vii) no payment has been made by Seller
or by any person acting on its behalf to any person (other than to any bona fide
employee or agent (as defined in subpart 3.4 of the FAR) of Seller) which is or
was contingent upon the award of any Government contract or which would
otherwise be in violation of any applicable procurement law or regulation or any
other Legal Requirement;
(viii) has complied with all applicable
regulations and other Legal Requirements and with all applicable contractual
requirements relating to the placement of legends or restrictive markings on
technical data, computer software and other proprietary assets;
(ix) in each case in which Seller has
delivered or otherwise provided any technical data, computer software or Seller
Intellectual Property Rights to any Governmental body in connection with any
Government contract, Seller has marked such technical data, computer software or
Seller Intellectual Property Rights with all markings and legends (including any
"restricted rights" legend and any "government purpose license rights" legend)
necessary (under the FAR or other applicable Legal Requirements) to ensure that
no Governmental body or other person or entity is able to acquire any unlimited
rights with respect to such technical data, computer software or Seller
Intellectual Property Rights;
(x) Seller has not made any disclosure
to any Governmental body pursuant to any voluntary disclosure agreement;
(xi) Neither Seller, nor any director,
officer, agent, employee or other person acting on behalf of Seller has used any
corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds. Neither Seller, nor any director, officer, agent, employee or
other person acting on behalf of Seller has accepted or received any unlawful
contributions, payments, gifts or expenditures.
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(xii) The performance of the Contracts
will not result in any violation of or failure to comply with any Legal
Requirement.
(xiii) Except for the right of government
customers to audit and adjust costs under government contracts, no Person is
renegotiating, or has the right to renegotiate, any amount paid or payable to
Seller under any Contract or any other term or provision of any Contract.
(xiv) The Contracts identified in Part
2.21 of the Disclosure Schedule collectively constitute all of the Contracts
necessary to enable Seller to conduct the Business in the manner in which the
Business is currently being conducted.
2.22 GOVERNMENT FURNISHED EQUIPMENT AND PROPERTY. Part 2.22 of the
Disclosure Schedule provides an accurate and complete breakdown of all
government furnished equipment (GFE) and government furnished property (GFP)
being delivered hereunder in connection with the novation of applicable
contracts.
(a) Buyer shall assume no liability in connection with
GFE and GFP which is not being delivered hereunder.
(b) All GFE and GFP are in good condition and working
order, are fit for their intended use and have been subject only to ordinary
wear and tear.
III.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 STATUS. Buyer is a corporation which is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has the requisite authority to enter into the Agreement and the documents
specified in Article VI hereof and to complete the transactions contemplated by
such documents.
3.2 NO DEFAULTS. Neither the execution, delivery and performance
by Buyer of this Agreement or the documents specified in Article VI hereof, nor
the consummation by Buyer of the transactions contemplated thereby are events
that, themselves or with the giving of notice or the passage of time or both,
will: (a) conflict with the provisions of the certificate of incorporation or
bylaws of Buyer; (b) constitute a violation of, conflict with or result in any
breach of or any default under, result in any termination or modification of, or
cause any acceleration of any obligation under, any material contract, mortgage,
indenture, agreement, lease or other instrument to which Buyer is a party or by
which it is bound, or by which it may be affected; (c) violate any judgment,
decree, order, statute, rule or regulation applicable to Buyer; or (d) result in
the creation or imposition of any lien, charge or encumbrance against the
business or the assets of Buyer.
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3.3 CORPORATE ACTION. All corporate or other actions and
proceedings to be taken by or on the part of Buyer in connection with the
transactions contemplated by this Agreement and the documents specified in
Article VI hereof have been duly and validly taken. This Agreement and the
documents specified in Article VI hereof have been duly and validly authorized,
executed and delivered by Buyer and constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
3.4 BROKERS. No broker, finder or other person would have any
valid claim against any of the parties to this Agreement for a commission or
brokerage fee or payment in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement of or action taken by Buyer.
3.5 LITIGATION. There are no suits, arbitration proceedings,
administrative charges or other legal proceedings, claims or governmental
investigations of any nature pending or, to Buyer's knowledge, threatened
against or affecting it that would affect Buyer's ability to carry out the
transactions contemplated by this Agreement or the documents specified in
Article VI hereof. Buyer is not subject to any material legal proceedings,
claims or governmental investigations.
3.6 APPROVALS AND CONSENTS. No approvals or consents of persons or
entities not a party to this Agreement are legally or contractually required to
be obtained by Buyer in connection with the consummation of the transactions
contemplated by this Agreement, the failure to obtain which would not have a
material effect on Buyer. No permit, license, or authorization of, or filing
with, any governmental regulatory authority or agency is required in connection
with the execution, delivery and performance of this Agreement, or the
consummation of the transactions contemplated hereby.
IV
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated
by this Agreement are, unless otherwise waived by Seller, subject to the
fulfillment of the following conditions:
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each of the representations and warranties of Buyer
contained in Article III of this Agreement shall be, in all material respects,
true and correct as of the Closing Date;
(b) Buyer shall have performed and complied with each and
every covenant and agreement required by this Agreement to be performed or
complied with by it prior to or on the Closing Date; and
(c) Buyer shall furnish Seller with a certificate, dated
the Closing Date and duly executed by an authorized officer of Buyer, to the
effect that the conditions set forth in Sections 4.1 (a) and (b) have been
satisfied.
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4.2 PROCEEDINGS. Neither Seller nor Buyer shall be subject to any
restraining order or injunction restraining or prohibiting the consummation of
the transactions contemplated hereby.
4.3 DELIVERIES. Buyer shall have delivered the documents and funds
specified in Section 6.2.
4.4 SUBLEASES AND LEASES. Seller and Buyer shall have entered into
the Subleases and Leases set forth in Exhibit A attached
hereto.
4.5 TRANSITION SERVICES. Seller and Buyer shall have entered into
the Transition Services Agreement set forth in Exhibit B.
4.6 MASTER SUBCONTRACT AGREEMENT. Seller and Buyer shall have
entered into the Master Subcontract Agreement set forth in Exhibit C.
V.
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are, unless otherwise waived by Buyer, subject to the fulfillment
of the following conditions:
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each of the representations and warranties of Seller
contained in Article II of this Agreement shall be true and correct as of the
Closing Date;
(b) Seller shall have performed and complied with each
and every covenant and agreement required by this Agreement to be performed or
complied with by it prior to or on the Closing Date;
(c) Seller shall furnish Buyer with a certificate, dated the
Closing Date and duly executed by an authorized officer of Seller, to the effect
that the conditions set forth in Sections 5.1 (a) and (b) have been satisfied.
5.2 PROCEEDINGS. Neither Buyer nor Seller shall be subject to any
restraining order or injunction restraining or prohibiting the consummation of
the transactions contemplated hereby.
5.3 DELIVERIES. Seller shall have delivered the documents
specified in Section 6.1.
5.4 EMPLOYEES. Buyer shall have received accepted offers of
employment from at least eighty percent (80%) of Seller's employees which have
been identified by Buyer, at its sole discretion, as "Desired Employees" and
from one hundred percent (100%) of Seller's employees identified by Buyer, at
its sole discretion, as "Key Employees."
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5.5 CONSENTS. Seller shall have received all required third party
consents except those consents that the parties have agreed shall be obtained
after the Closing.
5.6 SUBLEASES AND LEASES. Seller and Buyer shall have entered into
the Subleases and Leases set forth in Exhibit A attached hereto.
5.7 TRANSITION SERVICES. Seller and Buyer shall have entered into
the Transition Services Agreement set forth in Exhibit B.
5.8 MASTER SUBCONTRACT AGREEMENT. Seller and Buyer shall have
entered into the Master Subcontract Agreement set forth in Exhibit C.
5.9 ENVIRONMENTAL INDEMNITY AGREEMENT. Seller and Buyer shall have
entered into the Environmental Indemnity Agreement set forth in Exhibit D.
VI.
CLOSING; ITEMS TO BE DELIVERED AT THE CLOSING
6.1 DELIVERIES BY SELLER At the Closing, Seller shall deliver to
Buyer duly executed by Seller or such other signatory as may be required by the
nature of the document:
(a) Bills of sale, certificates of title, endorsements,
assignments and other good and sufficient instruments of sale, conveyance and
transfer and assignment (the "Transfer Documents"), in form and substance
satisfactory to Buyer sufficient to sell, convey, transfer and assign to Buyer
all right, title and interest of Seller to the Assets and the Assumed
Liabilities;
(b) Any consents required to be obtained by Closing;
(c) Certified copies of resolutions, duly adopted by the
board of directors and/or the shareholders of Seller, which shall be in full
force and effect at the time of the Closing, authorizing the execution, delivery
and performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby;
(d) The certificate referred to in Section 5.1(c),
together with a certificate demonstrating incumbency; and
(c) The Seller Disclosure Schedule.
(d) The Subleases and Lease in the forms attached hereto
as Exhibit A
(e) The Transition Services Agreement in the form
attached hereto as Exhibit B
(f) The Master Subcontract Agreement in the form attached
hereto as Exhibit C.
(g) The Environmental Indemnity Agreement in the form
attached hereto as Exhibit D.
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A legal opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., dated as of the Closing Date, in the
form attached hereto as Exhibit E.
6.2 DELIVERIES BY BUYER. Except as otherwise provided, at the
Closing Buyer shall deliver to Seller:
(a) Transfer Documents in form and substance satisfactory
to Seller sufficient for Buyer to assume all right, title and interest of Seller
to the Assets and the Assumed Liabilities;
(b) Any consents required to be obtained by Closing; and
(d) The certificate referred to in Section 4.1(c),
together with a certificate demonstrating incumbency.
(e) The Subleases and Lease in the forms attached hereto
as Exhibit A
(f) The Transition Services Agreement in the form
attached hereto as Exhibit B.
(g) The Master Subcontract Agreement in the form attached
hereto as Exhibit C.
(h) On April 2, 2001 Buyer shall deliver to Seller funds
in the amount of $9,800,000 plus an Interest Payment, as defined in Section
1.3(a), by wire transfer.
VII.
SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement, or in any Exhibit, Schedule,
certificate, agreement, document or statement delivered pursuant hereto, shall
survive for eighteen (18) months and shall not be affected in any respect by the
Closing, notwithstanding any investigation conducted by any party hereto and any
other information which any party may receive; provided, however, that the
representations set forth in Section 2.7 (Taxes and Fees) and Section 2.11
(Environmental Matters) shall survive until the expiration of the applicable
statute of limitations; and further provided, however, that Seller's and
▇▇▇▇▇▇▇'▇ obligations to indemnify Buyer for Environmental Matters after the
Closing shall be specifically set forth in the Environmental Indemnity
Agreement.
7.2 BASIC PROVISION; LIMITATIONS.
(a) Seller and ▇▇▇▇▇▇▇, jointly and severally, hereby
agree to indemnify, defend and hold harmless Buyer, its directors, officers and
employees and all persons which directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with
Buyer, and their respective successors and assigns (collectively, the "Buyer
Indemnities"), jointly and severally, from, against and in respect of, and to
reimburse the
20
Buyer Indemnities for, the amount of any and all Seller Deficiencies (as defined
in Section 7.3(a)).
(b) Buyer hereby agrees to indemnify, defend and hold
harmless Seller and its directors, officers, employees and all persons which
directly or indirectly, through one or more intermediaries, control, are
controlled by, or are under common control with Seller, and their respective
successors and assigns (collectively, the "Seller Indemnities") from, against
and in respect of, and to reimburse the Seller Indemnities for, the amount of
any and all Buyer Deficiencies (as defined in Section 7.3(b)).
7.3 DEFINITION OF DEFICIENCIES.
(a) As used in this Article VII, the term "Seller
Deficiencies" shall mean any and all losses, damages, liabilities and claims
sustained by the Buyer Indemnities and arising out of, based upon or resulting
from:
(i) Any misrepresentation, breach of warranty,
or any non-fulfillment of any representation, warranty, covenant, obligation or
agreement on the part of Seller contained in or made pursuant to this Agreement;
(ii) Any error contained in any statement,
report, certificate or other document or instrument delivered to the Buyer
Indemnities by Seller pursuant to this Agreement or contained in any Exhibit or
Schedule hereto;
(iii) Any failure by Seller to pay or discharge
any liability relating to the Business or the Assets that is not expressly
assumed by Buyer pursuant to the provisions of this Agreement;
(iv) Any litigation, proceeding or claim by any
third party to the extent relating to the Assets or the Business as operated
prior to the Closing Date regardless of whether or not it is included in the
Seller Disclosure Schedule;
(v) Any severance pay or other payment required
to be paid or any other liability with respect to any independent contractor
retained by Seller or employee of Seller that is not expressly being assumed
hereunder by Buyer;
(vi) Any failure by Seller to discharge any of
the indemnification obligations under the specific Environmental Indemnity
Agreement.
(vii) Any and all acts, suits, proceedings,
demands, assessments and judgments, and all fees, costs and expenses of any
kind, related or incident to any of the foregoing (including, without
limitation, any and all Legal Expenses (as defined in Section 7.6 below));
(viii) Contracts that are completed as of the
Closing but are not technically "closed out" for purposes that include, without
limitation, final rate determination and the issuance of technical reports; and
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(ix) Any Excluded Liability or Excluded Assets.
(b) As used in this Article VII, the term "Buyer
Deficiencies" shall mean any and all losses, damages, liabilities and claims
sustained by the Seller Indemnities and arising out of, based upon or resulting
from:
(i) Any misrepresentation, breach of warranty,
or any non-fulfillment of any representation, warranty, covenant, obligation or
agreement on the part of Buyer contained in or made pursuant to this Agreement;
(ii) Any error contained in any written
statement, report, certificate or other document or instrument delivered to the
Seller Indemnities by Buyer pursuant to this Agreement or contained in any
Exhibit or Schedule hereto;
(iii) Any failure by Buyer to pay or discharge any
liability relating to the Assets or the Business that is expressly assumed by
Buyer pursuant to the provisions of this Agreement;
(iv) Any litigation, proceeding or claim by any
third party to the extent relating to the Assets or Business after the Closing
Date;
(v) Any and all acts, suits, proceedings,
demands, assessments and judgments, and all fees, costs and expenses of any
kind, related or incident to any of the foregoing (including, without
limitation, any and all Legal Expenses (as defined below)).
7.4 PROCEDURES FOR ESTABLISHMENT OF DEFICIENCIES.
(a) In the event that any claim shall be asserted by any
third party against the Buyer Indemnities or Seller Indemnitees (Buyer
Indemnitees or Seller Indemnitees, as the case may be, hereinafter, the
"Indemnitees"), which, if sustained, would result in a Buyer Deficiency or a
Seller Deficiency (collectively with the Buyer Deficiencies, the
"Deficiencies"), then the Indemnitees, within a reasonable time after learning
of such claim, shall notify the party or parties required to indemnify the
Indemnities under the terms of Section 7.2(a) or 7.2(b), as applicable (the
"Indemnifying Party") of such claim, and shall extend to the Indemnifying Party
a reasonable opportunity to defend against such claim, at the Indemnifying
Party's sole expense and through legal counsel acceptable to the Indemnitees,
provided that the Indemnifying Party proceeds in good faith, expeditiously and
diligently. The Indemnitees shall, at their option and expense, with respect to
claims not solely for money damages, have the right to participate in any
defense undertaken by the Indemnifying Party with legal counsel of their own
selection. No settlement or compromise of any claim which may result in a
Deficiency may be made by the Indemnifying Party without the prior written
consent of the Indemnitees unless: (A) prior to such settlement or compromise
the Indemnifying Party acknowledges in writing its obligation to pay in full the
amount of the settlement or compromise and all associated expenses; and (B) the
Indemnitees are furnished with security reasonably satisfactory to the
Indemnitees that the Indemnifying Party will in fact pay such amount and
expenses. No settlement or compromise of any claim that
22
acknowledges any liability for a violation of law, or purports to impose any
non-monetary obligation upon a party may be entered into without such party's
consent.
(b) With respect to claims that are not third party
claims, in the event that the Indemnitees assert the existence of any Deficiency
against the Indemnifying Party, they shall give written notice to the
Indemnifying Party of the nature and amount of the Deficiency asserted. If,
within fifteen calendar days after the giving of the written notice by the
Indemnitees the Indemnifying Party does not provide written notice to the
Indemnitees that the Indemnifying Party intends to contest the assertion by the
Indemnitees (such notice by the Indemnifying Party being hereinafter referred to
as the "Contest Notice"), such assertion of the Indemnitees shall be deemed
accepted and the amount of the Deficiency shall be deemed established. In the
event, however, that a Contest Notice is given to the Indemnitees within said
fifteen calendar day period, then the contested assertion of a Deficiency shall
be settled by arbitration to be held in San Diego, California by an arbitrator
chosen through and in accordance with the Commercial Rules of the American
Arbitration Association or its successor body. The determination of the
arbitrator shall be delivered in writing to the Indemnifying Party and the
Indemnitees and shall be final, binding and conclusive upon all of the parties
hereto, and the amount of the Deficiency, if any, determined to exist, shall be
deemed established.
(c) The Indemnitees and the Indemnifying Party may agree
in writing, at any time, as to the existence and amount of a Deficiency, and,
upon the execution of such agreement such Deficiency shall be deemed
established.
7.5 PAYMENT OF DEFICIENCIES. The Indemnifying Parties hereby agree
to pay the amount of established Deficiencies within fifteen calendar days after
the establishment thereof. The amount of established Deficiencies shall be paid
in cash. Any amounts not paid by the Indemnifying Party when due under this
Section shall bear interest from and after the due date thereof until the date
paid at a rate equal to the lesser of: (a) ten percent (10%) per annum; or (b)
the highest legal rate permitted by applicable law. At the option of the
Indemnitees, the Indemnitees may offset any Deficiency or any portion thereof
that has not been paid by the Indemnifying Party to the Indemnitees against any
obligation the Indemnitees, or any of them, may have to the Indemnifying Party,
including, without limitation, the Holdback.
7.6 LEGAL EXPENSES. As used in this Article VII, the term "Legal
Expenses" shall mean any and all reasonable fees (whether of attorneys,
accountants or other professionals), costs and expenses of any kind reasonably
incurred by any person identified herein and its counsel in defending against,
or providing evidence, producing documents or taking other action with respect
to any asserted claim.
7.7 Limitation. Seller and ▇▇▇▇▇▇▇ shall have no liability to
Buyer under Section 7.2(a) above for Seller's Deficiencies until the aggregate
amount for which Seller and ▇▇▇▇▇▇▇ are liable, jointly and severally, under
Section 7.2(a) exceeds $100,000, and then Seller's and ▇▇▇▇▇▇▇'▇ liability shall
be only for the excess of such Seller Deficiency over said $100,000 sum, and
Seller's and ▇▇▇▇▇▇▇'▇ aggregate liability under Section 7.2(a) shall be limited
to and shall not exceed $11,500,000.00, as adjusted by any Closing Adjustment.
The limitations in this
23
Section 7.7 shall not apply to Seller's liability for environmental matters as
set forth in the Environmental Indemnity Agreement.
VIII.
POST-CLOSING COVENANTS OF SELLER
8.1 CONSENTS Nothing contained in this Agreement shall be
construed as an assignment or an attempted assignment of any contract which is
by law non-assignable without the consent of the other party or parties thereto,
unless such consent shall be given. Notwithstanding any other Section of this
Agreement, to the extent that any additional consent or approval of any third
person is required after Closing (i) in order to assign any of the Assets from
Seller to Buyer or (ii) by reason of the transactions provided for in this
Agreement, Seller will use its best efforts to obtain such consents and
approvals.
8.2 PRESERVATION OF RECORDS Seller covenants that it will preserve
and make available (including the right to inspect and copy) to Buyer, its
attorneys and accountants, for three years after the Closing Date, or longer if
required under Federal Acquisition Regulations, and during normal business
hours, such of the books, records, files, correspondence, memoranda and other
documents with respect to the Assets pursuant to this Agreement as Buyer may
reasonably require in connection with a legitimate purpose.
8.3 FURTHER ASSURANCES Seller agrees to remit to Buyer within 10
days of receipt any payments received by Seller after the Closing Date that
relate to the Business and belong to Buyer. In addition, from time to time, on
and after the Closing Date, Seller hereto will execute all such instruments and
take all such actions as any other party shall reasonably request, without
payment of further consideration, to carry out and effectuate the intent and
purpose hereof and all transactions and things contemplated by this Agreement,
including without limitation the execution and delivery of instruments, and any
and all actions which may reasonably be necessary or desirable to complete the
transactions contemplated hereby. Seller shall, at no material cost to Seller,
cooperate fully with Buyer and with its counsel and accountants in connection
with any steps required to be taken as part of their respective obligations
under this Agreement.
IX
POST-CLOSING COVENANTS OF BUYER
9.1 FURTHER ASSURANCES. Buyer agrees to remit to Seller within 10
days of receipt any payments received by Buyer after the Closing Date that do
not relate to the Business and belong to Seller. In addition, from time to time,
on and after the Closing Date, Buyer will execute all such instruments and take
all such actions as Seller shall reasonably request, without payment of further
consideration, to carry out and effectuate the intent and purpose hereof and all
transactions and things contemplated by this Agreement, including without
limitation the execution and delivery of instruments, and any and all actions
which may reasonably be necessary or desirable to complete the transactions
contemplated hereby. The parties shall
24
cooperate fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken as part of their
respective obligations under this Agreement.
9.2 PRESERVATION OF RECORDS. Buyer acknowledges that Seller is in
the process of selling its remaining business and assets not sold hereunder to
Science Applications International Corporation (SAIC) and that books and records
transferred hereunder may contain information required by SAIC or Seller.
Likewise, books and records transferred to SAIC may contain information required
by Buyer. Buyer covenants to preserve and make available to Seller and SAIC and
their respective agents, for three years after the Closing Date, or longer if
required under Federal Acquisition Regulations, such of the books and records of
Buyer acquired hereunder as relate to the Assets and as Seller or SAIC may
reasonable require in connection with a legitimate purpose. Seller shall cause
SAIC to assume its covenant in Section 8.2 above with respect to books and
records transferred to SAIC.
X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date as follows:
(a) By written agreement of Seller and Buyer, in
which each party shall bear its own costs with respect to this Agreement and the
transactions contemplated thereby.
(b) By the Board of Directors of Buyer if (i) at
any time Buyer has reasonable grounds to believe, and does believe, that there
has been a material misrepresentation, breach of warranty or breach of covenant
on the part of Seller in any of the representations, warranties or covenants
under this Agreement which breach is not curable, or, if curable, is not cured
within 30 days after written notice of such breach is given to Seller; or (ii)
any of the conditions set forth in Article V hereof have not been met in all
material respects by the Closing Date.
(c) By the Board of Directors of Seller if (i)
at any ▇▇▇▇ ▇▇▇▇▇▇ has reasonable grounds to believe, and does believe, that
there has been a material misrepresentation, breach of warranty or breach of
covenant on the part of Buyer in any of the representations, warranties or
covenants under this Agreement which breach is not curable, or, if curable, is
not cured within 30 days after written notice of such breach is given to Buyer;
or (ii) any of the conditions set forth in Article IV hereof have not been met
in all material respects by the Closing Date.
(d) By Buyer if Seller has not met the condition
set forth in Section 6.1(k) above.
(e) In the event that this Agreement shall be
terminated pursuant to Section 10.1, all further obligations of the parties
hereto under this Agreement shall terminate
25
without further liability or obligation of either party to another; provided,
however, the parties shall remain obligated for any breach of this Agreement.
XI.
MISCELLANEOUS
11.1 EXPENSES. Each party hereto shall bear all of its expenses
incurred in connection with the transactions contemplated by this Agreement,
including without limitation, accounting, financial advisory and legal fees
incurred in connection herewith; provided, however, that Buyer shall bear any
sales, transfer or use taxes arising from the transfer of the Assets to Buyer.
11.2 REMEDIES CUMULATIVE. The remedies provided in this Agreement
shall be cumulative and shall not preclude the assertion by any party hereto of
any other rights or the seeking of any other remedies against the other party
hereto.
11.3 PUBLIC ANNOUNCEMENTS. No party shall, without the prior
written approval of the other party hereto, make any press release or other
public announcement concerning the existence of this Agreement or the
transactions contemplated by this Agreement, except as and to the extent that
such party shall be so obligated by law, in which case such party shall give
advance notice to the other party and the parties shall use their best efforts
to cause a mutually agreeable release or announcement to be issued. Except as
and to the extent that a party is obligated by law, the timing and content of
any announcements, press releases or public statements concerning this Agreement
shall be by the agreement of Seller and Buyer.
11.4 RISK OF LOSS. The risk of loss, damage or destruction to any
of the Assets to be transferred to Buyer hereunder from fire or other casualty
or cause shall be borne by Seller at all times up to the time of the Closing,
and it shall be the responsibility of Seller to repair or cause to be repaired
and to restore the property to its condition prior to any such loss, damage, or
destruction. In the event of any such loss, damage, or destruction, the proceeds
of any claim for any loss, payable under any insurance policy with respect
thereto, shall be used to repair, replace, or restore any such property to its
former condition, subject to the conditions stated below. It is expressly
understood and agreed that, in the event of any loss or damage to any of the
Assets to be transferred hereunder from fire, casualty or other causes prior to
the close of business on the day before the Closing Date, Seller shall notify
Buyer of same in writing immediately. Such notice shall specify with
particularity the loss or damage incurred, the cause thereof (if known or
reasonably ascertainable), and the insurance coverage. In the event that the
property is not completely repaired, replaced or restored on or before the
Closing Date, Buyer at its sole option may elect to: (a) postpone the Closing
until such time as the property has been completely repaired, replaced or
restored to the reasonable satisfaction of Buyer (b) consummate the Closing and
accept the property in its then condition, in which event Seller shall pay to
Buyer all proceeds of insurance and assign to Buyer the right to any unpaid
proceeds and effect a dollar-for-dollar adjustment in the consideration provided
in Section 1.3 for any uninsured losses; or (c) terminate this Agreement. In the
event of loss, damage or destruction of a substantial portion of the Assets,
Seller may terminate this Agreement.
26
11.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and their respective
representatives, successors and assigns. Notwithstanding anything contained
herein, Buyer may assign any and all rights and obligations hereunder to any
entity controlled by Buyer.
11.6 AMENDMENTS; WAIVERS. The terms, covenants, representations,
warranties and conditions of this Agreement may be changed, amended, modified,
waived, discharged or terminated only by a written instrument executed by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner affect
the right of such party at a later date to enforce the same. No waiver by any
party of any condition or the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
11.7 NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
(which shall include notice by telex or facsimile transmission) and shall be
deemed to have been duly made and received when personally served, or when
delivered by Federal Express or a similar overnight courier service, expenses
prepaid, or, if sent by facsimile, addressed as set forth below:
If to Seller then to:
▇▇▇▇▇▇▇ Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, then to:
Titan Systems Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may alter the address to which communications are to be sent
by giving notice of such change of address in conformity with the provisions of
this Section 12.7 providing for the giving of notice.
27
11.8 CAPTIONS. The captions of Articles and Sections of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any of the provisions of this Agreement.
11.9 GOVERNING LAW. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement shall be governed by
and construed in accordance with the laws of the State of California without
giving effect to principles of conflicts of laws.
11.10 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto and the other documents delivered hereunder constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and supersede all prior agreements, understandings,
inducements or conditions, express or implied, oral or written, relating to the
subject matter hereof. The express terms hereof control and supersede any course
of performance and/or usage of trade inconsistent with any of the terms hereof.
11.11 EXECUTION; COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by telecopier, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
11.12 CONSTRUCTION. The parties acknowledge that each party and
its counsel has reviewed and revised this Agreement and that the rule of
construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement or any amendments or schedules hereto, or any documents executed in
connection herewith.
11.13 MULTIPLE COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11.14 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the Parties hereto, their respective Affiliates and their
successors and assigns permitted under this Agreement, and no provisions of
this Agreement (other than the indemnified Parties described in Sections
7.2(a) and (b)) shall be deemed to confer upon any other persons any remedy,
claim, liability, reimbursement, cause of action or other right.
11.15 NEGOTIATION OF DISPUTES. Except as provided in Section 1.6
hereof, if a dispute arises between the parties relating to the
interpretation or performance of this Agreement or any other agreement or
instrument that is an exhibit to this Agreement or the grounds for the
termination thereof, and the parties cannot resolve the dispute within thirty
days of a written request by either party to the other, such dispute shall be
referred to the Chief Executive Officer of Buyer, or his designee, and the
Chief Executive Officer of Seller, or his designee. Such persons shall hold a
meeting to attempt in good faith to negotiate a resolution of the dispute
prior to pursuing other available remedies. If within 10 business days after
such meeting, the Chief
28
Executive Officer of Buyer and the Chief Executive Officer of Seller, or
their respective designees, have not succeeded in negotiating a resolution of
the dispute, such dispute shall be submitted to arbitration as set forth in
Section 11.16 below.
11.16 ARBITRATION. Except as provided in Section 1.6 hereof, or
Section 8(e) of the Environmental Indemnity, disputes that have not been
successfully resolved pursuant to Section 11.15 above shall be submitted to
final and binding arbitration under the then current commercial rules and
regulations of the American Arbitration Association ("AAA") relating to
voluntary arbitration in San Diego, California. The arbitration shall be
conducted by three arbitrators, one selected by each party to the arbitration
and one selected by arbitrators appointed by the parties. If the arbitrators
cannot agree on a third arbitrator, the third arbitrator shall be selected in
accordance with the AAA rules. If a party fails to designate an arbitrator
within the time limits set by the AAA rules, the arbitrator selected by the
other party shall be the sole arbitrator. All arbitrators must be knowledgeable
in the subject matter at issue in the dispute. Each party shall initially bear
its own costs and legal fees associated with such arbitration and the parties
shall split the cost of the arbitrators. The prevailing party in any such
arbitration shall be entitled to recover from the other party the reasonable
attorneys' fees, costs and expenses incurred by such prevailing party in
connection with such arbitration. The decision of the arbitrator(s) shall be
final and may be sued on or enforced by the party in whose favor it runs in any
court of competent jurisdiction at the option of the successful party. The
rights and obligations of the parties to arbitrate any dispute relating to the
interpretation or performance of this Agreement or the grounds for the
termination thereof, shall survive the expiration or termination of this
Agreement for any reason. The arbitrator(s) shall be empowered to award specific
performance, injunctive relief and other equitable remedies as well as damages,
but shall not be empowered to award punitive or exemplary damages or award any
damages in excess of any limitations set forth in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY OMITTED]
29
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized signatories, all as of the day and year first
above written.
BUYER: TITAN SYSTEMS CORPORATION
By:
---------------------------------
SELLER: ▇▇▇▇▇▇▇ TECHNOLOGIES SYSTEMS
DIVISION, INC.
By:
---------------------------------
▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇ TECHNOLOGIES, INC.
By:
-------------------------------------
