ASSET PURCHASE AGREEMENT
dated as of February 20, 1998
by and among
Telos Corporation,
a California corporation
("Seller"),
Telos Corporation,
a Maryland corporation
("Shareholder")
and
NYMA, INC.,
a Maryland corporation
("Purchaser")
Covering the Purchase of Substantially
All of the Assets of
TELOS INFORMATION SYSTEMS,
a division of Telos Corporation
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered as
of the 20th day of February, 1998, by and among TELOS CORPORATION, a Maryland
corporation ("Shareholder"), TELOS CORPORATION, a California corporation
("Seller") and NYMA, INC., a Maryland corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, Seller is the owner of all right, title and interest in and to
the assets described on Schedule 2.1 hereto (the "Assets"), with such assets
being substantially all of the assets currently used in the Telos Information
Systems division operated by the Seller at the Jet Propulsion Laboratory and
certain other locations, (the "Business") as more particularly described in
paragraph 1.1 hereof, and with its principal executive offices at Seller's
office in Pasadena, California;
WHEREAS, Shareholder is the owner of all of the outstanding capital
stock of Seller and reasonably expects to benefit from the transactions
contemplated by this Agreement;
WHEREAS, Seller desires to sell the Assets to Purchaser and Purchaser
desires to acquire the Assets from Seller, all pursuant to this Agreement as
hereinafter provided; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement, and to set forth certain additional
agreements related to the transactions contemplated hereby;
Agreement
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:
1.1. Business shall mean the business of Telos Information Systems
Division, as operated as of the date hereof, and more particularly described
as the provision of support effort personnel as requested by customers under
the Contracts (as defined in Section 4.8 hereof) to work under such
customers' direction on specific technical work assignments at
customer-controlled facilities or such other locations as may be designated
by such customers. This
definition does not include the provision of labor in support of Seller or
Shareholder product or solution sales.
1.2. Governmental Authority shall mean any and all foreign,
federal, state or local governments, governmental institutions, public
authorities and governmental entities and courts.
1.3. Governmental Requirement shall mean any and all laws
(including, but. not limited to, applicable common law principles), statutes,
ordinances, codes, rules, regulations, orders, judgments, writs, injunctions,
decrees, decisions or pronouncements, promulgated, issued, passed or set
forth by any Governmental Authority.
1.4. Net Assets of the Seller are as defined in Section 3.2 hereof.
1.5. Person shall mean any natural person, any Governmental
Authority and any entity the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not
limited to, corporations, partnerships, joint ventures, joint stock
companies, trusts, estates, companies and associations, whether organized for
profit or otherwise.
1.6. Taxes. "Tax" and "Taxes" shall mean any and all income,
excise, franchise or other taxes and all other charges or fees imposed or
collected by any Governmental Authority or pursuant to any Governmental
Requirement, and shall also include any and all penalties, interest,
deficiencies, assessments and other charges with respect thereto.
1.7. Affiliate of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
1.8. Control and all derivations thereof shall mean the possession,
direct or indirect, of either (i) the ownership of or ability to direct the
voting of, as the case may be, fifty-one percent (51%) or more of the equity
interests, value or voting power in any Person or (ii) the power to direct or
cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
1.9. Best Knowledge of Seller means actual knowledge of either
Seller or Shareholder after reasonable inquiry and investigation. For
purposes hereof, Seller and Shareholder shall be deemed to have knowledge of
a matter if any of the following persons has knowledge of it: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇.
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE.
2.1. Purchase and Sale. Seller hereby agrees to sell, assign,
transfer and deliver to Purchaser all right, title and interest in and to the
Assets (as more fully described (either directly or by reference) on Schedule
2.1 hereto), free and clear of any liens or encumbrances of any nature
whatsoever (except for any liens, encumbrances or obligations, if any,
expressly
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assumed by Purchaser hereunder). The parties agree that the sale of the
Assets is intended to include the "good will" (such as reputation, customer
contacts, etc.) associated with the Business. Purchaser hereby agrees to
purchase from Seller the Assets in consideration for the Purchase Price (as
hereinafter defined) payable as set forth in Section 3 below.
2.2. Delivery of Assets and Transfer Documents. At the Closing
(hereinafter defined in Section 2.3), Seller shall have taken all steps
necessary to put Purchaser in possession of the Assets, free and clear of any
liens or encumbrances of any nature whatsoever (except for liens,
encumbrances or obligations, if any, expressly assumed by Purchaser
hereunder), and have delivered to Purchaser (i) a duly executed warranty ▇▇▇▇
of sale covering the Assets, in a form and containing terms and provisions
reasonably satisfactory to Purchaser, (ii) duly executed assignments for all
accounts receivable, tradenames and similar intangible property included in
the Assets, in form and substance acceptable to Purchaser and in recordable
form as appropriate, and (iii) such other duly executed transfer and release
documents which Purchaser has reasonably requested to evidence the transfer
of the Assets to Purchaser free and clear of any liens or encumbrances of any
nature whatsoever (except for liens, encumbrances or obligations, if any,
expressly assumed by Purchaser hereunder).
2.3. Closing; Closing Date. Subject to the terms and conditions
herein contained, the consummation of the transactions referred to above
shall take place (the "Closing") at the offices of Seller and Shareholder at
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, commencing at 9:00 a.m. local time on
February 27, 1998, or such other date as the parties may mutually determine
(the "Closing Date").
3. PURCHASE PRICE.
3.1. Price and Payment. The aggregate consideration for the Assets
and the Non-Competi_tion Agreements (set forth in Section 11 below) shall be
$14,940,000, subject to adjustment as provided in Section 3.2 below, payable
by wire transfer or delivery of other immediately available funds on the
Closing Date (the "Purchase Price").
3.2. Purchase Price Adjustment.
(a) The Purchase Price shall be increased or decreased on a
dollar-for-dollar basis by the amount by which the Net Assets of the Seller
(determined in accordance with this Section 3.2) is more or less than
$3,300,000.00 on the Closing Date; provided, however, that in no event shall
the Purchase Price paid for the Assets (including the Non-Competition
Agreements) and as so adjusted exceed $14,999,999.
(b) The "Net Assets of the Seller" shall mean the sum of all
Assets less all liabilities of the Seller assumed by Purchaser as of Closing,
determined in accordance with past practices of Seller as evidenced by its
financial statements previously provided to Purchaser (which past practices
are substantially in accordance with generally accepted accounting
principles, consistently applied ("GAAP"), with such variations therefrom as
have been previously disclosed to Purchaser).
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(c) The Net Assets of the Seller shall be initially
determined at the time of Closing by an estimate of Seller in good faith,
based on the January 31, 1998 balance sheet of the Business, which estimate,
together with Seller's support therefor in reasonable detail shall have been
provided to Purchaser at least one business day prior to the Closing. Any
adjustment as a result thereof shall reduce or increase the Purchase Price
payable pursuant to Section 3.1 above, to the extent set forth in Section
3.2, and subject to the final determination of such Net Assets as set forth
below in this paragraph; provided, however, that any increase in the Purchase
Price payable at Closing shall be initially limited to 75% of such increase
(with the full amount of such increase to be deferred until such time as the
PAF Determination (as defined below) or the Final Computation (as defined
below) has been made). Within thirty (30) days following the Closing Date,
Seller shall provide Purchaser with its final determination of the Net Assets
of the Seller (the "Seller Determination"). Within thirty (30) days after
delivery to Purchaser of the Seller Determination, Purchaser shall notify
Seller if it agrees with such Seller Determination. If Purchaser engages the
services of a public accounting firm in evaluating the Seller Determination,
the cost thereof shall be borne by Purchaser. If Purchaser agrees with the
Seller Determination, it shall become the "Final Computation" of the Net
Assets for purposes of this Agreement. In the event the Purchaser notifies
Seller (the "Purchaser Notice"), within such thirty-day period that Purchaser
does not agree with such Seller Determination, Purchaser and Seller shall
cooperate in good faith to determine a mutually agreeable Net Asset
determination. In the event Purchaser and Seller agree, the Net Asset
Determination upon which they agree shall become the Final Computation of the
Net Assets for purposes of this Agreement. In the event Purchaser and Seller
fail to agree upon the final Net Asset determination within such thirty-day
period, Purchaser shall engage a "Big Six" public accounting firm (the "PAF")
reasonably acceptable to Seller for the purpose of preparing a definitive
determination of the Net Assets, in accordance with the terms of this
Agreement (the cost of which shall determination shall be borne equally by
Seller and Purchaser). The determination of such PAF (the "PAF
Determination") shall be submitted in writing to the Seller and Purchaser no
later than thirty (30) days after the engagement of the PAF, which PAF
Determination shall be final, conclusive and binding on the parties
(d) Any required payment by the Seller or the Purchaser by
virtue of a Net Assets Adjustment (net of any preliminary adjustment made at
Closing) shall be made by the Seller or the Purchaser, as the case may be,
within ten (10) days of the receipt of the PAF Determination or the Final
Computation, as applicable.
3.3. Assumed Obligations. Purchaser hereby agrees to assume the
obligations of Seller under all contracts and agreements transferred by
Seller to Purchaser under this Agreement that are listed and described on
Schedule 3.3 hereto and that arise after the Closing Date (the "Assumed
Liabilities and Obligations"); provided that Purchaser specifically does not
assume any liabilities of Seller under such contracts or agreements with
respect to any breaches of such contracts or agreements occurring on or
before the Closing Date or any damages to third parties resulting from acts,
events or omissions occurring on or before the Closing Date.
3.4. Excluded Liabilities and Obligations.
5
(a) Except as expressly set forth in Section 3.3 above, the
Purchaser shall not assume and shall not be liable or responsible for any
debt, obligation or liability of the Business, the Seller, Shareholder or any
other Affiliate of the Seller, or any claim against any of the foregoing
parties, of any kind, whether known or unknown, contingent, absolute or
otherwise.
(b) Except for the Assumed Liabilities and Obligations
expressly provided for in Section 3.3 hereof, the Seller and Shareholder
shall jointly and severally forever defend, indemnify and hold harmless the
Purchaser from and against any and all liabilities, obligations, losses,
claims, damages (including incidentals and consequential damages), costs and
expenses (including court costs and reasonable attorney's fees) related to or
arising from the Business on or prior to the Closing Date.
3.5 Transfer Taxes. Purchaser and Seller acknowledge and agree
that the consideration (including, without limitation, the Purchase Price and
any adjustments thereto) includes and is inclusive of any and all sales, use,
transfer or other similar tax imposed as a result of the consummation of the
transaction contemplated by this Agreement, and Seller and Shareholder,
hereby agree to pay and discharge, and to indemnify Purchaser against, and
protect, save and hold Purchaser harmless from, any liability, obligation,
claim, assessment or deficiency (whether or not ultimately successful) for
any and all sales, use, transfer or other similar taxes (and any and all
interest, penalties, additions to tax and fines thereon or related thereto)
resulting or arising from or incurred in connection with the consummation of
the transactions contemplated by this Agreement
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller and Shareholder
hereby jointly and severally represent and warrant to Purchaser as follows:
4.1. Organization. Shareholder is a corporation duly organized,
validly existing and in good standing under the laws of the state of
Maryland, and is duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in the
manner as now conducted except where any such failure would not reasonably be
expected to have a material adverse effect on the financial condition,
operating results, assets, or business prospects of the Business. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the state of California, and is duly authorized, qualified and
licensed under all applicable Governmental Requirements to carry on its
business in the places and in the manner as now conducted except where any
such failure would not reasonably be expected to have a material adverse
effect on the financial condition, operating results, assets, or business
prospects of the Business. Seller is qualified to do business in every
jurisdiction in which the failure to so qualify might reasonably be expected
to have a material adverse effect on the financial condition, operating
results, assets, or business prospects of the Business.
4.2. Ownership. The Seller owns all of the Assets constituting and
necessary for the operation of the Business and will transfer the Assets at
Closing, free and clear of any liens, security interests, rights or
encumbrances of any kind whatsoever. The operation of the Business as
currently conducted is not dependent upon any rights or assets not included
in the
6
Assets being transferred to Purchaser hereunder, or on any employees other
than the Business Employees. Except as listed on Schedule 4.2 hereto, there
are no options, rights or other grants currently outstanding for the
acquisition or purchase of any of the Assets. All of the outstanding capital
stock of the Seller is owned by the Shareholder and Shareholder has the full
corporate power and authority to enter into this Agreement and perform its
obligations hereunder, and no further consents are required with respect
thereto.
4.3. Financial Statements. Seller has delivered to Purchaser
copies of the following financial statements for the Business, all of which
financial statements are included in Schedule 4.3(A) hereto.
(a) Unaudited Balance Sheet of the Business (the "Reference
Balance Sheet") as of December 31, 1997 (the "Balance Sheet Date") and
Internal Operations Summary of the Business for the one-month period ended on
the Balance Sheet Date.
(b) Internal Operations Summary of the Business for Seller's
fiscal years ended December 31, 1995 and 1996; and
(c) Internal Operations Summary of the Business as of and for
all months of 1997.
All financial statements supplied to Purchaser by Seller, whether or not
included in Schedule 4.3(A) hereto, are true and accurate in all respects and
have been prepared substantially in accordance with GAAP, except to the
extent previously disclosed to Purchaser, and are consistent with the
Seller's past practices, and present fairly the financial condition of the
Business as of the dates and for the periods indicated thereon. The
Reference Balance Sheet reflects, as of the Balance Sheet Date, all
liabilities, debts and obligations of any nature of Seller related to the
Business and the Assets, whether accrued, absolute, contingent or otherwise,
and whether due, or to become due, including, but not limited to,
liabilities, debts or obligations on account of taxes or other governmental
charges, or penalties, interest or fines thereon or in respect thereof, to
the extent such items are required to be reflected on such balance sheet,
which has been prepared substantially in accordance with GAAP (except to the
extent disclosed to Purchaser prior to the date hereof) and consistent with
Seller's past practices. Any liabilities, debts and obligations of any
nature of Seller related to the Business that would be required under
Seller's past practices to be reflected on notes to Seller's financial
statements but not on Seller's balance sheet are accurately reflected in
Schedule 4.3(A).
4.4. Events Since November 30, 1997. Except as set forth on
Schedule 4.4 hereto, since November 30, 1997, there has not been any material
change to:
(a) any change in the condition (financial or otherwise) or
in the properties, assets, liabilities, business or prospects of the Assets
or the Business, except normal and usual changes in the ordinary course of
business, none of which has been adverse and all of which in the aggregate
have not been adverse;
7
(b) any labor trouble, strike or any other occurrence, event
or condition affecting the employees of the Business that adversely affects
the condition (financial or otherwise) of the Assets or the Business.
(c) any breach or default by Seller or Shareholder or, to the
Best Knowledge of Seller, by any other party, under any agreement or
obligation included in the Assets or by which any of the Assets are bound;
(d) any damage, destruction or loss (whether or not covered
by insurance) adversely affecting the Assets or the Business;
(e) any change in the types, nature, composition or quality
of the services of the Business, any adverse change in the contributions of
any of the service lines of the Business to the revenues or net income of
such Business, or any adverse change in the sales, revenue or net income of
the Business;
(f) any transaction related to or affecting the Assets or the
Business other than transactions in the ordinary course of business of
Seller;
(g) any increase in the rate of compensation payable or to
become payable to, any bonus, incentive compensation, service award or other
like benefit granted, made or accrued, contingently or otherwise, for or to
the credit of, any director, officer or other employee, except for any
increases in the normal course of business;
(h) any addition to or modification of the employee benefit
plans, arrangements or practices affecting the officers, directors, or
employees of Seller other than (A) contributions made for 1997 in accordance
with the normal practices of the Seller, or (B) the extension of coverage to
such persons who became eligible after the most recent fiscal year end;
(i) modification, cancellation or termination of any material
contract or entry into any contract which is not in the ordinary course of
the Business; or
(j) any other occurrence, event or condition that has
adversely affected (or can reasonably be expected to adversely affect) the
Assets or the Business.
4.5. Competing Interests. Except as set forth on Schedule 4.5
hereto, neither Seller or Shareholder to the Best Knowledge of Seller:
(a) owns, directly or indirectly, any equity interests in, or
is a director, officer or employee of, or consultant to, any entity which is
a competitor, supplier or customer of the Business, (except for ownership, if
any, of less than one percent (1%) by value of the outstanding capital stock
of any corporation the capital stock of which is traded on a nationally
recognized securities exchange); or
(b) owns, directly or indirectly, in whole or in part, any
property, asset or right which is associated with the Assets or the Business,
or which Seller is presently
8
operating or using in connection with or the use of which is necessary for or
material to the operation of the Business.
4.6. Notes and Accounts Receivable. All notes and accounts
receivable of the Seller which are part of the Assets are reflected properly
on Seller's books and records, are valid receivables subject to no setoffs or
counterclaims, are presently current and collectible, and will be collected
in accordance with their terms at their recorded amounts, subject only to a
reserve for bad debts set forth on the face of the Reference Balance Sheet as
adjusted for the passage of time through the date of Closing in accordance
with the past customs and practices of the Business, as previously disclosed
to Purchaser.
4.7. Employee Matters. Schedule 4.7(A) hereto, sets forth a true
and complete list of the names of each corporate or administrative
(non-temporary) employee of Seller utilized in connection with the operation
of the Business (the "Business Employees"), together with the following
information as to each such Business Employee: (i) current annual
compensation; (ii) date of hire; (iii) accrued vacation and sick leave; (iv)
balance under 401(k) plan, if any, and statement as to vesting status under
such plan; and (v) a detailed description of any outstanding employee loans
made under the 401(k) plan, including borrowers, loan amounts, maturity
dates, interest rates, and payment histories. Except as specifically
described on Schedule 4.7(B) hereto, neither Seller nor Shareholder has any
employee benefit plans (including, but not limited to, pension plans and
health or welfare plans), arrangements or understandings, whether formal or
informal relating to any employees of the Business. Purchaser will have no
liability with respect to any such plans as a result of the transactions
contemplated by this Agreement. Seller does not now and has never
contributed to a "multi-employer plan" as defined in section 4001(a)(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Seller is not a party to any collective bargaining or other union agreements.
Seller has not, within the last five (5) years, had or been threatened with
any union activities, work stoppages or other labor trouble with respect to
its employees engaged in the Business which had or might have had a material
adverse effect on the Business. Other than wage increases in the ordinary
course of business, since the Balance Sheet Date, Seller has not made any
commitment or agreement to increase the wages or modify the conditions or
terms of employment of any of the (non-temporary) employees of Seller used in
connection with the Business. Each of the Business Employees employed
full-time in the Business does not perform any substantial services for
Seller or Shareholder outside the Business.
4.8. Contracts and Agreements. Schedule 4.8 hereto, sets forth a
true and complete list of and briefly describes (including termination date)
all of the following contracts, agreements, leases, licenses, plans,
arrangements or commitments, written or oral, that relate to the Assets
(including all amendments, supplements and modifications thereto):
(a) all contracts, agreements, or commitments in respect of
the sale of services;
9
(b) all offers, tenders, bids, proposals or the like
outstanding and capable of being converted into an obligation of Seller by
the passage of time or by an acceptance or other act of some other person or
entity or both;
(c) all sales or agency agreements or franchises or legally
enforceable commitments or obligations with respect thereto;
(d) all collective bargaining agreements, union agreements,
employment agreements, consulting agreements or agreements providing for the
services of an independent contractor;
(e) all profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plans.
(f) all loan or credit agreements, indentures, notes,
guarantees (other than endorsements made for collection), mortgages, pledges,
conditional sales or other title retention agreements, and all equipment
financing obligations, lease and lease-purchase agreements relating to or
affecting the Assets or the Business;
(g) all leases related to the Assets or the Business, and all
other contracts, agreements or legally enforceable commitments relating to or
affecting the Assets or the Business;
(h) all performance bonds, surety bonds and the like, all
contracts and bids covered by such bonds, and all letters of credit and
guaranties;
(i) all consent decrees and other judgments, decrees or
orders, settlement agreements and agreements relating to disclosure or
competitive activities, requiring, limiting or prohibiting any future action;
(j) all accounts, notes and other receivables, and all
security therefor, and all documents and agreements related thereto;
(k) all contracts or agreements of any nature with any 5% or
greater stockholder of Seller, or any Associate (as defined in Section 4.5
above) of such stockholders;
(l) any agreement under which Seller has advanced or loaned
any amount which remains outstanding, to any of the Business Employees
outside the ordinary course of business and which will not be paid off at or
prior to the Closing;
(m) each agreement requiring capital expenditures by Seller
in connection with the Business or the Assets after the date hereof in an
amount in excess of $10,000 individually or $50,000 in the aggregate;
10
(n) each written warranty, guaranty or other similar
undertaking with respect to contractual performance extended by Seller other
than in the ordinary course of business;
(o) any agreement creating or governing a partnership,
limited liability company, joint venture or any teaming agreement or other
contract (however named) which teaming agreement or other contract involves a
sharing of profits, losses, costs, or liabilities by Seller with any other
Person and involving a liability of Seller in excess of $50,000 per annum; and
(p) all contracts, commitments and agreements entered into
outside the ordinary course of the operation of the Business.
Except as set forth in Schedule 4.8, all of such contracts, agreements,
leases, licenses, plans, arrangements, and commitments and all other such
items included in the Assets but not specifically described above
(collectively, the "Contracts"), are held directly in the name of Seller or
the Business, are valid, binding and in full force and effect in accordance
with their terms and conditions and there is no existing default thereunder
or breach thereof by Seller, or, to the Best Knowledge of Seller and
Shareholder, by any other party to the Contracts, or any conditions which,
with the passage of time or the giving of notice or both, will constitute
such a default by Seller, or, to the Best Knowledge of Seller, by any other
party to the Contracts, and the Contracts will not be breached by or give any
other party a right of termination as a result of the transactions
contemplated by this Agreement. Seller is not aware of any reason why any of
the Contracts (i) will result in a loss to Purchaser on completion by
performance or (ii) cannot readily be fulfilled or performed by Purchaser
with the Assets on time without undue or unusual expenditure of money or
effort. Copies of all of the documents (or in the case of oral commitments,
descriptions of the material terms thereof) relevant to the Contracts listed
in Schedule 4.8 hereto have been delivered by Seller to Purchaser, and such
copies and descriptions are true, complete and accurate and include all
amendments; supplements or modifications thereto. To the Best Knowledge of
Seller and Shareholder, no purchaser of services under any Contract will stop
or decrease its rate of buying services (on an annualized basis) from Seller
prior to or after the Closing Date. No one has advised Seller or Shareholder
that any Contract assigned to Purchaser by Seller pursuant to the
transactions contemplated by this Agreement will be terminated by any
customer prior to, on or after the Closing or that any existing relationship
with any customer will expire upon termination of any existing Contract.
Except as set forth on Schedule 4.8(A) hereto, all of the Contracts may be
assigned to Purchaser without the approval or consent of any Person.
Schedule 4.8(A) is true and correct in all material respects to the Best
Knowledge of Seller and Shareholder. Seller hereby represents and warrants
that all the consents required for the assignment or novation of the
Contracts specified in Section 6.2 below, including without limitation all
consents necessary for the assignment or novation of the Contracts listed on
Schedule 4.8 hereto, will be obtained no later than the date on which Seller
delivers the Seller Determination in accordance with Section 3.2(c) hereof.
4.9. Effect of Agreement. Except as set forth on Schedule 4.9, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby
11
will not (i) result in any breach of any of the terms or conditions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of
Seller or Shareholder, or any commitment, mortgage, note, bond, debenture,
deed of trust, contract, agreement, license or other instrument or obligation
to which either Seller or Shareholder is now a party or by which Seller or
Shareholder or any of their properties or assets may be bound or affected;
(ii) result in any violation of any Governmental Requirement; (iii) cause
Purchaser to lose the benefit of any right or privilege included in the
Assets; (iv) relieve any Person of any obligation (whether contractual or
otherwise) or enable any Person to terminate any such obligation or any right
or benefit enjoyed by Seller or to exercise any right under any agreement in
respect of the Assets or the Business; or (v) require notice to or the
consent, authorization, approval or order of any Person (except as may be
contemplated by the penultimate sentence of Section 4.8 hereof). To the Best
Knowledge of Seller and Shareholder, the business relationships of clients,
customers and suppliers of the Business will not be adversely affected by the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
4.10. Properties, Assets and Leasehold Estates. Except as set
forth on Schedule 4.10, Seller has good and marketable title to all the
Assets, free and clear of all mortgages, liens, pledges, conditional sales
agreements, charges, easements, covenants, assessments, options, restrictions
and encumbrances of any nature whatsoever. All leases to which real or
personal property is leased in connection with the Business are in good
standing, valid and enforceable with respect to their terms and are held in
the name of Seller. Schedule 4.10 sets forth a listing of the fixed assets
included in the Assets, including a depreciation schedule with respect
thereto, and a listing of all real and personal property leases held by
Seller and used in the Business.
4.11. Intangible Property.
(a) Except as set forth on Schedule 4.11 hereto, the
operation of the Business as now conducted by Seller does not require the use
of or consist of any rights under any patents, inventions, trademarks, trade
names, brand names, copyrights or other material intellectual property
(including but not limited to software licenses). Seller owns and has the
full and exclusive right to use in connection with the Business all of the
items listed on Schedule 4.11 hereto, which items are in full force and
effect. Seller has not transferred, encumbered or licensed to any Person any
rights to own or use any portion of the items listed on Schedule 4.11 hereto
or any other intangible property included in the Assets. None of (i) the
items listed on Schedule 4.11, (ii) any other intangible property included in
the Assets, or (iii) the operation of the Business as presently conducted,
violates or infringes upon any patents, inventions, trademarks, tradenames,
brand names, copyrights or other material intellectual property owned by
others. To the Best Knowledge of Seller, none of the items listed on
Schedule 4.11 hereto or any other intangible property included in the Assets
is being infringed upon by any Person.
(b) Seller does not own any intellectual property used in
relation to the Business.
4.12. Suits, Actions and Claims. Except as set forth in Schedule
4.12 hereto, (i) there are no suits, actions, claims, inquiries or
investigations by any Person, or any legal,
12
administrative or arbitration proceedings in which the Business is engaged or
which are pending or, to the Best Knowledge of Seller and Shareholder,
threatened against or affecting the Business or Assets or relating to the
Business Employees, or which question the validity or legality of the
transactions contemplated hereby, (ii) no basis or grounds for any such suit,
action, claim, inquiry, investigation or proceeding exists, and (iii) there
is no outstanding order, writ, injunction or decree of any Governmental
Authority against or affecting Seller with respect to the Business, Business
Employees or the Assets. Without limiting the foregoing, neither Seller nor
Shareholder has any knowledge of any state of facts or the occurrence of any
event forming the basis of any present or potential claim against Seller or
Shareholder with respect to the Business, the Business Employees or the
Assets.
4.13. Licenses and Permits; Compliance with Governmental
Regulations. Schedule 4.13 hereto, sets forth a true and complete list of
all licenses and permits necessary for the conduct of the Business. Except
as set forth on Schedule 4.13, all such licenses and permits are fully
transferable by Seller. Seller has all such licenses and permits validly
issued to it and in its name or in the name of the Business, and all such
licenses and permits are in full force and effect. True and correct copies
of all such licenses and permits are included in Schedule 4.13 hereto. No
violations are or have been recorded in respect of such licenses or permits
and no proceeding is pending or, to the Best Knowledge of Seller or
Shareholder threatened seeking the revocation or limitation of any of such
licenses or permits. All such licenses and permits that are subject to
transfer are included in the Assets. Seller has complied with all
Governmental Requirements applicable to the Business (including without
limitation all Governmental Requirements relating to employees of Seller),
and all Governmental Requirements with respect to the distribution and sale
of products and services by the Business in all material respects;
4.14. Authorization. Each of Seller and Shareholder has full legal
right, power and authority to enter into and deliver this Agreement and to
consummate the transactions set forth herein and to perform all the terms and
conditions hereto to be performed by it. The execution and delivery of this
Agreement by each of Seller and Shareholder and the performance by them of
the transactions contemplated herein has been duly and validly authorized by
all requisite corporate action of Seller and Shareholder, and this Agreement
has been duly and validly executed and delivered by Seller and Shareholder
and is the legal, valid and binding obligation of each of Seller and
Shareholder, enforceable against them in accordance with its terms, except as
limited by applicable bankruptcy, moratorium, insolvency or other similar
laws affecting generally the rights of creditors or by principles of equity.
4.15. No Untrue Statements. The statements, representations and
warranties of Seller set forth in this Agreement and the Schedules hereto and
in all other documents and information furnished to Purchaser and its
representatives in connection herewith do not include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements, representations and warranties made not misleading.
4.16. Records. The books, records and minutes kept by Seller with
respect to the Assets and the Business, including, but not limited to, all
customer files, service agreements quotations, correspondence and historic
revenue data of the Business since January 1, 1995, have
13
been kept properly and contain records of all matters required to be included
therein by any Governmental Requirement, and such books, records and minutes
are true, accurate and complete and (except for corporate minute books and
stock records) are included in the Assets. Seller agrees to store for a
period of at least one (1) year from the Closing Date all of Seller's tax and
accounting records (other than those solely with respect to the Business
which are included in the Assets) for the one (1) year period prior to the
Closing Date. Such records shall be made available for inspection and copying
by Purchaser upon reasonable advance notice and during reasonable business
hours. At the end of such one (1) year period, Purchaser shall notify Seller
as to whether Purchaser shall require Seller to continue to retain such tax
and accounting records in the manner described above. Purchaser agrees to
maintain all books and records relating to the Assets during the period prior
to Closing, including financial records and documents and contracts included
in the schedules hereto for at least one (1) year after the Closing Date, and
Purchaser agrees, at least annually before each anniversary of the Closing
Date to certify to Seller and Shareholder that Purchaser is retaining the
books and records specified in this Agreement and this section 4.16.
Purchaser further agrees that if Purchaser intends, after the first
anniversary of the Closing Date, to destroy any of such books and records
during the six (6) year period after the Closing Date, Purchaser will first
notify Seller and provide Seller with an opportunity to take possession of
such records within a period of not less than thirty (30) days following such
notice.
4.17. Work-In-Process. Except as set forth on Schedule 4.17
hereto, Seller has not received any payments with respect to any
work-in-process with respect to the Business.
4.18. Brokers and Finders. No broker or finder has acted for
Seller or Shareholder in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokerage or finder's fee or to any commission in respect thereof based in
any way on agreements, arrangements or understandings made by or on behalf of
Seller or Shareholder.
4.19. Adverse Facts. Seller is not aware (after having made all
reasonable inquiries) of any fact or matter not disclosed in this Agreement
or in the Schedules hereto which might be reasonably expected to adversely
effect the Assets or the Business after Closing.
4.20. Deposits. Neither Seller nor Shareholder now hold, nor does
either Seller or Shareholder expect to receive between the date hereof and
the Closing Date, any deposits or prepayments by third parties with respect
to any of the Assets or the Business which are not reflected as liabilities
on the Reference Balance Sheet
4.21. Workers' Compensation Data. All data set forth in the
workers' compensation report of Seller attached hereto as Schedule 4.21 is
true, correct and complete as of the date thereof.
4.22. Customer List. Schedule 4.22 hereto sets forth a true,
correct and complete list of all customers of the Business to which Seller
has sold or provided services in excess of $250,000 per annum during the two
(2) years immediately preceding the date hereof.
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This list provides an accurate statement of the gross revenues received from
each such customer by the Business during the twenty-four (24) month period
ended December 31, 1997. To the Best Knowledge of Seller and Shareholder, no
current customer of the Business listed on Schedule 4.22 hereto will stop or
decrease its rate of buying services (on an annualized basis) from Seller
prior to the Closing Date, or from Purchaser after the Closing Date
4.23. No Royalties. No royalty, license fee or similar item or
amount is being paid or is owing by Seller, nor is any such item accruing,
with respect to the operation, ownership or use of the Business or the Assets.
4.24. Business. All of the revenues generated by the Seller from
the Business have been earned and received by Seller, and not through or in
Shareholder or in any Subsidiary (as hereinafter defined).
4.25. Insurance. Schedule 4.25 sets forth the following
information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage
and bond and surety arrangements) held by Seller with respect to the
Business:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(c) the policy number and the period of coverage; and
(d) the amount (including a description of how deductibles
and ceilings are calculated and operate) of coverage.
With respect to each such insurance policy, (A) the policy is legal,
valid, binding, enforceable, and in full force and effect in all material
respects; (B) no event has occurred which, with notice or the lapse of time,
would permit termination, modification, or acceleration, under the policy.
Schedule 4.25 describes any material self-insurance arrangements affecting
Seller.
4.26. Products. The Business does not include the manufacture or
sale of any products.
4.27. Environmental Matters. Seller owns no real estate, and each
portion of the real property leased by Seller in connection with the Business
is part of a larger premises also subject to lease agreements with other
tenants. To the Best Knowledge of Seller and Shareholder (but without
independent investigation), (i) Seller has complied with and is not in
violation of any environmental laws, (ii) Seller is not required to hold or
obtain any environmental permits, certificates, consents or other settlements
agreements, licenses, approvals, registrations or authorizations under any
environmental laws, (iii) no notice, citation, summons or order has been
issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any governmental or other
entity relating to such leased real property
15
or Seller's operations with respect to any alleged violation by Seller of any
environmental law or with respect to any use, possession, generation,
treatment, storage, recycling, transportation or disposal of any Hazardous
Substances by or on behalf of Seller, (iv) there are no facts or
circumstances related to environmental matters concerning such leased real
property that could reasonably be expected to lead to any future
environmental claims against Seller under current environmental laws, and (v)
there have been no environmental inspections, investigations, studies,
audits, tests, reviews or other analyses conducted in relation to any such
leased real property, Seller or the Business which have been provided or
reported to Seller or Shareholder
4.28. 3. Government Contracts. With respect to each Contract
included in the Assets which is directly or indirectly for any department or
agency of the United States government or any state government (a "Government
Contract"):
(a) During the past five (5) years, no payment has been made
by Seller or by any Person authorized to act on Seller's behalf, to any
Person in connection with any such Government Contracts, in violation of
applicable procurement laws or regulations or in violation of (or requiring
disclosure pursuant to) the Foreign Corrupt Practices Act.
(b) Schedule 4.28 sets forth all outstanding or pending
change orders which could reasonably be deemed to involve an amount in excess
of $10,000 and all claims, requests for equitable adjustments, outstanding or
pending subcontractor, supplier or vendor claims, and all teaming agreements,
joint venture arrangements and agency agreements, with respect to such
Government Contracts.
(c) Seller's accounts receivable, unbilled costs and accrued
profits (less customer progress payments), notes receivable, contracts in
progress, accounts payable and notes payable (collectively, the "Receivables
and Unbilled Costs") as of the Closing shall be recorded on its books and
records in the ordinary course of business in accordance with GAAP applied on
a consistent basis with prior years.
(d) With respect to each Government Contract, except as set
forth in Schedule 4.28, (A) Seller has complied with all material terms and
conditions of such Government Contract, including all clauses, provisions and
requirements incorporated expressly, by reference or by operation of law
therein, (B) Seller has complied with all requirements of applicable laws
pertaining to such Government Contract, (C) all representations and
certifications executed, acknowledged or set forth in such Government
Contract were complete and correct in all material respects as of their
effective date, and Seller has complied in all material respects with all
such representations and certifications, and (D) neither the United States
Government, any state government nor any prime contractor, subcontractor or
other Person has notified Seller in writing, that Seller has breached or
violated any applicable law, or any material certification, representation,
clause, provision or requirement pertaining to such Government Contract.
(e) Neither Seller nor Shareholder is currently, or has been
in the past five (5) years, debarred or suspended from doing business with
any Federal or state government
16
agency, nor has any such suspension or debarment action been commenced. No
show cause notices, notices of termination for default or cure notices have
been issued against Seller or Shareholder in the past five (5) years, except,
as to any such cure notices, those with respect to which cure has been made
in the ordinary course of business.
(f) Neither Seller nor Shareholder is currently, or has been
in the past five (5) years, under administrative, civil or criminal
indictment or, to Seller's or Shareholder's Best Knowledge, investigation,
with respect to any alleged irregularity, misstatement or omission arising
under or in any way relating to any of such Government Contracts.
(g) Schedule 4.7(A) lists all security clearances held by
Seller. Seller has previously provided to Purchaser an accurate and complete
list of the security clearances held by the Business Employees, which
constitute all security clearances necessary for the operation of the
Business. Seller has never been denied a security clearance necessary to
perform any such Government Contract unless such clearance has later been
granted.
4.29. Taxes. Seller has filed all tax returns (including without
limitation such returns regarding sales taxes and contributions relating to
any state and federal unemployment insurance contributions), and has withheld
and paid (or properly reserved and accounted on its financial statements for)
all taxes, relating to the Assets, the Business and the Business Employees
and accruing prior to the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to Seller as follows:
5.1. Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland.
5.2. Authorization. Purchaser has full legal right and corporate
power to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions
hereof to be performed by it. This Agreement has been duly executed and
delivered by Purchaser and is a legal, valid and binding obligation of
Purchaser enforceable in accordance with its terms, except as limited by
applicable bankruptcy, moratorium, insolvency, or other laws affecting
generally the rights of the creditors or by principals of equity. The
execution and delivery of this Agreement by Purchaser and the performance by
Purchaser of the transactions contemplated herein have been duly and validly
authorized by all requisite corporate action of Purchaser.
5.3. Brokers and Finders. No broker or finder has acted for
Purchaser in connection with this Agreement or the transactions contemplated
by this Agreement and, no broker or finder is entitled to any brokerage or
finder's fee or to any commission in respect thereof based in any way on
agreements, arrangements or understandings made by or on behalf of ▇▇▇▇▇▇▇▇▇.
▇▇
▇. PRE-CLOSING COVENANTS. The parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
6.1. General. Each of the parties will use all reasonable efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 7 below).
6.2. Notices and Consents. Seller will give any notices to third
parties, and the Seller and Shareholder will each use its best efforts to
obtain any third party consents that the Purchaser may request in connection
with the transfer of the Contracts to Purchaser and any other matters
pertaining to the Seller or Shareholder disclosed or required to be disclosed
by this Agreement. Each of the parties will make all reasonable efforts to
take any additional action that may be necessary, proper or advisable in
connection with any other notices to, filings with, and authorizations,
consents, and approvals of governments, governmental agencies, and third
parties that it may be required to give, make or obtain.
6.3. Operation of Business. Seller will not engage in any
practice, take any action, embark on any course of inaction, or enter into
any transaction outside the ordinary course of business with regard to the
Business or the Assets. Without limiting the generality of the foregoing,
Seller will not engage in any practice, take any action, embark on any course
of inaction, or enter into any transaction of the sort described in Section
4.4 hereof. Neither shall Seller nor Shareholder agree to any extension of
the expiration dates under the leases described in Section 7.1(n) hereof
beyond July 1, 1998.
6.4. Preservation of Business. Seller will keep the business and
properties of the Business substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
6.5. Full Access. Seller will permit representatives of the
Purchaser to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Seller, to all
premises, properties, books, records, contracts, tax records, and documents
of or pertaining to the Business.
6.6. Notice of Developments. The Seller will give prompt written
notice to the Purchaser of any material development affecting the assets,
liabilities, business, financial condition, operations, results of
operations, or future prospects of the Business. Each party will give prompt
written notice to the other of any material development affecting the ability
of the parties to consummate the transactions contemplated by this Agreement.
6.7. Exclusivity. Prior to Closing, the Seller and Shareholder
will not, with respect to the Business or the Assets, (i) solicit, initiate,
or encourage the submission of any proposal or offer from any person relating
to any (A) liquidation, dissolution, or recapitalization, (B) merger or
consolidation, (C) acquisition or purchase of securities or assets, or (D)
similar transaction or business combination involving Seller, or (ii)
participate in any discussions or
18
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by
any person to do or seek any of the foregoing. The Seller will notify the
Purchaser immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
6.8. Schedules. The Purchaser acknowledges that the facts
underlying the Schedules to the Agreement may change between the time of the
execution and delivery of this Agreement and the Closing. As such, the
parties hereto agree as follows:
(a) The Seller shall have the right to amend, restate or
supplement the Schedules to the Agreement at any time at least two (2)
business days prior to the Closing Date, and shall, as of the Closing,
restate Schedule 4.7(A) and Schedule 4.10, and any others of the Schedules
which have become inaccurate in any material respect as of such date;
(b) At least two (2) business days prior to the Closing, the
Seller shall deliver to the Purchaser two (2) complete copies of the proposed
final Schedules to the Agreement, marked to show changes from those attached
to the Agreement upon its execution; and
(c) Purchaser shall notify Seller in writing at the Closing
that either (i) Purchaser accepts such Schedules, in which case they shall
become a part of this Agreement as if such Schedules were in existence on the
date this Agreement was originally executed and all such disclosures made in
such Schedules shall be deemed to be disclosed as if such Schedules have been
made as of the date of this Agreement or (ii) Purchaser, in its sole
discretion, exercised in good faith, believes that the information disclosed
in such amended Schedules would result in a material adverse change or
material adverse affect on the Business, Assets or future prospects of the
Business and therefore elects to terminate this Agreement pursuant to the
provisions of Section 8 of this Agreement without any liability to Purchaser.
6.9. NASA ▇▇▇▇ FIPS Contract. Seller and Shareholder shall use all
reasonable efforts to cause the proposal submitted by Seller to, and
currently under consideration by, the NASA ▇▇▇▇ Research Center for the
Federal Information Processing Services project (collectively, "the NASA ▇▇▇▇
FIPS Contract") to be awarded to Purchaser as the successor to Seller in
connection with the outstanding proposal relating to such Contract (a copy of
which, not including Seller's indirect pricing information, has previously
been provided to Purchaser). The parties acknowledge their intent that, in
the event the NASA ▇▇▇▇ FIPS Contract is awarded to Seller, the economic
benefits and obligations of such contract are to flow to Purchaser through
appropriate contractual arrangements to be agreed upon by the parties in good
faith at the time such contract is awarded to Seller. Seller further
acknowledges and agrees that it shall cooperate fully in any administrative
proceedings resulting from the award of such contract which Purchaser may
determine are appropriate, and Purchaser agrees that Purchaser shall bear any
out of pocket costs incurred by Purchaser or Seller related thereto. The
terms of this Section 6.9 shall survive the Closing hereunder for a period of
six (6) years.
7. CONDITIONS TO OBLIGATION TO CLOSE.
19
7.1. Conditions to Obligation of the Purchaser. The obligations of
the Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Section 4
hereof shall be true and correct in all material respects at and as of the
Closing Date;
(b) Seller and Shareholder shall have performed and complied
with all of their covenants hereunder in all material respects through the
Closing;
(c) Seller and Shareholder shall have procured all of the
necessary third party consents required for the assignment or novation of the
Contracts with the Jet Propulsion Laboratory;
(d) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely, the right of the Purchaser
to own, operate, or control the Assets (and no such judgment, order decree,
stipulation, injunction, or charge shall be in effect);
(e) Seller shall have delivered to the Purchaser a
certificate to the effect that each of the conditions specified above in
Section 7.1(a)-(d) is satisfied in all respects;
(f) Purchaser shall have received all other necessary
authorizations, consents, and approvals of governments and governmental
agencies for the transfer of the Assets to Purchaser;
(g) Purchaser shall have received fully executed employment
agreements from ▇▇. ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, in form and substance
satisfactory to Purchaser, under which such individuals agree to be employed
by Purchaser after the Closing;
(h) all actions and approvals to be taken by the Seller or
Shareholder in connection with consummation of the transactions contemplated
hereby (including approval of the Seller's or Shareholder's stockholders if
required by law) and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
delivered to the Purchaser and will be in form satisfactory to Purchaser and
its counsel;
(i) the Purchaser shall have received from ▇▇▇▇ ▇. ▇▇▇▇▇▇,
P.L.C., counsel for the Seller and Shareholder, an opinion addressed to
Purchaser dated the date of the Closing, and in form and substance attached
hereto as Exhibit D;
(j) the Purchaser shall have obtained the approval of its
Board of Directors for the transactions contemplated by this Agreement;
20
(k) the Purchaser shall have received from the Seller its
unaudited financial statements (income statements for fiscal years 1995 and
1996) and for the twelve-month period ended December 31, 1997, and for
January 31, 1998, of the Business;
(l) Seller shall not have experienced any material adverse
change in the Business or the Assets, and all of the Contracts listed on
Schedule 7.1(c) shall be in full force and effect;
(m) Seller shall not have lost any material customer or
customers representing a significant amount of the Business nor shall the
same have significantly curtailed the buying of services from Seller. For
purposes of this Section 7.1(m), a "material customer" shall mean a customer
to whom Seller invoiced at least $1,000,000.00 of services in calendar year
1997;
(n) Shareholder and/or Seller shall have caused the liens on
the Assets held by NationsBank to be released;
(o) in the event Seller has been awarded the NASA ▇▇▇▇ FIPS
Contract, Seller and/or Shareholder and Purchaser shall have entered into, as
of the Closing Date, a software license agreement substantially in a form
acceptable to Purchaser and Seller, by which Purchaser has the right to use
Seller's and/or Shareholder's software products for the performance of the
NASA ▇▇▇▇ FIPS Contract, which software license agreement shall contain a fee
payable to Seller or Shareholder equal to two percent (2%) of the annual
revenue realized by Purchaser under the NASA ▇▇▇▇ FIPS Contract, but in no
event more than Four Million Dollars ($4,000,000) over the entire term of the
contract; and
(p) Purchaser may waive any condition specified in this
Section 7.1 if it executes a writing so stating at or prior to the Closing.
7.2. Conditions to Obligations of the Seller. The obligations of
the Seller and Shareholder to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Section 5
above shall be true and correct in all material respects at and as of the
Closing Date;
(b) the Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction wherein an unfavorable judgment, order,
decree, stipulation, injunction, or charge would (i) prevent consummation of
any of the transactions contemplated by this Agreement or (ii) cause any of
the transactions contemplated by this Agreement to be rescinded following
consummation (and no such judgment, order, decree, stipulation, injunction,
or charge shall be in effect);
21
(d) the Purchaser shall have delivered to Seller and
Shareholder a certificate (without qualification as to knowledge or
materiality or otherwise) to the effect that each of the conditions specified
above in Section 7.2(a)-(c) is satisfied in all respects;
(e) the Seller shall have obtained the approval of its Board
of Directors for the transactions contemplated by this Agreement;
(f) the Seller and Shareholder shall have received from the
Counsel for Purchaser, an opinion addressed to Seller and Shareholder and
dated as of the Closing Date in form and substance attached hereto as Exhibit
F; and
(g) the Seller or Shareholder may waive any condition
specified in this Section 7.2 if it executes a writing so stating at or prior
to the Closing.
8. TERMINATION.
8.1. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(a) 8.1. the Purchaser, the Seller and Shareholder may
terminate this Agreement by mutual written consent at any time prior to the
Closing;
(b) the Purchaser may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing in the event
the Seller or Shareholder is in breach.
(c) the Purchaser may terminate this Agreement by giving
written notice to the Seller on or before February 28, 1998 if the Purchaser
is not reasonably satisfied with the results of its continuing business,
legal, and accounting due diligence regarding the Seller.
(d) the Purchaser may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing if the Closing
shall not have occurred on or before February 28, 1998 by reason of the
failure of any condition precedent under Section 7 hereof (unless the failure
results primarily from the Purchaser itself breaching any representation,
warranty, or covenant contained in this Agreement);
(e) the Seller or Shareholder may terminate this Agreement by
giving written notice to the Purchaser at any time prior to the Closing if
the Closing shall not have occurred on or before February 28, 1998 by reason
of the failure of any condition precedent under Section 7 hereof (unless the
failure results primarily from the Seller or Shareholder breaching any
representation, warranty, or covenant contained in this Agreement). In such
event, this Agreement is null and void.
(f) the Purchaser shall have the right in its good faith
discretion, to terminate this Agreement at any time if any material adverse
change in the Business or Assets
22
occurs or if any information is subsequently disclosed in the Schedules to be
delivered by Seller hereunder after the date of execution of this Agreement
and prior to the Closing which information may reasonably be expected to have
a material adverse effect on the Business or the Assets following the Closing.
8.2. Effect of Termination. If any party terminates this Agreement
pursuant to Section 8.1 above, all obligations of the parties hereunder shall
terminate without any liability of any party to any other party (except for
any liability of any party then in breach of this Agreement).
9. NATURE OF STATEMENTS AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDER. All statements of fact contained in this
Agreement or in any written statement (including financial statements),
certificate, schedule or other document delivered by or on behalf of Seller
or Shareholder pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed representations and
warranties of Seller and Shareholder hereunder. All indemnifications,
guarantees, covenants, agreements, representations and warranties made by
Seller or Shareholder hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of
one year from the Closing Date, regardless of any investigation at any time
made by or on behalf of Purchaser; provided, however, that any such
representations, warranties, covenants, agreements and indemnifications with
regard to (i) taxes payable by Seller or with regard to the Business, the
Assets or the Business Employees, (ii) environmental matters, (iii)
employment law matters, and (iv) compliance with any Government Contracts
shall survive, in each case, for the applicable limitation period under law
or regulation with respect thereto. Notwithstanding the foregoing, the
covenants in Section 6.9 and in Sections 10, 11, 13, 14 and 18.11 hereof are
acknowledged to be covenants intended to be binding on the parties after the
Closing Date for such period as may be reasonably necessary to implement the
terms thereof.
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
10.1. Delivery of Funds and Other Assets Collected by Purchaser;
Power of Attorney. To the extent Purchaser receives any funds or other
assets in payment of receivables or work-in-process incurred prior to the
Closing Date and not included in the Assets, Purchaser shall immediately
deliver such funds and assets to Seller and take all steps necessary to vest
title to such funds and assets in Seller.
10.2. Delivery of Funds and Other Assets Collected by Seller or
Shareholder; Power of Attorney. To the extent Seller or Shareholder receives
any funds or other assets in payment of receivables or work-in-process
incurred on or after the Closing Date, or in connection with any other Assets
being sold to Purchaser hereto, each of Seller and Shareholder shall
immediately deliver such funds and assets to Purchaser and take all steps
necessary to vest title to such funds and assets in Purchaser.
10.3. In the event the NASA ▇▇▇▇ FIPS Contract is awarded after the
Closing Date:
23
(a) Seller and/or Shareholder and Purchaser shall enter into,
as of the date of such award, a software license agreement substantially in a
form acceptable to Purchaser and Seller, by which Purchaser has the right to
use Seller's and/or Shareholder's software products for the performance of
the NASA ▇▇▇▇ FIPS Contract, which software license agreement shall contain a
fee payable to Seller or Shareholder equal to two percent (2%) of the annual
revenue realized by Purchaser under the NASA ▇▇▇▇ FIPS Contract, but in no
event more than Four Million Dollars ($4,000,000) over the entire term of the
contract and, to the extent required under Section 6.9, the contractual
arrangements referred to in such Section; and
(b) in the event NASA ▇▇▇▇ agrees to reimburse the cost of
preparing the bid for the NASA ▇▇▇▇ FIPS Contract, Seller and Purchaser shall
cooperate in jointly pursuing a claim for such reimbursement, the amount of
which shall be fully payable to Seller, less any out of pocket costs incurred
by Purchaser in pursuing such reimbursement claim. In the event Purchaser (i)
causes, in its sole discretion, such bid to be withdrawn, or (ii) otherwise
refrains from taking any administrative action to which it is entitled in
relation to such bid, and, in connection with such withdrawal or refraining,
receives any form of compensation, Purchaser agrees to reimburse Seller its
bid and protest costs incurred in preparing such bid (to the extent such
amount is covered by such compensation received by Purchaser) and, to the
extent any compensation remains after such reimbursement, the parties agree
to negotiate in good faith a fair division of such remaining compensation.
10.4. Leases. Seller shall make its best efforts to obtain executed
consents to assignment or subleases from all lessors under the real property
leases for the office space which was used by Seller in connection with the
operation of the Business as of December 3, 1997 and shown on the floor plans
attached as Schedule 10.4 hereto, which leases are listed on Schedule 3.3
hereto, as soon as possible after the Closing Date and without any amendment
or modification to the terms thereof as previously disclosed to Purchaser.
In the event such consents to assignments or subleases are obtained,
Purchaser will, from and after Closing, hold harmless Seller from any
liability thereunder accruing as a result of acts, circumstances or
obligations occurring after Closing, and Seller and Shareholder will hold
harmless Purchaser from any liability thereunder accruing as a result of
acts, circumstances or obligations occurring prior to Closing. In the event
such consents to assignment or subleases are not obtained without amendment
or modification to the terms thereof as previously disclosed to Purchaser,
Seller agrees to indemnify Purchaser for any losses suffered by Purchaser
resulting from such amendment or modification. In the event Purchaser is
required to vacate any such office space prior the expiration of any such
lease for any reason other than Purchaser's default under any applicable
lease or sublease, Seller hereby agrees to bear the costs incurred by
Purchaser in the form of base rent and additional rent with respect to such
new office space to the extent the same exceeds the amount Purchaser would
have paid had Purchaser remained in the original office space under the
original lease.
11. NON-COMPETITION AGREEMENT. For a period commencing on the date
hereof through the third anniversary of the Closing Date, neither Seller nor
Shareholder, shall (i) at any location within the territorial boundaries of
the continental United States, compete directly or indirectly with Purchaser
(or Federal Data Corporation or any subsidiary thereof) in providing
24
support effort personnel under customer direction on specific technical work
assignments to either the National Aeronautics and Space Administration or
the Jet Propulsion Laboratory similar to the services by support effort
personnel under customer direction on specific technical work assignments
currently provided to the National Aeronautics and Space Administration and
the Jet Propulsion Laboratory under the Contracts, or (ii) solicit directly
or indirectly any of the accounts of either the National Aeronautics and
Space Administration or the Jet Propulsion Laboratory for support effort
personnel under customer direction on specific technical work assignments.
Each of Seller and Shareholder agrees that the limitations set forth herein
on the rights of Seller are reasonable and necessary for the protection of
the Purchaser. In this regard, Seller and Shareholder specifically agree
that the limitations as to period of time and geographic area, as well as all
other restrictions on its activities specified herein, are reasonable and
necessary for the protection of the Purchaser. Seller and Shareholder
further recognize and agree that violation of any of the agreements contained
in this Section 11 will cause irreparable damage or injury to Purchaser, the
exact amount of which may be impossible to ascertain, and that, for such
reason, among others, Purchaser shall be entitled to an injunction, without
the necessity of posting a bond, restraining any further violation of such
agreements. Such rights to any injunction shall be in addition to, and not
in limitation of, any other rights and remedies Purchaser may have against
Seller or Shareholder, including, but not limited to, the recovery of
damages. Further, it is agreed by Seller and Shareholder that in the event
the provisions of this Agreement should ever be deemed to exceed the time or
geographic limitations permitted by applicable law, then such provisions
shall be reformed to the maximum time or geographic limitations permitted.
The restrictions on competition by Seller and Shareholder in this Section 11
do not include the provision of labor in support of Seller or Shareholder
product or solution sales.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
12.1. Seller's Nondisclosure. Seller and Shareholder each
recognizes and acknowledges that it has and will have access to certain
confidential information of Seller that is included in the Assets (including,
but not limited to, list of customers, and costs and financial information)
that after the consummation of the transactions contemplated hereby will be
valuable, special and unique property of Purchaser. Seller and Shareholder
each agree that it will not disclose, and it will use all reasonable efforts
to prevent disclosure by any other Person of, any such material confidential
information to any Person, except to authorized representatives of Purchaser.
Seller and Shareholder recognize and agree that violation of any of the
agreements contained in this Section 12 will cause irreparable damage or
injury to Purchaser, the exact amount of which may be impossible to
ascertain, and that, for such reason among others, Purchaser shall be
entitled to an injunction, without the necessity of posting bond, therefor,
restraining any further violation of such agreements. Such rights to any
injunction shall be in addition to, and not in limitation of, any other
rights and remedies Purchaser may have against Seller or Shareholder.
12.2. Purchaser's Nondisclosure. Purchaser recognizes and
acknowledges that it has and will have access to certain confidential
information of Seller that is included in the Assets (including, but not
limited to, list of customers, and costs and financial information) that
25
prior to the consummation of the transactions contemplated hereby will be
valuable, special and unique property of Seller. Except to the extent
necessary for its due diligence with respect to the consummation of the
transaction contemplated hereby, Purchaser agrees that prior to the Closing
it will not disclose, and it will use all reasonable efforts to prevent
disclosure by any other Person of, any such material confidential information
to any Person, except to authorized representatives of Purchaser. Purchaser
recognizes and agrees that violation of any of the agreements contained in
this Section 12 will cause irreparable damage or injury to Seller, and/or
Shareholder, the exact amount of which may be impossible to ascertain, and
that, for such reason, among others, Seller and/or Shareholder shall be
entitled to an injunction, without the necessity of posting bond, therefor,
restraining any further violation of such agreements. Such rights to any
injunction shall be in addition to, and not in limitation of, any other
rights and remedies Seller and/or Shareholder may have against Purchaser.
13. ASSIGNMENT OF CONTRACTS. Notwithstanding any other provision of
this Agreement, nothing in this Agreement or any related document shall be
construed as an attempt to assign (i) any contract which, as a matter of law
or by its terms, is nonassignable without the consent of the other parties
thereto unless such consent has been given, or (ii) any contract or claims as
to which all of the remedies for the enforcement thereof enjoyed by Seller
would not, as a matter of law or by its terms, pass to Purchaser as an
incident of the transfers and assignments to be made under this Agreement.
In order, however, that the full value of every contract and claim of the
character described in clauses (i) and (ii) above and all claims and demands
on such contracts may be realized for the benefit of Purchaser, Seller, at
the request and expense and under the direction of Purchaser, shall take all
such action and do or cause to be done all such things as will in the opinion
of Purchaser, be necessary or proper in order that the obligations of Seller
under such contracts may be performed in such manner that the value of such
contract will be preserved and will inure to the benefit of Purchaser, and
for, and to facilitate, the collection of the moneys due and payable and to
become due and payable thereunder to Purchaser in and under every such
contract and claim incurred after the Closing. Seller shall promptly pay over
to Purchaser all moneys collected by or paid to it in respect of every such
contract, claim or demand to the extent such moneys are earned by the
Purchaser on or after the Closing Date. Nothing in this Section 13 shall
relieve Seller of its obligation to obtain any consents required for the
transfer of the Assets and all rights thereunder to Purchaser or shall
relieve Seller from any liability to Purchaser for failure to obtain such
consents.
14. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.
14.1. It is the intention of Purchaser, and Seller hereby
acknowledges and agrees with such position, that any employees of Seller that
Purchaser hires will be new employees of Purchaser as of the Closing Date or
the date of hire, whichever is later. Except as set forth in Section 14.3
below, such new employees shall be entitled only to such compensation and
employee benefits as are agreed to by such employees and Purchaser, or as are
otherwise provided by Purchaser, in its sole discretion.
14.2. Hiring of Employees.
26
(a) Purchaser will use its reasonable efforts to hire the
existing employees of Seller engaged in the Business in connection with its
purchase of the Assets; provided however, that Purchaser shall be entitled to
review employee records, conduct employee interviews and employee screening
procedures used by Purchaser in its business, and may refuse to offer
employment to any employee of Seller if such employee fails to meet the
hiring criteria of Purchaser.
(b) Except as provided in Section 15.2(a) above, the parties
agree that during the period of the Non-Competition Agreement specified in
Section 11 hereof, neither Purchaser nor any affiliate of Purchaser shall
actively solicit or recruit any employee of Seller or Shareholder, nor shall
Seller or Shareholder, or any affiliate of Seller or Shareholder, actively
solicit or recruit any employee of Purchaser. For the purposes of this
Section 15.2(b), the phrase "actively solicit or recruit" shall not include
the publication of any advertisement for employment disseminated to the
general public.
14.3. Existing Employee Benefit Plans. Purchaser shall have no
obligation after the Closing to continue any pension plans or work benefit
plans currently offered by Seller to its employees.
14.4. Indemnity Concerning Accrued Benefits. Except as expressly
assumed by Purchaser hereunder and as reflected in the Net Assets of Seller,
Seller and Shareholder jointly and severally agree to indemnify and hold
harmless Purchaser from and against any and all accrued and outstanding
employee benefits, salary, vacation pay, sick leave, bonuses, commissions and
other emoluments of its employees and from any liabilities or obligations
relating to workers' compensation, disability, unemployment or severance
claims and from any other employee related matters or liabilities with
respect to Seller's employees arising on or before the Closing Date.
15. EXPENSES. Whether or not the transactions contemplated hereby are
consummated, Seller and Shareholder will pay all of their costs and expenses
and Purchaser will pay all of its costs and expenses, incurred in connection
with the preparation of and execution of this Agreement and the consummation
of the transactions contemplated hereby, subject to any rights either Seller
or Purchaser may have to recover damages by reason of any breach hereof by
the other..
16. FURTHER ACTIONS. From time to time, at the request of any party
hereto; the other parties hereto shall execute and deliver such instruments
and take such action as may be reasonably requested to evidence and implement
the transactions contemplated hereby.
17. NOTICES. All notices, requests, demands and other communications
required permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid
telex or telegram or by facsimile or other similar instantaneous electronic
transmission device or mailing first class, postage prepaid, certified United
States mail, return receipt requested, as follows:
27
(a) If to Purchaser, at:
NYMA, Inc.
c/o Federal Data Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Shaw, Pittman, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Seller or Shareholder, at:
Telos Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇, Esquire
Telos Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇, P.L.C.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
provided that any party may change its address for notice by giving to the
other party written notice of such change. Any notice given under this
Section 17 shall be effective (i) if delivered personally, when delivered,
(ii) if sent by telex or telegram or by facsimile or other similar
instantaneous electronic transmission device, twenty-four (24) hours after
sending, and (iii) if sent via a nationally recognized overnight delivery
service, forty-eight (48) hours after sending.
18. GENERAL PROVISIONS.
28
18.1. GOVERNING LAW; INTERPRETATION; SECTION HEADINGS. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO CONFLICT-OF-LAWS RULES.
THE SECTION HEADINGS CONTAINED HEREIN ARE FOR PURPOSES OF CONVENIENCE ONLY,
AND SHALL NOT BE DEEMED TO CONSTITUTE A PART OF THIS AGREEMENT OR TO AFFECT
THE MEANING OR INTERPRETATION OF THIS AGREEMENT IN ANY WAY. ANY ACTION OR
PROCEEDING ARISING UNDER THIS AGREEMENT SHALL TAKE PLACE IN THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF MARYLAND.
18.2. Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or
the State of Maryland, or under any other applicable laws of any other
jurisdiction, then the parties hereto agree that such provision shall be
deemed modified for purposes of performance of this Agreement in such
jurisdiction to the extent necessary to render it lawful and enforceable, or
if such a modification is not possible without materially altering the
intention of the parties hereto, then such provision shall be severed
herefrom for purposes of performance of this Agreement in such jurisdiction.
The validity of the remaining provisions of this Agreement shall not be
affected by any such modification or severance, except that if any severance
materially alters the intentions of the parties hereto as expressed herein (a
modification being permitted only if there is no material alteration), then
the parties hereto shall use their best reasonable effort to agree to
appropriate equitable amendments to this Agreement in light of such
severance, and if no such agreement can be reached within a reasonable time,
any party hereto may initiate arbitration under the then current rules of the
American Arbitration Association to determine and effect such appropriate
equitable amendments.
18.3. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof. No
representation, promise, inducement or statement of intention has been made
by any party hereto which is not embodied in this Agreement, and no party
hereto shall be bound by or liable for any alleged representation, promise,
inducement or statement of intention not so set forth.
18.4. Binding Effect. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective heirs,
executors, administrators, representatives, successors and assigns.
18.5. Assignment. This Agreement and the rights and obligations of
the parties hereto shall not be assigned or delegated by any party hereto
without the prior written consent of the other parties hereto; provided,
however, that Purchaser may assign its rights and obligations hereunder to
Federal Data Corporation or to a wholly-owned (directly or indirectly)
subsidiary of Federal Data Corporation; provided that upon any such
assignment, Purchaser shall remain liable for the obligations of Purchaser
hereunder.
29
18.6. Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by
the party waiving compliance. The failure of any party at anytime or times
to require performance of any provision hereof shall in no manner affect the
right to enforce the same. No waiver by any party of any condition contained
in this Agreement, or of the breach 6f any term, provisions, representation,
warranty or covenant contained in this Agreement, in any one or more
instances, shall be deemed to be or construed as a further or continuing
waiver of any such condition or breach, or as a waiver of any other condition
or of the breach of any other term, provision, representation, warranty or
covenant.
18.6. Gender; Numbers. All references in this Agreement to the
masculine, feminine or neuter genders shall, where appropriate, be deemed to
include all other genders. All plurals used in this Agreement shall, where
appropriate, be deemed to be singular, and vice versa.
18.8. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This
Agreement shall be binding when one or more counterparts hereof, individually
or taken together, shall bear the signatures of the parties reflected hereon
as signatories.
18.9. Telecopy Execution and Delivery. A facsimile, telecopy or
other reproduction of this Agreement may be executed by one or more parties
hereto, and an executed copy of this Agreement may be delivered by one or
more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any party hereto,
all parties hereto agree to execute an original of this Agreement as well as
any facsimile, telecopy or other reproduction hereof.
18.10. Litigation Support. In the event and for so long as any
party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, circumstance, condition, occurrence, event, incident, action,
failure to act, or transaction prior to the Closing Date directly involving
Seller, the Business or the Assets, each of the other parties will make all
reasonable efforts to cooperate with it and its counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to their books and records as shall be reasonably necessary in
connection with the contest or defense, all at the sole cost and expense of
the contesting or defending party (unless the contesting or defending Party
is entitled to indemnification therefor under section 18.11 below).
18.11. Indemnification.
(a) Indemnification Provisions for Benefit of the Purchaser.
In the event Seller or Shareholder breaches any of its representations,
warranties, and covenants in this Agreement, provided that the Purchaser
makes a written claim for indemnification against the
30
Seller) pursuant to this section 18.11 within the survival period described
above, then Seller and Shareholder jointly and severally agree to indemnify
the Purchaser from and against any Adverse Consequences the Purchaser may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences the Purchaser may suffer after the end of any
applicable survival period) directly resulting from or caused by the breach;
provided, however, that (A) Seller and Shareholder shall not have any
obligation to indemnify the Purchaser from and against any Adverse
Consequences resulting from, arising out of or caused by the breach of any
representation or warranty of Seller or Shareholder (other than those set
forth in the last sentence of section 4.8 hereof or in section 4.29 hereof)
until Purchaser has suffered Adverse Consequences by reason of all such
breaches in excess of $350,000 in the aggregate, after which point Seller and
Shareholder will be obligated only to indemnify the Purchaser from and
against further such Adverse Consequences. For purposes hereof, "Adverse
Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
(b) Indemnification Provisions for Benefit of the Seller. In
the event (i) the Purchaser breaches any of its representations, warranties,
and covenants contained herein, provided that Seller makes a written claim
for indemnification against the Purchaser pursuant to this section 18.11
within the survival period described above, then the Purchaser agrees to
indemnify Seller and Shareholder from and against any Adverse Consequences
the Seller may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Seller or Shareholder
may suffer after the end of any applicable survival period) resulting from or
caused by the breach or claim.
(c) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this section 18.11, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing
within ten (10) days after the Indemnified Party has Knowledge thereof.
(ii) Any Indemnifying Party will have the right to assume the
defense of the Third Party Claim with counsel of his or its choice
reasonably satisfactory to the Indemnified Party at any time within ten
(10) days after the Indemnified Party has given notice of the Third
Party Claim; provided, however, that the Indemnifying Party shall
conduct the defense of the Third Party Claim actively and with all
reasonable diligence thereafter in order to preserve its rights in this
regard; and provided further that the Indemnified Party may retain
separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim. Indemnifying Party's counsel will
consult with such co-counsel, but shall remain in sole control of such
action.
31
(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with this
section 18.11, (A) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party
(not to be withheld, conditioned or delayed unreasonably) unless the
judgment or proposed settlement involves only the payment of money
damages by one or more of the Indemnifying Parties and does not impose
any material injunction or other equitable relief upon the Indemnified
Party and (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld, conditioned or delayed unreasonably).
(d) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third Party Claim in accordance with this section
18.11, however, (A) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner he or it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith) and (B) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the extent provided in this section 8.
(e) Determination of Adverse Consequences. The Parties shall
make appropriate adjustments for tax consequences and insurance coverage and
take into account the time cost of money in determining Adverse Consequences
for purposes of this section 18.11. All indemnification payments under this
section 18.11 shall be deemed adjustments to the Purchase Price.
Exclusive Remedy. Purchaser, Seller and Shareholder acknowledge and
agree that, except as otherwise set forth in this Agreement, the foregoing
indemnification provisions in this section 18.11 shall be the exclusive
remedy of the Purchaser, Seller and Shareholder with respect to matters
relating to Seller, the Business, the Assets and the transactions
contemplated by this Agreement arising or of which the Indemnified Party had
knowledge or should have had knowledge only after the Closing.
32
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PURCHASER
NYMA, INC.,
a Maryland corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Vice President
ATTEST:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary
SHAREHOLDER
TELOS CORPORATION, a
Maryland corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
ATTEST:
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Secretary
SELLER
TELOS CORPORATION, a
California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Treasurer and Chief Financial Officer
ATTEST:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary
33
The following schedules have been omitted because they are not deemed to be
material to an investment decision. The Company undertakes to furnish
supplementally a copy of any omitted schedule to the Commission upon request.
Schedule 2.1 - Purchase and Sale of Assets
Schedule 3.3 - Assumed Liabilities and Obligations
Schedule 4.3 - Financial Statements
Schedule 4.7 - Employee Matters
Schedule 4.8 - Contracts and Agreements
Schedule 4.10 - Properties, Assets and Leasehold Estates
Schedule 4.13 - Licenses and Permits. Compliance with Governmental Regulations
Schedule 4.22 - Customer List
Schedule 4.25 - Insurance
