UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: March 18, 1998
TELOS CORPORATION
(Exact name of registrant as specified in charter)
Maryland 52-0880974
(State of Incorporation) (I.R.S. Employer Identification No.)
19886 Ashburn Road, Ashburn, Virginia 20147-2358
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code
(703) 724-3800
Number of pages (excluding exhibits): 8
<PAGE>
Item 2. Acquisition or Disposition of Assets
On February 28, 1998, Telos Corporation sold substantially all of the net
assets of one of its divisions, Telos Information Systems (TIS), to NYMA, Inc.,
a subsidiary of Federal Data Corporation of Bethesda, Maryland for approximately
$15 million in cash. The sale price is subject to an adjustment to be finalized
within 60 days from the date of closing. Additionally, the sale itself has a
contingency which could require the sale to be unwound should certain contracts
not be successfully novated to the purchaser.
The purchase price shall be increased or decreased on a dollar for dollar
basis by the amount by which the net tangible assets, as defined in the Asset
Purchase Agreement dated February 20, 1998, deviate from $3.3 million, however,
the total purchase price must not exceed $15 million. In accordance with the
Company's loan agreement all proceeds from the sale will be used to pay down the
Company's Senior Revolving Credit Facility.
The sale of TIS does not qualify for discontinued operations treatment in
accordance with APB Opinion Number 30. Accordingly, the Company has presented
pro-forma financial information for the Company's Condensed Unaudited
Consolidated Statement of Operations for the nine months ended September 30,
1997 and the year ended December 31, 1997 assuming the sale of the division and
the application of the net proceeds thereof, occurred on January 1, 1996. The
Company has also presented its Condensed Unaudited Consolidated Balance Sheet at
September 30, 1997, assuming the sale of the division and the application of the
net proceeds thereof occurred on September 30, 1997.
<PAGE>
<TABLE>
<CAPTION>
TELOS CORPORATION AND SUBSIDIARIES
CONDENSED PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(amounts in thousands)
Pro-Forma
As Reported Adjustments Pro-Forma
------------------ ----------- -----------
<C> <S> <S> <S>
Sales
Systems and Support Services $92,725 ($17,444) $75,281
Systems Integration 87,710 -- 87,710
------ ------ ------
Total 180,435 (17,444) 162,991
Costs and expenses
Cost of sales 154,565 (14,459) 140,106
Selling, general and
administrative expenses 19,816 (1,051) 18,765
Goodwill amortization 644 (149) 495
------ ------ ------
Operating income 5,410 (1,785) 3,625
Other income (expense)
Other income 45 -- 45
Interest (expense) income (5,551) 1,125 (4,426)
------ ----- -----
Loss before taxes (96) (660) (756)
Income tax benefit -- 323 323
----- ------ ------
Loss from continuing operations $ (96) $ (337) $ (433)
===== ===== =====
(See accompanying notes)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TELOS CORPORATION AND SUBSIDIARIES
CONDENSED PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(amounts in thousands)
Pro-Forma
As Reported Adjustments Pro-Forma
------------- ----------- ---------
<S> <C> <C> <C>
Sales
Systems and Support Services $103,675 $(18,194) $85,481
Systems Integration 85,220 -- 85,220
------- ------- ------
Total 188,895 (18,194) 170,701
Costs and expenses
Cost of sales 168,281 (15,412) 152,869
Selling, general and
administrative expenses 29,055 (1,739) 27,316
Goodwill amortization 1,001 (330) 671
------ ----- ------
Operating loss (9,442) (713) (10,155)
Other income (expense)
Other expense (445) -- (445)
Interest (expense) income (5,668) 1,500 (4,168)
----- ----- -----
Loss before taxes (15,555) 787 (14,768)
Income tax benefit (expense) 5,739 (183) 5,556
------ ----- ------
Loss from continuing
operations $(9,816) $ 604 $(9,212)
====== ===== =====
(See accompanying notes)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TELOS CORPORATION AND SUBSIDIARIES
CONDENSED PRO-FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(amounts in thousands)
ASSETS
Pro-forma
As Reported Adjustments Pro-Forma
------------------ ----------- --------------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 424 $ -- $ 424
Accounts receivable, net 56,818 (3,707) 53,111
Inventories, net 14,497 -- 14,497
Other current assets 3,521 (14) 3,507
------ ----- ------
Total current assets 75,260 (3,721) 71,539
Property and equipment, net 16,504 (131) 16,373
Goodwill, net 12,901 (5,303) 7,598
Other assets 7,082 -- 7,082
------- ----- -------
Total assets $111,747 $(9,155) $102,592
======= ====== =======
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities
Accounts payable $21,958 $ (11) $21,947
Other current liabilities 7,494 2,212 9,706
Accrued compensation and benefits 10,389 (627) 9,762
------ ---- -----
Total current liabilities 39,841 1,574 41,415
Senior credit facility 36,030 (15,000) 21,030
Subordinated notes 16,893 -- 16,893
Capital lease obligation 12,163 -- 12,163
Other long-term liabilities -- -- --
------- ------ ------
Total liabilities 104,927 (13,426) 91,501
Redeemable preferred stocks
Senior redeemable preferred stock 5,100 -- 5,100
Class B redeemable preferred stock 11,767 -- 11,767
Redeemable preferred stock 27,431 -- 27,431
------ ------ ------
Total preferred stock 44,298 -- 44,298
Stockholders' investment (deficit)
Common stock 78 -- 78
Capital in excess of par -- -- --
Retained deficit (37,556) 4,271 (33,285)
------ ----- ------
Total stockholders' deficit (37,478) 4,271 (33,207)
------ ----- ------
$111,747 $(9,155) $102,592
======= ====== =======
(See accompanying notes)
</TABLE>
<PAGE>
TELOS CORPORATION
NOTES TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Sale of Assets
On February 28, 1998, Telos Corporation sold substantially all of the net
assets of one of its divisions, Telos Information Systems (TIS), to NYMA, Inc.,
a subsidiary of Federal Data Corporation of Bethesda, Maryland for approximately
$15 million in cash. The sale price is subject to an adjustment to be finalized
within 60 days from the date of closing. Additionally, the sale itself has a
contingency which could require the sale to be unwound should certain contracts
not be successfully novated to the purchaser.
The purchase price shall be increased or decreased on a dollar for dollar
basis by the amount by which the net tangible assets, as defined in the Asset
Purchase Agreement dated February 20, 1998, deviate from $3.3 million, however,
the total purchase price must not exceed $15 million. In accordance with the
Company's loan agreement all proceeds from the sale will be used to pay down the
Company's Senior Revolving Credit Facility.
The sale of TIS does not qualify for discontinued operations treatment in
accordance with APB Opinion Number 30.
Note 2. Basis of Presentation
The accompanying condensed pro-forma consolidated financial information is
presented in accordance with the rules of the Securities and Exchange
Commmission. The Condensed Pro-forma Consolidated Balance Sheet as of September
30, 1997 reflects the Company's Condensed Consolidated Balance Sheet as of
September 30, 1997, as previously reported, adjusted for the effects of the sale
of TIS and the application of the net proceeds thereof, assuming the transaction
occurred on September 30, 1997. The Condensed Pro-Forma Consolidated Statements
of Operations for the year ended December 31, 1996 and the nine months ended
September 30, 1997 reflect the Company's income from continuing operations for
the respective periods, as previously reported, adjusted for the effects of the
sale of TIS and the application of the net proceeds thereof, assuming the
transaction occurred on January 1, 1996. In accordance with the rules of the
Commission, the estimated gain on the sale of TIS, net of applicable income
taxes, of $4,271,000 has been excluded from the Pro-Forma Consolidated
Statements of Operations because it is a non-recurring item. Such gain is
included as an adjustment to retained deficit in the accompanying Condensed
Pro-Forma Consolidated Balance Sheet as of September 30, 1997.
<PAGE>
Item 7. Financial Statements and Exhibits
(c) Exhibits:
10.82 Asset Purchase Agreement
10.83 Interim Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed and on its behalf by the
undersigned hereunto duly authorized.
Telos Corporation
Date: March 18, 1998 By: /s/ Lorenzo Tellez
------------------------------
Lorenzo Tellez
V.P., Treasurer
Chief Financial Officer
<PAGE>
TELOS CORPORATION
FORM 8-K
EXHIBIT INDEX
10.82 Asset Purchase Agreement
10.83 Interim Agreement
<PAGE>
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
<PAGE>
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: Robert Spearing, Kurt Brewer,
Walter Natzic, Lorenzo Tellez, David Aldrich, William L.P. Brownley, Mark Hester
and John Wood.
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
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 bill 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 19886 Ashburn Road, Ashburn, Virginia, 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-Competition 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).
(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 has
below) 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.
(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 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;
(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 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;
(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;
(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 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, validvand 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, 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 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. 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 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 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 Purchaser.
6. 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 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 Ames 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 Ames Research Center for the Federal
Information Processing Services project (collectively, "the NASA Ames 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
Ames 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.
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 Mr. Kurt Brewer and Mr. Walter Natzic, 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
John B. Connor, 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;
(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
Ames 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 Ames 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 Ames
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);
(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 a
or prior to the Closing.
8. TERMINATION.
8.1. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(a) 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 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 Ames FIPS Contract is awarded
after the Closing Date:
(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 Ames 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 Ames 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 Ames agrees to reimburse
the cost of preparing the bid for the NASA Ames 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 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 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.
(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:
(a) If to Purchaser, at:
NYMA, Inc.
c/o Federal Data Corporation
4800 Hampden Lane
Bethesda, Maryland 20914
Attention: Peter C. Belford, President
Facsimile No.: (301) 961-3892
With a copy to:
Victoria J. Perkins, Esq.
Shaw, Pittman, Potts & Trowbridge
2300 N Street, NW
Washington, D.C. 20037
Facsimile No.: (202) 663-8007
(b) If to Seller or Shareholder, at:
Telos Corporation
19886 Ashburn Road
Ashburn, Virginia 20147
Attention: David Aldrich
Facsimile No.: (703) 724-3855
With a copy to:
William L.P. Brownley, Esquire
Telos Corporation
19886 Ashburn Road
Ashburn, Virginia 20147
Facsimile No.: (703) 724-3855
and:
John B. Connor, Esq.
John B. Connor, P.L.C.
1033 N. Fairfax Street, No. 310
Alexandria, Virginia 22314
Facsimile No: (703) 836-1799
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.
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.
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.
18.7. 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
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.
(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).
(iv) 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.
(d) 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.
(e) 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.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PURCHASER
NYMA, INC.,
a Maryland corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
ATTEST:
- ----------------------------
Secretary
SHAREHOLDER
TELOS CORPORATION, a
Maryland corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
ATTEST:
- -----------------------------
Secretary
SELLER
TELOS CORPORATION, a
California corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
ATTEST:
- ------------------------------
Secretary
565787 v1
<PAGE>
INTERIM AGREEMENT
This INTERIM AGREEMENT (the "Agreement") is made and entered into as of
the 28th day of February, 1998, by and between Telos Corporation, a California
corporation and Telos Corporation, a Maryland corporation (jointly the
"Seller"), and NYMA, Inc. ("Buyer"), a Maryland corporation.
WHEREAS, Seller provides information technology equipment and services
under certain contracts (the "JPL Contracts") with the Jet Propulsion Laboratory
("JPL"), and under certain contracts with other entities (the "Other Contracts",
and together with the JPL Contracts, the "Contracts"), which Contracts are to be
transferred to Buyer, as specifically set forth in the Asset Purchase Agreement
between the parties dated February 20, 1998 (the "APA");
WHEREAS, the Closing, as defined in Section 2.3 of the APA,
occurred at the close of business on February 28, 1998; and
WHEREAS, Seller and Buyer have agreed to take all reasonable steps
necessary to attempt to obtain novations of the Contracts in favor of Buyer, and
had anticipated that the novation of the JPL Contracts would occur prior to
Closing under the APA; and
WHEREAS, the parties wish to set forth certain terms of the
relationship between Seller and Buyer from the date hereof until the novation of
each such JPL Contract.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree
as follows:
<PAGE>
ARTICLE I
RELATIONSHIP OF PARTIES PRIOR TO NOVATION
The parties intend that Buyer shall have the economic and operational
benefit and obligations of each Contract from and after the date hereof. The
parties acknowledge, however, that until the novation of any Contract to Buyer,
Seller shall continue technically to be the contracting party thereunder.
A. Buyer shall, at the sole cost and expense of Buyer, timely perform
all obligations required of Seller under each Contract in accordance with the
respective terms and conditions of each such Contract (including any and all
amendments, options, modifications and orders issued thereunder prior to and
after the date hereof and such other terms and conditions as may have been duly
incorporated into each such Contract), including, but not limited to, as
appropriate, (i) providing all employees, equipment and services required to be
provided under such Contracts in accordance with the specifications, terms and
conditions of such Contract, and (ii) providing all general and administrative
duties necessary or ordinarily attendant to the performance of the Contracts,
including preparation of invoices and transmission of such invoices to Seller
for submission to the contracting party. Buyer shall indemnify Seller for its
failure to perform any such Contracts in accordance with Article III below. The
parties acknowledge that, between Buyer and Seller, the Business Employees (as
defined in the APA) shall become employees of Buyer as of the date hereof, for
purposes of performing Buyer's obligations under this Paragraph A.
B. Seller shall, as appropriate, (i) as soon as practicable, remit to
Buyer, by wire transfer, any payments received by Seller under the Contracts and
(ii) enforce for the benefit, and at the sole cost and expense of Buyer, all
other rights of Seller under such Contracts.
C. The parties intend that assuming the novations of the JPL Contracts
are received by April 15, 1998, Seller shall bear no cost or expense with regard
to the performance of the Contracts on or after the date hereof, and shall be
protected from any failure by Buyer to perform under any such Contract fully in
accordance with its terms. Accordingly, Buyer shall indemnify Seller in
accordance with Article III below.
D. Buyer shall have the right to use its reasonable discretion in the
performance under the Contracts on and after the date hereof, except to the
extent such discretion conflicts with any requirements of any Contract,
provided, however, that in the event any decision of Buyer under this Paragraph
D could materially increase Seller's liability or obligations under any such
Contract, Buyer shall not act on such decision without the prior written consent
of Seller, which consent shall not be unreasonably withheld, and further
provided that Buyer shall indemnify Seller for such decisions in accordance with
Article III below.
ARTICLE II
COSTS
Each party shall bear their own costs and expenses incurred in the
performance of this Agreement, other than costs billable under the Contracts.
ARTICLE III
INDEMNIFICATION
Buyer agrees to indemnify and hold harmless Seller from and against any
claim, loss, liability, damages, cost or expense (including reasonable
attorneys' fees and expenses) arising from or related to the Contracts and
related to any fact or circumstance occurring on or after the date hereof and
prior to termination pursuant to Paragraph C of Article IV, or to the failure of
Buyer to perform, or delay by Buyer in performance of, any obligation of Buyer
hereunder. Notwithstanding the foregoing, Buyer shall not be obligated to
indemnify Seller with respect to any matter as to which Seller is expressly
required to indemnify Buyer under any other agreement.
Seller agrees to indemnify and hold harmless Buyer from and against any
claim, loss, liability, damages, cost or expense (including reasonable
attorneys' fees and expenses) arising from or related to the Contracts and
related to any fact or circumstance occurring prior to the date hereof, or to
the failure of Seller to perform, or delay by Seller in performance of, any
obligation of Seller hereunder. Notwithstanding the foregoing, Seller shall not
be obligated to indemnify Buyer with respect to any matter as to which Buyer is
expressly required to indemnify Seller under any other agreement.
<PAGE>
ARTICLE IV
TERM
A. Current Contracts. The term of this Agreement shall extend with
respect to the Contracts from the date hereof until such Contracts are duly
novated to Buyer or, to the close of business, April 15, 1998, if novation of
the JPL Contracts has not yet been consummated by such time. Notwithstanding the
foregoing, each party's obligation to indemnify the other, pursuant to Article
III hereof, shall survive the expiration or termination of this Agreement.
B. Timely Receipt of Novation. If the appropriate novations relating to
each of the JPL Contracts are received from JPL prior to the close of business
on April 15, 1998, this Agreement shall terminate as to the JPL Contracts upon
Buyer's return of the original Letter of Credit issued to Buyer by NationsBank
concurrently with the closing under the APA.
C. Failure to Receive Novation. The parties acknowledge that Buyer's
willingness to implement the APA has been and continues to be conditioned on
successful novation of the JPL Contracts. Accordingly, if the appropriate
novations relating to the JPL Contracts are not received from JPL by close of
business on April 15, 1998, the following provisions shall apply:
1. This Agreement and the APA shall terminate.
2. Notwithstanding anything to the contrary set forth herein,
as of the date of such termination, the parties shall provide all reasonable
cooperation in an attempt to minimize any interruption in services to or adverse
effect upon the Contracts or Business Employees.
3. The parties shall take all reasonable steps toward the
objective that the economic benefits and obligations of the Contracts during the
period from the effective date hereof and such termination shall accrue to
Seller. Such steps shall include, without limitation, the prompt invoicing by
Seller for any work performed by Buyer under the Contracts on or after the date
hereof, and the prompt wire transfer by Seller to Buyer of any amounts received
by Seller with respect to such invoices.
ARTICLE V
MISCELLANEOUS
A. Severability. If any provision of this Agreement shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement (or the
application of such provisions to persons or circumstances other than those in
respect to which it is invalid or unenforceable) shall not be affected thereby,
and each provision of this Agreement, unless specifically conditioned upon such
invalid or unenforceable provision, shall be valid and enforceable to the
fullest extent permitted by law.
B. Choice of Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Maryland without regard
to the conflicts of law principles thereof.
C. Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Each party's right to assign this Agreement shall be coextensive with such
party's rights to assign the agreement by which Seller shall sell the assets of
its TIS division to Buyer.
D. Further Assurances. Each Party to this Agreement shall
execute such documents and take such further actions as may be reasonably
necessary to implement the provisions of this Agreement.
E. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
F. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
G. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be made in accordance with the requirements set
forth in the agreement by which Seller shall sell substantially all of its
assets to Buyer.
H. Expenses. Except as otherwise set forth herein, Buyer and Seller
shall each bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
I. APA. To the extent of any contradiction or inconsistency
between this Agreement and the APA, the terms of this Agreement shall control.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NYMA, INC,
a Maryland corporation
By:
Name:
Title:
TELOS CORPORATION,
a Maryland corporation
By:
Name:
Title:
TELOS CORPORATION,
a California corporation
By:
Name:
Title:
