Exhibit 2
TRANSITION agreement
THIS TRANSITION AGREEMENT (this "Agreement"), made as of the 31st
day of May, 2000, is by and among HALIFAX CORPORATION, a Virginia
corporation ("HC"), HALIFAX TECHNICAL SERVICES, INC., a Virginia
corporation ("HTSI") and U.S. FACILITIES, INC., a Delaware corporation
("USF").
BACKGROUND
A. USF has agreed to purchase from HC all of the issued and
outstanding shares of capital stock of HTSI pursuant to the terms of a
Stock Purchase Agreement of even date herewith (the "Purchase
Agreement"). All capitalized terms used and not defined herein shall
have the meanings ascribed to such terms in the Purchase Agreement.
B. HTSI is engaged in the business of providing facilities
management and technology services pursuant to the contracts listed on
Schedule 3.17 to the Purchase Agreement (collectively, the
"Transferred Contracts").
C. USF and HTSI have requested, and HC has agreed, that HC will
provide to HTSI during the Term (as hereinafter defined) and for the
fees set forth herein such accounting, contract administration, human
resources and procurement functions as HTSI may require (such services,
as further described in Section 1 below, being referred to herein
collectively as the "Transition Services").
D. The parties hereto wish to enter into this Agreement pursuant
to which HC will provide the Transition Services.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and intending to be legally bound hereby,
the parties agree as follows:
1. Transition Services to be Provided by HC. HC shall provide
Transition Services with respect to all Transferred Contracts in
accordance with the terms described below.
(a) General Identification of Services. The Transition
Services to be provided by HC shall include the following:
(i) Processing and facilitating the billing, collection
and deposit of revenues into HTSI's bank accounts and the payment by
HTSI of HTSI's past debts and liabilities and all debts and liabilities
incurred during the Term;
(ii) Providing advice concerning the Transferred
Contracts, including operations and administration at each contract
site;
(iii) Providing all human resources and labor
relations functions, including, without limitation, supervision of the
hiring and firing of all employees and training of all employees, as
well as the handling of employee benefits;
(iv) Providing financial and other reports and other
information to HTSI with respect to HTSI's operations;
(v) Providing payroll functions including, but not
limited to, payment, withholding, trust fund, deposit and tax
compliance services;
(vi) Handling all relationships with contractors and
subcontractors;
(vii) Managing liability planning and
administration, including insurance services (but not including the
providing of insurance, which shall be HTSI's responsibility),
monitoring claims and litigation and coordinating responses to
liability issues;
(viii) Providing data processing and information
services, including hardware and software, hardware systems and
networking facilities and the transition to HTSI and the implementation
by HTSI of the Deltec Government Accounting System;
(ix) Providing services relating to the purchase of
goods and services necessary to the performance of anyTransferred
Contracts, including negotiations with vendors and suppliers; and
(x) Performance of HTSI's accounting, bookkeeping and
record keeping functions relating to all of the above.
(b) Personnel Providing Transition Services. HC agrees to
provide each class of Transition Services set forth on Schedule 1
hereto and, to the extent reasonably practicable, shall provide such
Transition Services under the supervision of the employees listed on
Schedule 1.
(c) Duration of Transition Services. Notwithstanding
Section 3 hereof, on June 16, 2000, June 30, 2000 and July 14, 2000,
HTSI may elect, upon notice to HC, to terminate some or all of the
Transition Services provided by HC (such election by HTSI being
referred to herein as an "Optional Termination").
(d) Compensation and Expenses. As compensation for the
Transition Services, HTSI shall pay to HC a monthly fee of not more
than $55,000 (the "Management Fee"), allocated among each class of
services provided, as follows:
(i) Accounting: $22,000
(ii) Human Resources: $10,000
(iii) Contract Administration: $12,000
(iv) Procurement: $11,000
In addition to the Management Fee, HC shall be entitled to
reimbursement by HTSI for insurance premiums paid to maintain employee
benefits coverage for HTSI's employees following the Closing Date and
all expenses incurred by HC in providing the Transition Services (such
expenses being referred to herein as the "Transition Costs"). HC shall
not incur any expense relating to the Transition Services in excess of
$1000 without HTSI's prior written approval. The Management Fee shall
be payable by HTSI to HC on the last day of each calendar month during
the Term or any Renewal Term for services provided during such month.
In the event HC provides Transition Services (or any class or subclass
of Transition Services) for only a portion of any calendar month, the
Management Fee (or the portion thereof allocable to the subject class
or subclass of Transition Services) shall be prorated for the number of
days during such month that HC was obligated to provide such services.
HC agrees to submit to HTSI by the tenth (10th) calendar day of each
month during the Term an invoice in such detail as HTSI may reasonably
require listing the Transition Costs incurred by HC during the
preceding calendar month. Within ten (10) calendar days after the
receipt of an invoice for Transition Costs, HTSI shall remit payment
thereon to HC.
2. Collection of Accounts Receivable; Payment of Additional
Taxes.
(a) From and after the Closing, HC shall collect on HTSI's
behalf and for HTSI's account all amounts received by HC in payment of
Accounts Receivable and shall immediately remit to an account
designated by HTSI all amounts so collected by HC, less any amount
retained by HC in accordance with subparagraph 2(b)(ii) hereof.
(b) USF and HC have agreed in the Purchase Agreement that
HTSI shall pay to HC on account of Additional Taxes up to $190,000, to
be drawn from the first amounts received from and after Closing in
payment of Accounts Receivable. Accordingly, USF and HTSI hereby agree
that (i) HTSI shall pay to HC all amounts received by HTSI from and
after the Closing with respect to the Accounts Receivable, up to
$190,000 and (ii) HC may retain up to $190,000 from amounts received by
HC in payment of Accounts Receivable; provided, however, that in no
event shall the aggregate amount paid to and retained by HC pursuant to
this subparagraph (b) exceed $190,000.
(c) HC acknowledges and agrees that all amounts paid to or
retained by HC pursuant to subparagraph (b) above shall be deposited
into an escrow account and thereafter disbursed to HC or refunded to
USF in accordance with Section 2.6 of the Purchase Agreement.
3. Term of Agreement; Termination Rights.
(a) The term of this Agreement shall commence on the
date hereof and continue until July 31, 2000 (the "Initial Term"),
subject to any Optional Termination by HTSI pursuant to Section 1(c),
above, or a prior termination for Cause as hereinafter provided. This
Agreement may renew for one or more successive periods of thirty (30)
days (each such period being referred to hereinafter as a "Renewal
Term") upon the mutual agreement of the parties. In the event HTSI
wishes to renew the Agreement, HTSI shall submit a written request to
HC not less than ten (10) days prior to the expiration of the Initial
Term or any Renewal Term. HC shall accept or refuse HTSI's request in
writing within three (3) business days after receipt of HTSI's request.
In the event HC fails timely to respond to HTSI's request, the
Agreement shall be deemed to have been renewed for one additional
Renewal Term. The "Term" of this Agreement shall include the Initial
Term and each Renewal Term.
(b) Either party may terminate this Agreement at any time
for "Cause." As used herein, "Cause" means (i) the failure of the
other party to perform its duties or obligations hereunder in any
material respect, which failure continues for five (5) days after
written notice thereof from the nonbreaching party; or (ii) knowing and
intentional misconduct materially injurious to the party desiring to
terminate this Agreement.
(c) No termination of this Agreement shall affect HC's right
to receive (i) payment for Transition Services performed and/or (ii)
reimbursement of Transition Costs accrued through the effective date of
such termination.
4. Nature of Relationship between Parties. Nothing herein
contained shall be deemed to make HC a partner, co-venturer or other
participant in the business or operations of HTSI or USF, or in any
manner to render HC liable, as principal, surety, accommodation party,
guarantor, agent or otherwise, for any of the debts, obligations or
liabilities of HTSI or USF whether incurred directly by HTSI or by HC
on behalf of HTSI in accordance with this Agreement; it being
understood that such debts, obligations and liabilities are and shall
be and remain solely those of HTSI and USF.
5. HTSI's Right of Inspection. Upon HTSI's request, and HTSI's
and USF's agreement to treat such information with appropriate
confidentiality, HC shall make available to HTSI and its authorized
representatives for inspection such of HC's books and operational and
accounting records related to this Agreement as are necessary for
HTSI's verification of the proper performance by HC of its obligations
under this Agreement and the correctness and accuracy of the
information provided by HC to HTSI hereunder, and HC shall allow HTSI
to make copies of extracts therefrom. Such inspection and copying
shall be made at HTSI's expense.
6. Ratification and Exculpation.
(a) Each of HTSI and USF hereby ratifies, approves, assumes
and agrees to those obligations and undertakings which may be made by
HC for and on behalf of HTSI or USF under or in connection with this
Agreement which are within the scope of the authority vested in HC
hereunder.
(b) HC, its owners and Affiliates, and the directors,
officers, employees and agents of HC or any of its owners and
Affiliates, shall have no responsibility or liability for any acts or
omissions by any of them under or in connection with this Agreement if
such action or failure to act was not grossly negligent and was done
without intent to do injury to HTSI or USF. HC may confer with counsel
with respect to any action relating to HC's power or authority
hereunder, and HC, its owners and Affiliates, and directors, officers,
employees and agents of HC or any of its owners and Affiliates shall
not be liable under any circumstances for any act done or omitted to be
done in good faith on advice of counsel. HC shall be protected in
acting upon any certificate, statement, notice from any Person,
request, consent, agreement or other instrument whatsoever, not only as
to its due execution and validity, and the validity and effectiveness
of its provisions, but also as to the truth and acceptability of any
information therein contained which HC shall in good faith believe to
be valid and to be signed or presented by a proper Person.
7. Indemnity. Each of HTSI and USF shall indemnify, defend and
hold harmless HC and its shareholders, directors, officers, employees
and agents (collectively, the "HC Indemnitees") from and against any
and all losses, costs, liabilities, claims, suits, demands and expenses
(including, but not limited to, reasonable attorneys' fees and costs)
(collectively, "Liabilities") arising from this Agreement and HC's
performance of its duties hereunder, provided HC performs in accordance
with the terms hereof and, provided further, that this indemnity shall
not apply to any Liabilities incurred by the HC Indemnitees resulting
from HC's gross negligence or willful misconduct. HC shall indemnify,
defend and hold harmless HTSI and USF and their respective
shareholders, directors, officers, employees and agents (collectively,
the "HTSI/USF Indemnitees") from and against any and all Liabilities
incurred by any of the HTSI/USF Indemnitees as a result of HC's gross
negligence or willful misconduct.
8. Remedies. The right of either party to terminate this
Agreement for "Cause" pursuant to Section 3, above, shall be in
addition to all other rights or remedies which may be available to the
aggrieved party at law or in equity. The occurrence of any matter
constituting "Cause" hereunder (and the lapse of the cure period
described within such definition), at the option of the nonbreaching
party and upon written notice to the breaching party, shall constitute
a default under this Agreement, whereupon the nonbreaching party shall
be entitled to exercise all rights and remedies which may be available
to it. Without limiting the generality of the foregoing, either party
may commence an action in a court of competent jurisdiction upon the
alleged breach of this Agreement by the other party.
9. Notices. All notices hereunder must be in writing and will
be deemed to have been duly given when (a) delivered by hand (with
written confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt), or (c) when received by the addressee if sent
by a nationally recognized overnight delivery service (receipt
requested), in each case addressed to the parties as follows or to such
other addresses as may be designated in written notice to the parties:
To HC:
Halifax Corporation
5250 Cherokee Avenue
Alexandria, VA 22312
Attn: President
Fax No.: (703) 658-2426
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attn: Barry Genkin, Esquire
Fax No.: (215) 569-5550
To HTSI and USF:
Halifax Technical Services, Inc.
1800 John F. Kennedy Boulevard
16th Floor
Philadelphia, PA 19103
Attn: President
Fax No.: (215) 564-1529
with a copy to:
Obermayer Rebmann Maxwell & Hippel LLP
One Penn Center, 19th Floor
1617 John F. Kennedy Boulevard
Philadelphia, PA 19103
Attn: John V. O'Hara, Esquire
Fax No.: (215) 665-3165
10. Section Headings. All headings used are for convenience only
and shall not be referred to in construing this Agreement.
11. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No party may assign its
rights or obligations hereunder without the written consent of the
other party.
12. Modification. This Agreement may not be modified, varied,
supplemented or amended in any respect except in a writing executed by
all parties hereto.
13. Entire Agreement. This Agreement expresses the entire
agreement and understanding between the parties with respect to the
subject matter hereof and all prior agreements or understandings
relating to the subject matter hereof (other than the Purchase
Agreement) are hereby superseded and cancelled.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
15. Certain Defined Terms. "Person" as used herein means a
natural person, joint venture, corporation, partnership, sole
proprietorship, trust, estate, cooperative, association, government or
governmental entity or any other entity.
16. Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force and
effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the
extent not held valid or unenforceable.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and sealed this
Agreement as of the day and year first above written.
Attest: HALIFAX CORPORATION
___________________________ By: /s/Charles L. McNew
Authorized Officer President
Attest: HALIFAX TECHNICAL SERVICES, INC.
______________________________ By: /s/James C. Dobrowolski
Authorized Officer President
Attest: U.S. FACILITIES, INC.
_______________________________ By: /s/Willie F. Johnson
Authorized Officer Chairman
<PAGE>
SCHEDULE 1
Accounting
Accounts Payable: Jodi Ressler
Renee Jarman
Payroll Processing: Vivian Butler
Payroll Taxes/Union
Dues Compliance: Paul Saha*
Sales Tax Compliance: [name]
GL Processing: Kim Chu
Billing: Pam Auber
Collections: Monica Prey
Supervision: Diana Camargo
Financial Statement Joseph Sciacca
Review: Diana Camargo
Human Resources
Pam Kirschner
Doug Randles*
Jean Brooks (new benefit plan)
Katrina Edwards
Contracts
Jim Sherwood*
Jean Burdick
Suzanne Green
Procurement
Patricia McNamara
Maurice Evans
* HC contact person
