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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 19, 1996
KTI, INC.
(Exact name of Registrant as specified in Charter)
New Jersey 33-85234 22-2665282
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification
Number)
7000 Boulevard East, Guttenberg, New Jersey 07093
(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code- (201) 854-7777
Not Applicable
(Former name and former address, as changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 19, 1996 KTI, Inc. (the "Company" or the "Registrant") and its
wholly-owned subsidiary DataFocus Incorporated ("DataFocus"), executed an
Agreement with CIBER, Inc. ("CIBER"). Pursuant to the Agreement, DataFocus sold
substantially all of the assets of DataFocus' Business Systems Division, other
than cash and accounts receivable, to CIBER for $5,000,000, subject to customary
prorations, on July 26, 1996. DataFocus retained substantially all of the
liabilities of its Business Systems Division that arose prior to July 26, 1996.
The net proceeds of such sale, including cash and accounts receivable, less
related liabilities, are approximately $4,250,000. DataFocus has distributed
approximately $3,500,000 in cash to the Company and also distributed Business
Systems Division accounts receivable having a net value of approximately
$900,000. Of those sums, approximately $150,000 will be used to pay transaction
costs of KTI, relating to the sale.
Additionally, on July 29, 1996, the Company sold the stock of DataFocus to
certain members of the management of DataFocus. Pursuant to the sale, the
Company will receive $5,000 in cash, the cancellation of stock options issued to
DataFocus management to purchase 132,328 shares of the Company's common stock,
the cancellation of an option to purchase 20% of the common stock of DataFocus,
and a royalty agreement. Under the royalty agreement, the Company will receive a
monthly base royalty payment of $5,000 and quarterly payments of additional
royalties, equal to 5% of net revenue from the sale of NuTCRACKER software
product in excess of $4,000,000 per year. DataFocus will have the right to
repurchase the royalty agreement from the Company for the following payments:
A. $400,000 prior to July 29, 1997;
B. Three times the royalty payments due to the Company for the twelve
months immediately prior to the date of notice of repurchase, if given
on or after July 29, 1997 but before July 29, 1998;
C. Two times the royalty payments due to the Company for the twelve
months immediately prior to the date of notice of repurchase, if given
on or after July 29, 1998 but before July 29, 1999; or
D. An amount equal to the royalty payments due to the Company for the
twelve months immediately prior to the date of notice of repurchase, if
given after July 29, 1999.
As part of the sale of DataFocus to its management, the Company agreed to loan
up to $500,000 to certain members of the management of DataFocus, including
Thomas A. Bosanko, a director of the Company. The loan bears interest of 8% per
annum and provides for level quarterly principal payments to repay the loan over
a four year period. The loan is secured by Company common stock owned by the
such members of management of DataFocus.
The royalty agreement provides that royalty payments to the Company terminate
three years after the repayment of the loans.
The Company will use the distribution from DataFocus to pay maturing debt and to
augment its working capital.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Proforma Financial information
It is impractical to provide the required proforma financial information as
quarterly financial statements for the Company are not yet available. The
required proforma financial information will be filed as soon as practical,
following the completion of the quarterly statements for the Company, but not
later than September 27, 1996.
(b) Exhibits
Exhibit Number DESCRIPTION
- -------------- -----------
2.1 Agreement dated as of July 19, 1996 by and among KTI, Inc.,
DataFocus Incorporated and CIBER, Inc. The schedules to this
exhibit do not contain information which is material to an
investment decision and which is not otherwise disclosed in
the Agreement. The contents of the schedules include, among
other thing, lists of assets, employees, and contracts,
purchase price and expense allocations, legal opinions,
non-compete and employment agreements, descriptions of benefit
plans and financial statements. The Company hereby agrees to
furnish supplementally a copy of any omitted schedule to the
Commission upon request.
2.2 Agreement dated July 19, 1996 by and among KTI, Inc., Thomas
A. Bosanko and Patrick B. Higbie
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KTI, Inc.
------------------------------
(Registrant)
Dated: July 29, 1996 By:
-------------------------------
Name: Robert E. Wetzel
Title: Senior Vice President
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EXHIBITS INDEX
Exhibit Number DESCRIPTION
- -------------- -----------
2.1 Agreement dated as of July 19, 1996 by and among KTI, Inc.,
DataFocus Incorporated and CIBER, Inc. The schedules to this
exhibit do not contain information which is material to an
investment decision and which is not otherwise disclosed in
the Agreement. The contents of the schedules include, among
other thing, lists of assets, employees, and contracts,
purchase price and expense allocations, legal opinions,
non-compete and employment agreements, descriptions of benefit
plans and financial statements. The Company hereby agrees to
furnish supplementally a copy of any omitted schedule to the
Commission upon request.
2.2 Agreement dated July 19, 1996 by and among KTI, Inc., Thomas
A. Bosanko and Patrick B. Higbie
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July 16, 1996
KTI, Inc.
7000 Boulevard East
Guttenberg, New Jersey 07093
Attn: Martin J. Sergi, President
Dear Mr. Sergi:
This letter sets forth the agreement (the "Agreement") of KTI, Inc., a
New Jersey corporation ("KTI"), through its wholly-owned subsidiary DataFocus
Incorporated, a Delaware corporation ("DataFocus"), to sell, and of CIBER, Inc.,
a Delaware corporation ("CIBER"), to buy certain of the assets of DataFocus used
or held for use in connection with, necessary for or related to the Microsoft NT
computer software consulting business and associated activities of the Business
Systems Division of DataFocus (the "Business"), including certain servicing
rights under contracts relating to the Business. The parties agree as follows:
1. Asset Transfer. Subject to the terms and conditions of this
Agreement, DataFocus will sell, convey, assign, transfer and deliver to CIBER,
and CIBER will purchase and accept from DataFocus, for and in consideration of
the purchase price set forth in paragraph 3, all of DataFocus' right, title and
interest in, to and under the following assets other than Excluded Assets (as
defined herein) of DataFocus (the "Assets"), free and clear of all security
interests, liens, equities and claims of third parties other than liens for
taxes not yet delinquent:
(a) All assets, properties, privileges, rights, interests, business
and goodwill of DataFocus, other than the Excluded Assets, necessary for or used
or useful in connection with the Business, including, without limiting the
generality of the foregoing, the assets described in Exhibit A attached hereto;
(b) A list of all clients of the Business for which DataFocus has
performed work at any time since July 1, 1993;
(c) All current contracts, licenses to use software, purchase
orders, bids in process and other agreements of DataFocus relating to the
Business (the "Contracts"), including, but not limited to, those agreements
identified in Exhibit B attached hereto;
(d) All marketing files of DataFocus identifying contacts, dates of
most recent client contact and other information customarily contained therein
with respect to the Business;
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KTI, Inc.
July 16, 1996
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(e) All recruiting files of DataFocus identifying all active or
potential recruiting prospects, applications, letters, technical reviews,
references, resumes and other information customarily contained therein with
respect to the Business;
(f) All personnel files of DataFocus pertaining to any person
providing services for the Business as a billable consultant or employee,
together with any and all information customarily contained therein, including,
but not limited to, W-4's, 1099's, personnel reviews, commission and/or bonus
arrangements and salary history and, upon CIBER's request within one year after
Closing (as defined in paragraph 9), copies of such files for any former
DataFocus employee or consultant who provided services for the Business;
provided, however, that DataFocus shall be entitled to retain a set of these
files;
(g) All maintenance agreements, lease agreements and other
agreements related to any property (real or personal) used or held for use by
DataFocus in connection with the Business, each of which at the date hereof is
described in Exhibit C attached hereto, which list also identifies each
agreement requiring the consent of a third party in order to assign such
agreement to CIBER; and
(h) Non-exclusive use of the DataFocus' tradename for a period not
to exceed 90 days from the Closing Date.
2. Excluded Assets. Notwithstanding anything herein contained to the
contrary, the following assets and properties of DataFocus are specifically
excluded from the Assets and shall be retained by DataFocus (the "Excluded
Assets"):
(a) cash and bank accounts;
(b) accounts receivable arising out of services provided on or prior
to the Closing Date; and
(c) the property and rights described in Exhibit D attached hereto.
3. Purchase Price. The purchase price for the Assets shall be Five
Million Dollars ($5,000,000) and shall be payable by CIBER to DataFocus at
Closing by wire transfer of immediately available funds to a bank designated by
DataFocus. The actual amount payable at Closing by CIBER shall be reduced by the
amount of the accrued vacation liability and accrued payroll obligations assumed
by CIBER pursuant to paragraph 4 and by the amount of the bonuses DataFocus
accrues at Closing for Newton G. Fletcher and Matthew Jacobson (the "FJ
Amount").
4. Assumption of Liabilities. CIBER shall, as further consideration
for the transfer of the Assets, assume and discharge, and indemnify and hold
DataFocus harmless from and
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KTI, Inc.
July 16, 1996
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against (i) accrued vacation liability through the Closing Date and accrued
payroll obligations of DataFocus for the period from July 15, 1996 through the
Closing Date, in each case, for personnel of DataFocus who perform services for
the Business, who are offered employment by CIBER and who accept such
employment, (ii) the amount payable to Messrs. Fletcher and Jacobson as a bonus
(if any) for calendar year 1996 up to the FJ Amount and (iii) all debts,
liabilities and obligations of DataFocus relating to or arising with respect to
periods from and after the Closing Date (as defined in paragraph 9) under the
Contracts listed on Exhibit B. DataFocus hereby agrees to retain and discharge,
and to indemnify and hold CIBER harmless from and against, any and all debts,
liabilities and obligations, including taxes, of DataFocus relating to or
arising with respect to periods prior to the Closing Date and any debt,
liability or obligation of DataFocus not expressly assumed hereby, whenever
arising, including, without limitations, any debt, liability or obligation of
DataFocus pursuant to any "employee pension benefit plans" (as that term is
defined under Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), "employee welfare benefit plans" (as that term is
defined under Section 3(1) of ERISA) and any other plans, programs, practices,
policies or arrangements providing benefits for any or all of the present or
past employees of the Business, DataFocus or any organization which is a member
of a controlled group of organizations with DataFocus (within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended) (a "Commonly Controlled Entity") which are in effect as of the date
hereof or under which DataFocus has or will have any obligations or liabilities.
5. Allocation of Purchase Price. The parties agree that the purchase
price paid pursuant to paragraph 3 shall be allocated among the Assets pursuant
to Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
in accordance with Exhibit E attached hereto to which CIBER and DataFocus have
mutually agreed. DataFocus and CIBER agree to report the federal, state and
local income and other tax consequences of the transactions contemplated hereby,
and in particular to report the information required by Section 1060(b) of the
Code, in a manner consistent with the agreed upon allocation, and to file all
other applicable tax returns and forms to reflect such purchase price
allocation. Within 240 days following the Closing Date, CIBER and DataFocus
shall have agreed as to the content of the IRS Form 8594 to be filed by each of
them with their next income tax returns, and will not take any position
inconsistent therewith (except to correct any error) upon examination of any tax
return, in any refund claim, in any litigation, investigation or otherwise.
6. Revenues; Expenses.
(a) From and after the Closing Date, CIBER shall use reasonable
efforts to assist DataFocus in the collection of the accounts receivable of the
Business outstanding as of the Closing Date.
(b) From and after the Closing Date, DataFocus shall promptly
forward to CIBER all collections of any revenues derived from CIBER's
performance after the Closing Date of
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KTI, Inc.
July 16, 1996
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contract programming or other services under any Contracts, including any
thereof the assignment of which to CIBER shall not have been fully accomplished
at Closing. CIBER will promptly forward to DataFocus any collections of revenues
CIBER receives that are derived from DataFocus' performance through the Closing
Date.
(c) The parties agree to prorate, as of the close of business on the
Closing Date, the expenses of the Business of the type identified on Exhibit F
attached hereto. Any adjustment pursuant to this subparagraph shall be agreed
upon and shall be payable within sixty (60) days after the Closing Date;
provided, however, that if the amount of a proratable item is not known as of
such date, the parties shall prorate such item based on the prior year's
assessment or another reasonable basis and shall then adjust such proration when
the actual amount becomes known. The parties agree to negotiate in good faith
adjustments for any other items that arise following the Closing Date.
(d) DataFocus shall furnish to CIBER at Closing, to the extent
information is then available and as soon as practicable after Closing if not
then available, a list of all commissions, bonuses and other payments that may
become payable by DataFocus after Closing to employees or independent
contractors of DataFocus providing services to the Business. The party receiving
the revenues in respect of which such commissions or bonuses are payable shall
be responsible for accruing and paying, when due, such commissions and bonuses
to the employees and independent contractors entitled to receive such amounts.
To the extent both DataFocus and CIBER receive such revenues, the responsibility
for the payment of the commissions and bonuses attributable thereto shall be
allocated between them proportionately.
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KTI, Inc.
July 16, 1996
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7. Representations of KTI and DataFocus. Each of KTI and DataFocus
represents and warrants that:
(a) Organization and Authority. KTI is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New Jersey. DataFocus is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has all the
requisite corporate power and authority to own, the Assets and to carry on the
Business as now being conducted. Copies of DataFocus' certificate of
incorporation and by-laws, and all amendments thereto, heretofore delivered to
CIBER, are accurate and complete as of the date hereof. Each of KTI and
DataFocus has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, and is duly
qualified and in good standing as a foreign corporation to do business in each
jurisdiction in which it is required by law to be so qualified, except for any
states where the failure to be so qualified and in good standing would not have
a Material Adverse Effect on the Business. A list of states in which DataFocus
has, at the date hereof or at any time since January 1, 1996, client projects or
assignments is attached hereto as Schedule 7(a). This Agreement and the bills of
sale, assignments and other agreements and instruments of transfer to be
executed by KTI and DataFocus and delivered to CIBER in consummation of the
transactions contemplated hereby have been (or, upon execution and delivery,
shall have been) duly executed and delivered, have been authorized by all
necessary corporate and stockholder action, and constitute (or, upon execution
and delivery, will constitute) the legal, valid and binding obligations of KTI
and DataFocus enforceable against KTI and DataFocus in accordance with their
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws generally affecting the rights
of creditors and by general principles of equity;
(b) No Conflict or Breach. Except as disclosed on Schedule 7(b)
attached hereto, the execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby and the fulfillment of the terms hereof
will not (i) constitute, with or without the giving of notice or passage or
time, or both, a breach of any of the terms or provisions of, or a default under
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which DataFocus or KTI is a party or by which either of them or
any of their respective properties may be bound or affected, except any such
breach or default which has been waived in writing and a copy of which waiver
has been delivered to CIBER, (ii) result in the creation of any claim, lien,
encumbrance, security interest, restriction or other charge or defect upon any
of the Assets, (iii) conflict with the certificate of incorporation or by-laws
of either DataFocus or KTI, or (iv) violate any judgment, decree, order or award
of any court, governmental body or arbitrator binding upon or affecting
DataFocus or KTI or any of their respective property, except in the case of
clauses (i), (ii) and (iv) to the extent any such breach, default, security
interest, lien or violation would not, individually or in the aggregate, have a
Material Adverse Effect (as defined herein) on the Business;
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KTI, Inc.
July 16, 1996
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(c) Approvals. Except as set forth on Schedule 7(c) attached hereto,
no consent, approval or authorization prescribed (i) by any law (other than
state and local government business licenses and other routine governmental
consents, approvals and authorizations) or (ii) by any agreement or instrument
to which either KTI or DataFocus is a party, or by which either KTI or DataFocus
or any of their respective properties or businesses is bound or affected, is
required in order to permit the consummation of the transactions contemplated by
this Agreement or to allow CIBER's operation of the Business in the same manner
as DataFocus (other than any agreement or instrument involving less than $25,000
in annual expense or revenue);
(d) No Legal Conflicts. Neither KTI or DataFocus is prohibited by
any order, writ, injunction or decree of any body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no action or
proceeding is pending or, to the best of each of DataFocus' and KTI's knowledge,
threatened against DataFocus or KTI which questions the validity of this
Agreement or any of the actions which the parties hereto have taken in
connection herewith or which it is contemplated they shall take in connection
herewith;
(e) Ordinary Course. Except as set forth on Schedule 7(e) attached
hereto, since December 31, 1995, DataFocus has conducted the Business only in
the ordinary course of business consistent with past custom and practice, and
there has not been any event, occurrence or development or state of
circumstances or facts which has had or could reasonably be expected to have a
Material Adverse Effect on the Business or the Assets, or any material change in
any method of accounting or accounting practice by DataFocus; and there are no
material liabilities of the Business, whether accrued, contingent or otherwise,
other than liabilities provided for in the Financial Statements referred to in
subparagraph 7(o). Without limitation of the foregoing and except as set forth
on Schedule 7(e), since March 31, 1996, DataFocus has not:
(i) (x) created, incurred or assumed any long-term debt
(including obligations in respect of capital leases), or, except under existing
lines of credit, incurred or assumed any short term debt; (y) assumed,
guaranteed, endorsed or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person or
entity; or (z) made any loans, advances or capital contributions to, or
investments in, any other person or entity;
(ii) (x) increased in any manner the compensation of any of
its employees; (y) agreed to pay any pension, retirement allowance or other
employee benefit not required by any existing plan, agreement or arrangement to
any employee, whether past or present, except with respect to uniform changes
under any plan affecting all employees covered by such plan, copies of which
plans have been delivered to CIBER; or (z) committed itself to any additional
plans, including, but not limited to, pension, profit sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee
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KTI, Inc.
July 16, 1996
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benefit plan, agreement or arrangement, or to any employment agreement or
consulting agreement (arising out of prior employment) with or for the benefit
of any person, or to amend any such plans or any of such agreements in existence
on the date hereof;
(iii) cancelled or terminated any current insurance (or
reinsurance) policies relating to the Business or permitted any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than the
coverage remaining under those cancelled, terminated or lapsed were in full
force and effect;
(iv) (x) sold, transferred or otherwise disposed of or agreed
to sell, transfer, or otherwise dispose of, any of the Assets which have a net
book value, in the aggregate, in excess of $10,000 or (y) mortgaged or
encumbered any of the Assets;
(v) entered into any agreements, commitments or contracts
relating to the Business other than in the ordinary course of business and
consistent with past practices;
(vi) voluntarily consented to the termination of any Contract,
lease or other agreement material to the Business by any other party thereto;
(vii) paid, discharged, settled or satisfied or agreed to pay,
discharge, settle or satisfy, any claims, liabilities or obligations (absolute,
accrued, contingent or otherwise), other than when due in accordance with their
respective terms and other than claims, liabilities and obligations in an amount
not in excess of $10,000 individually or $50,000 in the aggregate; or
(viii) waived, released, granted or transferred any rights of
value or modified or changed any existing license, lease, contract or other
agreement or arrangement, other than rights, licenses, leases, contracts,
agreements and arrangements constituting Excluded Assets or involving less than
$25,000 in annual expense or revenue;
(f) Litigation. Except as disclosed on Schedule 7(f) attached hereto,
there is no pending or outstanding or, to the best knowledge of each of KTI and
DataFocus, threatened, action, suit, proceeding or investigation involving
DataFocus or the Business which if determined adversely would have a Material
Adverse Effect on the Business ("Claim"), and neither KTI nor DataFocus has
retained or assumed liability for any Claim or potential Claim, either
contractually or by operation of law, or any judgment, decree, injunction, rule
or order of any court, governmental department, commission, agency,
instrumentality or arbitrator;
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KTI, Inc.
July 16, 1996
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(g) Compliance with Applicable Law. Except as disclosed on Schedule
7(g), DataFocus holds all permits, licenses, exemptions, orders and approvals of
all governmental entities necessary for the lawful conduct of the Business other
than state and local governmental business licenses and other routine
governmental permits, licenses, exemptions, orders and approvals (the "DataFocus
Permits"). DataFocus is in material compliance with the terms of the DataFocus
Permits. The Business is not being conducted in violation of any order, writ,
injunction, decree, statute, rule or regulation of any governmental entity
applicable to DataFocus or the Business except for violations that individually
or in the aggregate do not, and insofar as reasonably can be foreseen in the
future, will not, have a Material Adverse Effect on the Business. DataFocus is
in material compliance with all immigration and other laws relating to the
employment or retention of persons who are not citizens of the United States.
Except as set forth on Schedule 7(g) attached hereto, as of the date hereof, to
the best knowledge of KTI and DataFocus, no investigation or review by any
governmental entity with respect to the Business is pending or threatened, nor
has any governmental entity indicated an intention to conduct the same;
(h) Absence of Defaults. Except as disclosed on Schedule 7(h)
attached hereto, DataFocus is not in default in any material respect under any
material Contract, lease, purchase or sale contract, note, indenture or loan
agreement or under any other agreement, instrument or arrangement to which
either of them is a party or by which either of them or any of their respective
properties may be bound;
(i) Contracts. Except as disclosed on Schedule 7(i) attached
hereto, neither KTI nor DataFocus is a party to or is bound by any of the
following which will or could bind CIBER or affect or relate to the Business or
the Assets after the Closing Date:
(i) any employment contracts or agreements, or other similar
formal agreements or any collective bargaining or labor agreements or any other
written agreement or arrangement with any officer, employee, sales
representative or consulting or person serving in a similar capacity;
(ii) any written or unwritten compensation plans, pension
plans, welfare plan and each other written plan, arrangement or policy relating
to stock options, stock purchases, compensation, deferred compensation,
severance, fringe benefits or other employee benefits, including, but not
limited to, performance compensation plans, vacation plans, bonus plans,
incentive plans, employee stock purchase plans, employee stock option plans,
employee stock bonus plans, deferred compensation agreements, employee pension
benefit plans, a group or individual medical, health, dental, accident,
disability, life and other employee benefit insurance contracts or arrangements,
employee welfare benefit plans or any other plans, programs, practices, policies
or arrangements providing benefits for any or all of the present or past
employees of the Business,
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KTI, Inc.
July 16, 1996
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DataFocus or any Commonly Controlled Entity which are in effect as of the date
hereof or under which DataFocus has or will have any obligations or liabilities;
(iii) any contracts for the purchase of any materials,
supplies, equipment or inventory, or for the sale of any inventory, except
contracts made in the ordinary course of business;
(iv) any leases or licenses to use any real or personal
property;
(v) any contracts, agreements or other commitments requiring
aggregate payments by DataFocus of more than $5,000 or otherwise involving more
than $5,000 in value (whether formal or informal, written or oral);
(vi) agreements or contracts containing any covenant
limiting the freedom of DataFocus to engage in any line of Business or compete
with any person in the field of the Business;
(vii) any contracts relating to export sales and any
governmental or quasi-government subsidies, incentives or grants relating to
exports or imports;
(viii) any contracts (not included in (i) through (vii)
above), other than contracts made in the ordinary course of business, where a
party is entitled prospectively to receive in excess of $5,000; or
(ix) any contract (not included in (i) through (vii) above),
other than contracts made in the ordinary course of business, where a party
thereto has the right or option prospectively to order products or services the
consideration for which would exceed $5,000.
Each contract set forth on Schedule 7(i) attached hereto, except as
noted on such Schedule, is assignable to CIBER without the consent of the other
party thereto and upon the Closing Date shall be enforceable by CIBER against
the other parties thereto and, except as disclosed on such Schedule, no material
breach on the part of KTI, DataFocus or, to the best knowledge of KTI and
DataFocus, the other party or parties to such contract exists with regard to
each such contract. Except as disclosed on Schedule 7(i), neither KTI nor
DataFocus is a party to or bound by any notes, loan agreements, capitalized or
other leases, letters of credit, agreements and other arrangements relating to
any indebtedness or guarantees or indemnification running to any person or
entity and which will affect or relate to the Business or the Assets after the
Closing Date (any such disclosed agreements shall hereinafter be referred to as
the "DataFocus Loan Agreements"). Schedule 7(i) also contains the name of the
obligee, the original principal amount and the current balance of the
indebtedness, a description
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July 16, 1996
Page 10
of all collateral given as security and all mortgages and other security
agreements executed in connection with the DataFocus Loan Agreements. DataFocus
has delivered to CIBER a true and correct copy of each agreement or document
referenced or cross-referenced on Schedule 7(i);
(j) Taxes. Except as set forth in the DataFocus Financial Statements
or Schedule 7(j), (i) KTI and DataFocus have filed all material returns,
declarations and reports required to be filed by either of them prior to the
Closing Date relating to any taxes or assessments with respect to any income,
properties or operations of either or both of them prior to the Closing Date
(the "Returns"), (ii) as of the time of filing, the Returns correctly reflected
(and as to any Returns not filed as of the date hereof, will correctly reflect)
in all material respects the facts regarding the income, business, assets,
operations, activities and status of KTI and DataFocus, (iii) KTI and DataFocus
have timely paid or made provision for all taxes and assessments that have been
shown as due and payable on the Returns that have been filed, (iv) KTI and
DataFocus have made or will make provision for all taxes and assessments payable
for any periods that end on or before the Closing Date for which no Returns have
yet been filed and for periods that begin before the Closing Date and end after
the Closing Date, (v) the charges, accruals and reserves for taxes and
assessments reflected on the books of KTI and DataFocus are adequate to cover
the liabilities that have accrued or are payable by them, (vi) neither KTI nor
DataFocus is delinquent in the payment of any material taxes or assessments,
(vii) no deficiency for any taxes or assessments has been prepared, asserted or
assessed in writing against either of them and (viii) neither KTI nor DataFocus
is or has been a party to any tax sharing agreement with any person which, as of
the Closing Date, is not a member of the affiliated group of which DataFocus is
a member.
(k) [Intentionally Omitted]
(l) Ownership and Condition of the Business and Assets.
(i) Except as otherwise stated herein and except as set forth
on Schedule 7(l) attached hereto, the Assets constitute all of the properties
and rights required to conduct the Business as presently conducted and will be
owned by CIBER free and clear of all liens and encumbrances;
(ii) Subject to consents not obtained on or prior to the
Closing Date, DataFocus has good and marketable title to all of the Assets, free
and clear of all security interests, liens and encumbrances except those
identified on Schedule 7(l) attached hereto, all of which shall be fully
discharged and terminated at Closing except as otherwise stated on such
Schedule;
<PAGE> 11
KTI, Inc.
July 16, 1996
Page 11
(m) Intellectual Property. Schedule 7(m) attached hereto
contains a complete and accurate list of (a) all patents, registered trademarks,
trade names, and copyrights owned by DataFocus and used or proposed to be used
by DataFocus in the Business and all applications therefor (indicating whether
or not such patent, trademark, trade name or copyright is owned by DataFocus)
and (b) all agreements relating to technology, know-how or processes which
DataFocus has licensed or authorized to use in the Business by others (other
than agreements entered into (i) with the United States government or any agency
or instrumentality thereof or (ii) relating to the use by DataFocus of
commercially available computer software). Except as set forth on Schedule 7(m),
no claims have been asserted by any person to the use by DataFocus of any such
patents, registered trademarks, trade names or copyrights or to the use of any
technology, processes or know-how owned or used or proposed to be used by
DataFocus in the Business (collectively, the "Intellectual Property") or
challenging or questioning the validity or effectiveness of any such license or
agreement except for claims that would not have a Material Adverse Effect on the
Business, and the use of such Intellectual Property by DataFocus in the Business
does not infringe on the rights of any person except where such infringement
would not have a Material Adverse Effect on the Business. DataFocus owns, free
and clear of any lien, encumbrance or other restriction, or is otherwise
licensed or has the right to use, all Intellectual Property used in and material
to the conduct of the Business. The consummation of the transactions
contemplated by this Agreement will not alter or impair any such rights, and
such Intellectual Property can be conveyed by DataFocus without the consent of
any third party or governmental entity;
(n) Environmental Matters.
(i) As used in this Agreement:
(1) "Environmental Laws" means any and all federal, state or
local environmental, public health and safety laws, rules, orders, regulations,
statutes, ordinances and codes, including, without limitation, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, the Safe Drinking Water Act, the Occupational Health and Safety
Act, the Toxic Substances Control Act, and any state equivalent of such acts;
(2) "Material of Environmental Concern" means hazardous
wastes, hazardous substances, petroleum and petroleum-derived products, all as
the foregoing are defined in any applicable Environmental Laws;
<PAGE> 12
KTI, Inc.
July 16, 1996
Page 12
(ii) Except as set forth on Schedule 7(n) attached hereto, the
Business is in compliance in all material respects with all applicable
Environmental Laws, which compliance includes, but is not limited to, the
possession by DataFocus or the Business of all permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof. Except as set forth on Schedule 7(n), neither
KTI nor DataFocus has received any written communication that alleges, or is
aware of any pending allegation, that the Business is in violation of applicable
Environmental Laws;
(iii) Except as set forth on Schedule 7(n), to the best of
each of KTI's and DataFocus' knowledge, there are no releases of Material of
Environmental Concern that could form the basis of any claim against KTI,
DataFocus or the Business in relation to the Business;
(o) Financial Statements. Schedule 7(o) attached hereto contains
unaudited balance sheets of DataFocus as of December 31, 1995 and as of March
31, 1996 and unaudited related statements of income of DataFocus for the period
January 1, 1995 to December 31, 1995 and for the period January 1, 1996 to March
31, 1996 (collectively, the "DataFocus Financial Statements"). The DataFocus
Financial Statements are subject in each case to normal year-end adjustments and
any other adjustments described therein. Each of the DataFocus Financial
Statements has been prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as otherwise
noted therein and except that the DataFocus Financial Statements do not contain
all of the footnote disclosures required by generally accepted accounting
principles. The statement of operations for DataFocus for the three months ended
March 31, 1996 and the other financial information delivered to CIBER fairly
present the financial position of DataFocus. Also attached as Schedule 7(o)
hereto is the profit and loss statement of the Business for the period January
1, 1996 to May 31, 1996. Such profit and loss statement was prepared in
accordance with the normal internal accounting procedures and policies;
(p) Labor Relations.
(i) Except as set forth on Schedule 7(p) attached hereto,
neither KTI nor DataFocus is a party to or bound by any collective bargaining or
other labor agreement which relates to the operations of the Business. Except as
set forth on Schedule 7(p), no employees of DataFocus employed in the Business
are represented by any labor organization, and, as of the date hereof, no labor
organization or group of employees of DataFocus employed in the Business has
made a demand for recognition, has filed a petition seeking a representation
proceeding or given DataFocus notice of any intention to hold an election of a
collective bargaining representative and no strike, work stoppage or labor
disturbance exists or, to each of KTI's and DataFocus' knowledge, is threatened
which involves any employees of DataFocus employed in the Business;
<PAGE> 13
KTI, Inc.
July 16, 1996
Page 13
(ii) Except as set forth on Schedule 7(p) attached hereto,
there are no pending complaints or charges or, to each of KTI's and DataFocus'
knowledge, threatened complaints or charges against KTI or DataFocus with
respect to any employee or group of employees of DataFocus employed in the
Business or filed or pending with any federal, state or local governmental
authority or court alleging employment discrimination by KTI or DataFocus with
respect to any employee or group of employees of DataFocus employed in the
Business;
(q) No Undisclosed Liabilities. Except as and to the extent set
forth on Schedule 7(q) attached hereto and on the balance sheets included in the
DataFocus Financial Statements, DataFocus does not have any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
could have a Material Adverse Effect on the Business;
(r) Personnel Compensation. At or prior to Closing, all DataFocus
personnel providing services for the Business have been or will have been fully
paid for such services through July 15, 1996 and amounts payable for services
between July 15, 1996 and the Closing Date will be paid by DataFocus pursuant to
the adjustment to the purchase price of the Assets in accordance with Sections 3
and 6 hereof;
(s) Employees. Schedule 7(s) attached hereto identifies all
employees, independent contractors and other personnel of DataFocus who provide
services for the Business, their respective rates of pay at the date hereof, and
with respect to all billing consultants (employees or independent contractors),
the billing class of each such consultant, if appropriate, under the current
structure, the purchase order number under which such consultant is currently
working and the date on which such purchase order is scheduled to be completed.
Each of DataFocus' personnel identified on Schedule 7(s) is working full-time
(unless noted as part-time) in the Business. Except as identified on Schedule
7(s), none of such personnel has expressly stated to an officer or manager of
DataFocus that he or she intends to resign or cease working with the Business
within six months after Closing;
(t) Consultants. DataFocus has no fewer than forty (40) full-time
billing consultants (not less than 25 of whom are employees) under contract in
the Business (i.e., employees or consultants averaging at least thirty (30)
billable hours per week for the two (2) calendar months ended June 30, 1996);
(u) Accelerated Vesting. Any employee of DataFocus who is offered
employment by CIBER and who has any unvested balance in any DataFocus-sponsored
401(k) plan shall be 100% vested in such plan on or as of the Closing Date; and
(v) Materiality. The representations and warranties of KTI and
DataFocus contained in this Agreement, disregarding all qualifications and
exceptions contained therein relating to
<PAGE> 14
KTI, Inc.
July 16, 1996
Page 14
materiality or Material Adverse Effect, are true and correct with only such
exceptions as would not in the aggregate have a Material Adverse Effect on the
Business.
(w) Files. To the best of each of KTI's and DataFocus' knowledge,
all files provided pursuant to paragraph 1(f) are correct and complete in all
material respects. Correct and complete copies of all agreements and instruments
referred to in such Exhibits have been delivered to CIBER.
8. Representations and Warranties of CIBER. CIBER represents and
warrants that:
(a) Organization and Authority. CIBER is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to conduct its
business as now conducted and to execute, deliver and perform this Agreement.
The execution, delivery and performance of this Agreement and the bills of sale,
assignments and other agreements and instruments of transfer to be executed by
CIBER and delivered to KTI and DataFocus in consummation of the transaction
contemplated hereby have been (or, upon execution and delivery, shall have been)
duly executed and delivered, have been authorized by all necessary corporate and
stockholder action of CIBER, and constitute (or, upon execution and delivery,
will constitute) the legal, valid and binding obligations of CIBER, enforceable
against it in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws generally affect the rights of creditors and by general principles
of equity;
(b) No Conflict or Breach. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not (i) constitute, with or without the
giving of notice or passage or time, or both, a breach of any of the terms or
provisions of, or a default under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which CIBER is a party or by which
it or its properties may be bound or affected, except any such breach or default
which has been waived in writing and a copy of which waiver has been delivered
to KTI, (ii) result in the creation of any claim, lien, encumbrance, security
interest, restriction or other charge or defect upon any of its assets, (iii)
conflict with the certificate of incorporation or by-laws of CIBER, or (iv)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator binding upon or affecting CIBER or its property, except in the cases
of clauses (i), (ii) and (iv) to the extent any such breach, default, security
interest, lien or violation would not, individually or in the aggregate, have a
Material Adverse Effect on CIBER;
<PAGE> 15
KTI, Inc.
July 16, 1996
Page 15
(c) Approvals. No consent, approval or authorization prescribed (i)
by any law (other than state and local government business licenses and other
routine governmental consents, approvals and authorizations) or (ii) by any
agreement or instrument to which CIBER is a party, or by which CIBER or any of
its properties or businesses is bound or affected, is required in order to
permit the consummation of the transactions contemplated by this Agreement
(other than any agreement or instrument involving less than $25,000 in annual
expense or revenue);
(d) No Legal Conflicts. CIBER is not prohibited by any order, writ,
injunction or decree of any body of competent jurisdiction from consummating the
transactions contemplated by this Agreement, and no action or proceeding is
pending or, to the best of CIBER's knowledge, threatened against CIBER which
questions the validity of this Agreement or any of the actions which the parties
hereto have taken in connection herewith or which it is contemplated they shall
take in connection herewith;
(e) Sufficient Funds. CIBER currently possesses sufficient financial
resources to consummate the transactions contemplated hereby and to perform its
obligations hereunder.
(f) Materiality. The representations and warranties of CIBER
contained in this Agreement, disregarding all qualifications and exceptions
contained therein relating to materiality or Material Adverse Effect, are true
and correct with only such exceptions as would not in the aggregate have a
Material Adverse Effect on CIBER.
9. Closing and Closing Date. The closing (the "Closing") of the
transaction contemplated hereby shall take place at Davis, Graham & Stubbs LLP,
Denver, Colorado, or at such other place as may be agreed upon by the parties on
July 26, 1996 or such other date as may be agreed upon by the parties (the
"Closing Date"). Except as otherwise set forth herein, all of DataFocus'
profits, losses, revenues, liabilities, rights and obligations acquired,
received or incurred with respect to the Assets acquired hereunder and the
liabilities assumed hereunder prior to the close of business (Eastern Daylight
Time) on the Closing Date shall be allocated to DataFocus and all of the same
acquired, received or incurred from and after such time shall be allocated to
CIBER. At the Closing, DataFocus, KTI and CIBER shall execute and deliver to
each other a General Assignment, Bill of Sale, and Assumption Agreement in the
form attached hereto as Exhibit G to evidence the transfer of the Assets to
CIBER and the assumption of certain obligations as provided herein. On the
Closing Date, DataFocus and KTI shall also deliver to CIBER an opinion of
counsel for DataFocus and KTI, dated the Closing Date, substantially in the form
attached hereto as Exhibit H. At the Closing, CIBER shall deliver to KTI and
DataFocus an opinion of its counsel, dated the Closing Date, substantially in
the form attached hereto as Exhibit H-1.
<PAGE> 16
KTI, Inc.
July 16, 1996
Page 16
10. Pre-Closing Covenants. (a) From the date hereof until the Closing
Date:
(i) DataFocus shall conduct its business in the ordinary
course consistent with past practice and use commercially reasonable efforts to
preserve intact its business organizations and relationships with third parties
and to keep available the services of its present personnel. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
without the consent of CIBER or except as required to consummate the
transactions contemplated hereby in accordance with the terms of this Agreement,
DataFocus shall not take, or agree to take, directly or indirectly, any of the
following actions:
(A) sell substantially all of the assets of the
Business, adopt a plan of liquidation or dissolution of DataFocus, or engage in
a merger, consolidation, share exchange or other business combination involving
the Business; and
(B) declare or make any provision for payment of, or the
setting aside of assets of the Business with respect to, any dividend or other
distribution of any property other than cash.
(ii) From the date hereof until the Closing Date, DataFocus
shall (A) give CIBER, its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties, books and
records of the Business, (B) furnish to CIBER, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such persons may reasonably request and (C) instruct
its employees, counsel and financial advisors to cooperate with CIBER in its
investigation of the Assets and Business.
(iii) KTI and DataFocus shall promptly notify CIBER of:
(A) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with any of the transactions contemplated hereby;
(B) any actions, suits, claims, investigations or
proceedings commenced or, to the knowledge of KTI or DataFocus threatened
against, relating to or involving or otherwise affecting DataFocus, that would
be required to be disclosed pursuant to Section 7(f) or that relate to the
consummation of the transactions contemplated hereby; and
(C) any material adverse developments affecting the
Business.
<PAGE> 17
KTI, Inc.
July 16, 1996
Page 17
(b) Subject to the terms and conditions of this Agreement, each of
CIBER, KTI and DataFocus shall use commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable to satisfy the conditions to the other party's
obligations under this Agreement.
11. Conditions to Closing. (a) The obligation of CIBER to consummate
the Closing is subject to the satisfaction or waiver by CIBER of the following
conditions:
(i) KTI and DataFocus shall have performed in all material
respects all obligations hereunder required to be performed by them at or prior
to the Closing Date.
(ii) The representations and warranties of KTI and DataFocus
contained in this Agreement and in any certificate or other writing delivered by
KTI or DataFocus pursuant hereto shall be true at and as of the Closing Date, as
if made at and as of such date, except to the extent that such representations
and warranties expressly relate to an earlier date.
(iii) CIBER shall have received a certificate signed by an
executive officer of KTI and DataFocus confirming the matters described in
paragraphs (i) and (ii) of this Section 11(a).
(iv) CIBER shall have received opinions of McDermott, Will &
Emery and Robert E. Wetzel, counsel to KTI and DataFocus, dated the Closing Date
in substantially the form attached as Exhibit H.
(v) DataFocus shall have received all third party consents
required to consummate the transactions contemplated hereby or CIBER shall have,
in the reasonable exercise of its judgment, determined that such consent may be
obtained after Closing or is otherwise not required at Closing.
(vi) There shall not have been instituted any action or
proceeding to restrain or invalidate the transactions contemplated hereby or
seeking damages from or to impose obligations on CIBER by reason of the
transactions contemplated hereby which, in either case, involve expense or lapse
of time that would be materially adverse to CIBER.
(vii) DataFocus and each of Thomas Bosanko and Patrick B.
Higbie shall have entered into Noncompetition Agreements with CIBER in
substantially the form attached as Exhibit I and each of Newton G. Fletcher,
Matthew Jacobson, Matt T. Einseln and Susan I. Healy shall have entered into
Employment Agreements with CIBER in substantially the form attached as Exhibit
J.
<PAGE> 18
KTI, Inc.
July 16, 1996
Page 18
(b) The obligation of KTI and DataFocus to consummate the Closing
is subject to the satisfaction or waiver by them of the following conditions:
(i) CIBER shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date.
(ii) The representations and warranties of CIBER contained in
this Agreement and in any certificate or other writing delivered by CIBER
pursuant hereto shall be true at and as of the Closing Date, as if made at and
as of such date, except to the extent that such representations and warranties
expressly relate to an earlier date.
(iii) KTI and DataFocus shall have received a certificate
signed by an officer of CIBER confirming the matters described in paragraphs (i)
and (ii) of this Section 11(b).
(iv) KTI and DataFocus shall have received an opinion of
Davis, Graham & Stubbs LLP, counsel to CIBER, dated the Closing Date, in the
form attached as Exhibit H-1.
(v) There shall not have been instituted any action or
proceeding to restrain or invalidate the transactions contemplated hereby or
seeking damages from or to impose obligations on KTI or DataFocus by reason of
the transactions contemplated hereby which, in either case, involve expense or
lapse of time that would be materially adverse to either of them.
12. Post-Closing Covenants.
(a) Third Party Consents. If DataFocus shall have failed to obtain,
at or prior to the Closing Date, any third party consents required for the
assignment of any of the Contracts or the agreements on Exhibit C, including any
office leases, DataFocus shall use commercially reasonable efforts to obtain
such consents after the Closing Date. DataFocus shall also use commercially
reasonable efforts to obtain the lessor's consent to change the signage on any
premises leased by DataFocus in connection with the Business to allow the use of
CIBER's name.
(b) Employees. During the first twelve (12) weeks following the
Closing, DataFocus, if requested by CIBER, will work with CIBER to encourage
certain of DataFocus' personnel of the Business to become and remain employees
of CIBER.
(c) Record Inspection. For two (2) years following the Closing
Date, CIBER will retain the books, records and other data of the Business
transferred pursuant to paragraph 1 hereof. KTI may copy any or all of such
books, records and data at any time within six (6)
<PAGE> 19
KTI, Inc.
July 16, 1996
Page 19
months after Closing. During such period, CIBER will afford to DataFocus, its
counsel and/or accountants at a location of CIBER's choosing within a fifty (50)
mile radius of Fairfax, Virginia or Denver, Colorado during normal business
hours, reasonable access to such books, records and other data as they pertain
to periods prior to the Closing Date to permit DataFocus to prepare tax returns,
to comply or prepare for any governmental or administrative order or proceeding.
CIBER may dispose of such books, records and other data during such two (2) year
period if, prior to such disposal, CIBER notifies DataFocus of such intention
and permits DataFocus, at DataFocus' expense, to remove the materials to be
disposed of within three (3) months after such notice.
13. Confidentiality. Except in accordance with Section 14, prior to the
Closing, without the prior written consent of the other party, neither CIBER,
KTI nor DataFocus will disclose to any person the existence of this Agreement or
the transactions contemplated hereby and each such party shall hold all
information provided to each by the other (other than information which is
otherwise publicly available) in strict confidence and shall not disclose or
disseminate such information except as reasonably necessary to consummate the
transaction contemplated hereby or as required by law. Following the Closing,
neither KTI nor DataFocus shall disclose or use information concerning the
Business except to its respective lenders, investors and professional advisors
(such as financial consultants, accountants and counsel) with a need to know or
as required by law. In the event the transactions contemplated hereby are not
consummated, each of CIBER, KTI and DataFocus shall return to the appropriate
party or, upon such party's request, destroy the confidential information of
such other party and no party shall disclose or disseminate such information to
anyone other than its employees, lenders, investors and professional advisors
(such as financial consultants, accountants and counsel) with a need to know or
as required by law.
14. Publicity. The parties agree to consult with each other before
issuing any public release or announcement concerning the transactions
contemplated hereby and, except as may be required by applicable law or the
rules of the Nasdaq National Market, will not issue any such release or
announcement prior to such consultation.
15. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT GIVING EFFECT TO ITS
CONFLICT OF LAWS PRINCIPLES.
16. Expenses. Each party will pay its respective expenses in connection
with the preparation and execution of this Agreement and the transaction
contemplated hereby. DataFocus shall be responsible for any and all sales, use
and other transfer taxes payable with respect to the transaction.
<PAGE> 20
KTI, Inc.
July 16, 1996
Page 20
17. Binding Effect; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no party may assign
its rights or obligations under this Agreement without the prior written consent
of the other party except that CIBER may assign its rights, but not its
obligations, hereunder, to a wholly-owned subsidiary.
18. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery, or
first-class mail, certified or registered with return receipt requested, or by
commercial overnight courier and shall be deemed to have been duly given upon
hand delivery or delivery by commercial overnight courier to the address
specified below or deposit in the U.S. mail as provided above, addressed as
follows:
(a) If to KTI or DataFocus:
c/o KTI, Inc.
7000 Boulevard East
Guttenberg, New Jersey 07093
Attention: General Counsel
With a copy to (which shall not constitute notice):
McDermott, Will & Emery
1211 Avenue of the Americas
New York, New York 10036
Attention: Brian Hoffmann
(b) If to CIBER, to:
CIBER, Inc.
5251 DTC Parkway, Suite 1400
Englewood, Colorado 80111
Attention: Mac J. Slingerlend
With a copy to (which shall not constitute notice):
Davis, Graham & Stubbs LLP
370 17th Street, Suite 4700
P.O. Box 181
Denver, Colorado 80201-0185
<PAGE> 21
KTI, Inc.
July 16, 1996
Page 21
Attention: John L. McCabe
(c) To such other address as to which notice is provided in
accordance with this paragraph.
19. Severability. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of this Agreement shall be deemed valid and
enforceable to the extent possible.
20. Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit nor confer any rights or remedies on any person
other than the parties hereto and their respective heirs, successors and legal
representatives.
21. Further Assurances. DataFocus shall (a) deliver at such times and
places as shall be reasonably agreed upon such additional instruments as CIBER
may reasonably request and (b) take all other actions reasonably requested of it
for the purpose of carrying out this Agreement. CIBER shall (a) deliver at such
times and places as shall be reasonably agreed upon such additional instruments
as DataFocus may reasonably request and (b) take all other actions reasonably
requested of it for the purpose of carrying out this Agreement. The party
requesting such delivery or action shall pay reasonable expenses incurred by the
party making such delivery or taking such action.
22. Commissions. Each party hereto represents and warrants to the other
parties that they or it have not incurred any obligations or liabilities for
brokerage or finder's fees or agent's commissions or like payment in connection
with this Agreement or the transactions contemplated hereby for which any party
will have any liability. Each party hereto agrees to indemnify the other party
hereto against any breach by it of the foregoing representation and warranty by
such indemnifying party.
23. Indemnification and Survival.
(a) The representations and warranties contained in this Agreement
shall survive the Closing and shall remain in effect for eighteen (18) months
following the Closing Date. No action or proceeding may be brought on the basis
of a breach of a representation or warranty hereunder more than eighteen (18)
months after the Closing Date unless the party commencing such action or
proceeding gives written notice to the other party of such breach, setting forth
in reasonable detail the basis for such claim of breach, on or before the
expiration of such eighteen (18) months period.
<PAGE> 22
KTI, Inc.
July 16, 1996
Page 22
(b) KTI and DataFocus agree to indemnify CIBER from and against any
loss, cost, liability or expense (including reasonable attorneys' fees) incurred
by CIBER arising out of or in connection with (i) any breach by any of it of any
representation, warranty, covenant or agreement contained in this Agreement;
(ii) any noncompliance with any applicable bulk sales or bulk transfer law or
similar law; and (iii) any and all sales, use or transfer taxes relating to the
sale of the Assets to CIBER.
(c) CIBER agrees to indemnify KTI and DataFocus from and against
any loss, cost, liability or expense (including reasonable attorneys' fees)
incurred by them arising out of or in connection with any breach by it of any
representation, warranty, covenant or agreement contained in this Agreement.
(d) The maximum liability of KTI and DataFocus, on the one hand,
and CIBER, on the other hand, under this Section 23 shall be $5,000,000.
24. Dispute Resolution; Arbitration. The parties shall negotiate in
good faith to resolve any dispute, controversy or claim arising out of or
relating to this Agreement within thirty (30) days after the giving of notice
thereof by either party to the other. Any matter not resolved through
negotiation within such time shall be resolved by binding arbitration before a
single arbitrator in Fairfax, Virginia in accordance with the commercial rules
of the American Arbitration Association then in effect, and judgment on the
arbitration award may be entered in any court having jurisdiction. Any party may
submit any dispute to arbitration hereunder within thirty (30) days after the
end of the negotiation period referenced above. The parties involved shall
select the arbitrator within thirty (30) days thereafter. If they are unable to
agree upon the arbitrator within such time period, each of KTI and CIBER shall
select an arbitrator within ten (10) additional days and such two arbitrators
(or, if one party fails to so select an arbitrator, the party that did so select
an arbitrator) shall select a third arbitrator within fifteen (15) days after
the expiration of such ten (10) day period. Such third arbitrator shall be the
sole arbitrator of the dispute. The parties shall instruct such arbitrator to
render a determination of the matter within thirty (30) days after the selection
of the arbitrator. The costs of arbitration proceedings hereunder shall be
shared equally by KTI and CIBER. The foregoing shall not limit the right of any
party to obtain interim relief, such as an injunction, from a court of competent
jurisdiction before, after or during the pendency of any arbitration proceeding.
25. Entire Agreement; Modifications. This Agreement represents the
entire understanding between the parties with respect to the subject matter
hereof and supersedes any and all prior understandings, agreements, plans and
negotiations, whether written or oral, with respect to the subject matter
hereof. All modifications to this Agreement must be in writing and signed by the
party against whom enforcement of such modification is sought.
<PAGE> 23
KTI, Inc.
July 16, 1996
Page 23
26. Material Adverse Effect shall mean any change or effect that is or
could be materially adverse to the properties, condition (financial or
otherwise) or results of operations of the Business or CIBER, as applicable.
27. Telephone Numbers. The use of the DataFocus telephone system and
telephone numbers shall be allocated as provided in Exhibit K.
28. Headings. The section headings herein are intended for reference
and shall not by themselves determine the construction or interpretation of this
Agreement.
29. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Letter Agreement
this _____ day of July, 1996.
Very truly yours,
CIBER, INC., a Delaware corporation
By:
--------------------------------
David G. Durham
Vice President - Finance
ACCEPTED AND AGREED TO:
KTI, INC., a
New Jersey corporation
By:
--------------------------------
Name:
-------------------------
Title:
-------------------------
DATAFOCUS INCORPORATED,
a Delaware corporation
<PAGE> 24
KTI, Inc.
July 16, 1996
Page 24
By:
--------------------------------
Name:
-------------------------
Title:
-------------------------
<TABLE>
<CAPTION>
LIST OF EXHIBITS
<S> <C> <C>
Exhibit A - Furniture, Fixtures, Equipment and Other Assets
Exhibit B - Contracts
Exhibit C - Maintenance and Lease Agreements
Exhibit D - Excluded Assets
Exhibit E - Allocation of Purchase Price
Exhibit F - Identified Prorations
Exhibit G - General Assignment, Bill of Sale and Assumption
Agreement
Exhibit H - Opinion of KTI and DataFocus Counsel
Exhibit H-1 - Opinion of CIBER Counsel
Exhibit I - Noncompetition Agreements
Exhibit J - Employment Agreements
Exhibit K - Telephone Allocation
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
LIST OF SCHEDULES
<S> <C> <C>
Schedule 7(a) - List of States Where Clients or Projects Located
Schedule 7(b) - Conflicts or Breaches
Schedule 7(c) - Approvals
Schedule 7(e) - Extraordinary Transactions
Schedule 7(f) - Litigation
Schedule 7(g) - Compliance
Schedule 7(h) - Defaults
Schedule 7(i) - List of Contracts/Consents
Schedule 7(j) - Taxes
Schedule 7(l) - Liens and Encumbrances
Schedule 7(m) - Intellectual Property
Schedule 7(n) - Environmental Exceptions
Schedule 7(o) - Financial Statements
Schedule 7(p) - Labor Relations
Schedule 7(q) - Undisclosed Liabilities
Schedule 7(s) - List of DataFocus Personnel
</TABLE>
<PAGE> 1
Agreement dated July 19, 1996
by and among
KTI, Inc.
Thomas A. Bosanko
and
Patrick B. Higbie
This Agreement dated this 19th day of July, 1996 witnesseth that:
Whereas, CIBER, Inc. ("CIBER") has made an offer to purchase substantially all
of the assets (the "Assets") of the Business Systems Division of DataFocus
Incorporated, a Delaware corporation ("DataFocus"), as evidenced by a letter
agreement dated July 16, 1996 attached hereto as Exhibit I; and
Whereas, the Board of Directors of KTI, Inc., a New Jersey corporation ("KTI"),
the parent and sole stockholder of DataFocus, is willing to approve the sale of
the Assets on terms similar to those proposed by CIBER; and
Whereas, Messrs. Bosanko and Higbie have an option to purchase 20% of the common
stock of DataFocus for $380,000.00; and
Whereas, the Board of Directors of DataFocus and Messrs. Bosanko and Higbie
consented to, and adopted, a Stockholder Appreciation Rights Plan (the "SAR
Plan") for the purpose of granting stockholder appreciation rights ("SARs") to
certain employees of DataFocus, a copy of which is attached hereto as Exhibit
IIa, and amended by the First Amendment thereto, attached hereto as Exhibit IIb;
and
Whereas, SARs have been granted to certain employees of DataFocus
("Participants") as shown on Exhibit III attached hereto; and
Whereas, Messrs. Bosanko and Higbie each have options to purchase 16,666 shares
of KTI common stock, no par value ("KTI Common Stock"), at $6.00 per share,
which options were issued under the KTI Stock Option Plan and are fully vested;
and
Whereas, Thomas A. Bosanko has additional options to purchase 66,665 shares of
KTI Common Stock at various prices per share, which options were issued under a
stock option plan of a corporation previously merged into KTI and are fully
vested; and
Whereas, Patrick B. Higbie has additional options to purchase 33,331 shares of
KTI Common Stock at various prices per share, which options were issued under a
stock option plan of a corporation previously merged into KTI and are fully
vested; and
<PAGE> 2
Whereas, Messrs. Bosanko and Higbie each has an employment contract with KTI,
dated as of November 21, 1994, attached hereto as Exhibits IVa and IVb,
respectively;
Now therefore, KTI, for itself and on behalf of DataFocus, and Messrs. Bosanko
and Higbie for themselves as individuals, hereby agree as follows:
1. If the Board of Directors of KTI shall approve the sale of the Assets to
CIBER under terms and conditions satisfactory to such Board, the approval of
which shall be evidenced by the signature of one or more Proper Officers of KTI
(A "Proper Officer" being the Chairman of the Board of Directors, the President,
or a Senior Vice President) on an agreement for the sale of the Assets between
KTI and CIBER, then:
A. Each of Messrs. Bosanko and Higbie may sign consulting agreements
with CIBER in form and substance reasonably satisfactory to Messrs. Bosanko and
Higbie, respectively, and CIBER. KTI shall have the right to act as the
intermediary between CIBER and Messrs. Bosanko and Higbie in the negotiation of
such consulting agreements;
B. Each of Messrs. Bosanko and Higbie shall sign a covenant not to
compete with CIBER, enforceable under the laws of Virginia and in form and
substance reasonably satisfactory to CIBER and, after consultation with Messrs.
Bosanko and Higbie, to KTI for a term of not more than eighteen months from the
date of the closing of the sale of the Assets (the "Closing"). Said covenant
shall cover client locations within a 50 mile radius of each of Washington, D.C.
and Metro Park in Edison, New Jersey. Activities covered by each covenant not to
compete will include current Business Systems Division activities and contract
computer application software programming, management consulting of information
services, PeopleSoft software consulting, millennium date change consulting,
network integration consulting and computer systems outsourcing. Each covenant
not to compete shall explicitly permit the pursuit of the sale of NuTCRACKER
software product ("NuTCRACKER"), including consulting services to port software
using NuTCRACKER, by Messrs. Bosanko and Higbie.
C. Each of the parties hereto shall execute and deliver any and all
other documents reasonably requested by CIBER or any other party hereto to
implement this Agreement and to permit the sale of the Assets.
Failure by either of Messrs. Bosanko or Higbie to execute and deliver the
covenant not to compete, or any other document reasonably requested by KTI or
CIBER as set forth in Paragraphs B. and C. above shall cause substantial
economic damage to KTI.
2. Each of Messrs. Bosanko and Higbie hereby represents and warrants that the
representations and warranties of DataFocus set forth in the letter agreement
attached hereto as Exhibit I are true and correct as of the date hereof.
3. Messrs. Bosanko and Higbie on one side, and KTI and DataFocus on the other
side have agreed that it would be in the best interests of both sides that the
arrangement between Messrs. Bosanko and Higbie be made more definite and
predictable. Accordingly, KTI and DataFocus
2
<PAGE> 3
and Messrs. Bosanko and Higbie have agreed that, effective at the Closing: (a)
Messrs. Bosanko's and Higbie's stock options to purchase shares of KTI Common
Stock be canceled; (b) Messrs. Bosanko's and Higbie's option to purchase 20% of
the common stock of DataFocus for $380,000 be canceled; and (c) Messrs.
Bosanko's and Higbie's existing employment agreements with KTI be canceled, all
in exchange for deferred compensation agreements between Messrs. Bosanko and
Higbie and DataFocus for the sum of money indicated opposite their name below:
Thomas A. Bosanko $310,000.00
Patrick B. Higbie $310,000.00
and, as additional compensation, Messrs. Bosanko and Higbie shall receive
bonuses from DataFocus in the amount set forth opposite their names below:
Thomas A. Bosanko $292,530.00 (1)(2)
Patrick B. Higbie $209,776.00 (1)(2)
(1) These numbers are estimates and may be modified, using the formula used to
develop these numbers and attached hereto as Exhibit V.
(2) FICA and federal and state income taxes shall be withheld from such bonuses
as required by law. The deferred compensation agreements must be executed and
delivered by Messrs. Bosanko and Higbie on one side and DataFocus on the other
side on or before the date of Closing.
Upon cancellation of the employment agreements between Messrs. Bosanko and
Higbie, on one side, and KTI, on the other side, at the date of Closing, all
obligations due to Messrs. Higbie and Bosanko from KTI thereunder shall cease on
said date. Any benefits due to Messrs. Bosanko or Higbie under any DataFocus
medical and employee benefit plans, and for accrued but not yet taken vacation
days shall be the obligations of DataFocus alone. Thereafter, Messrs. Bosanko
and Higbie shall be employees of DataFocus at will, with only such rights as may
be conferred upon them by their deferred compensation agreements with DataFocus.
The options of Messrs. Bosanko and Higbie, referred to in 3. (a) and (b) above,
shall be terminated at the Closing.
The net amount to be paid to Messrs. Bosanko and Higbie pursuant to this Section
3 shall be paid to Messrs. Bosanko and Higbie, promptly following the Closing of
the sale of the Assets.
4. Messrs. Bosanko and Higbie shall request the Board of Directors of DataFocus
to revalue its assets so as to increase its surplus, if appropriate, and in an
amount necessary, consistent with such Board's fiduciary duties, to permit the
payment of the dividend, described below.
Messrs. Bosanko and Higbie, on one side and KTI and DataFocus, on the other
side, hereby irrevocably agree that DataFocus shall declare and pay a partial
liquidating dividend to KTI on the date of Closing, consisting of cash and
accounts receivable, for:
(A) cash in an amount, equal to:
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<PAGE> 4
Cash received from CIBER pursuant to the sale of the Assets, as
adjusted for prorations, less
Accounts Payable of the Business Systems Division, retained by
DataFocus plus
Cash on hand of DataFocus, plus
Cash equivalents owned by DataFocus, plus
That portion of the security deposits attributable to leased premises
subleased, or otherwise assigned or transferred by DataFocus to CIBER
(such portion shall be determined when CIBER executes and delivers the
appropriate documents to DataFocus, KTI or the landlord), less
Transaction costs, including without limitation, investment banking and
legal fees, in connection with the sale of the Business Systems
Division actually paid after the date of determination of cash on hand,
less
Bonuses due to Messrs. Bosanko and Higbie pursuant to Section 3. above,
less Sales or use taxes, if any, imposed on the transfer of Assets from
DataFocus to CIBER, less
Costs of buildouts, etc., for demising walls to separate CIBER premises
from DataFocus premises, less
State income taxes, including without limitation, capital gains taxes
attributable to the sale of the Assets, for the period from January 1,
1996 to the date of Closing, less
Any distributions paid under the DataFocus Stockholder Appreciation
Rights Plan, less
Any severance paid to terminated employees of the Business Systems
Division of DataFocus, subject to an aggregate limit of $100,000.00,
and
(B) The assignment of all accounts receivable of the Business Systems
Division ("Accounts Receivable") (Said assignment shall be satisfactory
to KTI's special counsel in form and substance).
Any amounts due from KTI to DataFocus, other than those arising out of this
Agreement, shall be forgiven at Closing. Any amounts due from DataFocus to KTI,
other than those arising out of this Agreement, shall be forgiven at Closing.
Cash on hand and the retained Accounts payable shall be calculated after such
forgiveness.
Each of Messrs. Bosanko and Higbie hereby warrants and represents to KTI that,
to the best of their knowledge, after careful investigation, DataFocus will have
sufficient assets on hand after the payment of the dividend to meet all of
DataFocus's current obligations when due.
5. DataFocus shall deposit cash proceeds of Accounts Receivable directly into an
account in KTI's name, with such endorsements as may be necessary, pursuant to a
receivable agreement (the "Receivable Agreement"). DataFocus shall collect the
Accounts Receivable at DataFocus's sole cost. If DataFocus believes that it
would be appropriate to incur legal costs and expenses to collect such Accounts
Receivable, DataFocus shall request and receive written approval from KTI prior
to incurring such expenses. Such legal fees and expenses shall be the sole
expense of KTI when so approved. The Receivable Agreement shall further provide
that Accounts Receivable may not be compromised or settled without KTI's prior
written consent. For accounting
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<PAGE> 5
purposes, DataFocus shall credit cash received from a single customer in date
order of the invoices issued, unless otherwise designated by the customer
Messrs. Bosanko and Higbie acknowledge that the bonuses computed in accordance
with Exhibit V assume that the Accounts Receivable will be collected in the
amount indicated. To the extent that aggregate collections received during the
six month period following the date of Closing vary, plus or minus, Messrs.
Bosanko and Higbie shall receive 10% of such variance from KTI, or reimburse KTI
for such variance.
If sales or use taxes used in determining Messrs. Bosanko and Higbie's bonuses
are underestimated, KTI shall reimburse DataFocus for 80% of any such deficit.
Messrs. Bosanko and Higbie shall reimburse DataFocus for the remaining 20% of
said deficit. If sale or use taxes used in determining Messrs. Bosanko and
Higbie's bonuses are overestimated, DataFocus shall pay 80% of the excess to KTI
and 10% each to Messrs. Bosanko and Higbie.
6. KTI shall deposit $150,000.00 in an interest bearing account in its name with
a Bank of its selection. The funds in such account shall be used to pay any
lease and buildout expenses for that portion of the premises in the Metro Park,
New Jersey premises which are not occupied by either CIBER or DataFocus. Funds
may be withdrawn by KTI solely for such expenses. To the extent that funds
remain in such account upon final disposition of such portion of the premises,
the surplus shall be distributed 80% to KTI, 10% to Thomas A. Bosanko and 10% to
Patrick B. Higbie. If the funds in such account are insufficient, the
aforementioned parties shall contribute funds promptly, upon receipt of a
written request from KTI, in the same proportions. Upon the termination of all
obligations for such premises, KTI shall deliver an accounting for the
disbursement of funds from such account. Any interest earned on said account
shall be taxable to each party, in accordance with their interests.
7. KTI shall use its best efforts to cause any gain on the sale of Assets to
CIBER to be included in KTI's consolidated Federal income tax return. DataFocus
and Messrs. Bosanko and Higbie shall use their best efforts to cooperate with
KTI to achieve this goal, and shall make any election or other action reasonably
requested to achieve such goal.
8. Messrs. Bosanko and Higbie shall have the option to purchase all of the
common stock of DataFocus, after the payment of the dividend described in
Section 2 above, commencing on the next business day after the date of Closing
and terminating five business days thereafter. Said option may be exercised by
the payment by Messrs. Bosanko and Higbie to KTI of:
Cash in the amount of $5,000.00, plus
The execution and delivery of a royalty agreement between DataFocus and
KTI, in form and substance reasonably satisfactory to KTI's special
counsel, providing for a payment by DataFocus to KTI of a base royalty
of $5,000.00 per month, plus
Additional royalty of 5% of net NuTCRACKER product revenue (actual cash
sales proceeds, less cash actually paid for returns and less cash paid
for royalties) in excess of $4,000,000.00 per year. (Payments for any
period, less than a complete year for years later than 1996, will be
annualized to determine the appropriate percentage royalty, e.g., a one
month period with $500,000 in net NuTCRACKER product revenue would
result in
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<PAGE> 6
annualized net NuTCRACKER product revenue of $6,000,000 and require a
royalty payment of $13,333.33 for such month, which number includes the
base royalty.) The additional royalty for 1996 will be calculated on,
and paid on, total net NuTCRACKER product revenue in excess of
$4,000,000 for calendar 1996.
If said option is exercised, KTI will loan up to $500,000.00 to Messrs. Bosanko
and Higbie individually, on the condition that they will, in turn, make such
funds available to DataFocus.. The initial loan or loans shall be not less than
$300,000.00, without DataFocus's approval. Messrs. Bosanko and Higbie may
request and receive additional loans within six months of the date of the
exercise of Messrs. Bosanko's and Higbie's option to purchase DataFocus if KTI
has received not less than $200,000.00 in cash from the proceeds of collection
of the Accounts Receivable. Such additional loans, together with the initial
loan may not exceed $500,000.00 in the aggregate, calculated on the highest
level of disbursement on each loan. The Notes will provide for amortization over
4 years from the date of issuance of the first loan, with level quarterly
payments on principal, and monthly payments of interest. The interest rate shall
be eight percent per annum, calculated on actual days and a 365 or 366 day year
as appropriate. The Notes will have no prepayment penalties. The Notes, royalty
agreement and all payment obligations of DataFocus to KTI, pursuant to Sections
5 and 6 will be secured by 73,724 shares of KTI Common Stock . The Collateral
Value of KTI Common Stock shall change quarterly, commencing on the first
business day of each quarter, based on the closing sale, or bid price, as
appropriate, on the last business day of the preceding quarter. A portion of the
Collateral may be returned if such Collateral exceeds 150% of the sum of the
then principal amount of the Notes, any accrued and unpaid royalties and any
accrued and unpaid payment obligations. Additional Collateral shall be deposited
(subject to a maximum number of shares of KTI Common Stock of 73,724), or
Collateral released as appropriate upon written request of the party desiring
action to be taken. All documentation for the Note shall be reasonably
satisfactory to KTI's counsel
A default in the payment of royalties or in the payment of any payment
obligations pursuant to Sections 5 and 6 by DataFocus to KTI shall be a default
on the Note or Notes.
Royalties payable will terminate 3 years after the date of the final payment on
the Note, unless terminated earlier, pursuant to the immediately following
sentence. After the date of Closing, DataFocus shall have the option to
terminate the royalties payable hereunder for a single payment, in cash, in an
amount equal to: (i) $400,000 during the first year after the date of Closing;
(ii) 3 times the prior year's royalties during the second year after the date of
Closing; (iii) 2 times the prior year's royalties during the third year after
the date of Closing; and (iv) the prior year's royalties during the fourth and
subsequent years after the date of Closing. Additional royalty payments shall be
made each calendar quarter, by the tenth business day of the following quarter,
based on good faith estimates of the additional royalty payments for the entire
year.
9. DataFocus shall have its financial statements audited by an auditor of
national reputation, or an auditing firm which is a member of the SEC section of
the AICPA and which is reasonably acceptable to KTI.
10. DataFocus shall cooperate with CIBER in connection with the division of the
current office space in the Fairfax premises and the Metro Park premises. If
CIBER and DataFocus are unable
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<PAGE> 7
to agree, DataFocus must accede to CIBER's requirements for the partition of
such office space into separate offices.
DataFocus may not lease any office space in the State of New Jersey so long as
KTI shall have any obligation for any portion of the Metro Park premises.
DataFocus shall indemnify KTI for any damages suffered by KTI because of a
breach of leases by DataFocus in connection with the premises in Fairfax,
Virginia and Metro Park, New Jersey occupied by DataFocus, and not subleased to
CIBER. Certain employees of DataFocus will occupy a portion of the Metro Park
leased space for a short period of time. When such portion has been vacated and
is available for rental to a third party, then DataFocus's obligations for such
portion of the Metro Park leased premises will cease.
11. For purposes of computing payments due pursuant to the sale of Assets under
the SAR Plan, the net proceeds of the sale of the Assets (the "Net Proceeds")
shall be as follows (all amounts to be determined as of the date of Closing,
unless otherwise indicated in this Section):
Cash received from CIBER pursuant to the sale of the Assets, as
adjusted for prorations, less
Retained liabilities of DataFocus, including vacation pay, less
Any funds due to KTI from DataFocus per KTI's books (currently
consisting of routine administrative charges accruing in the normal
course of business), plus
Any funds due from KTI to DataFocus, per KTI's books (currently
consisting of a loan of approximately $200,000.00), less
Cash placed into escrow, plus
Cash on hand and cash equivalents, held by DataFocus and delivered to
KTI, plus Accounts Receivable, less
Cash paid to Messrs. Bosanko and Higbie pursuant to Section 3(a), less
The net present value, using a discount rate of 8%, of lease
obligations for that portion of the DataFocus premises in Fairfax,
Virginia not assumed by CIBER (the "Fairfax premises"), less
The net present value, using a discount rate of 8%, of lease
obligations for that portion of the Metro Park, New Jersey premises not
assumed by CIBER (the "Metro Park premises"),less
Any buildout expenses incurred in connection with the division of
office space in the Fairfax premises or in the Metro Park premises,
less
State income taxes, including without limitation, capital gains taxes
attributable to the sale of the Assets, for the period from January 1,
1996 to the date of Closing, less
Any severance costs for Business Systems Division employees not hired
by CIBER, plus
Any recoveries realized by DataFocus from the subleasing or other
resolution of the leases for the Fairfax premises and the Metro Park
premises, when received, plus
Funds when released to DataFocus from the escrow referred to above,
less
Any sales or use taxes, if any, imposed on the sale of the Assets,
but not any income or capital gains taxes imposed thereon, less
All transaction costs paid or accrued in connection with the sale of
DataFocus, including, without limitation, accountants, investment
banking fees and legal fees and expenses.
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<PAGE> 8
12. (a) Subject to the limitations set forth in subsection (c) below,
Messrs. Bosanko and Higbie hereby agree to indemnify and hold harmless each of
KTI and DataFocus and its affiliates, directors, officers and agents from and
against 20% of any and all costs, losses, liabilities damages, claims or
expenses, including, without limitation, litigation costs, penalties and
interest and reasonable attorneys' fees, experts' fees and court costs, actually
incurred, sustained, accrued or paid by any such indemnitee and arising out of
or resulting from any misrepresentation or breach of any warranty made by
DataFocus or KTI (except for warranties relating solely to KTI) in the agreement
for the purchase of the Assets by CIBER (the "Asset Agreement"), or the
schedules annexed thereto or the transactions contemplated thereby.
(b) If any claim is made, or litigation is commenced in respect of
which indemnity may be sought hereunder, the party seeking indemnification (the
"Aggrieved Party") shall, upon being legally served with, or otherwise notified
of, such claim or litigation, promptly notify the party from whom indemnity is
sought (the "Indemnifying Party") thereof in writing, and the Indemnifying Party
shall, at its expense, thereupon fulfill his obligation to defend the Aggrieved
Party against any such claim or litigation; provided, however, that the failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party
from (i) any liability under this Section 4, except to the extent that it has
been prejudiced in any material respect by such failure, or (ii) any liability
it may have otherwise. The Aggrieved Party's counsel may participate in the
defense of any such claim or litigation, provided that the Indemnifying Party
shall direct and control the defense of any such claim or litigation. Any such
participation of the Aggrieved Party shall be at the Aggrieved Party's expense
of any such claim or litigation, provided that the Indemnifying Party shall
direct and control the defense of any such litigation.
(c) No indemnity claim may be made hereunder with respect to the Asset
Agreement unless such claim is made before eighteen months after the date of
Closing; provided, however, that any indemnity claim will be deemed to have been
made upon the date the notice described below is received if there shall have
occurred any misrepresentation or breach of any warranty made by DataFocus in
the Asset Agreement or the schedules annexed thereto or the transactions
contemplated thereby and the Aggrieved Party shall have given written notice
thereof to the Indemnifying Party setting out the basis for such indemnity claim
before eighteen months after the date of Closing.
(d) Any amount for indemnification payable by the Indemnifying Party to
the Aggrieved Party pursuant to the terms hereof shall be payable in cash.
13. KTI shall indemnify Messrs. Bosanko and Higbie and DataFocus against any
claim asserted against DataFocus, after the exercise by Messrs. Bosanko and
Higbie of their option to purchase DataFocus, for any and all income taxes,
interest and penalties due to the inclusion of DataFocus in KTI's consolidated
Federal income tax for calendar 1995 and prior tax years. KTI shall indemnify
Messrs. Bosanko and Higbie and DataFocus against any claim asserted against
DataFocus, after the exercise of their option to purchase DataFocus, for any and
all income taxes, interest and penalties due on DataFocus's State income tax
returns for calendar 1995 and prior tax years. KTI shall indemnify DataFocus for
any Federal capital gains taxes, or Federal income taxes, interest and penalties
for that portion of the 1996 tax year ending on the day immediately prior to the
date on which Messrs. Bosanko and Higbie exercise their option to purchase
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<PAGE> 9
DataFocus, so long as such date is at least one business day after the Closing.
KTI will pay, or reimburse DataFocus for, State income taxes: (A) with respect
to Virginia, an amount equal to the amount of State income taxes that would be
owed, if 1996 State income taxes would have been calculated for that portion of
1996 ending on the date immediately preceding the date on which Messrs. Bosanko
and Higbie exercised their option to purchase DataFocus, assuming that DataFocus
had no additional income or expenses for the balance of the year; and (B) with
respect to New Jersey; the lesser of: (1) an amount equal to the amount of State
income taxes that would be owed, if 1996 State income taxes would have been
calculated for that portion of 1996 ending on the date immediately preceding the
date on which Messrs. Bosanko and Higbie exercised their option to purchase
DataFocus, assuming that DataFocus had no additional income or expenses for the
balance of the year; and (2) the proportionate share of income tax payable,
prorating the actual amount of State taxes due for 1996, based on (3)
DataFocus's taxable income for in that portion of the year immediately prior to
the date on which Messrs. Bosanko and Higbie exercise their option, and (4)
DataFocus's taxable income for the balance of 1996, reduced for both States by
the reserve for State income taxes held by DataFocus under Section 2. above. In
no event shall KTI be required to pay more than the State Taxes actually paid by
DataFocus. If the reserve held for State income taxes referred to in Section 2.
above exceeds such State income tax, 80% of the surplus shall be distributed to
KTI and 10% each to Messrs. Bosanko and Higbie.
KTI represents and warrants to Messrs. Bosanko and Higbie that all Employee
Benefit Plans of KTI (the "Plans"), prior to the date on which Messrs. Bosanko
and Higbie exercise their option to purchase DataFocus: (1) have not engaged in
any "prohibited transactions"; (2) are in material compliance with the
applicable provisions of the Employee Retirement Income Security Act of 1974 and
the regulations thereto ("ERISA"); and (3) have not been completely or partially
terminated nor has there been any "reportable events". None of the Plans has an
accumulated funding deficiency
KTI represents and warrants that it and its subsidiaries and its PERC affiliate
are in material compliance with all applicable Environmental Laws, including
without limitation, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, and other similar Federal and State laws. Neither
KTI or any of its subsidiaries or affiliates has received any written
communication that alleges, or is aware of any pending allegation of, any
current violation of applicable Environmental Laws.
KTI shall indemnify and hold each of Messrs. Bosanko and Higbie and DataFocus
and their affiliates, directors, officers from and against any and all costs,
losses, liabilities, damages, claims or expenses, including, without limitation,
litigation costs, penalties and interest and reasonable attorneys' fees,
experts' fees and court costs, actually incurred, sustained, accrued or paid by
Messrs. Bosanko and Higbie or DataFocus due to a breach of the above
representations or warranties, except that such indemnification shall be limited
to 80% of such amounts for any damages relating to DataFocus.
After exercise by Messrs. Bosanko and Higbie of their option to purchase all of
the stock of DataFocus, DataFocus shall be entitled to indemnification from KTI
to the same intent and effect as Messrs. Bosanko and Higbie.
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14. Messrs. Bosanko and Higbie shall resign all of their positions with every
subsidiary of KTI, other than DataFocus, at the Closing, if so requested by KTI.
15. Messrs. Bosanko and Higbie, DataFocus on one side, and KTI on the other
side, shall exchange mutual releases of any and all claims between such parties
to be effective at the exercise of the Bosanko and Higbie option to purchase the
common stock of DataFocus. At that time, this Agreement (including, without
limitation, the documents and instruments referred to herein) shall constitute
the entire agreement between the parties and shall supersede and replace any and
all agreements and obligations, whether written or oral, between Messrs. Bosanko
and Higbie and DataFocus, on one side, and KTI on the other side. The parties
hereto agree that, from and after the Closing, no suit may be brought by any
party hereto for any reason other than to enforce this Agreement and the
documents to be entered into pursuant to this Agreement. Notwithstanding this
Section, this Agreement shall not impair any obligation which KTI may have to
Thomas A. Bosanko solely in his capacity as a director of KTI.
16. If the sale of the Assets to CIBER is not completed, all Sections of this
Agreement, other than the second to last paragraph of Section 1, shall have no
force or effect. The last paragraph of Section 1. shall continue in full force
and effect, notwithstanding any failure to complete the Closing.
17. This Agreement may be amended by the parties hereto, by an action taken and
properly authorized at any time; provided that this Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
18. Whether or not the transactions contemplated hereby are consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
19. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO ANY APPLICABLE CONFLICTS OF
LAWS PRINCIPLES THEREOF.
20. This Agreement may be executed in two or more counterparts, all of which
shall constitute one and the same agreement, and shall be effective when two or
more counterparts have been signed by each of the parties hereto and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
In witness whereof, the undersigned have executed and delivered this Agreement
on the date first above written.
KTI, Inc.
By:
- ----------------- ----------------- ---------------------
Thomas A. Bosanko Patrick B. Higbie Senior Vice President
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